Exhibit
10.1


 


SECURITIES PURCHASE AGREEMENT


 


THIS SECURITIES PURCHASE AGREEMENT, dated as of  February 25, 2005 (this “Agreement”),
is by and among First Union Real Estate Equity and Mortgage Investments, an unincorporated
association in the form of a business trust organized in Ohio (the “Company”),
Perrin Holden & Davenport Capital Corp., as initial purchaser (the “Initial
Purchaser”) and each investor executing a signature page hereto (each an “Investor”
and collectively, the “Investors”).


 


RECITALS:


 


A.                                   The Company has authorized a new series
of preferred shares designated the “Series B-1 Cumulative Convertible Redeemable
Preference Shares of Beneficial Interest” (the “Series B-1 Stock”),
which will be convertible into shares of Common Stock in accordance with the
terms of the Certificate of Designations governing the Series B-1 Stock, in the
form attached hereto as Exhibit A (the “Certificate of Designations”).


 


B.                                     The Initial Purchaser desires to purchase
from the Company, and the Company desires to sell to the Investors, upon the
terms and subject to the conditions of this Agreement, the Series B-1 Shares.


 


C.                                     The Investors have agreed to purchase
from the Initial Purchaser, and the Initial Purchaser has agreed to sell to the
Investors, subject to the terms and conditions of this Agreement, the Series
B-1 Shares.


 


D.                                    The Company, the Initial Purchaser and
the Investors desire to set forth certain agreements herein.


 


AGREEMENT:


 


NOW, THEREFORE, in consideration of the foregoing and
of the respective covenants and undertakings hereunder and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, intending to be legally bound, the parties hereto do hereby agree
as follows:


 


ARTICLE I

DEFINITIONS


 


Section 1.01.                             Definitions.  As used in this Agreement, the following
terms have the meanings set forth below.


 


“Accredited Investor” shall mean any Person
that is an “accredited investor” within the definition contained in Rule 501(a)
under the Securities Act.


 


“Affiliate” shall mean (a) with respect to an
individual, any member of such individual’s family residing in the same
household; (b) with respect to an entity: (i) any executive officer,


 





















 


director, partner or Person that owns ten percent
(10%) or more of the outstanding beneficial 
interest of or in such entity, or (ii) any brother, sister,
brother-in-law, sister-in-law, lineal descendant or ancestor of any executive
officer, director, partner or Person that owns ten percent (10%) or more of the
outstanding beneficial  interest of or in
such entity; and (c) with respect to a Person, any Person which directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with such Person or entity; provided, however, that for
purposes of the definition of “Affiliate,” no Investor shall be deemed an “Affiliate”
of the Company.


 


“Agreement” shall have the meaning set forth in
the preamble.


 


“Audited Financial Statements” shall have the
meaning set forth in Section 3.07.


 


“Board of Trustees” shall mean the Board of Trustees
of the Company.


 


“Business Day” shall mean any day other than
(i) a Saturday, (ii) a Sunday or (iii) any other day on which banks in the City
of New York are authorized or required to close.


 


“By-Laws” shall mean, when used with respect to
a specified Person, the by-laws of a Person, as the same may be amended from
time to time.


 


“Capital Stock” shall mean, with respect to any
Person, any and all shares, shares of beneficial interest, interests,
participations, rights in or other equivalents (however designated and whether
voting or non-voting) of such Person’s capital stock or any form of membership,
ownership or participation  interests, as
applicable, including partnership interests, whether now outstanding or
hereafter issued and any and all securities, debt instruments, rights, warrants
or options exercisable or exchangeable for or convertible into such capital
stock.


 


“Certificate of Designations” shall have the
meaning set forth in the recitals.


 


“Certificate of Incorporation” shall mean, when
used with respect to a specified Person, the Declaration of Trust, Articles or
Certificate of Incorporation or other applicable organizational document of
such Person, as currently in effect.


 


“Closing” shall have the meaning set forth in
Section 2.02(a).


 


“Closing Date” shall have the meaning set forth
in Section 2.02(a).


 


“Code” shall mean the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder.


 


“Commission Filings” shall have the meaning set
forth in Section 3.08.


 


“Common Stock” shall mean the common shares of
beneficial interest, $1 par value per share, of the Company.


 


“Company” shall have the meaning set forth in
the preamble.


 


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“Company Group Member” shall mean each of the
Company and its Affiliates and their respective directors, officers, employees,
agents and attorneys and their respective successors and assigns.


 


“Company Subsidiaries” and “Company
Subsidiary” shall have the meaning set forth in Section 3.03.


 


“Consents” shall mean all governmental and
third party consents, approvals, filings, authorizations, qualifications and
waivers necessary to be received or made by a Person.


 


“Contemplated Transactions” shall mean the
transactions contemplated by each of this Agreement, and the other Transaction
Documents.


 


“Contract” shall mean any legally binding
contract, agreement, mortgage, deed of trust, bond, loan, indenture, lease,
license, note, option, warrant, right, instrument, commitment or other similar
document, arrangement or agreement, whether written or oral.


 


“Default” shall have the meaning set forth in
Section 2.02(d).


 


“Environment” shall mean soil, surface waters,
ground waters, land, stream, sediments, surface or subsurface strata and
ambient air.


 


“Environmental Laws” shall mean all Laws
relating to the pollution of or protection of the Environment, from
contamination by, or relating to injury to, or the protection of, real or
personal property or human health or the Environment, including, without
limitation, all valid and lawful requirements and agreements with courts and
other Governmental Bodies pertaining to reporting, licensing, permitting,
investigation, remediation and removal of, emissions, discharges, releases or
threatened releases of Hazardous Materials, chemical substances, pesticides,
petroleum or petroleum products, pollutants, contaminants or hazardous or toxic
substances, materials or wastes, into the Environment, or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, pollutants, contaminants or hazardous or toxic
substances, materials or wastes.


 


“Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the SEC
promulgated thereunder.


 


“GAAP” shall mean generally accepted accounting
principles applied on a consistent basis as in effect in the United States of
America.


 


“Governmental Body” shall mean any government
or governmental or quasi-governmental authority including, without limitation,
any federal, state, territorial, county, municipal or other governmental or
quasi-governmental agency, board, branch, bureau, commission, court, arbitral
body (public or private), department or other instrumentality or political unit
or subdivision, whether located in the United States or abroad, the National
Association of Securities Dealers, Inc., the New York Stock Exchange, the
Nasdaq National Market, the Nasdaq SmallCap Market or the American Stock
Exchange.


 


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“Hazardous Materials” shall mean any substance
whether solid, liquid or gaseous in nature:  (i) the creation, processing, use, transfer,
release or presence of which requires or may hereafter require notification,
investigation, or remediation under any Environmental Law; (ii) which is or
becomes defined as “toxic”, a “hazardous waste”, “hazardous material” or “hazardous
substance” or “pollutant” or “contaminant” under any present or future
Environmental Laws; (ii) the presence of which adversely affects or is
injurious to human health or safety or the Environment;  (iv) which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous and is or becomes regulated by any Governmental Body; (v) which
contains gasoline, diesel fuel or other petroleum hydrocarbons or volatile
organic compounds; (vi) which contains polychlorinated byphenyls (PCBs) or
asbestos or urea formaldehyde foam insulation; or (vii) which contains or emits
radioactive particles, waves or materials, including radon gas.


 


“Indemnitee” shall have the meaning set forth
in Section 9.01.


 


“Indemnitor” shall have the meaning set forth
in Section 9.01.


 


“Initial Purchase Price” shall have the meaning
set forth in Section 2.01.


 


“Initial Purchaser” shall have the meaning set
forth in the preamble.


 


“Initial Purchaser Group Members” shall mean
the Initial Purchaser and its Affiliates and their respective directors,
officers, employees, agents and attorneys and their respective successors and
assigns.


 


“Investors” shall have the meaning set forth in
the preamble.


 


“Investor Related Party Member” shall mean the
Investors and their Affiliates and each of their respective members, directors,
partners, officers, employees, agents and attorneys and their respective
successors and permitted assigns.


 


“Investors’ Rights Agreement” shall have the
meaning set forth in Section 7.01(g).


 


“IRS” shall mean the Internal Revenue Service.


 


“Law” shall mean any treaty, statute,
ordinance, code, rule, regulation, Order or other legal requirement enacted,
adopted, promulgated, applied or followed by any Governmental Body.


 


“Legal Proceeding” shall mean any judicial,
administrative or arbitral actions, suits, proceedings (public or private) or
governmental proceedings.


 


“Legend” shall mean the Legend set forth in
Section 4.02(e).


 


“Liability” shall mean any debt, liability or
obligation, whether known or unknown, asserted or unasserted, accrued,
absolute, contingent or otherwise, whether due or to become due.


 


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“Lien” shall mean any mortgage, pledge, lien
(statutory or otherwise), security interest, hypothecation, conditional sale agreement,
encumbrance or similar restriction or agreement.


 


“Loss” shall have the meaning set forth in
Section 9.01.


 


“Material Adverse Effect” shall mean any event,
condition or contingency that has had, or is reasonably likely to have, a
material adverse effect on the business, assets, liabilities (including
contingent liabilities), results of operations, financial condition or, to the
knowledge of the Company, prospects of the Company and the Company
Subsidiaries, taken as a whole or the ability of the Company
to perform its obligations under the Transaction Documents or the validity or
enforceability thereof.


 


“Notice” shall have the meaning set forth in
Section 9.02(a).


 


“NYSE” shall mean the New York Stock Exchange.


 


“Order” shall mean any order, injunction,
judgment, decree, ruling, writ, assessment or arbitration award.


