-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, fufMlrFBkHbtfXwRgwgiu12l50xqvosfcrtZwh/LlP1ZBVQ1aIMz3IWIghsFgsTr 6MeSmRnCx/WLC4VOATCyjw== 0000950123-94-001230.txt : 19940808 0000950123-94-001230.hdr.sgml : 19940808 ACCESSION NUMBER: 0000950123-94-001230 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940714 ITEM INFORMATION: Changes in control of registrant ITEM INFORMATION: Other events FILED AS OF DATE: 19940728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RPS REALTY TRUST CENTRAL INDEX KEY: 0000842183 STANDARD INDUSTRIAL CLASSIFICATION: 6798 IRS NUMBER: 136908486 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10093 FILM NUMBER: 94540509 BUSINESS ADDRESS: STREET 1: 733 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2123708585 MAIL ADDRESS: STREET 1: 733 THIRD AVE STREET 2: 24TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 8-K 1 RPS REALTY TRUST FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) July 14, 1994 ------------------------------- RPS REALTY TRUST - - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) MASSACHUSETTS - - -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation) 1-10093 13-6908486 - - ---------------------------------- ------------------------------------ (Commission File Number) (IRS Employer Identification No.) 733 Third Avenue, New York, New York 10017 - - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 370-8585 ---------------------- - - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) 2 Item 1(b) Changes of Control of Registrant Item 5 Other Events Reference is made to the Letter of Intent dated July 14, 1994 between the Registrant and Ramco-Gershenson, Inc. ("Ramco") and the Registrant's Press Release dated July 14, 1994 relating thereto, each of which is incorporated herein by reference and is included as an exhibit hereto. As described in the Letter of Intent, the Registrant and Ramco have reached an agreement in principle to effectuate a business combination through an operating limited partnership (the "Operating Partnership") to be formed by the Registrant. As contemplated by the Letter of Intent, the Registrant will contribute certain retail properties and cash to the Operating Partnership, and Ramco will contribute certain shopping center properties and stock in its property management corporation to the Operating Partnership, in exchange for units of partnership interest. The Registrant will be the sole general partner of the Operating Partnership and will hold between 63% and 70% of the interests in the Operating Partnership, and Ramco will hold between 30% and 37% of such interests. The limited partnership interests issued to Ramco will be exchangeable for shares of beneficial interest of the Registrant on a one-for-one basis or, at the Registrant's option, for cash. The Letter of Intent contemplates that upon consummation of the transaction, Ramco will have the right to designate four individuals (two of whom will be independent) to serve on the Registrant's nine person Board of Trustees and that the principals of Ramco will become executive officers of the Registrant. Notwithstanding the filing of this Form 8-K under Item 1(b) hereof, the Registrant does not believe that the transaction proposed in the Letter of Intent will result in a change of control of the Registrant. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RPS REALTY TRUST (Registrant) Date: July 28, 1994 By: /s/ Herbert Liechtung ----------------------------- Herbert Liechtung President S-1 4 EXHIBIT INDEX
Sequential Exhibit Page No. - - ------- ---------- 20 Press Release of the Registrant dated July 14, 1994 5 99 Letter of Intent dated July 14, 1994 between RPS Realty Trust and Ramco- Gershenson, Inc. 7
EX-20 2 PRESS RELEASE 1 EXHIBIT 20 2 FOR IMMEDIATE RELEASE Contact for RPS: Edwin Frankel RPS Realty Trust (212) 370-8561 Contact for Ramco: Dennis Gershenson Ramco-Gershenson, Inc. (810) 350-9900 RPS REALTY TRUST AND RAMCO-GERSHENSON, INC. TO JOIN FORCES; RPS TO BECOME AN EQUITY REIT New York, New York, and Southfield, Michigan, July 14, 1994 -- RPS Realty Trust (NYSE: RPS) and Ramco-Gershenson, Inc. jointly announced today that they have reached an agreement in principle to effectuate a business combination through an operating limited partnership. As contemplated by the letter of intent executed by both parties, Ramco will contribute 22 shopping center properties, containing approximately 3,900,000 leasable square feet, and stock in its property management corporation, while RPS will contribute seven retail properties, containing approximately 970,000 leasable square feet, and $75,000,000 in cash, to the operating partnership. This will result in the operating partnership owning and managing shopping centers and other retail properties containing almost 5,000,000 leasable square feet. 3 RPS will be the sole general partner of the operating partnership and will hold between 63% and 70% of the interests in the operating partnership, and Ramco will hold between 30% and 37%. The percentage interests to be received by the parties are based upon the relationship between the agreed upon values of the assets contributed by the parties, and are subject to adjustment based on changes in funds from operations attributable to the Ramco properties. It is also contemplated that prior to consummation of the transaction, RPS will dispose of its mortgage loan assets through prepayments, sales or a spin-off of such assets to RPS' shareholders. The proposed business combination, which is currently anticipated to close late in the fourth quarter of 1994 or early in the first quarter of 1995, is subject to the completion of due diligence investigations by both parties and the preparation of definitive documentation, and is subject to a number of conditions, including RPS' Board of Trustees and shareholder approval, receipt of a fairness opinion from RPS' financial advisor, disposition of RPS' mortgage loan assets or consummation of the spin-off transaction, and the refinancing of certain Ramco property debt on specified terms. The transaction is also subject to the condition that, based on future changes in funds from operations from the Ramco properties, Ramco's interest in the operating partnership will not be less than 30%. 2 4 Upon consummation of the transaction, it is anticipated that RPS' headquarters will move to Southfield, Michigan and RPS will change its name to Ramco-Gershenson Properties Trust. "The agreement with Ramco-Gershenson represents the successful culmination of management's efforts to convert RPS into an equity REIT," said Herbert Liechtung, President of RPS. "Management believes that the proposed transaction with Ramco- Gershenson will create an attractive portfolio of retail properties managed by a well-respected experienced organization which has exhibited significant development capabilities." "Upon completion of this transaction, we will achieve many of the benefits of 'going public' without the need to raise equity in the IPO marketplace," said Dennis Gershenson, who will become CEO of the Trust upon completion of the proposed transaction. "We at Ramco-Gershenson believe that this combination will provide the Trust with access to the capital markets that will ensure its continued growth and success in the shopping center industry." Ramco-Gershenson, Inc., which is controlled by principals Joel, Dennis, Richard and Bruce Gershenson and partner Michael Ward, is located in Southfield, Michigan, and has more than 40 years experience as a fully integrated shopping center developer. The company has developed over 70 shopping centers throughout its history, from super regional centers to free standing promotional department stores. 3 EX-99 3 LETTER OF INTENT 1 EXHIBIT 99 2 RPS REALTY TRUST 733 THIRD AVENUE NEW YORK, NEW YORK 10017 July 14, 1994 RAMCO-GERSHENSON, INC. 27600 NORTHWESTERN HIGHWAY SUITE 200 SOUTHFIELD, MICHIGAN 48034 Gentlemen: This letter (the "LETTER OF INTENT") sets forth the principal terms and conditions upon which RPS Realty Trust (THE "COMPANY") proposes to negotiate an acquisition of assets that will be effectuated through a contribution of certain assets of Ramco-Gershenson, Inc. and its affiliates (collectively, "RAMCO") and certain assets of the Company to a Delaware limited partnership (the "OPERATING PARTNERSHIP") to be formed by the Company (the "TRANSACTION"). This Letter of Intent represents only our current good faith intention to negotiate and enter into a definitive Asset Contribution Agreement relating to the Transaction. The date of the closing of the Transaction is referred to herein as the "CLOSING DATE". 