ACQUISITION AGREEMENT

 

 

                              ACQUISITION AGREEMENT

 

      THIS ACQUISITION AGREEMENT, dated as of November 7, 2005 (this

"Agreement"), is by and between Newkirk Realty Trust, Inc., a Maryland

corporation (the "Newkirk"), and First Union Real Estate Equity and Mortgage

Investments, an Ohio business trust ("First Union").

 

                                    RECITALS:

 

      WHEREAS, pursuant to that certain Exclusivity Services Agreement (the

"Exclusivity Agreement"), dated as of December 31, 2003, between First Union and

Michael L. Ashner ("Ashner"), Ashner is required to offer to First Union any

Business Opportunity (as defined in the Exclusivity Agreement) offered to him

during the period that he is serving as either an executive officer First Union

or as a member of the Board of Trustees of First Union;

 

      WHEREAS, Ashner is a director and executive officer of Newkirk;

 

      WHEREAS, Newkirk is simultaneously herewith making an initial public

offering of its shares of common stock, par value $.01 (the "Common Stock")

pursuant to a registration statement on Form S-11 filed by Newkirk (the

"Registration Statement") with the Securities and Exchange Commission and, in

connection therewith, desires to acquire from First Union certain rights

presently held by First Union pursuant to the Exclusivity Agreement in exchange

for shares of Common Stock;

 

      NOW, THEREFORE, in consideration of the foregoing and of the respective

covenants and undertakings hereunder and for other good and valuable

consideration, the receipt and adequacy of which are hereby acknowledged,

intending to be legally bound, the parties hereto do hereby agree as follows:

 

                                    ARTICLE I

                                   DEFINITIONS

 

      Section 1.01. Definitions. As used in this Agreement, the following terms

have the meanings set forth below.

 

      "Advisor" shall mean NKT Advisors LLC, a Delaware limited liability

company.

 

      "Advisory Agreement" shall mean that certain Advisory Agreement dated

November 7, 2005, between Newkirk, the Operating Partnership and the Advisor.

 

      "Affiliate" shall mean (a) with respect to an individual, any member of

such individual's family residing in the same household; (b) with respect to an

entity: (i) any executive officer, director, partner or Person that owns ten

percent (10%) or more of the outstanding beneficial interest of or in such

entity, or (ii) any brother, sister, brother-in-law, sister-in-law, lineal

descendant or ancestor of any executive officer, director, partner or Person

that owns ten percent (10%) or more of the outstanding beneficial interest of or

in such entity; and (c) with respect to a Person, any Person which directly or

indirectly, through one or more intermediaries, controls, is controlled by, or

is under common control with such Person or entity; provided, however, that for

purposes of the definition of "Affiliate," First Union shall not be deemed an

"Affiliate" of Newkirk.

 

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      "Agreement" shall have the meaning set forth in the preamble.

 

      "Basket" shall have the meaning set forth in Section 11.03.

 

      "Business Day" shall mean any day other than (i) a Saturday, (ii) a Sunday

or (iii) any other day on which banks in the City of New York are authorized or

required to close.

 

      "By-Laws" shall mean, when used with respect to a specified Person, the

by-laws of a Person, as the same may be amended from time to time.

 

      "Capital Stock" shall mean, with respect to any Person, any and all

shares, shares of beneficial interest, interests, participations, rights in or

other equivalents (however designated and whether voting or non-voting) of such

Person's capital stock or any form of membership, ownership or participation

interests, as applicable, including partnership interests, whether now

outstanding or hereafter issued and any and all securities, debt instruments,

rights, warrants or options exercisable or exchangeable for or convertible into

such capital stock.

 

      "Closing" shall have the meaning set forth in Section 2.03(a).

 

      "Closing Date" shall have the meaning set forth in Section 2.03(a).

 

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

 

      "Common Stock" shall have the meaning set forth in the Recitals.

 

      "Company Subsidiaries" and "Company Subsidiary" shall mean all of the

subsidiaries of the Company as set forth on Exhibit 21 of the Registration

Statement.

 

      "Consents" shall mean all governmental and third party consents,

approvals, authorizations, qualifications and waivers necessary to be received

by a Person for the consummation of the transaction contemplated by the

Agreement.

 

      "Contract" shall mean any legally binding contract, agreement, mortgage,

deed of trust, bond, loan, indenture, lease, license, note, option, warrant,

right, instrument, commitment or other similar document, arrangement or

agreement, whether written or oral.

 

      "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,

and the rules and regulations of the SEC promulgated thereunder.