 


“Permits” shall mean any approvals,
authorizations, licenses, permits or certificates by or of any Governmental
Body.


 


“Permitted Liens” shall mean (a) easements,
restrictions, covenants, rights of way or other minor irregularities of title
currently of record against any of the Properties, (b) real and personal
property leases, (c) Liens for Taxes not yet due and payable, or for Taxes
being contested in good faith, provided that in each such case, adequate
reserves are maintained in accordance with GAAP on the Balance Sheet, and (d)
any Lien created by statute of carriers, warehousemen, vendors, mechanics,
laborers or materialmen incurred in the ordinary course of business for sums not
yet due and payable.


 


“Person” shall mean any individual,
corporation, partnership, firm, limited liability company, joint venture,
trust, association, unincorporated organization, group, joint-stock company,
Governmental Body or other entity.


 


“Properties” shall have the meaning set forth
in Section 3.12(a).


 


“Purchase Price” shall mean $91,000,000 in the
aggregate, payable as set forth in Section 2.02.


 


“Registration Rights Agreement” shall have the
meaning set forth in Section 7.01(f).


 


“SEC” shall mean the U.S. Securities and
Exchange Commission.


 


“Securities Act” shall mean the Securities Act
of 1933, as amended, and the rules and regulations of the SEC promulgated
thereunder.


 


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“Series A Stock” shall mean the Series A
Cumulative Convertible Redeemable Preferred Shares of Beneficial Interest, $25
par value per share, of the Company.


 


“Series B-1 Designees” shall mean the Trustees
elected by the Investors to the Board of Trustees pursuant to the Certificate
of Designations.


 


“Series B-1 Shares” shall have the meaning set
forth in Section 2.01.


 


“Series B-1 Stock” shall have the meaning set
forth in the recitals.


 


“Specified Purchase Price” shall have the
meaning set forth in Section 2.01.


 


“Subsidiary” shall mean, as to any Person, any
other Person more than 50% of the shares of the voting stock, voting interests,
membership interests or partnership interests of which are owned or controlled,
or the ability to select or elect more than 50% of the directors or similar managers
is held, directly or indirectly, by such first Person or one or more of its
Subsidiaries or by such first Person and one or more of its Subsidiaries;
provided, however, that First Union Management, Inc. shall not be deemed to be
a Subsidiary of the Company.


 


“Tax Return” shall have the meaning set forth
in Section 3.11(a).


 


“Taxes” shall mean all U.S. federal, state,
local and foreign income, gross income, corporation, advance corporation, gross
receipts, estimated, import, customs, duties, transfer, excise, property,
sales, use, value-added, license, payroll, pay as you earn, withholding, social
security and franchise or other governmental taxes, imposed by any Governmental
Body and any interest, penalties or additions to tax with respect thereto.


 


“Transaction Documents” shall mean this
Agreement, the schedules and exhibits hereto, the Certificate of Designations, the
Series B-1 Shares, the Registration Rights Agreement, the Investors’ Rights
Agreement, and any certificate or other document delivered by or on behalf of
the Company or the Investors pursuant to this Agreement or in connection with
the transactions contemplated by this Agreement.


 


“Unaudited Financial Statements” shall have the
meaning specified in Section 3.07.


 


Section 1.02.                             Rules
of Construction.  Unless the context
otherwise requires:


 


(a)                                  an
accounting term defined by GAAP that is not otherwise defined herein has the
meaning assigned to it in accordance with GAAP;


 


(b)                                 “or”
is not exclusive;


 


(c)                                  words
in the singular include the plural, and words in the plural include the
singular;


 


(d)                                 the
words “include” and “including” shall be deemed to mean “include, without
limitation,” and “including, without limitation”;


 


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(e)                                  “herein,”
“hereof,” “hereto,” “hereunder” and other words of similar import refer to this
Agreement as a whole and not to any particular article, section, paragraph or
clause where such terms may appear;


 


(f)                                    references
to sections mean references to such section in this Agreement, unless stated
otherwise; and


 


(g)                                 the
use of any gender shall be applicable to all genders.


 


ARTICLE II

ISSUANCE, SALE AND PURCHASE OF THE SERIES B-1 STOCK


 


Section 2.01.                             Sale
and Purchase of the Series B-1 Stock. 
Upon the terms and subject to the conditions of this Agreement, the
Company will sell to the Initial Purchaser, and the Initial Purchaser will
purchase from the Company, an aggregate of 3,640,000 shares of the Series B-1
Stock (the “Series B-1 Shares”) for an aggregate purchase price of $90,750,000
(the “Initial Purchase Price”). 
The Company will then cause the Initial Purchaser to immediately sell
the Shares to the Investors, and the Investors will severally purchase from the
Initial Purchaser, an aggregate of 3,640,000 shares of the Series B-1 Shares
for an aggregate purchase price of $91,000,000] (the “Purchase Price”).  The number of Series B-1 Shares to be
purchased by each Investor at the Closing and the portion of the aggregate
purchase price to be paid by each Investor at the Closing in the exchange
therefor, shall be as specified in Schedule 2.01 (with respect to each
such Investor, such Investor’s “Specified Purchase Price”).


 


Section 2.02.                             Closing.


 


(a)                                  Subject
to the satisfaction or waiver of the conditions set forth in this Agreement,
the closing of the transactions contemplated by Section 2.01 (the “Closing”)
shall take place at 10:00 AM on February 28, 2005, or at such other time as may
be mutually agreed upon by the Investors and the Company (the “Closing Date”).  The Closing shall occur on the Closing Date
at the offices of Katten Muchin Zavis Rosenman, 575 Madison Avenue, New York,
New York.


 


(b)                                 At
the Closing: (i) the Company will deliver to the Initial Purchaser certificates
for the Series B-1 Shares to be sold in accordance with the provisions of
Section 2.01 registered in the name of the Initial Purchaser; (ii) the Initial
Purchaser, in full payment for the Series B-1 Shares, will deliver to the
Company immediately available funds, by wire transfer to such account as the
Company shall specify, the Initial Purchase Price; and (iii) each party shall
take or cause to happen such other actions, and shall execute and deliver such
other instruments or documents, as shall be required under Article VII.


 


(c)                                  At
the Closing: (i) the Initial Purchaser will deliver to the Investors certificates
for the Series B-1 Shares to be sold in accordance with the provisions of
Section 2.01 in such denominations as such Investor shall request registered in
the respective names of the Investors and proportions set forth in Schedule
2.01; (ii) each Investor, in full payment for the Series B-1 Shares, will
deliver to the Initial Purchaser immediately available funds, by wire


 


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transfer
to such account as the Initial Purchaser shall specify, before the Closing such
Investor’s Specified Purchase Price; and (iii) each party shall take or cause
to happen such other actions, and shall execute and deliver such other
instruments or documents, as shall be required under Article VII.


 


(d)                                 If
the Company or the Initial Purchaser (i) fails to tender certificates at
the Closing or fails to satisfy any condition that is not waived under
Article VII of this Agreement (either such event, a “Default”), and (ii) does
not cure such Default (or, in the case of a default by the Initial
Purchaser, if the Company fails to locate another registered broker dealer
who shall agree in writing to be bound by the terms of this Agreement
who cures such Default) within ten (10) business days of the Closing Date,
then the Investors will be released from their obligations under this Agreement
without waiving their rights hereunder.


 


Section 2.03.                             Use
of Proceeds.  The Company shall use
the proceeds from the sale of the Series B-1 Stock for general corporate
purposes.


 


ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


The Company represents and warrants to the Initial
Purchaser and to each of the Investors as follows:


 


Section
3.01.                             Organization
and Good Standing.  The Company is an
unincorporated association in the form of a business trust organized, validly
existing and in good standing under the Laws of the State of Ohio, and has full
trust power and authority to own, lease and operate its properties, and carry
on its business as presently conducted. 
The Company is duly qualified, registered or licensed as a foreign business
entity to do business and is in good standing in each jurisdiction in which the
ownership or leasing of its properties or the character of its present
operations makes such qualification, registration or licensing necessary,
except where the failure to so qualify or be in good standing could not individually
or in the aggregate reasonably have a Material Adverse Effect.  The Company has heretofore delivered or made
available to the Initial Purchaser and to the Investors complete and correct
copies of the Declaration of Trust and all amendments thereto of the Company,
as in effect as of the date of this Agreement.


 


Section 3.02.                             Authority;
Binding Effect.  The Company has full
trust power and authority to execute, deliver and perform this Agreement and
the other Transaction Documents and to consummate the Contemplated
Transactions.  The execution and delivery
of this Agreement and the other Transaction Documents and the consummation by
the Company of the transactions contemplated hereby and by the other
Transaction Documents have been duly and validly approved by all necessary
action on the part of the Company.  This
Agreement has been duly executed and delivered by the Company


 


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and
constitutes the legal, valid and binding obligation of the Company, enforceable
in accordance with its terms, except as such enforceability may be subject to
the effects of any applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar Laws affecting creditors’ rights
generally and subject to the effects of general equitable principles.  The other Transaction Documents, when executed
and delivered by the Company, will be duly executed and delivered by the
Company and constitute legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms, except as such
enforceability may be subject to the effects of any applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar Laws
affecting creditors’ rights generally and subject to the effects of general
equitable principles.