1. THE CONTRIBUTION. A. Structure of the Contribution. (a) Ramco will contribute to the Operating Partnership the following assets and properties: (i) the shopping center properties listed on Schedule 1 (including the development land and development out parcels and options on such development land owned or controlled by Ramco as specified on such Schedule) (collectively, the "RAMCO PROPERTIES"), subject to the Ramco Properties' existing liabilities as listed and described on Schedule 2, and (ii) 100% of the non-voting 3 common stock (generally entitled to dividends equal to 99% of net cash flow) and 5% of the voting common stock (collectively, the "RAMCO MANAGEMENT STOCK") of the corporation that will hold Ramco's property management contracts with third parties as set forth on Schedule 3 (collectively, the "RAMCO THIRD PARTY MANAGEMENT CONTRACTS"). (The Ramco Properties and the Ramco Management Stock are collectively referred to herein as the "RAMCO CONTRIBUTION ASSETS".) Excluded from the Ramco Properties will be the outlots owned by Ramco which are not useful for the development or expansion of retail shopping centers contributed to the Company as set forth on Schedule 4, which outlots will not be developed by Ramco. Subject to adjustment as set forth in subparagraphs (c) and (d) below, Ramco will receive a limited partnership interest in the Operating Partnership based on the agreed upon value of the Ramco Contribution Assets as a fraction of the agreed upon value of all the assets contributed to the Operating Partnership; provided, however, in no event will Ramco receive an interest in the Operating Partnership that exceeds 37%. The agreed upon value of the Ramco Contribution Assets will be determined in accordance with Schedule 5. Schedule 5.1 illustrates the application of Schedule 5 based on certain assumptions. All out-of-pocket costs incurred by Ramco related to options on development land owned by Ramco that are contributed to the Company (other than Office Max) shall be reimbursed by the Company from funds available under the Company's line of credit at such time as the line of credit is in place. If Ramco incurs out-of-pocket costs relating to Office Max that are not borrowed, such costs shall be reimbursed by the Company from funds available under the Company's line of credit, up to a maximum of $1,980,000 (inclusive of all borrowed amounts). (b) Concurrently with the contribution of the Ramco Contribution Assets to the Operating Partnership (i) all the property management contracts relating to the Ramco Properties will be canceled and (ii) the Company and the Operating Partnership will be released from any obligation as to debts in excess of $5,000,000 on the Ramco Properties that are owed to Ramco. (c) In the event projected net operating income from the Ramco Jackson, Michigan property (the "JACKSON PROPERTY") during the 12 month period commencing October 1, 1994 (based on Qualifying Leases (as such term is defined in Schedule 5) in place as of such date) is less than $2,824,000, Ramco will have the right to increase its interest in the Operating Partnership based on the performance of the Jackson Property from October 1, 1994 until the date which is one year from the closing in accordance with the formula set forth in Schedule 6. 2 4 (d) In the event that as of October 1, 1994 Ramco has entered into a Qualifying Lease for new space to be constructed in the area of the Tel-Twelve Mall (the "TEL-TWELVE PROPERTY") previously occupied by Montgomery Ward Garden Shop (the "TEL-TWELVE LEASE"), (i) for purposes of making the calculation set forth on Schedule 5, projected net operating income from the Tel-Twelve Property will be computed without regard to the existence of the Tel-Twelve Lease and (ii) Ramco will have the right to increase its interest in the Operating Partnership based on the formula set forth in Schedule 6.1. (e) The Company will contribute (i) the shopping center properties listed on Schedule 7 (collectively, the "COMPANY PROPERTIES") and (ii) $75,000,000 in cash (the "COMPANY CASH") to the Operating Partnership. (The Company Properties and the Company Cash are referred to collectively herein as the "COMPANY CONTRIBUTION ASSETS".) The Company Contribution Assets will have an agreed upon value of $123,657,000, or, if, as of October 1, 1994, projected net operating income from the Company Properties is less than $5,200,000, such lesser agreed upon amount as determined by an independent appraiser selected by the parties. The Company will initially receive an interest in the Operating Partnership based on the agreed upon value of the Company Contribution Assets as a fraction of the agreed upon value of all the assets contributed to the Operating Partnership as described in subparagraph (a) and this subparagraph (e). The Company's interest in the Operating Partnership will be divided into two parts: (i) a 1% general partner interest and (ii) a limited partnership interest equal to the difference between (x) 99% and (y) the limited partnership interest allocated to Ramco. (f) Immediately prior to the consummation of the Transaction, the Company will, if it does not dispose of such assets prior to such date, contribute its mortgage loans, its Saratoga Street, Baltimore, Maryland property, its Norgate property, a certain amount of cash and certain other tangible and intangible assets (including, without limitation, furniture, fixtures and equipment) to a qualified REIT subsidiary ("RPS MORTGAGE"). The stock of RPS Mortgage will be distributed to the shareholders of the Company in a spin-off by means of a pro rata dividend (the "SPIN-OFF TRANSACTION"). In connection with the Spin-Off Transaction, RPS Mortgage will assume the liabilities of the Company relating to the assets that were contributed to RPS Mortgage and the Company's leases for office space. (g) Following or contemporaneous with the Spin-Off Transaction and prior to the closing of the Transaction, the Company will merge into a subsidiary Maryland business trust and will change its name to Ramco-Gershenson Properties Trust. 3 5 (h) Following or contemporaneous with the Spin-Off Transaction and prior to the closing of the Transaction, the Company will combine its shares of beneficial interest by means of a 4 for 1 reverse split. B. Structure of the Operating Partnership. (a) The Company will be the sole general partner of the Operating Partnership and will be responsible for the management of the Operating Partnership's business and affairs. The holders of the units of limited partnership interest (the "OP UNITS"), as limited partners in the Operating Partnership, will not have any right to participate in the management of the Operating Partnership except that the Company (in its capacity as sole general partner of the Operating Partnership) will not have the right, without the approval of limited partners owning at least 85% of the OP Units, to (i) amend the Operating Partnership's limited partnership agreement (the "PARTNERSHIP AGREEMENT") in any manner that would materially adversely affect the rights, privileges and preferences of the OP Units, (ii) dissolve or terminate the Operating Partnership prior to its stated date of dissolution or termination (other than a dissolution or termination which occurs without a vote pursuant to the Partnership Agreement or applicable law) or (iii) amend the Partnership Agreement in a manner that would subject the holders of the OP Units to any personal liability beyond their interest in the Operating Partnership. (b) Following the closing of the Transaction, the Company and Ramco will agree to conduct their respective real estate acquisition, management and development businesses through the Operating Partnership. (c) Subject to compliance with the allocations mandated under Section 704(c) of the Internal Revenue of the Code, profits, losses and distributions from the Operating Partnership shall be made in accordance with each partner's percentage interest in the Operating Partnership. Profits and losses will be allocated to the partners in the Operating Partnership utilizing the "traditional" allocation method. C. Terms of the OP Units (a) The limited partnership interests in the Operating Partnership will be divided into such number of OP Units that, following such division, will permit the OP Units to be exchanged for the Company's shares of beneficial interest ("SHARES") on a one-for-one basis. This one-for-one exchange ratio will be adjusted in the event of a stock combination, stock split, stock dividend or other event having a dilutive or anti-dilutive effect on the limited partners' exchange rights. 4 6 Upon the effectiveness of an exchange of OP Units for Shares, the Company will be issued one OP Unit in respect of each OP Unit that was redeemed. (b) In the event a limited partner desires to cause the Company to exchange his OP Units for Shares, the Company will have the option (the "CASH OPTION") to exchange such limited partner's OP Units for cash equal to the product of (i) the number of Shares then issuable upon the exchange times (ii) the current per share market price of the Shares based on the average closing prices of the Shares on the New York Stock Exchange for the five consecutive trading days ending on the date the notice of exchange was made. The Company will be issued one OP Unit in respect of each OP Unit exchanged by the Company pursuant to the Cash Option. (c) Any exchange of OP Units for Shares will be subject to compliance with the ownership limitations (i.e., excess shares) included in the Company's organizational documents. (d) Except as otherwise permitted by at least a majority of the Company's independent trustees, all limited partners will be prohibited from exercising their exchange rights for a period of one year from the Closing Date except, in the event of the death of a limited partner prior to such time, the estate of such limited partner shall have the right to exercise such exchange rights to the minimum extent necessary to obtain the funds needed to pay any estate taxes that may be payable at such time. Except in connection with a merger, business combination or other reorganization transaction, the Company will not exchange any of its OP Units as long as there are any other holders of such OP Units. D. Board of Trustees (a) Upon the closing of the Transaction, Ramco shall have the right, subject to compliance with the Company's organizational documents, to designate four trustees (not less than two of whom shall be independent of Ramco, the Company and their respective affiliates) to serve on the Company's nine person Board of Trustees (the "BOARD OF TRUSTEES"). The Company will agree to exercise its best efforts to secure the resignation of up to four of its trustees (other than Messrs. Pashcow, Liechtung, Goldberg and Blank) as is necessary to enable the Ramco designees to be elected to the Board of Trustees. Messrs. Pashcow, Liechtung, Goldberg and Blank, as well as one other existing trustee or another person designated by the Company, will serve as trustees of the Company following the closing. 