 

      "Forfeiture Event" shall mean (i) the termination of the Advisory

Agreement by Newkirk for Cause (as defined in the Advisory Agreement), (ii)

Michael L. Ashner's resignation as the Chief Executive Officer and director of

Newkirk and the Advisor, or (iii) the death or disability of Michael L. Ashner

unless the other members of the Advisor's senior management at such time remain

in such positions.

 

 

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      "GAAP" shall mean generally accepted accounting principles applied on a

consistent basis as used in the United States of America.

 

      "Governmental Body" shall mean any government or governmental or

quasi-governmental authority including, without limitation, any federal, state,

territorial, county, municipal or other governmental or quasi-governmental

agency, board, branch, bureau, commission, court, arbitral body (public or

private), department or other instrumentality or political unit or subdivision,

whether located in the United States or abroad, the National Association of

Securities Dealers, Inc., the New York Stock Exchange, the Nasdaq National

Market, the Nasdaq SmallCap Market or the American Stock Exchange.

 

      "Indemnitee" shall have the meaning set forth in Section 10.01.

 

      "Indemnitor" shall have the meaning set forth in Section 10.01.

 

      "Law" shall mean any treaty, statute, ordinance, code, rule, regulation,

Order or other legal requirement enacted, adopted, promulgated, applied or

followed by any Governmental Body.

 

      "Legal Proceeding" shall mean any judicial, administrative or arbitral

actions, suits, proceedings (public or private) or governmental proceedings.

 

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

 

      "Lien" shall mean any mortgage, pledge, lien (statutory or otherwise),

security interest, hypothecation, conditional sale agreement, encumbrance or

similar restriction or agreement.

 

      "Lock-up Agreement" shall have the meaning ascribed thereto in the

Securities Purchase Agreement.

 

      "Loss" shall have the meaning set forth in Section 10.01.

 

      "Material Adverse Effect" shall mean any event, condition or contingency

that has had, or is reasonably likely to have, a material adverse effect on (i)

the assets, business, condition (financial or otherwise), results of operations,

stockholders' equity, properties or prospects of Newkirk, the Operating

Partnership, Newkirk REIT Advisor LLC, a Delaware limited liability company (the

"Manager") and the Company Subsidiaries, taken as a whole; (ii) the long-term

debt or capital stock of Newkirk, the Operating Partnership, the Manager or any

Company Subsidiary; or (iii) the offering contemplated by the Registration

Statement or consummation of any of the other transactions contemplated by this

Agreement, the Registration Statement or the Prospectus.

 

      "Net Lease Assets" shall mean (i) a property that is either (a) triple net

leased or (b) where a tenant leases at least 85% of the rentable square footage

of the property and, in addition to base rent, the tenant is required to pay

some or all of the operating expenses for the property, and, in both (a) and (b)

the lease has a remaining term, exclusive of all unexercised renewal terms, of

more than 18 months, (ii) management agreements and master leases with terms of

greater than three years where a manager or master lessee bears all operating

expenses of the property and pays the owner a fixed return, (iii) securities of

 

 

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companies including, without limitation, corporations, partnerships and limited

liability companies, whether or not publicly traded, that are primarily invested

in assets that meet the requirements of clauses (i) and (ii), and (iv) all

retenanting and redevelopment associated with such properties, agreements and

leases, and all activities incidental thereto.

 

      "Notice" shall have the meaning set forth in Section 10.02(a).

 

      "NYSE" shall mean the New York Stock Exchange.

 

      "Offering" shall mean the offering and sale of the Shares contemplated by

the Registration Statement and Prospectus.

 

      "Operating Partnership" shall mean The Newkirk Master Limited Partnership,

a Delaware limited partnership.

 

      "Order" shall mean any order, injunction, judgment, decree, ruling, writ,

assessment or arbitration award.

 

      "Person" shall mean any individual, corporation, partnership, firm,

limited liability company, joint venture, trust, association, unincorporated

organization, group, joint-stock company, Governmental Body or other entity.

 

      "Prospectus" shall mean the prospectus, in the form in which it is to be

filed with the SEC pursuant to Rule 424(b), or, if the prospectus is not to be

filed with the SEC pursuant to Rule 424(b), the prospectus in the form included

as part of the Registration Statement at the time the Registration Statement

becomes effective.

 

      "Purchase Price" shall have the meaning set forth in Section 2.02.

 

      "Qualified Institutional Buyer" shall mean a Person that is a "qualified

institutional buyer" within the definition contained in Rule 144A under the

Securities Act.

