0000898822-01-500635.txt : 20011009
0000898822-01-500635.hdr.sgml : 20011009
ACCESSION NUMBER: 0000898822-01-500635
CONFORMED SUBMISSION TYPE: SC 13D/A
PUBLIC DOCUMENT COUNT: 2
FILED AS OF DATE: 20010924
GROUP MEMBERS: GOTHAM HOLDINGS II, L.L.C.
GROUP MEMBERS: GOTHAM INT'L. ADVISORS, L.L.C.
GROUP MEMBERS: GOTHAM PARTNERS III, L.P.
SUBJECT COMPANY:
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: SC 13D/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-19676
FILM NUMBER: 1743594
BUSINESS ADDRESS:
STREET 1: 551 FIFTH AVE
STREET 2: STE 1416
CITY: NEW YORK
STATE: NY
ZIP: 10176
BUSINESS PHONE: 2129051104
MAIL ADDRESS:
STREET 1: 551 FIFTH AVE
STREET 2: SUITE 1416
CITY: NEW YORK
STATE: NY
ZIP: 10176
FORMER COMPANY:
FORMER CONFORMED NAME: FIRST UNION REALTY
DATE OF NAME CHANGE: 19691012
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: GOTHAM PARTNERS LP /NY/
CENTRAL INDEX KEY: 0000899983
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 363593298
STATE OF INCORPORATION: NY
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: SC 13D/A
BUSINESS ADDRESS:
STREET 1: 110 EAST 42ND ST 18TH FLOOR
CITY: NEW YORK
STATE: NY
ZIP: 10017
BUSINESS PHONE: 2122860300
MAIL ADDRESS:
STREET 1: 110 EAST 42 ND ST 18TH FLOOR
CITY: NEW YORK
STATE: NY
ZIP: 10017
SC 13D/A
1
sept24-13d.txt
AMENDMENT NO. 41 TO SCHEDULE 13D
1
==============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------------
SCHEDULE 13D/A
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 41)
---------------------------------------------
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
(NAME OF ISSUER)
SHARES OF BENEFICIAL INTEREST, $1.00 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
337400105
(CUSIP NUMBER)
---------------------------------------------
DAVID S. KLAFTER, ESQ.
GOTHAM PARTNERS MANAGEMENT CO., LLC
110 EAST 42ND STREET
NEW YORK, NEW YORK 10017
(212) 286-0300
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
---------------------------------------------
SEPTEMBER 24, 2001
(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
Check the following box if a fee is being paid with the statement. [ ] (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Schedules filed in paper format shall include a signed original and
five copes of the schedule, including all exhibits. SEE Rule 13d-7 for other
parties to whom copies are to be sent..
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, SEE
the NOTES).
2
-------------------------- --------------------------
CUSIP NO. 337400105 SCHEDULE 13D (PAGE 2 OF 10)
-------------------------- --------------------------
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON/
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Gotham Partners, L.P.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)|X|
(b)[ ]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(D) OR 2(E) [ ]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
--------------------------------------------------------------------------------
------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 2,873,158
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
------------------------------------------------------------------
------------------------------------------------------------------
8 SHARED VOTING POWER
0
------------------------------------------------------------------
------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
2,873,158
------------------------------------------------------------------
------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
------------------------------------------------------------------
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,873,158
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.24%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
--------------------------------------------------------------------------------
* See Instructions
3
-------------------------- --------------------------
CUSIP NO. 337400105 SCHEDULE 13D (PAGE 3 OF 10)
-------------------------- --------------------------
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON/
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Gotham International Advisors, L.L.C.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)|X|
(b)[ ]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(D) OR 2(E) [ ]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
--------------------------------------------------------------------------------
------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 2,431,664
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
------------------------------------------------------------------
------------------------------------------------------------------
8 SHARED VOTING POWER
0
------------------------------------------------------------------
------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
2,431,664
------------------------------------------------------------------
------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
------------------------------------------------------------------
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,431,664
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.97%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO;IA
--------------------------------------------------------------------------------
* See Instructions
4
-------------------------- --------------------------
CUSIP NO. 337400105 SCHEDULE 13D (PAGE 4 OF 10)
-------------------------- --------------------------
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON/
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Gotham Partners III, L.P.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|X|
(b)[ ]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(D) OR 2(E) [ ]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
--------------------------------------------------------------------------------
------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 58,448
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
------------------------------------------------------------------
------------------------------------------------------------------
8 SHARED VOTING POWER
0
