ATRIUM EUROPEAN REAL ESTATE LIMITED

Transcription

1 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document or the action you should take, you are recommended to seek immediately your own personal financial advice from your independent financial adviser, stockbroker, bank manager, solicitor, accountant or from another appropriately qualified and duly authorised independent adviser. If you have sold or otherwise transferred all of your Shares in Atrium European Real Estate Limited (the Company or Atrium ) please send this document and the accompanying documents at once to the purchaser or transferee or to the stockbroker, banker or other agent through whom the sale or transfer was effected for onward transmission to the purchaser or transferee. The Ordinary Shares of the Company are admitted to trading and listing on Euronext Amsterdam by NYSE Euronext ("Euronext Amsterdam"), and to trading and listing on the Vienna Stock Exchange (the "VSE"). ATRIUM EUROPEAN REAL ESTATE LIMITED (a company incorporated with limited liability under the Companies (Jersey) Law 1991, as amended, with registered number and registered with the Dutch Authority for the Financial Markets as a closed-ended investment scheme) Extraordinary General Meeting Approval of amendments to the Company s articles of association, conversion to a no par value company, payment of a dividend from stated capital and reduction of capital and authorisation of own-share purchases The Proposals described in this document are conditional on certain Shareholder approvals being obtained at the Extraordinary General Meeting. Notice of the Extraordinary General Meeting to be held at 12 noon (Jersey time) on 2 October 2009 at Hotel de France, St. Saviour's Road, St. Helier, Jersey, JE1 7XP is set out at the end of this document. Shareholders holding Special Voting Shares who wish to attend or to exercise the voting rights attached to their Special Voting Shares are requested to return the Form of Proxy accompanying the Circular for use at the Extraordinary General Meeting. To be valid, a Form of Proxy must be completed and returned in accordance with the instructions printed thereon to the Company as soon as possible, but in any event so as to be received not later than 12 noon (Jersey time) on 30 September Shareholders who hold their interests in Ordinary Shares through a financial institution which is a participant (aangesloten instelling) in Euroclear Nederland as defined in the Dutch Securities Giro Act (Wet giraal effectenverkeer) (i.e. an admitted institution of Euroclear Netherlands) and who wish to attend or to exercise the voting rights attached to those Shares at the Extraordinary General Meeting should send the Form of Proxy available from the Company s website, to their account holding bank or broker. Their account holding bank or broker will (via an admitted institution) be required to forward the completed Form of Proxy with a confirmation to Kempen & Co N.V. (either by to proxyvoting@kempen.nl or by fax to: ) by 4.30 p.m. (Amsterdam time/c.e.t.) on 28 September 2009, after which such Shareholder will receive an attendance ticket and proxy card. Only those persons holding interests in Shares via an admitted institution of Euroclear Netherlands as of 12 noon (Jersey time) on 30 September 2009 or, if the Extraordinary General Meeting is adjourned, as at 48 hours before the time of such adjourned meeting, shall, in accordance with the Articles, be entitled to attend or exercise the voting rights attaching to such Shares at the Extraordinary General Meeting. Persons who, prior to the listing of the Ordinary Shares on Euronext Amsterdam and the VSE in August 2009, held Austrian depositary certificates representing the Ordinary Shares will now, absent any further action on their part, hold interests in Ordinary Shares through Euroclear Netherlands and will be required to follow this procedure to attend or exercise voting rights at the Extraordinary General Meeting. Your attention is drawn to the letter from the Chairman of the Company which is set out in Part I of this Circular and which recommends that you vote in favour of the Resolutions. Your attention is also drawn to the section entitled Action to be Taken in Part I of this Circular.

2 CONTENTS Page Expected Timetable of Events 3 Part I Letter from the Chairman 5 Part II Letter from the Chairman of the Independent Committee 11 Part III Changes to the Relationship Agreement 13 Part IV Proposed Amendments to the Articles 15 Part V Additional Information 17 Part VI Definitions 18 Notice of Extraordinary General Meeting 20 Page 2

3 EXPECTED TIMETABLE OF EVENTS Last time for account holding banks or brokers to return (via an admitted institution) to Kempen & Co N.V. Forms of Proxy of holders of Ordinary Shares indicating such holders intention to attend and/or vote at the Extraordinary General Meeting Last time for submission of Forms of Proxy to the Company by holders of Special Voting Shares 4.30 p.m. (Amsterdam time/c.e.t.) on 28 September noon (Jersey time) on 30 September 2009 Extraordinary General Meeting 12 noon (Jersey time) on 2 October 2009 Closing of the Exchange Transaction During the fourth quarter of 2009 Record date for the Special Dividend Payment date for the Special Dividend Commencement of payment of the Annual Dividend Launch of the proposed partial tender offer for the 2006 Notes The first Business Day following closing of the Exchange Transaction Within 30 Business Days of closing of the Exchange Transaction (conditional, among other things, on closing of the Exchange Transaction) During the fourth quarter of 2009 (conditional, among other things, on closing of the Exchange Transaction) Following closing of the Exchange Transaction The above dates and times are subject to change. Page 3