 

      "Registration Rights Agreement" shall mean that certain Registration

Rights Agreement, dated of even date herewith, between Newkirk and First Union.

 

      "Registration Statement" shall have the meaning set forth on the Recitals.

 

      "Reversion Event" shall mean (i) the termination or non-renewal of the

Advisory Agreement or (ii) Michael L. Ashner's resignation as the Chief

Executive Officer and director of Newkirk and the Advisor.

 

      "SEC" shall mean the U.S. Securities and Exchange Commission.

 

      "Securities Act" shall mean the Securities Act of 1933, as amended, and

the rules and regulations of the SEC promulgated thereunder.

 

 

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      "Securities Purchase Agreement" shall mean that certain Securities

Purchase Agreement, dated of even date herewith, among Newkirk and First Union.

 

      "Shares" shall mean the shares of Common Stock issued to First Union

pursuant to the terms hereof.

 

      "Subsidiary" shall mean, as to any Person, any other Person more than 50%

of the shares of the voting stock, voting interests, membership interests or

partnership interests of which are owned or controlled, or the ability to select

or elect more than 50% of the directors or similar managers is held, directly or

indirectly, by such first Person or one or more of its Subsidiaries or by such

first Person and one or more of its Subsidiaries.

 

      "Vesting Event" shall mean (i) the termination of the Advisory Agreement

by the Advisor following a breach by Newkirk of the Advisory Agreement that

remains uncured by Newkirk, (ii) the non-renewal of the Advisory Agreement, or

(iii) termination of the Advisory Agreement by Newkirk other than for Cause (as

defined in the Advisory Agreement).

 

      Section 1.02. Rules of Construction. Unless the context otherwise

requires:

 

            (a) an accounting term defined by GAAP that is not otherwise defined

herein has the meaning assigned to it in accordance with GAAP;

 

            (b) "or" is not exclusive;

 

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

plural include the singular;

 

            (d) the words "include" and "including" shall be deemed to mean

"include, without limitation," and "including, without limitation";

 

            (e) "herein," "hereof," "hereto," "hereunder" and other words of

similar import refer to this Agreement as a whole and not to any particular

article, section, paragraph or clause where such terms may appear;

 

            (f) references to sections mean references to such section in this

Agreement, unless stated otherwise; and

 

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

 

                                   ARTICLE II

                    ASSIGNMENT OF RIGHTS; ISSUANCE OF SHARES

 

      Section 2.01. Assignment of Rights. Upon the terms and subject to the

conditions of this Agreement, First Union shall sell, assign, convey and

transfer to Newkirk all of First Union's right, title and interest under the

Exclusivity Agreement solely with respect to Net Lease Assets (the "Exclusivity

Assignment"), free and clear of any lien or other encumbrance.

 

 

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      Section 2.02. Purchase Price. In consideration of the assignment provided

for in Section 2.01 hereof, Newkirk shall issue to First Union shares of Common

Stock having a value of $20,000,000 (the "Purchase Price"), based on a purchase

price per share equal to the initial public offering price of the Common Stock

sold to the public pursuant to the Registration Statement.

 

      Section 2.03. Closing.

 

            (a) Subject to the satisfaction or waiver of the conditions set

forth in this Agreement, the closing of the transaction contemplated by Sections

2.01 and 2.02 (the "Closing") shall take place simultaneously with the closing

of Newkirk's initial public offering, or at such other time as may be mutually

agreed upon by First Union and Newkirk (the "Closing Date"). The Closing shall

occur on the Closing Date at the offices of Katten Muchin Rosenman, 575 Madison

Avenue, New York, New York.

 

            (b) At the Closing: (i) Newkirk will deliver to First Union (x) a

certificate for the Shares registered in the name of First Union and (y) legal

opinions of counsel to Newkirk addressed to First Union, satisfactory to counsel

to First Union (the "Newkirk Counsel Opinions"); (ii) First Union, in full

payment for the Shares, will execute and deliver to Newkirk an assignment in

form and substance reasonably satisfactory to Newkirk to evidence the

Exclusivity Assignment ; and (iii) each party shall take or cause to happen such

other actions, and shall execute and deliver such other instruments or

documents, as shall be required under Article VIII.

 

                                   ARTICLE III

                    REPRESENTATIONS AND WARRANTIES OF NEWKIRK

 

           Newkirk represents and warrants to First Union as follows:

 

      Section 3.01. Organization and Good Standing. Each of Newkirk, the

Operating Partnership and the Subsidiaries has been duly organized and validly

exists as a corporation, partnership, limited partnership or limited liability

company in good standing under the laws of its jurisdiction of organization.