------------------------------------------------------------------
------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
58,448
------------------------------------------------------------------
------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
------------------------------------------------------------------
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
58,448
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.17%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
--------------------------------------------------------------------------------
* See Instructions
5
-------------------------- --------------------------
CUSIP NO. 337400105 SCHEDULE 13D (PAGE 5 OF 10)
-------------------------- --------------------------
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON/
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Gotham Holdings II, L.L.C.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)|X|
(b)[ ]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(D) OR 2(E) [ ]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
--------------------------------------------------------------------------------
------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 477,963
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
------------------------------------------------------------------
------------------------------------------------------------------
8 SHARED VOTING POWER
0
------------------------------------------------------------------
------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
477,963
------------------------------------------------------------------
------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
------------------------------------------------------------------
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
477,963
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.37%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
--------------------------------------------------------------------------------
* See Instructions
6
This Amendment No. 41 (this "Amendment") amends and supplements the
Statement on Schedule 13D, as amended (the "Schedule 13D"), relating to the
shares of beneficial interest, par value $1.00 per share (the "Shares"), of
First Union Real Estate Equity and Mortgage Investments, an Ohio business trust,
(the "Issuer") previously filed by Gotham Partners, L.P. ("Gotham") and Gotham
Partners III, L.P., New York limited partnerships, and Gotham Holdings II,
L.L.C. and Gotham International Advisors, L.L.C., Delaware limited liability
companies (together, the "Reporting Persons"). This Amendment is being filed to
update the Schedule 13D in light of certain recent events. Capitalized terms
used and not defined in this Amendment have the meanings set forth in the
Schedule 13D.
Except as specifically provided herein, this Amendment does not
modify any of the information previously reported on the Schedule 13D.
ITEM 4. PURPOSE OF TRANSACTION
Item 4 is hereby amended to add the following:
On September 21, 2001, certain of the Reporting Persons entered into
a letter of intent with the Issuer (the "LOI") (a copy of which is attached as
an exhibit hereto and incorporated herein by reference, and the description
herein of which is qualified in its entirety by reference thereto) setting forth
certain agreements and understandings between such Reporting Persons and the
Issuer with respect to, among other things, a business combination transaction
(the "Proposed Transaction").
In connection with the LOI, the Reporting Persons who are party
thereto expect to negotiate and enter into definitive binding agreements with
respect to the Proposed Transaction, including the matters set forth in the LOI
and certain other customary terms and conditions for a transaction of the type
contemplated by the LOI. The Reporting Persons have filed this Amendment to
account for the agreements and understandings reflected in the LOI. If the
Proposed Transaction is consummated, among other matters, there will be a change
of control of the Issuer, with the Reporting Persons and/or their affiliates
controlling the Issuer thereafter.
In light of the preliminary nature of the Proposed Transaction, the
terms of the LOI itself, and, among other things, the variety of factors and
considerations relevant to the Proposed Transaction and the Reporting Persons'
investment in the Issuer, as previously included in this Item 4, there can be no
assurance that a definitive agreement with respect to the Proposed Transaction
will be agreed or entered into, nor as to the terms of any such definitive
agreement, nor that even if such agreement is entered into that the Proposed
Transaction will in fact be consummated.
In addition, Item 6 hereof is hereby incorporated by reference into
this Item 4.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
Item 6 is hereby amended to add the following:
7
As described above, the LOI (a copy of which is attached as an
exhibit hereto and incorporated herein by reference, and the description herein
of which is qualified in its entirety by reference thereto) relates to the
Proposed Transaction, which contemplates various matters including the
following:
The Issuer will merge with and into a newly formed company, which
will be named Gotham Golf Corp. following the merger. Concurrently, in exchange
for newly issued common stock of Gotham Golf Corp., Gotham and certain of its
affiliates will contribute to Gotham Golf Corp. their equity interests in Gotham
Golf Partners, L.P., a limited partnership that owns and operates golf courses
throughout the mid-Atlantic region, and related assets. In connection with the
merger, in exchange for their Shares, the Issuer's common shareholders will
receive cash in the amount of the Issuer's per Share net asset value, which will
be $2.20 per share of common stock, to be funded out of the Issuer's existing
cash on hand. Further, each of the Issuer's common shareholders will receive
rights to subscribe for stock in Gotham Golf Corp., in proportion to such
shareholder's ownership of Shares immediately preceding the merger, for up to an
aggregate of $40 million in Gotham Golf Corp. equity.
