1
Exhibit (20a)
SETTLEMENT AND STANDSTILL AGREEMENT
AGREEMENT, effective as of December 13, 1995, among First Union Real
Estate Equity and Mortgage Investments, an Ohio business trust (the "Trust"),
Richard M. Osborne ("Osborne") and Turkey Vulture Fund XIII, Ltd., an Ohio
limited liability company (the "Fund") (Osborne and the Fund collectively, the
"Osborne Investors").
WHEREAS, on February 3, 1995, the Trust commenced an action against
Osborne, et al., in the United States District Court for the Northern District
of Ohio, Eastern Division (Civil Action No. 95CV0274) (the "Federal Court
Action");
WHEREAS, on November 1, 1995, Osborne, et al., commenced an action
against James C. Mastandrea ("Mastandrea"), et al., in the Common Pleas Court
for Cuyahoga County, State of Ohio (Civil Action No. 297673) (the "State Court
Action"); and
WHEREAS, each of the Federal Court Action and the State Court Action
(together, the "Litigation") is presently pending and being prosecuted and has
resulted in substantial distraction of the time and resources of the parties and
their representatives from their other business activities; and
WHEREAS, the parties believe that it would be in each of their best
interests to resolve all issues between them pursuant to the terms of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual and
independent covenants hereinafter set forth and other good and valuable
consideration, the parties hereto agree as follows:
1. Certain Definitions.
(a) "Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on
the date hereof; provided that the term "Affiliate" shall not include
any member of the Fund, other than Osborne.
(b) The term "control" when used with respect to any person means
the power to direct the management and policies of such person, either
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
(c) The term "party" means the signatories to this Agreement and
each of their heirs, successors and administrators.
2
(d) The term "person" includes, without limitation, any
individual, corporation, company, limited liability company,
partnership, joint venture, group, organization, employee pension,
profit sharing or other benefit plan or trust, or any other entity.
(e) "Shares" shall mean the shares of beneficial interest $1.00
par value of the Trust.
(f) The term "Voting Securities" means all securities of the
Trust entitled to vote generally for the election of trustees and all
securities or rights convertible into, or exchangeable or exercisable
for, any such securities.
2. Dismissal of the Litigation; Release of Claims.
(a) As soon as practicable after execution of this Agreement, the
Trust, Mastandrea, Osborne and the Fund shall cause to be signed and
filed stipulations of dismissal in the Federal Court Action and in the
State Court Action in substantially the forms attached hereto as
Exhibits 1 and 2, respectively, and such other documents or pleadings
as may be necessary to cause the dismissal with prejudice of all claims
and counterclaims asserted against the parties or their trustees,
officers, members or Affiliates by each or any of them in the
Litigation. The parties acknowledge and agree that nothing contained in
this Agreement or in any such stipulations, documents or pleadings
shall be deemed an admission by any person of any of the allegations
contained in the Litigation.
(b) The parties covenant and agree that they shall not attempt to
institute litigation or commence any action or proceeding in any court
asserting any of the claims or allegations which were or which could
have been asserted against the parties or their trustees, officers,
members or Affiliates in the Litigation, including any claim for
sanctions levied in the Federal Court Action. The enforceability and
effectiveness of the covenants contained in this Section 2(b) shall be
expressly conditioned upon there being no breach of the provisions of
this Agreement by the party or parties against whom any such future
action may be brought or maintained.
(c) Each of the parties, on behalf of itself or himself and his
or its present and former trustees, officers, members and Affiliates,
hereby releases and discharges the other parties hereto and such other
parties' present and former trustees, officers, representatives,
employees, attorneys, advisors, members and Affiliates from any harm,
damage, loss, expense, cost, or other liability arising from or
relating to any claims, counterclaims, actions, or causes of action, at
law or in equity, known or unknown, direct or indirect, suspected or
unsuspected, which each now has or hereafter may have by reason of any
matter alleged or asserted, or relating to the matters alleged or
asserted in the
- 2 -
3
Litigation, except for any actions or causes of action arising by
reason of breach of this Agreement.
