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