5 7 (b) The two persons affiliated with Ramco who will become members of the Board of Trustees will be Joel Gershenson and Dennis Gershenson. (c) In the Company's discretion, the Company shall have the right to amend its organizational documents to provide that newly created trusteeships or vacancies on the Board of Trustees shall be filled by a majority of the independent trustees then in office. (d) At all times, a majority of the Board of Trustees shall be independent of Ramco, the Company and their affiliates. (e) The Board of Trustees will appoint a non-voting Advisory Committee consisting of Michael A. Ward, Richard Gershenson and Bruce Gershenson. The members of the Advisory Committee will be available to consult with and advise the Board of Trustees as requested. E. Uses of Contributed Cash (a) The cash contributed to the Operating Partnership by the Company shall be used as follows: (i) to pay all fees and expenses relating to the Transaction (other than prepayment penalties or premiums and any other expenses and related legal fees in excess of $250,000 relating to the debt listed on Schedule 2 and classified as Ramco Loan Payoffs, any cash amounts paid by Ramco to any third party in order to obtain his or its consent to the Transaction or to any Ramco investor who owns interests in the Ramco Properties, and such closing costs that are customarily paid by sellers of real property in the localities where the Ramco Properties are located), one-half of all title insurance costs and recording charges incurred in connection with the Transaction, and tenant improvement costs incurred at the Ramco Properties with respect to leases entered into after October 1, 1994 that are not otherwise included in whole or in part, in RNOI (as such term is defined in Schedule 5) (other than with respect to the Tel-Twelve Lease and Qualifying Leases at the Jackson Property entered into after October 1, 1994 that are not otherwise included, in whole or in part, in RNOI), (ii) if the Company has not received a commitment for a line of credit as of the closing of the Transaction, to establish a reserve equal to two times the estimated monthly general and administrative expenses of the Company, (iii) to prepay the remaining $5,000,000 of the debt associated with the Ramco Properties payable to Ramco and (iv) the balance, to prepay the debt listed on Schedule 2 and classified as Floating Rate or Prepayable Short-Term Loans and Short-Term Advantageous Rate Loans, as agreed to by the parties. 6 8 (b) All prepayment penalties or premiums and expenses (including, without limitation, legal fees relating to such prepayments) in excess of $250,000 relating to or triggered by the prepayment of any of the debt listed on Schedule 2 and anticipated to be prepaid as set forth in subparagraph (a) above shall be paid by Ramco. (c) Prior to the closing of the Transaction, Ramco shall use its best efforts to (i) refinance the debt listed on Schedule 2 and classified as Floating Rate or Prepayable Short-Term Loans and Short-Term Advantageous Rate Loans (after making the prepayments described in Paragraph 1.E.(a)) on the terms described in clause (ix) of Paragraph 4.A. and (ii) obtain a line of credit in an amount to be determined by the parties which would be used to fund the future development and acquisition activities of the Company. 2. MANAGEMENT AND CONFLICTS. A. The five principals of Ramco (collectively, the "RAMCO PRINCIPALS") will enter into agreements with the Company pursuant to which they will agree to conduct all of their real estate ownership, acquisition, management and development activities (other than certain limited activities relating to their existing video arcade and fast food franchise businesses and activities relating to the properties listed on Schedule 8 that will be excluded from the Transaction (collectively, the "EXCLUDED PROPERTIES")) through the Company and in connection therewith the Ramco Principals will agree to offer all real estate opportunities of which they become aware (other than opportunities relating to the Excluded Properties) to the Company. The Ramco Principals (other than Joel Gershenson and Dennis Gershenson) will enter into non-competition agreements with the Company pursuant to which such Ramco Principals will agree not to compete, directly or indirectly, with the Company with respect to the ownership, acquisition, management and development of real estate (except with respect to the Excluded Properties) until the later of (i) three years from the Closing Date or (ii) the date such Ramco Principal is no longer an officer or director of the Company; provided, however, in the event any such Ramco Principal becomes Chairman, Vice Chairman, President or Chief Executive Officer of the Company (or holds any other office in the Company that is vested with powers and duties substantially similar to those powers and duties typically vested by corporations or business trusts in the office of Chairman and President), the term of such Ramco Principal's non-competition agreement shall be extended until the later of (i) four years from the Closing Date or (ii) one year after the date such Ramco Principal is no longer an officer or director of the Company. Joel Gershenson and Dennis Gershenson will enter into similar non-competition agreements with the Company 7 9 except that the term of such agreements will extend until the later of (i) four years from the Closing Date or (ii) one year after the date such Ramco Principal is no longer an officer or director of the Company. B. Each of the Ramco Principals will enter into three year employment agreements with the Company pursuant to which each such Ramco Principal will be paid an annual base salary of $100,000 and shall receive such other perquisites (including, without limitation, stock options and bonuses) that are customarily provided by similar real estate investment trusts to comparable officers as agreed to by the parties. The Ramco Principals will hold the following offices with the Company: Chairman: Joel Gershenson; President and Chief Executive Officer: Dennis Gershenson; Chief Operating Officer and Executive Vice President: Michael Ward; Executive Vice President and Secretary: Richard Gershenson; Executive Vice President and Treasurer: Bruce Gershenson. C. The Ramco Principals will not be permitted to exchange or dispose of all or any portion of their OP Units during the 30 month period following the closing of the Transaction without the prior written consent of a majority of the Board of Trustees (including a majority of the independent trustees) (the "RAMCO LOCK-UP") other than to the minimum extent necessary to fund the payment of estate taxes due upon the death of any Ramco Principal. The third party investors of Ramco who will receive OP Units in connection with the Transaction will not be permitted to dispose of all or any portion of their OP Units during the one year period following the closing of the Transaction without the prior written consent of a majority of the Board of Trustees (including a majority of the independent trustees) other than to the minimum extent necessary to fund the payment of estate taxes due upon the death of any such investor. The Company will grant to the Ramco Principals "piggyback" registration rights at the time of closing that will become effective upon the expiration of the Ramco Lock-Up and, with certain exceptions (including, without limitation, the underwriter's cutback) to be agreed to by the parties, grant to the Ramco Principals the right to have any unregistered Shares held by them registered incidentally to any registration being conducted by the Company of its shares. D. During the 12 month period following the closing of the Transaction, each of the Ramco Principals will be permitted to pledge up to 25% of the OP Units initially held by him to a bank or other financial institution; following the expiration of such 12 month period and during the remaining term of the Ramco Lock-Up, the Ramco Principals will be permitted to pledge up to 50% of the OP Units initially held by him to a bank or other financial institution. 