4 IMPORTANT INFORMATION This Circular is being furnished to existing Shareholders in connection with the Extraordinary General Meeting of the Company. This Circular is individually directed to existing Shareholders and does not constitute an offer to any person or to the public generally to subscribe for or otherwise acquire any securities of the Company. You must not treat the contents of this Circular or any subsequent communications from the Company or any of its affiliates, officers, directors, employees or agents as advice relating to legal, tax, accounting, regulatory, investment or any other matters. Shareholders must rely upon their own representatives, including their own legal, tax, accounting, regulatory and investment advisers, as to legal, tax, accounting, regulatory, investment or any other related matters concerning the Proposals and the Resolutions. Atrium is established as a closed-end investment company domiciled in Jersey. Atrium is registered with the Dutch Authority for the Financial Markets as a collective investment scheme which may offer participations in The Netherlands pursuant to article 2:66 of the Financial Supervision Act (Wet op het financieel toezicht). All investments are subject to risk. Past performance is no guarantee of future returns. The value of investments may fluctuate. Results achieved in the past are no guarantee of future results. STATEMENTS REGARDING FORWARD-LOOKING INFORMATION This Circular includes statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms believes, estimates, anticipates, expects, intends, may, will or should or, in each case their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical facts. They appear in a number of places throughout this Circular and include statements regarding the intentions, beliefs or current expectations of the Company and its subsidiaries (together with the Company, the Group ). By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. You should assume, unless otherwise stated, that the information appearing in this Circular is current only as of 17 September 2009, being the latest practicable date prior to publication of this document. The business, financial condition, results of operations and prospects of the Company or the Group may change. Except as required by law or applicable regulation, the Company and the Group do not undertake any obligation to update any forward-looking statements, even though the situation of the Company or the Group may change in the future. All of the information presented in this Circular, and particularly the forward-looking statements, is qualified by these cautionary statements. You should read this Circular and the documents available for inspection completely and with the understanding that actual future results of the Company or the Group may be materially different from what the Company or the Group expects. Page 4

5 PART I LETTER FROM THE CHAIRMAN ATRIUM EUROPEAN REAL ESTATE LIMITED (a company incorporated with limited liability under the Companies (Jersey) Law 1991, as amended, with registered number and registered with the Dutch Authority for the Financial Markets as a closed-ended investment scheme) Directors: Chaim Katzman (Chairman) Peter Baguley Michael Bar Haim Rachel Lavine Peter Linneman Simon Radford Dipak Rastogi Shanti Sen Thomas William Wernink Andrew Wignall Registered office: Seaton Place St Helier Jersey JE4 0QH 17 September 2009 EXTRAORDINARY GENERAL MEETING Approval of amendments to the Company s articles of association, conversion to a no par value company, payment of a dividend from stated capital and reduction of capital and authorisation of own-share purchases Dear Shareholder, On 3 September 2009, the Company announced proposals to strengthen its balance sheet, reduce its debt, increase its equity and improve its corporate governance consistent with its previously stated and on-going strategy. The Proposals are conditional on the approval of certain resolutions by shareholders at an extraordinary general meeting. This Circular accompanies the notice of the Extraordinary General Meeting, which has been convened for this purpose and provides information on the Proposals and the resolutions to be proposed at the Extraordinary General Meeting. In addition, the Company is also taking the opportunity to seek approval at the Extraordinary General Meeting of the Company becoming a no par value company in order to facilitate the issue of new shares and to seek a new own-share purchase authority which takes into account that the Ordinary Shares are now listed on both the VSE and Euronext Amsterdam. The Proposals The Proposals consist of a number of elements. First, the Company has agreed an exchange transaction (the Exchange Transaction ) with CPI CEE Management LLC ( CPI ) and Gazit Midas Limited ( Gazit and together with CPI and their respective affiliates, the Investors ). Pursuant to the Exchange Transaction, the Company will issue in aggregate 144,853,705 new Ordinary Shares and pay approximately 9.3 million in cash to the Investors in exchange for: the outstanding million in principal amount of the Company s % subordinated convertible securities held by the Investors (the Convertible Bonds ); the outstanding 4,933,333 warrants to subscribe for Ordinary Shares held by the Investors (the Warrants ); Page 5