In addition to the foregoing, the Issuer will distribute all of its
assets (other than cash and cash equivalents in an amount equal to the sum of
(x) $114.25 million and (y) an amount equal to accumulated but unpaid dividends
and interest on debt and preferred stock of First Union (whether or not then due
or payable, but instead calculated on a pro rata basis with respect to the time
since the last payment of dividends or interest)) to a newly formed company,
First Union Asset Company ("FAC"), and units ("Units") representing all of the
equity interests in FAC, which will be distributed to common shareholders or
certain of the Reporting Persons as described below. After the consummation of
the Proposed Transaction, FAC will commence an orderly sale and/or distribution
of its assets. FAC will assume all existing and contingent liabilities of the
Issuer other than (1) the $12.5 million of 8.875% Senior Notes due September 15,
2003, (2) the approximately $24.6 of 8.4% Series A Cumulative Convertible
Redeemable Preferred Shares of preferred stock (including any accrued but unpaid
interest and dividends on such debt and preferred stock) and (3) certain other
specific liabilities, which will remain obligations of the Issuer or its
successor, Gotham Golf Corp. Further, FAC will provide the Issuer with a blanket
indemnity against any and all claims for any or all liabilities related to the
distributed assets or the Proposed Transaction. The Issuer will agree to provide
or cause to be provided up to approximately $6 million of secured working
capital financing to support FAC's requirements. FAC will be managed by a
management team to be determined by the parties.
In connection with the Proposed Transaction, the Issuer's common
shareholders will have the option (the "FAC Election") of electing to receive
(i) a pro rata distribution of FAC Units, or (ii) cash of $0.50 per Unit (the
"FAC Cash Amount") in lieu of their pro rata distribution of FAC Units, subject
to possible adjustment. If and to the extent the Issuer's common shareholders
fail to make an election in connection with the FAC Election, such shareholders
shall be deemed to have elected to receive FAC Units. In exchange for Gotham
paying cash to the Issuer in an amount equal to the FAC Cash Amount, the Issuer
will sell and Gotham will purchase a number of Units equal to the number of
Units in lieu of which the Issuer's common shareholders elected to receive cash
(as described above).
8
The Proposed Transaction will be effected pursuant to a combination
agreement in form and substance customary for comparable transactions, which
would be entered into only following (i) approval and recommendation by a the
unaffiliated members of the Issuer's Board of Trustees in connection with the
consideration of the Proposed Transaction, and (ii) receipt by the Issuer of an
opinion from its independent financial advisor as to the fairness from a
financial point of view of the Proposed Transaction to the Issuer's common
shareholders unaffiliated with Gotham. The obligation of the Issuer and Gotham
to consummate the Proposed Transaction will be conditioned upon the satisfaction
of certain customary closing conditions, including, among other things, approval
by no less than a majority of the Issuer's common shareholders.
In addition, Item 4 hereof is hereby incorporated by reference into
this Item 6.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
99.1 Letter of Intent by and among Gotham Partners, L.P. and First Union
Real Estate Equity and Mortgage Investments.
9
After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
September 24, 2001
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.,
its general partner
By: Karenina Corporation,
a general partner of Section H
Partners, L.P.
BY: /S/ WILLIAM A. ACKMAN
-----------------------------------------------
President
William A. Ackman
GOTHAM PARTNERS III, L.P.
By: Section H Partners, L.P.,
its general partner
By: Karenina Corporation,
a general partner of Section H
Partners, L.P.
BY: /S/ WILLIAM A. ACKMAN
-----------------------------------------------
President
William A. Ackman
GOTHAM INTERNATIONAL
ADVISORS, L.L.C.
BY: /S/ WILLIAM A. ACKMAN
-----------------------------------------------
Senior Managing Member
William A. Ackman
10
GOTHAM HOLDINGS II, L.L.C.