8 10 E. Upon the closing of the Transaction, the Company will satisfy (without using the Company Cash that will be contributed to the Operating Partnership) and/or, at the election of Joel M. Pashcow ("PASHCOW") and Herbert Liechtung ("LIECHTUNG"), RPS Mortgage will assume the remaining obligations of the Company under its existing employment agreements with Pashcow and Liechtung. F. Prior to the closing of the Transaction, the Company may amend the terms and conditions of its 1989 Stock Option Plan (the "EXISTING OPTION PLAN") so that, immediately prior to the Spin-Off Transaction, each current holder of an option (individually, an "OPTION" and collectively, the "OPTIONS") to purchase existing shares in the Company will receive, in exchange therefore, two separately exercisable Options: one to purchase Shares and the other to purchase shares in RPS Mortgage, each exercisable for the same number of shares, and containing substantially equivalent terms, as the existing Option. The exercise price for each new Option in the Company will be determined by adjusting existing exercise price ($5.75 per share) based on the relative fair market value of the assets that will be contributed to the Operating Partnership and the assets that will be contributed to RPS Mortgage. In addition, the total number of shares for which Options may be granted under the Existing Option Plan and the exercise price of outstanding Options will be adjusted to reflect the impact of the Company's 4 for 1 reverse split. Similar adjustments will be made to the Company's 1989 Trustees' Stock Option Plan and the options outstanding under such plan (the "TRUSTEES' PLAN"). In addition, the Company shall have the right to amend the Trustees' Plan to extend the exercise date for those options granted to any trustee who resigns prior to the expiration of such trustee's term. G. Prior to the closing of the Transaction, the Company will have the right to amend the terms of the Existing Option Plan as follows: (i) the expiration date of the Existing Option Plan and all outstanding Options will be extended for five years until December 6, 2004; (ii) the three month period during which former employees have the right to exercise outstanding Options will be extended to become a one year period and will not be triggered if a former employee continues to serve the Company in a trustee capacity; (iii) the Options will be assignable to members of an optionee's immediate family (including trusts for such family members); and (iv) a retirement provision will be added that will provide for a 5 year exercise period for following Retirement (as defined below). "Retirement" shall mean voluntary retirement from the Company at least age 55 provided the person in question has provided the Company and its predecessors with at least 15 years of continuous service. 9 11 H. Prior to the closing of the Transaction, the Board of Trustees will adopt a new employee stock option plan (the "NEW OPTION PLAN") that will provide for the grant of options equal to difference between (i) 9% of the total number of issued and outstanding Shares of the Company (on a fully diluted basis assuming the exchange of all OP Units for Shares) and (ii) the number of options granted under the Existing Option Plan and the Trustees' Plan. The New Option Plan will have terms and conditions that are substantially similar to those included in the Existing Option Plan, as amended as described above. Except as set forth in Paragraph 2.I. below, options under the New Option Plan shall be reserved for grant solely to employees of the Company. I. Subject to satisfaction of Pashcow's existing employment agreement with the Company, upon the closing of the Transaction, Pashcow shall be (i) elected Vice Chairman and (ii) pursuant to a new 5 year employment agreement, will be granted an additional 180,000 options (that will vest over a term of not more than 3 years) under the New Option Plan at a exercise price based on the average closing price of the Shares on the New York Stock Exchange for the 30 trading days following the Closing Date. At the closing of the Transaction, each of the Ramco Principals will be granted 24,000 options (that will vest over a term of not more than 3 years) at the exercise price described above. Pashcow's employment agreement will provide that if during the term of his employment agreement he is replaced as a trustee, he will receive the same benefits from the Company that he would have received had Pashcow remained a trustee throughout the term of his employment agreement. J. Prior to the closing of the Transaction, the Board of Trustees will adopt a trustees' medical health insurance plan that will provide satisfactory health benefits to the Company's trustees not otherwise covered. K. Ramco shall grant to the Company the option, exercisable at any time during the 10 year period commencing on the closing of the Transaction, to acquire, subject to the receipt of all necessary consents, Ramco's interest in any Excluded Property (other than any part of the Summit Place complex) for an amount (the "OPTION PRICE") (payable either in cash or subject to compliance with applicable securities laws, OP Units) equal to the lesser of (i) Ramco's net cash investment in such property (including any tax payable by Ramco as a result of the exercise of the option) and (ii) the fair market value of Ramco's interest in such property; provided, however, if at any time during the term of the option Ramco receives a bona fide offer to sell its interest in an Excluded Property that Ramco is willing to accept or receives a bona fide offer to sell the Excluded Property that Ramco is willing to accept, the Company shall have the right to acquire Ramco's interest in such 10 12 Excluded Property at the price for such interest or for the amount Ramco would have received had the Excluded Property been sold for the proposed price. In addition, if during such 10 year period Ramco's direct or indirect interest in the Summit Place complex shall equal 25% or more, the Company shall immediately receive an option (the "Summit Place Option") to acquire Ramco's interest in such property at a price equal to 90% of its fair market value. The exercise of the Summit Place Option shall be subject to the receipt of all consents needed to transfer Ramco's interest in the Summit Place Complex. 3. FUTURE DIVIDENDS. Following the closing of the Transaction, the Company will promptly announce its intention to pay a dividend based on a payout ratio of 85% of funds from operations ("FFO"). 4. CONDITIONS TO THE TRANSACTION. A. The definitive Asset Contribution Agreement will provide that the consummation of the Transaction will be subject to fulfillment, at or prior to the Closing Date, of each of the following conditions (among others): (i) the preparation, execution and delivery of a definitive Asset Contribution Agreement and related documents containing such provisions as are customary to transactions of this type, in form and substance reasonably satisfactory to the parties, (ii) the Board of Trustees and the shareholders of the Company shall have approved the Transaction, (iii) if applicable to the Transaction, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall have expired, (iv) all required material consents of third parties (including, without limitation, consents from the mortgagees of record holding the Ramco Property debt) shall have been obtained, (v) the Spin-Off Transaction shall have been consummated and in connection therewith the Company shall have received a no-action letter from the Securities and Exchange Commission (the "SEC"), satisfactory to the Company, generally to the effect that the issuance of the RPS Mortgage stock to the Company's existing shareholders in connection with the Spin-Off Transaction does not require registration under the Securities Act of 1933, (vi) the Company Cash shall equal $75,000,000 (reduced by any Transaction expenses advanced by the Company prior to closing), (vii) there shall not be enacted, entered, promulgated or enforced any statute, rule, regulation, executive order, decree, preliminary or permanent injunction or restraining order which prohibits the consummation of the Transaction, (vii) the absence of any material adverse change in the Company Properties or the Ramco Contribution Assets, (ix) the debt listed on Schedule 2 and classified as Floating Rate or 11 13 Prepayable Short-Term Loans and Short-Term Advantageous Rate Loans (after utilizing the Company Cash in the manner set forth in paragraph 1.E.) shall have been refinanced (the "Refinanced Loan") on the following terms: (a) the principal amount of the Refinanced Loan, after taking into account all borrowed transaction costs, shall not exceed $92,500,000; (b) the annual interest expense (all of which will be payable currently) relating to the Refinanced Loan shall not exceed $8,485,000; (c) the Refinanced Loan shall have a term of not less than 10 years; (d) the principal amount of the Refinanced Loan shall amortize on a schedule of not less than 30 years (unless otherwise agreed to by the parties); (e) the Refinanced Loan shall not be secured by more than $150,000,000 in properties; and (f) the Refinanced Loan shall have commercially