-----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, O7CzQk7+JZeVSuNnjlqLn3UlcscqPJNeBxmyYqWg+b9NojGz30+rb56rM9Kg6+v/ JgIn/e8+nSrT4KCGhl+eqA== 0000950152-96-005099.txt : 19961008 0000950152-96-005099.hdr.sgml : 19961008 ACCESSION NUMBER: 0000950152-96-005099 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19960612 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961007 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST UNION REAL ESTATE EQUITY & MORTGAGE INVESTMENTS CENTRAL INDEX KEY: 0000037008 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 346513657 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-06249 FILM NUMBER: 96639970 BUSINESS ADDRESS: STREET 1: 55 PUBLIC SQUARE STREET 2: STE 1900 CITY: CLEVELAND STATE: OH ZIP: 44113 BUSINESS PHONE: 2167814030 MAIL ADDRESS: STREET 1: 55 PUBLIC SQUARE SUITE 1910 CITY: CLEVELAND STATE: OH ZIP: 44113 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION REALTY DATE OF NAME CHANGE: 19691012 8-K/A 1 FIRST UNION REAL ESTATE 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------------- FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 --------------------------------- Date of Report June 12, 1996 First Union Real Estate Equity and Mortgage Investments (Exact name of registrant as specified in its charter) Ohio 1-6249 34-6513657 State or other jurisdiction (Commission File Number) (I.R.S. Employer Identification No.) Suite 1900, 55 Public Square Cleveland, Ohio 44113-1937 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (216) 781-4030 Former name or former address, if changed since last report. Total number of pages in report 5. 2 ONLY THOSE ITEMS AMENDED ARE REPORTED HEREIN ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On June 12, 1996, First Union signed a Purchase and Sale Agreement with Marathon U.S. Realties, Inc. for the purchase by First Union of a portfolio of nine retail shopping malls as previously reported in a Form 8-K dated June 12, 1996. As of September 27, 1996, First Union completed the transaction by investing $30 million as equity in a joint venture which purchased the portfolio of nine retail shopping malls, comprising approximately 5,800,000 square feet of gross leasable area, located in mid-size markets in Louisiana, Arkansas, Texas, Oklahoma and New Mexico. The joint venture's purchase price for the nine malls was $311.7 million which included the assumption of approximately $50 million in existing mortgage debt and a new mortgage loan for $165 million provided by an affiliate of one of the members of the joint venture, as described below. Eight of the mall properties were acquired in fee and one was acquired through the purchase of a 50% partnership interest in the mall. The acquisition of Pecanland Mall, one of the eight malls acquired in fee, is contingent upon the receipt of a consent by the mortgagee, which consent First Union expects the joint venture to receive. The members of the joint venture are First Union and affiliates of General Motors Acceptance Corporation ("GMAC") and Cargill, Incorporated ("Cargill"). First Union's $30 million investment in the joint venture is comprised of $3.5 million in common and $26.5 million in preferred equity. The aggregate equity investment of the other parties is $83.5 million which is comprised of $10 million in common ($6.6 million owned by GMAC and $3.4 million owned by Cargill) and $73.5 million in preferred equity owned by GMAC and Cargill, as described below. The preferred equity is divided into three series, of which First Union's is the most junior in distribution and liquidation priority. First Union's preferred equity is entitled to distributions at a fixed rate of 10% for the first five years and 4% thereafter. The two senior series of preferred equity consist of a $35 million series owned by Cargill (the "Senior Preferred") and a $38.5 million series owned by GMAC (the "Series B Preferred"). The Senior Preferred is entitled to distributions at a floating rate equal to LIBOR plus 500 basis points (which increases by 50 basis points after each three month period). The joint venture has the right to redeem the Senior Preferred at any time. First Union and GMAC will seek an investment by a third party to replace Cargill's Senior Preferred and common equity as soon as practicable. The Series B Preferred is entitled to distributions at a floating rate equal to LIBOR plus 600 basis points. The joint venture has purchased an interest rate cap that limits its exposure to LIBOR increasing above 7%. Generally, additional income and cash, if any, after preferred distributions will be allocated and distributed proportionately to the joint venture members according to their common equity ownership. First Union has call options on all of the preferred equity held by the other joint venture members, commencing immediately with respect to the Senior Preferred and commencing after six months with respect to the Series B Preferred. The call price of the Senior Preferred is equal to 100% of its face amount plus accumulated distributions thereon, with interest but without any additional premium. The call price of the Series B Preferred is equal to 100% of its face 2 3 amount plus the amount necessary to provide the holder thereof with a 15.75% annualized internal rate of return, after taking into account distributions previously made on the Series B Preferred. The holders of the Senior Preferred and the Series B Preferred have put options back to the joint venture with respect to their preferred equity commencing after two years in the aggregate amount of $10 million; put options on the remainder of the preferred equity are exercisable in the third and fourth years. First Union has the right to contribute capital to the joint venture in order to enable the joint venture to satisfy those puts. Any such capital contributed by First Union will constitute additional amounts of First Union's series of preferred equity. The put prices are identical to the call prices, as described above. If First Union is unable or unwilling to contribute capital to the joint venture so that the put options can be satisfied, GMAC and Cargill have the right to offset the dollar amount of such put option by transferring an equivalent amount of capital from First Union's capital account and increasing their own accounts by such amount. As long as First Union has any capital balance remaining in the joint venture, it has the right to subsequently have its capital account restored by meeting the put and paying certain additional amounts. There can be no assurance that First Union will have sufficient funds available to make the capital contributions which may be required to satisfy the put options of the other joint venture members or that First Union will choose to make such capital contributions at that time. The failure to make such capital contributions would have a material adverse effect on the financial condition of First Union. Once all the Senior Preferred and the Series B Preferred have been acquired, First Union will have call options on all of the common equity of the other joint venture members as well. The call price of the common equity is equal to 100% of the face amount plus the amount necessary to provide the holder thereof with a 20% annualized internal rate of return, after taking into account distributions previously made on the common equity. In addition, for so long as Cargill's common equity is outstanding, Cargill is entitled to receive $75,000 per month. There are no put options on the common equity. GMAC Commercial Mortgage Corporation provided an aggregate of $165 million in new first mortgage financing for this acquisition. The financing encumbers seven of the properties and those properties are cross-collateralized and their mortgages have cross default provisions. The mortgages are at an interest rate of 8.43% and provide for amortization on a 30-year schedule. The unpaid balances are due ten years after commencement. The joint venture members selected First Union to be the managing member of the joint venture, and First Union has in turn retained its affiliate, First Union Management, Inc. (the "Management Company") as property manager for all nine malls. Although presently a minority investor in the joint venture, First Union has approval rights over major business and operating issues, such as capital expenditures, leasing criteria, dispositions of any one of the nine mall properties and changes to the joint venture arrangements. 3 4 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Listed below are the financial statements, pro forma financial information and exhibits filed as a part of this report: a. Financial Statements of Business Acquired. The financial statements of the Marathon Centers are filed as part of this report on Form 8-K/A beginning on page F-2. b. Pro Forma Financial Information. The pro forma financial information of First Union Real Estate Equity and Mortgage Investments is filed as part of this report on Form 8-K/A beginning on page F-6. c. Exhibits. 23.1 Consent of Price Waterhouse LLP 99.1 Press Release, dated October 1, 1996 99.2 Purchase and Sale Agreement, dated as of June 12, 1996, between Marathon U.S. Realties, Inc., as Seller and First Union Real Estate Equity and Mortgage Investments, as Purchaser, as amended 99.3 Investment Agreement, dated as of September 27, 1996, between GMAC Commercial Equity Investments, Inc., a Pennsylvania corporation, First Union Real Estate Equity and Mortgage Investments, an Ohio business trust, and Cargill Financial Services Corporation, a Delaware corporation. 99.4 Limited Liability Company Agreement of Southwest Shopping Centers Co. I, L.L.C., a Delaware limited liability company, dated as of September 27, 1996 99.5 Form of Management and Leasing Agreement, dated as of September 30, 1996, between _________________________________________ and First Union Management, Inc., a Delaware corporation 99.6 Joinder Agreement, dated as of September 26, 1996, among Marathon U.S. Realties, Inc., Centrixx Realty Holdings Limited, Southwest Shopping Centers Co. I, L.L.C. and First Union Real Estate Eqity and Mortgage Investments 99.7 Joinder Agreement, dated as of September 26, 1996, among Marathon U.S. Realties, Inc., Centrixx Realty Holdings Limited, Southwest Shopping Centers Co. II, L.L.C. and First Union Real Estate Equity and Mortgage Investments 99.8 Joinder Agreement, dated as of September 26, 1996, among Marathon U.S. Realties, Inc., Centrixx Realty Holdings Limited, Temple Shopping Center Co., L.L.C. and First Union Real Estate Equity and Mortgage Investments 99.9 Escrow Agreement, dated as of September 26, 1996 among Marathon U.S. Realties, Inc., First Union Real Estate Equity and Mortgage Investments, Southwest Shopping Centers Co. I, L.L.C. and First American Title Insurance Company 4 5 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS By: /s/ James C. Mastandrea ---------------------------------------- James C. Mastandrea, Chairman, President, Chief Executive Officer, and Chief Financial Officer Date: October 7, 1996 5 6 INDEX TO FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION The following financial statements and pro forma financial information are included in Item 7 of this report on Form 8-K/A:
THE MARATHON CENTERS PAGE Report of Independent Accountants F-2 Schedule of Operating Revenues and F-3 Certain Expenses for the Years Ended December 31, 1995, 1994 and 1993 Notes to Schedule of Operating Revenues and Certain Expenses for the Years Ended December 31, 1995, 1994 and 1993 F-4 - F-5 FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS Pro Forma Condensed Combined Statements of Income for the Year Ended December 31, 1995 and the Nine Months Ended September 30, 1996 (Unaudited) F-7 - F-8 Condensed Combined Balance Sheet as of September 30, 1996 (Unaudited) F-9
F-1 7 REPORT OF INDEPENDENT ACCOUNTANTS To the Owners of the Marathon Centers: We have audited the accompanying schedule of operating revenues and certain expenses of the Marathon Centers (the "Properties") for each of the three years in the period ended December 31, 1995. This schedule is the responsibility of the Properties' management. Our responsibility is to express an opinion on this schedule based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the schedule of operating revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the schedule. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall schedule presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying schedule of operating revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission in connection with the proposed sale of the properties as described in Note 1 and is not intended to be a complete presentation of the Properties' revenues and expenses. In our opinion, the schedule of operating revenues and certain expenses referred to above presents fairly, in all material respects, the operating revenues and certain expenses of the Marathon Centers on the basis describe in Note 1, for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. PRICE WATERHOUSE LLP Dallas, Texas July 3, 1996 F-2 8 MARATHON CENTERS SCHEDULE OF OPERATING REVENUES AND CERTAIN EXPENSES (IN THOUSANDS)
Year Ended December 31, 1995 1994 1993 ---- ---- ---- Operating revenues $62,168 $60,457 $57,385 Operating expenses: Property operating expenses 20,234 20,618 19,501 Property taxes 3,375 3,392 3,363 ------- -------- -------- Excess of revenues over operating expenses 38,559 36,447 34,521 General and administrative expenses 4,690 4,518 3,890 ------- -------- -------- Excess of operating revenues over certain expenses $33,869 $31,929 $30,631 ======= ======== ========
The accompanying notes are an integral part of this schedule. F-3 9 MARATHON CENTERS NOTES TO THE SCHEDULE OF OPERATING REVENUES AND CERTAIN EXPENSES 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying schedule of operating revenues and certain expenses relates to the operations of the Marathon Centers (the Properties). The Properties consist of the following nine regional malls: Alexandria Mall, Alexandria, Louisiana Brazos Mall, Lake Jackson, Texas Killeen Mall, Killeen, Texas Mesilla Valley Mall, Las Cruces, New Mexico Park Plaza, Little Rock, Arkansas Pecanland Mall, Monroe, Louisiana Shawnee Mall, Shawnee, Oklahoma Temple Mall, Temple, Texas Villa Linda Mall, Santa Fe, New Mexico Except for Temple Mall and Villa Linda Mall, the Properties are owned by Marathon U.S. Realties, Inc. (MUSRI). Temple Mall is owned by Temple Mall Company, a Texas general partnership, in which MUSRI owns a 50% general partnership interest. Villa Linda Mall is owned by Centrixx Realty Holdings Limited, an affiliate of MUSRI. MUSRI, Temple Mall Company and Centrixx Realty Holdings Limited are collectively referred to as the Owners. The accompanying schedule of operating revenues and certain expenses includes the following amounts for MUSRI's 50% interest in Temple Mall Company (in thousands):
Year Ended December 31, 1995 1994 1993 ---- ---- ---- Revenues $3,049 $3,162 $2,828 Property operating expenses 1,161 1,059 986 Property taxes 214 266 266
Basis of Presentation The Owners are contemplating the sale of the Properties to First Union Real Estate Equity and Mortgage Investments. Accordingly, certain expenses which may not be comparable to the expenses expected to be incurred in the proposed future operations of the Properties, have been excluded under the assumption that the potential sale will be consummated. Expenses excluded consist of depreciation and valuation adjustments to the buildings and improvements, interest expense on debt incurred by the Properties to acquire and develop the property, and amortization of expenses not directly related to the proposed future operations of the Properties. Certain general and administrative expenses incurred net of fee revenues earned by MUSRI in 1995, 1994, and 1993 of $93,464, $403,536, and $406,627, respectively, related to properties not included in the potential sale have been excluded. Limited administrative services are provided at no cost to MUSRI by an affiliate. F-4 10 Revenue and Expense Recognition The accompanying schedule of operating revenues and certain expenses has been prepared on the accrual basis of accounting. 2. FUTURE MINIMUM RENTALS UNDER OPERATING LEASES The future minimum lease payments to be received by the Owners under noncancellable operating leases are as follows (in thousands):
Year Ending December 31: 1996 $ 32,927 1997 30,365 1998 28,125 1999 24,259 2000 21,306 Thereafter 82,060 -------- $219,042 ========
F-5 11 FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION The following sets forth the unaudited historical combined condensed Balance Sheet of First Union Real Estate Equity and Mortgage Investments as of September 30, 1996 and the unaudited pro forma combined condensed Statements of Income for the year ended December 31, 1995 and the nine months ended September 30, 1996. The unaudited pro forma combined condensed financial information is based on the historical financial statements of First Union and reflects First Union's investment in a joint venture that acquired the nine mall portfolio from Marathon U. S. Realties, Inc. Eight of the malls were acquired in fee and one was acquired through the purchase of a 50% partnership interest in the mall. The acquisition of one of the eight malls acquired in fee is contingent upon the receipt of a consent by the mortgagee, which is assumed to occur in the pro forma financial information. The unaudited pro forma information should be read in conjunction with the historical combined financial statements and notes related thereto of First Union. The unaudited combined condensed Balance Sheet of First Union as of September 30, 1996 includes the investment in the joint venture which occurred as of September 27, 1996. The unaudited combined condensed Statements of Income for the year ended December 31, 1995 and nine months ended September 30, 1996, are presented as if the investment in the joint venture occurred on January 1, 1995. In management's opinion, all adjustments necessary to reflect the joint venture investment have been included in the accompanying combined financial statements. The unaudited pro forma combined condensed Statements of Income are not necessarily indicative of the results which actually would have occurred if the transaction had been consummated at the beginning of the periods presented, nor do they purport to represent the financial results of operations for future periods. F-6 12 FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)
(IN THOUSANDS) ------------------------------------------ FIRST UNION (HISTORICAL) ADJUSTMENTS PRO FORMA ------------ ------------ --------- Revenues Rents $74,349 $ $74,349 Management and leasing fees 4,616 (a) 4,616 Interest 4,856 4,856 Equity in earnings of joint venture 1,405 (b) 1,405 -------- -------- -------- 79,205 6,021 85,226 Expenses Property operating 25,982 25,982 Real estate taxes 8,555 8,555 Depreciation and amortization 11,901 11,901 Interest 22,397 2,337 (c) 24,734 General and administrative 7,114 2,600 (d) 9,714 -------- -------- -------- 75,949 4,937 80,886 Income before capital gain or loss, extraordinary loss and cumulative effect of accounting change $ 3,256 $1,084 $ 4,340 Per Share Data: Income before capital gain or loss, extraordinary loss and cumulative effect of accounting change $ 0.18 $ 0.06(e) $ 0.24 ======== ======== ========
(a) To reflect the management and leasing fees assumed to be received by First Union from the joint venture for management of the properties. (b) To reflect First Union's share of equity earnings in the joint venture. (c) To reflect the additional interest cost associated with financing First Union's $30 million investment in the joint venture through bank loans. (d) To reflect the additional estimated general and administrative costs associated with managing and leasing the joint venture properties. (e) The pro forma per share amount for income before capital gain or loss, extraordinary loss and cumulative effect of change in accounting is based on the weighted average shares of beneficial interest outstanding of 18,116,000. F-7 13 FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
(IN THOUSANDS) --------------------------------------- FIRST UNION (HISTORICAL) ADJUSTMENTS PRO FORMA ------------ ------------- --------- Revenues Rents $55,386 $ $55,386 Management and leasing fees 3,407 (a) 3,407 Interest 3,609 3,609 Equity in earnings of joint venture 444 (b) 444 -------- ------- -------- 58,995 3,851 62,846 Expenses Property operating 19,517 19,517 Real estate taxes 6,198 6,198 Depreciation and amortization 9,858 9,858 Interest 17,513 1,688 (c) 19,201 General and administrative 4,769 1,950 (d) 6,719 -------- ------- -------- 57,855 3,638 61,493 Income before capital gain or loss, extraordinary loss and cumulative effect of accounting change $ 1,140 $ 213 $ 1,353 Per Share Data: Income before capital gain or loss, extraordinary loss and cumulative effect of accounting change $ 0.07 $ 0.01(e) $ 0.08 ======== ======= ========
(a) To reflect the management and leasing fees assumed to be received by First Union from the joint venture for management of the properties. (b) To reflect First Union's share of equity earnings in the joint venture. (c) To reflect the additional interest cost associated with financing First Union's investment of $30 million in the joint venture through bank loans. (d) To reflect the additional estimated general and administrative costs associated with managing and leasing the joint venture properties. (e) The pro forma per share amount for income before capital gain or loss, extraordinary loss and cumulative effect of change in accounting is based on the weighted average shares of beneficial interest outstanding of 17,237,000. F-8 14 FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS HISTORICAL COMBINED CONDENSED BALANCE SHEET AS OF SEPTEMBER 30, 1996 (UNAUDITED)
ASSETS (IN THOUSANDS) Investments in real estate, net $ 340,715 Investment in joint venture 30,000 (a) Mortgage loans receivable 42,206 Other assets 17,346 ---------- $ 430,267 ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Mortgage loans $ 129,985 Senior notes 100,000 Bank loans 63,940 Accounts payable and other 38,361 ---------- 332,286 Shareholders' equity 97,981 ---------- $ 430,267 ==========
(a) Reflects First Union's investment in a joint venture which acquired real estate properties from Marathon U.S. Realties, Inc., as of September 27, 1996. F-9 15 EXHIBIT INDEX
EXHIBIT NUMBER Consent of Price Waterhouse LLP 23.1 Press Release, dated October 1, 1996 99.1 Purchase and Sale Agreement, dated as of June 12, 1996, between 99.2 Marathon U.S. Realties, Inc., as Seller and First Union Real Estate Equity and Mortgage Investments, as Purchaser, as amended Investment Agreement, dated as of September 27, 1996, between 99.3 GMAC Commercial Equity Investments, Inc., a Pennsylvania corporation, First Union Real Estate Equity and Mortgage Investments, an Ohio business trust, and Cargill Financial Services Corporation, a Delaware corporation Limited Liability Company Agreement of Southwest Shopping 99.4 Centers Co. I, L.L.C., a Delaware limited liability company, dated as of September 27, 1996 Form of Management and Leasing Agreement, dated as of September 99.5 30, 1996, between ___________________________ _____________ and First Union Management, Inc., a Delaware corporation Joinder Agreement, dated as of September 26, 1996, among Marathon 99.6 U.S. Realties, Inc., Centrixx Realty Holdings Limited, Southwest Shopping Centers Co. I, L.L.C. and First Union Real Estate Equity and Mortgage Investments Joinder Agreement, dated as of September 26, 1996, among Marathon 99.7 U.S. Realties, Inc., Centrixx Realty Holdings Limited, Southwest Shopping Centers Co. II, L.L.C. and First Union Real Estate Equity and Mortgage Investments Joinder Agreement, dated as of September 26, 1996, among Marathon 99.8 U.S. Realties, Inc., Centrixx Realty Holdings Limited, Temple Shopping Center Co., L.L.C. and First Union Real Estate Equity and Mortgage Investments Escrow Agreement, dated as of September 26, 1996, among Marathon 99.9 U.S. Realties, Inc., First Union Real Estate Equity and Mortgage Investments, Southwest Shopping Centers Co. I, L.L.C. and First American Title Insurance Company
EX-23.1 2 EXHIBIT 23.1 1 Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-00953) of First Union Real Estate Equity and Mortgage Investments of our report dated July 3, 1996 relating to the Schedule of Operating Revenues and Certain Expenses of the Marathon Centers, which appears on page F-2 of the Current Report on Form 8-K/A of First Union Real Estate Equity and Mortgage Investments dated June 12, 1996. We also consent to the reference to us under the heading "Experts" in such Prospectus. EX-99.1 3 EXHIBIT 99.1 1 Exhibit 99.1 FIRST UNION REAL ESTATE INVESTMENTS AT THE COMPANY IN CLEVELAND, OHIO Thomas T. Kmiecik Peter H. Bryan Senior Vice President /Treasurer Edward Howard & Co. (216) 781-4030 (216) 781-2400 FOR IMMEDIATE RELEASE FIRST UNION REAL ESTATE INVESTMENTS ANNOUNCES COMPLETION OF $312 MILLION MARATHON ACQUISITION CLEVELAND, OHIO, OCTOBER 1, 1996 -- FIRST UNION REAL ESTATE INVESTMENTS (NYSE:FUR), today announced the completion of the $312 million acquisition of Marathon US Realties' portfolio of nine shopping malls located in the southwestern United States. As a result of this acquisition, one of the largest real estate transactions by a REIT this year, First Union now has assets under management exceeding $800 million and becomes one of the leading REIT specialists in repositioning retail and apartment properties to maximize intrinsic value. The properties were acquired in a joint venture with affiliates of GMAC Commercial Mortgage Corporation (GMAC-CM) and Cargill Financial Services Corporation. First Union's investment totaled $30 million, financed through a combination of internally generated funds and its recently expanded $96 million credit facility. The investment in the joint venture will not be consolidated on First Union's balance sheet, but will be shown as an equity investment in a joint venture. Under the terms of the agreement, all properties will be managed by First Union's affiliated management company, First Union Management, Inc. Additionally, First Union has the right to acquire the interests of the other partners after the first 6 months. This acquisition brings First Union's retail portfolio of managed properties to over 13 million square feet. James C. Mastandrea, Chairman and Chief Executive Officer of First Union Real Estate Investments, said, "We are well under way in the execution of our five year strategic plan, which began on January 1, 1994, to bring new life to First Union. One key element of this plan is the strengthening our existing portfolio. We have already upgraded and repositioned many of our properties, the benefit of which is being reflected in our improving occupancies, revenues and property net operating income. Another key element of our plan is growing our asset base to exceed $1 billion by the year 2000. The Marathon acquisition represents a major step toward this goal. Moreover, this acquisition is accretive to earnings, and we estimate that First Union's share of profits from the joint venture's operations will result in $0.08 to $0.10 per share in additional funds from operations in the next 12 months." (more) 2 The acquisition was available as a result of the previously announced decision of Marathon's parent, Canadian Pacific, to divest its U.S. retail real estate holdings. It consists of 6 million square feet of space with an overall occupancy of 92% and average in-line store sales of approximately $250 per square foot. Anchor tenants include Dillard's, JC Penney, Sears, Wal-Mart, Mervyn's, McRaes and Foley's. The malls are located in mid-size markets in Santa Fe and Las Cruces, New Mexico; Killeen, Temple and Lake Jackson, Texas; Shawnee, Oklahoma; Alexandria and Monroe, Louisiana; and Little, Arkansas. Each property dominates its respective market. First Union Real Estate Investments (NYSE:FUR) is an equity real estate investment trust (REIT) specializing in repositioning real estate to extract intrinsic value, primarily in retail and apartment properties in specific market concentrations. ### EX-99.2 4 EXHIBIT 99.2 1 Exhibit 99.2 PURCHASE AND SALE AGREEMENT BETWEEN MARATHON U.S. REALTIES, INC., AS SELLER AND FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, AS PURCHASER 2 TABLE OF CONTENTS ARTICLE 1 DEFINITIONS........................................... -1- 1.1 Definitions.......................................... -1- 1.2 Gender and Number.................................... -13- 1.3 References........................................... -14- 1.4 Illustrative Terms................................... -14- ARTICLE 2 AGREEMENT TO SELL..................................... -14- 2.1 Agreement............................................ -14- 2.2 Purchase Price....................................... -14- 2.3 Deposit.............................................. -14- ARTICLE 3 LENDER/PARTNER APPROVALS.............................. -15- 3.1 Assumption........................................... -15- 3.2 Loan Balances........................................ -15- 3.3 Contingency for Lender Approval...................... -15- 3.4 Partner Approvals.................................... -16- ARTICLE 4 INSPECTIONS BY PURCHASER.............................. -17- 4.1 Purchaser's Inspection Period........................ -17- 4.2 Termination Right.................................... -18- 4.3 Extensions of Inspection Period...................... -18- 4.4 Indemnification by Purchaser......................... -18- 4.5 Limitations on Purchaser's Inspections............... -19- 4.6 Condition of Property................................ -19- ARTICLE 5 TITLE AND SURVEYS..................................... -19- 5.1 Title and Survey..................................... -19- 5.2 Liens................................................ -20- 5.3 Approval/Disapproval of Title Review................. -20- 5.4 Purchaser's Options.................................. -20- 5.5 Escrow and Title Costs............................... -21- ARTICLE 6 CLOSING............................................... -22- 6.1 Closing.............................................. -22- 6.2 Seller Closing Documents............................. -22- 6.3 Purchaser Closing Documents.......................... -24- 6.4 Occurrence of Closing................................ -26- 6.5 Title to Purchaser's Nominee......................... -26- 6.7 Further Assurances................................... -26- 6.8 FIRPTA Withholdings.................................. -27- ARTICLE 7 APPORTIONMENTS AND PAYMENTS........................... -27- 7.1 Prorations........................................... -27- 7.2 Adjustments.......................................... -31- 7.3 Collection........................................... -31- 7.4 Closing and Final Proration Statements............... -32- 7.5 Utilities............................................ -32- 7.6 Reserves and Deposits................................ -32- 7.7 Construction Allowances.............................. -33- 3 7.8 Proration of Temple and Alexandria................... -33- 7.9 Survival............................................. -33- ARTICLE 8 ADDITIONAL AGREEMENTS OF SELLER AND PURCHASER......... -33- 8.1 Conduct of Business Prior to Closing Date............ -33- 8.2 Leasing.............................................. -35- 8.3 Insurance Policies................................... -36- 8.4 Management Office and Employees...................... -36- 8.5 Possession........................................... -37- 8.6 Management Information Systems....................... -37- 8.7 Mortgage Releases.................................... -37- 8.8 Lease/Estoppel Certificates.......................... -37- 8.9 Guaranty............................................. -37- ARTICLE 9 REPRESENTATIONS AND WARRANTIES........................ -38- 9.1 Seller's Representations and Warranties.............. -38- 9.2 Seller's Knowledge Defined........................... -44- 9.3 Purchaser's Representations and Warranties........... -44- 9.4 Survival of Representations and Warranties........... -45- ARTICLE 10 DAMAGE OR DESTRUCTION - CONDEMNATION................. -45- 10.1 Notice.............................................. -45- 10.2 Non-Material Damage................................. -46- 10.3 Loss Adjustments.................................... -46- ARTICLE 11 CONDITIONS TO CLOSING................................ -47- 11.1 Conditions to Seller's Obligations.................. -47- 11.2 Conditions to Purchaser's Obligations............... -47- ARTICLE 12 DEFAULT.............................................. -49- 12.1 Seller's Default.................................... -49- 12.2 Purchaser's Default................................. -49- 12.3 Liquidated Damages.................................. -49- 12.4 Closing is a Waiver................................. -49- ARTICLE 13 BROKERAGE COMMISSIONS................................ -50- ARTICLE 14 NOTICES.............................................. -50- 14.1 Notices............................................. -50- 14.2 Change of Address................................... -51- ARTICLE 15 INDEMNIFICATION...................................... -51- 15.1 Purchaser Indemnification........................... -51- 15.2 Seller Indemnification.............................. -52- 15.3 Indemnification Procedure........................... -52- ARTICLE 16 MISCELLANEOUS........................................ -53- 16.1 Parties Bound....................................... -53- 16.2 Headings; Exhibits.................................. -53- (ii) 4 16.3 Invalidity.......................................... -54- 16.4 Governing Law....................................... -54- 16.5 No Third Party Beneficiary.......................... -54- 16.6 Entirety and Amendments............................. -54- 16.7 Execution in Counterparts........................... -54- 16.8 Extension of Performance............................ -54- 16.9 Time................................................ -54- 16.10 Assignment......................................... -54- 16.11 Confidentiality.................................... -55- 16.12 Trustee Approval................................... -55- 16.13 No Solicitation.................................... -55- 16.14 Limit of Trustees' Liability....................... -55- 16.15 Exhibits........................................... -55- (iii) 5 PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT (the "AGREEMENT") is made as of this ____ day of June, 1996 (the "EFFECTIVE DATE"), by and between MARATHON U.S. REALTIES, INC., a Delaware corporation and FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio business trust. W I T N E S S E T H: In consideration of and in reliance upon the covenants 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: "ADDITIONAL CHARGES" means all charges (other than Rents) payable to an Owner by any Party under a Lease or Specialty License Agreement or by a Party under a Reciprocal Easement Agreement, including, without limitation, advertising and promotional fees, common area maintenance charges, charges for electricity or other utilities and HVAC charges, real estate taxes, insurance premiums and other amounts payable to the extent denominated in such Lease or Reciprocal Easement Agreement as a separate charge (as opposed to being included in a stated gross or base rent). "ADJUSTMENTS" shall have the meaning set forth in Section 7.2 hereof. "ADMINISTRATIVE FEES" shall have the meaning set forth in Section 7.1(c) hereof. "AFFILIATE" means, with respect to either Seller or Purchaser, as the case may be in each instance, any entity (a) that controls Seller or Purchaser, (b) that is controlled by Seller or Purchaser, (c) that is under common control with Seller or Purchaser, (d) into which Seller or Purchaser is merged or consolidated or (e) as to Purchaser, the Joint Venture. FUMI shall be deemed to be an "Affiliate" of Purchaser, even though it is not controlled by, or under common control with, Purchaser. "ALEXANDRIA" means Alexandria Mall Company, a Louisiana general partnership, established pursuant to that certain Restatement of Partnership Agreement of Alexandria Mall Company dated as of ________________, as amended by Modification of Partnership dated as of January 27, 1978 (said Restatement of Partnership Agreement, as amended, is hereinafter referred to as the "ALEXANDRIA PARTNERSHIP AGREEMENT"), in which Seller owns a ninety percent (90%) general partnership interest, which owns the regional mall -1- 6 commonly known as Alexandria Mall located in Alexandria, Louisiana, more particularly described in EXHIBIT A1 attached hereto ("ALEXANDRIA MALL"). "ALEXANDRIA INTEREST" means Seller's 90% general partnership interest in Alexandria. "AMENDMENTS TO PARTNERSHIP CERTIFICATES" means the amendments to the partnership agreement and all partnership certificates or other filings, to the extent such amendments, certificates or filings are required to be filed under any Law, applicable to the Partnership Interests, evidencing or reflecting in the public records the transfer of the respective Partnership Interests to Purchaser, to be executed by Purchaser, Seller and each partner of the applicable Partnership. "ANCHOR STORE" means those retail stores listed on EXHIBIT 9.1(c) attached hereto. "ASSIGNMENT OF CONTRACTS" means an assignment in the form of EXHIBIT 6.2(g) attached hereto, to be executed and acknowledged by Seller and Purchaser, pursuant to which Seller assigns to Purchaser, and Purchaser assumes, all of Owner's right, title and interest under the Contracts relating to a Seller-Owned Mall. "ASSIGNMENT OF LEASES" means an assignment in the form of EXHIBIT 6.2(f) attached hereto, to be executed and acknowledged by Seller and Purchaser, pursuant to which Seller assigns to Purchaser, and Purchaser assumes, all right, title and interest of the Seller under the Leases and the Specialty License Agreements relating to a Seller-Owned Mall. "ASSIGNMENT OF OFFICE AND EQUIPMENT LEASES" means an assignment in the form of EXHIBIT 6.2(q) attached hereto, to be executed and acknowledged by MRML and Purchaser or FUMI, pursuant to which MRML assigns, and Purchaser or FUMI assumes, all right, title and interest of MRML under the Office and Equipment Leases. "ASSIGNMENT OF PARTNERSHIP INTERESTS" means an assignment in the form of EXHIBIT 6.2(e) 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 in and to the respective Partnership Interests. "ASSIGNMENT OF RECIPROCAL EASEMENT AGREEMENTS" means an assignment in the form of EXHIBIT 6.2(h) attached hereto, to be executed and acknowledged by Seller and Purchaser pursuant to which Seller assigns, and Purchaser assumes, all of the Seller's right, title and interest in and to a Reciprocal Easement Agreement relating to a Seller-Owned Mall. "BALANCE OF THE PURCHASE PRICE" means the Purchase Price (a) less the Deposit and (b) plus or minus the net sum of the prorations, allocations, charges, credits, withholdings and other adjustments as provided in this Agreement. "BENEFIT PLAN" means any agreement, plan or arrangement for employee benefits, including any bonus, deferred compensation, severance, disability, sick pay, salary continuation, death benefit, vacation, stock purchase or stock option, hospitalization or other -2- 7 medical, life or other insurance, supplemental unemployment benefit, profit-sharing, pension or retirement plan or arrangement maintained or contributed to by Seller or any Seller Affiliate in connection with any Mall or with respect to any of the Employees. "BILLS OF SALE" means the bills of sale to be executed and delivered by Seller and MRML, pursuant to which Seller and MRML transfer and assign, and Purchaser or Purchaser's Nominee accepts, the title of Seller and MRML in and to any Personality and Other Assets owned by Seller and MRML, respectively, and used in connection with the management and operation of the Malls. "BRAZOS MALL" means that certain regional mall located in Lake Jackson, Texas, more particularly described in EXHIBIT A2 attached hereto. "BROKER" means Cushman & Wakefield of Texas, Inc., 1300 Post Oak Boulevard, #1600, Houston, TX 77056. "BUSINESS DAY" means any day other than a Saturday, Sunday or legal holiday in the State of Texas. "CENTRIXX" means Centrixx Realty Holdings Limited, a Canadian corporation and an Affiliate of Seller. "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. "CLOSING DATE" means the date that is fifteen (15) days after the expiration of the Inspection Period, unless such date is not a Business Day, in which event the Closing Date shall be the next Business Day thereafter, but in no event later than September 30, 1996, subject to extension to the extent expressly provided in accordance with the terms of this Agreement. "CLOSING DOCUMENTS" means the Seller Closing Documents and the Purchaser Closing Documents without distinction between them. "CLOSING STATEMENT" shall have the meaning set forth in Section 7.4(a) hereof. "COBRA" means the requirements of Section 4980B of the Code, Proposed Treasury Regulation Section 1.162-26 and Part 6 of Subtitle B of Title I of ERISA. "CODE" means the Internal Revenue Code of 1986, as amended, and all rules and regulations promulgated thereunder. "COMMON AREA EXPENSES" shall have the meaning set forth in Section 7.1(c) hereof. "CONFIDENTIAL INFORMATION" means the terms of this Agreement and all information or documentation reviewed or received by either party hereto in connection with this -3- 8 Agreement or the Property, including, specifically, information regarding Purchaser's financing plans, but excluding any information that is obtained from a third-party or is publicly available. "CONTRACTS" means all (a) management, service, maintenance, operating and repair contracts (excluding the Leases, the Specialty License Agreements and recorded documents evidencing the Permitted Exceptions) relating to the Malls and to which an Owner is a party, and (b) equipment leases to which an Owner is a party and all rights and options of an Owner thereunder, including rights to renew or extend the term or purchase the leased equipment, relating to equipment or property located in or upon the Malls or used 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 10.1 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, incurred as a result of administrative and judicial proceedings and orders, judgments, remedial actions and requirements thereof, but expressly excluding punitive damages. "DELINQUENCIES" shall have the meaning set forth in Section 7.3 hereof. "DEPOSIT" shall mean the sum of Three Million One Hundred Sixty Thousand and No/100 Dollars ($3,160,000.00). "DISAPPROVAL NOTICE" means a written notice of Purchaser identifying any title matter related to any of the Malls which Purchaser disapproves (a "DISAPPROVED TITLE MATTER"). "EFFECTIVE DATE" shall have the meaning set forth in the first sentence of this Agreement. "EMPLOYEES" means the on-site employees of MRML at each of the Malls and the employees of MRML located at the Dallas, Texas and Houston, Texas offices of MRML as of the Effective Date. "EQUITY FUNDS" means that portion of the Purchase Price to be paid by Purchaser out of Purchaser's own funds, or funds of the other party to the Joint Venture, and excluding any portion of the Purchase Price which is financed. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ESCROW" shall have the meaning set forth in Section 6.2 hereof. "ESCROW AGREEMENT" means the escrow agreement by and among Seller, Purchaser and Escrowee, in the form of EXHIBIT 2.3 attached hereto, executed by the parties thereto as of the Effective Date. This Agreement shall not be merged into the Escrow -4- 9 Agreement, but the Escrow Agreement shall be deemed auxiliary to this Agreement and, as between the parties hereto, if there is any conflict between the Escrow Agreement and this Agreement, the provisions of this Agreement shall govern and control. "ESCROWEE" means First American Title Insurance Company, 3033 LBJ Freeway, Suite 150, Dallas, Texas 75234, or any other nationally recognized title insurance company designated by Seller and approved by Purchaser. "ESTOPPEL CERTIFICATES" means the Lease Estoppel Certificates, the REA Estoppel Certificates, the Lender Estoppel Certificates, the Partnership Estoppel Certificates and the Seller Lease Estoppel Certificate. "FILING DOCUMENTS" shall have the meaning set forth in Section 6.4 hereof. "FINAL PRORATION STATEMENT" shall have the meaning set forth in Section 7.4(b) hereof. "FINANCIAL STATEMENTS" means profit and loss statements for each Mall dated as of December 31, 1994 and as of December 31, 1995, and the Interim Financial Statements, certified by Seller's Director of Finance. "FUMI" means First Union Management, Inc., a Delaware corporation and an Affiliate of Purchaser. "GAAP" means generally accepted accounting principles in Canada as in effect on the date hereof, as the same may be amended from time to time, applied on a consistent basis. "HAZARDOUS SUBSTANCE" means any hazardous, toxic or dangerous waste, substance or material, pollutant or contaminant, as defined for purposes of 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 substance which contains gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenyls (PCB's), radon gas, urea formaldehyde, asbestos or lead. "INDEMNIFIED PARTY" shall have the meaning set forth in Section 15.3(a) hereof. "INDEMNIFYING PARTY" shall have the meaning set forth in Section 15.3(a) hereof. "INITIAL SURVEY DELIVERY DATE" SHALL HAVE THE MEANING SET FORTH IN SECTION 5.1(a). "INSPECTION PERIOD" means the period of time from the Effective Date through and including the date that is sixty (60) days after the Effective Date and all extensions of such time period pursuant hereto. -5- 10 "INSURANCE POLICIES" means the liability and property damage insurance policies for each Mall listed in EXHIBIT 8.3 attached hereto. "INTERIM FINANCIAL STATEMENTS" means unaudited profit and loss statements for each Mall as of May 31, 1996, certified by Seller's Director of Finance. "JOINT VENTURE" means the joint venture to be formed by Purchaser as part of Purchaser's equity funding for this transaction. "KILLEEN MALL" means that certain regional mall located in Killeen, Texas, more particularly described in EXHIBIT A3 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. "LEASE ESTOPPEL CERTIFICATE" means the estoppel certificate in the form of EXHIBIT 6.2(j)(i) attached hereto. "LEASE PROPOSAL" shall have the meaning set forth in Section 8.2(b) hereof. "LEASE YEAR" shall have the meaning set forth in Section 7.1(e) hereof. "LEASES" means all leases, subleases, licenses, concessions and other agreements relating to the use or occupancy of any portion of the Malls, other than the Specialty License Agreements or Contracts, including those and any amendments, modifications or work letters related thereto that may be entered into by an Owner after the Effective Date and prior to Closing in accordance with the terms of this Agreement. "LENDER ESTOPPEL CERTIFICATES" means the estoppel certificates in the form of EXHIBIT 6.2(j)(iv) attached hereto. "LENDERS" means TIAA and NML. "LIEN SEARCH" means a search of the Secretary of State records, county recorder records, local court records (federal, state, county and municipal) and such other official public records with respect to each Mall that would disclose the presence of any Liens, bankruptcy proceedings, lis pendens or other matters affecting a Mall or an Owner. "LIENS" means any liens and/or security interests that encumber any part of the Real Property, Personalty or Other Assets owned by Alexandria, Temple or Seller, including, but not limited to, mortgages, deeds of trust, mechanics, materialmens, judicial, tax or governmental liens, pledges, options, rights of first offer or first refusal or other similar items relating to the Real Property, Personalty or Other Assets of any nature whatsoever. -6- 11 "MALL ASSETS" means with respect to the Seller-Owned Malls, (i) the Real Property, (ii) the Other Assets, (iii) the Personalty, (iv) the Leases, (v) the Specialty License Agreements, (vi) the Reciprocal Easement Agreements and (vii) the Contracts. "MALL INFORMATION" means the following existing information, wherever located, with respect to each Mall: books and records, financial statements, operating budgets, structural, mechanical, geotechnical or other engineering studies, Plans, soil test reports, environmental reports, feasibility studies, appraisals, ADA surveys or reports, OSHA asbestos surveys, marketing studies, Mall documents and compilations, Lease summaries, the Leases, the Contracts, the Specialty License Agreements, the Reciprocal Easement Agreements and all other contracts, agreements and/or documents relating to the Malls that have been prepared at an Owner's request and are within Seller's possession or control. "MALLS" means Alexandria Mall, Brazos Mall, Killeen Mall, Mesilla Valley Mall, Park Plaza, Pecanland Mall, Shawnee Mall, Temple Mall and Villa Linda Mall. "MATERIAL CONTRACTS" means any (a) contracts or other agreements (but excluding Specialty License Agreements and Leases) that would require performance (in whole or in part) by Purchaser on or after the Closing Date of any expenditures that, in the aggregate with respect to each such contract or agreement, would exceed Two Hundred Fifty Thousand Dollars ($250,000.00) in any calendar year); (b) any agreement for the sale of land parcels that may comprise all or any portion of the Real Property; or (c) Reciprocal Easement Agreements. "MATERIAL LEASE" means any Lease or Specialty License Agreement that either (a) covers more than ten thousand (10,000) square feet of space or (b) provides for a construction allowance or other landlord expenditures of more than One Hundred Fifty Thousand Dollars ($150,000.00). "MESILLA VALLEY MALL" means that certain regional mall located in Las Cruces, New Mexico, more particularly described in EXHIBIT A4 attached hereto. "MORTGAGE LOAN ASSIGNMENT AND ASSUMPTION AGREEMENT" means the mortgage loan assignment and assumption agreement to be executed by and among Purchaser, Seller and TIAA in the form of EXHIBIT 6.2(i) attached hereto or such other form approved by Purchaser, Seller and TIAA. "MORTGAGE LOAN DOCUMENTS" means those mortgages, deeds of trust, promissory notes, financing statements, and other loan documents, and all amendments, modifications and supplements thereto, securing or evidencing either the Pecanland Loan or Temple Loan. "MRML" means Marathon Realty Management Limited, a Delaware corporation and an Affiliate of Seller. "MUSRI LOAN" means the existing loan in the amount of Two Million Two Hundred Thousand and No/100 Dollars ($2,200,000.00) from Seller to Temple relating to the Temple Mall. -7- 12 "MUSRI LOAN DOCUMENTS" means all promissory notes, mortgages, deeds of trust, financing statements and other loan documents evidencing or securing the MUSRI Loan, and all amendments, modifications and supplements thereto. "NEW CONTRACT" means any Contract or agreement entered into after the expiration of the Inspection Period, having a term that expires after the Closing Date and relating to the use, maintenance and operation of any Mall, or any portion thereof. "NEW LEASE" means any Lease entered into after the expiration of the Inspection Period but excluding any of the foregoing that has a term that expires prior to the Closing Date or is terminated by the Owner or the Tenant thereunder on or prior to the Closing Date pursuant to a termination right granted thereunder. "NEW SPECIALTY LICENSE AGREEMENTS" means any Specialty License Agreement entered into after the expiration of the Inspection Period but excluding any of the foregoing that has a term that expires prior to the Closing Date or is terminated by the Owner or the Tenant thereunder on or prior to the Closing Date pursuant to a termination right granted thereunder. "NML" means Northwestern Mutual Life Insurance Company. "OFFICE AND EQUIPMENT LEASES" means the Dallas, Texas and Houston, Texas office leases of MRML and the other office and/or equipment leases of Seller or MRML used in connection with the management or operation of the Malls, all of which leases are listed and described on EXHIBIT 9.1(f) attached hereto. "OTHER ASSETS" means all tangible and intangible assets of any nature owned by Seller or Centrixx, as the case may be relating to the Malls other than the Personalty, the Real Property, the Leases, the Specialty License Agreements and the Contracts, including, without limitation, (a) all warranties on the Personalty or Real Property, (b) all plans, specifications, engineering drawings and prints relating to the construction of the buildings or other improvements that comprise the Malls, (c) all copyrights, logos, designs, trademarks, trade names, service marks and all goodwill associated with the Malls (including, without limitation, those listed on EXHIBIT D attached hereto), but excluding (i) those that are owned by a Tenant or a Party, (ii) the name "Marathon," the Marathon logo and any similar or derivative names, (iii) the HRIS software and system owned by J.D. Edwards and (iv) the name "Centrixx" and any similar or derivative names and (d) all claims and causes of action arising out of or in connection with the Mall that Purchaser expressly agrees to assume (other than claims for delinquent Rents and tenant obligations accruing prior to the Closing Date for which Seller has received no credit pursuant to Article 7). "OWNER" means (a) with respect to Alexandria Mall, Alexandria, (b) with respect to Temple Mall, Temple, (c) with respect to Villa Linda Mall, Centrixx, and (d) with respect to all Seller-Owned Malls other than Villa Linda Mall, Seller. "PARK PLAZA" means that certain regional mall located in Little Rock, Arkansas, more particularly described in EXHIBIT A5 attached hereto. -8- 13 "PARTNERSHIP AGREEMENTS" means the Alexandria Partnership Agreement and the Temple Partnership Agreement. "PARTNERSHIP CONSENTS" means the Roberts Consent and the White Consents. "PARTNERSHIP ESTOPPEL CERTIFICATES" means the Temple Partnership Estoppel Certificate and the Alexandria Partnership Estoppel Certificate both in the form of EXHIBIT 6.2(j)(v) attached hereto. "PARTNERSHIP FINANCIAL STATEMENTS" means the financial statements of the Partnerships audited by Price Waterhouse LLP and dated as of December 31, 1995, and the Rent Roll and the Updated Rent Roll applicable to the Partnership Sites. "PARTNERSHIP INTERESTS" means the Alexandria Interest and the Temple Interest. "PARTNERSHIP SITES" means Alexandria Mall and Temple Mall. "PARTNERSHIPS" means Alexandria and Temple. "PARTY" means TIAA or NML, a party to a Reciprocal Easement Agreement, a Specialty License Agreement, a Material Contract, an Office or Equipment Lease or a Lease, in each case other than an Owner or its predecessors in title with respect to any Mall. "PBGC" means the Pension Benefit Guaranty Corporation. "PECANLAND LOAN" means the existing mortgage loan encumbering the Pecanland Mall payable to TIAA. "PECANLAND MALL" means that certain regional mall located in Monroe, Louisiana, more particularly described in EXHIBIT A6 attached hereto. "PERMITTED EXCEPTIONS" means (a) real estate taxes and assessments not yet due and payable, (b) exceptions to title that are approved or deemed approved by Purchaser pursuant to Section 5.3, (c) the Liens securing the Pecanland Loan or Temple Loan, as the case may be, and (d) any matters or encumbrances arising by or through Purchaser or its agents, employees or representatives. "PERSON" shall mean an individual, a partnership, a corporation, a trust, an unincorporated organization, a government or any department or agency thereof or any other entity. "PERSONALTY" means all moveable equipment, appliances, machinery, furniture, furnishings, supplies, computer hardware and peripherals, disks (including backup tapes and data), proprietary databases and programs and other personal property located on or used in connection with the operation, ownership or management of any Mall and owned by Seller or MRML. -9- 14 "PLANS" means the as-built 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 any Mall and all rentable space and common areas therein, any off-site improvements related to the Malls and as-built drawings for all underground utilities. "PRIOR SURVEY" means a survey of each Mall complying with the requirements set forth in the definition of "Survey" set forth in this Section 1.1, except that it shall be dated within one (1) year prior to the Effective Date and shall be subject to the provisos set forth in the first sentence of Section 5.1(a) of this Agreement. "PROPERTY" means (i) the Partnership Interests and (ii) the Mall Assets. "PURCHASE PRICE" means Three Hundred Sixteen Million and No/100 Dollars ($316,000,000.00). "PURCHASE PRICE ALLOCATION" means the portion of the Purchase Price allocated to each Seller-Owned Mall or Partnership Interest as set forth in the Schedule of Purchase Price Allocations attached hereto as EXHIBIT B. "PURCHASER" means First Union Real Estate Equity and Mortgage Investments, an Ohio business trust, having its business offices at 55 Public Square, Suite 1900, Cleveland, Ohio 44113. "PURCHASER AFFILIATE" means any Affiliate of Purchaser. "PURCHASER CLOSING DOCUMENTS" shall have the meaning set forth in Section 6.3 hereof. "PURCHASER INDEMNITEE" means each Purchaser Affiliate and each agent, officer, director, trustee, servant or employee of either Purchaser or any Purchaser Affiliate. "PURCHASER'S NOMINEE" means such person as Purchaser shall designate to receive title to any of the Mall Assets in accordance with Section 6.5, which conveyance shall occur simultaneously with or immediately after the Closing as part of Purchaser's equity financing for the purchase of the Property. "PURCHASER'S POST-CLOSING COVENANTS" shall have the meaning set forth in Section 12.4(b) hereof. "REAL PROPERTY" means all of that certain land comprising the Malls and any development tracts, outparcels or outlots relating to such Malls owned or leased by any Owner, including the buildings and all other improvements, structures, fixtures, parking area, facilities, installations, non-movable machinery or equipment on the real property or used in connection with the occupancy thereof (except to the extent of trade fixtures and equipment owned by Tenants under the Leases or the Specialty License Agreements or owned by other third parties), together with all easements, rights-of-way, strips and gores, tenements, hereditaments and appurtenances, thereunto belonging or appertaining and all right, title and interest of an Owner in and to any streets, alleys, passages, common areas and other rights-of- -10- 15 way or appurtenances included in, adjacent to and used in connection with such real property, before or after the vacation thereof, including, without limitation, the easements, access rights and other rights provided in the Reciprocal Easement Agreements. "REA ESTOPPEL CERTIFICATE" means the estoppel certificate in the form of EXHIBIT 6.2(j)(iii) attached hereto. "RECIPROCAL EASEMENT AGREEMENTS" means all reciprocal easement agreements, together with all modifications, amendments and supplements thereof benefitting and/or burdening a Mall. "RENT ROLL" means the rent roll for each Mall in the form set forth in EXHIBIT C attached hereto, together with schedule(s), also set forth in EXHIBIT C, setting forth (i) security deposits and (ii) minimum rent, breakpoint and percentage rent factor for each Lease. "RENTS" means all rents, including, without limitation, fixed, minimum, percentage and overage rents, payable to Seller by any Party under a Lease or Specialty License Agreement, but excluding Additional Charges. "ROBERTS" means Arthur Roberts, the holder of the remaining ten percent (10%) general partnership interest in Alexandria. "ROBERTS CONSENT" means the written consent of Roberts to the transfer of the Alexandria Interest to Purchaser or Purchaser's Nominee. "ROBERTS INTEREST" means the ten percent (10%) general partnership interest of Roberts in Alexandria. "SELLER" means (a) with respect to Villa Linda Mall, Centrixx, having a business address at 200 Wellington Street West, Suite 400, Toronto, Ontario Canada M5V 3C7; (b) for all other purposes, Marathon U.S. Realties, Inc., a Delaware corporation, having its business offices at One Galleria Tower, 13355 Noel Road, Suite 1200, Dallas, Texas 75240- 6678. "SELLER AFFILIATE" means any Affiliate of Seller. "SELLER CLOSING DOCUMENTS" shall have the meaning set forth in Section 6.2 hereof. "SELLER LEASE ESTOPPEL CERTIFICATE" means the Seller's estoppel certificate in the form of EXHIBIT 6.2(j)(ii) attached hereto. "SELLER INDEMNITEE" means each Seller Affiliate and each agent, officer, director, partner, servant or employee of Seller or any Seller Affiliate. "SELLER-OWNED MALLS" shall mean Brazos Mall, Killeen Mall, Mesilla Valley Mall, Park Plaza, Pecanland Mall, Shawnee Mall and Villa Linda Mall. -11- 16 "SELLER'S POST-CLOSING COVENANTS" shall have the meaning set forth in Section 12.4(a) hereof. "SHAWNEE MALL" means that certain regional mall located in Shawnee, Oklahoma, more particularly described in EXHIBIT A7 attached hereto. "SPECIALTY LICENSE AGREEMENTS" means all agreements or licenses for a term of one (1) year or less for occupancy of space within a Mall, but generally terminable at the Owner's option upon not more than sixty (60) days notice, and any amendments, modifications or work letters related thereto including those that may be made by an Owner after the Effective Date but prior to Closing in accordance with the terms of this Agreement. "SURVEY" means a survey of each Mall dated within sixty (60) days prior to the Effective Date, prepared by a surveyor or civil engineer duly licensed in the jurisdiction in which the Mall is located in accordance with the standards adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 1992 known as the "Minimum Standard Detail Requirements of Land Title Surveys", including Table A Optional Survey Responsibilities and Specifications 1 through 4, 6, 8, 9, 10, 11 and 13. The Surveyor's certification of the Survey shall run to Seller, the Partnership (with respect to the Partnership Sites), Purchaser, Purchaser's Nominee, Title Insurer and any lenders to Purchaser that Purchaser may designate in writing to Seller not less than thirty (30) days prior to the Closing Date. "TAXES" shall have the meaning set forth in Section 7.1(a) hereof. "TEMPLE" means Temple Mall Company, a Texas general partnership, established pursuant to that certain Agreement of Partnership dated October 19, 1973, as amended by Amendment No. 1 to Partnership Agreement dated April 11, 1974, as further amended by Amendment No. 2 to Partnership Agreement dated December 28, 1978, as further amended by Amendment No. 3 to Partnership Agreement dated January 20, 1984, (said Agreement of Partnership, as amended, is hereinafter referred to as the "TEMPLE PARTNERSHIP AGREEMENT"), in which Seller owns a fifty percent (50%) general partnership interest, and which owns the regional mall commonly known as Temple Mall located in Temple, Texas more particularly described on Exhibit A8 of ("Temple Mall"). "TEMPLE INTEREST" means Seller's 50% general partnership interest in Temple. "TEMPLE LOAN" the existing mortgage loan encumbering the Temple Mall payable to NML. "TENANTS" means tenants, subtenants, concessionaires, licensees and/or occupants under the Leases. "THIRD PARTY CLAIM" shall have the meaning set forth in Section 15.3(a) hereof. "TIAA" means Teachers Insurance and Annuity Association. -12- 17 "TITLE COMMITMENT" means an ALTA Commitment issued by the Title Insurer committing to the issuance of a Title Policy. "TITLE INSURER" means First American Title Insurance Company, 3033 LBJ Freeway, Dallas, Texas 75234 or any other nationally recognized title insurance company designated by Seller and approved by Purchaser. "TITLE POLICY" means a current ALTA Owner's Policy of Title Insurance (Form B, 1992) or such other comparable form as is available in the applicable jurisdiction issued by Title Insurer for each Mall dated the date and time of Closing and with liability in the amount specified in Section 5.1, insuring Purchaser or Purchaser's Nominee as owner of fee title to the Seller-Owned Mall, Alexandria as owner of fee title to Alexandria Mall and Temple as owner of fee title to Temple Mall (and with respect to the Partnership Sites, showing Purchaser or Purchaser's Nominee as the named insured, with a proportionate reduction exception as to the existing policies for Temple and Alexandria) and with affirmative insurance as to all appurtenant easements benefiting the Real Property, including, without limitation, those granted under the Reciprocal Easement Agreement, subject only to the Permitted Exceptions applicable to the Mall covered by such policy. Each Title Policy shall (a) delete the standard or general exceptions from coverage (but may include an exception relating to parties in possession under unrecorded Leases), (b) contain a contiguity endorsement for each Mall that is comprised of more than one parcel if available, (c) affirmatively insure the Purchaser's rights under any Reciprocal Easement Agreements or other appurtenant easements that benefit the Real Property, (d) contain a survey endorsement if available, (e) if such endorsement is available, contain a zoning endorsement in the form of ALTA Endorsement Form 3.1 (or equivalent endorsement approved by Purchaser), (f) provide at Purchaser's expense for such coinsurance and direct access and such other endorsements as Purchaser shall require, (g) as to Alexandria Mall and Temple Mall, if Purchaser acquires the Partnership Interests therein rather than fee title, contain a non-imputation endorsement if available, and (h) contain a vehicular access endorsement if available. "UPDATED RENT ROLL" means a rent roll (in the form of the Rent Roll) certified for each Mall as true and correct by Seller as of a date not later than ten (10) Business Days prior to the Closing Date. "UPDATED SURVEY" shall have the meaning set forth in Section 5.1(b) hereof. "VILLA LINDA MALL" means that certain regional mall located in Santa Fe, New Mexico, more particularly described in EXHIBIT A9 attached hereto. "WHITE CONSENTS" means the written consent of the trustees under the White Trusts to the transfer of the Temple Interest to Purchaser or Purchaser's Nominee. "WHITE INTERESTS" means the fifty percent (50%) general partnership interest of the White Trusts in Temple. "WHITE TRUSTS" means those certain related trusts that collectively hold the remaining fifty percent (50%) general partnership interest in Temple. -13- 18 "WITHHOLDING CERTIFICATE" shall have the meaning set forth in Section 6.8. 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", "hereinafter", "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 (or cause to be sold) and Purchaser agrees to purchase from Seller, the Property. 2.2 PURCHASE PRICE. The Purchase Price for the Property shall be payable as follows: (a) Within one (1) Business Day after the Effective Date, Purchaser shall deposit with Escrowee the Deposit, by wire transfer of immediately available funds, which, along with all interest or other earnings accrued on such sum, shall serve as earnest money for this transaction. (b) The Balance of the Purchase Price shall be deposited by Purchaser in escrow on or prior to the Closing Date in immediate, 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 pursuant to the terms of the Escrow Agreement in the form of Exhibit 2.3 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 interest on the Deposit pursuant to the terms of this Agreement or the Escrow Agreement. -14- 19 ARTICLE 3 LENDER/PARTNER APPROVALS 3.1 ASSUMPTION. Subject to the terms and conditions of this Agreement, including without limitation the provisions of this Article 3 and of Article 11 relating to Lender and Partner Approvals and Purchaser's rights to terminate under Article 4 and 5, the Mortgage Loan Documents that secure the Pecanland Loan and the Temple Loan, respectively, shall be deemed to be Permitted Exceptions. Seller shall assign its rights to Purchaser or Purchaser's Nominee, and Purchaser or Purchase's Nominee shall assume Seller's obligations, as to the Pecanland Loan pursuant to the terms and conditions of the Mortgage Loan Assignment and Assumption Agreement. 3.2 LOAN BALANCES. Not less than fifty-five (55) days after the Effective Date, Seller shall deliver to Purchaser a Lender Estoppel Certificate from each Lender. In addition to the other requirements of the form of Lender Estoppel Certificate attached hereto as EXHIBIT 6.2(j)(iv), the Lender Estoppel Certificate shall include a statement of (i) the then outstanding balance of each of the Pecanland Loan or the Temple Loan, as the case may be, together with the amount of interest accrued thereon but not then paid, (ii) the amount of all deposits or reserves referred to in Section 7.6 hereof held by such Lender, if any, and (iii) the per diem interest charge for the period up to and including the Closing Date. Notwithstanding the foregoing, in the event that the Pecanland Mall is excluded from this transaction, no Lender Estoppel Certificate shall be required for such Mall. 3.3 CONTINGENCY FOR LENDER APPROVAL. (a) The obligations of the parties under this Agreement shall be contingent upon Seller obtaining, not less than one (1) Business Day prior to the expiration of the Inspection Period, written consent from TIAA to the transfer of Pecanland Mall to Purchaser or Purchaser's Nominee and the assumption of the Pecanland Loan by Purchaser or Purchaser's Nominee. If Seller is unable to obtain such written consent from TIAA by such deadline, then Purchaser shall have the right, at its election exercisable by written notice given within one Business Day after expiration of the Inspection Period, to participate for an additional thirty (30) days after such exercise, in further discussions or negotiations with TIAA to obtain such consent, in which case the Closing Date shall be correspondingly extended. If TIAA has not consented to the transfer and assumption by the Closing Date, as extended, the Mall Assets with respect to Pecanland Mall shall be excluded from the Property to be conveyed as part of the Closing, this Agreement shall not terminate and the parties shall proceed to close on the sale of the remaining Mall Assets and the Partnership Interests with a reduction in the Purchase Price by an amount equal to the Purchase Price Allocation for Pecanland Mall. Notwithstanding the foregoing, the parties shall continue in good faith to seek consent from TIAA for a period of six (6) months after the Closing Date, and if so obtained, Purchaser or Purchaser's Nominee shall purchase the Mall Assets with respect to Pecanland Mall for the purchase price equal to the Purchase Price Allocation applicable to Pecanland Mall, less the then outstanding principal amount of the Pecanland Loan, but otherwise on the same terms and conditions as are applicable to the other Seller-Owned Malls under this Agreement. The closing of such purchase shall occur not more than thirty (30) days after the parties obtain TIAA's consent to the transfer. In addition, if TIAA does not consent to the transfer and assumption of Pecanland Mall by the Closing Date, Seller agrees to enter into an agreement with Purchaser engaging Purchaser or Purchaser's designated manager to manage and lease Pecanland Mall on terms and conditions mutually acceptable to Purchaser and Seller, but such management and leasing agreement shall be cancelable on thirty (30) days notice by either -15- 20 party and shall be subject to the consent of TIAA. The provisions of this Section 3.3(a) shall survive the Closing. As used in this Section 3.3(a) only, the Inspection Period shall mean the initial sixty (60) day Inspection Period without any extension as permitted under Section 4.3. (b) The obligations of the parties under this Agreement shall be contingent upon Seller obtaining written consent from NML to the transfer of the Temple Interest to Purchaser or Purchaser's Nominee or, as the case may be, the conveyance of the Temple Mall to Purchaser or Purchaser's Nominee as set forth in Section 3.4(c) hereof. If Seller is unable to obtain such written consent from NML prior to the Closing Date (or any extended Closing Date agreed to by Purchaser and Seller), either Seller or Purchaser shall have the right to exclude the Temple Interest from the Property to be transferred as part of the Closing, this Agreement shall not terminate and the parties shall proceed to close on the sale of the remaining Malls with a reduction in the Purchase Price by an amount equal to the Purchase Price Allocation applicable to the Temple Interest. 3.4 PARTNER APPROVALS. (a) The parties' obligations under this Agreement with respect to the sale of the Alexandria Interest and the Temple Interest are subject to Seller obtaining the Partnership Consents. (b) As an alternative to obtaining the applicable Partnership Consent, Seller may obtain the written agreement of Roberts and/or the White Trusts for the purchase on the Closing Date by Seller of the Roberts Interest or the White Interests, respectively. Purchaser agrees to cooperate with Seller in negotiating any such agreements and in consummating any transaction agreed to by Seller, Purchaser, and the seller(s) of such interest. Notwithstanding the foregoing, the purchase price for the Roberts Interest shall not exceed Three Million One Hundred Sixty-Seven Thousand and No/100 Dollars ($3,167,000.00) and the purchase price for the White Interests shall not exceed Twelve Million Four Hundred Thousand and No/100 Dollars ($12,400,000.00) less fifty percent (50%) of the outstanding principal balance of the NML Loan on the Closing Date. The purchase price for the Roberts Interest or the White Interests shall be in cash unless Purchaser, Seller and the seller(s) of such interest mutually agree on another form of consideration, such as, at Purchaser's option, shares of Purchaser having a value equal to the applicable purchase price. If Purchaser elects to permit the payment of the purchase price by issuing shares of Purchaser's stock, such shares shall be issued on such terms and conditions as Purchaser shall require, including, without limitation, the terms and conditions contained in the form of the Shareholder Agreement attached as EXHIBIT 3.4(B) hereto. (c) In the event that Roberts and/or the White Trusts agree to the sale of the Roberts Interest and/or the White Interests, Purchaser shall purchase the Roberts Interest and/or the White Interests from Seller on the Closing Date at a purchase price determined in the manner described in Section 3.4(b), or Purchaser shall have the right to elect to purchase, as part of the Closing, the Mall Assets with respect to Alexandria Mall and/or the Mall Assets with respect to Temple Mall directly from Alexandria or Temple, respectively, rather than acquiring the Alexandria Interest and the Roberts Interest or the Temple Interest and the White Interests, as the case may be. The parties obligations with respect to the sale of the Mall Assets with respect to Temple Mall and Purchaser's right to purchase the Mall Assets with respect to Temple Mall shall be subject to Seller obtaining NML's written consent to the transfer of the Temple Mall to Purchaser or Purchaser's Nominee prior to the Closing Date. In the event that Purchaser makes such an election, (i) the Closing Documents shall be modified so that documents identical in form to those conveying the other Mall Assets are delivered with respect -16- 21 to the Mall Assets with respect to Alexandria Mall and/or Temple Mall, as applicable, with the conveyance running to Purchaser or Purchaser's Nominee; (ii) Seller shall assign Seller's rights, and Purchaser or Purchaser's Nominee shall assume, Seller's obligations under the Temple Loan, which assignment and assumption shall be in a form substantially similar to the Mortgage Loan Assignment and Assumption and as approved by NML; and (iii) the Purchase Price shall be increased by the purchase price for the White Interests or Roberts Interest, as the case may be, established pursuant to Section 3.4(b) hereof. (d) In the event that Seller is unable to obtain both the Roberts Consent and the White Consents by the thirtieth (30th) day after the Effective Date, then Purchaser shall have the right, at its election exercisable by written notice given on or before the expiration of the Inspection Period, to participate during the balance of the Inspection Period in further discussions or negotiations with Roberts and/or the White Trusts to obtain such consent. If both the Roberts Consent and the White Consents have not then been obtained, Purchaser shall have the option, exercisable at any time during the Inspection Period by written notice to Seller, to terminate this Agreement or, subject to satisfaction of the other conditions to Closing, to proceed to Closing with all of the Partnership Interests excluded from the sale of the Property, in which event, the Purchase Price shall be reduced by the Purchase Price Allocation applicable to the Partnership Interests. If Purchaser fails to notify Seller during the Inspection Period that Purchaser elects to terminate, this Agreement shall continue in full force and effect and Purchaser shall purchase the Mall Assets on the Closing Date. If either the Roberts Consent or the White Consents is obtained during the Inspection Period, the parties, subject to satisfaction of the other conditions to Closing, shall proceed to Closing, with the Partnership Interest as to which consent has not been obtained excluded from the sale of the Property, and the Purchase Price shall be reduced by the Purchase Price Allocation applicable to the excluded interest. (e) If the White Consents are obtained during the Inspection Period, but the trustees under the White Trusts do not elect to sell the White Interests, then, in such event, Purchaser and Seller agree that the Purchase Price Allocation applicable to the Temple Interest shall be increased by One Million One Hundred Thousand and No/100 Dollars ($1,100,000.00) and Seller, at Closing, shall assign to Purchaser or Purchaser's Nominee all of Seller's right, title and interest and Purchaser or Purchaser's Nominee shall assume all of Seller's obligations in, to and under the MUSRI Loan Documents pursuant to a loan assignment and assumption agreement in a form and substance acceptable to Seller and Purchaser. 3.5 PURCHASER'S NOMINEE. For purposes of the approvals by the Lenders or the Partnership Consents referred to in this Article 3, Purchaser's Nominee shall be the Joint Venture. Each request by Seller for such an approval shall contemplate a transfer of the Property to either Purchaser or such Joint Venture as Purchaser's Nominee. ARTICLE 4 INSPECTIONS BY PURCHASER 4.1 PURCHASER'S INSPECTION PERIOD. Purchaser and its engineers, surveyors, appraisers, attorneys, auditors and other agents or representatives shall have the right during the Inspection Period at Purchaser's sole cost and expense to inspect, examine, analyze, audit, survey, obtain engineering inspections, conduct soil tests, environmental tests and inspections of the Malls, examine, review and copy all Mall Information, the Office and -17- 22 Equipment Leases, examine, review and copy all records or files relating to the Employees, the Benefit Plans or other employment matters relating to MRML, and conduct such other tests, studies, reviews and inspections as Purchaser may reasonably elect. Seller shall cooperate with Purchaser in conducting the foregoing inspections and Seller shall make available to Purchaser at Seller's Dallas, Texas office, all Mall Information reasonably requested by Purchaser. Upon not less than twenty-four (24) hours prior written notice, Purchaser shall have reasonable access to the Malls and the Mall Information wherever located and shall be permitted to duplicate all or so much of the Mall Information Purchaser deems appropriate. Seller shall cooperate with Purchaser and facilitate Purchaser's inspection of the Malls and Mall Information and Purchaser shall reimburse Seller for any reasonable out-of-pocket expenses incurred by Seller, at Purchaser's request, in connection with Purchaser's due diligence investigations. Prior to Closing, Seller shall deliver all Mall Information to Purchaser at MRML's Dallas office and/or at the Malls, as the case may be. 4.2 TERMINATION RIGHT. Notwithstanding anything in this Agreement to the contrary, Purchaser may, in its sole discretion, elect to terminate this Agreement during the Inspection Period if Purchaser is not satisfied with the results of its due diligence review for any reason whatsoever. Without limiting the foregoing, and notwithstanding any other provision of this Agreement relating to Purchaser's presumed acceptance of the Pecanland Loan or the Temple Loan as a Permitted Encumbrance, Purchaser may elect to terminate this Agreement during the Inspection Period if it objects to the terms and conditions of any Mortgage Loan Document, including, without limitation, any modification thereto required as a condition to or in connection with any consent to the transactions contemplated hereby that is required to be obtained from a Lender pursuant to the terms of any Mortgage Loan Document. Such election to terminate shall be exercisable by Purchaser's delivery to Seller of a written notice of termination on or prior to the expiration of the Inspection Period, as it may be extended pursuant to Section 4.3 hereof. The failure of Purchaser to deliver to Seller the written notice of termination on or prior to the expiration of the Inspection Period shall be deemed a waiver of Purchaser's right to terminate this Agreement pursuant to this Section 4.2. 4.3 EXTENSIONS OF INSPECTION PERIOD. (a) The Inspection Period shall also be extended, day-for-day, for each day that passes after the tenth (10th) day after the Effective Date in which Purchaser has not received any Survey, the Title Commitments or a copy of any matter of record reflected in the Title Commitments, as and subject to the exceptions and provisos set forth in Section 5.1. (b) Purchaser shall have the right to further extend the Inspection Period, as may be extended by Section 4.3(a) hereof, by an additional period of thirty (30) days. The foregoing right to extend the Inspection Period shall be exercisable by Purchaser's delivery to Seller of a written notice electing to so extend the Inspection Period on or prior to the expiration of the Inspection Period, as it may be extended by Section 4.3(a) hereof. If Purchaser so elects to extend the Inspection Period, then the sum of One Million and No/100 Dollars ($1,000,000.00) of the Deposit shall be non-refundable to Purchaser in the event of termination of this Agreement for any reason other than default by Seller. 4.4 INDEMNIFICATION BY PURCHASER. Purchaser agrees to repair any material damage to the Malls, or to any office, room or other location owned or leased by Seller or Seller's agents or representatives, caused by the entry of Purchaser or any of Purchaser's agents, engineers, surveyors and other representatives upon the Malls, or in any office, room -18- 23 or other location owned or leased by Seller or Seller's agents or representatives, and Purchaser shall indemnify, defend and hold Seller and Seller's Affiliates harmless from and against any and all Damages caused by or resulting from any inspection, surveys, acts or omissions of Purchaser, its agents, engineers, surveyors and other representatives while at the Malls or while in any office, room or other location owned or leased by Seller or Seller's agents or representatives. The provisions of this Section 4.4 shall survive the Closing. 4.5 LIMITATIONS ON PURCHASER'S INSPECTIONS. Inspections of the Malls by Purchaser and its agents shall in each case be subject to the applicable Leases and Specialty License Agreements and 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 Malls. Any inspections may be observed by Seller or Seller's agents, including the Broker. 4.6 CONDITION OF PROPERTY. Purchaser acknowledges that neither Seller nor any of its officers, directors, general or limited partners, shareholders, agents, representatives or employees, nor the Broker, has made any representation or warranty concerning the Property or the Partnership Sites other than those representations and warranties of Seller expressly set forth in this Agreement. ARTICLE 5 TITLE AND SURVEYS 5.1 TITLE AND SURVEY. (a) Seller shall furnish to Purchaser, for each Mall, a Survey (subject to 5.1(b)), a Title Commitment and copies of matters of record reflected in each Title Commitment within ten (10) days after the Effective Date (the "INITIAL SURVEY DELIVERY DATE"), subject to extension due to delay on the part of the Title Insurer or surveyor; provided, however, that Seller shall not be deemed to have failed to satisfy the foregoing Survey delivery deadline if the sole omission from a Survey is the identification of adjoining property owners or if any Purchaser Nominee or lender(s) to Purchaser are not identified in the Survey certification; provided, further, however, that the Inspection Period shall be extended due to any delay in providing such adjoining property information beyond the thirtieth (30th) day after the Effective Date and that Surveys certified to any such Purchaser Nominee or to any such lender(s) shall be provided not later than the Closing Date. On the Closing Date, Seller shall cause to be delivered to Purchaser the Title Policies in the respective insured amount equal to the Purchase Price Allocation applicable to each Seller-Owned Mall, and Partnership Interest and otherwise in the form approved by the Purchaser pursuant to its review of title matters as set forth below. (b) Notwithstanding the provisions of Section 5.1(a), Purchaser acknowledges that within ten (10) days after the Effective Date Seller shall furnish to Purchaser a Prior Survey for each Mall, together with a certification by Seller that there have been no material changes to the Real Property relating to the Mall since the date of the Prior Survey that would require a modification to the Prior Survey. Within thirty (30) days after the Effective Date, Seller shall furnish to Purchaser a Survey as to each Mall (subject to the provisions set forth in Section 5.1(a) hereof regarding deliveries of Surveys certified to certain parties not later than the Closing Date) (the "UPDATED SURVEY"). If one or more Updated Surveys discloses any title matter that is not shown on the corresponding Prior Survey and that has a material adverse effect on the title to or use of the Mall shown thereon, then the Inspection Period shall be -19- 24 extended, day-for-day, for each day between the Initial Survey Delivery Date and the date on which the last to be delivered of the Updated Surveys with a discrepancy was delivered. 5.2 LIENS. Seller shall remove at or before Closing all Liens on any of the Property, other than the Permitted Exceptions and the liens of the Mortgage Loan Documents relating to the Pecanland Loan or the Temple Loan, including, without limitation (a) all delinquent taxes, bonds and assessments and interest and penalties thereon that are a Lien on the real property and (b) all other Liens, whether or not shown on the Title Commitment, that are not Permitted Exceptions. Seller shall be fully responsible for any fees, prepayment premiums or penalties incurred in connection with the removal of all such Liens. 5.3 APPROVAL/DISAPPROVAL OF TITLE REVIEW. Purchaser has the right to approve or disapprove the Title Commitments, the Surveys, the Lien Searches and all items shown or referenced in any of them that are not Permitted Exceptions, in the exercise of Purchaser's sole discretion, on or before the expiration of the Inspection Period. If Purchaser disapproves any such condition of title, Purchaser shall deliver to Seller a Disapproval Notice. If Purchaser fails to give Seller a Disapproval Notice by the expiration of the Inspection Period, Purchaser shall be deemed to have approved the Title Commitments, the Lien Searches, the Surveys and all matters shown or referenced in any of them. With respect to any Disapproved Title Matters, 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 with respect to any particular Mall, Purchaser may elect, in its sole discretion, (a) subject to satisfaction of the other conditions to Closing, to close the purchase of the Mall in question, take title subject to the Disapproved Title Matter(s) that Seller elects not to remove or cure and deduct from the respective Purchase Price Allocation otherwise payable to Seller at Closing for the affected Property(ies) all actual and direct costs incurred by Purchaser in connection with its cure or removal up to a maximum of Fifty Thousand Dollars ($50,000.00) as to each Disapproved Title Matter, (b) to terminate this Agreement only with respect to such Mall, with the Purchase Price reduced by an amount equal to the Purchase Price Allocation applicable to the Mall excluded or (c) to terminate this Agreement, in which event the Deposit shall be returned to Purchaser. If Seller elects to cure or remove any Disapproved Title Matter, then it thereafter shall be obligated to do so as long as this Agreement is in effect. Seller shall have thirty (30) days to remove or cure any Disapproved Title Matters that it has elected to remove or cure (or deemed to have elected to remove or cure), subject to extensions of such thirty (30)-day period as 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 5.3. 5.4 PURCHASER'S OPTIONS. If any Disapproved Title Matters that Seller has elected to remove or cure (or deemed to have elected to remove or cure) have not been removed at least five (5) days prior to Closing (as may be extended pursuant to Section 5.3 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 Mall in question, and take title subject to any Disapproved Title Matters that have not been cured or removed at or before Closing (provided that such election shall not release Seller from its obligation to cure or remove Disapproved Title -20- 25 Matters after the Closing, which obligation shall survive the Closing); (b) subject to satisfaction of the other conditions to Closing, to close the purchase of the Mall in question, cure or remove the Disapproved Title Matters that have not been cured or removed by Seller, and deduct from the respective Purchase Price Allocation otherwise payable to Seller at Closing for the affected Property(ies) all actual and direct costs, up to a maximum of Fifty Thousand and No/100 ($50,000.00) as to each Disapproved Title Matter, incurred by Purchaser in connection with its cure or removal of any Disapproved Title Matters that Seller was obligated to cure or remove; (c) to terminate this Agreement only with respect to such Mall and the Purchase Price shall be reduced by an amount equal to the Purchase Price Allocation applicable to the Mall excluded; or (d) to terminate this Agreement, in which event the Deposit shall be returned to Purchaser. 5.5 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) The fees charged by Escrowee shall be divided equally between Seller and Purchaser. (b) Seller shall pay the cost of the Surveys, the cost of securing the Title Commitments and the premium cost for the Title Policies (including, as to endorsements, only the cost of the endorsements required under the definition of Title Policy in Section 1.1 other than clause (f) thereof). (c) Purchaser shall pay the cost of any endorsements to the Title Policies requested by Purchaser in addition to those required to be provided by Seller pursuant to the definition of Title Policy in Section 1.1 including any costs arising under clause (f) thereof. (d) Seller shall be solely responsible for the payment of any real property transfer taxes, gains taxes levied or imposed upon Seller or the Property as a result of the transfers to Purchaser or Purchaser's Nominee, sales taxes levied or imposed upon Seller or the Property as a result of the transfers to Purchaser or Purchaser's Nominee, documentary stamps and other taxes, fees or charges imposed in connection with the conveyance of any Mall Assets or the transfer of any Partnership Interests but excluding any mortgage taxes or documentary taxes as to any of Purchaser's financing documents and excluding any transfer taxes, gains taxes, sales taxes, documentary stamps and other taxes arising from a transfer to Purchaser's Nominee that would otherwise not be due upon a transfer to Purchaser. Seller shall be required to 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 Purchaser, and not Seller, shall be responsible for the payment of any other recording fees or charges. Purchaser shall pay the costs of the Lien Search. (e) 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, gains taxes, documentary stamps, sales taxes and other taxes, fees or charges -21- 26 imposed by any governmental agency in connection with the transactions contemplated hereby. ARTICLE 6 CLOSING 6.1 CLOSING. Provided all conditions set forth in Sections 11.1 and 11.2 hereof have been either satisfied or waived, the Closing shall take place on the Closing Date at the office of Seller, or such other date or place as the parties shall agree. 6.2 SELLER CLOSING DOCUMENTS. On or before the Closing Date, or, if a deadline is specified below, by such deadline, Seller shall deliver, or, in the case of the Office and Equipment Leases, cause MRML to deliver, directly to Purchaser or to the Escrowee, as is specified in Section 6.4 hereof, two (2) executed originals (or four (4) counterparts, as the case may be, but only one (1) executed original of each deed) of each of the following documents for each Partnership Interest or for the Mall Assets with respect to each Seller-Owned Mall, as the case may be (collectively, the "SELLER CLOSING DOCUMENTS"): (a) A resolution of the Board of Directors of each Seller, certified by their respective Secretaries, authorizing the execution and delivery of this Agreement, the Seller Closing Documents and the consummation of the transactions contemplated hereby. (b) An incumbency certificate certifying the authority of the officers of each Seller executing this Agreement or any Seller Closing Documents. (c) Limited or Special Warranty Deeds transferring to Purchaser or Purchaser's Nominee fee simple title to the Real Property comprising each Seller-Owned Mall, subject only to the Permitted Exceptions, in the form of the attached EXHIBIT 6.2(c). (d) Bills of Sale, with limited warranty covenants, transferring to Purchaser or Purchaser's Nominee all of the Personalty and the Other Assets with respect to each Seller-Owned Mall and with respect to any Personalty owned by MRML, in the form of EXHIBIT 6.2(d) attached hereto. (e) As to each Partnership Interest, four (4) counterparts of the Assignment of Partnership Interests and of an Amendment to Partnership Certificate. (f) As to each Seller-Owned Mall, four (4) counterparts of the Assignment of Leases. (g) As to each Seller-Owned Mall, four (4) counterparts of the Assignment of Contracts. -22- 27 (h) As to each Seller-Owned Mall, four (4) counterparts of the Assignment of Reciprocal Easement Agreements. (i) Four (4) counterparts of each Mortgage Loan Assignment and Assumption Agreement, including, without limitation, any UCC filings required in connection therewith. (j) Except as otherwise provided below, not later than fifty (50) days after the Effective Date, (i) Lease Estoppel Certificates from the tenant under each Lease for an Anchor Store, and, in the case of each Mall, from Tenants occupying at least eighty percent (80%) of all non-anchor rented area of the Mall, subject to the last sentence of this Section 6.2(j) (such non-anchor rented area for each Mall as of the Effective Date being listed on EXHIBITS A-1 through A-9); (ii) a Seller Lease Estoppel Certificate if and as provided in the last sentence of this Section ; (iii) a REA Estoppel Certificates from each Party to a Reciprocal Easement Agreement; (iv) a Lender Estoppel Certificate, not later than fifty-five (55) days after the Effective Date, from each Lender; and (v) a Partnership Estoppel Certificate executed by each partner in the respective Partnerships other than Seller and having attached thereto a set of the same partnership documents provided to Purchaser by Seller pursuant to Section 6.2(l). A Seller Lease Estoppel Certificate with respect to any Tenant shall expire and be of no force or effect upon Purchaser's receipt of the Lease Estoppel Certificate from the applicable Tenant consistent with the information set forth on the Rent Roll and the Seller Estoppel Certificate. An Estoppel Certificate shall be deemed to be in form and substance satisfactory to Purchaser if it is executed by the applicable Tenant or other Party with the information consistent with that set forth in the Rent Roll and if it is dated not more than sixty (60) days before the Closing Date, provided that if Purchaser extends the Inspection Period under Section 4.3(b), the foregoing sixty (60) day limitation shall be extended to ninety (90) days. If and to the extent that, despite Seller's compliance with Section 8.8 hereof, Seller does not obtain Lease Estoppel Certificates from Tenants occupying at least eighty percent (80%) of all non-anchor rented area of each Mall, and provided that Seller has delivered Tenant Estoppel Certificates from Tenants occupying at least sixty percent (60%) of all non-anchor rented area of the Mall, then Seller may satisfy the requirements of Section 6.2(j)(ii) by delivering to Purchaser, not later than fifty-five (55) days after the Effective Date, a Seller Lease Estoppel Certificate as to Leases identified by Purchaser (which identification Purchaser shall provide to Seller by fifty-two (52) days after the Effective Date) and sufficient to result in Purchaser having received Lease Estoppel Certificates plus Seller Lease Estoppel Certificates as to eighty percent (80%) of such non-anchor rented area of each Mall. (k) Not later than five (5) Business Days before the Closing Date, the Updated Rent Roll. (l) Not later than five (5) Business Days before the Closing Date, the execution copies of the Partnership Agreements or copies thereof, certified by an officer of Seller. -23- 28 (m) A FIRPTA Affidavit, executed by Marathon U.S. Realties, Inc. (n) A Form 1099S, executed by Marathon U.S. Realties, Inc.. (o) All consents and approvals of the Lenders necessary pursuant to Section 3.3, the Partnership Consents and all consents listed on EXHIBIT 9.1(m). (p) Legal opinion of Seller's counsel relating to the matters set forth in Sections 9.1(g), (h) and (o)(i). (q) Four (4) counterparts of each Assignment of Office and Equipment Lease. (r) Four (4) counterparts of the written notices (i) to each Party to any Reciprocal Easement Agreement affecting the Seller-Owned Malls advising it of the change of ownership and directing it to pay all charges under its Reciprocal Easement Agreement for all periods from and after the Closing Date as directed by Purchaser; (ii) to each Tenant in the Seller-Owned Malls advising it of the change of ownership and directing it to pay Rent and other charges under its Lease for all periods from and after the Closing Date as directed by Purchaser; (iii) a general notice to any Party to the Contracts relating to the Seller-Owned Malls advising of the transfer and assignment of Seller's interest in the Contracts to Purchaser and directing that future inquiries be made directly to Purchaser; and (iv) to each landlord under an Office and Equipment Lease advising of the transfer and directing that future invoices and other notices be given directly to Purchaser. (s) GAP Undertaking from Seller to the Title Company; subject to the provisions of Section 8.7 hereof, any documentation required to be executed by Seller and/or any other party in order to remove all Liens required to be removed by Seller pursuant to the terms of this Agreement, together with any fees, prepayment premiums, penalties or other funds needed to accomplish such removal (the net proceeds of the Balance of the Purchase Price payable to Seller pursuant to the Closing Statement may be applied for this purpose); and any documentation required to be executed by Seller with respect to any state, county, or local transfer taxes or documentary taxes applicable to the conveyance of the Property pursuant to this Agreement. (t) Such other documents, instruments or agreements that Seller may reasonably be required to execute and/or deliver on or prior to Closing pursuant to any provision of this Agreement. In addition, at or prior to the Closing, Seller shall also deliver to, or at the direction of, Purchaser all keys, codes, files, computer disks and software included in the Personalty, books, records, Lease files, marketing materials, surveys, plans, specifications, or other written information or documents relating to any of the Malls in Seller's possession and -24- 29 control and all security codes relating to any Property and any other Personal Property or other Assets. 6.3 PURCHASER CLOSING DOCUMENTS. On or before the Closing Date, Purchaser shall deliver, or cause FUMI to deliver, as applicable, directly to Seller or to the Escrowee, as is specified in Section 6.4 hereof, two (2) executed originals (or four (4) counterparts, as the case may be) of each of the following documents for each Mall or Partnership Interest, as the case may be (collectively, as the "PURCHASER CLOSING DOCUMENTS"): (a) A resolution of the Board of Trustees of Purchaser, certified by its Secretary, authorizing the execution and delivery of this Agreement, the Purchaser Closing Documents and the consummation of the transactions contemplated by this Agreement and a Resolution of the Board of Directors of FUMI authorizing the execution and delivery of the Documents to be executed and delivered by FUMI as contemplated by the terms of this Agreement. (b) Incumbency certificates certifying the authority of the officers of Purchaser executing and delivering this Agreement or any Purchaser Closing Documents, and of FUMI executing and delivering any Purchaser Closing Documents, as applicable. (c) Four (4) counterparts of the Assignment of Partnership Interests and of an Amendment to Partnership Certificate. (d) Four (4) counterparts of the Assignment of Leases. (e) Four (4) counterparts of the Assignment of Contracts. (f) Four (4) counterparts of the Assignment of Reciprocal Easement Agreement. (g) Four (4) counterparts of the Mortgage Loan Assignment and Assumption Agreement, including, without limitation, any UCC filings required in connection therewith. (h) Legal opinion of Purchaser's counsel relating to the matters set forth in Sections 9.3(a), (b) and (c). (i) Four (4) counterparts of each Assignment of Office and Equipment Lease. (j) Four (4) counterparts of the written notices (i) to each Party to any Reciprocal Easement Agreement affecting the Seller-Owned Malls advising it of the change of ownership and directing it to pay all charges under its Reciprocal Easement Agreement for all periods from and after the Closing Date as directed by Purchaser; (ii) to each Tenant in the Seller-Owned Malls advising it of the change of ownership and directing it to pay Rent and other charges under its Lease for all periods from and after the Closing Date as directed by Purchaser; (iii) a general notice to any party to the Contracts assigned to Purchaser advising -25- 30 of the transfer and assignment of Purchaser's interest in the Contracts to Purchaser and directing that future inquiries be made directly to Purchaser; and (iv) to each landlord under an Office and Equipment Lease advising of the transfer and directing that future invoices and other notices be given directly to FUMI. (k) Any documentation required to be executed by Purchaser with respect to any state, county, or local transfer taxes or documentary taxes applicable to the conveyance of the Property pursuant to this Agreement. (l) Such other documents, instruments or agreements that Purchaser may reasonably be required to execute and/or deliver on or prior to Closing pursuant to any provision of this Agreement. 6.4 OCCURRENCE OF CLOSING. Seller and Purchaser shall deposit jointly with the Escrowee counterpart executed copies of the Limited or Special Warranty Deeds, the Assignments of Leases, the Assignments of Reciprocal Easement Agreements, the Mortgage Loan Assignment and Assumption Agreement and any documentation required to be executed by Seller or Purchaser pursuant to Section 6.2(s) or Section 6.3(k) and to be filed with any governmental office in connection with the recording of any of the foregoing (the "FILING DOCUMENTS"), and any funds required to be deposited by Seller pursuant to Section 6.2(s) hereof (which may be by credit against the Balance of the Purchase Price), accompanied by joint filing instructions setting forth the order of recording. As provided in Section 2.2(b), Purchaser also shall deposit the Balance of the Purchase Price with the Escrowee. The Closing shall be deemed to have occurred upon the completion of the following: (a) Delivery of the Filing Documents to the Escrowee; (b) Delivery of the other Seller Closing Documents to Purchaser and of the other Purchaser Closing Documents to Seller; (c) Delivery by the Title Insurer to Purchaser of either (at Purchaser's option) "proforma" policies of title insurance or "mark-ups" of the Title Commitments, in either case, conforming to the requirements of the Title Policies described in Section 1.1 hereof and having an effective date of insurance as of the date of recording of the Filing Documents to the Escrowee; and (d) Delivery of the Balance of the Purchase Price by the Escrowee to Seller. 6.5 TITLE TO PURCHASER'S NOMINEE. Purchaser may elect to have title to any one or more Properties conveyed to any one or more of Purchaser's Nominees. In each such instance, Purchaser shall, on or before the date that is five (5) Business Days before the Closing Date, deliver to Seller a written notice setting forth the name, tax mailing address, state of incorporation and other relevant information regarding each such Purchaser's Nominee for a particular Property. Any such Purchaser's Nominee shall agree in writing to be bound by the terms and conditions of this Agreement as they relate to such Property, but Purchaser shall in no event be released from any of its obligations or liabilities hereunder. -26- 31 6.6 CLOSING COSTS. Closing costs shall be paid in accordance with the provisions of Section 5.5 hereof. 6.7 FURTHER ASSURANCES. Seller and Purchaser agree that the intent and purpose of the Closing Documents is to convey all of the right, title and interest of Seller or any Seller Affiliate in any Property to Purchaser. In addition to the acts and deeds recited herein and contemplated to be performed, executed and/or delivered by Seller to Purchaser, Seller and Purchaser agree to perform, execute and/or deliver or cause to be delivered, executed and/or delivered at the Closing or after the Closing any and all further acts, deeds and assurances as may be necessary to consummate the transactions contemplated hereby and carry out the intent and purpose of this Agreement. The provisions of this Section 6.7 shall survive the Closing. 