Each of Newkirk, the Operating Partnership and Newkirk Subsidiaries has all

requisite power and authority to carry on its business as it is currently being

conducted and as described in the Prospectus, and to own, lease and operate its

respective properties. Each of Newkirk, the Operating Partnership and the

Company Subsidiaries is duly qualified to do business and is in good standing as

a foreign corporation, partnership, limited partnership or limited liability

company in each jurisdiction in which the character or location of its

properties (owned, leased or licensed) or the nature or conduct of its business

makes such qualification necessary, except for those failures to be so qualified

or in good standing which (individually and in the aggregate) could not

reasonably be expected to have a Material Adverse Effect. Newkirk has heretofore

delivered or made available to First Union complete and correct copies of the

Articles of Incorporation of Newkirk, as amended to date (the "Articles of

Incorporation").

 

      Section 3.02. Authority; Binding Effect. Newkirk has the full right, power

and authority to execute and deliver this Agreement, to perform its obligations

hereunder and to consummate the transactions contemplated by this Agreement, the

Registration Statement and the Prospectus. This Agreement and the transactions

 

 

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contemplated by this Agreement, the Registration Statement and the Prospectus

have been duly and validly authorized by Newkirk. This Agreement has been duly

and validly executed and delivered by Newkirk. This Agreement constitutes the

legal, valid and binding obligation of Newkirk, enforceable in accordance with

its terms, except as such enforceability may be subject to the effects of any

applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,

moratorium or similar Laws affecting creditors' rights generally and subject to

the effects of general equitable principles

 

      Section 3.03. Organization and Good Standing of Company Subsidiaries.

Newkirk Subsidiaries constitute all of the Subsidiaries of Newkirk and the

Operating Partnership. Each of Newkirk, the Operating Partnership and the

Company Subsidiaries has all necessary consents, approvals, authorizations,

orders, registrations, qualifications, licenses, filings and permits of, with

and from all judicial, regulatory and other legal or governmental agencies and

bodies and all third parties, foreign and domestic (collectively, the

"Consents"), to own, lease and operate its properties and conduct its business

as it is now being conducted and as disclosed in the Registration Statement and

the Prospectus except where the failure to obtain such consents would not have a

Material Adverse Effect, and each such Consent is valid and in full force and

effect, and none of Newkirk, the Operating Partnership nor any Company

Subsidiary has received notice of any investigation or proceedings which results

in or, if decided adversely to Newkirk, the Operating Partnership or any Company

Subsidiary, could reasonably be expected to result in, the revocation of, or

imposition of a materially burdensome restriction on, any Consent. Each of

Newkirk, the Operating Partnership and the Company Subsidiaries is in compliance

with all applicable laws, rules, regulations, ordinances, directives, judgments,

decrees and orders, foreign and domestic, except where failure to be in

compliance could not reasonably be expected to have a Material Adverse Effect.

No Consent contains a materially burdensome restriction not adequately disclosed

in the Registration Statement and the Prospectus.

 

      Section 3.04. Capitalization. The capitalization table set forth in the

Registration Statement and Prospectus accurately sets forth as of the date

indicated therein, (i) the authorized capitalization of Newkirk, the number of

shares of each class issued and outstanding and the number of shares reserved

for issuance in connection with Newkirk's stock option plans, and (ii) all

options, warrants, convertible securities, rights to subscribe to, calls,

contracts, undertakings, arrangements and commitments to issue which may result

in the issuance of stock of Newkirk. All of the issued and outstanding shares of

Newkirk's Capital Stock have been duly and validly authorized and issued and are

fully paid and non-assessable and are not subject to any preemptive rights. No

securities of Newkirk are entitled to preemptive or similar rights, and no

person has any right of first refusal, preemptive right, right of participation,

or any similar right to participate in the transaction contemplated by this

Agreement. All of the issued partnership interests, shares of capital stock of

or other ownership interests in the Operating Partnership and in each Company

Subsidiary have been duly and validly authorized and issued and are fully paid

and non-assessable and (except as otherwise set forth in the Prospectus) at the

Closing will be owned directly or indirectly by Newkirk (in the case of the

Operating Partnership) or by the Operating Partnership or a Company Subsidiary,

free and clear of any Lien, charge, mortgage, pledge, security interest, claim,

equity, trust or other encumbrance, preferential arrangement, defect or

restriction of any kind whatsoever.