 


Section 3.03.                             Organization
and Good Standing of Company Subsidiaries. 
Schedule 3.03 lists all Subsidiaries of the Company and their
respective jurisdictions of incorporation (collectively, the “Company
Subsidiaries” and each, a “Company Subsidiary”).  Except as set forth in Schedule 3.03,
the Company owns, directly or indirectly, all the shares of outstanding Capital
Stock of each Company Subsidiary.  There
are no outstanding securities or rights convertible into or exchangeable for
shares of any Capital Stock of any Company Subsidiary and there are no
Contracts by which any Company Subsidiary is bound to issue additional shares
of Capital Stock.  All of the shares of
Capital Stock of each of the Company Subsidiaries are duly and validly
authorized, fully paid and non-assessable and, except for the Liens set forth
in Schedule 3.03, are owned by the Company free and clear of any Lien with
respect thereto.  Each Company Subsidiary
is duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, and has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as it is now being conducted, and is duly licensed or qualified to do business
in each other jurisdiction in which it owns or leases properties, or conducts
any business, so as to require such qualification, except where the failure to
be so licensed or qualified in any such jurisdiction could not individually or
in the aggregate reasonably have a Material Adverse Effect.  Except for the limitations relating to the
Liens set forth in Schedule 3.03, no Company Subsidiary is subject to
any restriction on its ability to make distributions to its owners.


 


Section 3.04.                             Capitalization.


 


(a)                                  Schedule
3.04(a) sets forth (i) the authorized capitalization of the Company, the
number of shares of each class issued and outstanding and the number of shares
reserved for issuance in connection with the Company’s stock option plans or
otherwise, and (ii) all options, warrants, rights to subscribe to, calls,
contracts, undertakings, arrangements and commitments to issue which may result
in the issuance of stock of the Company. 
All of the issued and outstanding shares of the Company’s stock have
been and all shares reserved for issuance will on issuance be, duly and validly
authorized and issued and are fully paid and non-assessable and are not subject
to any preemptive rights.  Except as set
forth on Schedule 3.04(a), pursuant to this Agreement, and as provided in the
Certificates of Designations of the Series A Stock and Series B-1 Stock, (i) no
equity securities of the Company are or may be required to be issued by reason
of any options, warrants, rights to subscribe to, calls or commitments of any
character whatsoever, (ii) there are outstanding no securities or rights
convertible into or exchangeable for shares of any stock of the Company, and
(iii) there are no contracts, commitments, understandings or arrangements by
which the Company is bound to issue additional shares of its stock or
securities or rights convertible into or exchangeable for shares of any stock
of the Company, or options, warrants or rights to purchase or acquire any
additional shares of its stock.  Neither
the Company nor any Company Subsidiary is subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any of its Capital


 


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Stock.  Except as contemplated by the Registration
Rights Agreement or as set forth on Schedule 3.04(a), there are no Contracts
between the Company and any Person granting such Person the right to require
the Company to file a registration statement under the Securities Act with
respect to any securities of the Company owned or to be owned by such Person or
to require the Company to include such securities in any other registration
statement filed by the Company under the Securities Act.


 


(b)                                 The
Series B-1 Shares will have the voting powers, designations, preferences and
rights, and the qualifications, limitations and restrictions thereof, set forth
in the Certificate of Designations.  The
Company has reserved, or will on or before Closing reserve, for issuance the
shares of Common Stock issuable upon conversion of the Series B-1 Shares.  When paid for by, and issued to, the Initial
Purchaser, the Series B-1 Shares will be duly authorized, validly issued, fully
paid and non-assessable and will be free and clear of any Liens.  When paid for by, and sold to, each of the Investors
the Series B-1 Shares will be duly authorized, validly issued, fully paid and
non-assessable and will be free and clear of any Liens.  The issuance and sale of the Series B-1
Shares is not subject to any preemptive rights. 
Except for the restrictions set forth, or referred to, in the Legend,
the Series B-1 Shares when issued and sold will not be subject to any
restriction on use, voting or transfer; and the shares of Common Stock issuable
to each such Investor upon conversion of the Series B-1 Shares, when issued in
accordance with the Company’s Declaration of Trust, will be duly authorized,
validly issued, fully paid and non-assessable, and will be free and clear of
any Liens and except for the restrictions set forth, or referred to, in the
Legend, will not be subject to any restriction on use, voting or transfer or to
any preemptive rights.


 


Section 3.05.                             No
Violations; Consents.  Except as set
forth on Schedule 3.05, neither the execution, delivery or performance
by the Company of this Agreement or the other Transaction Documents nor the
consummation of the Contemplated Transactions, will (a) conflict with, or
result in the breach of, any provision of the organizational documents or
by-laws of the Company or any Company Subsidiary, (b) conflict with, violate,
result in the breach or termination of, or constitute a default or give rise to
any right of termination or acceleration or right to increase the obligations
or otherwise modify the terms thereof under any Contract, Permit or Order to
which the Company or any Company Subsidiary is a party or by which the Company or
any Company Subsidiary or any of the properties or assets of the Company or any
Company Subsidiary is bound, (c) constitute a violation of any Law applicable
to the Company or any Company Subsidiary; or (d) result in the creation of any
Lien upon the properties or assets of the Company or any Company Subsidiary
other than with respect to the foregoing clauses (b), (c) and (d), such
requirements, conflicts, violations, breaches or rights which could not
individually or in the aggregate reasonably have a Material Adverse Effect.  Except as set forth on Schedule 3.05,
other than those which have been obtained or made or which could not individually
or in the aggregate reasonably have a Material Adverse Effect, no Consent is
required on the part of the Company or the Company Subsidiaries in connection
with the execution and delivery of this Agreement or the Transaction Documents,
or the compliance by the Company with any of the provisions hereof or thereof.


 


Section 3.06.                             Listing.  The Company is not in violation of the
listing requirements of the NYSE in any material respect.  The Company has not received any notice from
the NYSE that


 


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the
Common Stock is to be delisted by the NYSE. 
Conditioned upon the approval of a listing application by the NYSE, the
transactions contemplated under this Agreement constitute a bona fide private
financing under paragraph 312.03 of the NYSE Listed Company Manual and
stockholder approval is not required under the rules and regulations of the
NYSE in order to authorize the issuance of the Series B-1 Shares pursuant to
this Agreement or the listing of the Common Stock into which the Series B-1
Stock is convertible.


 


Section 3.07.                             Financial
Statements.  The Company has
previously delivered to the Initial Purchaser and to the Investors copies of
(i) the combined balance sheet of the Company, First Union Management, Inc. and
the Company Subsidiaries as of December 31, 2003 and the related combined
statements of operations, shareholder’ equity and cash flow for the year ended
December 31, 2003 as reported in the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2003, filed by the Company with the SEC
under the Exchange Act, and accompanied by the audit report of KPMG LLP,
independent public accountants, (collectively, the “Audited Financial
Statements”), and (ii) the unaudited consolidated balance sheet of the
Company and the Company Subsidiaries as of September 30, 2004 (the “Balance
Sheet”) and the related unaudited consolidated income statements and cash
flows for the thirteen weeks and thirty-nine weeks ended September 30, 2004, as
reported in the Company’s Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2004, filed with the SEC under the Exchange Act (the
“Unaudited Financial Statements”). The Audited Financial Statements
accurately reflect the books and records of the Company and present fairly, in
all material respects, the combined financial position of the Company, First
Union Management, Inc. and the Company Subsidiaries and the combined results of
their operations and their cash flows for the periods and dates covered
thereby, in conformity with GAAP.  The
Unaudited Financial Statements accurately reflect the books and records of the
Company and present fairly, in all material respects, the combined financial
position of the Company and the Company Subsidiaries and the combined results
of their operations and their cash flows for the period and date covered
thereby, in conformity with GAAP, except for changes resulting from normal year-end
adjustments (none of which will be material in amount).


 


Section 3.08.                             Commission
Filings.  The Company has filed all
reports, registration statements, proxy statements and other materials, together
with any amendments required to be made with respect thereto, that were
required to be filed with the SEC under the Securities Act or the Exchange Act
from and after December 31, 2003 (all such reports and statements are
collectively referred to herein as the “Commission Filings”).  As of their respective dates, the Commission
Filings, including the financial statements contained therein, complied in all
material respects with all of the statutes and published rules and regulations
enforced or promulgated by the regulatory authority with which the Commission
Filings were filed, and, except to the extent the information in any Commission
Filing has been revised or superseded by a later filed Commission Filing, did
not and do not as of the date hereof contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.


 


11





















 


Section 3.09.                             Absence
of Certain Developments.


 


(a)                                  Except
as set forth on Schedule 3.09(a), or disclosed in the Commission Filings,
since December 31, 2003:


 


(i)                                     no
event, condition or contingency has occurred which could reasonably have a
Material Adverse Effect;


 


(ii)                                  neither
the Company nor any Company Subsidiary has transferred, issued, sold or
disposed of any shares of their Capital Stock or granted any options, warrants,
calls or other rights to purchase or otherwise acquire shares of their Capital
Stock other than under the Company’s employee stock option plans and the
dissolution of former Company Subsidiaries;


 


(iii)                               there
has not been any damage, destruction or loss, whether or not covered by
insurance, with respect to the property of the Company or any Company
Subsidiary having a material adverse impact on the business of the Company or
the Company Subsidiaries, taken as a whole;


 


(iv)                              neither
the Company nor any Company Subsidiary has made any change in the accounting
principles, methods or practices followed by it (including, without limitation,
its method of accounting for stock options) other than a change which was
required by reason of a concurrent change in Law or GAAP;


 


(v)                                 neither
the Company nor any Company Subsidiary has amended its organizational documents
or By-Laws except as contemplated by this Agreement;


 


Section 3.10.                             Litigation.  There are no Legal Proceedings pending or, to
the knowledge of the Company, threatened, that question the validity of this
Agreement or the Transaction Documents or any action taken or to be taken by
the Company or any Company Subsidiary in connection with the consummation of
the Contemplated Transactions.  Except as
otherwise disclosed herein or in the Commission Filings or on Schedule 3.10,
there are no Legal Proceedings pending or, to the knowledge of the Company,
threatened, against or affecting the Company or any Company Subsidiary or any
of their respective properties or assets, at Law or in equity, involving claims
of more than $1,000,000 or that otherwise individually or in the aggregate could
reasonably have a Material Adverse Effect if adversely determined.  There is no outstanding or, to the knowledge
of the Company, threatened, Order of any Governmental Body against the Company
or any Company Subsidiary or any of their respective properties or assets,
which Orders could individually or in the aggregate reasonably have a Material
Adverse Effect.