(d) Each of Osborne and the Fund agrees to reimburse,
indemnify and hold the Trust harmless from, against and in respect of
all losses, claims, damages, liabilities, costs and expenses,
including, without limitation, fines, penalties, court costs and
reasonable attorneys' fees (collectively, "Loss"), which the Trust may
suffer or incur in connection with a breach of Section 2(c) by any
present and former officers, members and Affiliates of Osborne or the
Fund. The Trust agrees to reimburse, indemnify and hold each of Osborne
and the Fund harmless from, against and in respect of all Loss which
Osborne and the Fund may suffer or incur in connection with a breach of
Section 2(c) by any present and former trustees, officers, and
Affiliates of the Trust.
(e) In the event that any legal proceedings shall be
instituted or any claim or demand shall be given by any person, in
respect of which payment may be sought by any party or parties from any
other party or parties under the provisions of Section 2(d), the party
or parties seeking indemnification (collectively, the "Indemnitee")
shall cause written notice of any claim of which it has knowledge which
is covered by this Agreement to be forwarded promptly to the party or
parties from which indemnification is sought (collectively, the
"Indemnitor"). Such notice shall specify the amount and nature of the
claim and the reason why it constitutes an indemnified liability, it
being understood that failure to so provide notice shall not relieve
the other party from liability except to the extent material damages or
prejudice results from such failure.
(f) In case any action is brought by a third party against any
Indemnitee with respect to which such Indemnitee is entitled to
indemnification hereunder and notice of such action to the Indemnitor
has been given pursuant to Section 2(e), the Indemnitor will be
entitled to participate therein, and to the extent it may elect by
written notice delivered to the Indemnitee within thirty (30) days
after receiving the aforesaid notice from such Indemnitee, to assume
the defense thereof with counsel reasonably satisfactory to such
Indemnitee. Such Indemnitee shall cooperate with respect to any such
participation or defense. Notwithstanding the foregoing, the Indemnitee
shall have the right to employ its own counsel in any such case but the
fees and expenses of such counsel shall be at the expense of such
Indemnitee, unless (i) the employment of such counsel shall have been
authorized in writing by the Indemnitor, (ii) the Indemnitor shall not
have employed counsel reasonably satisfactory to such Indemnitee to
have charge of the defense of such action within thirty (30) days after
notice of commencement of the action, or (iii) such Indemnitee shall
have reasonably concluded, based upon written advice of counsel that
there may be defenses available to it which are different from or
additional 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 with respect to such different
defenses) in any of which events such fees and expenses of one
additional
- 3 -
4
counsel shall be borne by the Indemnitor. Notwithstanding anything in
this Section 2 to the contrary, an Indemnitor shall not be liable for
any settlement of any claim or action effected without its written
consent, provided, however, that such consent is not unreasonably
withheld.
3. Purchase of Shares. The Trust or its nominee shall purchase from the
Fund nine hundred fifty thousand (950,000) Shares (the "Purchased Shares"). The
purchase price for such Shares shall be the average of the composite closing
trading prices for the Shares on the New York Stock Exchange during the period
from January 3, 1995 through December 8, 1995, which price has been determined
and agreed by the parties to be $7.50 per Share. The purchase shall occur on a
date set by the Trust and noticed in writing mailed or faxed to Osborne at least
forty-eight (48) hours in advance, but in no event shall such purchase occur
later than January 10, 1996. At the time of purchase, the Fund shall deliver the
Purchased Shares in exchange for the Trust's or its nominee's bank or certified
check, or at the Fund's option, according to wire transfer instructions provided
to the Trust or its nominee in writing, in the amount of Seven Million One
Hundred Twenty-Five Thousand Dollars ($7,125,000). It is understood by the
parties that the Trust shall also pay to the Fund the dividend declared on the
Shares on December 6, 1995. Such payment shall be made at the same time all
other Trust shareholders are paid such dividend.