reasonable terms; (x) the satisfaction of the Floor Amount Condition (as defined below); and (xi) the receipt by the Company's Board of Trustees of an opinion from Dean Witter Reynolds Inc. ("DEAN WITTER"), satisfactory to such board, relating to the fairness, from a financial point of view, of the Transaction to the existing shareholders of the Company. B. Ramco's obligation to proceed with the Transaction is subject to the condition that Ramco and its investors will receive a limited partnership interest in the Operating Partnership that is 30% or more (the "FLOOR AMOUNT CONDITION") (assuming for this purpose that Ramco's projected net operating income from (i) the Jackson Property for the 12 month period commencing October 1, 1994 is $2,824,000 and (ii) the Tel-Twelve Property for the 12 month period commencing October 1, 1994 includes a full 12 months of revenues attributable to the Tel-Twelve Lease). (For purposes of making the calculation in clause (ii) above, revenues from the Tel-Twelve Lease shall not be less than $182,000 or more than $510,000 notwithstanding the actual terms of such lease or if such lease exists.) If at any time the Company notifies Ramco that in its good faith judgment (after application of the assumption described in the following sentence) Ramco and its investors would receive a limited partnership interest in the Operating Partnership that is less than the Floor Amount Condition, Ramco, within 5 business days of the receipt of such notice, will be obligated to either (x) terminate the Asset Contribution Agreement or (y) reduce the Floor Amount Condition to the percentage specified in the Company's notice as determined in manner consistent with the formula for allocating interests in the Operating Partnership and after application of the assumption that the interest rate on the Refinanced Loan will be 150 basis points over prevailing rates for 10 year United States Treasury Bonds. 12 14 5. PUBLIC ANNOUNCEMENTS. Except as may be required by law or under the Company' listing agreement with the New York Stock Exchange, neither of the parties hereto shall make any public announcement regarding the subject matter of this Letter of Intent without the prior consent of the other; provided, however, neither the Company nor its Board of Trustees shall be prohibited from issuing or making available any press release to any wire service or investment banking firm or making any disclosure to the Company's shareholders (through letter, SEC filing or otherwise) that, in the good faith judgment of the Company's Board of Trustees, is necessary to discharge the Board of Trustees' fiduciary duties owed to the Company's shareholders. Each party shall use commercially reasonable efforts to coordinate any public announcements and to consult with one another prior thereto. 6. NO SHOPPING. Each party will cease all existing discussions with any third party with respect to, and will cease all activities relating to, any merger, consolidation, sale of a substantial portion of assets, tender offer, initial public offering or any similar transaction or business combination which would defeat the intent of this Letter of Intent (collectively, an "ACQUISITION PROPOSAL"). In addition, neither party will, nor will either party authorize or permit its directors, trustees or employees or any attorneys, accountants, investment bankers or other representatives retained by it to, directly or indirectly, solicit or encourage the making of any inquiries or the making of any proposal which it is reasonably expected may lead to any Acquisition Proposal; provided, however, that nothing contained in this paragraph shall preclude any action taken by the Company's Board of Trustees (including, without limitation, responding to requests for information from all persons (including, without limitation, persons with whom the Company had discussions prior to the date of this Letter of Intent) and participating in negotiations regarding alternative transactions (including Acquisition Proposals) involving the Company) that, in the good faith judgment of the Board of Trustees, is necessary to discharge the Board of Trustees' fiduciary duties owed to the Company's shareholders. (For purposes of determining the duties that the Board of Trustees owes to its shareholders, the Company has advised you that for state law purposes it is treating the Transaction as a sale of control of the Company). In the event the Company receives a written offer for an Acquisition Proposal, it will promptly advise Ramco of the existence of such offer. The provisions of this paragraph shall not apply to any assets that will not be included in the Transaction. 13 15 7. COMMERCIALLY REASONABLE EFFORTS. Each of the parties hereto agrees on a prompt basis to proceed with the negotiation and execution and delivery of a definitive Asset Contribution Agreement embodying the terms relating to the Transaction set forth in this Letter of Intent and containing such other provisions as are customary and mutually agreed to by the parties. 8. CERTAIN FEES AND EXPENSES. A. The definitive agreement relating to the Transaction shall provide that if the Company terminates the transaction contemplated by the Asset Contribution Agreement because either (i) the Company entered into an alternative transaction with a third party or (ii) Dean Witter was unable to render a fairness opinion in connection with the Transaction (other than as a result of the condition of the Ramco Contribution Assets), the Company will reimburse Ramco for all reasonable out-of-pocket expenses incurred by Ramco in connection with the Transaction up to a maximum of $1,250,000 (without any offset or credit for any expenses advanced by the Company in connection with the Refinanced Loan). B. If the Transaction is consummated, all fees and expenses relating to the Transaction shall be paid by the Company (other than any prepayment penalties or premiums and expenses and legal fees in excess of $250,000 relating to the prepayment of the debt listed on Schedule 2 and classified as Ramco Loan Payoffs, any cash amounts paid by Ramco to any third party in order to obtain its consent to the Transaction or to any Ramco investor, and such closing costs that are customarily paid by sellers of real property in the localities where the Ramco Properties are located) but including one-half of all title insurance costs and recording costs incurred in connection with the Transaction, and tenant improvement costs incurred at the Ramco Properties with respect to leases entered into after October 1, 1994 that are not otherwise included, in whole or in part, in RNOI (other than with respect to the Tel-Twelve Lease, and Qualifying Leases at the Jackson Property entered into after October 1, 1994 that are not otherwise included, in whole or in part, in RNOI). C. From and after execution of the Asset Contribution Agreement, the Company will, upon receipt by the Company of the undertaking described below, advance all reasonable expenses relating to the Refinanced Loan that satisfies the terms described in paragraph 4.A.(ix). The Company's obligation to advance such expenses shall be subject to receipt of an undertaking from Ramco and the Ramco Principals to repay such amounts in the event the Asset Contribution Agreement is 14 16 terminated as a result of a breach by Ramco of any of its representations, warranties or covenants set forth in the Asset Contribution Agreement. D. Notwithstanding anything to the contrary contained herein, Ramco shall be responsible for any transfer taxes relating to the contribution of the Ramco Properties to the Company. Ramco and RPS shall cooperate in minimizing any such transfer taxes which may be so payable. In doing so Ramco shall provide the Company with such assurances and indemnifications as may be reasonably requested by the Company against the imposition of any such transfer taxes. 9. COOPERATION. Each party hereto will use commercially reasonable efforts to (a) furnish to the other parties such necessary information and reasonable assistance as such other parties may reasonably request in connection with the transactions contemplated hereby, (b) cooperate in preparing, causing to be filed with the SEC and to be cleared for mailing a proxy statement relating to the Transaction and the Spin-off Transaction, (c) provide the officers, employees, attorneys, accountants, investment bankers and other representatives of the other party with reasonable access to the properties and personnel of such party and furnish upon request copies of all books, records, documents and other information of such party (including, without limitation, interim financial reports of such party) that relate to the assets or properties that will be contributed by such party to the Operating Partnership in connection with the Transaction, and (d) provide such further assistance as the other party hereto may reasonably request. 