By: Gotham Holdings Management LLC,
the Manager
BY: /S/ WILLIAM A. ACKMAN
-----------------------------------------------
Senior Managing Member
William A. Ackman
EX-99
3
sept24ex991.txt
EXHIBIT 99.1 - LETTER OF INTENT
11
EXHIBIT 99.1
GOTHAM PARTNERS, L.P.
110 EAST 42ND STREET
NEW YORK, NEW YORK 10017
September 21, 2001
Special Committee of the Board of Directors of
First Union Real Estate Equity and Mortgage Investments
Re: LETTER OF INTENT
Gentlemen:
Reference is made to that certain letter, dated July 3, 2001, which
set forth the general outline of the current transaction we are proposing (the
"PROPOSED TRANSACTION") between First Union Real Estate Equity and Mortgage
Investments ("FIRST UNION") and Gotham Partners, L.P. and certain of its
affiliates ("GOTHAM"). In connection with the foregoing, this letter of intent
(the "AGREEMENT") sets forth the principles and commitments of the parties in
furtherance of the negotiations and definitive agreements to be entered into in
respect of the Proposed Transaction.
You should understand that the Proposed Transaction has been
submitted to you on a preliminary basis and, consequently, this Agreement does
not represent a binding commitment by any party to undertake the Proposed
Transaction. Furthermore, subject to the provisions hereof, each party reserves
the right to discontinue discussions with respect to the Proposed Transaction at
any time, and for any or no reason. Notwithstanding the foregoing, this
Agreement represents a binding commitment on the part of First Union with
respect to the exclusivity and expense reimbursement provisions contained
herein.
In consideration of the premises, covenants and agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are acknowledged and agreed, the parties hereto agree as follows:
1. TRANSACTION OUTLINE. The Proposed Transaction will require First Union
-------------------
common shareholder approval, which will be solicited pursuant to a single
proxy statement-prospectus. The Proposed Transaction will be part of an
integrated plan which will be consummated at a single closing occurring
after the effective time of the merger described below. The Proposed
Transaction will consist of the following steps:
(a) First Union will contribute all of its existing assets other
than the Retained Assets (as defined herein) (the
"DISTRIBUTED ASSETS") to a newly formed publicly traded
------------------
company, First Union Asset Company ("FAC"), in exchange for
---
12
First Union Real Estate Equity and Mortgage Investments
September 21, 2001
Page 2
units ("Units") representing all of the equity interests in
-----
FAC. The "RETAINED ASSETS" will consist of cash and cash
---------------
equivalents in an amount equal to the sum of (x) $114.25
million and (y) an amount equal to accumulated but unpaid
dividends and interest on debt and preferred stock of
First Union (whether or not then due or payable, but
instead calculated on a pro rata basis with respect to the
time since the last payment of dividends or interest).
(b) The legal form of FAC has not been finally determined but
will, in any event, have limited liability to the Unit
holders. FAC's organizational documents will provide for an
orderly sale and/or distribution of the Distributed Assets,
including the Park Plaza Mall, Circle Tower, HQ Global
preferred stock and warrants, Ventek, the Peach Tree Mall
legal claim, and non-cash working capital. FAC will assume
all existing and contingent liabilities of First Union other
than (1) the $12.5 million of 8.875% Senior Notes due
September 15, 2003, (2) the $24.7 million of 8.4%
convertible preferred stock (including any accrued but
unpaid interest and dividends on this debt and preferred
stock) and (3) certain specific liabilities to be
scheduled, which will remain obligations of First Union
(or its successor, as described below).
(c) FAC will provide First Union with a blanket indemnity against
any and all claims of whatever kind or nature including but
not limited to environmental claims relating to the use,
ownership, lease, operation or maintenance of the
Distributed Assets and for any or all liabilities,
obligations, claims, causes of action or any other
liabilities arising or related to the Distributed Assets
or the Proposed Transaction.
(d) First Union will agree to provide or cause to be provided up
to $6 million of secured working capital financing to support
FAC's requirements. The working capital facility will have
the following terms, and such other terms as are customary
for similar facilities: 2% per annum facility fee on
undrawn available amounts; 12.75% interest on drawn
amounts; 2 year term; secured by all the assets of FAC;
all net proceeds of asset sales and other extraordinary
receipts will be used to repay any amounts drawn under the
facility (and such prepayments, as well as any other
prepayments, will reduce the available amount under the
facility for the remaining term thereof; in the event of
what would otherwise be a required repayment event at a
time when there is no amount drawn under the facility, or
when the amount that would otherwise be required to be
repaid is in excess of the amount then drawn, the amount
of such otherwise required or excess repayment will
permanently reduce the availability under the facility).