6.8 FIRPTA WITHHOLDINGS. Purchaser shall withhold 10% of the amount realized on the disposition of all Real Property owned by Centrixx, and Purchaser shall remit such amount to the Internal Revenue Service in accordance with Code Section 1445 and the Treasury Regulation thereunder, unless Centrixx establishes to the reasonable satisfaction of Purchaser that no withholding or a reduced amount of withholding is required under Code Section 1445 and Treasury Regulations thereunder, in which case Purchaser shall withhold and remit to the Internal Revenue Service, or if the Purchaser already has withheld, shall remit to the Internal Revenue Service such amounts as set forth in a withholding certificate for the Real Property of Centrixx transferred hereunder issued by the Internal Revenue Service or the United States Secretary of the Treasury ("WITHHOLDING CERTIFICATE"). To the extent Purchaser has withheld an amount in excess of that set forth in the Withholding Certificate, Purchaser shall remit such excess amount to Centrixx . ARTICLE 7 APPORTIONMENTS AND PAYMENTS 7.1 PRORATIONS. Subject to the provisions of Section 7.3 below, the items pertaining to the Malls that are identified in this Section shall be prorated between the parties on a per diem basis (employing the actual number of calendar days in the period involved and a 365-day year) so that credits and charges with respect to such items for all days preceding and including the Cutoff Date shall be allocated to Seller, and credits and charges with respect to such items for all days after the Cutoff Date shall be allocated to Purchaser. Each payment received shall be attributed to the most recent period for which such a payment is due. On or before May 1, 1997, Purchaser shall prepare and submit to Seller the Final Proration Statement, and the parties shall make final adjusting payments indicated thereon, all as provided in Section 7.4(b) hereof. (a) UNREIMBURSED REAL ESTATE TAXES. Real estate taxes and assessments, both general and special, that are levied or assessed upon the Real Property as such taxes may be increased or decreased following Closing ("TAXES"), excluding (i) Taxes paid directly to the taxing authority by Tenants or Parties to a Reciprocal Easement Agreement or Specialty License Agreement, and (ii) Taxes reimbursable to the Owner of the Real Property by Tenants thereof or Parties to a Reciprocal Easement Agreement or Specialty License Agreement with respect thereto, shall be prorated as of the Cutoff Date. If the Cutoff Date occurs prior to issuance of the tax bill for the fiscal tax year in which the Cutoff Date occurs, Purchaser and Seller shall -27- 32 initially prorate Taxes for such tax year based upon the most recently received tax bill, and subsequently adjust such proration when the Taxes for such tax year are officially determined. (b) FIXED RENT AND FIXED CHARGES. Rents, other than percentage or overage rents, together with other fixed or separately invoiced charges thereunder and/or pursuant to the Reciprocal Easement Agreements, shall be prorated as of the Cutoff Date. (c) COMMON AREA CHARGES. Certain of the Leases and Specialty License Agreements provide for reimbursement to the landlord thereunder of certain expenses relating to common areas ("COMMON AREA EXPENSES"), including, but without limitation, the expenses of operating and maintaining certain improvements located on the Real Property, including exterior parking, roadways, landscaping, sidewalks and other areas provided for the common use or benefit of Tenants, Parties to Specialty License Agreements and their patrons, as well as insurance, real estate taxes, heating and cooling charges, and various services with respect thereto including the management and administration thereof, which may be computed as a percentage of other costs of operating and maintaining the common areas (the "ADMINISTRATIVE FEES"). Common Area Expenses are determined on an annual basis, but the anticipated amount thereof may be estimated and paid in monthly or other installments of the estimated amount during the course of the year with a final adjustment made after the close of the year when such costs and expenses have been finally determined. Seller and Purchaser have agreed as follows with respect to Common Area Expenses: (i) Except as hereinafter provided, Seller shall be responsible for all Common Area Expenses through the Cutoff Date, and shall be entitled to retain reimbursements thereof collected through the Cutoff Date and to receive reimbursements therefor collected after the Cutoff Date, up to the aggregate amount of such Common Area Expenses for which Seller is responsible. Purchaser shall be responsible for all Common Area Expenses after the Cutoff Date and shall be entitled to receive and retain all remaining reimbursements of Common Area Expenses collected from Tenants or Parties to Specialty License Agreements with respect thereto after payment to Seller of reimbursements for periods prior to the Cutoff Date. (ii) Upon issuance of the Final Proration Statement referred to in Section 7.4(b) hereof: (Y) Seller shall pay to Purchaser the amounts (if any) received by Seller on account of Common Area Expenses that is in excess of those amounts to be paid by Seller as Common Area Expenses as hereinabove provided; and/or (Z) Purchaser shall pay to Seller any deficiency in the reimbursement of Common Area Expenses to which Seller is entitled as hereinabove provided. (iii) The Final Proration Statement referred to in Section 7.4(b) hereof, shall show the total Common Area Expenses for the year in which the Cutoff Date occurs, the amount thereof paid by Seller and by Purchaser, respectively, and the reimbursements thereof received by Seller and Purchaser, respectively, all as hereinabove provided, with a separate computation showing the amount of the Administrative Fees -28- 33 allocable to Purchaser and Seller. Seller shall be entitled to that portion of the total Administrative Fees actually collected for such year as is determined by multiplying such total by a fraction the numerator of which shall be the Common Area Expenses incurred by Seller with respect to such year, and the denominator of which shall be the total Common Area Expenses for such year. Purchaser shall be entitled to the remaining portion of the Administrative Fees. (d) REIMBURSED TAXES AND INSURANCE. Taxes or insurance premiums that are reimbursed by Tenants under their Leases and/or by Parties to Specialty License Agreements or under Reciprocal Easement Agreements shall be prorated in the same manner as is provided in Section 7.1(c)(i) and (ii) above with respect to Common Area Expenses. (e) PERCENTAGE RENT. Percentage rent payable under the Leases and Specialty License Agreements shall be prorated as of the Cutoff Date as follows: (i) Any percentage rent which is attributable to a lease year as defined in each Lease or Specialty License Agreement (a "LEASE YEAR") ending on or before the Cutoff Date shall be retained by Seller or promptly paid over to the Seller if received by Purchaser. (ii) Percentage rent payable with respect to a Lease Year during which the Cutoff Date occurs, shall be apportioned between Purchaser and Seller as and when received for such Lease Year as follows: (Y) For Tenants or Parties to Specialty License Agreements that report sales on a monthly basis, Seller shall be entitled to that part of their percentage rent that is the aggregate of: (1) the sum determined by multiplying the total percentage rent for such Lease Year by a fraction, the numerator of which is the total sales prior to the month in which the Cutoff Date occurs, and the denominator of which is the total sales for such Lease Year, and (2) for the month in which the Cutoff Date occurs, the sum obtained by multiplying the percentage rent due for such month by a fraction, the numerator of which is the number of days in such month through and including the Cutoff Date, and the denominator of which is the number of days in such month. Purchaser shall be entitled to the remainder of such percentage rent. (Z) For Tenants or Parties to Specialty License Agreements that report sales only on an annual basis, Seller shall be entitled to percentage rent determined by multiplying the total percentage rent for such Lease Year by a fraction, the numerator of which shall be the total number of days in such Lease Year through and including the Cutoff Date, and the denominator of which shall be the number of days in such Lease Year. Purchaser shall be entitled to the remainder of such percentage rent. -29- 34 The final amount of the foregoing allocations of percentage rent to Seller shall be paid by Purchaser to Seller as provided in Section 7.4(b) hereof. Purchaser agrees, upon Seller's request, to provide Seller with those statements of monthly or annual gross sales received from Tenants or Parties to Specialty License Agreements with respect to any Lease Year in which the Cutoff Date occurs. (f) VENDOR LICENSE PAYMENTS. All amounts collected or payable for the admission to or use of any facilities comprising the Property, including but not limited to the operation of storage, vending or other coin-operated machines, shall be prorated as of the Cutoff Date. (g) [Intentionally omitted] (h) SALES TAXES. Sales, excise and similar taxes that have been collected by Seller but that will be payable in whole or in part to governmental authorities by Purchaser after Closing (other than such taxes, if any, as result from the transfer of any part of the Property to Purchaser upon Closing), shall be prorated as of the Cutoff Date. (i) FUELS AND UTILITIES. To the extent not covered under Section 7.1(c), utility and fuel charges, including, without limitation, charges for water, electricity, gas, gasoline, steam, oil and telephones used in connection with the heating, cooling, lighting, maintenance and operation of the Property, shall be prorated as of the Cutoff Date. (j) MERCHANT ASSOCIATION FUNDS AND EXPENSES. Contributions held by an Owner for or as, or to be made by an Owner to, any merchants' association or promotional fund established with respect to any Mall, and the cost to such Owner of providing services to any such association or fund, shall be prorated as of the Cutoff Date. (k) PROMOTIONAL EXPENSE. Prepaid costs incurred by an Owner for advertising and promotion of a Mall that has not yet occurred, to the extent reimbursement therefor is not to be received from Tenants, shall be prorated as of the Cutoff Date. (l) PERMIT AND LICENSE FEES. Annual or other periodic fees for permits and licenses required in connection with the operation of any part of the Property shall be prorated as of the Cutoff Date to the extent that Purchaser succeeds Seller as the permittee or licensee thereunder and is not required to obtain new permits and/or licenses in its own name. (m) CONTRACTS. Except to the extent reimbursable by Tenants or by Parties to Specialty License Agreements or Reciprocal Easement Agreements, payments to be made under any Contract that is to be assigned to and assumed by Purchaser upon Closing shall be prorated as of the Cutoff Date. (n) INTEREST EXPENSE. Current interest payable under the Temple Loan and the Pecanland Loan shall be prorated as of the Cutoff Date. Seller shall pay all past due interest, and all other fees, penalties and other charges or costs due to each Lender, whether in connection with a Lender's consent to the transfer of the Mall, or the transfer of the Temple Interest or otherwise. -30- 35 (o) RECIPROCAL EASEMENT AGREEMENTS. Charges and payments, if any, under the Reciprocal Easement Agreements not otherwise covered under Section 7.1(a), (b) and (d) shall be prorated as of the Cutoff Date. Seller shall pay all past due amounts required to be paid by a Seller under any Reciprocal Easement Agreement. If any amount currently due to or payable by Seller under a Reciprocal Easement Agreement is not known as of the Closing Date, then a proration shall be made by the parties based on a reasonable estimate of such amount and the parties shall adjust the proration when the actual amount becomes known. (p) [Intentionally omitted] (q) OTHER EXPENSES. Except to the extent reimbursable by Tenants or Parties to Reciprocal Easement Agreements or Specialty License Agreements, or the subject of other express provision of this Agreement, all other reasonable and necessary expenses, customary in connection with the operation and maintenance of the Property and requiring payments for any period in which the Cutoff Date occurs shall be prorated between Seller and Purchaser as of the Cutoff Date. (r) NO PRORATION OF CERTAIN TAXES. The parties have agreed that Seller will not give Purchaser a credit for those Taxes that any Tenant or Party to a Specialty License Agreement or Reciprocal Easement Agreement is obligated by its Lease, Specialty License Agreement or Reciprocal Easement Agreement to pay directly to the taxing authority. 7.2 ADJUSTMENTS. The following amounts, if any (the "Adjustments"), without duplication, shall be paid or credited by Seller to Purchaser upon Closing: (a) SECURITY DEPOSITS. Tenant Security deposits which are held by Seller as of the Closing Date. The Updated Rent Roll for each Mall shall include a schedule setting forth the unapplied portion of any security deposits relating to such Mall. To the extent such security deposits have been paid or credited to Purchaser, Purchaser agrees to indemnify and hold Seller harmless from any claim by the depositing Tenant for the return thereof. (b) DEPOSITS FOR SPACE PREPARATION. Payments made to Seller by or on behalf of any Tenant for the preparation or alteration of any space to be occupied by such Tenant. 7.3 COLLECTION. To the extent that any sum to be received pursuant to any Lease, Specialty License Agreement a Reciprocal Easement Agreement, whether as Rent, percentage rent, or as reimbursement of Common Area Expenses or any other item to be reimbursed thereunder, is past due on the Cutoff Date (hereinafter collectively referred to as "DELINQUENCIES"), then (i) Seller shall receive no credit therefor at Closing, and (ii) all payments, of any kind, received by Purchaser after Closing from Tenants or Parties to Specialty License Agreements or Reciprocal Easement Agreements with Delinquencies still outstanding shall, as between Purchaser and Seller, be applied first to installments of Rent, Common Area Expenses, Taxes and/or percentage rent due from such Tenant or Parties to Specialty License Agreements or Reciprocal Easement Agreements for any period following Closing, next to the reasonable costs, if any, incurred by Purchaser in collecting payments of Delinquencies from such Tenant or from Parties to Specialty License Agreements or Reciprocal Easements Agreements and last paid to Seller with respect to the Delinquencies due from such Tenant or Party to Specialty License Agreements or Reciprocal Easement Agreements. Purchaser shall -31- 36 promptly remit to Seller all sums received by Purchaser after Closing to which Seller is entitled pursuant to the foregoing provisions. Purchaser shall use reasonable efforts to collect the Delinquencies; provided, however, that Purchaser may, but shall not be obligated to, commence any litigation against any Tenant or other Party from whom Delinquencies are due, incur any expenses (other than the expense of routine billing), or terminate a Lease, Specialty License Agreement or Reciprocal Easement Agreement. Purchaser shall not be liable to Seller for any Delinquencies (unless collected) and shall not have any obligation to collect any Delinquencies. Reasonable collection costs, including, without limitation, reasonable attorneys' fees, shall be charged against the amount of any Delinquencies that are collected. 7.4 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 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 7, in such form as fairly reflects such prorations, allocations and adjustments to the reasonable satisfaction of Purchaser and Seller, such form to be agreed upon by Purchaser and Seller within forty-five (45) days following the Effective Date (the "CLOSING STATEMENT"). The Closing Statement delivered at Closing shall be certified by an officer of Seller as being accurate and complete and in accordance with the provisions of this Article 7, and to correctly present the prorations, allocations and adjustments to be made in accordance with the requirements of this Article 7. (b) FINAL PRORATION STATEMENT. On or before May 1, 1997, Purchaser shall submit to Seller a final proration statement consistent with the form of the Closing Statement, prepared as of the Cutoff Date but employing information available as of April 1, 1997, and certified by an officer of Purchaser as being accurate and complete and in accordance with the provisions of this Article 7, and to correctly present the final prorations and adjustments to be made in accordance with the requirements of this Article 7, and as to any amounts for which final information is not available as of April 1, 1997, 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 the Seller's receipt of the Final Proration Statement, Purchaser agrees to allow Seller, its accountants and representatives, to examine those books and records in the possession and control of Purchaser which relate to the Final Proration Statement for a period of one (1) year 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 one (1) year 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. 7.5 UTILITIES. Seller shall cooperate with Purchaser in the transfer of electricity, gas, water, sewer and other utility services for the Seller-Owned Malls from the name of the current Owner to the name of Purchaser as of the Closing Date. Seller shall also assign to Purchaser any deposits held by a utility company with respect to any such utility services for the Seller-Owned Malls and Purchaser shall pay to Seller the amount of any deposits -32- 37 so assigned. Seller shall pay or cause to be paid all utility bills for charges that have been rendered for any Mall prior to the Cutoff Date. 7.6 RESERVES AND DEPOSITS. Purchaser shall pay to Seller the amount of any reserves, escrow deposits or accruals made with, or held by, a Lender or any insurance carrier for capital repair or replacement reserves, real property taxes and assessments, insurance premiums, excess retention escrows with any insurance carriers, and/or other items. As of the Closing, and contingent upon the occurrence of the Closing, Seller hereby assigns to Purchaser all of Seller's right, title and interest in and to any such reserves, escrow deposits and accruals if any. 7.7 CONSTRUCTION ALLOWANCES. Responsibility for construction allowances and other tenant inducements and for leasing commissions shall be allocated as provided in Section 8.1. 7.8 PRORATION OF TEMPLE AND ALEXANDRIA. If a Partnership Interest is transferred to Purchaser pursuant to the provisions of Section 3.4 hereof, the net prorations and adjustments calculated pursuant to this Article 7 for Alexandria Mall shall be multiplied by ninety percent (90%), and those for Temple Mall shall be multiplied by fifty percent (50%). 7.9 SURVIVAL. The provisions of this Article 7 shall survive the Closing. ARTICLE 8 ADDITIONAL AGREEMENTS OF SELLER AND PURCHASER 8.1 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 material terms of all Leases, Contracts, Specialty License Agreements, Partnership Agreements, Reciprocal Easement Agreements, Office and Equipment Leases and any other agreements, instruments and easements applicable to the Malls, and timely pay (or cause to be paid) all taxes, assessments, utility charges and other costs and expenses relating to the Malls. (b) Seller shall operate and manage (or cause to be operated and managed) each Mall 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, approvals or 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) and all easements and rights-of-way that are required in order to continue the present use of each Mall and ensure adequate vehicular and pedestrian ingress and egress to each Mall, such that on the Closing Date, each Mall 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 10. Without limiting the generality of the foregoing, Seller shall spend, at a minimum, such amounts for repair and maintenance as are consistent with its -33- 38 prior practice. Seller shall promptly advise Purchaser in writing of any significant repair or improvement required to keep a Mall in such condition. During the Inspection Period, Seller shall not make any alterations to any Mall which would materially adversely affect the Mall. After the expiration of the Inspection Period, Seller shall not make any material alterations to any Mall, or remove any of the Personalty therefrom, without Purchaser's prior written consent, unless such Personalty so removed is simultaneously replaced with new Personalty of similar quality and utility. (c) Seller shall, at its sole reasonable cost and expense, and upon request from Purchaser given by the end of the Inspection Period, terminate any Contracts identified by Purchaser to be terminated, which termination shall be effected on or prior to the Closing Date to the extent feasible and, if such termination cannot be effected on or prior to the Closing Date by reason of the terms of any Contract which require advance notice, Seller shall deliver notice of termination, which termination shall become effective as early as possible under the terms of the applicable Contract. Except with Purchaser's prior written consent, Seller shall not enter into any Material Contract that will be an obligation affecting Purchaser or any Mall subsequent to the 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 sixty (60) days notice. (d) Except with Purchaser's prior written consent, Seller shall not, nor permit MRML or any other Seller Affiliate to, (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, 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 of any Employee beyond the date such compensation would have been paid in the ordinary course of business and consistent with prior practice. (e) Prior to the Closing, Seller shall pay, or otherwise provide for the payment of, in a manner reasonably acceptable to Purchaser, all obligations for leasing commissions,construction allowances and other tenant inducements incurred in connection with Leases and Specialty License Agreements for which Seller has issued approval prior to the date of this Agreement. Purchaser shall be responsible for and shall pay in full, on the Closing Date, without credit from Seller, all leasing commissions with respect to Leases and Specialty License Agreements which are approved or deemed approved, or for which approval is not required under the terms of this Agreement, subsequent to the date of this Agreement and in accordance with the terms of this Agreement including Purchaser's right to approve any Lease during the Inspection Period pursuant to Section 8.2. Purchaser shall be responsible for and shall pay, on or after the Closing Date, without credit from Seller, construction allowances and other tenant inducements owed to Tenants under Leases or Specialty License Agreements which Purchaser has approved or is deemed to have approved pursuant to -34- 39 Section 8.2 of this Agreement, or for which approval is not required under the terms of this Agreement. (f) All federal, state, county and municipal taxes and assessments and other governmental or quasi governmental levies of any kind that relate to the Property or the operation of the Malls that are required to be paid prior to the Cutoff Date shall be paid through the Cutoff Date either in cash or by credit in favor of Purchaser as otherwise provided in Article 7 hereof. 8.2 LEASING. (a) Prior to the expiration of the Inspection Period, Seller shall not enter into, amend, terminate or waive any rights under any Material Leases or Material Contracts without Purchaser's prior written consent, which consent shall not be unreasonably withheld or delayed. If and to the extent that Purchaser does not deny a request for such consent by notice given to Seller within two (2) Business Days after Purchaser's receipt of Seller's request therefor, Purchaser shall be deemed to have provided such consent. In any event, copies of the foregoing shall be provided to Purchaser prior to expiration of the Inspection Period. Notwithstanding the foregoing, Seller shall have the right at any time to exercise any or all of its legal remedies against any Tenant who is in default under its Lease or Specialty License Agreement (including, without limitation, the right to commence unlawful detainer or eviction actions), provided Seller shall not following the expiration of the Inspection Period seek to terminate any Lease or Specialty License Agreement or any tenant's right of possession under any Lease or Specialty License Agreement without Purchaser's written consent, which consent may be withheld in Purchaser's sole discretion, and which shall be deemed given if Purchaser does not deny a request for such consent by notice given to Seller within two (2) Business Days after Purchaser's receipt of Seller's written request therefor. (b) After the expiration of the Inspection Period, Seller shall not enter into any New Lease, New Contract or New Specialty License Agreement or amend, modify, terminate or waive any rights under any existing Lease, Contract or Specialty License Agreement without Purchaser's prior written consent, which consent may be withheld in Purchaser's sole discretion. Purchaser shall review, and in Purchaser's sole discretion, either approve or disapprove in writing, a written proposal from Seller for a New Lease or New Specialty License Agreement (a "LEASE PROPOSAL") or for termination of an existing Lease or Specialty License Agreement (a "TERMINATION PROPOSAL") within four (4) Business Days after receipt of such Lease Proposal or Termination Proposal. If Purchaser fails to deny a request for such consent to a Lease Proposal or Termination Proposal within four (4) Business Days after receipt thereof, Purchaser shall be deemed to have approved such Lease Proposal or Termination Proposal. With respect to each Lease or Specialty License Agreement, Seller shall utilize the standard form lease, specialty license agreement or lease modification, as the case may be, then in use at the Mall provided, however, that without Purchaser's consent Seller shall have the right to make such modifications in said standard form which are consistent with modifications generally made by Seller in the ordinary course of leasing space at the Malls. Following approval or deemed approval of any Lease Proposal, Purchaser shall have the right to review and approve any final form of Lease, Specialty License Agreement or lease modification that Seller intends to execute; provided, however, that Purchaser shall not be permitted to reject any Lease, Specialty License Agreement or lease modification for which Purchaser approved the Lease Proposal and which is prepared on the standard form lease, -35- 40 specialty license agreement or lease modification, as the case may be, then in use at the Mall with only such modifications in said standard form which are consistent with modifications generally made by Seller in the ordinary course of leasing space at the Malls. (c) Not later than the earlier of four (4) Business Days after entering into same or two (2) days prior to the Closing Date, Seller shall provide Purchaser with copies of all Leases, Specialty License Agreements and lease amendments, modifications or terminations executed by Seller after the Effective Date and prior to the Closing Date. (d) Any request for a consent under this Section 8.2 shall include a copy of all proposed actions and a statement of all material facts relating thereto (including, without limitation, the amount of the leasing commissions payable with respect thereto). 8.3 INSURANCE POLICIES. EXHIBIT 8.3 attached hereto is a schedule of all insurance policies currently in effect with respect to any Mall. 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 the Seller. Seller shall have the right, at its sole cost and expense, to renew or replace insurance policies that expire prior to the Closing Date, provided that the policy limits are the same as, or greater than, those set forth in EXHIBIT 8.3. 8.4 MANAGEMENT OFFICE AND EMPLOYEES. (a) Seller or MRML, as the case may be, shall assign, and Purchaser shall cause FUMI to assume, the obligations of Seller or MRML, as the case may be, under the Office and Equipment Leases. Purchaser shall cause FUMI to enter into an agreement concerning the employees of MRML in the form attached hereto as EXHIBIT 8.4. (b) Effective as of the Closing Date, Seller shall cause MRML to terminate the Employees, all of whom are employees of MRML. (c) Notwithstanding the provisions of Section 8.4(b), in the event that an Employee who accepts an offer of employment from FUMI ceases to be employed by FUMI or a Purchaser Affiliate during the three (3) month period beginning on the Closing Date under circumstances which would otherwise entitle him to a severance benefit under the terms of either the Marathon Realty Management Limited Special Severance Program (Salaried Employees) or the Marathon Realty Management Limited Special Severance Program (Hourly Employees) (as in effect as of the Effective Date of this Agreement) if he were then employed by MRML and had not been employed by FUMI or a Purchaser Affiliate, Seller shall or shall cause MRML to pay such severance benefit to such Employee. In the event such an Employee who accepts an offer of employment from FUMI ceases to be employed by FUMI or a Purchaser Affiliate after the three (3) month period beginning on the Closing Date, but before the end of the six (6) month period beginning on the Closing Date, Purchaser shall cause FUMI to pay any severance benefit due to such Employee under the foregoing benefit programs, and in the event such an Employee ceases to be employed by FUMI or a Purchaser Affiliate after the six (6) month period beginning on the Closing, Date, Purchaser shall cause FUMI to pay any severance benefit as shall be determined under arrangements then maintained in effect by FUMI. The provisions of this Section 8.4(c) shall survive the Closing. -36- 41 (d) Notwithstanding any provision of this Agreement to the contrary, nothing in this Agreement shall confer upon any Employee the right to continue for any definite term in the employ of FUMI or any Purchaser Affiliate or, subject to any existing employment contracts, understandings or other agreements expressly assumed by FUMI, shall interfere with or restrict in any way the rights of FUMI to discharge any Employee at any time for any reason, with or without cause. Seller shall pay, or cause to be paid, all wages, salaries and benefits, including, but not limited to, amounts reflecting accrued vacation owed by Seller or any Seller Affiliate to the Employees at the Closing Date and in compliance with applicable laws. The provisions of this Section 8.4(d) shall survive the Closing. (e) Seller shall provide or cause MRML to provide health plan continuation coverage in accordance with and if required by COBRA with respect to Employees who do not accept an offer of employment from FUMI and those former employees of Seller or MRML and other qualified beneficiaries who are entitled to such continuation coverage by reason of events prior to the Closing Date. The provisions of this Section 8.4(e) shall survive the Closing. 8.5 POSSESSION. Seller shall deliver possession of the Property to Purchaser upon the completion of the Closing, subject to the rights of Tenants under the Leases and licensees under the Specialty License Agreements. 8.6 MANAGEMENT INFORMATION SYSTEMS. Purchaser agrees that Seller shall retain all software licenses necessary to comply with licensing requirements. Following the Closing Date, Seller agrees to use its best efforts to provide to Purchaser access to the data contained in Seller's management information systems on disk form or otherwise permit access to Seller's software for the purpose of the conversion of such data to Purchaser's management information systems. Purchaser acknowledges that Seller's parent currently outsources the management information system through an IBM subsidiary and that Purchaser shall pay the reasonable costs of continuing such service post-Closing until Purchaser completes its conversion of such data. 8.7 MORTGAGE RELEASES. Seller covenants and agrees to obtain the release of any mortgages or other security instruments affecting the Malls, other than Temple and Pecanland. Prior to the Closing, Seller shall request that the parties holding such mortgage or other security interests deposit releases of such instruments into escrow with the Escrowee. With respect to any releases not so received prior to Closing, Seller shall secure the same and cause the same to be recorded within one hundred and twenty (120) days following the Closing Date. 8.8 LEASE/ESTOPPEL CERTIFICATES. Seller agrees to request the Lease Estoppel Certificates from each of the Tenants or other parties contemplated thereby as soon as reasonably possible following the Effective Date and to use its best efforts to obtain the Lease Estoppel Certificates within the time frame set forth in Section 6.2(j), and shall deliver copies of the Lease Estoppel Certificates directly to Purchaser by telecopy on the day they are respectively received by Seller, with copies delivered by overnight express courier transmission to Purchaser at least once each week. For purposes of this Section 8.8, best efforts shall not require commencement of litigation or payments of money to secure estoppels. -37- 42 8.9 GUARANTY. Seller agrees to cause 2685752 CANADA, INC., a Canadian corporation (the "Guarantor") which is an affiliate of Seller, to deliver to Purchaser, simultaneously with the execution and delivery of this Agreement, a Guaranty in the form attached to this Agreement. The parties agree that, in any instance in which this Agreement terminates by its terms, with a distribution of the Deposit pursuant to its terms, the Guaranty likewise shall be returned to the Guarantor. In addition, within five (5) Business Days after the Effective Date, Seller shall deliver to Purchaser a pro forma balance sheet and operating statement of the Guarantor, the review of which shall be included in Purchaser's due diligence. ARTICLE 9 REPRESENTATIONS AND WARRANTIES 9.1 SELLER'S REPRESENTATIONS AND WARRANTIES. Seller makes the following representations and warranties for the benefit of Purchaser, with the understanding that such representations and warranties are material and are being relied upon by Purchaser in entering into this Agreement. (a) REAL PROPERTY. The Owners do not own any land in addition to the land described on EXHIBITS A1 through A9 which is contiguous to any Mall or located in the immediate vicinity of any Mall (e.g., located across a public roadway) or otherwise related to any Mall. Seller has not entered into, and to Seller's best knowledge, no predecessor in interest or title to Seller has entered into, any unrecorded or undisclosed easement, liens or option agreements that would have a material adverse effect on title to the Property. (b) CONTRACTS. EXHIBIT 9.1(b) contains a description of all Contracts entered into by or on behalf of an Owner in connection with the management, maintenance or operation of such Mall. Except for the Contracts, there are no other agreements to which an Owner is party or, to Seller's best knowledge, by which it or any Mall or the Property is bound that may affect the current use, operation or enjoyment of any Mall. Each Owner has performed all the material obligations required to be performed by it under the Contracts, and to Seller's best knowledge, no other parties to any of the Contracts are in default of a material term thereunder. Except as set forth on EXHIBIT 9.1(b), all of the Contracts can be terminated by the Owner who is a party thereto at its option upon not more than thirty (30) days' prior written notice without premium or penalty of any kind. (c) LEASES. The information contained in the Rent Roll and Updated Rent Roll is true, correct and complete, Seller has delivered to Purchaser true, correct and complete copies of all of the Leases and the Specialty License Agreements and there are no leases, occupancies, tenancies, licenses or, to Seller's best knowledge, written subleases, in effect pertaining to any portion of a Mall, and no persons, tenants, licensees or entities occupy space in the Property, except as stated in the Rent Roll or the Updated Rent Roll. There are no options or rights to renew, extend or terminate the Leases or the Specialty License Agreements, or expand any leased or licensed premises, except as shown in the Rent Roll or the Updated Rent Roll or as set forth in the Leases or Specialty License Agreements. Except as disclosed by the Rent Roll, the Updated Rent Roll or EXHIBIT 9.1(c): (i) the Leases and the Specialty License Agreements and any guaranties thereof are in full force and effect and no Rents or other payments, or other deposits, are held by an Owner except the security deposits described on the -38- 43 Rent Roll or Updated Rent Roll and prepaid Rent for the current month; (ii) each Owner is the sole owner of the landlord's or licensor's interest in the Leases and the Specialty License Agreements; (iii) as of the Closing Date, except for the Pecanland Loan and the Temple Loan, no Rents due under, or other interest in, any of the Leases or the Specialty License Agreements will have been assigned to any party other than Purchaser or otherwise pledged or encumbered in any way; (iv) neither the landlord nor, to Seller's best knowledge, any Tenant or licensee is in default under any Lease or Specialty License Agreement, nor, except as disclosed in EXHIBIT 9.1(c), has Seller received any written notice from any Tenant or licensee of any default under its Lease or Specialty License Agreement or of any Tenant or licensee's termination of its Lease or Specialty License Agreement in advance of the scheduled expiration date of its Lease or Specialty License Agreement (except as disclosed in the Lease Estoppel Certificates); (v) all of the improvements to be constructed by an Owner, if any, contemplated under the Leases or the Specialty License Agreements or as required therein or in any collateral agreement, plans or specifications respecting the Leases or Specialty License Agreements have been fully completed and paid for; and (vi) to Seller's knowledge, the Partnerships have no business relationship with any Tenant or licensee other than that of landlord and Tenant or licensee and no Partner owns ten percent (10%) or more of any Tenant or licensee. EXHIBIT 9.1(c)(i) includes a list of all retail stores located within a Mall having a floor area in excess of twenty thousand (20,000) square feet, and including any combination of retail stores at a single Mall owned or controlled by the same parent company and having an aggregate floor area in excess of such amount which is under a single Lease. (d) RECIPROCAL EASEMENT AGREEMENTS. The Reciprocal Easement Agreements are in full force and effect. Each Owner is in compliance with all its material obligations under all such agreements. To Seller's best knowledge, all other parties to the Reciprocal Easement Agreements are in compliance with all of their material obligations under the respective agreements. (e) PERSONAL PROPERTY OTHER ASSETS; AND OFFICE AND EQUIPMENT LEASES. Each Owner owns good title to the Personalty and Other Assets relating to its Mall, free and clear of all Liens other than the Permitted Exceptions. To Seller's knowledge, except as listed on EXHIBIT 9.1(e), Owner owns no material Personal Property or Other Assets which are either located within or used in connection with the Mall. (f) OFFICE AND EQUIPMENT LEASES. EXHIBIT 9.1(f) contains a description of all Office and Equipment Leases entered into by or on behalf of Seller or MRML connection with the management, operation, leasing or maintenance of any Mall. Except for the Office and Equipment Leases, there are no other office and/or equipment leases to which Seller or MRML is a party that is currently utilized in the management or operation of any Mall. Neither Seller, MRML nor, to Seller's best knowledge, any party is in default under the terms of any Office and Equipment Lease. (g) SELLER'S AND AFFILIATES' AUTHORITY. Seller has been duly formed and is validly existing and Seller has the full right and authority and, subject to Section 9.1(m) hereof, has obtained any and all corporate consents required to enter into this Agreement, consummate or cause to be consummated the sale and make or cause to be made transfers and assignments contemplated herein; the persons signing this Agreement on behalf of Seller are authorized to do so; and this Agreement and all of the documents to be delivered by Seller at -39- 44 the Closing have been authorized and properly executed and will constitute the valid and binding obligations of Seller, enforceable against Seller in accordance with their terms. (h) PENDING ACTIONS. Except as set forth in EXHIBIT 9.1(h), Seller has not received written notice of any suit, action or proceeding pending against Seller or any part of the Malls, and to the best of Seller's knowledge, there are no suits, actions or proceedings threatened against Seller or any part of the Malls which, if determined adversely to Seller, would have a material adverse affect on any Mall. (i) CONDEMNATION. Except as set forth on EXHIBIT 9.1(i) attached hereto, Seller has not received written notice of any pending or proposed condemnation or eminent domain proceedings affecting the Malls. (j) PHYSICAL CONDITION OF THE IMPROVEMENTS. To Seller's best knowledge, except as disclosed on EXHIBIT 9.1(j), there are no material structural defects in the buildings located on the Real Property. Seller has made available to Purchaser all Plans commissioned by Seller and all other Plans in Seller's possession or control. (k) LICENSES. The Owner of each Mall has all material licenses, permits (including, without limitation, all building permits and occupancy permits), easements and rights-of-way which are required for the present use of the Mall. (l) [Intentionally omitted.] (m) CONSENTS/BULK SALES NOTICE. Except as set forth on EXHIBIT 9.1(m), and except for the Lender consents pursuant to Section 3.3 and the Partnership Consents, no approval, consent, waiver, filing, registration or qualification with any third party, including, but not limited to, any governmental bodies, agencies or instrumentalities is required to be made, obtained or given for the execution, delivery and performance of this Agreement or any of the Closing Documents by Seller. To Seller's knowledge, there is no bulk sales notice required in connection with the transfer to Purchaser of the Property. Without limiting the foregoing, the Seller and Purchaser agree to waive the applications of all bulk sales laws; provided, further, that Seller indemnifies and holds Purchaser harmless from and against any actual and direct loss, cost, expenses, and liabilities from failing to comply with any bulk sales law. (n) LOANS. EXHIBIT 9.1(n) attached hereto sets forth the outstanding principal balance of each of the MUSRI Loan, the Temple Loan and the Pecanland Loan and contains a complete list of the MUSRI Loan Documents and the Mortgage Loan Documents. Seller or Temple, as the case may be, is in compliance with their respective material obligations under the Mortgage Loan Documents. To Seller's best knowledge, the Lenders under the Mortgage Loan Documents and the borrower and lender under the MUSRI Loan Documents each are in compliance with all of their respective material obligations thereunder. (o) NO VIOLATION. Except for consent requirements under the Partnership Agreements and the Mortgage Loan Documents, none of the execution, delivery or performance of this Agreement by Seller does or will, (i) violate, conflict with or constitute a default under any term or condition of (A) the organizational documents of Seller or the Partnerships or any other agreement to which Seller or the Partnerships is a party or by which they are bound, or (B) any terms or provision of any judgment, decree, order, statute, injunction, rule or regulation -40- 45 of a governmental unit applicable to Seller or the Partnerships or any agreement to which Seller or the Partnerships is a party or by which they or their assets are bound; or (ii) result in the creation of any Lien or other encumbrance upon the Partnership Interests, the assets or properties of Seller or the Partnerships, except as created by this Agreement. (p) PARTNERSHIPS: (i) ORGANIZATION; AUTHORITY. Each Partnership is a general partnership duly formed and existing under the laws of the jurisdiction of its formation. (ii) OWNERSHIP OF THE PARTNERSHIP INTERESTS. The Partnership Interests constitute Seller's entire and only ownership interest in the Partnerships. Seller is the legal and beneficial owner of the Partnership Interests free and clear of all mortgages, liens, options, rights of first refusal, claims, encumbrances and other security arrangements or restrictions of any kind. Seller has not granted any outstanding rights to purchase the Partnership Interests and Seller is not a party to any agreement, arrangement or understanding restricting or otherwise relating to the transfer or voting of the Partnership Interests, except for agreements in the Partnership Agreements and the Mortgage Loan Documents. (iii) ABSENCE OF UNDISCLOSED LIABILITIES AND CONTRACTUAL OBLIGATIONS. Except for liabilities disclosed in the Partnership Financial Statements or arising in the ordinary course of business since the date of the Partnership Financial Statements, the Partnerships have no material undisclosed liabilities of any nature, whether matured or unmatured, fixed or contingent, regardless of whether the disclosure thereof would otherwise be required by GAAP, under circumstances whereby any such liabilities could or would following the Effective Date hereof remain with such Partnership and that would have, individually or in the aggregate, a material adverse effect upon such Partnership, except for the Leases, the Temple Loan, the MUSRI Loan, the Reciprocal Easement Agreements, the Contracts, and/or the Specialty License Agreements and any other disclosed liabilities. (iv) [Intentionally omitted] (v) LITIGATION. Except as disclosed in EXHIBIT 9.1(p)(v), there are no actions, suits, proceedings, judgments, orders, decrees or investigations pending, or, to the Seller's best knowledge, threatened in writing before any court, governmental unit or any arbitrator with respect to any of the Partnerships or their assets that, if adversely determined, could adversely affect the Partnerships, the Partnership Interests, or the purchase of the Partnership Interests by Purchaser. (vi) TRANSFER TAXES. To Seller's knowledge, there are no transfer taxes payable, accruing or otherwise arising out of the transfer of the Partnership Interests to the Purchaser. (q) TAXES. There are no pending real estate tax challenges, complaints or actions with respect to real estate or personal property taxes or assessments for any of the -41- 46 Malls except as set forth on EXHIBIT 9.1(q) attached hereto. To Seller's knowledge there are no outstanding or unpaid federal, state or local taxes or tax assessments that relate to the Property which are delinquent against any Owner that could become a lien against any of the Property. (r) LAWS. Except as disclosed in EXHIBIT 9.1(r), to Seller's knowledge, the buildings and improvements located upon the Malls and the current use and operation thereof are in material compliance with all Laws, and, to Seller's knowledge, the buildings and improvements located upon the Malls are in material compliance with all covenants, conditions, or restrictions affecting the Malls. Seller has not received written notice alleging any violation of applicable zoning or subdivision laws, and Seller has not applied for and has not received written notice of any application for rezoning or other change in applicable land use laws, ordinances or resolutions that could adversely affect the use, operation or enjoyment of any Mall. There are no agreements between an Owner and any governmental authorities, agencies, utilities or quasi-governmental entities that affect the Malls, except those agreements that are identified in the Title Commitment, disclosed by the Survey or described in EXHIBIT 9.1(r). (s) UTILITIES. To Seller's knowledge, all utility services, water supply, storm and sanitary sewer facilities, telephone lines and fire protection facilities required by law or for the normal operation of the Malls are (i) available at the property lines of the Real Property from public rights-of-way, (ii) connected to the Malls with valid permits, and (iii) in good working order and repair. (t) FINANCIAL STATEMENTS. The Financial Statements, the Rent Roll and the Updated Rent Roll furnished to Purchaser in connection with or pursuant to this Agreement (i) accurately reflect the financial condition of the Malls or Seller, as the case may be, as of the date thereof, (ii) were prepared on behalf of Seller in accordance with GAAP and in the ordinary course of business, (iii) the Financial Statements do not fail to state any material liability contingent or otherwise, the omission of which would be misleading or material in nature as of the Closing Date and (iv) there have been no material adverse changes in the financial condition of the Property or Seller from that shown in the Interim Financial Statements. (u) ENVIRONMENTAL. Except as disclosed to Purchaser in those certain environmental reports listed on EXHIBIT 9.1(u): (i) to Sellers' knowledge, no underground storage tanks have ever been or are located in any part of the Property; (ii) other than standard office and janitorial supplies and pesticides used in landscaping, all of which are stored at the Malls by Seller only in such amounts as are customary for such uses, to Seller's knowledge, no Hazardous Substances have been introduced by Seller or are present at the Malls; (iii) to Seller's knowledge, the Property has been used in compliance with all environmental laws and requirements imposed by any applicable governmental authority and Owner has not brought onto the Malls any Hazardous Substance; (iv) to Seller's knowledge there are no lawsuits or other proceedings initiated by any governmental agency or any other entity regarding the environmental condition of the Malls or the presence or disposal of Hazardous Substances at the Malls and neither Seller, any Owner nor, to Seller's best knowledge, any Tenant of a Mall has received any written notice of violation issued pursuant to any Law pertaining to environmental conditions with respect to a Mall or any use or condition thereof. (v) EMPLOYEE BENEFITS. Attached hereto as EXHIBIT 9.1(v) is an Employee Benefits List that identifies each Benefit Plan. Except as identified in the Employee Benefit List, -42- 47 none of the Benefit Plans is an "employee pension benefit plan" as defined in Section 3(2) of ERISA. All of the Benefit Plans and related trusts, if any, are in form and have been administered in substantial compliance with all Laws, including, without limitation, ERISA, the Code and COBRA. Except as described in the Employee Benefits List, Seller and its Affiliates are not obligated to pay any additional amounts to or pursuant to any Benefit Plan or related trust. No employees of Seller or MRML participate in any "multiemployer pension plan" within the meaning of the Multiemployer Pension Plan Amendment Act of 1980, as amended, and Seller and MRML do not have any liability under ERISA for any complete or partial withdrawal from any such multiemployer plan. None of the Property is currently subject to any lien or pledge as security, whether perfected or unperfected, in favor of the PBGC, the Internal Revenue Service, or any Benefit Plan arising under Title IV of ERISA, Section 306 of ERISA, or Section 412 of the Code, and to Seller's best knowledge, no facts or circumstances exist which would subject the Property to any such lien or pledge in the future. The consummation of the transactions contemplated by this Agreement do not present a material risk to Seller or MRML of incurring a liability under such Title IV other than liability for premiums due the PBGC. Except as described on the Employee Benefits List, no Benefit Plan provides benefits, including without limitation, death or medical benefits (whether or not insured), with respect to Employees beyond their retirement or other termination of service (other than (i) coverage mandated by applicable law, (ii) death benefits or retirement benefits under any "employee pension benefit plan," as that term is defined in Section 3(2) of ERISA or (iii) benefits the full cost of which is borne by the Employee (or his or her beneficiary)). Except as described on the Employee Benefits List, the consummation of the transaction contemplated by this Agreement will not (i) entitle any Employee to severance pay, unemployment compensation, or any other payment, benefit, or award, or (ii) accelerate or modify the time of payment or vesting, or increase the amount of any benefit, award, or compensation due any Employee. No "leased employee," as that term is defined in Section 414(n) of the Code, performs services for Seller or MRML. Seller will make available to Purchaser as part of the Mall Information true and correct copies of, and included in EXHIBIT 9.1(v) is a listing of, all of the Employee Benefit Plans, the most recent determination letters from the Internal Revenue Service with respect thereto, the most recent annual reports (Form 5500 and the schedules thereto), the most recent summary plan descriptions and the most recent actuarial valuations, if any. (w) EMPLOYEES. EXHIBIT 9.1(w) contains a complete and correct list of the names of all of the current Employees (including Employees on authorized leaves of absences), including their titles and their date of hire, and Seller has delivered to Purchaser's general counsel a certificate stating their salaries or hourly compensation and any bonuses received or granted in the last twelve (12) months. None of such Employees has a contract of employment for a definite term. There are no collective bargaining agreements or other agreements or arrangements of any kind with, or recognition of, a union or employee association of any kind with respect to any of the Employees. There are no government contracts or subcontracts to which Seller or any Seller Affiliate is subject that impose affirmative action obligations upon Seller or any Seller Affiliate with respect to employment practices. With respect to any Employee, there are: (i) no actions at law, suits in equity, administrative claims, charges or complaints or investigations, pending or to Seller's knowledge threatened, against Seller, any Seller Affiliate or MRML arising under any laws governing employment, the employer employee relationship, the terms and conditions of employment or employment practices; (ii) no matters, including but not limited to investigations, hearings or appeals, involving Seller, any Seller Affiliate or MRML are pending or to Seller's knowledge threatened before the National Labor Relations Board, the Equal Employment Opportunity Commission, the United -43- 48 States Department of Labor or any state or federal agency charged with responsibility for labor or civil rights standards or violations; (iii) no citations, fines or penalties heretofore have been asserted or are pending against Seller or MRML relating to health and safety in its work places and to Seller's knowledge none is threatened; and (iv) no matters involving Seller, any Seller Affiliate or MRML are currently before any arbitrator, mediator or conciliator in respect to the employer employee relationship or any of its employees or former employees, except as set forth on EXHIBIT 9.1(w) hereto. (x) DOCUMENTS. To Seller's knowledge, all of the documents and Mall Information that have been delivered or made available to Purchaser by or on behalf of Seller, (a) are true, correct and complete copies of what they purport to be and (b) have not been modified, except as set forth therein. (y) [Intentionally omitted] (z) ALL ASSETS. The Property constitutes all of the assets used by Owner to operate its Mall in the manner in which it is currently being operated. 9.2 SELLER'S KNOWLEDGE DEFINED. Whenever the terms "Seller's knowledge," "Seller's best knowledge" or terms of similar import are used in this Agreement, they shall mean (a) the actual knowledge of Michael Rulli, the Senior Vice President of Seller; Robert Lee, the Vice President, Property Operations; Brian Peters, Regional Manager; Earl Dorsett, Regional Manager; and Michael Ponds, Corporate Facilities Manager; whom Seller represents and warrants are individuals who have the requisite knowledge regarding the condition, management, leasing and operation of the Malls, after making an independent, diligent investigation of all matters that are the subject of the representations and warranties made by Seller in this Agreement. In order to meet the criteria of an independent, diligent investigation as of the Effective Date, the named individuals shall review all necessary or appropriate files, and review and discuss the contents of all of Seller's representations and warranties with appropriate officers and employees of Seller (but without any obligation to hire any third party experts or consultants). In order to meet the criteria of an independent, diligent investigation as of the Closing Date, the named individuals shall review and discuss the contents of all of Seller's representations and warranties with the persons described in the immediately preceding sentence and property managers and Mall managers not more than five (5) days before the Closing Date, and shall perform such additional and follow-up inspections and inquiries as they deem reasonably necessary. 9.3 PURCHASER'S REPRESENTATIONS AND WARRANTIES. Purchaser makes the following representations and warranties for the benefit of Seller with the understanding that such representations and warranties are material and are being relied upon by Seller in entering into this Agreement. (a) PURCHASER'S AUTHORITY. Purchaser has been duly formed, is validly existing and is in good standing (to the extent applicable), and Purchaser has the full right and authority and has obtained any and all corporate consents required to enter into this Agreement, consummate or cause to be consummated the purchase and accept the transfers and assignments contemplated herein; the persons signing this Agreement on behalf of Purchaser are authorized to do so; and this Agreement and all of the documents to be delivered by Purchaser at the -44- 49 Closing have been or will be authorized and properly executed and will constitute the valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their terms. (b) PENDING ACTIONS. There is no action or proceeding pending against Purchaser, and to Purchaser's knowledge, there are no actions or proceedings threatened against Purchaser which, if determined adversely to Purchaser, would have a material adverse affect on Purchaser or Purchaser's ability to consummate the transactions contemplated under the terms of this Agreement. (c) NO VIOLATION. None of the execution, delivery or performance of this Agreement by Purchaser does or will violate, conflict with or constitute a default under any term or condition of (i) the organizational documents of Purchaser or any other agreement to which Purchaser is a party or by which they are bound, or (ii) any terms or provisions of any judgment, decree, order, statute, injunction, rule or regulation of a governmental unit applicable to Purchaser or any agreement to which Purchaser is a party or by which they or their assets are bound. (d) CLOSING FUNDS. Purchaser has available sufficient funds or financing commitments, in combination with the Equity Funds, to close the transaction contemplated in this Agreement, or will arrange for sufficient funds on or prior to the Closing Date, so as to permit the Closing of this transaction. Purchaser acknowledges that Purchaser's obligation to close this transaction is not contingent upon Purchaser obtaining such financing. 9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made by Seller and Purchaser in this Agreement shall be deemed to be remade as of the Closing Date and shall survive the Closing for a period of eighteen (18) months after the Closing Date, and there shall be no liability for breach of any representation or warranty in this Agreement unless written notice of a claim specifying in reasonable detail the claimed breach is delivered to the other party within such eighteen (18)-month period. The foregoing limitations shall not apply to the warranties and covenants as to title and ownership set forth in the limited or special warranty deeds or bills of sale relating to any of the Real Property, the Personalty or the Other Assets. ARTICLE 10 DAMAGE OR DESTRUCTION - CONDEMNATION 10.1 NOTICE. (a) In the event of any damage to or destruction or condemnation of any Mall or any portion thereof prior to Closing that Seller reasonably believes would require repairs at a cost in excess of Fifty Thousand Dollars ($50,000.00), 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 Mall has been damaged, or whether such taking or threatened taking has affected or will affect a Material Part of the Mall. For purposes of this Article 10, Purchaser may determine that a "Material Part" of the Mall has been damaged or taken if: -45- 50 (i) An Anchor Store would have the right to terminate any Reciprocal Easement Agreement or its Lease, as applicable, as a result thereof; (ii) Tenants occupying an aggregate twenty percent (20%) or more of the total net rentable area of the Mall not occupied by an Anchor Tenant would have the right to terminate their Leases as a result thereof; or (iii) The estimated cost of repairing the damage (whether or not insured), or restoring the Mall after the taking, will in Purchaser's reasonable judgment equal or exceed One Million Dollars ($1,000,000.00). (b) If Purchaser determines that a Material Part of the Mall has been damaged, or that a Material Part of the Mall 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, or to terminate this Agreement as to the Mall only (or as to the applicable Partnership Interest, as the case may be), with the Purchase Price reduced by the Purchase Price Allocation applicable to the affected Mall or Partnership Interest. If Purchaser does not so terminate, then: (i) In the case of damage to a Material Part of a Seller-Owned Mall, Seller shall (A) deliver to Purchaser at Closing all insurance proceeds received on account of such damage, (B) assign to Purchaser at Closing its right to recover under any insurance policies covering such damage and (C) pay to Purchaser by credit to the Purchase Price at Closing the amount of the deductible, if any; provided, however, that the foregoing assignment of insurance policy rights and proceeds shall not include those relating to business interruption loss for the period prior to the Closing; (ii) In the case of a threatened or actual taking of a Material Part of a Seller-Owned Mall, Seller shall (A) deliver to Purchaser at Closing all condemnation awards and other proceeds received in connection with the taking and (B) assign to Purchaser at Closing Seller's entire right, title and interest in all awards and other proceeds connected with the taking; and (iii) In the case of damage to or threatened or actual taking of a material part of Temple or Alexandria, the Partnership shall continue to own all rights to or under insurance policies or condemnation on awards on proceeds. 