10. BINDING EFFECT; TERMINATION. Except for the provisions of Sections 5, 6, 7, 9, 10, 11, and 12, this Letter of Intent constitutes an expression of mutual intention, is not a binding obligation on the part of either party hereto and shall not otherwise create any rights in favor of either of the parties hereto. A binding agreement with respect to the Transaction will result only from the execution and delivery of a definitive Asset Contribution Agreement and such other definitive agreements as the parties determine are necessary to reflect the respective obligations and rights of the parties with respect to the Transaction. The provisions of Sections 6, 7 and 9 shall terminate on, and have no effect following, the earliest of (i) October 15, 1994, (ii) upon written notice from the Company to Ramco following a good faith determination by the Company's Board of Trustees that an Acquisition Proposal for an alternative transaction is more favorable than the Transaction to the Company's shareholders, or (iii) the execution 15 17 of a definitive agreement relating to the Transaction; provided, however, such termination shall not excuse any breach arising prior to the date of such termination. 11. EXPENSES. Promptly following the execution and delivery of this Letter of Intent, the Company and Ramco shall, at the Company's expense, commission (i) an audit by Deloitte & Touche of the Ramco Properties and, if requested by the Company, the management corporation, and (ii) a Phase I environmental study and engineering report on the Company's Properties. In the event (i) this Letter of Intent is terminated prior to the execution of a definitive Asset Contribution Agreement and (ii) in the good faith judgment of the Company projected net operating income from the Ramco Properties for the 12 month period commencing October 1, 1994 (based on Qualifying Leases in place as of such date) is less than $26,200,000, Ramco and the Ramco Principals hereby agree, jointly and severally, to reimburse the Company for all amounts advanced pursuant to clause (i) of this paragraph 11 (collectively, the "Advanced Expenses"). Ramco and the Ramco Principals shall reimburse the Company for the Advanced Expenses within 5 business days after the receipt of a notice from the Company that the events described in clauses (i) and (ii) above have occurred. Except for the bankruptcy of a partnership previously disclosed to the Company, Ramco and the Ramco Principals, hereby agree, jointly and severally, to reimburse the Company for the Advanced Expenses, within 5 business days after receipt of a notice from the Company, if the Letter of Intent is terminated or the Company does not enter into a definitive Asset Contribution Agreement primarily because one or more of the Ramco Principals was involved during the past 5 years in one of the events described in Item 401(f) of Regulation S-K promulgated under the Securities Exchange Act of 1934. 12. MISCELLANEOUS. The laws of the State of New York shall govern the interpretation, validity and performance of the terms of this Letter of Intent, regardless of the law that might be applied under applicable principles of conflicts of law. The parties acknowledge that this Letter of Intent shall not affect the parties' respective obligations under the confidentiality letters dated November 2, 1993 between the Company and Ramco and the Ramco Principals which shall remain in effect in accordance with the terms thereof. The parties hereto irrevocably and unconditionally consent to submit to the jurisdiction of the courts of the State of New York in connection with any actions, suits or proceedings arising out of or relating to this Letter of Intent, and further agree that service of any process, summons, notice or 16 18 document by U.S. Registered Mail to the respective party's address set forth above (or any other address provided in writing to the other party) shall be effective service of process for any action, suit or proceeding brought against a party hereto in any such court. The parties hereto hereby irrevocably and unconditionally waive any objection to the lack of venue of any action, suit or proceedings arising out of this Letter of Intent, in the courts of the State of New York or the United States of America located in the State of New York, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 13. COUNTERPARTS. This Letter of Intent may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 17 19 Please acknowledge your agreement to, and acceptance of, the foregoing, by executing a copy of this agreement in the appropriate space set forth below and returning the same to the undersigned, whereupon it will constitute our agreement with respect to the matters contained herein. Very truly yours, RPS REALTY TRUST By:/s/ Herbert Liechtung --------------------- Herbert Liechtung, President AGREED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN: RAMCO-GERSHENSON, INC. By:/s/ Dennis Gershenson ----------------------------------- Dennis Gershenson, Vice President- Finance /s/ Dennis Gershenson - - --------------------- Dennis Gershenson /s/ Joel Gershenson - - ------------------- Joel Gershenson /s/ Bruce Gershenson - - -------------------- Bruce Gershenson /s/ Richard Gershenson - - ---------------------- Richard Gershenson /s/ Michael A. Ward - - ------------------- Michael A. Ward 18 20 ATTACHMENT TO LETTER OF INTENT SCHEDULE 1-PART 1 LISTING OF INCLUDED SHOPPING CENTERS SHOPPING CENTER LOCATION TEL-TWELVE MALL SOUTHFIELD, MICHIGAN FRASER SHOPPING CENTER FRASER, MICHIGAN EASTRIDGE SHOPPING CENTER FLINT, MICHIGAN ROSEVILLE PLAZA ROSEVILLE, MICHIGAN NAPLES TOWNE CENTRE NAPLES, FLORIDA SOUTHFIELD PLAZA SOUTHFIELD, MICHIGAN TROY TOWNE CENTER TROY, OHIO SOUTHFIELD PLAZA EXPANSION SOUTHFIELD, MICHIGAN WEST ALLIS SHOPPING CENTRE WEST ALLIS, WISCONSIN NORTH TOWNE COMMONS TOLEDO, OHIO NEW TOWNE PLAZA CANTON, MICHIGAN FERNDALE TOWNE CENTRE FERNDALE, MICHIGAN CLINTON VALLEY STRIP STERLING HEIGHTS, MICHIGAN KENTWOOD TOWNE CENTRE GRAND RAPIDS, MICHIGAN CLINTON CONSUMER MALL STERLING HEIGHTS, MICHIGAN ORION PLAZA LAKE ORION, MICHIGAN WEST OAKS I NOVI, MICHIGAN SPRING MEADOWS SHOPPING CENTER TOLEDO, OHIO JACKSON CROSSING JACKSON, MICHIGAN EDGEWOOD SHOPPING CENTER LANSING, MICHIGAN WEST OAKS II NOVI, MICHIGAN OAKBROOK SQUARE FLINT, MICHIGAN 19 21 ATTACHMENT TO LETTER OF INTENT SCHEDULE 1 - PART 2 DEVELOPMENT LAND AND DEVELOPMENT OUTPARCELS
PARCEL SIZE (ACRES) ROSEVILLE PLAZA (12 MILE & GRATIOT) .90 NEW TOWNE PLAZA (CANTON TOWNSHIP) 2.0, 2.5 EDGEWOOD TOWNE CENTRE (LANSING) .75, .95
20 22 ATTACHMENT TO LETTER OF INTENT SCHEDULE 1 - PART 3 REIMBURSABLE COSTS RELATED TO OPTIONS ON DEVELOPMENT LAND OWNED BY RAMCO
OPTIONS & RELATED DEVELOPMENT COSTS INCURRED TO 5-12-94 (1) JACKSON WEST JACKSON, MICHIGAN 26,297 TROY - LIVERNORS & MAPLE TROY, MICHIGAN 2,483 WARREN-TEN MILE & DEQUINDRE WARREN, MICHIGAN 721 OFFICEMAX-NORTH TOWNE TOLEDO, OHIO 175,468 BENNETT PROPERTY TOLEDO, OHIO 41,574 HORNHOLLOWAY PROPERTY TOLEDO, OHIO 7,320 ROTH PROPERTY TOLEDO, OHIO 871 SARA PROPERTY TOLEDO, OHIO 10,360 WEST OAKS III NOVI, MICHIGAN SPRINGMEADOWS PHASE III TOLEDO, OHIO SHELBY TOWNSHIP-HALL ROAD SHELBY TOWNSHIP, MICHIGAN ------- 265,094 =======
(1) COSTS INCURRED BASED ON ACCOUNTING RECORDS. CERTAIN ITEMS INCLUDING LEGAL, PROFESSIONAL, ENGINEERING, ENVIRONMENTAL MAY NOT HAVE BEEN INVOICED YET. COSTS TO BE UPDATED TO DATE OF COMBINATION. ALL OPTION AND RELATED DEVELOPMENT COSTS INCURRED TO DATE OF COMBINATION WILL BE REIMBURSED TO RAMCO BY THE REIT. FUTURE PAYMENTS FOR DEVELOPMENT COSTS TO BE THE RESPONSIBILITY OF THE REIT. 21 23 ATTACHMENT TO LETTER OF INTENT SCHEDULE 2 RAMCO PROPERTIES' EXISTING LIABILITIES SEE REVISED ATTACHED SCHEDULE REFLECTS PROJECTED DEBT BALANCES AS OF JUNE 30, 1994 24 PRIVILEGED AND CONFIDENTIAL, PREPARED AT THE REQUEST OF, AND UNDER THE DIRECTION OF MONIGHAM MILLER SCHWARTZ AND COHN
RAMCO-GERSHENSON,INC. 23-JUN-94 LOANS OUTSTANDING ON REFIT PROPERTIES FILENAME:LINSHARE 2 INTEREST TYPE LENDER RATE - - ------------------------------------------------------------------------------------------------------ FLOATING RATE OR PREPAYABLE SHORT-TERM LOANS TEL-TWELVE HALL FIRST BANK OF BOSTON PRIME + 1 TEL-TWELVE HALL TERM HUNTINGTON BANK PRIME + 1 TEL-TWELVE HALL EQUIP HUNTINGTON BANK PRIME + 1 RAMCO FRASER FIRST BANK OF BOSTON PRIME + 1 RAMCO FRASER EQUIP HUNTINGTON BANK PRIME + 1 RAMCO LAPEER FIRST NBO BANK, N.A. PRIME + .5 RAMCO SOUTH NAPLES FIRST BANK OF BOSTON PRIME + 1 SOUTHFIELD PLAZA EQUIP HUNTINGTON BANK PRIME + 1 RAMCO SINGSER FIRST BANK ONE TREAS + 425 S-12 ASSOCIATES FIRST KEY BANK OF NEW YORK 9.375% WEST ALLIS SHOPPING CENTER FIRST BANK OF BOSTON PRIME + 1 FORD SHELDON FIRST HUNTINGTON BANK PRIME + 1 FORD SHELDON FIRST AETNA LIFE 9.925% FERNDALE PLAZA FIRST SUN LIFE 9.75% 104W STERLING FIRST NORTHWESTERN MUTUAL LIFE 10.125% 104W STERLING EQUIP HUNTINGTON BANK PRIME + 1 RAMCO OAKBROOK SECOND BANK OF BOSTON PRIME + 1 STERLING MALL FIRST MUTUAL BENEFIT 11.50% STERLING MALL SECOND FIRST OF AMERICA PRIME + 1 W & G REALTY FIRST AETNA LIFE 9.925% WEST OAKS I EQUIP HUNTINGTON BANK PRIME + 1 WEST OAKS II EQUIP HUNTINGTON BANK PRIME + 1 RAMCO JACKSON CONSTRUCTION NBO BANK, N.A. PRIME + .75 RAMCO JACKSON TERM HUNTINGTON BANK PRIME + 1 RAMCO LANSING CONSTRUCTION BANK OF BOSTON PRIME + 1 LEWIS ALEXIS GROUP FIRST NATIONWIDE LIFE 9.50% NORTH TOWNE OFFICEWAX - CONSTRUCTION MICHIGAN NATIONAL BANK PRIME + .75 LA II GROUP TOTAL SHORT - TERM LOANS - - -------------------------------- SHORT - TERM ADVANTAGEOUS RATE LOANS - - -------------------------------- ROSEVILLE PLAZA FIRST BARCLAY'S BANK LIBOR + 125 SOUTHFIELD PLAZA FIRST BARCLAY'S BANK LIBOR + 125