4. Representations and Warranties of the Osborne Investors. Each of the
Osborne Investors hereby jointly and severally represent and warrant to the
Trust as follows:
(a) This Agreement has been duly authorized, executed and
delivered by a duly authorized representative of the Fund and by
Osborne and constitutes a legal, valid and binding obligation of each
of the Osborne Investors. The Fund has taken all necessary action to
authorize the execution, delivery and performance of this Agreement;
and the Agreement does not conflict with or violate the Fund's charter
documents, operating agreement or other agreements or instruments by
which the Fund or its properties are bound.
(b) The Purchased Shares are owned by the Fund. When delivered to
the Trust or its nominee, the Purchased Shares will be free and clear
from any liens, claims, pledges and encumbrances of any kind.
5. Representations and Warranties of the Trust. The Trust hereby
represents and warrants to each of the Osborne Investors that this Agreement has
been duly authorized, executed and delivered by a duly authorized officer of the
Trust and constitutes a legal, valid and binding obligation of the Trust. The
Trust has taken all necessary action to authorize the execution, delivery and
performance of this Agreement; and the Agreement does not conflict with or
violate the Trust's Declaration of Trust, By-Laws or other agreements or
instruments by which the Trust or its properties are bound.
- 4 -
5
6. Restrictions on Certain Actions by the Osborne Investors. Each of
the Osborne Investors jointly and severally agrees that, during the term of this
Agreement, none of the Osborne Investors, nor any Affiliate of the Osborne
Investors will, without the prior written consent of the Trust (specifically
expressed in a resolution duly adopted by the Board of Trustees of the Trust):
(a) except as otherwise expressly permitted by this Agreement,
acquire, offer to acquire, or agree to acquire, directly or indirectly,
by purchase or otherwise (except pursuant to a stock split, stock
dividend, or other pro rata distribution by the Trust to holders of any
class of its outstanding Voting Securities), any Voting Securities;
(b) take any action alone or in concert with another person to
seek to acquire control of or influence the management, Board of
Trustees or policies of the Trust;
(c) (i) make or participate in any "solicitation" as defined in
Regulation 14A under the Exchange Act of proxies or consents with
respect to any Voting Securities or make any public or private
statements to third parties in connection with the solicitation of such
proxies or consents by others including actions described in Rule
14a-1(l)(2)(iv) under the Exchange Act, (ii) become a participant in
any "election contest" relating to the election of trustees of the
Trust described in Rule 14a-11 under the Exchange Act, (iii) call or
seek to call, directly or indirectly, any special meeting of
shareholders of the Trust for any reason whatsoever, (iv) seek,
request, or take any action to obtain or retain, directly or
indirectly, any list of holders of any Voting Securities, (v) assist or
encourage any attempt by any other person to do or seek the foregoing,
(vi) initiate, propose or otherwise solicit holders of Voting
Securities for the approval of one or more shareholder proposals at any
time, (vii) induce or attempt to induce any other person to initiate
any shareholder proposal relating to the Trust, or (viii) execute any
written consent in lieu of a meeting;
(d) form, join or in any way participate in a "group," as such
term is defined in Regulation 13D under the Exchange Act, with respect
to any Voting Securities of the Trust;
(e) seek or propose any merger, consolidation, business
combination, tender or exchange offer, sale or purchase or transfer of
assets or securities, restructuring, recapitalization or similar
transaction of or involving the Trust;
(f) enter into any arrangements, understandings or agreements
(whether written or oral) with, or advise, assist or encourage, any
other person in connection with any of the foregoing;
(g) sell, transfer or otherwise dispose of any Voting Securities
except as follows:
- 5 -
6
(i) sales in privately negotiated transactions of not more
than one percent (1%) of the then-outstanding Voting Securities
to any person (including Affiliates of such person) in any single
transaction or series of transactions; or
(ii) sales in normal open-market transactions, executed by
or through a registered broker or dealer who receives no more
than the usual and customary broker's commission, which do not
involve the sale of more than twenty-five percent (25%) of the
average trading volume in the Shares over the prior four (4)
weeks;
provided, that any Osborne Investor or any Affiliate may sell more than
1% of the then-outstanding Voting Securities in the event of a merger,
consolidation, business combination, tender or exchange offer,
restructuring, recapitalization or similar transaction of or involving
the Trust that is approved by the Trustees.