 


Section 3.11.                             Tax
Matters.


 


(a)                                  For
the periods since January 1, 2001, the Company and each Company Subsidiary has
timely filed or caused to be timely filed any and all returns, declarations,
reports (including any consolidated, combined or unitary returns), claims for
refund, information returns, or other documents or statements relating to
Taxes, including any schedule or attachment thereto and any amendment or
supplement thereof (each, a “Tax Return”) required to be filed by it
under applicable federal, state, local or foreign Law, except to the extent
that any failure to do so could


 


12





















 


not
individually or in the aggregate reasonably have a Material Adverse Effect. The
reserves for Taxes contained in the financial statements of the Company or
carried on the books and records of the Company and the Company Subsidiaries,
as applicable, are in the aggregate adequate to cover all Tax liabilities and
deferred Taxes of the Company and the Company Subsidiaries as of the date of
this Agreement, except to the extent that any inadequacy could not individually
or in the aggregate reasonably have a Material Adverse Effect.


 


(b)                                 For
the periods since January 1, 2001, all Taxes shown as being due and owing by
the Company or any Company Subsidiary on any Tax Return have been paid.


 


(c)                                  The
Company and each Company Subsidiary has timely withheld and paid all Taxes
required to have been withheld and paid in connection with any amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or third
party, except to the extent that any failure to do so could not individually or
in the aggregate reasonably have a Material Adverse Effect.


 


(d)                                 None
of the Company nor any Company Subsidiary has waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency, in each case except as to Taxes that are disclosed on
Schedule 3.11(d) or in the financial statements of the Company and the
Company Subsidiaries, as applicable, or that, if assessed could not individually
or in the aggregate reasonably have a Material Adverse Effect.


 


(e)                                  The
Company has elected under Section 856(c) of the Internal Revenue Code of 1986,
as amended (the “Code”), to be taxed as a real estate investment trust (“REIT”),
and such election has not been revoked or terminated and remains in full force
and effect.  The Company is qualified
under the Code as a REIT.


 


Section 3.12.                             Real
Property.


 


(a)                                  Each
of the Company and the Company Subsidiaries owns interests in the properties
listed on Schedule 3.12(a) (the “Properties”), free and clear of
all Liens other than Permitted Liens and the Liens set forth on Schedule
3.12(a) or disclosed in the Commission Filings.


 


(b)                                 Each
of the Company and the Company Subsidiaries owns either a fee simple interest
or a land estate or interest as a ground lessee in the Properties as set forth
in Schedule 3.12(b).


 


Section 3.13.                             Material
Contracts.  Except as listed on Schedule
3.13, there is no default and the Company has received no written notice of
default under any Contract or a Contract listed in the Commission Filings by
the Company, the Company Subsidiaries or, to the knowledge of the Company, by
any other party thereto, in each case which could individually or in the
aggregate reasonably have a Material Adverse Effect, and no event has occurred
that, individually or in the aggregate, with the lapse of time or the giving of
notice or both would constitute a default thereunder by the Company, the
Company Subsidiaries or, to the knowledge


 


13





















 


of
the Company, by any other party thereto, that could individually or in the
aggregate reasonably have a Material Adverse Effect.


 


Section 3.14.                             Company
Employees.  The Company has no
employees and is administered by FUR Advisors LLC pursuant to an Advisory
Agreement, dated December 31, 2003.  The
Company does not presently maintain or contribute to, or have any liability with
respect to, any employee benefit plan.


 


Section 3.15.                             Compliance
with Laws.  (a) The Company and the
Company Subsidiaries are in compliance in all material respects with all
material Laws and material Orders promulgated by any Governmental Body
applicable to the Company and the Company Subsidiaries or to the conduct of the
business or operations of the Company and the Company Subsidiaries or the use
of their properties (including any leased properties) and assets.  Since January 1, 2004, neither the Company
nor any Company Subsidiary has received any written notice of violation or
alleged material violation of any such Law or Order by any Governmental Body in
any material respect that has not been resolved. Since January 1, 2004, neither
the Company nor any Company Subsidiary has received written notice that it is
the subject of an investigation by any Governmental Body which could individually
or in the aggregate reasonably have a Material Adverse Effect.


 


(b)                                 To the knowledge of the Company, except as
set forth on Schedule 3.15(b), the Company and the Company Subsidiaries
have all Permits necessary for the conduct of their business, except where the
failure to have such Permits would not individually or in the aggregate reasonably
have a Material Adverse Effect.


 


Section 3.16.                             Preferred
Stock Exemption.


 


(a)                                  Assuming
the representations and warranties of the Investors contained in Article IV are
true, the offer and sale of the Series B-1 Shares (and the issuance of the
Common Stock to such Investors upon the conversion of such Series B-1 Shares)
are exempt from the registration requirements of the Securities Act.  The Company has not taken and will not take
any actions which would cause the offers and sales contemplated hereunder to
become ineligible for exemption under the Securities Act.


 


(b)                                 Neither
the Company nor any Person acting on its behalf has offered the Series B-1
Stock to any Person by means of general or public solicitation or general or
public advertising, such as by newspaper or magazine advertisements, by
broadcast media, or at any seminar or meeting whose attendees were solicited by
such means.


 


Section 3.17.                             Investment
Company Act.  The Company and the
Company Subsidiaries are not, nor are they directly or indirectly controlled by
or acting on behalf of any Person that is, an investment company within the
meaning of the Investment Company Act of 1940, as amended.


 


Section 3.18.                             Financial
Advisors.  Except as set forth on Schedule
3.18, no agent, broker, investment banker, finder, financial advisor or
other Person is or will be entitled to any


 


14





















 


broker’s
or finder’s fee or any other commission or similar fee as a result of actions
taken by the Company or its Affiliates, directly or indirectly, in connection
with the Contemplated Transactions.


 


Section 3.19.                             No
General Solicitation.  None of the
Company or any of its “affiliates” (as defined in Rule 501(b) of Regulation D
under the Securities Act (“Regulation D”)), has, directly or through an agent,
engaged in any form of general solicitation or general advertising in
connection with the offering of the Series B-1 Shares (as those terms are used
in Regulation D) under the Securities Act or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act; and the
Company has not entered into any contractual arrangement with respect to the
distribution of the Series B-1 Shares except for this Agreement and the
Registration Rights Agreement, and the Company will not enter into any such
arrangement.


 


Section 3.20.                             Environmental Laws.  Except
as set forth in Schedule 3.20, each of the Company and the Company Subsidiaries
is in compliance in all material respects with all limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in any applicable Environmental Laws, or in any plan,
Order, notice or demand letter issued, entered, promulgated or approved
thereunder except where the failure to comply would not individually or in the
aggregate have a Material Adverse Effect.


 


ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE

INITIAL PURCHASER AND THE INVESTORS


 


Section 4.01.                             Initial
Purchaser Representations.


 


(a)                                  The
Initial Purchaser represents and warrants to and agrees with the Company and
each of the Investors that it is a registered broker-dealer and an
institutional accredited investor, as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, as the case may be, with such knowledge and
experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Series B-1 Shares, and
(ii) it is not acquiring the Series B-1 Shares with any present intention of
offering or selling any of the Series B-1 Shares in a transaction that would
violate the Securities Act or the securities laws of any state of the United
States or any other applicable jurisdiction


 


(b)                                 The
Initial Purchaser hereby represents and warrants to the Company and each of the
Investors that it (i) has not solicited offers for, or offered or sold, the Series
B-1 Shares by means of any form of general solicitation or general advertising
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act and (ii) has only solicited offers for the Series B-1
Shares from persons whom the Initial Purchaser reasonably believed to be
accredited investors.


 


(c)                                  The
Initial Purchaser represents and warrants to the Company and each of the
Investors that it has had the opportunity, directly or indirectly or through
its representatives,


 


15





















 


to
ask questions of and receive answers from Persons acting on behalf of the
Company concerning the transactions contemplated by this Agreement.


 


Section 4.02.                             Investors
Representations.  Each of the
Investors represents and warrants, severally, to the Company as follows:


 


(a)                                  Authorization.  Such Investor is a corporation, partnership
or limited liability company duly organized and validly existing under the Laws
of the state or country of its jurisdiction of formation.  Such Investor has the full corporate,
partnership or limited liability company power and authority to enter into this
Agreement and the other Transaction Documents and to consummate the
transactions contemplated hereby and thereby. 
The execution and delivery of this Agreement and the other Transaction
Documents and the consummation by the Investors of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of the Investors. 
This Agreement and the other Transaction Documents have been and will
be, as the case may be, duly executed and delivered by such Investor and
constitute legal, valid and binding obligations of such Investor, enforceable
in accordance with their respective terms, except as such enforceability may be
subject to the effects of any applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar Laws affecting creditors’
rights generally and subject to the effects of general equitable principles.