PROJECTED TO BE BALANCE RAMCO THIRD DEBT REFINANCED AT DEBT TO PARTY LEFT AT REIT TYPE 6-30-94 EQUITY SWAP DEBT IN PLACE INCEPTION - - -------------------------------------------------------------------------------------------------------- FLOATING RATE OR PREPAYABLE SHORT-TERM LOANS TEL-TWELVE MALL 31,115,000 31,115,000 31,115,000 TEL-TWELVE MALL 112,497 112,497 112,497 TEL-TWELVE MALL 16,579 16,579 16,579 0 0 RAMCO FRASER 2,276,089 2,276,089 2,276,089 RAMCO FRASER 28,234 28,234 28,234 0 0 RAMCO LAPEER 9,289,923 9,289,923 9,289,923 0 0 RAMCO SOUTH NAPLES 1,096,692 1,096,692 1,096,692 0 0 SOUTHFIELD PLAZA 22,950 22,950 22,950 0 0 RAMCO SINGSER 7,333,933 7,333,933 7,333,933 0 0 S-12 ASSOCIATES 2,086,821 2,086,821 2,086,821 0 0 WEST ALLIS SHOPPING CENTER 14,861,461 14,861,461 14,861,461 0 0 FORD SHELDON 576,716 576,716 576,716 FORD SHELDON 5,875,075 5,875,075 5,875,075 0 0 FERNDALE PLAZA 1,793,679 1,793,679 1,793,679 0 0 104W STERLING 1,684,800 1,684,800 1,684,800 104W STERLING 20,530 20,530 20,530 0 0 RAMCO OAKBROOK 1,517,300 1,517,300 1,517,300 0 0 STERLING MALL 5,899,747 5,899,747 5,899,747 STERLING MALL 1,628,437 1,628,437 1,628,437 0 0 W & G REALTY 4,381,413 4,381,413 4,381,413 0 0 WEST OAKS I 21,781 21,781 21,781 0 0 WEST OAKS II 30,728 30,728 30,728 0 0 RAMCO JACKSON 24,691,163 24,691,163 24,691,163 RAMCO JACKSON 63,742 63,742 63,742 0 0 RAMCO LANSING 4,280,720 4,280,720 4,280,720 0 0 LEWIS ALEXIS GROUP 13,000,000 13,000,000 13,000,000 0 0 NORTH TOWNE OFFICEMAX - 1,620,000 1,620,000 1,620,000 LA II GROUP ------------------------------------------------------------ TOTAL SHORT - TERM LOANS 135,326,010 0 135,326,010 0 135,326,010 - - -------------------------------- SHORT - TERM ADVANTAGEOUS RATE LOANS - - -------------------------------- ROSEVILLE PLAZA 9,903,108 9,903,108 9,903,108 0 SOUTHFIELD PLAZA 8,821,633 8,821,633 8,821,633 0
*REPRESENTS LOAN PREPAYABLE WITH PENALTY. 25 PRIVILEGED AND CONFIDENTIAL, PREPARED AT THE REQUEST OF, AND UNDER THE DIRECTION OF MONIGHAM MILLER SCHWARTZ AND COHN
RAMCO-GERSHENSON,INC. 23-JUN-94 LOANS OUTSTANDING ON REFIT PROPERTIES FILENAME:LINSHARE 2 PROJECTED BALANCE RAMCO INTEREST AT DEBT TO TYPE LENDER RATE 6-30-94 EQUITY SWAP - - ------------------------------------------------------------------------------------------------------------------------------- -------------------------- TOTAL SHORT - TERM ADVANTAGEOUS RATE LOANS 18,724,741 0 - - ------------------------------------------ LONG-TERM ADVANTAGEOUS RATE LOANS - - ------------------------------------------ RAMCO OAKBROOK FIRST CAPITOL HOLDING .75 OF SALOMON 30 YR UTILI 7,000,000 WEST OAKS I FIRST UNION MUTUAL 10.125% 4,413,627 -------------------------- TOTAL LONG-TERM ADVANTAGEOUS RATE LOANS 11,413,627 0 - - ------------------------------------------ LONG-TERM LOANS LEFT IN PLACE - - ------------------------------------------ KENTWOOD TOWNE CENTER FIRST NATIONWIDE LIFE 9.375% 11,265,548 WEST OAKS II FIRST TRAVELERS 10% 9,549,050 SPRING MEADOWS FIRST TRAVELERS 9.50% 12,000,540 SPRING MEADOWS FIRST FDB ANNUITY 8.75% 1,970,635 -------------------------- TOTAL LONG-TERM LOANS LEFT IN PLACE 34,785,773 0 - - ------------------------------------------ RAMCO LOAN PAYOFFS - - ------------------------------------------ RAMCO FRASER OTHER RAMCO VENTURES 64,271 RAMCO SOUTH NAPLES OTHER RAMCO VENTURES 1,601,461 (1,601,461) RAMCO SINGER OTHER RAMCO VENTURES 72,864 (72,864) WEST ALLIS SHOPPING CENTER OTHER RAMCO VENTURES 1,035,392 FERNDALE PLAZA LAND CONT 21,875 FERNDALE PLAZA OTHER RAMCO VENTURES 193,635 (193,635) KENTWOOD TOWNE CENTER OTHER RAMCO VENTURES 142,010 (142,010) RAMCO OAKBROOK OTHER RAMCO VENTURES 1,618,759 STERLING MALL OTHER RAMCO STERLING HEIGHTS 420,000 STERLING MALL OTHER 104W STERLING 177,200 STERLING MALL OTHER RAMCO VENTURES 681,125 (681,125) W & G REALTY OTHER RAMCO VENTURES (344,114) 344,114 SPRING MEADOWS OTHER RAMCO VENTURES 79,351 RAMCO JACKSON OTHER RAMCO VENTURES 2,458,166 (2,458,166) RAMCO JACKSON OTHER RAMCO-GERSHENSON, INC. RAMCO LANSING OTHER RAMCO VENTURES 2,697,079 (494,852) -------------------------- TOTAL RAMCO LOAN PAYOFFS 10,919,174 (5,300,099) -------------------------- TOTAL LOANS OUTSTANDING 211,169,325 (5,300,099) ========================== LESS: REIT DEBT PAYDOWN (75,000,000-2,000,000 TRANSACTION COSTS = 73,000,000) DEBT REMAINING IN PLACE 132,869,226
TO BE THIRD DEBT REFINANCED PARTY LEFT AT REIT DEBT IN PLACE INCEPTION - - --------------------------------------------------------------------------------------------- ---------------------------------------- TOTAL SHORT - TERM ADVANTAGEOUS RATE LOANS 18,724,741 18,724,741 0 - - ------------------------------------------ LONG-TERM ADVANTAGEOUS RATE LOANS - - ------------------------------------------ RAMCO OAKBROOK 7,000,000 7,000,000 0 WEST OAKS I 4,413,627 4,413,627 0 ---------------------------------------- TOTAL LONG-TERM ADVANTAGEOUS RATE LOANS 11,413,627 11,413,627 0 - - ------------------------------------------ 0 0 LONG-TERM LOANS LEFT IN PLACE 0 0 - - ------------------------------------------ 0 0 KENTWOOD TOWNE CENTER 11,265,548 11,265,548 0 WEST OAKS II 9,549,050 9,549,050 0 SPRING MEADOWS 12,000,540 12,000,540 0 SPRING MEADOWS 1,970,635 1,970,635 0 ---------------------------------------- TOTAL LONG-TERM LOANS LEFT IN PLACE 34,785,773 34,785,773 0 - - ------------------------------------------ RAMCO LOAN PAYOFFS - - ------------------------------------------ RAMCO FRASER 64,271 64,271 0 0 RAMCO SOUTH NAPLES 0 0 0 0 RAMCO SINGER 0 0 0 0 WEST ALLIS SHOPPING CENTER 1,035,392 1,035,392 0 0 FERNDALE PLAZA 21,875 21,875 FERNDALE PLAZA 0 0 0 0 KENTWOOD TOWNE CENTER 0 0 0 0 RAMCO OAKBROOK 1,618,759 1,618,759 0 0 STERLING HALL 420,000 420,000 STERLING HALL 177,200 177,200 STERLING HALL 0 0 0 0 W & S REALTY 0 0 SPRING MEADOWS 79,351 79,351 RAMCO JACKSON 0 0 RAMCO JACKSON 0 0 RAMCO LANSING 2,202,227 2,202,227 ---------------------------------------- TOTAL RAMCO LOAN PAYOFFS 5,619,075 0 5,619,075 ---------------------------------------- TOTAL LOANS OUTSTANDING 205,869,226 64,924,141 140,945,085 ======================================== LESS: REIT DEBT PAYDOWN (75,000,000-2,000,000 TRANSACTION COSTS = 73,000,000) (73,000,000) ------------------------- DEBT REMAINING IN PLACE 64,924,141 67,945,085 132,869,226 =========================
26 ATTACHMENT TO LETTER OF INTENT SCHEDULE 3 THIRD-PARTY SHOPPING CENTER MANAGEMENT CONTRACTS RAMCO OFFICE ONE DEVELOPMENT COMPANY SUMMIT NORTH LIMITED PARTNERSHIP SUMMIT PLACE AND SUMMIT CROSSING KM BLUE ASH DEVELOPMENT COMPANY LIVONIA TOWNE SQUARE KM SAGINAW DEVELOPMENT COMPANY RAMCO CLINTON DEVELOPMENT COMPANY SANDUSKY CENTER PARTNERS SOUTHFIELD PROPERTIES - GGJ ASSOCIATES SOUTHFIELD PROPERTIES - CEDAR/JOLLY MAPLE & LIVERNOIS PLAZA G & R DEVELOPMENT G & S REALTY COMPANY C G S ASSOCIATES - LIVONIA SOUTHFIELD PROPERTIES - LANSING MART GERSHENSON-WITTBOLD LOUISVILLE MELVINDALE PLAZA MICHIGAN MART ASSOCIATES GERSHENSON-WITTBOLD MT. CLEMENS NINE MILE & HARPER SOUTHFIELD PROPERTIES - PLYMOUTH/SOUTHFIELD KMART TEN MILE & DEQUINDRE SOUTHFIELD PROPERTIES - VAN BORN SOUTHFIELD PROPERTIES - YPSILANTI SOUTHFIELD PROPERTIES - DAYTON SOUTHFIELD PROPERTIES - SOUTHGATE SOUTHFIELD PROPERTIES - 13 MILE & SCHOENHERR SOUTHFIELD PROPERTIES - WESTLAND OTHER MANAGEMENT/ACCOUNTING SERVICE CONTRACTS PONMALREST ASSOCIATES, INC. BURGER KING FRANCHISE R G PARTNERSHIP BURGER KING PROPERTY LANDLORD RAMCO VIDEO - TEL TWELVE MALL VIDEO ARCADE MAIN STREET VIDEO VIDEO ARCADE SUMMIT VIDEO VIDEO ARCADE 23 27 ATTACHMENT TO LETTER OF INTENT SCHEDULE 3 ACCOUNTING SERVICES RAMCO SUMMIT NORTH DEVELOPMENT COMPANY RAMCO LEWIS ALEXIS ASSOCIATES FERNDALE REDEVELOPMENT COMPANY RAMCO L & W PARTNERS RAMCO GP FERNDALE/LIVONIA LIMITED PARTNERSHIP LIVONIA REDEVELOPMENT COMPANY RAMCO LAPEER, INC. RAMCO KENTWOOD ASSOCIATES RAMCO OAKBROOK SQUARE, INC. RAMCO STERLING HEIGHTS RAMCO JACKSON, INC. RAMCO CONSUMER MALL ASSOCIATES RAMCO TROY ASSOCIATES LIMITED PARTNERSHIP RAMCO NOVI DEVELOPMENT COMPANY RAMCO SPRING MEADOWS ASSOCIATES LIMITED PARTNERSHIP PONMALREST ASSOCIATES, INC. RAMCO ALLIS DEVELOPMENT COMPANY R G PARTNERSHIP RAMCO VIDEO - TEL TWELVE MALL MAIN STREET VIDEO SUMMIT VIDEO RAMCO SANDUSKY ASSOCIATES RAMCO SANDUSKY, INC. R G TEL TWELVE COMPANY SCHUST & BAY DEVELOPMENT COMPANY RAMCO VENTURES FIVE PARTNERS 24 28 ATTACHMENT TO LETTER OF INTENT SCHEDULE 4 OUTLOTS NOT USEFUL FOR DEVELOPMENT OR EXPANSION OF RETAIL SHOPPING CENTERS, OR OTHERWISE EXCLUDED
PARCEL SIZE ACRES STERLING HEIGHTS, MICHIGAN (1) 5.84 WATERFORD, MICHIGAN (2) 5.0,1.15,2.6,1.2 SAGINAW, MICHIGAN (3) 3.77,25.54 SANDUSKY, OHIO (4) 1.1,1.6,.96,8.63,6.92 TROY, OHIO (5) .92, 18.745 COMMERCE TOWNSHIP (COMMERCE (6) 1.55, 24.55 & UNION LAKE) SPRING MEADOWS PLACE (7) 1.019 (SPRINGFIELD TOWNSHIP, OHIO)
(1) SALE OF PROPERTY TO BE COMPLETED BEFORE REIT FORMATION (2) PART OF SUMMIT PLACE COMPLEX (3) 3.77 ACRES ADJACENT TO SHOPPING CENTER NOT INCLUDED IN REIT, 25.54 ACRES ZONED MULTIPLE BEHIND SHOPPING CENTER. (4) ADJACENT TO SHOPPING CENTER NOT INCLUDED IN REIT. (5) LAND IN PROXIMITY OF SHOPPING CENTER CANNOT BE DEVELOPED AS EXPANSION TO SHOPPING CENTER. (6) LAND CURRENTLY ZONED MULTI-FAMILY, BEING USED FOR SEPTIC FIELD ADJACENT TO SHOPPING CENTER NOT INCLUDED IN REIT. (7) PROPERTY UNDER CONTRACT TO BE SOLD BEFORE REIT FORMATION.