FAC will be managed by a management team to be determined
by the parties.
13
First Union Real Estate Equity and Mortgage Investments
September 21, 2001
Page 3
(e) First Union will merge with and into a newly formed company,
Newco, a Delaware corporation. Concurrently, Gotham will
contribute its equity interests in Gotham Golf Partners, L.P.
and related assets ("GGP") to Newco in exchange for newly
issued common stock of Newco. Immediately following the
consummation of the merger, Newco shall be renamed Gotham Golf
Corp.
(f) In connection with the merger described in subsection 1(e)
above, First Union common shareholders (other than Gotham
with respect to the shares to be concurrently issued to it in
respect of the contribution of GGP) will receive cash in the
amount of the per share net asset value, subject to
certain adjustments (but not to be adjusted below $2.20
per share of common stock), of First Union at closing
(which will be funded out of First Union's existing cash
on hand) in exchange for their shares of First Union
common stock.
(g) In addition to the foregoing, concurrently with the
consummation of the merger, each former shareholder of First
Union common stock will receive rights to subscribe for stock
in Gotham Golf Corp. in proportion to such shareholder's
ownership of common stock immediately preceding the merger,
for up to $40 million in Gotham Golf Corp. equity with GGP
having an equity valuation of $50 million prior to the
subscription offering. If and to the extent that any such
holders of common stock decline to exercise such rights,
the remaining holders of such rights shall be permitted to
subscribe for the remaining Gotham Golf Corp. stock
available in the subscription offering. The parties will
endeavor to encourage a when-issued market in the rights
prior to the close of the subscription offering.
(h) In connection with the matters described in subsection 1(a)
above, First Union common shareholders will have the option
(the "FAC ELECTION") of electing to receive (i) a pro rata
------------
distribution of FAC Units, or (ii) cash of $0.50 per Unit
(subject to possible adjustment as described in the next
sentence, the "FAC CASH AMOUNT") in lieu of their pro rata
---------------
distribution of FAC Units. The aggregate FAC Cash Amount
will be subject to reduction on a dollar-for-dollar basis
by the amount by which transaction costs (other than fees
and expenses of any investment banker or legal counsel to
GGP retained by GGP in connection with the $40 million
equity offering, and other than SEC filing fees,
reasonable printing costs and any fees and expenses
(including, without limitation, fees for accountants,
lawyers, financial advisors and consultants) incurred by
Gotham for its own account in connection with the Proposed
Transaction) payable by First Union or FAC exceed $2
million, with such reduction to be applied pro rata on a
per Unit basis.
14
First Union Real Estate Equity and Mortgage Investments
September 21, 2001
Page 4
(i) If and to the extent common shareholders fail to make an
election in connection with the FAC Election, such
shareholders shall be deemed to have elected to receive FAC
Units.
(j) In exchange for Gotham paying cash to First Union in an amount
equal to the FAC Cash Amount, First Union will sell and Gotham
will purchase a number of Units equal to the number of Units
in lieu of which First Union common shareholders elected to
receive cash (as described above).
(k) Prior to the consummation of the Proposed Transaction shares
of First Union convertible preferred stock will continue to
have the right to convert into shares of First Union common
stock, in accordance with their existing terms. In
connection with the Proposed Transaction, each current
holder of such shares will receive shares of convertible
preferred stock of Gotham Golf Corp., which will have
identical terms to the shares of First Union convertible
preferred stock.
(l) The Proposed Transaction will be effected pursuant to a
combination agreement in form and substance customary for
transactions of this sort, which would be entered into only
following (i) approval and recommendation by a the
unaffiliated members of the First Union Board of Directors in
connection with the consideration of the Proposed
Transaction, and (ii) receipt by First Union of an opinion
from its independent financial advisor as to the fairness
from a financial point of view of the Proposed Transaction
to the common shareholders of First Union unaffiliated
with Gotham. The Board of First Union will not be
required to make a recommendation with respect to the
shareholders' election to receive cash in lieu of FAC
Units. The Board of First Union will not be required to
make a recommendation with respect to the exercise of the
subscription rights for Gotham Golf Corp.