 


(b)                                 Investment
Representations.  Such Investor is an
Accredited Investor and is acquiring the Series B-1 Shares allocated to such
Investor for such Investor’s own account, for investment, and not with a view
to, or for sale in connection with, the distribution thereof or of any interest
therein.  Such Investor has adequate net
worth and means of providing for its current needs and contingencies and is
able to sustain a complete loss of the investment in such Series B-1 Shares,
and has no need for liquidity in such investment.  Such Investor, itself or through its
officers, employees or agents, has sufficient knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of an investment such as an investment in the Series B-1 Shares, and such
Investor, either alone or through its officers, employees or agents, has
evaluated the merits and risks of the investment in such Series B-1
Shares.  Such Investor understands that
the Series B-1 Stock has not been registered under the Securities Act by reason
of its issuance in a transaction exempt from the registration requirements of
the Securities Act pursuant to the exemption provided in Section 4(2) and/or
Regulation D promulgated under the Securities Act, and that the Series B-1
Stock may not be sold or otherwise disposed of unless registered under the
Securities Act or exempted from such registration.


 


(c)                                  Investors’
Acknowledgment.  Such Investor has
had the opportunity, directly or through its representatives, to ask questions
of and receive answers from Persons acting on behalf of the Company concerning
the transactions contemplated by this Agreement.


 


(d)                                 Financial
Advisors.  No agent, broker,
investment banker, finder, financial advisor or other Person is or will be
entitled to any broker’s or finder’s fee or any other commission or similar fee
as a result of actions taken by such Investor, directly or indirectly, in
connection with any of  the transactions
contemplated by this Agreement or any of the


 


16





















 


Transaction
Documents except that Credit Suisse First Boston has acted as the Company’s placement
agent for the Transaction as set forth on Schedule 3.18.


 


(e)                                  Legend.


 


(i)                                     The
certificates evidencing the Series B-1 Stock and the Common Stock issuable upon
conversion of the Series B-1 Stock will bear a legend (the “Legend”)
substantially similar to the following:


 


“THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  NO INTEREST IN THESE SECURITIES MAY BE
PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT WHILE
A REGISTRATION STATEMENT IS IN EFFECT UNDER SAID ACT OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT. 
THIS CERTIFICATE IS ISSUED PURSUANT TO AND SUBJECT TO THE RESTRICTIONS
ON TRANSFER AND OTHER PROVISIONS OF THE INVESTORS’ RIGHTS AGREEMENT BETWEEN THE
COMPANY, AND THE INVESTORS REFERRED TO THEREIN, A COPY OF WHICH IS ON FILE WITH
THE COMPANY.  EXCEPT AS PROVIDED IN SUCH
AGREEMENT, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT TRANSFERABLE
AND ANY PURPORTED TRANSFER IN VIOLATION OF THE PROVISIONS OF SUCH AGREEMENT
SHALL BE VOID AND OF NO FORCE AND EFFECT.


 


THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON OWNERSHIP AND TRANSFER CONTAINED IN THE BY-LAWS AND
THE CERTIFICATE OF DESIGNATIONS FOR THE PURPOSE OF THE COMPANY’S MAINTENANCE OF
ITS STATUS AS A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE “CODE”).  IF THE
RESTRICTIONS ON OWNERSHIP OR TRANSFER ARE VIOLATED THE ISSUANCE OR TRANSFER
RESULTING IN SUCH VIOLATION WILL BE VALID ONLY WITH RESPECT TO SUCH AMOUNT OF
SECURITIES AS DOES NOT RESULT IN A VIOLATION OF THE COMPANY’S BY-LAWS OR
CERTIFICATE OF DESIGNATIONS, AND SUCH ISSUANCE OR TRANSFER SHALL BE NULL AND
VOID WITH RESPECT TO ANY EXCESS SECURITIES. 
ALL TERMS IN THIS LEGEND NOT


 


17





















 


OTHERWISE DEFINED HEREIN HAVE THE MEANINGS ASCRIBED
THERETO IN THE COMPANY’S BY-LAWS OR CERTIFICATE OF DESIGNATIONS AS THE SAME MAY
BE FURTHER AMENDED FROM TIME TO TIME.


 


(ii)                                  The
first paragraph of the legend endorsed on the certificates pursuant to Section
4.02(e) hereof shall be removed and the Company shall issue a certificate
without such portion of the legend to the holder thereof at such time as the
securities evidenced thereby cease to be restricted securities upon the
earliest to occur of (i) a registration statement with respect to the sale of
such securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (ii) the securities shall have been sold to the public pursuant to
Rule 144 (or any successor provision) under the Securities Act, and (iii) such
securities may be sold by the holder without restriction or registration under
Rule 144(k) under the Securities Act (or any successor provision).


 


(f)                                    Ownership
and Transfer Limitations.  Such
Investor has received a copy of the By-Laws of the Company and the Certificate
of Designations for the Series B-1 Stock, and understands the restrictions on
transfer and ownership of the Company’s Capital Stock included therein.  As of the Closing, no Person who or which is
a beneficial owner of such Investor will own indirectly (based solely on such Person’s
percentage ownership of Series B-1 Stock through the Investor) 9.8% or more of
the Series B-1 Stock.  The Investors are
not acting as a “group” under Section 13(d) of the Exchange Act.


 


(g)                                 No
Other Representation.  Such Investor
acknowledges that the Company is not making any representation, warranty,
covenant or agreement in connection with the transactions contemplated by this
Agreement, other than as set forth in this Agreement and the other Transaction
Documents.


 


(h)                                 NYSE
Compliance.  Such Investor
acknowledges that it does not beneficially own more than five percent of the
Company’s outstanding Common Shares and is not otherwise a substantial
stockholder of the Company, as defined under Rule 312.03 of the NYSE Listed
Company Manual.


 


(i)                                     Other
than as set forth in Section 4.01, each of the Investors hereby acknowledges
and agrees that it has not relied upon any representation by the Initial Purchaser,
nor has the Initial Purchaser made any representation to such Investor, in
connection with this Agreement and the transactions contemplated hereby.


 


Section 4.03.                             Each
of the parties hereto acknowledges that Credit Suisse First Boston and its Affiliates
are acting solely as financial advisor and/or placement agent to the Company
and have not provided advice to any Investor in connection with the transaction
contemplated by this Agreement.  Each
Investor further acknowledges and agrees that it has not relied upon any
representation by Credit Suisse First Boston or any of its Affiliates, nor have
Credit Suisse or any of its Affiliates made any representation to such Investor
in connection with this Agreement and the transactions contemplated hereby.


 


18





















 


ARTICLE V

COVENANTS OF THE COMPANY


 


The Company covenants and agrees that for so long as
the Series B-1 Shares are outstanding (and in the case of Section 5.06, as long
as the Investor holds shares of Common Stock issued on conversion thereof):


 


Section 5.01.                             Accounting
System.  The Company will maintain a
system of accounting and proper books of record and account, in accordance with
GAAP and applicable Laws.


 


Section 5.02.                             Corporate
Existence.  The Company will preserve
and keep in full force and effect its existence as an unincorporated business
trust and the corporate existence of each Company Subsidiary (unless merged
into the Company) and all rights and franchises of the Company and the Company
Subsidiaries unless, in the good faith judgment of the Company, the termination
of or failure to preserve or keep in full force and effect such existence of a
subsidiary, right or franchise could not individually or in the aggregate reasonably
have a Material Adverse Effect.


 


Section 5.03.                             Compliance
with Law.  The Company will, and will
cause each Company Subsidiary to, comply, in all material respects, with all
Laws which are applicable with respect to the conduct of their respective
businesses and the ownership of their respective properties  and will maintain in effect all government
authorizations, provided that the Company shall not be deemed to be in
violation of this Section 5.04 as a result of any failure to comply with any
provisions of such Laws or failure to maintain in effect, the noncompliance
with which and the failure to maintain which would not result in enforceable
fines, penalties, injunctive relief or other civil or criminal liabilities
which, in the aggregate, could reasonably have a Material Adverse Effect.


 


Section 5.04.                             Maintain
Listing.  The Company will use
commercially reasonable efforts to (x) maintain the listing and trading of its
Common Stock on the NYSE, for so long as the Company qualifies for such listing
under the rules and regulations of the NYSE and (y) comply in all material
respects with the Company’s reporting, filing, and other obligations, under the
rules and regulations of the NYSE.  In
the event that the Common Stock is no longer eligible for listing and trading
on the NYSE, the Company will use commercially reasonable efforts to secure the
listing or quotation of the Common Stock on the Nasdaq National Market, the
Nasdaq SmallCap Market or the American Stock Exchange (if such listing is
permitted by the bylaws, rules or regulations of any of the foregoing) and to
comply in all material respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of such exchanges or the National
Association of Securities Dealers, Inc., as applicable.  The Company will promptly provide to the
Initial Purchaser and each of the Investors copies of any notices it receives
from the NYSE and any other exchange or quotation system on which the Common
Stock is then listed regarding the continued eligibility of the Common Stock
for listing on such exchanges or quotation systems.


 


19





















 


Section
5.05.                             Secure
Listing.  The shares of Common Stock
issuable upon conversion of the Series B-1 Stock shall be duly listed, pending
notice of issuance, on the NYSE prior to the Closing and the Company shall
maintain such listing in accordance with Section 5.04.


 


Section
5.06.                             Exempt
Persons.  The provisions of the
Company’s By-Laws annexed hereto as Schedule 5.06 will remain in effect.