10.2 NON-MATERIAL DAMAGE. If any Mall suffers damage to other than a Material Part, the Closing Date shall not be extended, and, in the case of a Seller-Owned Mall, Seller shall (A) deliver to Purchaser at Closing all insurance or condemnation proceeds received on account of such damage or taking (other than those relating to business interruption loss for the period prior to the Closing) and (B) assign to Purchaser at Closing Seller's right to recover under any insurance policies covering such damage and (C) shall pay to Purchaser by credit to the Purchase Price at Closing the amount of the deductible, if any. The provisions of -46- 51 Section 10.1(b)(iii) shall apply to any damage to other than a Material Part of Temple Mall or Alexandria Mall. 10.3 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 10. In connection with any claim with respect to insurance or condemnation proceeds pursuant to this Article 10, Seller shall not settle or approve settlement of any claim after expiration of the Inspection Period without Purchaser's prior written consent which consent shall not be unreasonably withheld and Purchaser and Seller shall fully cooperate with each other in prosecuting diligently the recovery of any such claim(s). To the extent necessary, Purchaser shall give Seller reasonable access after the Closing to the Mall and any records pertaining to the damaged or condemned Mall. The provisions of this Section 10.3 shall survive the Closing. ARTICLE 11 CONDITIONS TO CLOSING 11.1 CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of Seller under this Agreement are subject to the satisfaction on or prior to the Closing Date of the conditions set forth in this Section 11.1. Each 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's representations and warranties made in this Agreement are true on the Closing Date in all material respects as though such representations and warranties were made on the Closing Date, subject to factual modifications due to third-party events (such as, for example, filing of a lawsuit by third-party) which do not have a material adverse effect. (b) 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. (c) Seller shall have received all third-party consents and approvals, if any, required to permit the Closing. (d) Neither Purchaser or Seller, as applicable, have terminated this Agreement pursuant to any right of termination set forth herein. (e) Purchaser has delivered the Purchaser Closing Documents and the balance of the Purchase Price. (f) 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, unless the same shall not have admitted in writing an inability to pay its debts as they mature, (ii) Purchaser shall not have admitted in writing an -47- 52 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 proceedings under any such law, or had any petition filed against it in any proceeding under any of the foregoing laws unless the same shall have been dismissed, cancelled or terminated prior to the Closing Date. 11.2 CONDITIONS TO PURCHASER'S OBLIGATIONS. The obligations of Purchaser under this Agreement are subject to the satisfaction on or prior to the Closing Date of the conditions set forth in this Section 11.2. Each 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's representations and warranties made in this Agreement are true on the Closing Date in all material respects as though such representations and warranties were made on the Closing Date, subject to factual modifications due to third-party events (such as, for example, filing of a lawsuit by a third party or receipt of a notice of default from a Tenant) which do not have a material adverse effect. (b) 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. (c) Purchaser shall have received copies of the consent of the Lenders, the Partnership Consents and any other consents set forth in EXHIBIT 9.1(m) required in Section 9.1(m). (d) Neither Purchaser nor Seller, as the case may be, shall have terminated this Agreement pursuant to any right of termination set forth herein. (e) Seller shall have delivered the Seller Closing Documents. (f) 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, and no such receiver, liquidator or trustee shall have otherwise been appointed, 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 -48- 53 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 proceedings under any such law, or had any petition filed against it in any proceeding under any of the foregoing laws unless the same shall have been dismissed, cancelled or terminated prior to the Closing Date. ARTICLE 12 DEFAULT 12.1 SELLER'S DEFAULT. If Seller shall fail to 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 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, (b) seek specific performance of Seller's obligations under this Agreement, or (c) terminate this Agreement, in which event the Deposit shall be promptly returned to Purchaser, and Purchaser shall have the right to bring an action for actual Damages against Seller; provided, however, in any action by Purchaser against Seller for actual Damages due to Seller's failure to close this transaction, Purchaser's right of recovery shall be limited to an amount equal to Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00), and in no event shall Purchaser be entitled to collect Damages from Seller in excess of Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00). 12.2 PURCHASER'S DEFAULT. If Purchaser shall default in the performance of any of its obligations hereunder including, without limitation, Purchaser's failure to close due to 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 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. 12.3 LIQUIDATED DAMAGES. Purchaser and Seller acknowledge that, in the event that Purchaser 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, 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 -49- 54 in advance. Seller hereby agrees that its receipt of the Deposit in the event of Purchaser's failure or default in 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 default. 12.4 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 perform any of its obligations under this Agreement required to be performed prior to or on the Closing Date; provided, however, that such waiver shall not apply to or affect Seller's liability with respect to any breach of Seller's representations and warranties made as of the Closing Date contained in this Agreement or of any obligations or covenants to be performed by Seller following the Closing Date or that expressly survive the Closing ("SELLER'S POST-CLOSING COVENANTS"). (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 perform any of its obligations under this Agreement required to be performed prior to or on the Closing Date; provided, however, that such waiver shall not affect Purchaser's liability with respect to any breach of Purchaser's representations and warranties made as of the Closing Date contained in this Agreement or of any obligations or covenants to be performed by Purchaser following the Closing Date or that expressly survive the Closing ("PURCHASER'S POST-CLOSING COVENANTS"). ARTICLE 13 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 the 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 Seller's obligation to the 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 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 party or firm 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. ARTICLE 14 NOTICES 14.1 NOTICES. Any notice, request, demand, instruction or other document 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 -50- 55 by the person to whom delivered (including without limitation delivery to and/or receipt by telecopy), or (b) four (4) days after deposit in United States registered or certified mail, return receipt requested, 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: If to Purchaser: First Union Real Estate Equity and Mortgage Investments 55 Public Square Suite 1900 Cleveland, Ohio 44113 Attention: Paul F. Levin Telecopy No.: (216) 781-7364 with a copy to: Thompson Hine & Flory P.L.L. 3900 Society Center 127 Public Square Cleveland, Ohio 44114-1216 Attention: Linda A. Striefsky, Esq. Telecopy No.: (216) 566-5800 If to Seller: Marathon U.S. Realties, Inc. One Galleria Tower 13355 Noel Road Suite 1200 Dallas, Texas 75240-6678 Attention: Michael E. Rulli Telecopy No.: (214) 448-2070 with a copy to: Marathon Realty Company Limited 200 Wellington Street West Suite 400 Toronto, Ontario M5V 3C7 Canada Attention: John E. Beales Telecopy No.: (416) 348-1902 with a copy to: Neal, Gerber & Eisenberg Two N. LaSalle Street 21st Floor Chicago, Illinois 60602 Attention: Reuben C. Warshawsky Telecopy No.: (312) 269-1747 14.2 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. -51- 56 ARTICLE 15 INDEMNIFICATION 15.1 PURCHASER INDEMNIFICATION. Purchaser hereby indemnifies and agrees to hold harmless and defend Seller and each Seller Indemnitee from and against all Damages imposed upon, suffered or incurred by Seller or any Seller Indemnitee, (a) by reason of claims made by any Lender, Tenants under the Leases, or other Parties under the Reciprocal Easement Agreements or Specialty License Agreements or under those Contracts assigned to Purchaser, or by any Partner or other party with respect to the Partnership Interests, or arising under the Partnership Agreement or against the Partnership, that relate to any actions or events first occurring, or obligations first accruing, on or after the Closing Date; (b) by reason of an event or accident occurring at any time on or after the Closing Date relating to the Property, except in each case those obligations of Seller under this Agreement or the Seller Closing Documents that expressly survive the Closing and those claims that constitute a breach of warranties or representations of Seller hereunder or under any of the Seller Closing Documents; (c) the breach of any representation or warranty made by Purchaser under this Agreement; or (d) the failure by Purchaser to perform any of Purchaser's Post-Closing Covenants. 15.2 SELLER INDEMNIFICATION. Seller hereby indemnifies and agrees to hold harmless and defend Purchaser and each Purchaser Indemnitee from and against all Damages imposed upon, suffered or incurred by Purchaser or any Purchaser Indemnitee, (a) by reason of claims made by any Lender under the Mortgages, Tenants under the Leases, or other Parties under the Reciprocal Easement Agreements or the Specialty License Agreements or under those Contracts assigned to Purchaser, or by any Partner or other party with respect to the Partnership Interests, or arising under the Partnership Agreements or against the Partnership, that relate to any actions or events first occurring, or obligations first accruing, prior to the Closing Date; (b) by reason of an event or accident occurring, at any time prior to the Closing Date relating to the Malls, except in each case those obligations of Purchaser under this Agreement or Purchaser Closing Documents that expressly survive the Closing and those claims that constitute a breach of warranties or representations of Purchaser hereunder or under any of the Purchaser Closing Documents; (c) the breach of any representation or warranty made by Seller under this Agreement; or (d) the failure by Seller to perform any of Seller's Post-Closing Covenants. 15.3 INDEMNIFICATION PROCEDURE. (a) The indemnified party (the "INDEMNIFIED PARTY") shall give the indemnifying party (the "INDEMNIFYING PARTY") prompt notice of any Damages incurred (or likely to be incurred) by the Indemnified Party with respect to any claim or assertion of claims by a third party ("THIRD PARTY CLAIM") for which indemnification is available hereunder and the Indemnifying Party may (i) prior to the commencement of any proceedings in connection with such Damages, undertake the negotiation of any resolution of the dispute relating to such Damages, including without limitation any settlement, release or remediation (subject to Section 15.3(c)) or (ii) undertake the defense of any proceeding (including any alternative dispute resolution proceeding) regarding such Damages by selecting legal counsel who shall be reasonably acceptable to the Indemnified Party. -52- 57 (b) Provided the Indemnifying Party shall have undertaken the Indemnified Party's defense of a Third Party Claim with legal counsel reasonably acceptable to the Indemnified Party, and shall have so notified the Indemnified Party, the Indemnified Party shall be entitled to participate at its own expense in the aforesaid negotiation or defense of any claim relating to such Damages (subject to reimbursement to the limited extent provided in Section 15.3(e)), but such negotiations or defense shall be controlled by counsel to the Indemnifying Party. (c) The Indemnifying Party shall not be liable for payments relating to the resolution of any dispute or any settlement of any litigation or proceeding effected without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld. The Indemnifying Party shall not, without the Indemnified Party's written consent, resolve any dispute or settle or compromise any claim regarding Damages from a Third Party Claim or consent to entry of any judgment which would impose an injunction or other equitable relief upon the Indemnified Party or which does not include as an unconditional term thereof the release by the claimant or the plaintiff of the Indemnified Party from all liability in respect of any such Damages. (d) Each party hereto agrees to give the other party prompt notice of any Damages (or possible Damages) asserted against it which might be Damages for which indemnity could be sought against the other party, but the failure to give such notice shall not release the Indemnifying Party of its obligations under this Section 15.3, expect to the extent of the actual harm suffered thereby. (e) In the event the Indemnifying Party fails to timely undertake negotiation of any dispute or defend, contest or otherwise protect against any claim or suit with respect to a Third Party Claim, and to so notify the Indemnified Party, the Indemnified Party may, but will not be obligated to, defend, contest or otherwise protect against the same, and make any compromise or settlement thereof and recover the entire costs thereof from the Indemnifying Party, including reasonable attorneys' and experts' fees, disbursements and all amounts paid as a result of such claim or suit or the compromise or settlement thereof; provided, however, that if the Indemnifying Party undertakes negotiation of any dispute and the defense of such matter in accordance with and subject to the above terms of this Section 15.3, the Indemnified Party shall not be entitled to recover from the Indemnifying Party for its costs incurred thereafter in connection therewith other than the reasonable costs of investigation undertaken by the Indemnified Party and reasonable costs of providing assistance. The Indemnified Party shall cooperate and provide such assistance as the Indemnifying Party may reasonably request in connection with the negotiation of any dispute and the defense of the matter subject to indemnification and the Indemnifying Party shall reimburse the Indemnified Party's reasonable costs incurred thereafter in connection with such cooperation and assistance. ARTICLE 16 MISCELLANEOUS 16.1 PARTIES BOUND. Subject to the provisions of Section 16.10 of this Agreement, all provisions hereof, including, without limitations, all representations and -53- 58 warranties made hereunder, shall extend to, be obligatory upon and inure to the benefit of the respective heirs, devisees, legal representatives, successors, assigns and beneficiaries of the parties hereto. 16.2 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 annexed 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. 16.3 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. 16.4 GOVERNING LAW. This Agreement shall, in all respects, be governed, construed, applied and enforced in accordance with the laws of the State of Texas. 16.5 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. 16.6 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 (whether written or oral) relating to the subject matter of this Agreement, including, without limitation, that certain letter of intent dated May 14, 1996 from Purchaser to Seller. This Agreement may be amended 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. 16.7 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. 16.8 EXTENSION OF PERFORMANCE. Whenever under the terms of this Agreement the time for performance of a covenant or condition falls upon a Saturday, Sunday or legal holiday in the state of Texas, 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. 16.9 TIME. Time is of the essence in the performance of each and every term, condition and covenant contained in this Agreement. -54- 59 16.10 ASSIGNMENT. The rights and obligations of either party under this Agreement may be assigned by either party to an Affiliate of such party without the prior consent of, but with written notice to, the other party, provided that (a) such Affiliate assumes the obligations of the assigning party, (b) no such assignment will release the assigning party from any of its obligations or liabilities under this Agreement, (c) such assignment shall not delay the Closing, and (d) such assignment shall not require the non-assigning party to obtain any additional or revised third party consents, certificates or approvals. Except as provided in this Section , this Agreement may not be assigned by either Seller or Purchaser without the prior written consent of the other party. 16.11 CONFIDENTIALITY. The Confidential Information shall be treated as confidential, and shall be maintained confidential, by the other party and its employees, agents, contractors, attorneys, representatives and such other parties as are reasonably deemed necessary by Seller or Purchaser, any such disclosure to non-parties in all events to be subject to this confidentiality provision, except as required by S.E.C. or NYSE regulations. Each party agrees to use such Confidential Information only for the purpose of this transaction, and for no other purpose. Seller acknowledges that possession of Confidential Information relating to Purchaser 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 Purchaser governed by such laws, and Seller 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. 16.12 TRUSTEE APPROVAL. Purchaser's obligations hereunder are specifically contingent upon approval by Purchaser's Board of Trustees by no later than the expiration of the Inspection Period. 16.13 NO SOLICITATION. From the Effective Date until the Closing Date or the earlier termination of this Agreement, neither Seller nor its officers, directors, employees and agents shall directly or indirectly, (a) take any action to solicit or entertain any Acquisition Proposal (as defined below), (b) disclose any nonpublic information relating to the Property and designed to facilitate the sale of the Property or afford access to the Property, books or records of the Seller to any Person (other than Purchaser) in connection with soliciting or entertaining an Acquisition Proposal, or (c) engage or participate in negotiations or enter into agreements with any Person (other than Purchaser) with respect to an Acquisition Proposal. For purposes of this Agreement, "ACQUISITION PROPOSAL" means any offer or proposal for (i) a business combination involving the Seller and any Person (other than Purchaser) or (ii) an acquisition by any Person (other than Purchaser) of any of the Properties, in one or more transactions. 16.14 LIMIT OF TRUSTEES' LIABILITY. Notwithstanding anything contained herein to the contrary, this Agreement is made and executed on behalf of First Union Real Estate Equity and Mortgage Investments, a business trust organized under the laws of the State of Ohio, by its officer(s) on behalf of the trustees thereof, and none of the trustees or any additional or successor trustee hereafter appointed, or any beneficiary, officer, employee or agent of Purchaser shall have any liability in his personal or individual capacity, but instead, all parties shall look solely to the property and assets of Purchaser for satisfaction of any Damages of any nature in connection with this Agreement. -55- 60 16.15 EXHIBITS. The parties acknowledge that Seller's intent is to sell and Purchaser's intent is to purchase the Property, but that (i) the various exhibits setting forth the form of Closing Documents (excluding, for purposes of this Section 16.15, any exhibits to be attached to Closing Documents, such as legal descriptions) are subject to further review and proposed modification by Seller and Purchaser during the ten (10)-day period commencing on the Effective Date, provided that any such proposed modifications must be acceptable to Seller and Purchaser, (ii) the other exhibits hereto are subject to further review and modification by Seller during the ten (10)-day period commencing on the Effective Date and (iii) such other exhibits hereto are subject to further review by Purchaser, including, without limitation, as a part of Purchaser's due diligence during the Inspection Period. Seller shall deliver to Purchaser not later than the tenth (10th) day after the Effective Date any modifications made by Seller to such other exhibits hereto, whereupon such modifications shall be deemed to have been made as of the Effective Date for purposes of Seller's representations and warranties hereunder. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -56- 61 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date. SELLER: PURCHASER: MARATHON U.S. REALTIES, INC., FIRST UNION REAL ESTATE EQUITY a Delaware corporation AND MORTGAGE INVESTMENTS, an Ohio business trust By:___________________________ By:_________________________________________ Name: John E. Beales Name: James C. Mastandrea Title: Vice President Title: President and Chief Executive Officer By:_________________________________________ Name: Steven M. Edelman Title: Executive Vice President and Chief Investment Officer -57- 62 JOINDER: The undersigned, as owner of the Villa Linda Mall, hereby joins in the execution of this Agreement in order to bind itself to the terms and provisions of this Agreement that relate to the undersigned and/or the Villa Linda Mall and hereby confirms all representations, warranties and covenants contained in this Agreement with respect to Villa Linda Mall. CENTRIXX REALTY HOLDINGS LIMITED By:____________________________________________ Name: John E. Beales Title: Vice President -58- 63 LIST OF EXHIBITS A - Legal Description of Real Property and Non-Anchor Rented Area of Each Mall A1 - Alexandria Mall A2 - Brazos Mall A3 - Killeen Mall A4 - Mesilla Valley Mall A5 - Park Plaza A6 - Pecanland A7 - Shawnee Mall A8 - Temple Mall A9 - Villa Linda Mall B -Schedule of Purchase Price Allocations C -Rent Roll by Mall D -Schedule of Tradenames, Servicemarkers, etc. 2.3 -Form of Escrow Agreement 3.2 -Loan Balances 3.4(b) -Form of Shareholder Agreement 6.2(c) -Form of Limited or Special Warranty Deeds 6.2(d) -Form of Bill of Sale 6.2(e) -Form of Assignment of Partnership Interests 6.2(f) -Form of Assignment of Leases 6.2(g) -Form of Assignment of Contracts 6.2(h) -Form of Assignment of Reciprocal Easement Agreements 6.2(i) -Form of Mortgage Loan Assignment and Assumption Agreement 6.2(j)(i) -Form of Lease Estoppel Certificate 6.2(j)(ii) -Form of Seller Estoppel Certificate 6.2(j)(iii) -Form of REA Estoppel Certificate 6.2(j)(iv) -Form of Lender Estoppel Certificate 6.2(j)(v) -Form of Partnership Estoppel Certificate 6.2(q) -Form of Assignment of Office Leases and Equipment 8.3 -Schedule of Insurance Policies 8.4 -FUMI Employee Agreement 9.1(b) -Schedule of (i) Defaults under Contracts and (ii) Contracts Not Terminable on 30 Days' Notice 9.1(c) -Schedule of Defaults under Leases 9.1(c)(i) -List of Anchor Stores 9.1(e) -Schedule of Personal Property and Other Assets 9.1(f) -Schedule of Office and Equipment Leases 9.1(h) -Schedule of Pending Litigation -59- 64 9.1(i) -Schedule of Condemnation Disclosures 9.1(j) -Schedule of Mall Defects 9.1(m) -Schedule of Required Consents 9.1(n) -Schedule of Mortgage Loan Documents and MUSRI Loan Documents [with outstanding principal balances] 9.1(p)(v) -Schedule of Partnership Litigation 9.1(q) -Pending Real Estate Tax Challenges, Complaints or Actions 9.1(r) -Schedule of Government Agreements 9.1(u) -Schedule of Environmental Reports 9.1(v) -Employee Benefits List 9.1(w) -List of Employees -60- 65 AMENDMENT TO PURCHASE AND SALE AGREEMENT THIS AMENDMENT TO PURCHASE AND SALE AGREEMENT (the "Amendment"), made and entered into as of the 12th day of August, 1996 (the "Amendment Effective Date"), by and between MARATHON U.S. REALTIES, INC., a Delaware corporation, and FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio business trust ("Purchaser"). W I T N E S S E T H: WHEREAS, Marathon U.S. Realties, Inc. and Purchaser have entered into that certain Purchase and Sale Agreement (the "Agreement"), dated as of June 12, 1996, which Agreement was also executed by Centrixx Realty Holdings Limited ("Centrixx") pursuant to the joinder clause contained in the Agreement (Marathon U.S. Realties, Inc. and Centrixx are hereinafter referred to as "Seller" in accordance with the provisions of Section 1.1 of the Agreement); and WHEREAS, Seller and Purchaser desire to amend the Agreement to reflect the parties' understanding with respect to any Ground Leases (as hereinafter defined in this Amendment) affecting the Real Property (as defined in the Agreement) and to reflect certain other changes agreed to by Seller and Purchaser. NOW, THEREFORE, in consideration of and in reliance upon the covenants herein contained, and for good and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. DEFINED TERMS. Except as may otherwise be expressly provided herein, or unless the context clearly requires a different meaning, the capitalized words and phrases used in this Amendment shall have the same meanings ascribed to such words and phrases in the Agreement. 2. AMENDMENTS. The Agreement is hereby amended, as of the Amendment Effective Date, as follows: A. DEFINITIONS. (i) The following defined terms are hereby added to Section 1.1 of the Agreement: "ASSIGNMENT OF GROUND LEASES" means an assignment in the form of EXHIBIT 6.2(u) attached hereto, to be executed and acknowledged by Seller and Purchaser, pursuant to which Seller assigns, and Purchaser assumes, all right, title and interest of Seller under the Ground Leases relating to the Seller-Owned Malls. 66 "GROUND LEASES" means all ground leases affecting or relating to all or any portion of the Real Property as to which an Owner is the ground lessee, including all amendments or modifications related thereto entered into by an Owner prior to the Effective Date. "GROUND LEASE ESTOPPEL CERTIFICATE" means the estoppel certificate in the form of EXHIBIT 6.2(j)(vi) attached hereto. (i) The defined terms "Closing Date", "Inspection Period", "Leases", "Mall Information", "Party", "Purchase Price", "Real Property" and "Title Policy", each contained in Section 1.1 of the Agreement, are each deleted in their entirety and replaced with the respective definitions set forth below: "CLOSING DATE" means September 27, 1996, subject to extension to the extent expressly provided in Sections 5.3 and 10.3 of this Agreement. "INSPECTION PERIOD" means the period ending September 6, 1996; provided, however, that such Inspection Period shall extend, day-for-day, but in no event past September 13, 1996, for each day that passes after August 23, 1996 in which Purchaser has not received, for each Mall, a Survey, a Title Commitment (together with copies of matters of record reflected in each Title Commitment) and the Estoppel Certificates required by Section 6.2(j) of this Agreement. "LEASES" means all leases, subleases, licenses, concessions and other agreements relating to the use or occupancy of any portion of the Malls to which an Owner is a party, other than the Ground Leases, Specialty License Agreements or Contracts, including those and any amendments, modifications or work letters related thereto that may be entered into by an Owner after the Effective Date and prior to Closing in accordance with the terms of this Agreement. "MALL INFORMATION" means the following existing information, wherever located, with respect to each Mall: books and records, financial statements, operating budgets, structural, mechanical, geotechnical or other engineering studies, Plans, soil test reports, environmental reports, feasibility studies, appraisals, ADA surveys or reports, OSHA asbestos surveys, marketing studies, Mall documents and compilations, Lease summaries, the Leases, the Ground Leases, the Contracts, the Specialty License Agreements, the Reciprocal Easement Agreements and all other contracts, agreements and/or -2- 67 documents relating to the Malls that have been prepared at an Owner's request and are within Seller's possession or control. "PARTY" means TIAA or NML, a party to a Reciprocal Easement Agreement, a Ground Lease, a Specialty License Agreement, a Material Contract, an Office or Equipment Lease or a Lease, in each case other than an Owner or its predecessors in title with respect to any Mall. "PURCHASE PRICE" means Three Hundred Eight Million Five Hundred Thousand and 00/100 Dollars ($308,500,000.00). Without waiving Purchaser's right of termination pursuant to Section 4.2, it is the parties' intention that there shall be no further reductions in the Purchase Price for matters relating to Purchaser's due diligence investigations, or for any other matter, except as expressly set forth in the Agreement. "REAL PROPERTY" means all of that certain land comprising the Malls and any development tracts, outparcels or outlots relating to such Malls owned or leased by any Owner (including, without limitation, pursuant to any Ground Lease), including the buildings and all other improvements, structures, fixtures, parking area, facilities, installations, non-movable machinery or equipment on the real property or used in connection with the occupancy thereof (except to the extent of trade fixtures and equipment owned by Tenants under the Leases or the Specialty License Agreements or owned by other third parties), together with all easements, rights-of-way, strips and gores, tenements, hereditaments and appurtenances, thereunto belonging or appertaining and all right, title and interest of an Owner in and to any streets, alleys, passages, common areas and other rights-of-way or appurtenances included in, adjacent to and used in connection with such real property, before or after the vacation thereof, including, without limitation, the easements, access rights and other rights provided in the Reciprocal Easement Agreements. "TITLE POLICY" means, with respect to Real Property owned in fee simple by an Owner, a current ALTA Owner's Policy of Title Insurance (Form B, 1992), and with respect to Real Property leased by an Owner pursuant to a Ground Lease, a current ALTA Leasehold Owner's Policy (10-17-92), or, in each case, such other comparable form as is available in the applicable jurisdiction issued by Title Insurer for each Mall dated the date and time of Closing and with liability in the amount specified in Section 5.1, insuring Purchaser or Purchaser's Nominee as owner of fee title to the Seller-Owned Mall and Alexandria Mall (or owner of a good and valid leasehold estate pursuant to a Ground Lease, as the case may be) and Temple as owner of fee title to Temple Mall (or owner of a good and valid leasehold estate pursuant to a Ground Lease, as the case may be). With respect to the Partnership Sites, each Title Policy shall -3- 68 show Purchaser or Purchaser's Nominee as the named insured, with a proportionate reduction exception as to the existing policy for Temple, if available in Texas. Each Title Policy shall contain affirmative insurance as to all appurtenant easements benefiting the Real Property, including, without limitation, those granted under the Reciprocal Easement Agreement, subject only to the Permitted Exceptions applicable to the Mall covered by such policy, and shall (a) delete the standard or general exceptions from coverage (but may include an exception relating to parties in possession under unrecorded Leases), (b) contain a contiguity endorsement for each Mall that is comprised of more than one parcel if available, (c) affirmatively insure the Purchaser's rights under any Reciprocal Easement Agreements or other appurtenant easements that benefit the Real Property, (d) contain a survey endorsement if available, (e) if such endorsement is available, contain a zoning endorsement in the form of ALTA Endorsement Form 3.1 (or equivalent endorsement approved by Purchaser), (f) provide at Purchaser's expense for such reinsurance and direct access and such other endorsements as Purchaser shall require, (g) as to Alexandria Mall and Temple Mall, if Purchaser acquires the Partnership Interests therein rather than fee title, contain a non-imputation endorsement if available, and (h) contain a vehicular access endorsement if available. B. CONTINGENCY FOR LENDER APPROVAL. (i) The first three sentences of Section 3.3(a) of the Agreement shall be deleted in their entirety and replaced with the following: The obligations of the parties under this Agreement shall be contingent upon Seller obtaining, not less than five (5) days prior to the Closing Date, written consent from TIAA to the transfer of Pecanland Mall to Purchaser or Purchaser's Nominee and the assumption of the Pecanland Loan by Purchaser or Purchaser's Nominee. Seller and Purchaser acknowledge and agree that Purchaser is participating in discussions with TIAA to obtain such consent. If TIAA has not consented to the transfer and assumption by the Closing Date, the Mall Assets with respect to Pecanland Mall shall be excluded from the Property to be conveyed as part of the Closing, this Agreement shall not terminate and the parties shall proceed to close on the sale of the remaining Mall Assets and the Partnership Interests with a reduction in the Purchase Price by an amount equal to the Purchase Price Allocation for Pecanland Mall. (i) Section 3.3(b) is hereby amended by adding the phrase ", not less than five (5) days prior to the Closing Date," before the words "written consent" in the first sentence of Section 3.3(b) and by deleting the phrase "prior to the Closing Date (or any extended Closing Date agreed to by Seller and Purchaser)" in the second sentence of Section 3.3(b) and replacing it with the words "by such deadline". -4- 69 C. PARTNER APPROVALS. The first three (3) sentences of Section 3.4(d) are hereby deleted in their entirety and replaced with the following sentence: "Purchaser shall have the right to continue to participate during the Inspection Period in discussions or negotiations with the White Trusts to obtain the White Consents." D. OPERATING AGREEMENT. The following provision is added as Section 3.6 of the Agreement: 3.6 DELIVERY OF TERMS OF OPERATING AGREEMENT. Purchaser shall deliver to TIAA, NML and the White Trusts (or the attorney for the White Trusts) a synopsis of the salient terms of the Operating Agreement of Purchaser's Nominee responsive to inquiries of such parties, respectively. Such responses shall be provided from time to time with reasonable promptness and copies thereof shall be delivered to Seller. E. EXTENSIONS OF INSPECTION PERIOD. Section 4.3 of the Agreement is hereby deleted in its entirety. F. TITLE AND SURVEY. Notwithstanding anything in the Agreement to the contrary, Seller shall, on or before August 23, 1996, deliver to Purchaser, for each Mall, a Survey, a Title Commitment and copies of matters of record reflected in each Title Commitment. In Section 5.1(a) of the Agreement, the following language shall be deleted from the first sentence thereof: "the Inspection Period shall be extended due to any delay in providing such adjoining property information beyond the thirtieth (30th) day after the Effective Date and that". The last sentence of Section 5.1(b) shall be deleted in its entirety. G. CLOSING. Section 6.1 is hereby amended by adding the following as the last sentence to Section 6.1: "The parties agree that the closing proceedings shall commence on September 24, 1996, and the parties shall continue such proceedings with diligence so that the Closing can occur on or before the Closing Date." H. SELLER CLOSING DOCUMENTS. (i) Section 6.2(j) is amended by deleting the word "and" before the number "(v)" and adding the following at the end of the first sentence thereof: and (vi) a Ground Lease Estoppel Certificate from each Party to a Ground Lease. (i) Notwithstanding anything in the Agreement to the contrary, Seller shall deliver to Purchaser, on or before August 23, 1996, all -5- 70 Estoppel Certificates required by Section 6.2(j) of the Agreement. In addition, in the last sentence of Section 6.2(j), delete the phrase "fifty-five (55) days after the Effective Date" and replace with the date "September 3, 1996", and delete the phrase "fifty-two (52) days after the Effective Date" and replace with the date "August 28, 1996". (ii) The following is added as a new subsection (u) of Section 6.2 of the Agreement: (u) Four (4) counterparts of each Assignment of Ground Leases. I. PURCHASER CLOSING DOCUMENTS. The following is added as a new subsections (m) and (n) of Section 6.3: (m) Four (4) counterparts of each Assignment of Ground Leases. (n) A resolution of the members of Purchaser's Nominee (and a resolution of any such corporate member) authorizing the execution and delivery of the Purchaser Closing Documents. J. APPORTIONMENT AND PAYMENTS. The phrase "[Intentionally omitted]" is deleted from Section 7.1(p) of the Agreement and is replaced with the following: (p) GROUND LEASES. Rent and, without duplication of their proration pursuant to other provisions of this Section, all other costs, charges, reimbursements and other expenses payable pursuant to each Ground Lease by an Owner as the lessee thereunder, shall be prorated as of the Cutoff Date. K. CONDUCT OF BUSINESS PRIOR TO CLOSING DATE. The following is added as a new subsection (g) to Section 8.1 of the Agreement: (g) Prior to Closing, Seller shall not enter into, amend, terminate or waive any rights under any Ground Leases without Purchaser's prior written consent, which consent may be withheld in Purchaser's sole discretion. L. SELLER'S REPRESENTATIONS AND WARRANTIES. (i) Section 9.1(a) of the Agreement is hereby amended by adding the phrase "or lease" after the word "own" in the first sentence. -6- 71 (i) Delete the phrase "and paid for" at the end of clause (v) of Section 9.1(c) and replace with the following: ", or are under construction and Seller has reserved sufficient funds to pay for all costs of construction required to be paid or otherwise provided for by Seller prior to Closing in accordance with the terms of this Agreement". (iii) The phrase "[Intentionally omitted]" is deleted from Section 9.1(l) of the Agreement and is replaced with the following: (l) GROUND LEASES. Other than the Ground Leases affecting the Alexandria Mall described in EXHIBIT 9.1(l), there are no other Ground Leases affecting any portion of the Real Property. Seller has delivered to Purchaser true, correct and complete copies of all of the Ground Leases. The Ground Leases are in full force and effect. Neither the ground lessee nor, to Seller's knowledge, any other Party to any Ground Lease is in default thereunder and Seller has not received notice of any default pursuant to any Ground Lease, except in each case as disclosed in EXHIBIT 9.1(l). All the improvements that an Owner is obligated to construct as the lessee pursuant to any Ground Lease have been completed except as disclosed in EXHIBIT 9.1(l). M. SELLER INDEMNIFICATION. Section 15.2 of the Agreement is hereby amended by deleting the word "or" before clause (d) and adding a new clause (e) as follows immediately before the period ending Section 15.2: ; or (e) by reason of any labor, employment, employee benefit or other claim that arises out of an employment relationship and that relates to any action or events first occurring, or obligations first accruing, prior to the Closing Date and that is made by or relating to any Employee or former employee of Seller, MRML or any Affiliate of Seller, or by such Employee's or former employee's successor(s), assign(s) or estate or any other person claiming through such Employee or former employee, including, but not limited to, any such claim relating to compensation, workers' compensation or any benefit N. EXHIBITS. (i) The List of Exhibits attached to the Agreement is hereby amended to add the following: 6.2(j)(vi) -Form of Ground Lease Estoppel Certificate 9.1(l) -Description of Alexandria Ground Leases and List of Defaults 6.2(u) -Form of Assignment of Ground Leases -7- 72 (i) EXHIBIT B to the Purchase Agreement entitled "Schedule of Purchase Price Allocations" is hereby deleted and replaced with EXHIBIT B attached to this Amendment and made a part hereof. 3. EFFECTIVE DATE OF AGREEMENT. The parties hereby confirm that the Effective Date of the Agreement is June 12, 1996. 4. RATIFICATION OF AGREEMENT. This Amendment shall be deemed to form a part of and be construed in connection with and as part of the Agreement. Except as herein expressly amended, all of the other terms, covenants and conditions contained in the Agreement shall continue to remain unchanged and in full force and effect and are hereby ratified and confirmed. 5. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original and all of such counterparts shall constitute one Amendment. Signature pages may be attached from the counterparts and attached to a single copy of the Amendment to physically form one document. 6. PARTIES BOUND. Subject to the provisions of Section 16.10 of the Agreement, all provisions hereof, including, without limitation, all representations and warranties made hereunder, shall extend to, be obligatory upon and inure to the benefit of the respective heirs, devisees, legal representatives, successors, assigns and beneficiaries of the parties hereto. 7. HEADINGS/EXHIBITS. The headings of the various Articles and Sections of this Amendment have been inserted solely for purposes of convenience, are not part of this Amendment and shall not be deemed in any manner to modify, explain, expand or restrict any of the provisions of this Amendment. All Schedules and Exhibits annexed 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. 8. LIMIT OF TRUSTEES' LIABILITY. Notwithstanding anything contained herein to the contrary, this Amendment is made and executed on behalf of First Union Real Estate Equity and Mortgage Investments, a business trust organized under the laws of the State of Ohio, by its officer(s) on behalf of the trustees thereof, and none of the trustees or any additional or successor trustee hereafter appointed, or any beneficiary, officer, employee or agent of Purchaser shall have any liability in his personal or individual capacity, but instead, all parties shall look solely to the property and assets of Purchaser for satisfaction of any Damages of any nature in connection with this Amendment. -8- 73 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -9- 74 IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the Amendment Effective Date. SELLER: PURCHASER: MARATHON U.S. REALTIES, INC., FIRST UNION REAL ESTATE EQUITY a Delaware corporation AND MORTGAGE INVESTMENTS, an Ohio business trust By:/s/ John E. Beales By:/s/ James C. Mastandrea ------------------ ----------------------- Name: John E. Beales Name: James C. Mastandrea Title: Vice President Title: President and Chief Executive Officer By:/s/ Steven M. Edelman --------------------- Name: Steven M. Edelman Title: Executive Vice President and Chief Investment Officer -10- 75 JOINDER: The undersigned, as owner of the Villa Linda Mall, hereby joins in the execution of this Amendment in order to bind itself to the terms and provisions of this Amendment that relate to the undersigned and/or the Villa Linda Mall and hereby confirms all representations, warranties and covenants contained in the Amendment with respect to Villa Linda Mall. CENTRIXX REALTY HOLDINGS LIMITED By:/s/ John E. Beales ------------------------ Name: John E. Beales Title: Vice President The undersigned, as Guarantor pursuant to that certain Guaranty dated as of June 12, 1996, delivered in connection with the Agreement, hereby joins in the execution of this Amendment for the purpose of evidencing its consent to the terms and provisions thereof. 2685752 CANADA, INC., a Canadian corporation By:M.J. Patava --------------------------------- Name: ------------------------------- Title:Vice President and Treasurer ------------------------------ -11- 76 September 26, 1996 (216) 566-5500 Marathon U.S. Realties, Inc. One Galleria Tower 13355 Noel Road Suite 1200 Dallas, TX Attn: Michael E. Rulli RE: Purchase and Sale Agreement between Marathon U.S. Realties, Inc. ("Seller") and First Union Real Estate Equity and Mortgage Investments ("Purchaser") dated June 12, 1996, as amended (as so amended, the "Purchase Agreement") Gentlemen: As you are aware, pursuant to Paragraph 3.3 of the Purchase Agreement, in the event that Seller does not obtain the TIAA consent as contemplated therein by the Closing Date, the parties shall continue in good faith to seek consent from TIAA for a period of six months after the Closing Date. This letter is intended to amend the Purchase Agreement by allowing additional time to obtain such consent. Terms capitalized herein and not otherwise defined herein shall have the meaning set forth in the Purchase Agreement. Accordingly, this is to confirm our agreement that in the event that, at the end of such initial six month period, TIAA has not granted its consent, the parties shall, at Purchaser's election, exercisable by delivering written notice to Seller, continue in good faith to seek the consent from TIAA for an additional, period of six months thereafter, and further, that in the event that the TIAA consent has still not been granted by the expiration of such second six month period, then the parties shall, at Purchaser's election, again exercisable by delivering written notice to Seller, continue in good faith to seek the consent from TIAA for an additional 77 Page 2 period of six months thereafter; provided, that (a) the extension rights provided for above shall be exercisable only so long as the Pecanland Escrow Agreement (referenced below) remains in effect, and (b) the cancellation right with respect to the management agreement referred to in Paragraph 3.3 of the Purchase Agreement shall not be exercisable by Seller so long as the Pecanland Escrow Agreement (referenced below) remains in effect. In connection with the Closing, the parties further agree to enter into the Pecanland Escrow Agreement in the form of Exhibit A attached hereto and made a part hereof. Please confirm your agreement to the foregoing by executing below and returning a copy of this letter to the undersigned. Very truly yours, First Union Real Estate Equity and Mortgage Investments By: /s/ James C. Mastandrea ------------------------ Marathon U.S. Realties, Inc. By: /s/ John E. Beales ------------------------- Its: Vice President ------------------------ cc: Neal, Gerber & Eisenberg Two North LaSalle Street 21st Floor Chicago, Illinois 60602 Attn: Reuben Warshawsky, Esq. Thompson, Hine & Flory P.L.L. 3900 Key Tower 127 Public Square Cleveland, Ohio 44114-1216 Attn: Linda A. Striefsky, Esq. 78 September 27, 1996 First Union Real Estate Equity and Mortgage Investments 55 Public Square Suite 1900 Cleveland, OH 44113 Attention: Paul F. Levin Re: Purchase and Sale Agreement between Marathon U.S. Realties, Inc. ("Seller") and First Union Real Estate Equity and Mortgage Investments ("Purchaser") dated as of June 12, 1996, as amended (as so amended, the "Purchase Agreement") Gentlemen: This letter will amend the Purchase Agreement in the manner described herein. Capitalized terms not otherwise defined herein shall have the same meaning in this letter as defined in the Purchase Agreement. 1. Proration of Real Estate Taxes. Notwithstanding anything to the contrary contained in the Purchase Agreement, including, without limitation, Article 7 thereof, Seller will pay on the Closing Date the discounted present value of Seller's prorata share of the tax expenses for the Property which are reimbursed by tenants. The tax expenses are to be based on the actual 1995 taxes discounted at five percent (5%) from the due date of such taxes. For the final reproration on the Final Proration Statement, the actual tax expenses will be prorated and Seller will pay or receive credit for the actual versus the undiscounted amount paid on the Closing Date. The revenue will be prorated based upon actual expenses. 2. Temple Mall Flume and Drain Easement. Seller has provided an indemnification to First American Title Insurance Company ("First American") in order to cause First American to remove the exception for the encroachment of the flumes and drains at Temple Mall. In accordance with the terms of said indemnification, within sixty (60) days after the Closing Date, Seller shall cause the abandonment of the encroachments labeled "A" and "C" on the survey of Temple Mall, and either (a) obtain an easement from Douglas & Associates, LLC and Lowe's with respect to the encroachment labeled "D" on the survey of Temple Mall in the form previously approved by Purchaser or (b) relocate the drainage pipe for the encroachment labeled "D" on the survey of Temple Mall in order to eliminate the encroachment and tie into the storm drainage system of the City of Temple, Texas in accordance with plans approved by Purchaser. The encroachment noted at "B" is located on a platted road. Seller shall provide an original executed copy of the easement agreement to Purchaser. 3. Vehicle Titles. Seller shall cooperate with Purchaser after the Closing Date to cause the transfer of all vehicle titles owned by Seller or its predecessors in interest to be properly transferred to Purchaser within sixty (60) days after the Closing Date. Such vehicles include those listed on Exhibit A and identified as "to be transferred". Such cooperation shall include, without limitation, execution of assignments of title or leases, transfers of registered title or such other documents reasonably required to transfer such vehicle titles. Seller agrees to maintain 79 First Union Real Estate Equity and Mortgage Investments September 27, 1996 Page 2 insurance on all vehicles at the levels set forth in Exhibit B hereto until such time as they have been transferred to Purchaser. 4. Pecanland Escrow. Purchaser and Seller acknowledge that a Lender Estoppel Certificate has not been received from TIAA, and therefore the Escrow Agreement between Purchaser, Seller, Southwest Shopping Centers Co. I, L.L.C. and First American with respect to Pecanland Mall is hereby amended to the extent necessary to acknowledge that such Lender Estoppel Certificate has not been obtained and that it must be obtained by Seller and delivered to Purchaser prior to the Closing as to Pecanland Mall. 5. Not later than Tuesday, October 1, 1996, Seller shall obtain and deliver to Purchaser the original executed copy of the Ground Lessor Estoppel Certificate and Consent from the Abrahams. Please confirm your agreement to the foregoing by executing below and returning a copy of this letter to the undersigned. Very truly yours, MARATHON U.S. REALTIES, INC. By:/s/ Michael E. Rulli -------------------- Michael E. Rulli Vice-President FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS By:/s/ Frank Schwab ------------------------------- Frank Schwab Vice-President Title: ----------------------- cc: Linda A. Striefsky Reuben C. Warshawsky EX-99.3 5 EXHIBIT 99.3 1 Exhibit 99.3 INVESTMENT AGREEMENT THIS INVESTMENT AGREEMENT, dated as of September 27, 1996 is between GMAC COMMERCIAL EQUITY INVESTMENTS, INC., a Pennsylvania corporation ("GMAC-CM"), FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio business trust ("FUR"), and CARGILL FINANCIAL SERVICES CORPORATION, a Delaware corporation ("CFSC"). W I T N E S S E T H: - - - - - - - - - -- FUR, GMAC-CM and CFSC desire to form a limited liability company ("NEWCO") under the laws of the State of Delaware under the name "Southwest Shopping Centers Co. I, L.L.C." to own, manage and operate, directly or indirectly, nine (9) regional shopping malls, or interests therein, including partnership interests (the "PROPERTIES") to be acquired by Newco (or LLC #2 or LLC #3, as hereinafter defined), as the designee of FUR under a Purchase Agreement dated June 12, 1996, as amended (the "PURCHASE AGREEMENT"), between Marathon U.S. Realties, Inc., a Delaware corporation ("MARATHON"), as seller, and FUR, as purchaser, all on the terms and conditions set forth in this Investment Agreement, the LLC Agreements and the Management Agreements. A list of the Properties is attached as SCHEDULE 1. It is hereby agreed as follows: SECTION 1. DEFINITIONS. ------------ The following terms used herein shall have the respective meanings given below, such definitions to be equally applicable to both singular and plural forms of the terms defined: "ACQUISITION LOAN" shall mean the $165,000,000 loan to be made by the GMAC Lender to LLC #2 on the Closing Date pursuant to the Acquisition Loan Documents. "ACQUISITION LOAN DOCUMENTS" shall mean the financing and related security documentation entered into between LLC #2 and GMAC Lender providing for the Acquisition Loan. "AFFILIATE" of any Person shall mean any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person. A Person shall be deemed to control another Person if such first Person owns, directly or indirectly, more than 50% of the voting stock of the second Person or has the power, directly or indirectly, to elect or remove a majority of the members of the Board of Directors, trustees or comparable governing body of such second Person. 