25 29 Schedule 5 (a) The dollar value of the Ramco Contribution Assets shall be determined in accordance with the following formula: ANOI [RNOI - (RPI + ( ---- x RGA ))] x.85 TNOI - - ------------------------------------ - $75,000,000 .09 Where: RNOI = The sum of (i) projected net operating income from the Ramco Properties (exclusive of revenues attributable to the Tel-Twelve Lease) for the 12 month period commencing October 1, 1994 based on Qualifying Leases in place as of such date and (ii) MCF. RPI = Projected interest on the Ramco Properties for the 12 month period commencing on the Closing Date based on debt financing in place immediately following the closing. CNOI = Projected net operating income from the Company Properties for the 12 month period commencing October 1, 1994 based on leases in place as of such date. TNOI = The sum of ANOI and CNOI. RGA = The 12 month projected general and administrative expenses of the Company. MCF = Projected net cash flow from the management corporation for the 12 month period commencing October 1, 1994 assuming that the Transaction closed on that date and all management contracts relating to the Ramco Properties were canceled. ANOI = RNOI increased by (i) projected net operating income from the Tel-Twelve Lease for the 12 month period commencing October 1, 1994 and (ii) the difference between $2,824,000 and RNOI from the Jackson Property as of October 1, 1994. 26 30 OPV = $17.36 Unless the Company otherwise agrees, a lease will be considered a "Qualifying Lease" if it satisfies all of the following conditions: it is duly executed and delivered by all necessary parties, it initially had a term of at least 3 years, it requires the payment of a market rent, the tenant under the lease is a person who normally occupies space in a retail shopping center, the tenant is open for business and paying rent or, if it is a new lease, the tenant is scheduled to be open for business and paying rent within 3 months after the lease is signed (except if the conditions for occupancy require that more than 3 months elapse before the tenant is scheduled to open for business and begin paying rent, this condition will be satisfied if the tenant under such lease provides the Company with an estoppel letter indicating that the lease is in full force and effect and the tenant is scheduled to be open for business and paying rent within 5 months after the lease is signed), the tenant's business, design of improvements and type of establishment is consistent with the leasing restrictions included in existing reciprocal easement agreements, development agreements and/or anchor leases, it satisfies all REIT eligibility requirements, and it requires the tenant to pay for an appropriate share of operating expenses at the property. 27 31 SCHEDULE 5.1 ILLUSTRATION OF SCHEDULE 5 FORMULA
Base Case - - --------- Dollar Value of RPS Assets $123,657,000 67.5% Gershenson NOI $ 27,607,000 Add: Third-Party Management 231,000 Less: Interest on Existing Debt at 8.79% (4,046,000) Less: Interest on $92.5 Million of Refinanced Debt at 8.45% (7,800,000) Less: G&A Allocated to Gershenson (1,753,800) ------------- Gershenson FFO 14,238,200 Payout Ratio 85% ------------- 12,102,470 Dividend Yield 9.0% ------------- 134,471,890 Less: RPS Cash Contribution (75,000,000) ------------- Dollar Value of Gershenson Assets 59,471,890 32.5% ----------------------- Combined Value 183,128,890 100.0% RPS Shares Outstanding 5,698,480 67.5% Gershenson Shares/OP Units 2,740,640 32.5% ------------ Total Shares/OP Units to be Outstanding 8,439,120 Per Share Value $17.36
28 32 Schedule 6 Ramco will be entitled to receive additional OP Units, up to an aggregate maximum equal to the difference between (A) the number of OP Units Ramco would have received at the closing assuming rent projected 12 month net operating income from the Jackson Property on October 1, 1994 equalled at least $2,824,000 and (B) the number of OP Units issued to Ramco at the closing of the Transaction as a result of the actual projected 12 month net operating income from the Jackson Property as of October 1, 1994, determined in accordance with the following formula: OP Units = (NOI / CR) - (AA + I) --------------------- OPV Where: NOI = The annualized stabilized net operating income of the Jackson Property from all sources other than non-qualifying leases on the date which is one year from the Closing Date minus the sum of (i) the projected 12 month net operating income from the Jackson Property from all sources as of October 1, 1994, (ii) any increased rent attributable to automatic fixed minimum rent escalations attributable to leases in place as of October 1, 1994, (iii) percentage rents in excess of the percentage rents taken into consideration in computing projected 12 month net operating income from the Jackson Property as of October 1, 1994 with respect to leases in place as of October 1, 1994; provided, however, with respect to any leases entered into on or after October 1, 1994, annualized stabilized net operating income shall not include the amount by which tenant improvements and tenant allowances in such lease (calculated by amortizing such amounts over the initial term of the lease) exceed the product of (a) the average thereof for such property and type of tenant and (b) the number of square feet covered by such lease. CR = the applicable capitalization rate of .106. AA = the sum of all amounts advanced by the Operating Partnership from and after the closing of the Transaction through and including the date which is one year from the Closing Date for capital expenditures relating to new tenants, tenant improvements, tenant allowances and leasing costs at the Jackson Property. 29 33 I = interest on AA (calculated from the date such amounts were advanced) at an annual rate equal to the greater of (i) 10% per annum or (ii) a floating rate per annum equal to the prime rate of Bank of Boston plus 2%. OPV = $17.36 A lease will be considered "nonqualifying" unless it satisfies all of the following conditions: it is executed and delivered within one year from the Closing Date, it has a term of at least 3 years, it requires the payment of a market rent, the tenant under the lease is a person who normally occupies space in a retail shopping center and is open for business and paying rent, the tenant's business, design of improvements and type of establishment is consistent with the leasing restrictions included in existing reciprocal easement agreements, development agreements and/or anchor leases, it satisfies all REIT eligibility requirements, and it requires the tenant to pay for an appropriate share of operating expenses at the property. 30 34 Schedule 6.1 Ramco will be entitled to receive additional OP Units, up to an aggregate maximum equal to the number of OP Units Ramco would have received at the closing assuming rent from the Tel-Twelve Property on October 1, 1994 had been increased by $510,000, determined in accordance with the following formula: OP Units = (NOI / CR) - (AA + I) --------------------- OPV Where: NOI = The annualized stabilized net operating income attributable to the Tel-Twelve Lease (after taking into account all incremental increases in expenses at the Tel-Twelve Property attributable to such lease) on the date the tenant under such lease begins paying rent. CR = the applicable capitalization rate of .106. AA = the sum of all amounts advanced or incurred by the Operating Partnership from and after the closing of the Transaction through and including the date on which the tenant under the Tel-Twelve Lease begins paying rent for capital expenditures, tenant improvements, tenant allowances and leasing costs relating to the Tel-Twelve Lease. I = interest on AA (calculated from the date such amounts were advanced) at an annual rate equal to the greater of (i) 10% per annum or (ii) a floating rate per annum equal to the prime rate of Bank of Boston plus 2%. OPV = $17.36 Ramco will not be entitled to receive additional OP Units pursuant to this Schedule 6.1 unless the tenant under the Tel-Twelve Lease is open for business and begins paying rent within one year from the Closing Date. 31 35 ATTACHMENT TO LETTER OF INTENT SCHEDULE 7 LISTING OF COMPANY OWNED SHOPPING CENTERS TO BE CONTRIBUTED Sunshine Plaza Shopping Center Crofton Shopping Center Trinity Corners Shopping Center Commack Property Lantana Shopping Center 9 North Wabash Chester Plaza Shops 32 36 ATTACHMENT TO LETTER OF INTENT SCHEDULE 8 RAMCO EXCLUDED PROPERTIES AND BUSINESSES RIVER'S EDGE OFFICE BUILDING SOUTHFIELD, MICHIGAN SUMMIT NORTH WATERFORD, MICHIGAN SUMMIT PLACE AND SUMMIT CROSSING WATERFORD, MICHIGAN BLUE ASH COMMONS CINCINNATI, OHIO LIVONIA TOWNE SQUARE LIVONIA, MICHIGAN RAY TOWNE PLAZA SAGINAW, MICHIGAN PARK PLACE SHOPPING CENTER SANDUSKY, OHIO
FOLLOWING IS A LIST OF BUSINESSES IN WHICH THE RAMCO PRINCIPALS ARE INVOLVED WHICH ARE NOT INCLUDED AS PART OF THE TRANSACTION AND AR NOT A PART OF EXCLUDED PROPERTIES. THIS FOLLOWING LIST IS FOR INFORMATIONAL PURPOSES ONLY. PONMALREST ASSOCIATES, INC. BURGER KING FRANCHISE K G PARTNERSHIP BURGER KING PROPERTY LANDLORD
VIDEO ARCADE BUSINESSES AS OF MAY 12, 1994: RAMCO VIDEO - TEL TWELVE MALL VIDEO ARCADE MAIN STREET VIDEO VIDEO ARCADE SUMMIT VIDEO VIDEO ARCADE
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