6 the removal and reduction of certain significant rights held by CPI and Gazit under the relationship agreement entered into at the time of the Investors original investment in the Company (the Relationship Agreement ); and the outstanding 8,043 special voting shares issued to the Investors in connection with the issue of Convertible Bonds (the Special Voting Shares ). Second, following closing of the Exchange Transaction ( Closing ), Atrium proposes to: make a partial tender offer for the notes issued under the Company s 2006 guaranteed medium term note programme (the 2006 Notes ) at 95% up to a maximum amount of 120 million in principal amount; pay a special dividend to Shareholders of 0.50 per Ordinary Share (the Special Dividend ); and commence a dividend policy of payment of a dividend of 0.12 per Ordinary Share per year (subject to any legal and regulatory requirements and restrictions and commercial viability), payable in quarterly instalments (the Annual Dividend ). The Board has approved the Proposals on the unanimous recommendation of a committee comprising the Company s independent directors (being the members of the Board who have not been nominated and appointed by the Investors pursuant to the Articles), chaired by Dr Peter Linneman and advised by Kempen & Co Corporate Finance B.V.. Directors appointed by the Investors did not participate in the vote of the Board approving the Proposals. A letter from Dr. Linneman regarding the background to, and benefits for the Company of, the Proposals is set out in Part II of this Circular. As described in more detail below, Closing is conditional on the obtaining of certain shareholder approvals at the Extraordinary General Meeting. Closing is also subject to the obtaining of applicable anti-trust clearances. The Company expects that, subject to obtaining the relevant approvals and clearances, Closing will occur by 31 December The Investors, who as at 16 September 2009 (being the last practicable date prior to publication of this Circular) who currently hold in aggregate approximately 30.2% of the voting rights of the Company, have committed to vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting. On Closing, based on the information available at 16 September 2009, the Investors will in aggregate own approximately 49.0% of the Ordinary Shares, carrying approximately 49.0% of the voting rights in the Company. Further details regarding the Exchange Transaction The Company has agreed with the Investors to exchange the outstanding million in principal amount of the Convertible Bonds and 4,933,333 Warrants held by the Investors for an aggregate consideration of 144,853,705 new Ordinary Shares and approximately 9.3 million in cash. The Company will pay interest on the Convertible Bonds until the earlier of 30 September 2009 and Closing. As part of the exchange, the outstanding 8,043 Special Voting Shares held by the Investors will be repurchased by the Company for a nominal consideration and cancelled. The new Ordinary Shares to be issued to the Investors in the Exchange Transaction will be subject to a six month lock up from the date of Closing, subject to customary exceptions including the pledge of the Shares as security. The Company intends to apply for the new Ordinary Shares to be listed on the VSE and Euronext Amsterdam. Amendments to the Relationship Agreement and the Articles As part of the Exchange Transaction, the Investors have agreed to the removal or reduction of many of the consent rights contained in the Relationship Agreement, in order to enhance the Board s autonomy. The Company and the Investors have entered into an amended Relationship Agreement which, conditional on Closing, will replace the existing Relationship Agreement. It is also proposed that, conditional and effective upon Closing, certain changes are made to the Articles to implement the terms of the Exchange Transaction. Page 6