7. Voting. Unless the Trust otherwise agrees in writing, during the
Term of this Agreement, the Osborne Investors and any of their Affiliates which
beneficially own any Voting Securities entitled to vote at a meeting of the
Trust's shareholders, shall (i) vote, and shall cause their Affiliates to vote,
all Voting Securities beneficially owned by them in the election of trustees of
the Trust and on all other matters to be voted on by the holders of Voting
Securities in the manner recommended by management of the Trust and (ii) be
present or be represented by proxy at each such meeting so that all such Voting
Securities may be counted for the purpose of determining the presence of a
quorum. Each of the Osborne Investors hereby grants, during the term of this
Agreement, to the Chief Executive Officer of the Trust, a limited power of
attorney to vote any and all Shares owned by the Osborne Investors to the extent
such Shares have not been voted in accordance with this Section 7.
8. Covenants of Osborne. Osborne agrees: (a) that he will deliver
copies to the Trust of monthly broker transaction reports that reflect any and
all transactions by the Osborne Investors in Shares; (b) that he will not take
any action that would result in distribution of Shares to members of the Fund;
and (c) that in the event the Osborne Investors receive any margin calls with
respect to such Shares, that Osborne will promptly notify the Trust and if the
Osborne Investors fail to meet the margin call, the Osborne Investors will take
the necessary action to allow the Trust to purchase any Shares subject to such
margin calls at the then-current market price, to the extent that the Osborne
Investors do not meet such margin calls.
9. Specific Enforcement. Each of the Trust, on the one hand, and each
of the Osborne Investors, on the other, acknowledges and agrees that the other
would not have an adequate remedy at law and would be irreparably harmed in the
event that any of the material provisions of this Agreement were not performed
in accordance with their specific terms or this Agreement were otherwise
materially breached. It is accordingly agreed that the Trust, on the one hand,
and the Osborne Investors, on the
- 6 -
7
other, shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to specifically enforce this Agreement and the material terms
and provisions hereof in any action instituted in any court of the United States
or any state thereof having subject matter jurisdiction, in addition to any
other remedy to which such party may be entitled, at law or in equity. Each
party hereby consents to personal jurisdiction in any such action brought in the
United States District Court for the Northern District of Ohio, or in any court
of the State of Ohio having subject matter jurisdiction, to service of process
upon them in the manner set forth in Section 14(c) hereof, to reasonable
expedited proceedings for injunctive and other relief, and hereby waives any
venue objections therein.
10. Term. This Agreement shall commence on the date hereof and shall
terminate on the tenth anniversary of the date hereof.
11. Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the subject matter hereof.
12. Limitation of Liability. Notwithstanding anything set forth herein
to the contrary, this Agreement is made and executed on behalf of the Trust, by
its officers on behalf of the Trustees thereof, and none of the Trustees or
officers or any additional or successor officers or Trustees or any beneficiary,
employee or agent of the Trust shall have any liability in their personal or
individual capacity, but instead the Osborne Investors shall look solely to the
real property or assets of the Trust for satisfaction of claims of any nature
arising under or in connection with this Agreement.
13. Limitation of Liability. Notwithstanding anything set forth herein
to the contrary, this Agreement is made and executed on behalf of the Fund, by
its officers, and Osborne, and none of the members of the Fund or any additional
or successor members of the Fund, except Osborne, shall have any liability in
their personal or individual capacity, but instead the Trust shall look solely
to the real property or assets of the Fund and Osborne for satisfaction of
claims of any nature arising under or in connection with this Agreement.