2 "CFSC" shall have the meaning given thereto in the opening paragraph. "CFSC INVESTMENT" shall mean the contribution of $38,132,286 made by CFSC Subsidiary to Newco on the Closing Date in payment for its limited liability company interest therein (including $35,000,000 for its Senior Preferred Capital). "CFSC LLC #2 INVESTMENT" shall mean the contribution of $259,891 made by CFSC Subsidiary in LLC #2 Manager on the Closing Date in payment for its limited liability company interest therein. "CFSC LLC #3 INVESTMENT" shall mean the contribution of $7,823 made by CFSC Subsidiary in LLC #3 on the Closing Date in payment for its limited liability company interest therein. "CFSC PARTY" shall mean, as applicable, CFSC or CFSC Subsidiary. "CFSC SUBSIDIARY" shall mean CFSC Capital Corp. XXXI, a Delaware corporation. "CLOSING DATE" shall have the meaning given in SECTION 2(a) of this Investment Agreement. "COMMON CAPITAL" shall have the meaning given thereto in the LLC #1 Agreement. "FUR" shall have the meaning given thereto in the opening paragraph. "FUR INVESTMENT" shall mean the contribution of $29,724,409 made by FUR Subsidiary to Newco on the Closing Date in payment for its limited liability company interest therein (including $26,500,000 for its Series A Preferred Capital). "FUR LLC #2 INVESTMENT" shall mean the contribution of $267,538 made by FUR Special Subsidiary in LLC #2 Manager on the Closing Date in payment for its limited liability company interest therein. "FUR LLC #3 INVESTMENT" shall mean the contribution of $8,053 made by FUR Subsidiary in LLC #3 on the Closing Date in payment for its limited liability company interest therein. "FUR PARTY" shall mean, as applicable, FUR, FUR Subsidiary, FUR Special Subsidiary or FUMI. 2 3 "FUR SPECIAL SUBSIDIARY" shall mean First Southwest II, Inc., a Delaware corporation and wholly-owned subsidiary of FUR. "FUR SUBSIDIARY" shall mean First Union Southwest L.L.C., a Delaware limited liability company of which FUR and First Southwest I, Inc., a wholly-owned subsidiary of FUR, are the members. "GMAC-CM" shall have the meaning given thereto in the opening paragraph. "GMAC-CM INVESTMENT" shall mean the contribution of $44,580,315 made by GMAC-CM to Newco on the Closing Date in payment for its limited liability company interest therein (including $38,500,000 for its Series B Preferred Capital). "GMAC-CM LLC #2 INVESTMENT" shall mean the contribution of $504,499 made by GMAC-CM in LLC #2 Manager on the Closing Date in payment for its limited liability company interest therein. "GMAC-CM LLC #3 INVESTMENT" shall mean the contribution of $15,186 made by GMAC-CM in LLC #3 on the Closing Date in payment for its limited liability company interest therein. "GMAC LENDER" shall mean GMAC Commercial Mortgage Corporation. "INVESTMENTS" shall mean, collectively, the CFSC Investment, the FUR Investment and the GMAC-CM Investment. "LLC #1 AGREEMENT" shall mean the Limited Liability Company Agreement of Newco substantially in the form of Exhibit A-1 to be dated as of the Closing Date among FUR Subsidiary, CFSC Subsidiary and GMAC-CM. "LLC #2 AGREEMENT" shall mean the Limited Liability Company Agreement of Southwest Shopping Centers Co. II, L.L.C. substantially in the form of Exhibit A-2 to be dated as of the Closing Date among Newco and LLC #2 Manager. "LLC #2 MANAGER" shall mean First SW, II, L.L.C., a Delaware limited liability company. "LLC #2 MANAGER AGREEMENT" shall mean the Limited Liability Company Agreement of LLC #2 Manager substantially in the form of Exhibit A-4 to be dated as of the Closing Date among FUR Special Subsidiary, GMAC-CM and CFSC Subsidiary. "LLC #3 AGREEMENT" shall mean the Limited Liability Company Agreement of Temple Shopping Center Co., L.L.C. substantially in the form of Exhibit A-3 to be 3 4 dated as of the Closing Date among Newco, FUR Subsidiary, CFSC Subsidiary and GMAC-CM. "LLC AGREEMENTS" shall mean, collectively, the LLC #1 Agreement, the LLC #2 Agreement, the LLC #2 Manager Agreement and the LLC #3 Agreement. "LLC #2" shall mean Southwest Shopping Centers Co. II, L.L.C. "LLC #3 shall mean Temple Shopping Center Co., L.L.C. "MANAGEMENT AGREEMENTS" shall mean, collectively, (i) with respect to each of the Properties other than Temple Mall, a form of Management and Leasing Agreement between FUMI and Newco or LLC #2, as applicable, in substantially the form of Exhibit A to LLC #1 Agreement, and (ii) with respect to LLC #3, the existing Management Agreement for such Property, as assigned to FUMI on the Closing Date. "MARATHON" shall have the meaning given thereto in the Witnesseth paragraph. "NEWCO" shall have the meaning given thereto in the Witnesseth paragraph. "PERSON" shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization. "PROPERTIES" shall have the meaning given thereto in the Witnesseth paragraph. "PURCHASE AGREEMENT" shall have the meaning given thereto in the Witnesseth paragraph. "SENIOR PREFERRED CAPITAL" shall have the meaning given thereto in the LLC #1 Agreement. "SENIOR PREFERRED DISTRIBUTION" shall have the meaning given thereto in the LLC #1 Agreement. "SERIES A PREFERRED CAPITAL" shall have the meaning given thereto in the LLC #1 Agreement. "SERIES B PREFERRED CAPITAL" shall have the meaning given thereto in the LLC #1 Agreement. "SERIES B PREFERRED DISTRIBUTION" shall have the meaning given thereto in the LLC #1 Agreement. 4 5 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. SECTION 2. INVESTMENTS. ------------ (a) INVESTMENTS BY FUR. Subject to the terms and conditions of this Investment Agreement, FUR agrees (i) to cause FUR Subsidiary to make the FUR Investment in Newco on the closing date under the Purchase Agreement (the "Closing Date"), (ii) to cause FUR Special Subsidiary to make the FUR LLC #2 Investment in LLC #2 Manager on the Closing Date, and (iii) to cause FUR Subsidiary to make the FUR LLC #3 Investment in LLC #3 on the Closing Date. FUR covenants that FUR Subsidiary will always be controlled, directly or indirectly, by FUR. (b) INVESTMENTS BY GMAC-CM. Subject to the terms and conditions of this Investment Agreement, GMAC-CM agrees (i) to make the GMAC-CM Investment in Newco on the Closing Date, (ii) to make the GMAC-CM LLC #2 Investment in LLC #2 Manager on the Closing Date, and (iii) to make the GMAC-CM LLC #3 Investment in LLC #3 on the Closing Date. (c) INVESTMENT BY CFSC. Subject to the terms and conditions of this Investment Agreement, CFSC agrees (i) to cause CFSC Subsidiary to make the CFSC Investment in Newco on the Closing Date, (ii) to cause CFSC Subsidiary to make the CFSC LLC #2 Investment in LLC #2 Manager on the Closing Date, and (iii) to cause CFSC Subsidiary to make the CFSC LLC #3 Investment in LLC #3 on the Closing Date. CFSC covenants that CFSC Subsidiary will always be controlled, directly or indirectly, by CFSC. SECTION 3. CONDITIONS PRECEDENT -------------------- (a) The obligations of FUR to take the actions on the Closing Date specified in SECTION 2(a) shall be subject to the fulfillment to the satisfaction of, or waiver in writing by, FUR on or prior to the Closing Date of the following conditions precedent: (i) MARATHON TRANSACTION. The conditions precedent under the Purchase Agreement to the consummation of the transaction with Marathon shall have been met or waived, it being understood and agreed that FUR shall have the right in its sole discretion to decide whether such conditions precedent in the Purchase Agreement have been fulfilled or to waive the same. (ii) OTHER INVESTMENTS. GMAC-CM and CFSC Subsidiary shall have made their respective Investments on the Closing Date contemplated by SECTIONS 2(b) and 2(c), respectively, and LLC #2 5 6 Manager and LLC #1 shall have made the investment in LLC #2 contemplated by the Acquisition Loan Documents. (iii) ACQUISITION LOAN. GMAC Lender shall have funded the Acquisition Loan. (iv) WARRANTIES. The respective representations and warranties of GMAC-CM and CFSC set forth in SECTIONS 4(b) and 4(c), respectively, shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date. (v) PERFORMANCE. GMAC-CM and CFSC shall each have performed and complied in all material respects with all agreements and conditions contained herein required to be performed or complied with on or prior to the Closing Date. (vi) LITIGATION. No material action or proceeding shall have been instituted nor shall have any governmental action been threatened before any court or governmental agency, nor shall any order, judgment or decree have been issued or proposed to be issued by any court or governmental agency to set aside, restrain, enjoin or prevent the performance of this Investment Agreement and the transactions contemplated hereby. (vii) OPINIONS. FUR shall have received a favorable opinion of counsel for each of GMAC-CM and CFSC, dated the Closing Date, addressed to FUR and substantially in the form of SCHEDULES 2 and 3, respectively. (viii) [Intentionally omitted]. (ix) SWAP AGREEMENT. Newco shall have entered into an interest rate swap agreement with respect to the Senior Preferred Distribution and the Series B Preferred Distribution on terms satisfactory to FUR. (b) The obligations of GMAC-CM to take the actions on the Closing Date specified in SECTION 2(b) shall be subject to the fulfillment to the satisfaction of, or waiver in writing by, GMAC-CM on or prior to the Closing Date of the following conditions precedent: 6 7 (i) MARATHON TRANSACTION. The conditions precedent under the Purchase Agreement to the consummation of the transaction with Marathon shall have been met or waived, it being understood and agreed that GMAC-CM shall have the right in its sole discretion to decide whether such conditions precedent in the Purchase Agreement have been fulfilled or to waive the same. (ii) OTHER INVESTMENTS. FUR and CFSC shall have made their respective Investments on the Closing Date contemplated by SECTIONS 2(a) and 2(c), respectively, and LLC #2 Manager and LLC #1 shall have made the investment in LLC #2 contemplated by the Acquisition Loan Documents. (iii) ACQUISITION LOAN. GMAC Lender shall have funded the Acquisition Loan. (iv) WARRANTIES. The respective representations and warranties of FUR and CFSC set forth in SECTIONS 4(a) and 4(c), respectively, shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date. (v) PERFORMANCE. FUR and CFSC shall each have performed and complied in all material respects with all agreements and conditions contained herein required to be performed or complied with on or prior to the Closing Date. (vi) LITIGATION. No material action or proceeding shall have been instituted nor shall have any governmental action been threatened before any court or governmental agency, nor shall any order, judgment or decree have been issued or proposed to be issued by any court or governmental agency to set aside, restrain, enjoin or prevent the performance of this Investment Agreement and the transactions contemplated hereby. (vii) OPINIONS. GMAC-CM shall have received a favorable opinion of counsel for each of FUR and CFSC, dated the Closing Date, addressed to GMAC-CM and substantially in the form of SCHEDULES 4 and 3, respectively. (viii) [Intentionally omitted]. (ix) SWAP AGREEMENT. Newco shall have entered into an interest rate swap agreement with respect to the Senior Preferred 7 8 Distribution and the Series B Preferred Distribution on terms satisfactory to GMAC-CM. (c) The obligations of CFSC to take the actions on the Closing Date specified in SECTION 2(c) shall be subject to the fulfillment to the satisfaction of, or waiver in writing by, CFSC on or prior to the Closing Date of the following conditions precedent: (i) MARATHON TRANSACTION. The conditions precedent under the Purchase Agreement to the consummation of the transaction with Marathon shall have been met or waived, it being understood and agreed that CFSC shall have the right in its sole discretion to decide whether such conditions precedent in the Purchase Agreement have been fulfilled or to waive the same. (ii) OTHER INVESTMENTS. FUR and GMAC-CM shall have made their respective Investments on the Closing Date contemplated by SECTIONS 2(a) and 2(b), respectively, and LLC #2 Manager and LLC #1 shall have made the investment in LLC #2 contemplated by the Acquisition Loan Documents. (iii) ACQUISITION LOAN. GMAC Lender shall have funded the Acquisition Loan. (iv) WARRANTIES. The respective representations and warranties of FUR and GMAC-CM set forth in SECTIONS 4(a) and 4(b), respectively, shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date. (v) PERFORMANCE. FUR and GMAC-CM shall each have performed and complied in all material respects with all agreements and conditions contained herein required to be performed or complied with on or prior to the Closing Date. (vi) LITIGATION. No material action or proceeding shall have been instituted nor shall have any governmental action been threatened before any court or governmental agency, nor shall any order, judgment or decree have been issued or proposed to be issued by any court or governmental agency to set aside, restrain, enjoin or prevent the performance of this Investment Agreement and the transactions contemplated hereby. 8 9 (vii) OPINIONS. CFSC shall have received a favorable opinion of counsel for each of FUR and GMAC-CM, dated the Closing Date, addressed to CFSC and substantially in the form of SCHEDULES 4 and 2, respectively. (viii) [Intentionally omitted]. (ix) SWAP AGREEMENT. Newco shall have entered into an interest rate swap agreement with respect to the Senior Preferred Distribution and the Series B Preferred Distribution on terms satisfactory to CFSC. (x) CASH FLOW COVERAGE RATIO. CFSC shall have satisfied itself that the coverage ratio for payment of the Senior Preferred Distribution from net cash flow available for distributions (cash flow available after debt service on Acquisition Loan, operating expenses, reserves, tenant improvements and leasing commissions) will not be less than 1.60 to 1.00. (d) AUTHORIZATION, EXECUTION, AND DELIVERY OF DOCUMENTS. The obligations of FUR, GMAC-CM and CFSC to take their respective actions on the Closing Date under SECTIONS 2(a), 2(b) and 2(c), respectively, shall further be subject to the conditions precedent that this Investment Agreement and each of the following documents shall have been duly authorized, executed and delivered by the respective parties thereto and shall be in full force and effect: (i) each of the LLC Agreements; and (ii) each of the Management Agreements (or, in the case of LLC #3, the applicable Assignment Agreement). SECTION 4. REPRESENTATIONS AND WARRANTIES. ------------------------------- (a) REPRESENTATIONS AND WARRANTIES OF FUR. FUR represents and warrants to GMAC-CM and CFSC that: (i) DUE ORGANIZATION. FUR is a business trust duly organized and existing under the laws of the State of Ohio and has the power, authority and legal right to enter into, and perform its obligations under, this Investment Agreement. Each other FUR Party is a corporation (or, in the case of FUR Subsidiary, a limited liability company) duly organized and existing under the laws of the State of Delaware and has the power, authority and legal right to enter into, and perform its obligations under, 9 10 each LLC Agreement to which it is or will be a party and, in the case of FUMI, the Management Agreements. (ii) DUE AUTHORIZATION; ENFORCEABILITY. This Investment Agreement has been duly authorized, executed and delivered by FUR and constitutes a valid and legally binding obligation of FUR. Each LLC Agreement to which a FUR Party is or will be a party has been duly authorized, and when executed and delivered by such FUR Party, will constitute its valid and legally binding obligation. The Management Agreements have been duly authorized by FUMI, and when executed and delivered by FUMI, will constitute its valid and legally binding obligations. (iii) NO VIOLATION. The execution and delivery by FUR of this Investment Agreement, the execution and delivery by each FUR Party of each LLC Agreement to which such FUR Party is or will be a party and the execution and delivery by FUMI of the Management Agreements are not, and the performance by FUR or such FUR Party, as applicable, of its obligations hereunder and thereunder will not be, inconsistent with its Declaration of Trust, certificate of incorporation or limited liability company agreement, as applicable, or bylaws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to it, and do not and will not contravene any provision of, or constitute a default under, any material indenture, mortgage, contract or other instrument to which FUR or such FUR Party is a party or by which it or its property is bound or require the consent or approval of, the giving of notice to, the registration with or the taking of any action in respect of or by, any Federal or state governmental authority or agency, except such as have been duly obtained, given or accomplished and are in full force and effect. (iv) LITIGATION. There is no litigation, proceeding or investigation pending, or to FUR's actual knowledge, threatened against FUR or any FUR Party which questions the validity or legality of this Investment Agreement or of any action taken or to be taken by FUR or any FUR Party pursuant to or in connection with the provisions of this Investment Agreement. (v) ERISA. FUR represents and warrants that no FUR Party will purchase or hold its interest in any of the LLC Agreements with plan assets of any "employee benefit plan" (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, ("ERISA")) which is subject to Title I of ERISA or a "plan" covered by Section 4975 of the Internal Revenue Code of 1986, as amended. 10 11 (vi) BROKERS. All negotiations relating to this Investment Agreement and the transactions contemplated hereunder have been carried on by FUR without the intervention of any person as the result of any action by FUR (and, so far as known to FUR, without the intervention of any other person), in such manner as to give rise to any valid claim against FUR for a brokerage commission, finder's fee or like payment, except for NatWest Markets, whose fees and expenses are to be paid by Newco under Section 24(o) of the LLC #1 Agreement. (vii) PURCHASE FOR INVESTMENT. FUR Subsidiary is purchasing its membership interests in Newco and LLC #3, and FUR Special Subsidiary is purchasing its membership interest in LLC #2 Manager, for its own account with no present intention of distributing any such membership interest or any part thereof in any manner which would violate the Securities Act. FUR acknowledges that the membership interests of FUR Subsidiary and FUR Special Subsidiary, as applicable, have not been registered under the Securities Act, and that neither Newco nor any such other limited liability company contemplates any filing, and is not legally required to file, any such registration statement. FUR Subsidiary and FUR Special Subsidiary are each an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. (b) REPRESENTATIONS AND WARRANTIES OF GMAC-CM. GMAC-CM represents and warrants to FUR and CFSC that: (i) DUE ORGANIZATION. GMAC-CM is a corporation duly organized and validly existing in good standing under the laws of the Commonwealth of Pennsylvania and has the corporate power, authority and legal right to enter into and perform its obligations under this Investment Agreement and each LLC Agreement to which it is or will be a party. (ii) DUE AUTHORIZATION; ENFORCEABILITY. This Investment Agreement has been duly authorized, executed and delivered by GMAC-CM and constitutes a valid and legally binding obligation of GMAC-CM. Each LLC Agreement to which GMAC-CM is or will be a party has been duly authorized, and when executed and delivered by GMAC-CM, will constitute its valid and legally binding obligation. (iii) NO VIOLATION. The execution and delivery by GMAC-CM of this Investment Agreement and each LLC Agreement to which GMAC-CM is or will be a party is not, and the performance by GMAC-CM of its obligations hereunder and thereunder will not be, inconsistent with its 11 12 charter or bylaws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to it, and do not and will not contravene any provision of, or constitute a default under, any material indenture, mortgage, contract or other instrument to which GMAC-CM is a party or by which it or its property is bound, or require the consent or approval of, the giving of notice to, the registration with or the taking of any action in respect of or by, any governmental authority or agency, except such as have been obtained, given or accomplished and are in full force and effect. (iv) LITIGATION. There is no litigation, proceeding or investigation pending, or to GMAC-CM's actual knowledge, threatened against GMAC-CM which questions the validity or legality of this Investment Agreement or of any action taken or to be taken by GMAC-CM pursuant to or in connection with the provisions of this Investment Agreement. (v) ERISA. GMAC-CM represents and warrants that it will not purchase or hold its interest in any of the LLC Agreements with plan assets of any "employee benefit plan" (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, ("ERISA")) which is subject to Title I of ERISA or a "plan" covered by Section 4975 of the Internal Revenue Code of 1986, as amended. (vi) BROKERS. All negotiations relating to this Investment Agreement and the transactions contemplated hereunder have been carried on by GMAC-CM without the intervention of any person as the result of any action by GMAC-CM (and, so far as known to GMAC-CM, without the intervention of any other person), in such manner as to give rise to any valid claim against GMAC-CM for a brokerage commission, finder's fee or like payment, except for NatWest Markets, whose fees and expenses are to be paid by Newco under Section 24(o) of the LLC #1 Agreement. (vii) PURCHASE FOR INVESTMENT. GMAC-CM is purchasing its membership interests in Newco, LLC #2 Manager and LLC #3 for its own account with no present intention of distributing any such membership interest or any part thereof in any manner which would violate the Securities Act. GMAC-CM acknowledges that the membership interests have not been registered under the Securities Act, and that neither Newco nor any such other limited liability company contemplates any filing, and is not legally required to file, any such registration statement. GMAC-CM is an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. 12 13 (c) REPRESENTATIONS AND WARRANTIES OF CFSC. CFSC represents and warrants to FUR and GMAC-CM that: (i) DUE ORGANIZATION. CFSC is a corporation duly organized and validly existing in good standing under the laws of the State of Delaware and has the corporate power, authority and legal right to enter into and perform its obligations under this Investment Agreement. CFSC Subsidiary is a corporation duly organized and validly existing in good standing under the laws of the State of Delaware and has the corporate power, authority and legal right to enter into and perform its obligations under each LLC Agreement to which it is or will be a party. (ii) DUE AUTHORIZATION; ENFORCEABILITY. This Investment Agreement has been duly authorized, executed and delivered by CFSC and constitutes a valid and legally binding obligation of CFSC. Each LLC Agreement to which CFSC Subsidiary is or will be a party has been duly authorized, and when executed and delivered by CFSC Subsidiary, will constitute its valid and legally binding obligation. (iii) NO VIOLATION. The execution and delivery by CFSC of this Investment Agreement, and the execution and delivery by CFSC Subsidiary of each LLC Agreement to which it is or will be a party, are not, and the performance by CFSC or CFSC Subsidiary, as applicable, of its obligations hereunder and thereunder will not be, inconsistent with its charter or bylaws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to it, and do not and will not contravene any provision of, or constitute a default under, any material indenture, mortgage, contract or other instrument to which CFSC or CFSC Subsidiary is a party or by which it or its property is bound, or require the consent or approval of, the giving of notice to, the registration with or the taking of any action in respect of or by, any governmental authority or agency, except such as have been obtained, given or accomplished and are in full force and effect. (iv) LITIGATION. There is no litigation, proceeding or investigation pending, or to CFSC's actual knowledge, threatened against CFSC or CFSC Subsidiary which questions the validity or legality of this Investment Agreement or of any action taken or to be taken by CFSC or CFSC Subsidiary pursuant to or in connection with the provisions of this Investment Agreement. (v) ERISA. CFSC represents and warrants that CFSC Subsidiary will not purchase or hold its interest in any of the LLC Agreements with 13 14 plan assets of any "employee benefit plan" (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, ("ERISA")) which is subject to Title I of ERISA or a "plan" covered by Section 4975 of the Internal Revenue Code of 1986, as amended. (vi) BROKERS. All negotiations relating to this Investment Agreement and the transactions contemplated hereunder have been carried on by CFSC without the intervention of any person as the result of any action by (and, so far as known to CFSC, without the intervention of any other person), in such manner as to give rise to any valid claim against CFSC for a brokerage commission, finder's fee or like payment (vii) PURCHASE FOR INVESTMENT. CFSC Subsidiary is purchasing its membership interests in Newco, LLC #2 Manager and LLC #3 for its own account with no present intention of distributing any such membership interest or any part thereof in any manner which would violate the Securities Act. CFSC acknowledges that the membership interests of CFSC Subsidiary have not been registered under the Securities Act, and that neither Newco nor any such other limited liability company contemplates any filing, and is not legally required to file, any such registration statement. CFSC Subsidiary is an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. SECTION 5. CONFIDENTIALITY. ---------------- Each party and its Affiliates shall treat all data and information furnished by a party hereto or an Affiliate to the other party hereto or to one of its Affiliates which is marked "Confidential" or contains a similar proprietary notice clause as confidential, and shall take or cause to be taken such reasonable precautions as are necessary to prevent disclosure thereof to others during the term of this Investment Agreement and for a period of three (3) years from the date of this Investment Agreement; PROVIDED, HOWEVER, that this obligation shall not be applicable: (i) to the extent such data or information was part of the public domain at the time of its disclosure to such party; (ii) to the extent such data or information became generally available to the public or otherwise part of the public domain after its disclosure to such party other than through any act or omission of such party or its Affiliate in breach of this Investment Agreement; 14 15 (iii) to the extent such data or information was subsequently disclosed to such party by a third party on a nonconfidential basis who had no obligation to either party or any Affiliate of either party or Newco (whether directly or indirectly) not to disclose such information; or (iv) to the extent that a party can demonstrate that such data or information was in such party's possession at the time of disclosure and was not acquired, directly or indirectly, from the other party or an Affiliate on a confidential basis. Each party may disclose such data and information to (i) its respective Affiliates, (ii) its directors, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of its investment in Newco), (iii) its financial advisors and other professional advisors, (iv) any investor to which such party sells or offers to sell its interest in Newco in accordance with Section 18(a) of the LLC Agreement, (v) any federal or state regulatory authority having jurisdiction over such party, (vi) any national securities exchange or nationally recognized rating agency that requires access to information about such party's investment portfolio or (vii) upon prompt notice to the other parties hereto, any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to such party, (x) in response to any subpoena or other legal process, or (y) in connection with any litigation to which such party is a party; provided that each party shall take all reasonable measures to impose upon any such Person described in clauses (i)-(iv) of this SECTION 5 an obligation to respect the confidential nature of the data and information disclosed substantially in accordance with the terms of this SECTION 5. The provisions of this SECTION 5 shall survive the termination of this Investment Agreement. SECTION 6. NOTICES. -------- All communications, notices and consents provide for herein shall be in writing and be given in person (or air freight delivery) or by means of facsimile or other wire transmission (with request for assurance of receipt in a manner typical with respect to communications of that type) or by mail, and shall become effective (x) on delivery if given in person or by air freight delivery, (y) on the date of transmission if sent by telecopy or other wire transmission, or (z) five business days after being deposited in the mails, with proper postage for first class registered or certified air mail, prepaid. Notices shall be addressed as follows: (i) if to FUR, at: 55 Public Square, Suite 1900 Cleveland, Ohio 44113 Attention: Paul F. Levin, Esq. 15 16 with a copy to: 55 Public Square, Suite 1900 Cleveland, Ohio 44113 Attention: Steven M. Edelman (ii) if to GMAC-CM, at: 650 Dresher Road Horsham, Pennsylvania 19044-8015 Attention: General Counsel with a copy to: Commercial Capital Initiatives, Inc. Wall Street Plaza 88 Pine Street, 21st Floor New York, New York 10005 Attention: Dan Driscoll (iii) if to CFSC, at: 6000 Clearwater Drive Minnetonka, Minnesota 55343 Attention: Gregory T. Zoidis or at such other address as either party hereto may from time to time designate by notice duly given in accordance with the provisions of this Section to the other party hereto. SECTION 7. GOVERNING LAW; WAIVER OF JURY TRIAL. ------------------------------------ (a) GOVERNING LAW. This Investment Agreement shall be governed by and construed in accordance with the law of the State of Delaware, without regard to its conflict of law rules. (b) WAIVER OF JURY TRIAL. Each of FUR, GMAC-CM and CFSC hereby waives any right to a trial by jury in any suit, action or proceeding arising out of or relating to this Investment Agreement and agrees that any such suit, action or proceeding shall be tried before a court and not before a jury. SECTION 8. TERMINATION. ------------ In the event that the Closing Date contemplated by SECTION 2 hereof has not occurred prior to October 31, 1996, then FUR, GMAC-CM or CFSC, acting alone, may upon notice to the other parties terminate this Investment Agreement together with any LLC Agreement and any Management Agreement which has theretofore been executed and delivered by the parties or their respective Affiliates; PROVIDED, HOWEVER, that no such termination shall relieve any party from any breach or default of any of its duties or obligations under this Investment Agreement which may have occurred 16 17 prior to the date of such termination; and provided further that the provisions of SECTIONS 5 and 10(F) shall survive any such termination. SECTION 9. REPLACEMENT OF SENIOR PREFERRED CAPITAL. ---------------------------------------- Newco will have the right under the LLC #1 Agreement to redeem the Senior Preferred Capital and the Common Capital of CFSC at any time after the Closing Date. FUR and CFSC agree that GMAC-CM may act on behalf of Newco in directing the terms and conditions of any such redemption and the resultant replacement Senior Preferred Capital. Each of FUR and CFSC agrees to cooperate in good faith with GMAC-CM and Newco in connection with any such redemption and replacement and to execute and deliver such amendments to the LLC Agreements and other agreements as may be necessary or advisable to consummate such replacement, provided that (i) the after-tax future economic return of FUR Subsidiary and the other rights, obligations and benefits of FUR (taking into account, among other things, FUR's REIT status) under the LLC Agreements as a result of the replacement are not in any way adversely affected and (ii) the selection and identity of any person replacing CFSC in Newco, LLC #2 Manager and LLC #3 shall be subject to FUR's reasonable approval. All costs and expenses of negotiating and documenting the refinancing (including, without limitation, the fees and expenses of counsel for FUR and Newco) shall be for the account of GMAC-CM. SECTION 10. MISCELLANEOUS. -------------- (a) COUNTERPARTS. This Investment Agreement may be executed in any number of counterparts and by either party hereto on separate counterparts, each of which, when so executed and delivered, shall be an original, but all such counterparts shall together constitute but one and the same instrument. (b) SURVIVAL. All covenants, agreements, indemnities, representations and warranties contained in this Investment Agreement and in any agreement, document or certificate delivered pursuant hereto or in connection herewith, shall survive the execution and delivery of this Investment Agreement and the consummation of the transactions contemplated hereby. (c) BINDING EFFECT. All covenants, agreements, indemnities, representations and warranties in this Investment Agreement, the LLC Agreements and the Management Agreements, and in any agreement, document or certificate delivered hereunder or thereunder, shall bind the party making the same and its permitted successors and assigns and shall inure to the benefit of each party for whom made and their respective permitted successors and assigns. Except as otherwise indicate, all references herein to any party to this Investment Agreement, the LLC Agreements and the Management Agreements shall include the permitted successors and assigns 17 18 of such party. Notwithstanding the foregoing, no party hereto shall assign its rights or obligations under this Investment Agreement without the prior written consent of the other parties, which consent may be withheld in each such other party's sole discretion. (d) AMENDMENTS, SUPPLEMENTS, ETC. Neither this Investment Agreement nor any of the terms hereof may be amended, modified or supplemented orally, but only by an instrument in writing signed by the party against which enforcement of such change is sought. (e) HEADINGS. The headings of the sections and paragraphs of this Investment Agreement have been inserted for convenience of reference only and shall in no way restrict or otherwise modify any of the terms or provisions hereof. (f) EXPENSES. The fees and expenses of FUR and GMAC-CM (including, without limitation, the reasonable fees and expenses of their outside counsel with respect to this Investment Agreement, the Purchase Agreement and the Acquisition Loan Documents) shall be paid by Newco, LLC #2 or LLC #3, as applicable; such fees and expenses of CFSC shall be paid by GMAC-CM. (g) ENTIRE AGREEMENT. This Investment Agreement together with the LLC Agreements and the Management Agreements embody the entire agreement and understanding between the parties with respect to the subject matter hereof and thereof, and supersede any agreements, representations, warranties or understandings, oral or written, between the parties with respect to the subject matter of this Investment Agreement, the LLC Agreement and the Management Agreements entered into prior to the date hereof. (h) LIMITATION OF LIABILITY. Notwithstanding anything contained herein to the contrary, this Investment Agreement is made and executed on behalf of FUR by its officers on behalf of the trustees thereof, and none of the trustees or any additional or successor trustee hereafter appointed, or any beneficiary, officer, employee or agent of FUR shall have any liability in his personal or individual capacity, but instead, all parties shall look solely to the property and assets of FUR for satisfaction of claims of any nature arising under or in connection with this Investment Agreement. (i) NO CONSEQUENTIAL OR LOST PROFIT DAMAGES. No party to this Investment Agreement, nor any Affiliate of any such party, shall seek or be entitled to incidental, indirect or consequential damages or damages for lost profits in any claim made under this Investment Agreement or in connection with the transactions contemplated hereby. 18 19 IN WITNESS WHEREOF, the parties hereto have each caused this Investment Agreement to be duly executed by their respective officers thereunto duly authorized as of the date first above given. FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS By: /s/ PAUL LEVIN ------------------------- Its: VICE PRESIDENT AND SECRETARY ---------------------------- GMAC COMMERCIAL EQUITY INVESTMENTS, INC. By: /s/ JAMES DALTON ------------------------------ Its: SENIOR VICE PRESIDENT ---------------------------- CARGILL FINANCIAL SERVICES CORPORATION By: /s/ AUTHORIZED OFFICER ------------------------------ Its: AUTHORIZED OFFICER ---------------------------- 20 EXHIBITS -------- Exhibit A-1 Form of LLC #1 Agreement Exhibit A-2 Form of LLC #2 Agreement Exhibit A-3 Form of LLC #3 Agreement Exhibit A-4 Form of LLC #2 Manager Agreement SCHEDULES --------- Schedule 1 List of Properties Schedule 2 Opinion of Counsel for GMAC-CM Schedule 3 Opinion of Counsel for CFSC Schedule 4 Opinion of Counsel for FUR EX-99.4 6 EXHIBIT 99.4 1 Exhibit 99.4 ====================================================================== LIMITED LIABILITY COMPANY AGREEMENT OF SOUTHWEST SHOPPING CENTERS CO. I, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY DATED AS OF SEPTEMBER 27, 1996 ====================================================================== 2
TABLE OF CONTENTS ----------------- SECTION 1. Formation of Limited Liability Company................................................... 1 SECTION 2. Name..................................................................................... 1 SECTION 3. Definitions.............................................................................. 1 SECTION 4. Business of the Company.................................................................. 9 (a) Purpose......................................................................... 9 (b) Subsidiary Companies............................................................ 9 (c) Separateness Covenants..........................................................10 SECTION 5. Term.....................................................................................11 SECTION 6. Principal Place of Business..............................................................11 SECTION 7. Registered Agent; Registered Office......................................................11 SECTION 8. Capital Contributions; No Withdrawal or Resignation......................................11 (a) Initial Capital Contributions...................................................11 (b) Additional Contributions; Interest..............................................11 (c) Withdrawal and Resignation; Return of Capital Contribution............................................................12 (d) Special Rules for Capital Accounts..............................................12 SECTION 9. Distributions............................................................................12 (a) Current Distributions...........................................................12 (b) Distributions from Sale.........................................................13 SECTION 10. Allocations of Income and Losses.........................................................14 (a) Allocations.....................................................................14 (b) Priority........................................................................14 (c) Qualified Income Offset.........................................................15 (d) Minimum Gain Chargeback.........................................................15 (e) Nonrecourse Liability...........................................................15 (f) Section 754 Related Adjustments.................................................16 (g) Change in Membership Interests..................................................16 (h) Loss Limitation.................................................................16 (i) [Intentionally omitted].........................................................16 (j) State and Local Taxes...........................................................16
3
SECTION 11. Withholding............................................................................. 16 SECTION 12. Books, Records and Accounting........................................................... 17 (a) Books and Records.............................................................. 17 (b) Fiscal Year; Accounting........................................................ 17 (c) Reports........................................................................ 17 (d) Access......................................................................... 17 SECTION 13. Company Funds........................................................................... 17 SECTION 14. Management.............................................................................. 17 (a) Manager Powers................................................................. 17 (b) Election....................................................................... 18 (c) Resignation.................................................................... 19 (d) Removal........................................................................ 19 (e) Limitations on Powers.......................................................... 19 (f) Reimbursement.................................................................. 19 SECTION 15. Meetings................................................................................ 19 (a) Meetings of Members............................................................ 19 (b) Consent of Members............................................................. 19 SECTION 16. Voting.................................................................................. 20 (a) Members........................................................................ 20 (b) Voting......................................................................... 20 (c) Actions Requiring Member Approval.............................................. 20 SECTION 17. Limitation of Liability and Indemnification............................................. 21 (a) Limitation of Liability........................................................ 21 (b) Indemnification by the Company................................................. 21 (c) Expenses....................................................................... 22 (d) Not Exclusive.................................................................. 22 (e) Insurance...................................................................... 23 SECTION 18. Assignment of Membership Interests and New Members...................................... 23 (a) Assignment..................................................................... 23 (b) Limitations on Assignment...................................................... 23 (c) Negative Pledge................................................................ 23 (d) Admission of Assignees......................................................... 23 (e) Admission of New Members....................................................... 24
-ii- 4 SECTION 19. Put and Call Options.................................................................... 24 (a-1) Refinancing Senior Preferred Capital........................................... 24 (a-2) Senior Preferred Capital Options............................................... 24 (b) Series B Preferred Capital Options............................................. 25 (c) CFSC Common Capital Option..................................................... 26 (d) GMAC-CM Common Capital Option.................................................. 26 (e) CFSC Redemption Options........................................................ 26 (f) GMAC-CM Redemption Options..................................................... 27 (g) Failure to Purchase Senior Preferred Capital................................... 28 (h) Failure to Purchase Series B Preferred Capital.............................................................. 28 (i) No Purchase of Common Capital.................................................. 29 (j) Exercise of Options............................................................ 30 (k) New Member; Certain Assignments................................................ 31 (l) FUR Subsidiary Capital Contributions Under Section 19............................................................... 31 SECTION 20. Dissolution............................................................................. 31 SECTION 21. Winding Up and Distribution of Assets................................................... 32 (a) Winding Up..................................................................... 32 (b) Distribution of Assets......................................................... 32 SECTION 22. Conflict of Interest.................................................................... 33 SECTION 23. Taxation................................................................................ 33 (a) Status of the Company.......................................................... 33 (b) Tax Elections.................................................................. 33 (c) Company Tax Returns............................................................ 34 (d) Tax Audits..................................................................... 34
-iii- 5 SECTION 24. Miscellaneous........................................................................... 35 (a) Governing Law.................................................................. 35 (b) Binding Effect................................................................. 35 (c) Pronouns and Number............................................................ 35 (d) Captions....................................................................... 35 (e) Enforceability................................................................. 35 (f) Counterparts................................................................... 36 (g) Notices........................................................................ 36 (h) Entire Agreement; Amendment.................................................... 36 (i) Further Assurances............................................................. 36 (j) Third Parties.................................................................. 37 (k) Facsimile Signatures........................................................... 37 (l) Reliance upon Books, Reports and Records....................................... 37 (m) Time Periods................................................................... 37 (n) Waiver......................................................................... 37 (o) Expenses....................................................................... 37
SCHEDULE I MEMBERS SCHEDULE II PROPERTIES SCHEDULE III ASSUMED LOANS SCHEDULE IV TAX REPORTING REQUIREMENTS EXHIBIT A MANAGEMENT AGREEMENT -iv- 6 Exhibit 99.4 LIMITED LIABILITY COMPANY AGREEMENT OF SOUTHWEST SHOPPING CENTERS CO. I, L.L.C. This Limited Liability Company Agreement is made and entered into as of the 27th day of September, 1996 by and among the Members listed on Schedule I attached hereto. SECTION 1. FORMATION OF LIMITED LIABILITY COMPANY. The Members agree to the formation of a limited liability company (the "Company") pursuant to the Act and for that purpose have caused a Certificate of Formation to be filed with the Secretary on September 19, 1996. The rights and duties of the Members shall be as provided in the Act, except as modified by this Agreement. For and in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Members executing this Agreement hereby agree to the terms and conditions of this Agreement. SECTION 2. NAME. The business of the Company shall be conducted under the name "Southwest Shopping Centers Co. I, L.L.C.". SECTION 3. DEFINITIONS. For purposes of this Agreement, unless the context clearly indicates otherwise, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Acquisition Loan" shall have the meaning given thereto in the Investment Agreement. "Act" means the Delaware Limited Liability Company Act, Delaware Code Title 6, Sections 18.101 ET SEQ., as amended from time to time. "Adjusted Capital Account Deficit" means, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments: (i) credit to such Capital Account any amounts that such Member is obligated to restore pursuant to any provision of this Agreement; (ii) credit to such Capital Account the Member's share of Company Minimum Gain and the Member's amount of Member Minimum Gain; and (iii) debit to such Capital Account any items described in Treasury Regulations section 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of Adjusted Capital Account Deficit is intended to comply with 1 7 the provisions of section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted consistently therewith. "Affiliate" of any Person shall mean any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person. A Person shall be deemed to control another Person if such first Person owns, directly or indirectly, more than 50% of the voting stock of the second Person or has the power, directly or indirectly, to elect or remove a majority of the members of the Board of Directors, trustees or comparable governing body of such second Person. "Agreement" means this Limited Liability Company Agreement, as amended, modified or supplemented from time to time. "Applicable Margin" means (i) 5.0%, plus (ii) 0.5% for each three-month period commencing on each three-month anniversary of the date hereof while the Senior Preferred Capital is outstanding. "Assumed Loans" means the existing loans on the Properties assumed by the Company (or Subsidiary Company) under the Purchase Agreement or which the Company (or Subsidiary Company) may take subject to, as described on Schedule III. "Capital Account" means, with respect to each Member, the capital account established and maintained on the books and records of the Company for such Member. Each Member's Capital Account shall initially equal the value of the Capital Contribution to the Company made by the Member as set forth on Schedule I attached hereto. During the term of the Company, (i) each Member's Capital Account shall be INCREASED by the amount of (w) income and gain allocated to the Member and (x) any cash or the fair market value of property (net of any liability assumed or to which such property is subject) subsequently contributed by the Member to the Company, (ii) each Member's Capital Account shall be DECREASED by the amount of (y) loss and deduction allocated to the Member and (z) all cash and the fair market value of property (net of any liability assumed or to which such property is subject) distributed to the Member, and (iii) each Member's Capital Account shall otherwise be kept in accordance with Section 704(b) of the Code and applicable United States Treasury Regulations promulgated thereunder. In addition, Capital Accounts shall be affected by the operation of Section 19 hereof. "Capital Contribution" means the total amount of cash or other property contributed to the Company by a Member. Contributed property shall be valued at fair market value, net of any liabilities assumed or to which the contributed property is subject. "Capital Interest" means a percentage determined for each Member equivalent to a fraction, the numerator of which is the aggregate Capital Contributions made by such Member with respect to Common Capital and Preferred Capital and the denominator of 2 8 which is the aggregate Capital Contributions made by all Members with respect to Common Capital and Preferred Capital. The amount of FUR Subsidiary's Capital Contribution acquired by CFSC Subsidiary or GMAC-CM pursuant to Section 19(g) or 19(h) shall be deemed a Capital Contribution by such acquiring Member (and not of FUR Subsidiary until such time, if any, as it is reacquired by FUR Subsidiary pursuant to Section 19(a-2) or 19(b)) for purposes of determining the Capital Interest of such Member. "CFSC" means Cargill Financial Services Corporation, a Delaware corporation, and its permitted successors and assigns. "CFSC Subsidiary" means CFSC Capital Corp. XXXI, a Delaware corporation. "CFSC Common Capital" means that portion of CFSC Subsidiary's Capital Contribution not constituting Senior Preferred Capital or Class B Common Capital. "Class B Common Capital" means the capital interest in the Company into which FUR Subsidiary may convert its Series A Preferred Capital or FUR Common Capital or into which CFSC Subsidiary or GMAC may convert its CFSC Common Capital or GMAC Common Capital respectively. The Class B Common Capital shall be non-voting until such time that only Class B Common Capital is outstanding. "Code" means the United States Internal Revenue Code of 1986, as amended, modified or rescinded from time to time, or any similar provision of succeeding law. "Common Capital" means the FUR Common Capital, the GMAC-CM Common Capital and the CFSC Common Capital. "Common Membership Percentage" shall mean the percentage share of a Member, solely with respect to its Membership Interest in Common Capital, as set forth opposite such Member's name on Schedule I attached hereto as it may be amended, modified or supplemented from time to time or adjusted pursuant to Section 19. "Company Redemption Default" means a failure by the Company to redeem in excess of $10,000,000 of Preferred Capital at the request of either or both of CFSC Subsidiary or GMAC-CM pursuant to the requirements of either or both of Sections 19(e) and 19(f), respectively, and the continuance of such failure to perform for 30 days. "Fair Market Value" means, with respect to Common Capital, the amount of such Common Capital plus such additional amount which, after giving recognition to the amount and timing of any Net Cash Flow distributions made to a Member on account of its Common Capital, results in an internal rate of return of 20% per annum (compounded annually) on the Common Capital of such Member, but if the determination is made as of a date after the fifth anniversary of the date hereof and the Net Cash Flow 3 9 distributions thereon through the fifth anniversary of the date hereof exceeded 20% per annum, the determination shall be for the period commencing on the fifth anniversary of the date hereof. "FUMI" means First Union Management Inc., a Delaware corporation. "FUR" means First Union Real Estate Equity and Mortgage Investments, an Ohio business trust. "FUR Common Capital" means that portion of FUR Subsidiary's Capital Contribution not constituting Series A Preferred Capital or Class B Common Capital. "FUR Subsidiary" means First Union Southwest L.L.C., a Delaware limited liability company of which FUR and First Southwest I, Inc., a wholly-owned subsidiary of FUR, are the members, and its permitted successors and assigns. "GMAC-CM" means GMAC Commercial Equity Investments, Inc., a Pennsylvania corporation, and its permitted successors and assigns. "GMAC-CM Common Capital" means that portion of GMAC-CM's Capital Contribution not constituting Series B Preferred Capital or Class B Common Capital. "Investment Agreement" means the Investment Agreement dated as of September 27, 1996 among FUR, CFSC and GMAC-CM, as it may be amended, modified or supplemented from time to time. "IRS" means the United States Internal Revenue Service or any successor entity. "LIBOR" means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the rates, reported from time to time by Bloomberg Business Services On- Line Financial Data Service ("Bloomberg"), at which foreign branches of major United States banks offer United States dollar deposits to other banks for a one-month period in the London interbank market at approximately 11:00 A.M. (London time) two business days before the first day of such month. If such interest rate shall cease to be available from Bloomberg, LIBOR shall be determined from such financial reporting service or other information as shall be mutually acceptable to the Members. "LLC #2" shall have the meaning given thereto in Section 4(b). "LLC #2 Manager" shall mean First SW II, L.L.C., a Delaware limited liability company of which each of the Members holding Common Capital (or their Affiliates) holds a 33 1/3% membership interest. "LLC #3" shall have the meaning given thereto in Section 4(b). 