7 In particular, the existing rights of the Investors under the Articles to appoint certain directors be removed and replaced with new rights to appoint certain directors to reflect the fact that they will hold only Ordinary Shares. The existing rights of the Investors under the Articles to appoint certain directors and officers will be terminated and new rights will be given to the Investors to reflect the fact that they will hold only Ordinary Shares, so that they may appoint: four directors for so long as they hold in aggregate at least 80,000,000 Ordinary Shares; three directors for so long as they hold in aggregate at least 60,000,000 Ordinary Shares; two directors for so long as they hold in aggregate at least 40,000,000 Ordinary Shares; and one director for so long as they hold in aggregate at least 20,000,000 Ordinary Shares. In addition, the Investors may determine the chairman of the Board and a majority of the nomination committee for so long as they hold an aggregate of at least 55,000,000 Ordinary Shares. Further, certain of the rights reserved to the Investors pursuant to the Relationship Agreement, in particular in relation to material changes to the business of the Company and the Group and the issue of new Shares by the Company and the Group, will now become matters for a decision of Shareholders as a whole pursuant to the Articles. Amendments to the Articles are also being proposed in connection with the resolution to make the Company a no par value company, as described further below. These other amendments would become effective following the Extraordinary General Meeting. A summary of the changes to the Relationship Agreement and the proposed amendments to the Articles are included in Part III and Part IV of this Circular respectively. Special Dividend Subject to Closing, the Company proposes to pay the Special Dividend to the holders of its Ordinary Shares of 0.50 per Ordinary Share. The record date for the entitlement to the Special Dividend and the payment date will be set and announced after Closing. The record date is expected to be the first Business Day following Closing and the payment date is expected to occur no more than 30 Business Days following the date of Closing. The new Ordinary Shares to be issued to the Investors and all other Ordinary Shares in issue on the record date will be entitled to the Special Dividend. Payment of the Special Dividend will be subject to the restrictions on distributions imposed on the Company by the Jersey Companies Law. In particular, the Company is not allowed to make a distribution unless it satisfies a statutory solvency test, which requires that the Directors who are to authorise the distribution have formed the opinion that: (a) (b) immediately following the date on which the distribution is proposed to be made, the Company will be able to discharge its liabilities as they fall due; and having regard to (i) the prospects of the Company and to the intentions of the Directors with respect to the management of the Company s business and (ii) the amount and character of the financial resources that will in their view be available to the Company, the Company will be able to (A) (B) continue to carry on business, and discharge its liabilities as they fall due, until the expiry of the period of 12 months immediately following the date on which the distribution is proposed to be made or until the Company is dissolved, whichever occurs first. Payment of the Special Dividend is intended to be made from the Company s capital reserves and a resolution to approve payment of the Special Dividend from the Company s stated capital is being proposed at the Extraordinary General Meeting. Closing of the Exchange Transaction is conditional on this approval being obtained. Page 7

8 It should be noted that payment of the Special Dividend is conditional on Closing. Dividend policy and payment of Annual Dividend Subject to Closing, the Company intends, with effect from the fourth quarter of 2009, and subject to legal and regulatory requirements and restrictions (as described in the section headed Special Dividend above) and commercial viability, to distribute 0.12 per ordinary share per year payable in quarterly instalments to the holders of its Ordinary Shares. This Annual Dividend will be subject to future review and, if appropriate, modification. Payment of the first four quarterly instalments of the Annual Dividend is expected to be made from the Company s capital reserves and a resolution to approve payment of those four instalments out of the Company s stated capital is being proposed at the Extraordinary General Meeting. It should be noted that commencement of the payment of the Annual Dividend is conditional on Closing. Partial tender offer for the 2006 Notes The Company intends to launch a partial tender offer for the 2006 Notes at a price of 95 for every 100 in principal amount, capped at 120 million in principal amount. Acceptance in full of the tender offer would save the Company 7.7 million per year, or 29.3 million in total, in interest payments until maturity in August Further details of the tender offer for the 2006 Notes, which is expected to be launched following Closing, will be announced in due course. Interests of the Investors in the Company Following Closing, based on the information available at 16 September 2009, the Investors will own in aggregate approximately 49.0% of the Shares of the Company carrying approximately 49.0% of the Company s outstanding voting rights. The remaining outstanding Special Voting Shares held by the Investors will be acquired and cancelled by the Company on Closing pursuant to the put option agreement dated 6 April 2009 between the Company and the Investors and the existing shareholder repurchase authority relating to the Special Voting Shares. The Investors have confirmed to the Company that, for a period of twenty months after Closing for so long as 100 million or more in principal amounts of the Company s 2006 Notes remain outstanding, the Investors will not acquire securities of the Company that would result in their aggregate ownership of the Company triggering a change of control for purposes of the 2006 Notes. Other matters to be considered at the Extraordinary General Meeting In addition to the Proposals, the Company is also taking the opportunity to seek approval at the Extraordinary General Meeting to the Company becoming a no par value company, in order to facilitate the issue of new shares and to seek a new own-share purchase authority which takes into account that the Ordinary Shares are now listed on both the VSE and Euronext Amsterdam. These resolutions are described further below. The Proposals are conditional on the approval of the resolution that the Company becomes a no par value company but not on the approval of the resolution for the own-share purchase authority. The Resolutions Resolutions will be proposed at the Extraordinary General Meeting for the following purposes: To make Atrium a no par value company to facilitate the issue of new Ordinary Shares, to authorise the Company to issue an unlimited number of shares of any class and to make consequential changes to the Company s Memorandum and Articles. Currently, the par value of the Ordinary Shares is 5 per ordinary share, meaning that the Company cannot issue new Ordinary Shares for less than 5 per share. The changes to the Articles will also include changes to facilitate the payment of dividends by the Company once it is a no par value company and other minor amendments. As described elsewhere in this Circular, to amend the Articles to extend certain shareholder rights, and to terminate the existing rights of the Investors to appoint certain directors and to replace them with new rights dependent on their holding of interests in Ordinary Shares. Page 8