14. Miscellaneous.
(a) This Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the successors and permitted assigns
of the parties hereto (it being understood that no person who acquires
any Voting Securities from any of the Osborne Investors in a
transaction permitted by Section 6(g) hereof shall be bound by any
provision of this Agreement). Except as otherwise expressly provided
herein, this Agreement shall not be assignable.
(b) This Agreement may not be modified, amended, altered or
supplemented, except by a written instrument duly executed by each of
the parties hereto.
- 7 -
8
(c) Except as otherwise expressly provided herein, all notices,
requests, claims, demands and other communications hereunder shall be
in writing and shall be given (and shall be deemed to have been duly
given if so given) by personal delivery, cable, telegram or fax, or by
mail (registered or certified mail, postage prepaid, return receipt
requested) to the respective parties as follows:
If to any of the Osborne Investors, to:
Richard M. Osborne
7001 Center Street
Mentor, OH 44060
with a copy to:
Byron Krantz
Kohrman, Jackson & Krantz
20th Floor
One Cleveland Center
Cleveland, OH 44114
If to the Trust, to:
First Union Real Estate Equity & Mortgage Investments
55 Public Square
Suite 1900
Cleveland, OH 44113
Attention: James C. Mastandrea
Paul Levin
with a copy to:
Mary Ann Jorgenson
Squire, Sanders & Dempsey
4900 Society Center
127 Public Square
Cleveland, OH 44114
or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of change
of address shall be effective only upon receipt.
(d) This Agreement shall be governed by and construed in
accordance with the law of the State of Ohio.
- 8 -
9
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties hereto or their duly authorized officer or representative as of
the date and year first above written.
FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS
By: /s/ James C. Mastandrea
-------------------------------------
James C. Mastandrea
Chief Executive Officer and Chairman
STATE OF OHIO )
-------------------------
) SS:
COUNTY OF CUYAHOGA )
------------------------
PAUL F. LEVIN
I, ___________________________, a duly licensed Notary Public on
13th
and for said county and state, do hereby attest that on the ____ day of
December, 1995, personally appeared before me the above-named James C.
Mastandrea, Chief Executive Officer and Chairman of First Union Real Estate
Equity and Mortgage Investments, who acknowledged to me that he is duly
authorized to enter into the foregoing Settlement and Standstill Agreement on
behalf of First Union Real Estate Equity and Mortgage Investments; that he had
read the foregoing Settlement and Standstill Agreement; and that he was signing
it as his own free will and act; and who signed the said Settlement and
Standstill Agreement in my presence.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
as of the date set forth above.
/s/ Paul F. Levin
-------------------------
NOTARY PUBLIC
Paul F. Levin, Attorney at Law
My Commission Expires: Notary Public - State of Ohio
My commission has no expiration date.
Section 147.03 R.C.
- 9 -
10
RICHARD M. OSBORNE
/s/ Richard M. Osborne
-----------------------------------
STATE OF OHIO )
-------------------------
) SS:
COUNTY OF CUYAHOGA )
------------------------
ROBERT A. FUERST
I, ___________________________, a duly licensed Notary Public on
13th
and for said county and state, do hereby attest that on the ____ day of
December, 1995, personally appeared before me the above-named Richard M.
Osborne; who acknowledged to me that he had read the foregoing Settlement and
Standstill Agreement; and that he was signing it as his own free will and act;
and who signed the said Settlement and Standstill Agreement in my presence.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
as of the date set forth above.
/s/ Robert A. Fuerst
-------------------------
NOTARY PUBLIC
Robert A. Fuerst, Attorney
My Commission Expires: Notary Public - State of Ohio
My commission has no expiration date.
Section 147.03 R.C.