2. CONDITIONS. The obligation of First Union and Gotham to consummate the
----------
Proposed Transaction will be conditioned upon, among other items to be
mutually agreed, the satisfaction of the following:
(a) Completion of the definitive documentation of the transactions
described herein on terms and conditions satisfactory to both
parties.
(b) Receipt of all necessary consents to the transactions contemplated
hereby (including the consent of any third parties).
(c) Receipt of all necessary and advisable governmental approvals,
satisfactory to both parties, of the transactions described
herein.
15
First Union Real Estate Equity and Mortgage Investments
September 21, 2001
Page 5
(d) Approval by no less than a majority of First Union's existing
common shareholders and approval by no less than 70% of the Board
of First Union of the Proposed Transaction. At the time that a
definitive agreement is entered into in respect of the Proposed
Transaction, shareholders represented on the Board will enter into
agreements to vote in favor of the Proposed Transaction.
(e) From the date of execution of the definitive documentation until
the consummation of the transactions described herein and subject
to the operation of First Union's business in accordance with
ordinary course past practices (excluding changes caused (x) by
the announcement of the transaction and (y) economic events
generally related to the U.S. economy or securities markets),
and further subject to the satisfaction or waiver on or prior
to the closing, on the part of Gotham, the absence of any
material adverse change in First Union's businesses and assets
including, without limitation, (A) the commencement of
voluntary or involuntary bankruptcy proceedings, the
acceleration of or any material default under any existing
material loan agreement (if not waived by the relevant
creditors or debt holders (but excluding any waiver that is for
a period of time not extending beyond the end of the
immediately following fiscal quarter)), a general assignment
for the benefit of creditors, or the appointment or motion for
the appointment of a trustee, receiver, or liquidator for all
or a substantial part of the assets or properties with respect
to HQ Global or any other material portion of the Distributed
Assets (or any determination or public announcement to take any
such action or any public announcement that any such action is
under consideration); or (B) receipt of a draw notice with
respect to the Ventek performance guarantees. The parties
agree that the following shall not constitute a "material
adverse change": (i) the commencement of construction of a mall
or similar shopping facility in a location that competes with
the Park Plaza Mall and (ii) the insolvency of HQ Global or
Ventek, unless the conditions in (A) above are met. Subject to
their mutual agreement, the parties will also include in the
definitive documentation any further exceptions to the notion
of a "material adverse change."
3. EXCLUSIVITY. During the Exclusivity Period (as defined herein), Gotham
-----------
shall have the exclusive right to conduct due diligence, evaluate
Confidential Information (as such term is defined in that certain letter
agreement, dated August 9, 2001, by and between the parties hereto,
hereafter the "CONFIDENTIALITY AGREEMENT") and to conduct
-------------------------
discussions and negotiations with First Union relating to the Proposed
Transaction. The period from the acceptance of this Agreement through the
earlier of (i) November 15, 2001 or (ii) the date Gotham receives written
notice from First Union that it has received a Superior Proposal (as
defined herein) and that First Union believes in good faith based upon the
advice of counsel that its fiduciary duties require it to terminate
discussions relating to the Pro-
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First Union Real Estate Equity and Mortgage Investments
September 21, 2001
Page 6
posed Transaction as a result of and to pursue such Superior Proposal is
hereinafter referred to as the "EXCLUSIVITY PERIOD." During the
------------------
Exclusivity Period, neither First Union nor its Representatives (as such
term is defined in the Confidentiality Agreement) shall, directly or
indirectly, (i) solicit, initiate or encourage any inquiry or proposal,
except from Gotham, that constitutes, or may be reasonably expected to
lead to, a proposal or offer to acquire any interest in, dispose of or
otherwise result in a change of control of First Union or any of its
assets (any of the foregoing inquiries or proposals being referred to in
this Agreement as an "ACQUISITION PROPOSAL"); (ii) engage in
--------------------
negotiations or discussions concerning, or provide any information to any
person or entity relating to, an Acquisition Proposal; or (iii) agree to,
approve or recommend any Acquisition Proposal. A "SUPERIOR PROPOSAL" is
-----------------
a BONA FIDE proposal made by a third party to acquire, for consideration
consisting of cash or publicly-traded securities, more than 90% of the
common shares of First Union or all or substantially all of the assets of
First Union, on terms that the Board of Directors of First Union
determines in good faith (based on the advice of a financial advisor of
nationally recognized reputation) to be more favorable to its stockholders
than the Proposed Transaction and for which financing, to the extent
required, is then committed or which, in the good faith judgment of the
Board of Directors of First Union, is reasonably capable of being
obtained.