 


ARTICLE VI

ACTIONS PRIOR TO CLOSING


 


Section 6.01.                             Access
to Information.  Until the Closing
Date or the earlier termination of this Agreement, the Company will permit the
Initial Purchaser and representatives of the Investors to visit and inspect any
of the properties of the Company or any of the Company Subsidiaries, to examine
the corporate books, records, agreements and files of the Company and make
copies or extracts therefrom and to request information at reasonable times and
intervals concerning the general status of the Company’s financial condition
and operations, all upon reasonable notice and at such reasonable times and as
often as the Initial Purchaser and such Investor may reasonably request.


 


Section 6.02.                             Consent.  Until the Closing Date, each of the parties
hereto will use its reasonable best efforts and shall fully cooperate with each
other party to make promptly all registrations, filings and applications, give
all notices and obtain all Consents in connection with the transactions
contemplated hereby.


 


Section 6.03.                             Publicity.  Until the Closing Date, the parties agree not
to issue any announcement, press release, public statement or other information
to the press or any third party with respect to this Agreement or the
Contemplated Transactions without obtaining the prior written approval of the
other parties hereto (which approval shall not be unreasonably withheld);
provided, however, that nothing contained herein shall prevent any party
hereto, at any time, from furnishing any required information to any
Governmental Body or from issuing any announcement, press release, public
statement or other information to the press or any third party with respect to
this Agreement or the Contemplated Transactions if required by Law, although,
the parties agree to consult with each other as to the content of any release
so required and consider in good faith the comments of the other thereon.


 


ARTICLE VII

CONDITIONS TO CLOSING


 


Section 7.01.                             Conditions
to Obligations of the Initial Purchaser and the Investors.  The obligation of the Initial Purchaser and
the Investors to consummate the transactions contemplated hereby shall be
subject to the fulfillment on or prior to the Closing Date of the following
conditions, any or all of which may be waived by the Initial Purchaser and/or
the Investors, as applicable, in whole or in part to the extent permitted by
applicable Law:


 


20





















 


(a)                                  Consents.  The Company
shall have obtained the consents set forth in Schedule 3.05, in form and
substance reasonably satisfactory to the Initial Purchaser and the Investors.


 


(b)                                 Material Adverse Effect. 
Between the date hereof and the Closing Date, neither the Company nor
any Company Subsidiary shall have suffered or experienced a Material Adverse
Effect.


 


(c)                                  No Governmental Order or Other Proceeding or Litigation.  No Order of any Governmental Body shall be in
effect that restrains or prohibits the Contemplated Transactions.


 


(d)                                 Legal Opinion.  The
Initial Purchaser and the Investors shall have received, dated the Closing Date
and addressed to each of the Initial Purchaser and the Investors, an opinion of
Katten Muchin Zavis Rosenman, counsel to the Company, substantially in the form
attached hereto as Exhibit B.


 


(e)                                  Certificate of Designations. 
The Certificate of Designations shall have been adopted by the Board of
Trustees and shall be in full force and effect.


 


(f)                                    Registration Rights Agreement.  The Registration Rights Agreement shall have
been executed and delivered by the parties thereto and shall be in full force
and effect, in substantially the form attached hereto as Exhibit C (the “Registration
Rights Agreement”).


 


(g)                                 Investors’ Rights Agreement. 
The Investors Rights Agreement shall have been executed and delivered by
the parties thereto and shall be in full force and effect, in substantially the
form attached hereto as Exhibit D (the “Investors’ Rights Agreement”).


 


(h)                                 Stock Certificates.


 


(i)                                     The
Company shall have delivered to the Initial Purchaser a certificate or certificates
representing the Series B-1 Shares, duly registered in the name of the Initial
Purchaser.


 


(ii)                                  The
Initial Purchaser shall have delivered to the Investors certificates
representing the Series B-1 Shares in the amounts specified on Schedule 2.01,
duly registered by the Company in the respective names of the Investors as set
forth in Schedule 2.01.


 


(i)                                     Company Certificates. 
The Company shall have delivered to the Initial Purchaser and the Investors:


 


(i)                                     a
certificate, dated the Closing Date, executed by the Secretary of the Company
which certifies that (A) attached to such certificate is a complete and correct
copy of the Declaration of Trust and all amendments thereto of the Company, and
(B) attached to such certificate is a complete and correct copy of the By-Laws
of the Company (including the amendments referred to in paragraph (j)) and the
Certificate of Designations, each as in full force and effect at the Closing
Date; and


 


21





















 


(ii)                                  a
certificate, dated the Closing Date, executed by the Secretary of the Company,
which certifies as complete and correct resolutions of the Board of Trustees
authorizing the execution, delivery and performance of this Agreement and each
of the other Transaction Documents, the issuance and sale of the Series B-1
Stock and the issuance of the shares of Common Stock issuable upon conversion
of the Series B-1 Stock, the reservation of such shares of Common Stock and the
performance of the transactions contemplated by this Agreement and the other
Transaction Documents.


 


(j)                                     By-Law Amendment. 
The By-Laws of the Company shall have been amended as provided in
Schedule 5.06 hereto.


 


(k)                                  The representations and warranties
contained in this Agreement shall be accurate on the Closing Date as if made on
the Closing Date and the Company shall have performed all of its covenants and
agreements as set forth in this Agreement on or before the Closing Date.  The Company shall not have taken any action
since the date of this Agreement that would have required a vote or waiver of
the Investors or the holders of the Series B-1 Shares under any Transaction
Document.


 


(l)                                     The Investors shall have received a
certificate executed by the President of the Company stating that the conditions
set forth in paragraphs (a), (b), (k) and (o) have been satisfied.


 


(m)                               The Investors shall have received from
the Company such other certificates and documents as they shall reasonably
request, and all proceedings taken by the Company in connection with the Transaction
Documents and all documents and papers relating to such Primary Documents shall
be satisfactory to the Purchasers.


 


(n)                                 The consummation of the Transaction shall
not be prohibited by applicable Law.


 


(o)                                 The shares of Common Stock issuable upon
conversion of the Series B-1 Stock shall have been listed on the NYSE, pending
notice of issuance.


 


(p)                                 The Company shall have paid the
reasonable legal expenses of the Investors incurred in connection with the
Transaction pursuant to Article X below.


 


(q)                                 The Investors shall not be subject as of
the Closing Date to any penalties or liabilities under the Code or other Laws as
the result of the consummation of the transactions contemplated under this
Agreement that were not applicable as of the date of execution of this
Agreement.


 


(r)                                    It
shall be a condition to each Investor’s obligations under this Agreement that
all other Investors tender payment for the Series B-1 Shares as set forth on
Schedule 2.01; provided, however, that the release of any such
Investor as the result of such noncompliance by any other Investor shall not
affect any remedy the Company may have against such noncomplying Investor.


 


22





















 


(s)                                  Steve
Mandis shall have been appointed a Trustee of the Company.


 


Section 7.02.                             Conditions
to Obligations of the Company.  The
obligation of the Company to consummate the transactions contemplated hereby
shall be subject to the fulfillment on or prior to the Closing Date of the
following conditions, any or all of which may be waived by the Company:


 


(a)                                  No Governmental Order or Other Proceeding or Litigation.  No Order of any Governmental Body shall be in
effect that restrains or prohibits the Contemplated Transactions.


 


(b)                                 NYSE Listing.  The shares
of Common Stock issuable upon conversion of the Series B-1 Stock shall have
been listed on the NYSE, pending notice of issuance.


 


(c)                                  Registration Rights Agreement.  The Registration Rights Agreement shall have
been executed and delivered by the other parties thereto and shall be in full
force and effect.


 


(d)                                 Investors’ Rights Agreement. 
The Investors Rights Agreement shall have been executed and delivered by
the other parties thereto and shall be in full force and effect.


 


(e)                                  It
shall be a condition to the Company’s obligations under this Agreement that all
Investors tender payment for the Series B-1 Shares as set forth on Schedule
2.01.


 


ARTICLE VIII

SURVIVAL


 


Section 8.01.                             Survival.  The representations, warranties and covenants
to be performed at or prior to Closing of the parties set forth in this
Agreement shall survive for a period of 24 months following the execution and
delivery of this Agreement and thereafter shall be of no further force or
effect, provided that the representations and warranties set forth in Sections
3.11 (Taxes) and 4.02(f)(Ownership and Transfer Limitations), shall survive for
the applicable period of the statute of limitations and the representations and
warranties set forth in Sections 3.01 (Organization), 3.02 (Authorization) and 3.04
(Capitalization) shall survive indefinitely (or if indefinite survival is not
permitted by Law, then for the maximum period permitted by applicable Law).  Following the expiration of the periods set
forth above with respect to any particular representation or warranty, no party
hereto shall have any further liability with respect to such representation or
warranty.  Except as set forth herein,
all of the covenants, agreements and obligations of the parties hereto shall
survive the Closing indefinitely (or if indefinite survival is not permitted by
Law, then for the maximum period permitted by applicable Law).  Anything herein to the contrary
notwithstanding, any claim for indemnification that is asserted by written
notice which notice specifies in reasonable detail the facts upon which such
claim is made as provided in this Section 8.01 within the survival period shall
survive until resolved pursuant to a final non-appealable judicial
determination or otherwise.