4 10 "Majority Interest" means more than 50% of Common Membership Percentages. "Management Agreement" has the meaning set forth in Section 4(c)(vii). "Manager" means any Person elected by the Members to manage the Company in accordance with Section 14. "Member" means any Person with a Membership Interest in the Company. "Membership Interest" means the interest of a Person in the Common Capital, Class B Common Capital or Preferred Capital of the Company (including, but not limited to, all rights, obligations, capital contributions, benefits and other attributes with respect to such Common Capital, Class B Common Capital or Preferred Capital, respectively) as provided in this Agreement. "Minimum Gain" has the meaning set forth in Section 1.704-2(d) of the Treasury Regulations. "Net Cash Flow" means for any period the amount equal to: (i) the sum of (A) gross receipts from business operations, all investment income and investment gain of the Company and all other cash received by the Company and (B) any amounts released from Reserves; DECREASED by (ii) the sum of (A) disbursements of the Company for operating expenses, expenditures for capital investments and reinvestments, principal payments on indebtedness, interest and other expenses, including any repayment of indebtedness required or elected to be made in connection with any refinancing, sale or other event, and (B) any increase in Reserves. "Option Closing Date" shall have the meaning given thereto in SECTION 19(j). "Person" means any individual, corporation, partnership, association, limited liability company, trust, estate or other enterprise or entity. "Preferred Capital" means, collectively, the Senior Preferred Capital, the Series A Preferred Capital and the Series B Preferred Capital. "Preferred Distribution" means, collectively, the Senior Preferred Distribution, the Series A Preferred Distribution, the Series B Preferred Distribution, the Senior 5 11 Accumulated Preferred Distribution, the Series A Accumulated Preferred Distribution and the Series B Accumulated Preferred Distribution. "Preferred Distribution Default" means a failure by the Company to pay three (3) consecutive quarterly Preferred Distributions on the Senior Preferred Capital or the Series B Preferred Capital. "Preferred Interest" means a percentage determined for CFSC Subsidiary or GMAC-CM, as applicable, equivalent to a fraction, the numerator of which is such Member's Preferred Capital, and the denominator of which is the sum of the Senior Preferred Capital and the Series B Preferred Capital. "Properties" means the real estate properties listed on Schedule II hereto. "Purchase Agreement" means the Purchase Agreement dated June 12, 1996, as amended, between Marathon U.S. Realties, Inc. and FUR, as it may be amended, modified or supplemented from time to time. "Reserves" means the reasonable reserves established and maintained from time to time in amounts reasonably determined in the annual management plan and budget or in amounts approved by a Majority Interest to be adequate and sufficient for current and future operating and working capital and to pay for structural capital expenditures, tenants' alterations and leasing commissions or other costs and expenses incident to the Company's business. "Secretary" means the Secretary of State of Delaware. "Senior Accumulated Preferred Distribution" means the amount of any Senior Preferred Distribution which is accrued but not paid to CFSC Subsidiary with respect to any quarter under Section 9, which Senior Preferred Distribution shall bear interest from each payment date until paid at a rate equal to LIBOR plus the Applicable Margin, compounded monthly. "Senior Preferred Capital" means $35,000,000 contributed by CFSC Subsidiary, as such amount may be increased or reduced from time to time in accordance with Sections 9 and 19. "Senior Preferred Distribution" means an amount equal to LIBOR plus the Applicable Margin (each as determined as of the end of each month for the following month) of the Senior Preferred Capital from time to time outstanding, compounded monthly and calculated on the basis of a year of 360 days consisting of twelve 30-day months; provided, however, that the Senior Preferred Distribution on any Special Senior Preferred Capital shall be 10% per annum on the notional amount thereof. 6 12 "Series A Accumulated Preferred Distribution" means the amount of any Series A Preferred Distribution which is accrued but not paid to FUR Subsidiary with respect to any quarter under Section 9, which Series A Accumulated Preferred Distribution shall bear interest from each payment date until paid at the rate of 10% per annum, compounded monthly, until the fifth anniversary of the date hereof, and 4% per annum thereafter, compounded monthly. "Series A Preferred Capital" means $26,500,000 contributed by FUR Subsidiary, as such amount may be increased or reduced from time to time in accordance with Sections 9 and 19. "Series A Preferred Distribution" means an amount equal to (i) 10% per annum from the date hereof to the date which is the fifth anniversary of the date hereof, and (ii) 4% per annum thereafter, of the Series A Preferred Capital from time to time outstanding, compounded monthly and calculated on the basis of a year of 360 days consisting of twelve 30-day months. "Series B Accumulated Preferred Distribution" means the amount of any Series B Preferred Distribution which is accrued but not paid to GMAC-CM with respect to any quarter under Section 9, which Series B Accumulated Preferred Distribution shall bear interest from each payment date until paid at the rate of 6% per annum in excess of LIBOR, compounded monthly. "Series B Preferred Capital" means $38,500,000 contributed by GMAC-CM, as such amount may be reduced from time to time in accordance with Sections 9 and 19. "Series B Preferred Distribution" means an amount equal to 6.00% per annum in excess of LIBOR (determined as of the end of each month for the following month) of the Series B Preferred Capital from time to time outstanding, compounded monthly and calculated on the basis of a year of 360 days consisting of twelve 30-day months; provided, however, that the Series B Preferred Distribution on any Special Series B Preferred Capital shall be 10% per annum on the notional amount thereof. "Special Majority" means more than 74.5% of Common Membership Percentages, plus 100% of the Members holding Senior Preferred Capital; provided, however, that if a Company Redemption Default (or, with respect to clause (iii) of Section 16(c) only, a Preferred Distribution Default) shall have occurred and be continuing, Special Majority shall mean the approval of Members holding at least 65% of the Capital Interest (including 100% of the Members holding Senior Preferred Capital); and provided further, that any (1) dissolution, merger or consolidation pursuant to clause (i), (ii) or (vi) of Section 16(c) shall always require unanimous approval of the Members to the extent such action may violate any financing documents, (2) any action under clause (x) of Section 16(c) shall always require unanimous approval of the Members and (3) the 7 13 provisions of Section 24(h) shall be given effect with respect to any amendment, modification or supplement to this Agreement. "Special Senior Preferred Capital" shall have the meaning given thereto in the second paragraph of Section 19(a-2). "Special Series A Preferred Distribution" means any distribution made with respect to the Series A Preferred Capital in accordance with Section 19(i). "Special Series B Preferred Capital" shall have the meaning given thereto in the second paragraph of Section 19(b). "Subsidiary Company" means (i) Southwest Shopping Centers Co. II, L.L.C., a Delaware limited liability company in which the Company owns a 99% membership interest and LLC #2 Manager owns a 1% membership interest, or (ii) Temple Shopping Center Co., L.L.C., a Delaware limited liability company in which the Company owns a 99% membership interest and the Members holding Common Capital own in the aggregate 1% of the membership interest. "Subsidiary Fair Market Value" means, with respect to the membership interest of each Member owning Common Capital (or Affiliate thereof) in LLC #2 Manager and in LLC #3, the amount of its capital contribution in such limited liability company plus such additional amount which, after giving recognition to the amount and timing of any "Net Cash Flow" (as defined in the operating agreement for such limited liability company) distributions made to such Member on account of its membership interest, results in an internal rate of return of 20% per annum (compounded annually) on the capital contribution therein of such Member, but if the determination is made as a date after the fifth anniversary of the date hereof and such Net Cash Flow distributions thereon through the fifth anniversary of the date hereof exceeded 20% per annum, the determination shall be for the period commencing on the fifth anniversary of the date hereof. "Treasury Regulations" means the income tax regulations, including any temporary regulations, from time to time promulgated under the Code. "Value" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes except as follows: (a) The Value of any asset contributed by a Member to the Company is the fair market value of such asset as determined at the time of contribution; 8 14 (b) The Value of any Company asset distributed to a Member shall be adjusted to equal the fair market value of such asset on the date of distribution; (c) If the Capital Accounts of the Members are adjusted pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(f) to reflect the fair market value of the Company's assets, the Value of each such asset shall be adjusted to equal its fair market value as of the time of such adjustment in accordance with such Treasury Regulation; (d) If the Value of a Company asset has been determined or adjusted pursuant to clause (a) or (c) above, such Value shall thereafter be adjusted by the depreciation, amortization or cost recovery deductions, if any, taken into account with respect to such asset under Treasury Regulation Section 1.704-1(b)(2)(iv)(g); and (e) Solely for purposes of this definition of "Value", the term "fair market value" shall mean the amount which, in the reasonable judgment of the Manager (with the consent of the other Members, which consent will not be unreasonably withheld), would be paid for a particular security or property by a willing buyer to a willing seller (neither under any compulsion to buy or sell) unreduced by any liabilities secured by the security or property or assumed by any party in connection therewith. SECTION 4. BUSINESS OF THE COMPANY. (a) PURPOSE. The purpose of the Company is to (i) own, manage, operate, finance (whether secured or unsecured), hold, lease, pledge, develop and realize upon the Properties and any related real property or tangible or intangible personal property (including any interests in partnerships that own the Properties), and in connection therewith, the Company shall have the right to dispose of and exchange any Property or interest therein or other asset of the Company, and to carry on any actions necessary, convenient or incidental to the conduct, promotion or attainment of the aforementioned purpose, and (ii) execute, deliver and perform the Limited Liability Company Agreement for each Subsidiary Company and to be a member thereof. (b) SUBSIDIARY COMPANIES. On the closing date, upon receipt of the Capital Contributions from the Members, the Company shall contribute (i) $102,160,845 to Southwest Shopping Centers Co. II, L.L.C. ("LLC #2) in payment for its limited liability company interest therein, and (ii) $3,072,220 to Temple Shopping Center Co., L.L.C. ("LLC #3") in payment for its limited liability company interest therein. 9 15 (c) SEPARATENESS COVENANTS. The Company shall at all times: (i) maintain books and records separate from any other Person at its principal office which show a true and accurate record in United States dollars of all business transactions arising out of and in connection with the conduct of the Company and the operation of its business in sufficient detail to allow preparation of tax returns required to be prepared pursuant to Section 23; (ii) not commingle assets with those of any other Person, including Members; (iii) conduct its own affairs in its own name; (iv) maintain and periodically prepare financial statements separate from those of any other Person; (v) pay its own liabilities out of its own funds; (vi) observe all organizational formalities required by the Act, the Certificate of Formation and this Agreement; (vii) maintain an "arm's-length relationship" with each of its Affiliates and Members; provided, however, that this clause (vii) shall not prevent (1) the execution, delivery and performance of (x) the Management and Leasing Agreements between the Company and LLC #2, as the applicable owner, and FUMI, as manager, for each of their respective Properties substantially in the form approved by the Members and attached hereto as Exhibit A and (y) in the case of LLC #3, the assignment of the existing Temple Mall management agreement to FUMI, as successor manager for its Property (each such management agreement for the respective Property being a "Management Agreement"), (2) the execution, delivery and performance of the Acquisition Loan Documents (as defined in the Investment Agreement) with GMAC Lender (as so defined) or (3) the payment to GMAC-CM of the equity placement fee previously agreed to; (viii) not guarantee or become obligated for the debts of any other Person or hold out its credit as being available to satisfy the obligations of any other Person; (ix) use stationery, invoices and checks separate from those of all other Persons; 10 16 (x) not pledge its assets for the benefit of any other Person except pursuant to the purposes and activities set forth in Section 4(a); (xi) hold itself out as an entity separate from all other Persons; (xii) not engage in any merger, consolidation or combination transaction with any Person; (xiii) not incur debt except pursuant to the purposes and activities set forth in Section 4(a); and (xiv) not make any loans to its Members. SECTION 5. TERM. The term of the Company shall begin upon the filing of the Certificate of Formation with the Secretary and shall continue until the earlier of (a) December 31, 2050 or (b) the date as of which the Company is dissolved in accordance with this Agreement or by law. SECTION 6. PRINCIPAL PLACE OF BUSINESS. The principal place of business of the Company shall be located at 55 Public Square, Suite 1900, Cleveland, Ohio 44113. The Members may, from time to time, change the principal place of business of the Company and/or establish additional places of business of the Company. SECTION 7. REGISTERED AGENT; REGISTERED OFFICE. The registered agent for the service of process shall be The Corporation Trust Company. The registered office in the State of Delaware shall be 1209 Orange Street, in the City of Wilmington, County of New Castle. The Members may, from time to time, change the registered agent or office through appropriate filings with the Secretary. SECTION 8. CAPITAL CONTRIBUTIONS; NO WITHDRAWAL OR RESIGNATION. (a) INITIAL CAPITAL CONTRIBUTIONS. In accordance with the Investment Agreement, each Member shall make the Capital Contribution set forth opposite such Member's name on Schedule I attached hereto in cash. Each Member holding Common Capital shall receive the Common Membership Percentage set forth opposite such Member's name on such Schedule. (b) ADDITIONAL CONTRIBUTIONS; INTEREST. No Member shall be obligated to make (nor shall any Member have the right to make without the consent of all Members) any additional Capital Contribution, provided, however, that (i) FUR Subsidiary shall have the right to make, or cause to be made, additional Capital Contributions pursuant to Section 19, and (ii) additional Common Capital may be contributed with the approval of a Special Majority. Any additional Capital Contribution made by a Member (other than FUR Subsidiary pursuant to Section 19) shall be in the form of Common Capital. No 11 17 Member has any obligation to restore a deficit balance in such Member's Capital Account or to make any contributions to the Company in order to restore such deficit balance. No Member shall be paid any interest or specified return on any Capital Contribution other than as provided herein. (c) WITHDRAWAL AND RESIGNATION; RETURN OF CAPITAL CONTRIBUTION. No Member shall be entitled to withdraw or resign as a Member or to receive any part of such Member's Capital Contribution or any distribution from the Company in connection therewith except as expressly provided in Sections 9(b) and 19(b). (d) SPECIAL RULES FOR CAPITAL ACCOUNTS. It is the intention of the Members that Capital Accounts shall be maintained in accordance with Section 704(b) of the Code and with the Treasury Regulations thereunder. The following rules shall apply in maintaining Capital Accounts: (i) In the event any interest in the Company is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest. (ii) If property is distributed by the Company, Capital Accounts shall be adjusted as though such property had been sold on the date of such distribution for its then fair market value, and any income, gain or loss on such sale had been calculated and allocated pursuant to Section 1.704-1(b)(2)(iv)(e) of the Treasury Regulations in accordance with Section 10. Upon the liquidation of the Company or any Membership Interest in the Company, the Members' Capital Accounts shall be adjusted to reflect allocations of income, gain and losses determined as though there were an actual sale of the Company's assets on the date of the liquidation for fair market value. SECTION 9. DISTRIBUTIONS. (a) CURRENT DISTRIBUTIONS. Except as specified in Sections 9(b) and 19 hereof, Net Cash Flow shall be distributed to the Members quarterly (except that the distribution specified in clause (vii) below shall be made annually) in accordance with the following priority: (i) first, the Senior Accumulated Preferred Distribution, if any, shall be made to CFSC Subsidiary; (ii) second, the Senior Preferred Distribution shall be made to CFSC Subsidiary; 12 18 (iii) third, the Series B Accumulated Preferred Distribution, if any, shall be made to GMAC-CM; (iv) fourth, the Series B Preferred Distribution shall be made to GMAC-CM; (v) fifth, the Series A Accumulated Preferred Distribution, if any, shall be made to FUR Subsidiary; (vi) sixth, the Series A Preferred Distribution shall be made to FUR Subsidiary; and (vii) seventh, the remainder shall be distributed among the Members in accordance with their respective Common Membership Percentages. Quarterly distributions shall be made on the last day of each calendar quarter unless such day is not a business day in which event the distribution shall be made on the last business day of such quarter. Annual distributions shall be made on December 31 of each year unless such day is not a business day in which event the distribution will be made on the last business day of the year. (b) DISTRIBUTIONS FROM SALE. In the event of the sale of any of the Properties or destruction or condemnation of any of the Properties, the net proceeds thereof (other than insurance and condemnation proceeds which will be used to rebuild such Property) available for distribution shall be distributed within 30 days of such event in the following manner: (i) first, the Senior Accumulated Preferred Distribution, if any, shall be made to CFSC Subsidiary; (ii) second, the Senior Preferred Capital shall be redeemed by the Company at the redemption price set forth in Section 19(e) and the second paragraph of Section 19(a-2), as applicable; (iii) third, the Series B Accumulated Preferred Distribution, if any, shall be made to GMAC-CM; (iv) fourth, the Series B Preferred Capital shall be redeemed by the Company at the redemption price set forth in Section 19(f) and the second paragraph of Section 19(b), as applicable; (v) fifth, the Series A Accumulated Preferred Distribution, if any, shall be made to FUR Subsidiary; 13 19 (vi) sixth, the Series A Preferred Capital shall be redeemed by the Company at a redemption price of par, plus the accrued but unpaid Series A Preferred Distribution; and (vii) seventh, the remainder shall be distributed in accordance with clause (vii) of Section 9(a) above; provided, however, that if all or a portion of FUR Subsidiary's Capital Contribution has been converted pursuant to Section 19(g) or 19(h), then a distribution shall be made to the holders of the Common Capital in an amount equal to Fair Market Value and the remainder shall be distributed to the Members in accordance with their respective Capital Interests. SECTION 10. ALLOCATIONS OF INCOME AND LOSSES. (a) ALLOCATIONS. All income, gains, losses and deductions of the Company (I.E., each item of Company income, gain, loss and deduction) shall be determined annually by the Manager or accountants designated by it in accordance with the Federal income tax accounting rules in Section 703 of the Code and Section 1.704-1(b)(2)(iv) of the Treasury Regulations. The Members intend that the allocations set forth in this Section 10 shall reflect the Members' interests in the Company (within the meaning of Section 704(b) of the Code), and to the extent that the Manager determines that adjustments are necessary to such allocations to reflect such Members' interests in the Company, the Members agree to determine reasonably in good faith the adjustments that should be made with the consent of all Members. (b) PRIORITY. Except as provided otherwise in this Section 10, the income, gains, losses and deductions of the Company (including any items thereof if necessary) for each Company fiscal year (or portion thereof) shall be allocated among the Members in a manner that will, as nearly as possible (taking into account the immediately succeeding sentence), cause the Capital Account balance of each Member (as computed for purposes of Section 704(b) of the Code) at the end of such Company fiscal year (but without taking into account actual cash distributions made during such year) to be equal to an amount equal to the hypothetical distribution (if any) that such Member would receive if, on the last day of such Company fiscal year (or portion thereof), (w) all Net Cash Flow subject to Section 9(a) distributed during, or distributable for, such Company fiscal year (or portion thereof) were distributed in accordance with Section 9(a), (x) all remaining assets, including cash, were sold for cash equal to their Value, taking into account any adjustments thereto for such Company fiscal year (or portion thereof), (y) all Company liabilities were satisfied in cash according to their terms (limited, with respect to each nonrecourse liability, to the Value of the assets securing such liability) and (z) the net proceeds of such sale (after satisfaction of such liabilities) were distributed in full pursuant to Section 21(b). By way of illustration and not limitation, to the extent necessary to, as nearly as possible, cause the Capital Account balance of each Member (as computed for purposes of Section 704(b) of the Code) at the end of 14 20 such Company fiscal year (but without taking into account actual cash distributions made during such year) to be equal to such Member's hypothetical distribution (if any), items of gross income, gain, loss and deduction shall be specially allocated among the Members so that if for any Company fiscal year there is Company net income which is less than total cash distributions made for such year under Section 9 or there is Company net loss, items of gross income and gain shall first be allocated to those Members receiving cash distributions to the extent of such cash distributions. Insofar as the character of income allocable under this Section 10(b) as ordinary income or capital gain is concerned (but without affecting the amount of income allocable to any Member under the preceding sentences of this Section 10(b) or otherwise), to the extent that for any Company fiscal year there are cash distributions distributed under both Section 9(a) and Section 9(b), ordinary income attributable to cash distributions under Section 9(a) and capital gain attributable to cash distributions under Section 9(b) shall be allocable, to the extent possible, in proportion to the cash distributions made to each Member under Section 9(a) and Section 9(b), respectively. It is the intent of this Section 10(b) that with respect to any class of Preferred Capital prior to conversion or redemption thereof, for any Company fiscal year the aggregate income and gain allocated to such holder of Preferred Capital shall not exceed the actual Preferred Distribution payable to such holder for such Company fiscal year. (c) QUALIFIED INCOME OFFSET. Except as provided in Section 10(d) hereof, in the event that any Member unexpectedly receives any adjustments, allocations or distributions described in Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Treasury Regulations, items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate as quickly as possible, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of such Member created by such adjustments, allocations and distributions. (d) MINIMUM GAIN CHARGEBACK. Notwithstanding any other provision of this Section 10 (but subject to Section 10(e)), if there is a net decrease in Company Minimum Gain during any Fiscal Year, each Member shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to the portion of such Member's share of the net decrease in Company Minimum Gain, determined in accordance with Section 1.704-2(g)(2) of the Treasury Regulations. The items to be so allocated shall be determined in accordance with Section 1.704-2(f) of the Treasury Regulations. This Section 10(d) is intended to comply with the minimum gain chargeback requirement in such Sections of the Treasury Regulations and shall be interpreted consistently therewith. (e) NONRECOURSE LIABILITY. Notwithstanding any other provision of this Section 10, (i) there is hereby incorporated by reference a partner nonrecourse debt minimum gain chargeback within the meaning of Treasury Regulation section 1.704-2(i)(4), (ii) losses, income and gains shall be allocated in accordance with Treasury Regulation section 1.704-2(i) where such losses, income and gains are attributable to a partner nonrecourse liability 15 21 (within the meaning of such Treasury Regulation), and (iii) for purposes of the aforementioned Treasury Regulations (and without limiting any other provision of this Agreement), the Members shall be treated as partners and the Company shall be treated as a partnership. (f) SECTION 754 RELATED ADJUSTMENTS. To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required to be taken into account in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Treasury Regulations, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Treasury Regulations. (g) CHANGE IN MEMBERSHIP INTERESTS. If there is a change in any Member's Membership Interest during any year, allocations among the Members shall be made in accordance with their Membership Interests in the Company from time to time during such year in accordance with Section 706 of the Code using the closing-of-the-books method, except that depreciation, amortization and similar items shall be deemed to accrue ratably on a daily basis over the entire year during which the corresponding asset is owned by the Company for the entire year, and over the portion of a year after such asset is placed in service by the Company if such asset is placed in service during the year. (h) LOSS LIMITATION. Net loss allocated to a Member shall not exceed the maximum amount of net loss that can be so allocated without causing such Member to have an Adjusted Capital Account Deficit at the end of the fiscal year. All net loss in excess of the limitation set forth in this Section 10(h) shall be allocated to the other Member(s) to the extent that the allocation would not cause such other Member(s) to have an Adjusted Capital Account Deficit. (i) [Intentionally omitted]. (j) STATE AND LOCAL TAXES. Items of income, gain, loss, deduction, credit and tax preference for state and local income tax purpose shall be allocated to and among the Members in a manner consistent with the allocation of such items for federal income tax purposes in accordance with the foregoing provisions of this Section 10. SECTION 11. WITHHOLDING. The Company is authorized to withhold from distributions to be made to a Member, or with respect to allocations to a Member, and to pay over to a federal, state or local government, any amounts required to be withheld pursuant to the Code or any provisions of any other federal, state or local law. Any amounts so withheld shall be treated as distributed to such Member pursuant to this 16 22 Section 11 for all purposes of this Agreement and shall be offset against the net amounts otherwise distributable to such Member. The Company may also withhold from distributions that would otherwise be made to a Member, and apply to the obligations of such Member, any amounts that such Member owes to the Company. SECTION 12. BOOKS, RECORDS AND ACCOUNTING. (a) BOOKS AND RECORDS. The Company shall maintain complete and accurate books and records of the Company's business and affairs in accordance with generally accepted accounting principles. The books and records shall be maintained at the principal place of business of the Company and shall be accessible to the Members in accordance with the Act. (b) FISCAL YEAR; ACCOUNTING. The Company's fiscal year shall be the calendar year for accounting and tax purposes. The accounting methods and principles to be followed by the Company shall be selected from time to time by the Manager, subject to the approval of a Special Majority. (c) REPORTS. The Company shall provide to the Members (i) an annual report concerning the financial condition and results of operation of the Company and the Members' Capital Accounts within ninety (90) days after the end of each fiscal year, which annual report shall be certified by independent public accountants of nationally recognized standing, and (ii) copies of the monthly reports on the Properties provided to the Company pursuant to the Management Agreement. (d) ACCESS. Each Member shall have access, during normal business hours and upon reasonable notice to the Manager, to the Company's books and records in accordance with the provisions of Section 18-305 of the Act. SECTION 13. COMPANY FUNDS. The funds of the Company shall be deposited in such bank or other financial institution account or accounts, or invested in such interest-bearing or non-interest-bearing investments, as shall be designated by the Manager. All withdrawals from any such bank accounts shall be made only by the Manager or by individuals duly appointed by the Manager. SECTION 14. MANAGEMENT. (a) MANAGER POWERS. The business of the Company shall be managed by or under the authority of the Manager, and the Company shall not have any employees. The Manager shall have all rights, powers and authority of a Manager under the Act and as provided for in this Agreement. The Manager shall cause the Company to enter into the Management Agreements with FUMI on the date hereof with respect to the management, leasing and operation of the Properties. Subject to Section 14(e), the Manager shall have all rights, power and authority to do for, on behalf of and in the 17 23 name of the Company all things that it deems necessary, proper or desirable to carry out its duties and responsibilities, including, without limitation: (1) acquire by purchase, lease, or otherwise, any real property constituting or related to the Properties; (2) finance, improve, own, sell, convey or assign any real estate constituting or related to the Properties; (3) borrow money for and on behalf of the Company, and, in connection therewith, mortgage or grant a security interest in all or any portion of the Company's assets; (4) prepay, in whole or in part, refinance, amend, modify, or extend any mortgages, trust deeds or security agreements which may affect any asset of the Company and in connection therewith execute for and on behalf of the Company any extensions, renewals or modifications of such mortgages, trust deeds or security agreements; (5) execute any and all other instruments and documents which may be necessary or in the opinion of the Manager desirable to carry out the intent and purpose of this Agreement and the purpose of the Company; (6) make any and all expenditures which the Manager, in its sole discretion, deems necessary or appropriate in connection with the management of the affairs of the Company and the carrying out of its obligations and responsibilities under this Agreement, including, without limitation, all legal, accounting, and other related expenses incurred in connection with the organization and financing and operating of the Company; (7) appoint Persons to act on behalf of the Company; and (8) approve any non-budgeted expenditures. (b) ELECTION. The initial Manager shall be FUR Subsidiary and shall serve until its resignation in accordance with Section 14(c) or removal in accordance with Section 14(d). Upon such resignation or removal, a replacement Manager shall be elected by the affirmative vote of a Special Majority (without including in such calculation the Membership Interest of any Member who is the Manager or an Affiliate of the Manager who was so removed, in the event of the removal of the Manager for cause under Section 14(d)). 18 24 (c) RESIGNATION. The Manager may not resign without the prior written consent of GMAC-CM, which consent shall be not be unreasonably withheld. (d) REMOVAL. The Manager may be removed with cause by the affirmative vote of a Special Majority without including in such calculation the Membership Interest of any Member who is the Manager or who is an Affiliate of the Manager. The Manager may be removed without cause by the unanimous vote of all Members. For purposes hereof, "cause" shall mean (i) a Company Redemption Default; (ii) the Manager is convicted of fraud, theft, embezzlement or other felony; (iii) the Manager shall have materially breached any of its obligations under this Agreement; (iv) the wilful misconduct or gross negligence of the Manager in the performance of its duties hereunder; (v) FUMI shall have been (or concurrently shall be) replaced as the property manager under and in accordance with the Management Agreements, or the Management Agreements shall have been (or concurrently shall be) terminated (other than as a result of the sale of the Properties subject thereto); or (vi) an event of default shall have been declared under the Acquisition Loan or any of the Assumed Loans. (e) LIMITATIONS ON POWERS. The Manager shall not have any power, right or authority to take any action requiring Member approval as set forth in Section 16 in the absence of the requisite Member approval. (f) REIMBURSEMENT. The Manager shall be reimbursed by the Company for any reasonable out-of-pocket expenses incurred by the Manager on behalf of the Company but shall not otherwise receive any compensation as Manager hereunder. SECTION 15. MEETINGS. (a) MEETINGS OF MEMBERS. Meetings of Members for any proper purpose may be called at any time by any Member or Members whose Common Membership Percentage(s) equal or exceed 10% or by the Manager. Members may participate in any meeting through the use of a conference telephone or similar communications equipment by means of which all individuals participating in the meeting can hear each other, and such participation shall constitute presence in person at the meeting. The Company shall give written notice of the date, time, place and purpose of any meeting to all Members at least ten (10) days and not more than sixty (60) days prior to the date fixed for the meeting. Notice may be waived by any Member. (b) CONSENT OF MEMBERS. Any action required or permitted to be taken at any annual or special meeting of Members may be taken by the written consent of the Members entitled to vote holding the requisite Membership Interests without a meeting, without prior notice and without a vote. The written consent shall set forth the action so taken, and counterparts thereof shall be furnished to all Members. 19 25 SECTION 16. VOTING. (a) MEMBERS. The affirmative vote or written consent of a Majority Interest shall decide all matters properly brought before the Members; provided, however, that no action set forth in subsection (c) shall be taken by the Company without the approval of a Special Majority. (b) VOTING. A Member may vote either in person or by written proxy or consent signed by the Member or by his duly authorized attorney in fact. (c) ACTIONS REQUIRING MEMBER APPROVAL. Notwithstanding any other provision of this Agreement, the approval of a Special Majority (determined after giving effect to Section 24(h) in the case of any amendment, modification or supplement to this Agreement) shall be required to approve the following actions (but in the case of clauses (vii) and (xii) only, without including in such calculation the Membership Interest of any Member who is an Affiliate of the managing agent thereunder in the event that "cause" exists for removing the Manager or circumstances exist under the Management Agreement for removing the managing agent thereunder): (i) The dissolution or winding up of the Company or any Subsidiary Company; (ii) The merger or consolidation of the Company or any Subsidiary Company; (iii) The sale, exchange, mortgage, pledge, encumbrance, lease (other than a lease in accordance with the criteria set forth in the Management Agreement) or other disposition or transfer of any Property or all or substantially all of the assets of the Company or any Subsidiary Company; (iv) The annual management plan and budget, including a cash management plan, of the Company or any Subsidiary Company; (v) Amendments to this Agreement or the Certificate of Formation or the organizational documents of any Subsidiary Company; (vi) Establishment, formation, dissolution, liquidation, merger or consolidation of any Subsidiary Company or sale of a Membership Interest therein (other than as contemplated in Section 19(c) or 19(d)); (vii) The termination or amendment of any Management Agreement or any change in the managing agent appointed under any thereof; 20 26 (viii) The amendment, modification, extension, refinancing or prepayment of the Acquisition Loan or any Assumed Loans, or the incurrence of any indebtedness for borrowed money other than the Acquisition Loan and the Assumed Loans; (ix) Capital or operating expenditures by the Company or any Subsidiary Company in excess of the annual budget, including the Permitted Variance Range permitted under the related Management Agreement, for each Property owned by the Company or the relevant Subsidiary Company; (x) The authorization of any action by the Company that, if taken, would result in FUR failing to qualify as a real estate investment trust under the Code; (xi) The institution of (or consent or approval to) any proceeding in bankruptcy or any other insolvency or reorganization proceeding involving the Company or any Subsidiary Company; (xii) Matters specified in Sections 4.2 and 4.3 of each Management Agreement (other than the Temple Mall Management Agreement) and any other matter therein as requiring owner's consent; and (xiii) The redemption by the Company of any Membership Interest other than as provided for in Section 19. SECTION 17. LIMITATION OF LIABILITY AND INDEMNIFICATION. (a) LIMITATION OF LIABILITY. The debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member or Manager shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member or Manager. Further, this Agreement is made and executed on behalf of each Member by its officers duly authorized, and no director, trustee, officer, employee, agent, stockholder or beneficiary of any such Member (or any Affiliate thereof) shall have any liability in his or its personal or individual capacity, but instead, all parties shall look solely to the property and assets of the Company for satisfaction of claims of any nature arising under or in connection with this Agreement. (b) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify, in accordance with and to the full extent now or hereafter permitted by law, any Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including, without limitation, an action by or in the right of the Company) 21 27 by reason of the fact that such Person is or was a Member, Manager or officer of the Company (and the Company may so indemnify a Person by reason of the fact that such Person is or was an employee or agent of the Company, or is or was serving at the request of the Company as a director, trustee, member, manager, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise), against any liabilities, expenses (including, without limitation, attorneys' fees and expenses and any other costs and expenses incurred in connection with defending such action, suit or proceeding), judgments, fines and amounts paid in settlement actually and reasonably incurred by such Person in connection with such action, suit or proceeding if such Person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption (a) that the Person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company, or (b) with respect to any criminal action or proceeding, that the Person had reasonable cause to believe that his or her conduct was unlawful. "Other enterprise" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a Person with respect to an employee benefit plan; and references to serving at the request of the Company shall include, without limitation, any service as a member, manager, officer, employee or agent of the Company or any other entities in which it has an ownership interest which imposes duties on, or involves services by, such member, manager, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries. (c) EXPENSES. Expenses (including, without limitation, attorneys' fees and expenses) incurred by a Member, Manager or officer of the Company in defending a civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the Member, Manager or officer to repay such amount if it shall ultimately be determined that such Member, Manager or officer is not entitled to be indemnified by the Company under this Section 17 or under any other contract or agreement between such Member, Manager or officer and the Company. Such expenses (including attorneys' fees) incurred by employees or agents of the Company may be so paid upon the receipt of the aforesaid undertaking and such terms and conditions, if any, as the Manager deems appropriate. (d) NOT EXCLUSIVE. The indemnification and advancement of expenses provided by this Section 17 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of Members or otherwise, both as to action in such Person's official capacity and as to action in another capacity while holding such office, and shall continue as to a Person who has ceased to be a Member, Manager, officer, employee 22 28 or agent and shall inure to the benefit of the successors, assigns, heirs, executors and administrators of such a Person. (e) INSURANCE. The Company may purchase and maintain insurance on behalf of any Person who is or was a Member, Manager, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, trustee, member, manager, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such Person and incurred by such Person in any such capacity, or arising out of such Person's status as such, whether or not such Person would be entitled to indemnity against such liability under the provisions of this Section 17. SECTION 18. ASSIGNMENT OF MEMBERSHIP INTERESTS AND NEW MEMBERS. (a) ASSIGNMENT. A Membership Interest shall not be assignable in whole or in part, except as expressly provided in this Agreement. An assignment of a Membership Interest shall not entitle the assignee to become or to exercise any rights or powers of a Member until such assignee is admitted as a Member in accordance with this Agreement. An assignment shall entitle the assignee only to receive such distributions, to share in such profits and to receive such allocations of income, gain, loss, deduction, credit, tax preference and similar items to which the assignor was entitled to the extent assigned. Notwithstanding anything to the contrary, a Member which assigns its interest in the Company shall continue to have the power to exercise any voting, consent or approval rights attributable to the interest so assigned unless and until the assignee of such interest is or is admitted as a Member. (b) LIMITATIONS ON ASSIGNMENT. Except as provided in Section 19 hereof, no Member may assign any Membership Interest (or any portion thereof or interest therein), and no Person shall become a Member, unless (i) in the opinion of counsel selected by or acceptable to the Manager, such action will not subject the Company to federal income taxation as an association taxable as a corporation or violate applicable state or federal securities laws, and (ii) such proposed Member shall make ERISA representations and warranties to the Company comparable to those made by or on behalf of the original Members in Section 4(a)(v), 4(b)(v) and 4(c)(v) of the Investment Agreement. Any attempted action in contravention of this Section 18(b) shall be void and of no force or effect. (c) NEGATIVE PLEDGE. No Member shall pledge, or create or suffer to exist any lien upon, its Membership Interest or any portion thereof. (d) ADMISSION OF ASSIGNEES. Notwithstanding anything to the contrary in this Agreement, an assignee of a Membership Interest shall be admitted as a Member only upon (i) the written consent of all other Members and the Manager, which consent may be granted or withheld in the sole and absolute discretion of such Member and Manager 23 29 whose consent is required hereby and (ii) the execution by such Person of this Agreement. Until the assignee of a Membership Interest is admitted as a Member, the assignor, subject to the penultimate sentence of Section 18(a), shall continue to be a Member and upon such admission, the assignor shall be released of all obligations hereunder. (e) ADMISSION OF NEW MEMBERS. A new Member shall be admitted only upon (i) the consent of a Special Majority, and (ii) the execution by such new Member of this Agreement; provided, however, that any amendments to this Agreement required as a result of such new Member admission shall be subject to the provisions of Section 24(h). SECTION 19. PUT AND CALL OPTIONS. (a-1) REFINANCING SENIOR PREFERRED CAPITAL. The Company shall have the right to redeem the outstanding Senior Preferred Capital, in whole but not in part, at any time in connection with a refunding or refinancing thereof at a redemption price equal to the face amount of the Senior Preferred Capital, plus the Senior Accumulated Preferred Distribution, if any, plus the amount of any accrued but unpaid Senior Preferred Distribution. (a-2) SENIOR PREFERRED CAPITAL OPTIONS. FUR Subsidiary shall have the option to purchase, and upon the exercise of such option CFSC Subsidiary shall have the obligation to sell, all or a portion of the outstanding Senior Preferred Capital in a minimum amount of $5,000,000 (except that if the outstanding amount of Senior Preferred Capital at such time is less than $5,000,000, then in a minimum amount equal to such outstanding amount) at any time and from time to time on or before the fifth anniversary of the date hereof in accordance with Section 19(j). The purchase price of such Senior Preferred Capital (except as provided in the paragraph below) shall be equal to 100% of the face amount being purchased plus the portion of the sum of the Senior Accumulated Preferred Distribution, if any, and the amount of any accrued but unpaid Senior Preferred Distribution allocable to such amount of Senior Preferred Capital being purchased, to the date of such purchase. For purposes of determining the foregoing, Senior Preferred Distributions (other than Senior Preferred Distributions on any Special Senior Preferred Capital) shall be prorated between the amount of Senior Preferred Capital then being purchased and the amount of Senior Preferred Capital not then being purchased (other than any Special Senior Preferred Capital). Any Senior Preferred Capital acquired by FUR Subsidiary hereunder shall be automatically converted without any action by the Company on the Option Closing Date into an equal amount of Series A Preferred Capital. If any of the Senior Preferred Capital held by CFSC Subsidiary on the Option Closing Date has been obtained by the operation of Section 19(g) or 19(h) (the "Special Senior Preferred Capital"), FUR Subsidiary shall purchase all Senior Preferred Capital before any Special Senior Preferred Capital is purchased by FUR Subsidiary under this 24 30 Section 19(a-2). The purchase price for such Special Senior Preferred Capital shall be equal to (i) the sum of two times the Senior Accumulated Preferred Distribution, if any, thereon plus (ii) two times the accrued and unpaid Senior Preferred Distribution thereon plus (iii) the aggregate amount of all Senior Preferred Distributions made thereon and (iv) $100, all determined after giving effect to the 10% per annum rate provided for in the definition of Senior Preferred Distribution. Any Special Senior Preferred Capital acquired by FUR Subsidiary hereunder shall be automatically converted without any action by the Company into an equal amount of Series A Preferred Capital. (b) SERIES B PREFERRED CAPITAL OPTIONS. FUR Subsidiary shall have the option to purchase, and upon the exercise of such option GMAC-CM shall have the obligation to sell, all or a portion of the outstanding Series B Preferred Capital in a minimum amount of $5,000,000 (except that if the outstanding amount of Series B Preferred Capital at such time is less than $5,000,000, then in a minimum amount equal to such outstanding amount) at any time on or after the six-month anniversary of the date hereof and from time to time on or before the fifth anniversary of the date hereof in accordance with Section 19(j); provided, however, that FUR Subsidiary shall not be permitted to exercise its option under this Section 19(b) so long as any Senior Preferred Capital is outstanding. The purchase price of such Series B Preferred Capital (except as provided in the paragraph below) shall be equal to 100% of the face amount being purchased plus such additional amount, if any, as would provide GMAC-CM with a 15.75% per annum internal rate of return, compounded monthly, on the amount of Series B Preferred Capital purchased, after giving recognition to the amount and timing of Series B Preferred Distributions (other than Series B Preferred Distributions on any Special Series B Preferred Capital) until all Series B Preferred Capital (other than Special Series B Preferred Capital) has been purchased. For purposes of determining such return, Series B Preferred Distributions (other than Series B Preferred Distributions on any Special Series B Preferred Capital) shall be prorated between the amount of Series B Preferred Capital then being purchased and the amount of Series B Preferred Capital not then being purchased (other than any Special Series B Preferred Capital). Any Series B Preferred Capital acquired by FUR Subsidiary hereunder shall be automatically converted without any action by the Company on the Option Closing Date into an equal amount of Series A Preferred Capital. If any of the Series B Preferred Capital held by GMAC-CM on the Option Closing Date has been obtained by the operation of Section 19(g) or (h) (the "Special Series B Preferred Capital"), FUR Subsidiary shall purchase all Series B Preferred Capital before any Special Series B Preferred Capital is purchased by FUR Subsidiary under this Section 19(b). The purchase price for such Special Series B Preferred Capital shall be equal to (i) the sum of two times the Series B Accumulated Preferred Distribution, if any, thereon plus (ii) two times the accrued and unpaid Series B Preferred Distribution thereon plus (iii) the aggregate amount of all Series B Preferred Distributions made thereon and (iv) $100, all determined after giving effect to the 10% per annum rate provided for in the definition of Series B Preferred Distribution. Any Special Series B 25 31 Preferred Capital acquired by FUR Subsidiary hereunder shall be automatically converted without any action by the Company into an equal amount of Series A Preferred Capital. (c) CFSC COMMON CAPITAL OPTION. At any time after (or concurrently with) the acquisition by FUR Subsidiary or redemption by the Company of all of the outstanding Senior Preferred Capital and Series B Preferred Capital, until and including the date which is the earlier of the first anniversary thereof or the fifth anniversary of the date hereof, FUR Subsidiary shall have the option to purchase, and upon the exercise of such option CFSC Subsidiary shall have the obligation to sell, CFSC Subsidiary's entire Membership Interest in the Company at a purchase price equal to its Fair Market Value; provided, however, that FUR Subsidiary shall simultaneously with its exercise of the option under this Section 19(c) exercise its option to purchase GMAC-CM's entire Membership Interest under Section 19(d). Simultaneously with the exercise of FUR Subsidiary's option hereunder, FUR Subsidiary shall cause First Southwest II, Inc. to exercise an option to purchase the membership interest of CFSC Subsidiary in each of LLC #2 Manager and LLC #3 at a purchase price equal to its respective Subsidiary Fair Market Value. (d) GMAC-CM COMMON CAPITAL OPTION. At any time after (or concurrently with) the acquisition by FUR Subsidiary or redemption by the Company of all of the outstanding Senior Preferred Capital and Series B Preferred Capital, until the earlier of the first anniversary thereof or the fifth anniversary of the date hereof, FUR Subsidiary shall have the option to purchase, and upon the exercise of such option GMAC-CM shall have the obligation to sell, GMAC-CM's entire Membership Interest in the Company at a purchase price equal to its Fair Market Value; provided, however, that FUR Subsidiary shall simultaneously with its exercise of the option under this Section 19(d) exercise its option to purchase CFSC Subsidiary's entire Membership Interest under Section 19(c). Simultaneously with the exercise of FUR Subsidiary's option hereunder, FUR Subsidiary shall cause First Southwest II, Inc. to exercise an option to purchase the membership interest of GMAC-CM in each of LLC #2 Manager and LLC #3 at a purchase price equal to its respective Subsidiary Fair Market Value. (e) CFSC REDEMPTION OPTIONS. Unless CFSC Subsidiary shall exercise its right to avoid a redemption in accordance with Section 19(j), the Company shall have the obligation to redeem, (i) on the second anniversary of the date hereof, $10,000,000 of the outstanding Senior Preferred Capital, (ii) on the third anniversary of the date hereof, an amount equal to (u) $30,000,000 of the outstanding Senior Preferred Capital, PLUS (v) the amount of outstanding Senior Preferred Capital specified in clause (i) to the extent the put option therefor was not exercised by CFSC Subsidiary on the second anniversary date, LESS (w) the amount of any Series B Preferred Capital redeemed on the second anniversary date pursuant to Section 19(f), (iii) on the fourth anniversary of the date hereof, (x) $33,500,000 of the outstanding Senior Preferred Capital, PLUS (y) the amount of outstanding Senior Preferred Capital specified in clauses (i) and/or (ii) to the extent 26 32 the put option therefor was not exercised by CFSC Subsidiary on the second and/or third anniversary date, LESS (z) the amount of Series B Preferred Capital redeemed on the second and third anniversary dates pursuant to Section 19(f); provided, however, that the amounts specified in clauses (i), (ii) and (iii) above shall be decreased dollar for dollar by (1) the aggregate amount of Senior Preferred Capital purchased by FUR Subsidiary pursuant to Section 19(a-2) prior to each respective anniversary date (applying the amount of such FUR Subsidiary purchases of Senior Preferred Capital first to the amount in clause (i), then clause (ii) and then clause (iii)), and (2) the aggregate amount of Series B Preferred Capital purchased by FUR Subsidiary pursuant to Section 19(b) prior to each respective anniversary date (applying the amount of such FUR Subsidiary purchases of Series B Preferred Capital first to the amounts in clause (i), then clause (ii) and then clause (iii)). The redemption price of such Senior Preferred Capital shall be equal to 100% of the face amount being purchased plus a portion of the sum of the Senior Accumulated Preferred Distribution, if any, and the accrued but unpaid Senior Preferred Distribution allocable to such amount being purchased, to the date of such purchase. For purposes thereof, Senior Preferred Distributions (other than Senior Preferred Distributions on any Special Senior Preferred Capital) shall be prorated between the amount of Senior Preferred Capital then being purchased and the amount of Senior Preferred Capital not then being purchased (other than any Special Senior Preferred Capital). FUR Subsidiary shall have the right to make additional Capital Contributions to the