 

 

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      Section 3.05. No Violations; Consents. Neither the execution, delivery or

performance by Newkirk of this Agreement nor the consummation of the transaction

contemplated hereby, will (a) conflict with, or result in the breach of, any

provision of the organizational documents of Newkirk, the Operating Partnership

or any Company Subsidiary, (b) conflict with, violate, result in the breach or

termination of, or constitute a default or give rise to any right of

termination, amendment, cancellation or acceleration or right to increase the

obligations or otherwise modify the terms thereof under any Contract or Order to

which Newkirk, the Operating Partnership or any Company Subsidiary is a party or

by which Newkirk or any Company Subsidiary or any of the properties or assets of

Newkirk, the Operating Partnership or any Company Subsidiary is bound, (c)

constitute a violation of any Law applicable to Newkirk, the Operating

Partnership or any Company Subsidiary; or (d) result in the creation of any Lien

upon the properties or assets of Newkirk, the Operating Partnership or any

Company Subsidiary. Except for the approval of the NYSE referred to in Section

6.01(c) and the declaration by the SEC of the effectiveness of the Registration

Statement, no Consent is required on the part of Newkirk, the Operating

Partnership or the Company Subsidiaries in connection with the execution and

delivery of this Agreement and the consummation of the transaction contemplated

hereby, including the issuance, sale and deliver of the Shares to be issued,

sold and delivered hereunder.

 

      Section 3.06. Listing. Newkirk has applied to have its shares of Common

Stock listed on the NYSE.

 

      Section 3.07. Financial Statements. The pro forma financial statements,

financial statement schedules and pro forma data set forth in the Registration

Statement and Prospectus accurately reflect the books and records of Newkirk and

the Operating Partnership and present fairly, in all material respects, the

financial position of Newkirk and the Operating Partnership and the Company

Subsidiaries and the results of their operations and their cash flows for the

period and date covered thereby, in conformity with GAAP, except for changes

resulting from year-end adjustments (none of which will be material in amount).

The assumptions used in preparing the pro forma and financial information

included in the Registration Statement and the Prospectus provide a reasonable

basis for presenting the significant effects directly attributable to the

transactions or events described therein.

 

      Section 3.08. Commission Filings. The Operating Partnership has filed all

reports, registration statements, proxy statements and other materials, together

with any amendments required to be made with respect thereto, that were required

to be filed with the SEC under the Securities Act or the Exchange Act from and

after January 1, 2002 (all such reports and statements are collectively referred

to herein as the "Commission Filings"). As of their respective dates, the

Commission Filings, including the financial statements contained therein,

complied in all material respects with all of the statutes and published rules

and regulations enforced or promulgated by the regulatory authority with which

the Commission Filings were filed, and, except to the extent the information in

any Commission Filing has been revised or superseded by a later filed Commission

Filing, did not and do not as of the date hereof contain any untrue statement of

a material fact or omit to state any material fact required to be stated therein

or necessary in order to make the statements therein, in the light of the

circumstances under which they were made, not misleading. The financial

statements of the Operating Partnership included in the Commission Filings

comply in all material respects with applicable accounting requirements and the

rules and regulations of the SEC with respect thereto as in effect at the time

of filing.

 

 

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      Section 3.09. Absence of Certain Developments. Except as specifically

disclosed in the Commission Filings, since December 31, 2004 and as of the date

hereof no event or series of events has occurred which could reasonably have a

Material Adverse Effect.

 

      Section 3.10. Litigation. There are no Legal Proceedings pending or, to

the knowledge of Newkirk, threatened, that question the validity of this

Agreement or the transaction contemplated hereby or any action taken or to be

taken by Newkirk, the Operating Partnership or any Company Subsidiary in

connection with the consummation of the transaction contemplated hereby. There

are no material Legal Proceedings pending or, to the knowledge of Newkirk,

threatened, against or involving Newkirk, the Operating Partnership or any

Company Subsidiary or any of their respective properties or assets, at Law or in

equity which in the aggregate could reasonably have a Material Adverse Effect.

There is no outstanding or, to the knowledge of Newkirk, threatened, Order of

any Governmental Body against Newkirk, the Operating Partnership or any Company

Subsidiary or any of their respective properties or assets, which Order could

reasonably have a Material Adverse Effect.

 

      Section 3.11. Compliance with Laws. Newkirk, the Operating Partnership and

the Company Subsidiaries are in compliance in all material respects with all

Laws and Orders promulgated by any Governmental Body applicable to Newkirk, the

Operating Partnership and the Company Subsidiaries or to the conduct of the

business or operations of Newkirk, the Operating Partnership and the Company

Subsidiaries or the use of their p