 


23





















 


ARTICLE IX

INDEMNIFICATION


 


Section 9.01.                             Generally.  Subject to the limitations and other
provisions of this Article IX, the Company covenants and agrees to indemnify,
defend and hold harmless the Investor Related Party Members and the Initial Purchaser
Group Members from and against (but only to the extent of) any and all Losses
resulting from, incurred in connection with or arising out of (but only to the
extent of) (a) any breach of any representation, warranty or covenant of the
Company contained herein, (b) the failure of the Company to perform any of the
agreements, covenants or obligations contained herein (other than if any such
claim was caused by a breach by the Investors under this Agreement) and (c)
claims by third parties (other than investors in, or securityholders, members,
partners or Affiliates of, any Investor, or any party to an agreement with an
Investor which agreement is breached or is subject to a claim that it has been
breached as a result of the Company’s performance under this Agreement) resulting
solely from the purchase of the Series B-1 Shares or the use by the Company of
the proceeds thereof.  Subject to the
limitations and other provisions of this Article IX, each Investor, severally
and not jointly, covenants and agrees to indemnify, defend and hold harmless
the Company Group Members from and against (but only to the extent of) any and
all Losses resulting from, incurred in connection with or arising out of (but
only to the extent of) (a) any breach of any representation, warranty, covenant
or agreement of such Investor contained herein or (b) the failure of such
Investor to perform any of the agreements, covenants or obligations of such
Investor contained herein.  The term “Loss”
or any similar term shall mean any and all damages, reduction in value actually
realized or incurred of the original investment in the Series B-1 Shares,
deficiencies, costs, claims, fines, judgments, amounts paid in settlement,
expenses of investigation, interest, penalties, assessments, out-of-pocket
expenses (including reasonable attorneys’ and auditors’ fees and disbursements,
witness fees and court costs).  The party
or parties being indemnified are referred to herein as the “Indemnitee”
and the indemnifying party is referred to herein as the “Indemnitor.”


 


24





















 


Section 9.02.                             Indemnification
Procedure.


 


(a)                                  Any
party who receives notice of a potential claim that may, in the judgment of
such party, result in a Loss shall use all reasonable efforts to provide the
parties hereto notice thereof, provided that failure or delay or alleged delay
in providing such notice shall not adversely affect such party’s right to
indemnification hereunder, unless and then only to the extent that such failure
or delay or alleged delay has resulted in actual prejudice to the Indemnitor,
including, without limitation, by the expiration of a statute of
limitations.  In the event that any party
shall incur or suffer any Losses in respect of which indemnification may be sought
by such party hereunder, the Indemnitee shall assert a claim for
indemnification by written notice (a “Notice”) to the Indemnitor stating
the nature and basis of such claim.  In
the case of Losses arising by reason of any third party claim, the Notice shall
be given within thirty (30) days of the filing or other written assertion of
any such claim against the Indemnitee, but the failure of the Indemnitee to
give the Notice within such time period shall not relieve the Indemnitor of any
liability that the Indemnitor may have to the Indemnitee, except to the extent
that the Indemnitor demonstrates that the defense of such action has been
materially prejudiced by the Indemnitee’s failure to timely give such Notice.


 


(b)                                 In
the case of third party claims for which indemnification is sought, the
Indemnitor shall, if necessary, retain counsel reasonably satisfactory to the
Indemnitee, and have the option (i) to diligently conduct any proceedings or
negotiations in connection therewith, (ii) to take all other steps to settle or
defend any such claim (provided that the Indemnitor shall not settle any such
claim without the consent of the Indemnitee which consent shall not be
unreasonably withheld or delayed, provided, that it shall not be deemed
unreasonable to withhold consent if such settlement involves a finding or
admission of violation of laws or rights, or relief other than monetary damages
that will be paid by the Indemnitor) and (iii) to employ counsel to contest any
such claim or liability in the name of the Indemnitee or otherwise.  In any event, the Indemnitee shall be
entitled to participate at its own expense and by its own counsel in any
proceedings relating to any third party claim. 
The Indemnitor shall, within 15 Business Days of receipt of the Notice,
notify the Indemnitee of its intention to assume the defense of such claim (in
which case the Indemnitor will be deemed to have waived any right to dispute
its liability under Section 9.01 with respect to such claim and its outcome).  If (i) the Indemnitor shall decline to assume
the defense of any such claim, (ii) the Indemnitor shall fail to notify the
Indemnitee within 15 Business Days after receipt of the Notice of the
Indemnitor’s election to defend such claim, (iii) the Indemnitee shall have reasonably
concluded that there may be defenses available to it which are different from
or in addition to those available to the Indemnitor (in which case the
Indemnitor shall not have the right to direct the defense of such action on
behalf of the Indemnitee), or (iv) a conflict exists between the Indemnitor and
the Indemnitee which the Indemnitee has reasonably concluded would prejudice
the Indemnitor’s defense of such action, then in each such case the Indemnitor
shall not have the right to direct the defense of such action on behalf of the
Indemnitee and the Indemnitee shall, at the sole expense of the Indemnitor,
defend against such claim and (x) in the event of a circumstance described in
clause (i) and (ii), the Indemnitee may settle such claim without the consent
of the Indemnitor (and the Indemnitor may not challenge the reasonableness of
any such settlement) and (y) in the event of a circumstance described in clause
(iii) and (iv), the Indemnitee may not settle such claim without the consent of
the Indemnitor (which consent will not be unreasonably withheld or


 


25





















 


delayed,
provided, that it shall not be deemed unreasonable to withhold consent
if such settlement involves a finding or admission of violation of laws or
rights, or relief other than monetary damages that will be paid by the
Indemnitor).  The reasonable expenses of
all proceedings, contests or lawsuits in respect of such claims shall be borne
and paid by the Indemnitor if the Indemnitee is entitled to indemnification
hereunder and the Indemnitor shall pay the Indemnitee, in immediately available
funds, the amount of any Losses, promptly after the incurrence of such
Losses.  Regardless of which party shall
assume the defense or negotiation of the settlement of the claim, the parties
agree, without limiting the Indemnitor’s obligations hereunder, to cooperate
fully with one another in connection therewith. 
In the event that any Losses incurred by the Indemnitee do not involve
payment by the Indemnitee of a third party claim, then, the Indemnitor shall,
within 20 days after written notice from the Indemnitee specifying the amount
of Losses, pay to the Indemnitee, in immediately available funds, the amount of
such Losses.  Anything in this Article X
to the contrary notwithstanding, the Indemnitor shall not, without the
Indemnitee’s prior written consent, settle or compromise any claim or consent
to entry of any judgment in respect thereof which imposes any future obligation
on the Indemnitee or which does not include, as an unconditional term thereof,
the giving by the claimant or plaintiff to the Indemnitee, a release from all
liability in respect of such claim.


 


Section 9.03.                             Limitations
on Indemnification.  Notwithstanding
anything to the contrary contained herein, the liability of (i) the Company
under this Article IX shall be limited to an amount equal to the Purchase
Price; and (ii) each Investor under this Article IX shall be limited to an
amount equal to the Purchase Price paid by such Investor.


 


ARTICLE X

FEES, EXPENSES AND COSTS


 


Section 10.01.                         The Company agrees to pay at the Closing (or
in the event the transactions contemplated hereunder are not consummated other
than as the result of noncompliance by the Investors) and hold the Investors
harmless against liability for the payment of reasonable legal fees and
expenses owed by such Investors to their counsel, incurred in connection with
this Agreement and other reasonable costs and expenses (including, without
limitation, accounting expenses and consultants’ fees) incurred by the
Investors in connection with this Agreement, up to a maximum aggregate amount
of $100,000.  In the event the Company
requests that the Transaction Documents be amended, or if the Company files for
bankruptcy or is declared bankrupt, the Company shall pay the reasonable legal
fees incurred by the Investors in connection therewith.


 


ARTICLE XI

TERMINATION


 


Section 11.01.                       Termination.  This Agreement may be terminated on or any
time prior to the Closing by the mutual written consent of each of the
Investors and the Company.


 


Section 11.02.                       Effect
Of Termination.  In the event of the
termination of this Agreement as provided in Section 11.01, all obligations and
agreements of the parties set forth in this Agreement shall forthwith become
void except for the obligations set forth in: 
(i) Section 6.03


 


26





















 


(Publicity),
(ii) Article IX (Indemnification) and (iii) Article X (Fees, Expenses and
Costs), and there shall be no liability or obligation on the part of the
parties hereto except as otherwise provided in this Agreement.  Notwithstanding the foregoing, the
termination of this Agreement under Section 11.01 shall not relieve either party
of any liability for breach of this Agreement prior to the date of termination.


 


ARTICLE XII

MISCELLANEOUS


 


Section 12.01.                       Notices
and Addresses.  Any notice, demand,
request, waiver, or other communication under this Agreement shall be in
writing and shall be deemed to have been duly given on the date of service, if
personally served or sent by facsimile or electronic mail; on and upon receipt,
if delivered to a courier or mailed by express mail, if sent by courier
delivery service or express mail for next day delivery, or if mailed to the party
to whom notice is to be given, by first class mail, registered, return receipt
requested, postage prepaid and addressed as follows:


 


	
  If to the Company:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  First Union Real
  Estate Equity and Mortgage Investments

  
	
   

  	
   

  	
  7 Bulfinch Place, Suite 500,

  
	
   

  	
   

  	
  P.O. Box 9507,

  
	
   

  	
   

  	
  Boston, Massachusetts 02114

  
	
   

  	
   

  	
  Facsimile: (617) 570-4746

  
	
   

  	
   

  	
  Telephone: (617) 570-4600

  
	
   

  	
   

  	
  E-mail:
  ASST@wfajericho.com

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Katten Muchin
  Zavis Rosenman

  
	
   

  	
   

  	
  575 Madison
  Avenue

  
	
   

  	
   

  	
  New York, New
  York 10022

  
	
   

  	
   

  	
  Attention: Mark
  I. Fisher

  
	
   

  	
   

  	
  Facsimile: (212)
  940-8776

  
	
   

  	
   

  	
  Telephone: (212)
  940-8800

  
	
   

  	
   

  	
  E-mail: mark.fisher@kmzr.com

  
	
   

  	
   

  	
   

  
	
  If to the Initial Purchaser:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Perrin Holden
  & Davenport Capital Corp.