Company in such amounts as shall be required to meet the Company's obligations to redeem the Senior Preferred Capital pursuant to this Section 19(e). Any such additional Capital Contribution made by FUR Subsidiary shall constitute Series A Preferred Capital. (f) GMAC-CM REDEMPTION OPTIONS. GMAC-CM shall have the right to cause the Company to redeem, and upon the exercise of such right the Company shall have the obligation to redeem, (i) on the second anniversary of the date hereof, to the extent that CFSC Subsidiary shall not have exercised its put option on such date pursuant to clause (i) of Section 19(e), $10,000,000 of the outstanding Series B Preferred Capital, (ii) on the third anniversary of the date hereof, an amount equal to (u) $30,000,000 of the outstanding Series B Preferred Capital, PLUS (v) the amount of outstanding Series B Preferred Capital specified in clause (i) to the extent the put option therefor was not exercised by GMAC-CM on the second anniversary date, LESS (w) the amount of Senior Preferred Capital redeemed on the second and third anniversary dates pursuant to Section 19(e), (iii) on the fourth anniversary of the date hereof, an amount equal to (x) $33,500,000 of the outstanding Series B Preferred Capital, PLUS (y) the amount of outstanding Series B Preferred Capital specified in clauses (i) and/or (ii) to the extent the put option therefor was not exercised by GMAC-CM on the second and/or third anniversary date, LESS (z) the amount of Senior Preferred Capital redeemed on the second, third and fourth anniversary dates pursuant to Section 19(e); provided, however, that the amounts specified in clauses (i), (ii) and (iii) above shall be decreased dollar for dollar by (1) the aggregate amount of Series B Preferred Capital purchased by FUR Subsidiary pursuant to Section 19(b) prior to each respective anniversary date (applying 27 33 the amount of such FUR Subsidiary purchases of Series B Preferred Capital first to the amounts in clause (i), then clause (ii) and then clause (iii)), and (2) the aggregate amount of Senior Preferred Capital purchased by FUR Subsidiary pursuant to Section 19(a-2) prior to each respective anniversary date (applying the amount of such FUR Subsidiary purchases of Senior Preferred Capital first to the amounts in clause (i), then clause (ii) and then clause (iii)). The redemption price of such Series B Preferred Capital shall be equal to 100% of the face amount being purchased plus such additional amount, if any, as would provide GMAC-CM with a 15.75% per annum internal rate of return, compounded monthly, on the amount purchased, after giving recognition to the amount and timing of Series B Preferred Distributions (other than Series B Preferred Distributions on any Special Series B Preferred Capital). For purposes of determining such return, Series B Preferred Distributions (other than Series B Preferred Distributions on any Special Series B Preferred Capital) shall be prorated between the amount of Series B Preferred Capital then being purchased and the amount of Series B Preferred Capital not then being purchased (other than any Special Series B Preferred Capital). FUR Subsidiary shall have the right to make additional Capital Contributions to the Company in such amounts as shall be required to meet the Company's obligations to redeem the Series B Preferred Capital pursuant to this Section 19(f). Any such additional Capital Contribution made by FUR Subsidiary shall constitute Series A Preferred Capital. (g) FAILURE TO PURCHASE SENIOR PREFERRED CAPITAL. If CFSC Subsidiary does not exercise its right to avoid a redemption under Section 19(e) and the Company fails to redeem the requisite Senior Preferred Capital on the Option Closing Date, each of CFSC Subsidiary and GMAC-CM shall have the right, by notice to the Company, FUR and such other Member, upon tender of payment to FUR Subsidiary of $100 by each of them, to effect the transfer to CFSC Subsidiary and GMAC-CM, pro rata, of an amount of FUR Subsidiary's Capital Contribution (up to a maximum of FUR Subsidiary's remaining Capital Contribution) equal to the product of each such Member's Preferred Interest and the dollar amount of the Senior Preferred Capital the Company failed to redeem; provided that such purchase option shall be satisfied first from the Series A Preferred Capital and then against the remaining Capital Contribution of FUR Subsidiary. Any portion of FUR Subsidiary's Capital Contribution as to which notice is delivered hereunder shall be automatically converted without any action by the Company or FUR Subsidiary on the Option Closing Date into an amount of Senior Preferred Capital and an amount of Series B Preferred Capital, each determined on a pro rata basis as hereinabove provided. (h) FAILURE TO PURCHASE SERIES B PREFERRED CAPITAL. If GMAC-CM exercises its put option under Section 19(f) and the Company fails to redeem the requisite Series B Preferred Capital on the Option Closing Date, each of GMAC-CM and CFSC Subsidiary shall have the right, by notice to the Company, FUR and such other Member, upon tender of payment to FUR Subsidiary of $100 by each of them, to effect the transfer to GMAC-CM and CFSC Subsidiary, pro rata, of an amount of FUR Subsidiary's Capital 28 34 Contribution (up to a maximum of FUR Subsidiary's remaining Capital Contribution) equal to the product of each such Member's Preferred Interest and the dollar amount of the Series B Preferred Capital the Company failed to redeem; provided that such purchase option shall be satisfied first from the Series A Preferred Capital and then against the remaining Capital Contribution of FUR Subsidiary. Any portion of FUR Subsidiary's Capital Contribution as to which notice is delivered hereunder shall be automatically converted without any action by the Company or FUR Subsidiary on the Option Closing Date into an amount of Series B Preferred Capital and an amount of Senior Preferred Capital, each determined on a pro rata basis as hereinabove provided. (i) NO PURCHASE OF COMMON CAPITAL. If there is neither Senior Preferred Capital nor Series B Preferred Capital outstanding and FUR Subsidiary has not exercised its call option pursuant to either or both Section 19(c) and/or Section 19(d), then FUR Subsidiary may elect to convert all of its outstanding Series A Preferred Capital to Class B Common Capital within five (5) business days of the expiration of FUR Subsidiary's call options under said Sections 19(c) and 19(d). (i) If FUR Subsidiary does not convert its Series A Preferred Capital to Class B Common Capital within the time period specified above, then as of the first distribution of Net Cash Flow after the fifth anniversary of the date hereof, Net Cash Flow shall be distributed in accordance with the following priority: (A) first, to the Members in accordance with their respective Common Membership Percentage until an amount equal to the Fair Market Value of the outstanding Common Capital on the date of such distribution is received; (B) second, the Series A Accumulated Preferred Distribution, if any, shall be made to FUR Subsidiary; (C) third, the Series A Preferred Distribution shall be made to FUR Subsidiary; and (D) fourth, the remainder shall be distributed 1% among the Members in accordance with their Common Membership Percentages (based on their respective Common Membership Percentages on the fifth anniversary hereof), and 99% shall be distributed to FUR Subsidiary as a Special Series A Preferred Distribution. Once distributions pursuant to (A) hereof have fully satisfied the Common Capital of a Member, such Common Capital shall be considered fully redeemed and no longer outstanding. (ii) If FUR converts its Series A Preferred Capital to Class B Common Capital within the time period specified above: (A) Any Member owing Common Capital may elect either (x) to convert all of its outstanding Common Capital into Class B Common Capital or (y) to receive first the amount equivalent to Fair Market Value of its outstanding Common Capital on the date of such distribution as of the first distribution of Net Cash Flow after the fifth anniversary of the date hereof and then its pro rata portion (based 29 35 on its Common Membership Percentage immediately prior to such election under this clause (y)) of 1% of the remaining distributions of Net Cash Flow, and 99% of the remaining distributions of Net Cash Flow would be distributed pro rata to the holders of the Class B Common Capital (once distributions pursuant to clause (y) hereof have fully satisfied such Member's Common Capital, such Common Capital shall be considered fully redeemed and no longer outstanding); and (B) If all of the Members owning Common Capital elect to convert their respective Common Capital into Class B Common Capital under (A) above, the Class B Common Capital shall thereafter be included in computing the Common Membership Percentages and as of the first distribution of Net Cash Flow after the fifth anniversary of the date hereof, Net Cash Flow shall be distributed among the Members in accordance with their Common Membership Percentages. (j) EXERCISE OF OPTIONS. In the event that the Company exercises its refinancing option under Section 19(a-1) or FUR Subsidiary elects to exercise its purchase option under Sections 19(a-2), 19(b), 19(c) or 19(d), the Company or FUR Subsidiary, as the case may be, shall give CFSC Subsidiary or GMAC-CM, as applicable, thirty (30) days' prior notice of such election specifying the portion of the Senior Preferred Capital, Series B Preferred Capital or Common Capital, as applicable, to be purchased and the applicable purchase price therefor. The Company shall be required to effect each redemption specified in Section 19(e) unless CFSC Subsidiary shall give the Company and the other Members notice of its election to avoid such redemption not more than one hundred fifty (150) nor less than ninety (90) days prior to the applicable anniversary date. In the event that GMAC-CM is permitted under the terms of Section 19(f) to exercise its redemption option and it elects to do so, GMAC-CM shall give the Company and the other Members notice of such election not less than seventy-five (75) days prior to the applicable anniversary date specifying the amount of outstanding Series B Preferred Capital to be redeemed and the applicable redemption price therefor. In the event CFSC Subsidiary or GMAC-CM elects to exercise its remedies under Section 19(g) or 19(h), CFSC Subsidiary or GMAC-CM, as applicable, shall give the Company and the other Members ten (10) days' prior notice of such election specifying the Series A Preferred Capital and/or FUR Subsidiary's remaining Capital Contribution to be purchased. The closing of any purchase or redemption under this Section 19 shall take place on a mutually acceptable date not later than thirty (30) days after receipt of notice provided by FUR Subsidiary, GMAC-CM or CFSC Subsidiary, as the case may be, on the applicable anniversary date, as applicable (the "Option Closing Date") at a location acceptable to CFSC Subsidiary or GMAC-CM, as applicable, and FUR Subsidiary in New York, New York; provided, however, that the Company shall be able to satisfy its redemption obligation under Section 19(e) or 19(f) prior to any 30 36 scheduled Option Closing Date with respect to CFSC Subsidiary's or GMAC-CM's remedy under Section 19(g) or 19(h). At the closing the parties shall execute and deliver such documents of transfer, and the Company, FUR Subsidiary, CFSC Subsidiary or GMAC-CM, as applicable, shall make payment of the redemption or purchase price in immediately available funds, as may be necessary to give effect to the transfer of Senior Preferred Capital, Series B Preferred Capital, Series A Preferred Capital, or Common Capital of CFSC Subsidiary, GMAC-CM or FUR Subsidiary, as applicable, free and clear of all liens, claims and encumbrances. Anything in this Section 19 to the contrary notwithstanding, FUR Subsidiary shall not be entitled to exercise rights under Sections 19(a-2), 19(b), 19(c) and 19(d) if a Company Redemption Default shall have occurred and be continuing as a result of a failure by the Company to redeem Preferred Capital under Sections 19(e) and/or 19(f) on both of the second anniversary and the third anniversary of the date hereof. (k) NEW MEMBER; CERTAIN ASSIGNMENTS. Within the thirty days after the exercise of an option that would cause a Membership Interest to be redeemed or reduced to zero but before the transaction is consummated at a time when there are only two Members, the other Member shall be entitled to cause one of its Affiliates to acquire a one percent interest in the Company by making a cash contribution equal to the fair market value of such interest (with fair market value being determined by reference to the purchase price reflected in the option being exercised). Subject to Section 18(d), FUR Subsidiary may assign to a third Person FUR Subsidiary's purchase rights under Sections 19(a-2), 19(b), 19(c), 19(d) and its right to make additional Capital Contributions pursuant to Sections 19(e) and 19(f). (l) FUR SUBSIDIARY CAPITAL CONTRIBUTIONS UNDER SECTION 19. Each Capital Contribution made by FUR Subsidiary (or its assignee pursuant to Section 19(k)) under Section 19(e) or 19(f) shall be used by the Company solely to redeem the applicable Preferred Capital under Section 19(e) or 19(f), respectively, and shall not be used for any other purpose. SECTION 20. DISSOLUTION. The Company shall be dissolved and terminated upon the happening of first to occur of any of the following events: (a) The expiration of the term of the Company; (b) The approval or written consent of the Members as provided in Section 16(c) for the dissolution or winding up of the Company; (c) The bankruptcy (as defined in Section 18-304 of the Act), death, insanity, retirement, resignation, expulsion, withdrawal or dissolution of any Member, unless within ninety (90) days of such occurrence the Company is continued by the written consent 31 37 of the holders of a majority of both (i) the remaining Members determined on the basis of such Members' Capital Accounts on the date of such occurrence and (ii) the remaining Members determined on the basis of such Members' profits interests (from the date of such occurrence through the date that the Company would terminate if not continued), which consent may be granted or withheld in the sole and absolute discretion of each Member whose consent is required hereby, and if there is only one (1) Member remaining, the admission of one (1) or more additional Members; and (d) Judicial dissolution pursuant to the Act. SECTION 21. WINDING UP AND DISTRIBUTION OF ASSETS. (a) WINDING UP. If the Company is dissolved, the Manager shall wind up the affairs of the Company. (b) DISTRIBUTION OF ASSETS. Upon the winding up of the Company, the Manager shall pay or make reasonable provision to pay all claims and obligations of the Company, including all costs and expenses of the liquidation and all contingent, conditional, or unmatured claims and obligations that are known to the Manager but for which the identity of the claimant is unknown. If there are sufficient assets, such claims and obligations shall be paid in full and any such provision shall be made in full. If there are insufficient assets, such claims and obligations shall be paid or provided for according to their priority and, among claims and obligations of equal priority, ratably to the extent of assets available therefor. Any remaining assets shall be distributed as follows: (i) First, to creditors, including Members in their capacities as creditors, in the order of priority as provided by law; (ii) Second, to CFSC Subsidiary, the amount of any Senior Accumulated Preferred Distribution; (iii) Third, to CFSC Subsidiary, the redemption price of the outstanding Senior Preferred Capital (determined in accordance with Section 19(e) and the second paragraph of Section 19(a-2), as applicable); (iv) Fourth, to GMAC-CM, the amount of any Series B Accumulated Preferred Distribution; (v) Fifth, to GMAC-CM, the redemption price of the Series B Preferred Capital (determined in accordance with Section 19(f) and the second paragraph of Section 19(b), as applicable); 32 38 (vi) Sixth, to FUR Subsidiary, the amount of any Series A Accumulated Preferred Distribution; (vii) Seventh, to FUR Subsidiary, the redemption price of the outstanding Series A Preferred Capital, plus any accrued but unpaid Series A Preferred Distribution thereon; and (viii) Eighth, to Members, the balance in accordance with their respective Common Membership Percentages; provided, however, that if all or a portion of FUR Subsidiary's Capital Contribution has been converted pursuant to Section 19(g) or 19(h), then a distribution shall be made to the holders of the Common Capital in an amount equal to Fair Market Value and the remainder shall be distributed to the Members in accordance with their respective Capital Interests. SECTION 22. CONFLICT OF INTEREST. No Member or Manager shall be required to act hereunder as its sole and exclusive business activity and any Member or Manager may have other business interests and engage in other activities in addition to those relating to the Company. Neither the Company nor any Member or Manager shall have any right by virtue of this Agreement in or to any other interests or activities or to the income or proceeds derived therefrom. A Member or Manager may transact business with the Company and, subject to applicable laws, has the same rights and obligations with respect thereto as any other Person. No transaction between a Member or Manager and the Company shall be voidable solely because a Member or Manager has a direct or indirect interest in the transaction if either the transaction is fair and reasonable to the Company or the percentage or number of disinterested Members as required under this Agreement or applicable law, authorize, approve or ratify the transaction. SECTION 23. TAXATION. (a) STATUS OF THE COMPANY. The Members acknowledge that this Agreement creates a partnership for federal and state income tax purposes (and only for such purposes), and hereby agree not to elect to be excluded from the application of Subchapter K of Chapter 1 of Subtitle A of the Code or any similar state statute. (b) TAX ELECTIONS. The Manager shall, upon the written request of any Member benefitted thereby, cause the Company to file an election under Section 754 of the Code and the Treasury Regulations thereunder to adjust the basis of the Company assets under Section 734(b) or 743(b) of the Code and a corresponding election under the applicable sections of state and local law. The Manager shall have the authority to make all other Company elections permitted under the Code, including elections of methods of depreciation. 33 39 (c) COMPANY TAX RETURNS. The Manager shall cause the necessary federal income and other tax returns and information returns for the Company to be prepared. Each Member shall provide such information, if any, as may be needed by the Company for purposes of preparing such tax returns and information returns. The Manager shall deliver to each Member within 90 days after the end of each fiscal year a copy of all federal, state and local income and franchise tax returns for the Company and each entity in which the Company owns an interest for approval. In addition, the Manager shall deliver to each Member the information described on Schedule IV. Each Member shall approve or disapprove of each such return within ten days after receipt of any such return by such Member. In the event that any Member does not approve or disapprove of any such return within such ten days, such return shall be deemed approved by such Member. The Manager shall provide copies of all final returns to each of the Members within 15 days of filing such returns with the appropriate taxing authorities. (d) TAX AUDITS. (i) FUR Subsidiary shall be the Company's tax matters partner within the meaning of Section 6231(a)(7) of the Code (the "Tax Matters Member") with respect to federal income tax audits. If at any time the Tax Matters Member cannot or elects not to serve as the Tax Matters Member, is removed by the Members as the Tax Matters Member or ceases to be a Member, a Majority Interest shall select another Member to be the Tax Matters Member. The Tax Matters Member, as an authorized representative of the Company, shall direct the defense of any claims made by the IRS to the extent that such claims relate to the adjustment of Company items at the Company level. The Tax Matters Member shall promptly deliver to each Member a copy of any notice of beginning of administrative proceedings or any report explaining the reasons for a proposed adjustment received from the IRS relating to or potentially resulting in an adjustment of Company items. The Tax Matters Member shall, unless a Majority Interest consents to the contrary, diligently and in good faith contest any proposed adjustment of a Company item that principally affects the Members at the administrative and judicial levels, including, if appropriate or if requested by a Majority Interest, appealing any adverse judicial decision, and shall consider in good faith any suggestions made by any Member or its counsel regarding the conduct of such administrative or judicial proceedings. The Tax Matters Member shall keep each Member advised of all material developments with respect to any proposed adjustment that come to its attention, including, without limitation, the scheduling of all conferences and substantive telephone calls with the IRS. Each Member shall be entitled, at the Company's expense, to attend all meetings with the IRS and to review in advance any material written information (including, without limitation, any pleadings, memoranda or similar items) to be submitted to the IRS. Without first obtaining the 34 40 consent of all Members, the Tax Matters Member shall not, with respect to any proposed adjustment of a Company item that materially and adversely affects any Member, (A) enter into a settlement agreement that purports to bind Members other than the Tax Matters Member (including, without limitation, any stipulation consenting to an entry of decision by any tax court), or (B) enter into an agreement or stipulation extending the statute of limitations. (ii) The Company shall promptly deliver to each Member a copy of all notices, communications, reports or writings of any kind with respect to income or similar taxes received from any state or local taxing authority relating to the Company that might materially and adversely affect each Member, and shall keep such Members advised of all material developments with respect to any proposed adjustment of Company items that come to its attention. (iii) Each Member shall continue to have the rights described in this Section 23(d) with respect to tax matters relating to any period during which it was a Member, whether or not it is a Member at the time of the tax audit or contest. SECTION 24. MISCELLANEOUS. (a) GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflict of law rules. (b) BINDING EFFECT. Except as otherwise specifically provided herein, this Agreement shall be binding upon and inure to the benefit of the parties and their legal representatives, heirs, administrators, executors, successors and assigns. (c) PRONOUNS AND NUMBER. Wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, feminine and neuter. (d) CAPTIONS. Captions or section headings contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope or intent of this Agreement or any provision hereof. (e) ENFORCEABILITY. If any provision of this Agreement, or the application of the provision to any Person or circumstance shall be held invalid, the remainder of this Agreement, or the application of that provision to Persons or circumstances other than those with respect to which it is held invalid, shall not be affected thereby. To the extent 35 41 any provision of this Agreement is prohibited or ineffective under the Act, this Agreement shall be considered amended to the smallest degree possible in order to make this Agreement effective under the Act. In the event the Act is subsequently amended or interpreted in such a way to make any provision of this Agreement that was formerly invalid valid, such provision shall be considered to be valid from the effective date of such interpretation or amendment. (f) COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. (g) NOTICES. Any notices permitted or required under this Agreement shall be deemed to have been given when delivered in person, by facsimile transmission or by courier or three (3) days after being deposited in the United States mail, postage prepaid, and addressed to the Company at its principal place of business and to any Member at the address reflected on the books and records of the Company. (h) ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire agreement between the parties hereto with respect to the matters set forth herein and supersedes all prior understandings or agreements between the parties with respect to such matters. This Agreement, including all schedules hereto, may only be amended, modified or supplemented (including, without limitation, any amendment, modification or supplement arising out of a refinancing under Section 19(a-1)) by written agreement of Members holding both a Special Majority and Members holding a majority of the Capital Interests; provided, however, that any amendment, modification or supplement which adversely affects a class of Membership Interest (i.e., the Common Capital, the Class B Common Capital or any class of Preferred Capital) shall also be approved by the Members owning such class of Membership Interest, voting separately as a class; and provided further, that the Membership Interest of any Member which in connection with any such amendment, modification or supplement is being redeemed in full in accordance with the terms of this Agreement then in effect and before giving effect to any such amendment, modification or supplement shall not be included in any such calculation of Special Majority, Capital Interests or class voting hereunder. (i) FURTHER ASSURANCES. The Members shall execute and deliver such further instruments and do such further acts and things as may be required to carry out the intent and purposes of this Agreement. Each Member shall execute all such certificates and other documents and shall do all such filing, recording, publishing, and other acts as the Manager deems appropriate to comply with the requirements of law for the formation and operation of the Company and to comply with any laws, rules, and regulations relating to the acquisition, operation, or holding of the property of the Company. 36 42 (j) THIRD PARTIES. Nothing in this Agreement, whether express or implied, shall be construed to give any Person other than a Member or the Company any legal or beneficial or other equitable right, remedy or claim under or in respect of this Agreement, any covenant, condition, provision or agreement contained herein or the property of Company. (k) FACSIMILE SIGNATURES. The facsimile signature of any Manager or Member may be used at all times and for all purposes in place of an original signature. (l) RELIANCE UPON BOOKS, REPORTS AND RECORDS. Unless he has knowledge concerning the matter in question which makes his reliance unwarranted, each Manager and Member shall, in the performance of his duties hereunder, be entitled to rely on information, opinions, reports or statements, including, without limitation, financial statements and other financial data, if prepared or presented by one or more employees of the Company or by legal counsel, accountants or other Persons as to matters such Manager or Member reasonably believes to be within such Person's professional or expert competence. (m) TIME PERIODS. In applying any provision of this Agreement which requires that an act be done in or not done in a specified number of days prior to an event or that an act be done during a period of a specified number of days, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included. (n) WAIVER. No failure by any Manager or Member to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition. (o) EXPENSES. The Company shall be responsible for the fees and expenses of NatWest Markets for its services in connection with the transactions contemplated by the Investment Agreement. 37 43 IN WITNESS WHEREOF, the undersigned Members have executed this Agreement as of the date first set forth above. FIRST UNION SOUTHWEST L.L.C. BY: FIRST SOUTHWEST I, INC., ITS MANAGER By: /s/ PAUL LEVIN ------------------------- Its: VICE PRESIDENT AND SECRETARY ---------------------------- GMAC COMMERCIAL EQUITY INVESTMENTS, INC. By: /s/ JAMES DALTON ------------------------------ Its: SENIOR VICE PRESIDENT ------------------------------ CFSC CAPITAL CORP. XXXI By: /s/ Jeffrey Leu ------------------------------ Its: Senior Vice President ------------------------------ 44 SCHEDULE MEMBERS COMMON MEMBERSHIP NAME AND ADDRESS CAPITAL CONTRIBUTION PERCENTAGE INTEREST - ---------------- -------------------- ------------------- First Union Southwest L.L.C. $3,224,409 of Common 25.926% 55 Public Square Capital (plus Series A Suite 1900 Preferred Capital of Cleveland, OH 44113 $26,500,000) GMAC Commercial Equity $6,080,315 of Common 48.889% Investments, Inc. Capital (plus Series B 650 Dresher Road Preferred Capital of Horsham, PA 19044-8015 $38,500,000) CFSC Capital Corp. XXXI $3,132,286 of Common 25.185% 6000 Clearwater Drive Capital (plus Senior Minnetonka, MN 55343-3905 Preferred Capital of $35,000,000) 45 SCHEDULE II PROPERTIES SOUTHWEST SHOPPING CENTERS CO. I, L.L.C. - ---------------------------------------- Pecanland Mall Monroe, Louisiana SOUTHWEST SHOPPING CENTERS CO. II, L.L.C. - ----------------------------------------- Park Plaza Mall Little Rock, Arkansas Alexandria Mall Alexandria, Louisiana Villa Linda Mall Santa Fe, New Mexico Mesilla Valley Mall Las Cruces, New Mexico Shawnee Mall Shawnee, Oklahoma Killeen Mall Killeen, Texas Brazos Mall Lake Jackson, Texas TEMPLE SHOPPING CENTER CO., L.L.C. - ---------------------------------- Temple Mall Temple, Texas 46 SCHEDULE III ASSUMED LOANS SOUTHWEST SHOPPING CENTERS CO. I, L.L.C. - ---------------------------------------- Creditor: Teachers Insurance and Annuity Association of America Debtor: Pecanland Mall Associates, Ltd. c/o The Herring Group Dated: December 18, 1985 Maturity: January 1, 2018 SOUTHWEST SHOPPING CENTERS CO. II, L.L.C. - ----------------------------------------- None TEMPLE SHOPPING CENTER CO., L.L.C. - ---------------------------------- Creditor: Northwestern Mutual Life Insurance Company Debtor: Temple Mall Maturity: March 15, 2001 47 SCHEDULE IV TAX REPORTING REQUIREMENTS A. Manager shall provide or cause asset manager or outside tax preparer to provide the following state tax apportionment information ("Apportionment Information") to the Members with respect to each Member's Membership Interest in the Company, within 45 days of the end of each fiscal quarter: (1) tax gain or loss and gross proceeds realized upon foreclosure, including date, by location (state) of property; (2) tax gain or loss on disposition of real or tangible personal property, including date, by location (state) of property; (3) Company payroll by location (state); (4) adjusted tax basis of real property by location (state) of property; and, (5) gross rental income on real property or personal property by location (state) of property. B. Manager shall also use its best efforts or cause the asset manager or outside tax preparer to obtain such Apportionment Information with respect to the Company's ownership interest in any underlying entity. C. Manager shall file or shall cause the asset manager or outside tax preparer to file all state income and franchise tax returns of the Company and any underlying flow through entity in which the Company owns an interest in each state in which the Company or the underlying flow through entity does business, for purposes of income and franchise taxes, as such terms or equivalent may be defined by the various states. D. Manager shall file or cause the asset manager or outside tax preparer to file all state income and franchise tax returns of the Company and any underlying flow through entity in which the Company owns an interest in each state consistently with the Apportionment Information provided to the Members. Included with each Member's K-1, shall be information summarizing Apportionment Information for the taxable year of the Company with respect to each Member. E. Manager shall provide or shall cause the asset manager or outside tax preparer to provide each Member with the name and telephone number of a contact person with respect to federal and state tax matters pertaining to the Company, and any flow through entity in which the Company owns an interest. EX-99.5 7 EXHIBIT 99.5 1 Exhibit 99.5 Copy of Form of Management and Leasing Agreement dated September 30, 1996 between __________________________________________________ and First Union Management, Inc., a Delaware corporation for each of the following properties: Alexandria Mall, Alexandria, Louisiana Brazos Mall, Lake Jackson, Texas Killeen Mall, Killeen, Texas Mesilla Valley Mall, Las Cruces, New Mexico Park Plaza, Little Rock, Arkansas Shawnee Mall, Shawnee, Oklahoma Villa Linda Mall, Santa Fe, New Mexico 2 MANAGEMENT AND LEASING AGREEMENT -------------------------------- THIS MANAGEMENT AND LEASING AGREEMENT is made as of September 30, 1996 by and between SOUTHWEST SHOPPING CENTERS CO. II, L.L.C., a Delaware limited liability company ("OWNER"), and FIRST UNION MANAGEMENT, INC., a Delaware corporation ("MANAGER"). RECITALS -------- A. Owner holds title to an approximately ____________ square foot shopping center known as ____________, located at ____________________________, ________ and legally described on EXHIBIT A attached hereto (the "PROPERTY"). B. Owner wishes to provide for the management, leasing and operation of the Property and Manager is willing to perform such services as an independent contractor for Owner, all pursuant to the terms of this Agreement. NOW, THEREFORE, incorporating the Recitals as set forth above, and in consideration of the mutual covenants herein contained, Owner and Manager hereby agree as follows: ARTICLE 1 AGREEMENT TO MANAGE AND TERM ---------------------------- 1.1 AGREEMENT TO MANAGE. Owner hereby appoints Manager, an independent contractor, as the sole and exclusive property manager and leasing agent for the Property upon the terms hereinafter set forth. Manager hereby accepts such appointment and agrees to furnish the services provided in this Agreement. 1.2 TERM. This Agreement shall commence on the date hereof, shall have an initial term of one (1) year from the date hereof and shall be automatically renewed for additional one (1) year terms until the earlier to occur of (i) the termination of this Agreement as provided herein or (ii) the date that is the seventh anniversary of the date hereof. 1.3 TERMINATION BY EITHER PARTY. Either party has the right at any time by giving five (5) days' notice to the other party to terminate this Agreement upon the occurrence of any of the following "Events of Default": (a) If the other party shall fail to make any payment which it is obligated to make pursuant to the terms of this Agreement and such failure shall continue for a period of five (5) days after notice thereof to the defaulting party; 3 (b) If the other party shall fail to keep, observe or perform any material covenant, agreement, term or provision of this Agreement, other than an obligation to pay money, to be kept, observed or performed by such other party, and such failure shall continue for a period of thirty (30) days after notice thereof to the defaulting party; provided, however, that if such default is curable but cannot be cured with reasonable diligence in said 30-day period and the applicable party shall have commenced such cure within said 30-day period and is diligently proceeding to complete such cure, such 30-day period shall be extended during the period of such diligent cure but not longer than one hundred eighty (180) days after the expiration of the initial thirty (30) day period, unless further extended by the non-defaulting party; (c) If the other party shall (i) apply for or consent to the appointment of a receiver, trustee or liquidator of such party or of all or a substantial part of its assets, (ii) file a voluntary petition in bankruptcy, or admit in writing its inability to pay its debt as they come due, (iii) make a general assignment for the benefit of creditors, or (iv) file a petition or an answer seeking reorganization or agreement with creditors or take advantage of any insolvency law, or file an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding; (d) If the other party shall have an order, judgment or decree entered against it by any court of competent jurisdiction, on the application of a creditor, adjudicating such party a bankrupt or insolvent or approving a petition seeking reorganization of such party or appointing a receiver, trustee or liquidator of such party or of all or a substantial part of its assets, and such order, judgment or decree shall continue unstayed and in effect for a period of ninety (90) consecutive days. 1.4 AUTOMATIC TERMINATION. This Agreement shall automatically terminate upon the occurrence of any of the following conditions: (a) The Property is sold to a party that is not an affiliate of First Union (defined below); (b) If GMAC or the Senior Preferred Holder (each as defined below), individually or collectively, exercises its or their right to acquire all of the interests in Owner pursuant to Section 19 of that certain Limited Liability Company Agreement of Southwest Shopping Centers Co. I, L.L.C., dated as of September _, 1996, by and among GMAC Commercial Equity Investments, Inc. ("GMAC") CFSC Capital Corp. XXXI ("CARGILL") and First Union Southwest L.L.C. ("FIRST UNION"), then upon six months' notice from GMAC to Manager after consummation of such acquisition, this Agreement shall terminate on the date specified in such notice; or (c) Subject to the consent of the Lender (as defined below), upon written notice from the Owner at any time that an Event of Default shall be continuing under the Acquisition Loan Documents (as defined in the below). 2 4 (d) First SW II, L.L.C. resigns as "Manager" pursuant to Section 14(c) of that certain Limited Liability Company Agreement of Southwest Shopping Centers Co. II, L.L.C., dated as of September __, 1996 between Southwest Shopping Centers Co. I, L.L.C. and First SW II, L.L.C. (the "Operating Agreement"). (e) First SW II, L.L.C. is removed as "Manager" pursuant to Section 14(d) of the Operating Agreement. As used herein, the term Senior Preferred Holder shall mean the holder from time to time of the Senior Preferred Capital (as defined in the Operating Agreement). 1.5 TERMINATION BY LENDER. The holder of any mortgage lien against the Property, including, without limitation, the holder of the Acquisition Loan Documents (the "Lender") shall have the right to terminate this Agreement upon thirty (30) days notice to Manager and without penalty or premium (i) upon the appointment of a receiver, (ii) if it, or its successors or assigns, shall succeed to the interest of the Owner in the Property by reason of foreclosure of such mortgage or a deed-in-lieu thereof or (iii) in accordance with the provisions of Section 3.13(c) of the Mortgage and Security Agreement of even date herewith granted by First Owner to Lender, encumbering the Property and more fully described on Exhibit B hereto. 1.6 EFFECT OF EXPIRATION OR TERMINATION. (a) Any expiration or termination of this Agreement shall in no way affect or impair any rights or obligations which have accrued to either party hereto for the period ending on or prior to the earlier to occur of such expiration or termination; provided, however, that no such expiration or termination shall impair the rights of Manager to receive payments provided for in SECTION 1.7 or ARTICLE 4 hereof. Immediately upon the expiration or termination of this Agreement, Manager shall deliver to Owner all funds, including tenant security deposits, tenant correspondence, property files, vendor invoices and books and records of Owner related to the Property then in possession or control of Manager. Within sixty (60) days following expiration or termination of this Agreement, Manager shall deliver to Owner a final accounting concerning the operations of the Property through the date of expiration or termination. (b) EFFECT ON TEMPLE AGREEMENT. Manager has assumed the obligations of manager under a certain property management agreement relating to management and leasing of the Temple Mall in Temple, Texas (the "Temple Agreement"). The Temple Agreement provides, among other things, that the manager thereunder may resign upon 30 days notice. Notwithstanding any other provision of this Agreement or the Temple Agreement, Manager agrees that it shall be deemed to have given such notice under the Temple Agreement in the event that Manager shall be terminated pursuant to Section 1.4 or Section 1.5 of this Agreement and shall, nevertheless, promptly give such notice to the other party to the Temple Agreement. The foregoing covenant may be enforced directly by GMAC or Cargill, and their respective successors and assigns under the applicable operating agreement. 1.7 PENDING MATTERS. Within fifteen (15) days after the expiration or termination of this Agreement, Manager shall submit to Owner a pending matters list (the "PENDING MATTERS 3 5 LIST") setting forth in reasonable detail all leasing transactions that were in the course of active negotiation at the time of such expiration or termination. In the event any leasing transaction appearing on said Pending Matters List is consummated (as evidenced by the execution and delivery of a Lease executed and delivered by the tenant and Owner) within twelve (12) months after the cancellation or termination of this Agreement, then such transaction shall be deemed a transaction consummated during the term hereof, and Owner shall pay a Commission (such commission, a "POST-TERMINATION COMMISSION") to Manager for such transaction in accordance with the applicable provisions and conditions of this Agreement. The provisions of this SECTION shall survive the expiration or termination of this Agreement. ARTICLE 2: MANAGEMENT --------------------- 2.1 GENERAL. Subject to the availability of funds in the Operating Account (defined below), Manager shall manage and operate the Property in a manner consistent with the management and operation of comparable regional malls in the same market or similar market as the Property, shall provide such services as are customarily provided by a manager of regional malls of comparable class and standing in the same market or similar market as the Property, and shall consult with Owner and keep Owner advised as to all material or extraordinary matters and decisions affecting the Property. Without limiting the foregoing, Manager shall timely prepare and deliver to Owner such accounting and operations reports in the manner required hereunder and maintain businesslike relations with tenants of the Property whose service requests shall be received, considered and recorded in systematic fashion in order to show the action taken with respect to each request. Complaints of a serious nature shall be promptly reported to Owner and, after thorough investigation, Manager shall timely report to Owner with appropriate recommendations for addressing such complaints. 2.2 BUDGETS. (a) BUDGET APPROVAL PROCESS. Manager shall submit by November 15th of each year during the term hereof an estimated budget detailing all projected revenues and expenses for the operation of the Property during the next calendar year. Manager shall prepare such budget in the form and with such detail as reasonably required by Owner. Owner shall, within thirty (30) days after receipt of such budget, notify Manager of its approval or disapproval of such budget. Owner's failure to timely respond shall be deemed Owner's approval of such budget. In the event Owner disapproves of any proposed budget, Manager shall make all revisions thereto which Owner shall direct. Manager shall promptly resubmit the revised proposed budget to Owner for approval and upon such approval, or deemed approval as provided above, such budget shall be the "APPROVED BUDGET" for such calendar year. Until a proposed budget is approved, Manager shall continue to operate the Property pursuant to the Approved Budget for the prior calendar year except for increased expenses relating to taxes, insurance, then existing financing and utilities which shall be paid on a current basis. 4 6 Manager agrees that it shall, to the extent that it is so informed of any requirements, comply with any budget preparation requirements agreed upon between the members of Owner pursuant to the terms of Owner's formation documents. (b) PAYMENT OF BUDGETED EXPENSES. Manager shall have the right to withdraw funds from the Operating Account in order to pay all Property expenses then due and in accordance with the Approved Budget. Manager shall also have the right to pay those Property expenses that vary from the Approved Budget without first obtaining Owner's consent, so long as such variances (the "PERMITTED VARIANCE RANGE") do not exceed, on an expense category subtotal line basis ten percent (10%) of the applicable subtotal line value in the Approved Budget, and all variances, whether permitted or approved do not in the aggregate exceed 10%. (By way of illustration, see Exhibit G. In Exhibit G. "Total HVAC" is an expense category subtotal, made up of lines 5220, 5270 and 5280). Excluded from the variance restrictions in the immediately preceding sentence are those variances (collectively, the "VARIANCE EXCLUSIONS") which are created because of the timing of their payment during the year, utility expenses, general real estate taxes, insurance premiums, financing costs and emergency expenses which Owner authorizes Manager to pay on a current basis. 2.3 REIMBURSABLE AND NONREIMBURSABLE COSTS. All costs incurred by Manager in the performance of its duties under this Agreement that are in accordance with the Approved Budget, within the Permitted Variance Range or are Variance Exclusions shall be reimbursed by Owner to the extent not reimbursed out of the Operating Account. The following costs, however, shall not be reimbursable by Owner to Manager: (a) salaries and payroll expenses of Manager's executives, personnel, and employees of Manager above the level of Regional Manager, other than those typically charged in whole or in part to tenants through common area maintenance or other passthroughs; (b) Manager's off-site overhead and general administrative expenses, except long distance telephone, fax, overnight delivery, courier, registered mail, copying, entertainment (subject to Owner's prior approval in each instance), uniforms, and twoway radios, where such charges are directly related to the operation of the Property; (c) costs of Manager's principal and branch offices; (d) any costs incurred by Manager as a result of Manager's Event of Default hereunder, Manager's gross negligence or Manager's willful misconduct; and (e) any costs incurred by Manager in the performance of its duties hereunder that are not (i) approved by Owner, or (ii) in accordance with the Approved Budget, or (iii) within the Permitted Variance Range, or (iv) a Variance Exclusion or (v) incurred by Manager in the performance of its obligations under SECTION 2.7 hereof, or (vi) expressly provided for in this Agreement. 5 7 2.4 EMPLOYMENT AND SUPERVISION OF PERSONNEL. Manager shall retain qualified outside vendors or employ and supervise all personnel required for the management and leasing of the Property, as well as the maintenance of the necessary books and records in connection therewith, including management for on-site supervision, operation and security of the Property. All such employees shall be employees of the Manager, shall be on Manager's payroll, shall be under the control of the Manager and shall not be employees of Owner. Manager will, in the hiring and retention of such employees, use reasonable care to select qualified, competent and trustworthy employees. Manager shall procure and maintain, at Owner's sole expense, worker's compensation insurance and employer's liability insurance covering all employees working on or about the Property and, to the extent reasonably required in writing by Owner and at Manager's expense, fidelity bonds covering all employees who handle funds of Owner. 2.5 CONTRACTS AND SUPPLIES. Manager shall, at Owner's expense, enter into contracts on behalf of Owner for the furnishing to the Property of required utility services, and shall arrange for appropriate heating and air-conditioning services and other janitorial, maintenance, pest control, and any other services and concessions which are reasonably required in connection with the maintenance and operation of the Property through such contracts or its employees. Owner's prior approval shall be required for any contracts (a) that have a term in excess of one (1) year and that are not terminable on sixty (60) days notice or less or (b) that are with affiliates of Manager and that are on terms in excess of those that would have been obtained in a bona fide arms-length negotiation. Manager shall provide Owner with prior written notice before it enters into any agreement with an affiliate of Manager pursuant to clause (b) of the immediately preceding sentence. Manager shall also place purchase orders for cleaning and maintenance supplies, goods and other personal property as are reasonably necessary to properly maintain the Property. All such contracts and orders shall be for amounts in accordance with the Approved Budget, the Permitted Variance Range and the Variance Exclusions. When taking bids or issuing purchase orders, Manager shall use all reasonable efforts to secure for and credit to Owner, any discounts, commissions or rebates obtainable as a result of such purchases or services. 2.6 ALTERATIONS, REPAIRS AND MAINTENANCE. Manager shall, at Owner's sole expense, ensure that the Property's physical facilities, personal property and grounds are at all times well maintained and kept in good order and repair and in a proper state of cleanliness. Manager shall, on behalf of Owner and at Owner's expense, make or contract for all repairs, alterations, decorations, or replacements which shall be reasonably required to preserve, maintain and keep the Property in similar condition to that of the Property at the commencement of this Agreement (ordinary wear and tear excepted). Manager shall not make or contract for any repair or improvement in or to the Property without Owner's prior written approval if the cost would exceed the year to date allocation for the applicable line items for such repairs set forth in the Approved Budget plus the Permitted Variance Range, unless the same is immediately required by law, is necessary without delay in order to protect the Property or any person, is a Variance Exclusion or is made under other circumstances which Manager reasonably deems to be an emergency. 6 8 2.7 COMPLIANCE WITH LAWS. (a) Subject to the availability of funds in the Approved Budget or otherwise made available by Owner, Manager shall use commercially reasonably efforts to cause the Property to be in full compliance with all applicable federal, state, and municipal laws, ordinances, regulations and orders relating to the use, operation, repair and maintenance of the Property and with the rules, regulations or orders of the local Board of Fire Underwriters or other similar body, if any. Manager shall give prompt notice to Owner of any violation or notice of alleged violation of any laws, ordinances, regulations, rules and orders that comes to its attention. Subject to the availability of funds in the Approved Budget or otherwise made available by Owner and provided Owner has not notified Manager that it intends to contest any violation, Manager shall promptly remedy any violation of any such federal, state and municipal law, ordinance, rule, regulation or order which comes to its attention. Owner and Manager agree to cooperate with each other to cause the Property to be operated at all times in compliance with all applicable federal, state and municipal laws, ordinances and regulations and shall not knowingly, directly or indirectly, suffer, permit or make any use of the Property which is prohibited by any such laws, ordinances and regulations. Owner hereby indemnifies and agrees to defend and hold Manager and its partners, officers, employees and agents harmless from any Losses (defined below) by virtue of the Property's noncompliance with federal, state or municipal laws, ordinances or regulations or its use prohibited thereby, to the extent not caused by the gross negligence or willful misconduct of Manager. (b) The Property is currently subject to the agreements, covenants, conditions and restrictions contained in those certain deeds, mortgages, easements, and ordinances listed in EXHIBIT B attached hereto as well as to all existing leases (as the same may be amended from time to time, the "AGREEMENTS"). Manager shall use commercially reasonable efforts to fully perform all of the obligations and duties on the part of Owner to be performed under the Agreements and all other agreements binding against the Property of which Owner makes Manager aware, provided, that Manager shall not be required to make any payment or incur any liability on account thereof and provided, further, that with respect to any such agreements, amendments or other documents entered into after the date hereof, such documents shall not materially increase Manager's obligations hereunder without Owner first obtaining Manager's prior consent. 2.8 COLLECTION OF RENT. Manager shall exercise commercially reasonable efforts to collect all rents and other sums and charges due from tenants, subtenants, licensees and concessionaires of the Property. However, Manager shall not terminate any lease, lock out a tenant, institute suit for rent or for use and occupancy, or institute proceedings for recovery of possession, without in each case first obtaining the prior written approval of Owner which approval may not be unreasonably withheld, and shall be deemed received if Owner does not respond within five (5) business days. In connection with such suits or proceedings only legal counsel designated by Owner shall be retained, and all such suits or proceedings shall be brought 7 9 in the name of Owner, at Owner's expense, and (except to the extent Owner directs otherwise) shall be handled in such manner as Manager elects. 2.9 INVENTORY. Manager shall maintain a current inventory of all equipment supplies, furnishings, furniture and all other items of personal property now or hereafter owned by Owner and located upon or used in the operation of the Property. Within ten (10) days after written request by Owner, Manager shall provide Owner with a copy of such inventory list. 2.10 SIGNS. Manager may place one or more signs on or about the Property stating, among other things, that Manager is the exclusive management and leasing agent for the Property. All such signs and locations thereof shall be subject to Owner's prior reasonable approval. 2.11 ADDITIONAL SERVICES. If Owner requests Manager to perform services which are not specifically provided for in this Agreement (including without limitation, the supervision of tenant improvements or the supervision of capital repairs or replacements), Manager shall be compensated for such services on an hourly basis or on a negotiated fee basis consistent with market terms for such service in the market in which the Property is located. 2.12 ADVANCES. Manager shall not be obligated to make any advance to or for the account of Owner or to pay any sum except out of funds held or provided as set forth in this Agreement. Manager shall not be obligated to incur any liability or obligation for the account of Owner without assurance that the necessary fund for the discharge thereof will be promptly provided. 