- 10 -
11
TURKEY VULTURE FUND XIII, LTD.
By: /s/ Richard M. Osborne
---------------------------------
Richard M. Osborne,
Managing Member
STATE OF OHIO )
-------------------------
) SS:
COUNTY OF CUYAHOGA )
------------------------
ROBERT A. FUERST
I, ___________________________, a duly licensed Notary Public on
13th
and for said county and state, do hereby attest that on the ____ day of
December, 1995, personally appeared before me the above-named Richard M.
Osborne, Managing Member of Turkey Vulture Fund XIII, Ltd., who acknowledged to
me that he is duly authorized to enter into the foregoing Settlement and
Standstill Agreement on behalf of Turkey Vulture Fund XIII, Ltd.; that he had
read the foregoing Settlement and Standstill Agreement; and that he was signing
it as his own free will and act; and who signed the said Settlement and
Standstill Agreement in my presence.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
as of the date set forth above.
/s/ Robert A. Fuerst
-------------------------
NOTARY PUBLIC
Robert A. Fuerst, Attorney
My Commission Expires: Notary Public - State of Ohio
My commission has no expiration date.
Section 147.03 R.C.
- 11 -
12
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
FIRST UNION REAL ESTATE EQUITY ) CIVIL ACTION NO. 1:95CV0274
AND MORTGAGE INVESTMENTS, )
) JUDGE LESLEY BROOKS WELLS
Plaintiff, ) (Magistrate Judge Streepy)
)
v. )
)
RICHARD M. OSBORNE, et al., )
)
Defendants. ) STIPULATION OF SETTLEMENT
) -------------------------
By and through their undersigned counsel, the parties hereto stipulate
and agree that all claims and counterclaims by each of them against any or all
of the others of them herein are hereby settled and dismissed with prejudice,
each party to bear its own costs.
Respectfully submitted,
--------------------------------------
Frances Floriano Goins (#0018631)
SQUIRE, SANDERS & DEMPSEY
4900 Society Center, 127 Public Square
Cleveland, Ohio 44114-1304
(216/479-8500)
Attorney for Plaintiff and
Counterclaim Defendants First Union Real
Estate Equity and Mortgage Investments
and J. C. Mastandrea
EXHIBIT 1
13
--------------------------------
Bryon S. Krantz (#00031431)
KOHRMAN, JACKSON & KRANTZ
One Cleveland Center, 20th Fl.
Cleveland, Ohio 44114
(216) 696-8700
Attorney for Defendants Richard M.
Osborne and Turkey Vulture Fund XIII,
Ltd.
IT IS SO ORDERED.
DATE:
-------------------- --------------------------------------------
UNITED STATES DISTRICT COURT JUDGE
- 2 -
14
IN THE COURT OF COMMON PLEAS
CUYAHOGA COUNTY, OHIO
RICHARD M. OSBORNE, et ano., ) CASE NO. 297673
)
Plaintiffs, ) JUDGE RICHARD J. McMONAGLE
)
v. )
)
JAMES C. MASTANDREA, et al., )
)
Defendants. ) STIPULATION OF SETTLEMENT
) -------------------------
By and through their undersigned counsel, the parties hereto stipulate
and agree that all claims herein are hereby settled and dismissed with
prejudice, each party to bear its own costs.
Respectfully submitted,
--------------------------------------
Byron S. Krantz (#00031431)
KOHRMAN, JACKSON & KRANTZ
One Cleveland Center, 20th Fl.
Cleveland, Ohio 44114
(216) 696-8700
Attorney for Plaintiffs
EXHIBIT 2
15
--------------------------------
Frances Floriano Goins (0018631)
SQUIRE, SANDERS & DEMPSEY
4900 Society Center, 127 Public Square
Cleveland, Ohio 44114-1394
(216/479-8500)
Attorney for Defendants
IT IS SO ORDERED.
DATE:
-------------------- --------------------------------------------
JUDGE