4. EXPENSES. Except as provided in the following two sentences, each
--------
party shall bear its own expenses with respect to the Proposed
Transaction, including, without limitation, fees for accountants, lawyers,
financial advisors and consultants. Notwithstanding the foregoing, First
Union shall reimburse Gotham and its affiliates (including GGP) for their
reasonable and documented out-of-pocket expenses incurred in connection
with the Proposed Transaction in the event that (A) during the
Exclusivity Period, First Union terminates discussions with Gotham
relating to the Proposed Transaction if such termination is in connection
with an alternative Acquisition Proposal or Superior Proposal, or (B)
within 9 months from and after the end of the Exclusivity Period, either
(x) a transaction that would constitute an alternative Acquisition
Proposal or Superior Proposal is otherwise consummated or recommended by
First Union or its Board of Directors, or any definitive agreement with
respect to such a transaction is entered into, or (y) First Union enters
into discussions or negotiations with respect to any such agreement or
transaction, which subsequently lead to any of the events or
circumstances set forth in the foregoing clause (x). Furthermore,
notwithstanding the first sentence of this Section 4, in the event that
the Proposed Transaction is consummated, the transaction costs related
thereto (including, without limitation, fees and expenses, but excluding
fees and expenses of any investment banker or legal counsel to GGP
retained by GGP in connection with the $40 million equity offering, and
the SEC filing fees related to such offering, all of which will be borne
by First Union and its successor Gotham Golf Corp.) will be borne by FAC,
and accordingly FAC will promptly reimburse the parties' and their
affiliates' reasonable expenses incurred in connection with the Proposed
Transaction, including, without limitation, fees for accountants, lawyers,
financial advisors and consultants.
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First Union Real Estate Equity and Mortgage Investments
September 21, 2001
Page 7
5. ENFORCEMENT. First Union and Gotham expressly acknowledge that any
-----------
breach of any term of this Agreement could severely impact the other
party's business, assets and /or operations. The parties agree that
monetary damages are an insufficient remedy for any actual or
anticipatory breach of this Agreement, and that injunctive relief is an
appropriate remedy to prevent any breach of any term hereof. Such
remedy shall not be deemed the exclusive remedy for any breach of this
Agreement but shall be in addition to all other rights and remedies
available at law or in equity.
6. GOVERNING LAW. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of New York without regard to its
choice of law provisions.
7. ENTIRE AGREEMENT. This Agreement and any agreements and the understandings
----------------
related hereto (whether in writing or otherwise) embody the entire
agreement and understanding of the parties hereto; there are no
restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein;
and all prior agreements and understandings between the parties with
respect to the subject matter hereof and thereof are superseded.
8. COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, all of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
Facsimile signatures on this Agreement shall be deemed to be original
signatures for all purposes.
9. INTERPRETATION. The section headings contained in this Agreement are
--------------
for convenience of reference only, are not part of the agreement of the
parties and shall not affect in any way the meaning or interpretation
of this Agreement.
10. NO PARTNERSHIP OR SIMILAR ENDEAVOR. Nothing herein shall be construed (i)
----------------------------------
as creating any partnership, joint venture, or similar relationship
between Gotham, First Union or their respective affiliates or (ii) as
creating any obligation on either Gotham and First Union to perform any
work or to enter into any agreement or business arrangement.
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First Union Real Estate Equity and Mortgage Investments
September 21, 2001
Page 8
If the foregoing is acceptable, please so signify by executing and
returning to the undersigned a copy of this Agreement.
Very truly yours,
BY AND ON BEHALF OF
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.,
its general partner
By: Karenina Corporation,
a general partner of Section H
Partners, L.P.
BY: /S/ WILLIAM A. ACKMAN
-----------------------------------
Name: William A. Ackman
Title: President
BY AND ON BEHALF OF
FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS
By:/S/ DANIEL J. ALTOBELLO
-------------------------------------------
Name: Daniel J. Altobello
Title: Trustee
cc. Thomas H. McCormick, Esq., Shaw Pittman LLP