  
	
   

  	
   

  	
  5 Hanover Square

  
	
   

  	
   

  	
  New York, NY
  10004

  
	
   

  	
   

  	
  Attention:
  Nelson Braff

  
	
   

  	
   

  	
  Facsimile:

  
	
   

  	
   

  	
  Telephone: (212)
  566-5100

  
	
   

  	
   

  	
  E-mail: nbraffphd@aol.com

  



 


27





















 


	
  If to any
  Investor, to the address set forth on such Investor’s signature page attached
  hereto, with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Mark Weissler, Esq.

  
	
   

  	
   

  	
  Milbank, Tweed,
  Hadley & McCloy LLP

  
	
   

  	
   

  	
  1 Chase
  Manhattan Plaza

  
	
   

  	
   

  	
  New York, NY
  10005

  
	
   

  	
   

  	
  Facsimile: (212)
  822-5446

  
	
   

  	
   

  	
  Telephone: (212)
  530-5446

  
	
   

  	
   

  	
  E-mail:
  mweissler@milbank.com

  



 


Section 12.02.                       Captions.  The captions in this Agreement are for convenience
of reference only and shall not be given any effect in the interpretation of
this Agreement.


 


Section 12.03.                       No
Waiver.  The failure of a party to
insist upon strict adherence to any term of this Agreement on any occasion
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement.  Any waiver must be in
writing.  Any of the covenants or
agreements contained in this Agreement may be waived only by the written
consent of the Initial Purchaser and the Investors.


 


Section 12.04.                       Severability.  If one or more provisions of this Agreement
are held to be unenforceable under applicable Law, such provision(s) shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms so long as the economic or legal substance of the
transactions contemplated by this Agreement are not affected in any manner
materially adverse to any party.


 


Section 12.05.                       Exclusive
Agreement; Amendment.  This Agreement
supersedes all prior agreements among the parties with respect to its subject
matter, is intended (with the documents referred to herein) as a complete and exclusive
statement of the terms of the agreement among the parties with respect thereto
and cannot be changed or terminated except by a written instrument executed by
the party or parties against whom enforcement thereof is sought.


 


Section 12.06.                       Limitation
on Assignment; Parties in Interest.


 


(a)                                  No
assignment of this Agreement or of any rights or obligations hereunder may be
made by the Company or the Investors (by operation of Law or otherwise) without
the prior written consent of the other parties hereto and any attempted
assignment without the required consents shall be void.


 


(b)                                 This
Agreement shall be binding upon, and shall inure to the benefit of, and be
enforceable by, the parties and their respective successors, transferees and
assigns.


 


28





















 


Section 12.07.                       Obligations
of Investors Several.  The
obligations of the Investors hereunder shall be several and not joint.  No Investor shall be responsible for the
breach of any provision of this Agreement by any other Investor.


 


Section 12.08.                       Governing
Law.  This Agreement and (unless
otherwise provided) all amendments hereof and waivers and consents hereunder
shall be governed by the internal Laws of the State of New York, without regard
to the conflicts of Law principles thereof which would specify the application
of the Law of another jurisdiction.


 


Section 12.09.                       Jurisdiction.  Each of the Investors and the Company (a)
hereby irrevocably and unconditionally submits to the exclusive jurisdiction of
any state or federal court sitting in New York County, New York for the
purposes of any suit, action or other proceeding arising out of this Agreement
or the subject matter hereof brought by the Company, or any Investor, (b)
hereby waives the right to jury trial and (c) hereby waives and agrees not to
assert, by way of motion, as a defense, or otherwise, in any such suit, action
or proceeding, any claim that it is not subject personally to the jurisdiction
of the above-named courts, that its property is exempt or immune from
attachment or execution, that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is
improper or that this Agreement or the subject matter hereof may not be
enforced in or by such court.  If a
judgment is obtained, this Section shall not preclude enforcement thereof in
any forum.


 


Section 12.10.                       No Third
Party Beneficiary.  The terms and
provisions of this Agreement are intended solely for the benefit of each party
hereto and their respective successors or permitted assigns, and it is not the
intention of the parties to confer third-party beneficiary rights upon any
other Person other than any Person entitled to indemnity under Article IX; provided,
however, that Credit Suisse First Boston and its Affiliates shall be
entitled to the benefits of, and to rely on, the representation set forth in
Section 4.03.


 


Section 12.11.                       Injunctive
Relief.  In the event that any party
threatens to take any action prohibited by this Agreement, the parties agree
that there may not be an adequate remedy at law.  Accordingly, in such an event, a party may
seek and obtain preliminary and permanent injunctive relief (without the
necessity of posting any bond or undertaking). 
Such remedies shall, however, be cumulative and not exclusive and shall
be in addition to any other remedies which any party may have under this
Agreement or otherwise.


 


Section 12.12.                       Counterparts.  This Agreement may be executed via facsimile
and in any number of counterparts, each of which shall be deemed to be an
original instrument and all of which together shall constitute one and the same
instrument.


 


Section 12.13.                       Actions
Simultaneous.  All actions to be
taken and all documents to be executed and delivered by all parties at the
Closing shall be deemed to have been taken and executed and delivered
simultaneously and no actions shall be deemed to have been taken nor shall any
documents be deemed to have been executed and delivered until all actions have
been taken and all documents have been executed and delivered.


 


29





















 


Section
12.14.                       Home Office
Payment.  So long as any Investor or
its nominee shall be the holder of any Shares, and notwithstanding anything
contained in the Certificate of Designations to the contrary, the Company will
pay all sums becoming due with respect to such Shares, other than with respect
to redemption, by direct deposit of automated clearinghouse funds into such
account as the Investor shall provide by written notice to the Company, subject
to execution of such documentation as the Company’s transfer agent shall reasonably
require.


 


[Signature Pages Follow]


 


30





















 


IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date first above written.


 


 


FIRST
UNION REAL ESTATE EQUITY

AND MORTGAGE INVESTMENTS


 


 


	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
				



 


31





















 


	
  HALCYON
  STRUCTURED OPPORTUNITIES FUND, L.P.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Steve Mandis

  
	
   

  	
  Title:

  
	
   

  
	
  Address: c/o

  	
  Halcyon Management
  Company

  
	
   

  	
  477 Madison Avenue, 8th
  Floor

  
	
   

  	
  New York, NY 10022

  
	
   

  	
  212-303-9493

  
	
   

  	
  smandis@halcyonllc.com

  
					



 


32





















 


	
  FAIRHOLME VENTURES II LLC

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:  Bruce Fairholme

  
	
   

  	
  Title:

  
	
   

  
	
  Address:  c/o

  	
  Fairholme Capital
  Management, L.L.C.

  
	
   

  	
  51 John F. Kennedy
  Parkway

  
	
   

  	
  Short Hills, NJ 07078

  
	
   

  	
  973-379-6557

  
	
   

  	
  bruce@fairholme.net

  
					



 


33





















 


	
  HBK FUND L.P.

  
	
   

  
	
  By: HBK Investments L.P., Investment
  Advisor

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:  Authorized
  Signatory

  
	
   

  
	
  Address: c/o

  	
  HBK Investments

  
	
   

  	
  300 Crescent Court,
  Suite 700

  
	
   

  	
  Dallas, TX 75201

  
	
   

  	
  214-758-6132

  
	
   

  	
  jestes@hbk.com

  
					



 


34





















 


	
  GOLDMAN SACHS & CO.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  
	
  Address: c/o

  	
  Goldman Sachs & Co.

  
	
   

  	
  85 Broad St.

  
	
   

  	
  New York, NY 10004

  
	
   

  	
  212-902-2734

  
	
   

  	
  jessica.beattie@gs.com

  
					



 


35





















 


	
  KING STREET CAPITAL, L.P.

  
	
   

  
	
  By:

  	
  King Street Capital Management,
  L.L.C.

  
	
   

  	
  Its Investment Manager

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  
	
  Address: c/o

  	
  King Street Capital
  Management

  
	
   

  	
  65 East 55th Street,
  30th Floor

  
	
   

  	
  New York, NY 10022

  
	
   

  	
  212-812-3109

  
	
   

  	
  mpaige@kingstreet.com

  
					



 


36





















 


	
  BASSO
  MULTI-STRATEGY HOLDING FUND LTD.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Howard Fischer

  
	
   

  	
  Title:

  
	
   

  
	
  Address: c/o

  	
  Basso Capital
  Management

  
	
   

  	
  1266 East Main Street,
  4th Floor

  
	
   

  	
  Stamford, CT 06902

  
	
   

  	
  203-352-6120

  
	
   

  	
  hfischer@bassocap.com

  
					



 


37





















 


	
  KIMCO REALTY CORPORATION

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name: David Henry

  
	
   

  	
  Title:

  
	
   

  
	
  Address: c/o

  	
  Kimco Realty
  Corporation

  
	
   

  	
  3333 New Hyde Park Road

  
	
   

  	
  New Hyde Park, NY 11042

  
	
   

  	
  516-869-7166

  
	
   

  	
  dhenry@kimcorealty.com

  
					



 


38





















 


	
  INITIAL PURCHASER:

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name: Nelson Braff

  
	
   

  	
   

  
	
   

  	
  Title:

  
				



 


39