2.13 OWNER'S SEPARATE LEGAL EXISTENCE. Manager shall act, as appropriate, in a manner that identifies and recognizes the separate legal existence of Owner. ARTICLE 3: MANAGEMENT FEE ------------------------- 3.1 MANAGEMENT FEE. As consideration for the performance by Manager of all of its property management duties under this Agreement, Owner agrees to pay to Manager a property management fee (the "MANAGEMENT FEE") equal to four percent (4%) of Gross Receipts (defined below). The Management Fee shall be paid in arrears on a monthly basis, not later than the tenth (1Oth) day of the month following the month for which such fee is earned. "GROSS RECEIPTS" means all revenues of every kind and nature derived from the operation of the Property during a month determined on a cash basis, including, without limitation, (i) rent, (ii) rent adjustments, (iii) utility charges, (iv) parking charges, (v) service charges, (vi) forfeited security deposits and other forfeited tenant deposits, (vii) proceeds of rent interruption insurance and (viii) tenant reimbursements for operating expenses, taxes and insurance. Gross Receipts shall not include: (i) non-forfeited security deposits and other non-forfeited refundable deposits; (ii) interest on bank accounts for the operation of the Property; (iii) proceeds from the sale or refinancing of any part of the Property; (iv) insurance proceeds or dividends received from any insurance policies pertaining to physical loss or damage to the Property or any part thereof (but 8 10 not proceeds of rent interruption insurance which are included as provided above); (v) condemnation awards or payments received in lieu of condemnation of the Property or any part thereof; and (vi) any trade discounts and rebates received in connection with the purchase of personal property. 3.2 PAYMENT OF MANAGEMENT FEE AND LEASING COMMISSION. Provided that no Event of Default is then existing with respect to Manager, Manager shall be entitled to pay itself from the Operating Account the monthly Management Fee then due as well as any Commission then due hereunder. Upon the cure of such Event of Default, Manager shall be entitled to deduct any past Management Fee or Commission which was not paid by virtue of the immediately preceding sentence. ARTICLE 4: LEASING ------------------ 4.1 LEASING. Owner hereby designates Manager as its exclusive broker for leasing of space in the Property and agrees that it shall refer all inquiries for leases and renewals to Manager and Manager shall negotiate all such leases, subleases, renewals, licenses and agreements (collectively, "LEASES"). Manager shall make every reasonable effort to obtain and keep desirable tenants for the Property. Manager shall, so far as reasonably possible, procure financial references for prospective tenants, investigate such references, and use its best judgment in the selection of prospective tenants. Manager agrees to perform whatever reasonable service may be required in connection with the negotiation of Leases or renewals, extensions, modifications, or cancellations thereof. 4.2 EXECUTION OF LEASES. All Leases are to be prepared by Manager in accordance with the leasing guidelines set forth in any loan document constituting an Agreement as well as any further guidelines established by Owner, unless Owner shall otherwise consent in writing. The initial leasing guidelines required by Owner are attached hereto as EXHIBIT C. Manager is authorized to enter into and execute on Owner's behalf Leases for space in the Property in accordance with the terms hereof and, except as otherwise directed by Owner in a particular case, all Leases shall be in the Owner's name but executed by Manager as managing agent for Owner. 4.3 LEASE FORMS. All Leases entered into after the date hereof (but not the renewal, extension, expansion, amendment, modification or supplement of any Leases existing as of the date hereof) shall be on the form approved by Owner unless Owner shall otherwise consent in writing; provided, however, that Manager shall have the right (i) to use the form required by any national or regional tenant if reasonably necessary to conclude the transaction and is customary in the market and (ii) to make any modifications from the form approved by Owner to the extent such changes are reasonably necessary to conclude the transaction and are customary in the market, so long as such modifications, do not significantly affect Owner's material rights and obligations under the Lease and conform in all material respects to the 9 11 leasing guidelines approved by Owner. Owner hereby approves the forms of lease and license agreements attached hereto as EXHIBIT D and EXHIBIT E, respectively. 4.4 ADVERTISING. Manager shall coordinate all advertising, promotions and marketing affecting the Property. All such advertising and marketing shall be prepared by Manager in accordance with the Approved Budget, the Permitted Variance Range or the Variance Exclusions. From time to time upon Manager's request and to the extent funds are unavailable in the Operating Account, Owner shall remit to Manager Owner's contribution to merchants' association, promotional or marketing fund as required under the Leases. Any advertising or promotional materials for the Property that utilizes the name "General Motors" or "GMAC" or any variant thereof shall be subject to the prior approval of GMAC. 4.5 LEASING EXPENSES. Owner shall reimburse Manager for all reasonable out-of-pocket expenses of Manager, if any, directly related to negotiating Leases for space in the Property, including, without limitation, all reasonable attorneys' fees and expenses, costs of postage, telephone, mailings, presentations, reports, renting plans, descriptive brochures and other leasing materials. 4.6 LEASING COMMISSIONS. (a) INITIAL LEASES AND RENEWALS AND EXTENSIONS. (i) During the term of this Agreement, and thereafter as herein provided, Owner shall pay Manager a commission (a "COMMISSION") with respect to each Lease of all or any portion of the Property equal to (1) four and one-half percent (4.5%) of the entire Base Rent (hereinafter defined) payable over the term (exclusive of any period covered by any un-exercised renewal or extension option) for any Lease entered into during the term of this Agreement or any Lease entered into after the termination or expiration of this Agreement if such post termination or expiration Lease is entered into pursuant to the terms of SECTION 1.7 hereof and (2) in the case of negotiated renewal or extension (as opposed to a renewal or extension by the applicable lessee pursuant to the its exercise of a renewal or extension option granted in the applicable Lease that does not require the negotiation of the terms of such renewal or extension option), three percent (3%) of the entire Base Rent payable over the period covered by the renewed or extended term (exclusive of any period covered by any un-exercised renewal or extension option) of any Lease existing as of the date hereof or any Lease entered into during the term of this Agreement or any Lease entered into after the termination or expiration of this Agreement if such post termination or expiration Lease is entered into pursuant to the terms of SECTION 1.7 hereof, all whether such renewal or extension occurs during the term hereof, during the period described in SECTION 1.7 hereof or thereafter, each to the extent such Lease under this clause (2) contains an option of extension or renewal. Commissions 10 12 shall be paid at the times and in the manner set forth in SECTION 4.6(b) or (c) hereof. (ii) The term "BASE RENT", when used herein, shall be defined to mean the entire rent or consideration payable by a tenant under any applicable Lease during the initial term of such Lease, including fixed and specified increases in such rent or consideration, less: (1) all credits and payments allowed or made to or for the benefit of such tenant other than for construction of its space, specifically provided for in any applicable Lease, including, but not limited to: (A) Commissions paid to brokers unaffiliated with Owner in connection with the applicable Lease; (B) rent abatements; (C) "take-over" payments with respect to space formerly occupied by such tenant; and (D) rent payable under the Lease which is attributable to operating costs, insurance expenses, real estate taxes or the consumer price index or another inflationary index; (2) late payment charges; (3) percentage rentals; (4) security deposits; (5) extra services or supplies furnished or constructed by or for the Owner and reimbursed to the Owner by such tenant by way of additional rental or other payment pursuant to a Lease or separate agreement; (6) rent allocated to payment for gas, water, electricity, telephone service, heat, air conditioning or any equipment associated therewith except to the extent that payment of any such items is covered in the initial expense stop stipulated in a Lease; (7) moving allowances; and (8) rental payments upon a continuation of tenancy on a statutory or month-to-month basis. The aforesaid deductions shall be allocated over the entire term of any such Lease and shall not include any extension or renewal term. (b) PAYMENT OF COMMISSION FOR RENEWALS AND EXTENSIONS. (i) If a Lease gives the tenant an option of renewal or extension and in the event the tenant exercises any option of renewal or extension during the term of the Lease or any extension or renewal thereof, a Commission for such renewal or extension calculated pursuant to SECTION 4.6(a) will be paid by the Owner to Manager based upon the extended or additional period. (ii) Any such Commissions shall be due and payable in full within thirty (30) days of the commencement of any renewal or extension term. For any exercise of Lease extension or renewal after expiration or termination of this Agreement, the Owner shall promptly notify the Manager in writing of such exercise and the terms thereof. The Owner's obligation to pay such Commission for such Leases shall survive the expiration or termination of this Agreement. 11 13 (c) PAYMENT OF COMMISSIONS FOR INITIAL LEASES. (i) All Commissions due to Manager and to any cooperating broker pursuant to this Agreement shall, except as provided in SECTION 4.6(b) hereof, be payable on the following terms: (1) one half (1/2) of the Commission shall be paid within thirty (30) days after execution by any tenant which is binding upon such tenant (and acceptance by Owner, if not within pre-approved guidelines); and (2) the balance of the Commission shall be paid within thirty (30) days after the last to occur of (i) any such tenant has taken possession of the demised premises, (ii) if rent is payable in the first (1st) month, commenced paying rent, (iii) any security then required by the Lease is deposited or delivered to Owner, (iv) the term of the Lease has commenced and (v) any consents or subordination, non-disturbance and attornment agreements then required by the Lease have been given or delivered by the tenant to the appropriate parties. (ii) In the event that a tenant defaults under a Lease for which Manager is entitled to the balance of its Commission, Owner shall have no duty to enforce such Lease in order to preserve such Commission. In the event that a tenant defaults under a Lease for which Manager is entitled to a Commission prior to the time all of the Commission is payable pursuant to the foregoing, then all previously paid portions of such Commission may be retained by Manager but Manager shall not be entitled to any portion of the Commission not yet paid unless such default is cured. (iii) In the event that a tenant has the right during the initial stated term under a Lease to terminate the Lease for reasons other than the Owner's default, a Commission shall be computed and paid in accordance with this Agreement based on the Base Rent allocable to the period of time, if any, as to which such tenant has no such rights to terminate the Lease. In the event the Lease is not terminated during the initial stated term by the tenant, Owner shall pay (at the time said right to terminate expires or is waived, whichever is sooner) any unpaid balance of the Commission otherwise due. (d) COOPERATING BROKERS. Manager agrees to actively solicit the cooperation of other real estate brokers in finding tenants for space in the Property. In the event a cooperating broker is involved in securing a tenant, the Owner shall pay a total Commission equal to one hundred fifty percent (150%) of the Commission provided for in the provisions of CLAUSES (a) and (c) of this SECTION 4.6. Manager shall be responsible for negotiating an acceptable sharing of the total Commission with the cooperating broker. In no event shall Manager receive more than 100% of the Commission provided for in the provisions of CLAUSES (a) through (c) of this SECTION 4.6. (e) CONSTRUCTION MANAGEMENT FEE. Owner agrees that if Manager shall be responsible for coordinating the build-out of any tenant space, Manager shall be entitled 12 14 to a construction management fee equal to ten percent (10%) of the hard costs of such construction, not to exceed $75,000.00 in any one instance. ARTICLE 5: PROCEDURE FOR HANDLING RECEIPTS AND OPERATING CAPITAL --------------------------------------- Subject to the terms and conditions of the Operating Agreement and the Acquisition Loan Documents, all funds relating to the management and operation of the Property shall be administered as follows: 5.1 RECEIPTS. All monies received by Manager for or on behalf of Owner in connection with the operation and management of the Property shall, within one (1) business day after receipt, be deposited by Manager in an operating account (the "Operating Account") established in Owner's name at such bank as directed by Owner. [As of the date hereof, the Owner owns six other regional malls (herein, such regional malls, together with other properties acquired in substitution or replacement thereof, are called the "OTHER PROPERTIES")that are subject to separate management and leasing agreements with Manager, each of which agreements are in substantially the same form as this Agreement (collectively, the "OTHER MANAGEMENT AGREEMENTS"). The Owner agrees that the Manager may establish one Operating Account for the monies received by Manager for or on behalf of Owner in connection with the operation and management of the Property and some or all of the Other Properties in satisfaction of the requirements of SECTION 5.1 of this Agreement and the applicable Other Management Agreements. 5.2 DISBURSEMENTS. Owner shall deposit and maintain sufficient funds in the Operating Account, and Manager shall withdraw and pay from Operating Account, such amounts at such times as the same are required in connection with the management and operation of the Property in accordance with the Approved Budget and the provisions of this Agreement. Manager shall remit to Owner on or after the twentieth (20th) day of each month during the term hereof, all funds in the Operating Account except those necessary to pay additional obligations with respect to this Property and the applicable Other Properties anticipated to come due prior to the receipt of additional rentals. 5.3 AUTHORIZED SIGNATORIES. Certain designated officers and employees of Manager, approved by Owner, shall be authorized signatories on the Operating Account and shall have authority to make withdrawals from the Operating Account in accordance with the terms hereof. Manager shall, to the extent reasonably required in writing by Owner, cause all persons who are authorized signatories or who in any way handle funds for the Property to be bonded, at Manager's expense, in an amount reasonably designated by Owner. 5.4 SECURITY DEPOSITS. All security deposits of tenants of the Property shall be maintained under the joint control of Owner and Manager in such manner as Owner shall approve and as required by the applicable state law. 13 15 ARTICLE 6: ACCOUNTING --------------------- 6.1 BOOKS AND RECORDS. Manager shall maintain a comprehensive system of office records, books, computer files and data and accounts pertaining to the Property, which system, records, books, computer files and data and accounts shall be available for examination, copying and audit by Owner and its agents, accountants and attorneys during regular business hours. The Owner shall establish guidelines and procedures for such books and records and Manager shall maintain such records in accordance with such guidelines and procedures at the on-site Property management office or at Manager's central office. Manager shall preserve all records, books, computer files and data and accounts for a period of three years during the term hereof and at the end of such period shall deliver or make available to Owner such records, books, computer files and data and accounts. All such records, books and computer files and data shall be the property of Owner. Without limiting the generality of this Section, Manager shall provide reports to Owner as set forth on Exhibit F hereto. 6.2 PERIODIC STATEMENTS: AUDITS. (a) PERIODIC STATEMENTS. Manager shall timely prepare and deliver to Owner such monthly, quarterly and/or annual leasing and management reports and accounting information as and in the manner reasonably required pursuant to Owner's standard reporting requirements, as may be amended from time to time. (b) AUDIT. In the event that Owner requires an audit, the audit shall be at Owner's expense and the Manager shall cooperate with the auditors. 6.3 RETURN OF COMPUTER HARDWARE AND SOFTWARE. Immediately following the termination of this Agreement by either Owner or Manager, Manager shall return and/or deliver to Owner, in good condition and working order, all hardware, software, documentation, backup tapes, signature cartridges and all other computer hardware and software purchased or otherwise provided by Owner to Manager for Manager's use during the term of this Agreement. Promptly upon Owner's request following the termination of this Agreement, Manager shall deliver to Owner hard copy outputs of information on its computer systems that relate to the Property, but Manager shall not be required to provide any computer hardware or software. ARTICLE 7: INSURANCE -------------------- 7.1 INSURANCE BY OWNER. Owner, at its expense, will obtain and keep in force any insurance required by any lender with a security interest in the Property as well as adequate insurance against physical damage (e.g., fire and extended coverage endorsement, boiler, and machinery) and against liability for loss, damage, or injury to property or persons which might arise out of the occupancy, management, operating, or maintenance of the Property. Manager shall be named as a named insured on all liability insurance policies obtained by Owner. Owner 14 16 hereby waives, and shall cause its insurer to waive, all rights to subrogation with respect to losses payable under such policies. 7.2 INSURANCE BY MANAGER. Manager shall obtain the worker's compensation insurance and fidelity bonds reasonably required by Owner pursuant to the terms hereof, such worker's compensation insurance to be at Owner's expense as provided in SECTION 2.4 hereof and such fidelity bonds to be at Manager's expense as provided in SECTION 2.4 hereof and SECTION 5.3 hereof. In addition, Manager shall, at its expense which is not reimbursable, obtain and keep in force, commercial general liability and automobile liability insurance relating to its activities and those of its employees and agents with respect to the performance of its obligations under this Agreement. Such insurance shall be with companies and in an amount reasonably acceptable to Owner. Owner shall be named as a named insured on such commercial general liability policy. Manager hereby waives, and shall cause its insurer to waive, all rights to subrogation with respect to losses payable under such policies. 7.3 LOSS OR DESTRUCTION. Manager agrees (a) to notify Owner and the insurance carrier promptly after Manager receives notice of any loss, damage or injury to the Property and (b) to take no action (such as admission of liability) which might bar Owner from obtaining any protection afforded by any policy Owner may hold. Manager shall aide and cooperate with Owner in every reasonable way with respect to such insurance or any loss thereunder. Manager is authorized to settle on Owner's behalf any and all property damage claims not in excess of $250,000, which includes authority for the execution of proof of loss, the adjustment of losses, signing of receipts and the collection of money. If the claim is greater than $250,000, Manager shall act only with the prior written approval of Owner. Any money collected by Manager under this SECTION shall be deposited in the Operating Account. ARTICLE 8: INDEMNIFICATION -------------------------- 8. 1 GENERAL. (a) OWNER INDEMNIFICATION. Owner agrees to indemnify, defend and hold Manager and its partners, officers, employees and agents harmless from any and all claims, judgments, damages, penalties, fines, costs, expenses, liabilities (including sums paid in settlement of claims) or losses, direct or indirect, known or unknown, including without limitation, reasonable attorneys', consultants' and experts' fees and expenses (collectively, "LOSSES"), suffered, paid or incurred by Manager (i) in connection with the performance of its obligations under this Agreement (other than those arising out of Manager's gross negligence or willful misconduct), (ii) the matters subject to indemnification as described in SECTION 2.7(a) of this Agreement, (iii) in connection with action taken by Manager at the request of Owner or (iv) by reason of Owner's failure or refusal to comply with or abide by any rule, order, determination, ordinance or law of any federal, state or municipal authority; excluding, however, in each instance, those 15 17 Losses arising out of Manager's gross negligence or willful misconduct. The provisions of this paragraph shall survive the termination of this Agreement. (b) MANAGER INDEMNIFICATION. Manager hereby agrees to indemnify, defend and hold Owner and its partners, officers, employees and agents harmless from any and all Losses arising out of or in any way connected with any act or omissions of Manager or its employees or agents, which constitute gross negligence or willful misconduct and that are not taken or omitted at the direction of Owner; excluding, however, in each instance, those Losses arising out of Owner's gross negligence or willful misconduct. The provisions of this paragraph shall survive the termination of this Agreement. 8.2 ENVIRONMENTAL INDEMNIFICATION. Owner agrees to indemnify, defend and hold Manager and its partners, officers, employees and agents harmless from any Losses which are incurred by Manager or arise against Manager during or after the term of this Agreement from or in any way connected with the presence or suspected presence of Hazardous Substances (as defined below) existing or present on, under or about the Property, unless the Hazardous Substances are present solely as a result of the gross negligence or willful misconduct of Manager, its officers, employees, or agents. For purposes of this section, "HAZARDOUS SUBSTANCES" shall mean any hazardous, toxic, radioactive, infectious or carcinogenic substances, material, gas or waste which is or becomes listed or regulated by any federal, state or local law or governmental authority or agency, including, without limitation, petroleum and petroleum products, PCBs, asbestos, and all substances defined as hazardous materials, hazardous wastes, hazardous substances or extremely hazardous waste under any federal, state or local law or regulation. ARTICLE 9: MISCELLANEOUS PROVISIONS ----------------------------------- 9.1 NOTICES. All notices, waivers, demands, requests, or other communications required or permitted hereunder shall be in writing and be deemed to have been properly given, served and received (i) if delivered by messenger, when delivered, (ii) if mailed, three (3) business days after deposit in the United States mail, certified or registered, postage prepaid, return receipt requested, (iii) if telecopied, upon mechanical confirmation of completed transmission, or (iv) if delivered by reputable overnight express courier, freight prepaid, the next business day after delivery to such courier; in every case addressed to the party to be notified as follows: 16 18 To Manager: First Union Management, Inc. 55 Public Square Suite 1900 Cleveland, Ohio 44113 Attention: Paul F. Levin General Counsel Telephone: (216) 781-4030 Facsimile: (216) 781-7364 and First Union Management, Inc. 55 Public Square Suite 1900 Cleveland, Ohio 44113 Attention: John J. Dee Chief Accounting Officer Telephone: (216) 781-4030 Facsimile: (216) 781-7467 To Owner: Southwest Shopping Center Co. II, L.L.C. 55 Public Square Suite 1900 Cleveland, Ohio 44113 Attention: Paul F. Levin General Counsel Telephone: (216) 781-4030 Facsimile: (216) 781-7364 with a copy to: Mayer, Brown & Platt 190 South LaSalle Street Chicago, Illinois 60603 Attention: Robert E. Gordon, Esq. Telephone: (312) 782-0600 Facsimile: (312) 701-7711 or to such other address(es) or addressee(s) as any party entitled to receive notice hereunder shall designate to the others in the manner provided herein for the service of notices. Rejection or refusal to accept or inability to deliver because of changed address or because no notice of changed address was given, shall be deemed receipt. 9.2 SUBORDINATION. (a) Owner and Manager agree that this Agreement is subordinate to any mortgages or trust deeds held by or for any bank, insurance company or other lending institution that may now or hereafter be placed upon the Property. The preceding sentence shall 17 19 not be interpreted to enlarge the duties of Manager hereunder or to diminish the rights of Manager hereunder, the sole purpose of the preceding sentence being to indicate the agreement of Owner and Manager that a foreclosure of any such mortgage or trust deed shall terminate this Agreement in accordance with the provisions of SECTION 1.5 hereof (but shall not release the then accrued obligations of the parties hereunder or those obligations of the parties hereunder that survive the termination of this Agreement). (b) Manager agrees that the terms of this Agreement are subject to any contrary terms set forth in any written agreement between Manager and the holder of such lien. 9.3 SEVERABILITY. If any term, covenant or condition of this Agreement or the application thereof to any person or circumstance shall, to any extent, be held to be invalid or unenforceable, the remainder of this Agreement, or the application of such term, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant or condition of this Agreement shall be valid and shall be enforced to the fullest extent permitted by law. 9.4 NO JOINT VENTURE OR PARTNERSHIP. Owner and Manager hereby renounce the existence of any joint venture or partnership between them and agree that nothing contained herein or in any document executed in connection herewith shall be construed as making Manager and Owner joint venturers or partners. 9.5 MODIFICATION. TERMINATION. This Agreement may be amended or modified only by a written instrument executed by Manager and Owner. 9.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject maker hereof. 9.7 ARTICLE AND SECTION HEADINGS. Article and Section headings contained in this Agreement are for reference only and shall not be deemed to have any substantive effect or to limit or define the provisions contained herein. 9.8 SUCCESSORS AND ASSIGNS. This Agreement shall be binding on the parties hereto, and their successors and permitted assigns. Manager may not assign or otherwise transfer its interest hereunder without the prior written consent of Owner, which consent may be withheld in Owner's sole discretion. This Agreement is freely assignable by Owner. 9.9 GOVERNING LAW. This Agreement shall be construed in accordance with the internal laws of the state in which the Property is located. 9.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument. 18 20 9.11 ATTORNEY'S FEES. In the event of any controversy, claim or action being filed between the parties respecting this Agreement or in connection with the Property the prevailing party shall be entitled to recover reasonable attorney's fees, costs and expenses, whether or not such controversy was litigated or prosecuted to judgment. 9.12 MANAGER'S OFFICE. Owner shall provide a reasonable and appropriate space within the Property, rent free, to serve as Manager's on-site office. Owner shall fully furnish and equip the same and shall pay all direct costs of operating said on-site office, including utilities, telephone and office supplies. Manager's right to occupy such space shall be pursuant to a license granted under this Agreement and shall terminate simultaneously with the termination of this Agreement. Manager shall use such office only for the performance by Manager of its duties and responsibilities hereunder. 9.13 CONFIDENTIALITY. Except for information generally available to the public from sources other than the Manager, Manager shall not disclose to third parties unaffiliated with itself or the members of Owner any proprietary information concerning the Property, including without limitation, information concerning Property income and expenses. Notwithstanding the restrictions of the immediately preceding sentence, Manager may disclose proprietary information concerning the Property to its employees, agents, attorneys, accountants and other consultants, or as required by legal, administrative or regulatory requirements. 19 21 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered as of the date first above written. SOUTHWEST SHOPPING CENTERS CO. II, L.L.C., a Delaware limited liability company By: First SW II, L.L.C., a Delaware limited liability company, its manager By: First Southwest II, Inc., a Delaware corporation, its manager By: --------------------------------- Steven M. Edelman Vice President MANAGER: FIRST UNION MANAGEMENT, INC., a Delaware corporation By: ----------------------------------------- Name: Joseph W. Kearney ------------------------------------ Title: ASST. VICE PRESIDENT, ----------------------------------- RETAIL OPERATIONS ----------------------------------- 20 EX-99.6 8 EXHIBIT 99.6 1 Exhibit 99.6 JOINDER AGREEMENT THIS JOINDER AGREEMENT (the "Agreement") is made and entered into as of this 26 day of September, 1996, by and between FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio business trust ("First Union"), and SOUTHWEST SHOPPING CENTERS CO. I, L.L.C., a Delaware limited liability company ("Southwest"), for the benefit of MARATHON U.S. REALTIES, INC., a Delaware corporation, and CENTRIXX REALTY HOLDINGS LIMITED, a Canadian corporation (collectively hereinafter referred to as "Seller"). RECITALS A. Seller and First Union have entered into that certain Purchase and Sale Agreement dated as of June 12, 1996, as amended by that certain Amendment to Purchase and Sale Agreement dated as of August 12, 1996 (said Purchase and Sale Agreement, as amended, is hereinafter referred to as the "Purchase Agreement"). Capitalized terms not specifically defined herein shall have the same meanings as set forth in the Purchase Agreement. B. Pursuant to Section 6.5 of the Agreement, First Union may elect to have title to any one or more Properties conveyed to any one or more nominees, provided that any such nominee agrees in writing to be bound by the terms and conditions of the Purchase Agreement as they relate to the particular Property. C. First Union has elected to direct Seller to transfer title to Pecanland Mall to Southwest, and Southwest desires to join and be bound by, the rights, duties, obligations, covenants and liabilities of First Union under the terms and conditions of the Purchase Agreement with respect to Pecanland Mall. NOW, THEREFORE, in consideration of the recitals set forth above, which are made a part of this Agreement, the mutual covenants hereinafter contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Southwest, for the benefit of Seller, hereby joins in and agrees to be bound by all of the rights, duties, obligations, covenants and liabilities of First Union under the terms and conditions of the Purchase Agreement as they relate to Pecanland Mall. 2. First Union agrees for the benefit of Seller that nothing contained in this Agreement shall release First Union from any of its obligations or liabilities under the terms of the Purchase Agreement. 2 3. For purposes of any notices to be given to Southwest, the following address shall be used: Southwest Shopping Centers Co. I, L.L.C. c/o First Southwest I, Inc. 55 Public Square, Suite 1900 Cleveland, Ohio 44113 Attn: Paul F. Levin 4. This Agreement shall be binding upon and shall inure to the benefit of First Union, Southwest, and their respective legal representatives, successors and assigns. This Agreement shall also inure to the benefit of Seller and its legal representatives, successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. FIRST UNION REAL ESTATE EQUITY SOUTHWEST SHOPPING CENTERS AND MORTGAGE INVESTMENTS, CO. I, L.L.C., a Delaware limited an Ohio business trust liability company By: FIRST UNION SOUTHWEST L.L.C., a Delaware limited liability company, its manager By:/s/ James C. Mastandrea ------------------------------ Name: ------------------------- Title: Chairman, President, By: FIRST SOUTHWEST I, Chief Executive Officer INC., a Delaware and Chief Financial corporation, its manager Officer ------------------------ By:/s/ James C. Mastandrea ----------------------- James C. Mastandrea President and Chief Executive Officer 2 EX-99.7 9 EXHIBIT 99.7 1 Exhibit 99.7 JOINDER AGREEMENT THIS JOINDER AGREEMENT (the "Agreement") is made and entered into as of this 26 day of September, 1996, by and between FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio business trust ("First Union"), and SOUTHWEST SHOPPING CENTERS CO. II, L.L.C., a Delaware limited liability company ("Southwest"), for the benefit of MARATHON U.S. REALTIES, INC., a Delaware corporation, and CENTRIXX REALTY HOLDINGS LIMITED, a Canadian corporation (collectively hereinafter referred to as "Seller"). RECITALS A. Seller and First Union have entered into that certain Purchase and Sale Agreement dated as of June 12, 1996, as amended by that certain Amendment to Purchase and Sale Agreement dated as of August 12, 1996 (said Purchase and Sale Agreement, as amended, is hereinafter referred to as the "Purchase Agreement"). Capitalized terms not specifically defined herein shall have the same meanings as set forth in the Purchase Agreement. B. Pursuant to Section 6.5 of the Agreement, First Union may elect to have title to any one or more Properties conveyed to any one or more nominees, provided that any such nominee agrees in writing to be bound by the terms and conditions of the Purchase Agreement as they relate to the particular Property. C. First Union has elected to direct Seller to transfer title to Alexandria Mall, Brazos Mall, Killeen Mall, Mesilla Valley Mall, Park Plaza, Shawnee Mall and Villa Linda Mall (such malls are hereinafter referred to as the "Transferred Malls") to Southwest, and Southwest desires to join and be bound by, the rights, duties, obligations, covenants and liabilities of First Union under the terms and conditions of the Purchase Agreement with respect to the Transferred Malls. NOW, THEREFORE, in consideration of the recitals set forth above, which are made a part of this Agreement, the mutual covenants hereinafter contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Southwest, for the benefit of Seller, hereby joins in and agrees to be bound by all of the rights, duties, obligations, covenants and liabilities of First Union under the terms and conditions of the Purchase Agreement as they relate to the Transferred Malls. 2. First Union agrees for the benefit of Seller that nothing contained in this Agreement shall release First Union from any of its obligations or liabilities under the terms of the Purchase Agreement. 2 3. For purposes of any notices to be given to Southwest, the following address shall be used: Southwest Shopping Centers Co. II, L.L.C. c/o First Southwest II, Inc. 55 Public Square, Suite 1900 Cleveland, Ohio 44113 Attn: Paul F. Levin 4. This Agreement shall be binding upon and shall inure to the benefit of First Union, Southwest, and their respective legal representatives, successors and assigns. This Agreement shall also inure to the benefit of Seller and its legal representatives, successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. FIRST UNION REAL ESTATE EQUITY SOUTHWEST SHOPPING CENTERS AND MORTGAGE INVESTMENTS, CO.I, L.L.C., a Delaware limited liability an Ohio business trust company By: FIRST SW II, L.L.C., a Delaware limited liability company, its manager By:/s/ James C. Mastandrea ------------------------------ Name:_________________________ By: First Southwest II, Inc., a Title: Chairman, President, Delaware corporation, its Chief Executive Officer manager and Chief Financial Officer By:/s/ James C. Mastandrea ----------------------- ------------------------- James C. Mastandrea, President and Chief Executive Officer 2 EX-99.8 10 EXHIBIT 99.8 1 Exhibit 99.8 JOINDER AGREEMENT THIS JOINDER AGREEMENT (the "Agreement") is made and entered into as of this 26 day of September, 1996, by and between FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio business trust ("First Union"), and TEMPLE SHOPPING CENTER CO., L.L.C., a Delaware limited liability company ("TSC"), for the benefit of MARATHON U.S. REALTIES, INC., a Delaware corporation, and CENTRIXX REALTY HOLDINGS LIMITED, a Canadian corporation (collectively hereinafter referred to as "Seller"). RECITALS A. Seller and First Union have entered into that certain Purchase and Sale Agreement dated as of June 12, 1996, as amended by that certain Amendment to Purchase and Sale Agreement dated as of August 12, 1996 (said Purchase and Sale Agreement, as amended, is hereinafter referred to as the "Purchase Agreement"). Capitalized terms not specifically defined herein shall have the same meanings as set forth in the Purchase Agreement. B. Pursuant to Section 6.5 of the Agreement, First Union may elect to have title to any one or more Properties conveyed to any one or more nominees, provided that any such nominee agrees in writing to be bound by the terms and conditions of the Purchase Agreement as they relate to the particular Property. C. First Union has elected to direct Seller to transfer the Temple Interest to TSC, and TSC desires to join and be bound by, the rights, duties, obligations, covenants and liabilities of First Union under the terms and conditions of the Purchase Agreement with respect to the Temple Interest, the Temple Partnership Agreement and Temple Mall. NOW, THEREFORE, in consideration of the recitals set forth above, which are made a part of this Agreement, the mutual covenants hereinafter contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. TSC, for the benefit of Seller, hereby joins in and agrees to be bound by all of the rights, duties, obligations, covenants and liabilities of First Union under the terms and conditions of the Purchase Agreement as they relate to the Temple Interest, the Temple Partnership Agreement and Temple Mall. 2. First Union agrees for the benefit of Seller that nothing contained in this Agreement shall release First Union from any of its obligations or liabilities under the terms of the Purchase Agreement. 2 3. For purposes of any notices to be given to TSC, the following address shall be used: Temple Shopping Center Co. I, L.L.C. c/o First Southwest I, Inc. 55 Public Square, Suite 1900 Cleveland, Ohio 44113 Attn: Paul F. Levin 4. This Agreement shall be binding upon and shall inure to the benefit of First Union, TSC, and their respective legal representatives, successors and assigns. This Agreement shall also inure to the benefit of Seller and its legal representatives, successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. FIRST UNION REAL ESTATE EQUITY TEMPLE SHOPPING CENTER CO., AND MORTGAGE INVESTMENTS, L.L.C., a Delaware limited liability company an Ohio business trust By: FIRST UNION SOUTHWEST L.L.C., a Delaware limited liability company, its designated managing member By:/s/ James C. Mastandrea ------------------------------ Name:------------------------- By: FIRST SOUTHWEST I, Inc., Title: Chairman, President, a Delaware corporation, Chief Executive Officer its manager and Chief Financial Officer By:/s/ James C. Mastandrea ----------------------- --------------------------- James C. Mastandrea, President and Chief Executive Officer 2 EX-99.9 11 EXHIBIT 99.9 1 Exhibit 99.9 ESCROW AGREEMENT THIS ESCROW AGREEMENT (the "Agreement") is dated as of September 26, 1996, by and among MARATHON U.S. REALTIES, INC., a Delaware corporation ("MUSRI"), FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio business trust ("First Union"), SOUTHWEST SHOPPING CENTERS CO. I, L.L.C., a Delaware limited liability company ("Southwest") and FIRST AMERICAN TITLE INSURANCE COMPANY ("First American"). RECITALS: WHEREAS, MUSRI and First Union have entered into that certain Purchase and Sale Agreement dated as of June 12, 1996, as amended by that certain Amendment to Purchase and Sale Agreement dated as of August 12, 1996, as amended from time to time (said Purchase and Sale Agreement as amended is hereinafter referred to as the "Purchase Agreement"); WHEREAS, the consent of TIAA (as defined in the Purchase Agreement) has not yet been obtained by MUSRI in accordance with the terms of the Purchase Agreement; WHEREAS, pursuant to the terms of the Purchase Agreement, the Mall Assets (as defined in the Purchase Agreement) with respect to Pecanland Mall (as defined in the Purchase Agreement) are to be excluded from the Property to be transferred under the terms of the Purchase Agreement; and WHEREAS, the parties have agreed to escrow all documents and the allocated portion of the Purchase Price (as defined in the Purchase Agreement) pursuant to the terms of this Agreement, pending receipt of the TIAA consent. NOW, THEREFORE, in consideration of the terms and conditions contained in the Purchase Agreement and this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. The fully executed documents transferring the Mall Assets with respect to Pecanland Mall, as set forth on Schedule 1, shall be deposited in escrow with First American. MUSRI, First Union and Southwest acknowledge that they have approved the title commitment and pro forma attached hereto as Schedule 3 and all other required deliveries and matters set forth in the Purchase Agreement with respect to Pecanland Mall. MUSRI shall arrange from time to time for an extension of the title commitment so that it shall not lapse prior to the first to occur of the expiration or termination of this Agreement or the Disbursement Date. 2. The net amount of the allocated portion of the Purchase Price with respect to Pecanland Mall in the amount of $4,188,193.20, in accordance with the terms of the Closing Statement attached hereto as Schedule 2 (the "Net Purchase Price"), shall be deposited in escrow with First American. The Net Purchase Price shall be invested by First American in 7-day U.S. Treasury Bills, or as otherwise directed by MUSRI and First Union, and all interest accrued shall be paid to MUSRI in the event that the deposits are disbursed in accordance with Paragraph 4 of this Agreement, or shall be paid to First Union in the event that the deposits are disbursed in accordance 2 with Paragraph 6 of this Agreement. Notwithstanding the foregoing sentence, the provisions of Section 7.4(b) of the Purchase Agreement shall continue to be applicable to Pecanland Mall. 3. Upon receipt by First American of a consent, assumption and release document from TIAA (the "Consent") acceptable to MUSRI and First Union, pursuant to which (a) TIAA consents to the transfer of the Mall Assets with respect to Pecanland Mall, (b) Southwest assumes the obligations under the terms of the Pecanland Loan (as defined in the Purchase Agreement), (c) TIAA releases MUSRI under the terms of the Pecanland Loan, and (d) provided that there shall be no change in the status of title to Pecanland Mall from that reflected in the title commitment and pro forma attached hereto as Schedule 3 that has not been approved in advance by First Union or been caused by any action of First Union or Southwest, MUSRI and Southwest shall deliver to First American written notice of their approval of the Consent (the "Consent Approval"). Any fees, expenses, title charges or other consideration required by TIAA shall be paid by MUSRI. Notwithstanding the foregoing, the Consent shall be deemed acceptable to MUSRI if it provides for a release of MUSRI with respect to obligations under the loan documents evidencing the Pecanland Loan prior to the date of execution thereof by TIAA and Southwest delivers to MUSRI on or before execution thereof by TIAA, an indemnification agreement reasonably acceptable to MUSRI indemnifying MUSRI against obligations under the loan documents evidencing the Pecanland Loan subsequent to the date of execution of the Consent by TIAA. 4. Upon receipt of the Consent Approval, First American is hereby authorized and directed to record those documents noted on Schedule 1 as documents for recording, to deliver two (2) execution copies of the remaining documents noted on Schedule 1 to First Union, with two (2) execution copies thereof to MUSRI and to disburse the Net Purchase Price less the disbursements set out on Schedule 2 to MUSRI. The date upon which such disbursement occurs is hereinafter referred to as the "Disbursement Date." 5. MUSRI, First Union and Southwest agree that notwithstanding the date of recording of the deed conveying Pecanland Mall, the proration date and Cutoff Date (as defined in the Purchase Agreement) with respect to Pecanland Mall shall be the date of this Agreement. 6. In the event that the Consent has not been obtained within six (6) months after the date of this Agreement, subject to the extension rights set forth below, this Agreement shall terminate without any notice to any party and thereupon the Act of Sale with respect to Pecanland Mall shall be returned to MUSRI, the fully executed documents transferring the Mall Assets with respect to Pecanland Mall, as set forth on Schedule 1, shall be destroyed by First American and the Net Purchase Price shall be returned to First Union. Notwithstanding the foregoing, at the expiration of the foregoing six (6) month period, First Union shall have the right, exercisable by written notice to MUSRI, to extend this Agreement for an additional period of six (6) months, and thereafter at the expiration of said foregoing six (6) month extension First Union shall have the right, exercisable by written notice to MUSRI, to extend this Agreement for a second additional period of six (6) months. In addition, the parties may, by written notice to First American, further extend the term of this Agreement for such additional period as the parties agree. Further notwithstanding anything to the contrary contained in this Agreement, in the event that MUSRI at any time receives a notice of default from TIAA, which notice relates to any alleged default relating to the transactions 2 3 contemplated by this Agreement, this Agreement shall terminate on or before the earlier to occur of (a) the expiration date of the cure period set forth in any such notice or (b) any applicable notice and cure period under the documents evidencing the Pecanland Loan. The termination of this Agreement as provided in this Paragraph 6 shall not affect the rights and obligations of MUSRI, First Union and Southwest under the Purchase Agreement, including, without limitation, under Paragraph 3.3 thereof. Notwithstanding the foregoing, First Union may by written notice to MUSRI, given not less than thirty (30) days prior to the effective date of the termination, terminate this Agreement, including its management rights and obligations, and to terminate the provisions of Section 3.3 of the Purchase Agreement if First Union determines that it is not fruitful to continue pursuing the consent of TIAA to a Consent acceptable to First Union. 7. From the date of this Agreement until the Disbursement Date, Pecanland Mall shall be managed by First Union Management, Inc. ("FUMI") in accordance with the terms of this Paragraph 7, and in accordance with the terms of the documents evidencing the Pecanland Loan, and in accordance with property management standards applicable to similar properties in similar metropolitan areas. In addition, in the event that the Consent has not been obtained within fourteen (14) days after the date of this Agreement, the parties shall negotiate in good faith the terms and conditions of a management and leasing agreement, which terms and conditions shall include the management and leasing fee arrangement set forth in this Paragraph 7, and authority for FUMI to execute leases upon the same approval procedures as were applicable to MUSRI under Section 8.2 of the Purchase Agreement. All revenue collected by FUMI or Southwest during the term of this Agreement with respect to Pecanland Mall, as determined in accordance with generally accepted accounting principles consistently applied (the "Revenue") from the date of this Agreement until the Disbursement Date shall be paid at the direction of FUMI for the benefit of Southwest. During the term of this Agreement all expenses with respect to Pecanland Mall, including, without limitation, the debt service under the Pecanland Loan (collectively hereinafter referred to as the "Expenses"), shall be paid by FUMI from the Revenue. Within fifteen (15) days after the end of each month during the term of this Agreement, FUMI shall provide written statements to MUSRI setting forth the Revenue and Expenses for the prior month. In the event that this Agreement is terminated as set forth in Paragraph 6 of this Agreement, the Revenue less the Expenses, and net of the Management Fee (as hereinafter defined) shall be paid by FUMI to MUSRI within five (5) business days after such termination. As used herein, the term "Management Fee" shall mean a fee paid to FUMI for FUMI's services in connection with management and leasing of the Pecanland Mall equal to 4% per month of gross revenues and leasing fees payable at $3.00 per square foot on new leases and $1.00 per square foot for renewal leases, prorated on a per diem basis from the date of this Agreement until the Disbursement Date. 8. In the event conflicting demands for disbursement of the escrow deposits are made, or conflicting notices are served on First American, and such conflicting demands or notices remain unresolved for fourteen (14) days after First American has received such conflicting demands or notices and notified the parties hereto thereof, the parties hereto expressly agree and consent that First American may at any time thereafter notify all parties, in the manner required under Paragraph 10 hereof, that First American intends to file an interpleader action in the United States District Court, Northern District of Texas (the "Court"). First American shall then promptly file the interpleader action and deposit the escrow deposits made under Paragraphs 1 and 2 with the Court. 3 4 MUSRI and First Union jointly and severally agreed to pay the costs, including reasonable attorneys' fees, that First American may expend or incur in such interpleader suit or any other litigation in connection with this Agreement, the among of such costs to be fixed and judgment therefor to be rendered by the Court in such suit. Upon the filing of an interpleader action and deposit of all deposits made under the terms of this Agreement with the Court, First American shall be fully released and discharged from all obligations imposed on it under this Agreement. 9. The duties and obligations of First American hereunder shall be determined solely by the express provisions of this Agreement. First American shall be entitled to rely and shall be protected in acting in reliance upon any instructions or directions furnished to it in writing by MUSRI, Southwest or First Union or pursuant to any provisions of this Agreement. First American may resign by giving not less than thirty (30) days' written notice to MUSRI, Southwest and First Union of its intention to do so; provided, however, that First American shall continue to serve until MUSRI, Southwest and First Union shall have appointed a successor escrow agent. Similarly, First American may be removed and replaced following the giving of not less than five (5) days prior written notice to First American by MUSRI, Southwest and First Union. 10. Any notice, request, demand, instruction or other document to be given or served hereunder 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 telecopy), or (b) four (4) days after deposit in United States registered or certified mail, return receipt requested, 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: If to MUSRI: Marathon Realty Company Limited 200 Wellington Street West Suite 400 Toronto, Ontario M5V 3C7 Canada Attention: John E. Beales Telecopy: (416)348-1902 With a copy to: Neal, Gerber & Eisenberg Two N. LaSalle Street 21st Floor Chicago, Illinois 60602 Attention: Reuben C. Warshawsky Telecopy: (312)269-1747 4 5 If to First Union or Southwest: First Union Real Estate and Mortgage Investments 55 Public Square, Suite 1900 Cleveland, Ohio 44113 Attention: Paul F. Levin Telecopy: (216)781-7364 With a copy to: Thompson Hine & Flory P.L.L. 3900 Society Center 127 Public Square Cleveland, Ohio 44114-1216 Attention: Linda A. Striefsky Telecopy: (216)566-5800 If to First American: First American Title Insurance Company 3030 LBJ Freeway Suite 150 Dallas, Texas 75234 Attention: James B. Shackelford Telecopy: (972)241-7112 11. Whenever any period of time is specified herein for the taking of any action or the giving of any notice, the period shall be computed by excluding the day upon which the period is specified to commence and including the last day of the period specified. If the last day of the period falls on a Saturday, Sunday or federal holiday, the period shall be extended to include the first subsequent day thereafter that is not a Saturday, Sunday or federal holiday. 12. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. 13. None of the parties hereto may make any assignment of this Agreement or any interest therein without the prior written consent of the other parties. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and/or assigns. 14. Except as specifically set forth or referred to herein, nothing herein expressed or implied is intended or shall be construed to confer upon or give to any third party any rights or remedies under or by reason of this Agreement. This Agreement may not be amended or terminated orally but only by an instrument in writing duly executed by the parties hereto. 5 6 15. First American shall not be responsible for any loss of principal or interest due to changes in the market for any securities purchase pursuant to the terms hereof; for any penalties or loss caused by purchase or sales delays or the making or redeeming of investments; or for any loss or impairment of funds while the funds are in the course of collection or while those funds are on deposit in a financial institution, if such loss or impairment results from failure, insolvency or suspension of a financial institution. 16. Notwithstanding anything contained herein to the contrary, this Agreement is made and executed on behalf of First Union, a business trust organized under the laws of the State of Ohio, by its officer(s) on behalf of the trustees thereof, and none of the trustees or any additional or successor trustee hereafter appointed, or any beneficiary, officer, employee or agent of First Union shall have any liability in his personal or individual capacity, but instead, all parties shall look solely to the property and assets of First Union for satisfaction of any losses, claims or damages of any nature in connection with this Agreement. 17. This Agreement has been made pursuant to and shall be governed by the laws of the State of Texas. 6 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered on the date first above written. MARATHON U.S. REALTIES, INC., a Delaware corporation By:/s/ John E. Beales -------------------- John E. Beales Vice-President FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, By:/s/ James C. Mastandrea ------------------------------------ Name: ------------------------------ Title: Chairman, President Chief Executive Officer and Chief Financial Officer ----------------------------- 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/ James C. Mastandrea ------------------------------ James C. Mastandrea President and Chief Executive Officer FIRST AMERICAN TITLE INSURANCE COMPANY By: ------------------------------- Name: ------------------------- Title: ------------------------ 7 -----END PRIVACY-ENHANCED MESSAGE-----