9 To approve the payment of the Special Dividend and the first four quarterly instalments of the proposed 0.12 Annual Dividend out of the Company s stated capital and to approve the corresponding reduction in the Company s capital. To authorise the Company to make market purchases of interests of up to 50 million Ordinary Shares which takes into account that the Ordinary Shares are now listed on both the VSE and Euronext Amsterdam. The authority provides for a minimum purchase price (exclusive of expenses) of 1 Euro cent per ordinary share and a maximum purchase price of the higher of: (a) 110 per cent. of the average of the middle market quotations for a share of the relevant class on the relevant market on which the Ordinary Shares are purchased for the five business days immediately preceding the date on which the share is purchased; and (b) the higher of (i) the price of the last independent trade for a share of the relevant class and (ii) the highest current independent bid for a share of the relevant class at the time of purchase. The authority conferred will expire at the Annual General Meeting of the Company in 2010 unless it is varied, revoked or renewed prior to such date by a special resolution of the Company in general meeting. The Exchange Transaction and the remainder of the Proposals are conditional on each of the Resolutions (except for Resolution 4, the own-share purchase authority) being passed. In addition, the Resolutions regarding the amendments to the Articles as they relate to the Exchange Transaction (Resolution 2) and the authority to reduce the stated capital account of the Company in order to pay the Special Dividend and Annual Dividend (Resolution 3) are each conditional on the other being passed, as well as the resolution to make the Company a no par value company (Resolution 1), meaning that each of Resolution 1, 2 and 3 must be passed for Resolutions 2 and 3 to become effective. Further, neither Resolution 2 nor 3 will become effective if the Exchange Transaction does not close for any reason. However, the effectiveness of Resolution 1 and Resolution 4 are not conditional on Closing. Each Resolution is a special resolution, which requires two-thirds of those members who (being entitled to do so) vote in person or by proxy to vote in favour of the relevant resolution. The Extraordinary General Meeting A notice is set out in this Circular convening the Extraordinary General Meeting for 12 noon (Jersey time) on 2 October 2009 at Hotel de France, St. Saviour's Road, St. Helier, Jersey, JE1 7XP to consider and, if thought fit, pass the Resolutions. The Extraordinary General Meeting will not be quorate unless there are present two Shareholders entitled to vote and attending in person or by proxy. If within thirty minutes from the time appointed for the Extraordinary General Meeting a quorum is not present or if during the meeting a quorum ceases to be present the meeting shall stand adjourned to the same day in the next week at the same time and place or to such other time and place as the Directors shall determine and if at such adjourned meeting a quorum is not present within thirty minutes from the time appointed for the holding of the meeting, those Shareholders present in person shall constitute a quorum. Action to be Taken After carefully reading and considering the information contained in this Circular, please vote either by attending the Extraordinary General Meeting at 12 noon at Hotel de France, St. Saviour's Road, St. Helier, Jersey, JE1 7XP on 2 October 2009, or by proxy. (i) Persons holding Special Voting Shares A Form of Proxy will accompany this Circular for use by holders of Special Voting Shares at the Extraordinary General Meeting. Whether or not holders of Special Voting Shares intend to attend the Extraordinary General Meeting, they are urged to complete and return the Form of Proxy as soon as possible. To be valid, the Form of Proxy must be completed in accordance with the instructions printed on it and lodged with the Company, as soon as possible, but in any event not later than 12 noon (Jersey time) on 30 September The lodging of a Form of Proxy by a holder of Special Voting Shares will not prevent such holder from attending the Extraordinary General Meeting and voting in person if such holder so wishes. Page 9

10 (ii) Persons holding Ordinary Shares through Euroclear Netherlands Shareholders who hold their Ordinary Shares through Euroclear Netherlands and who wish to attend or to exercise the voting rights attaching to those shares at the Extraordinary General Meeting should inform their account holding bank or broker in writing by returning the Form of Proxy to their account holding bank or broker. The Form of Proxy is available from the Company s website, The Shareholders account holding bank or broker will be required to forward (via an admitted institution) this Form of Proxy with a confirmation to Kempen & Co N.V. (either by to proxyvoting@kempen.nl or by fax to: ) by 4.30 p.m. (Amsterdam time/c.e.t.) on 28 September 2009, after which such Shareholder will receive an attendance ticket and proxy card. Only those persons holding interests in Ordinary Shares via an admitted institution of Euroclear Netherlands as of 12 noon (Jersey time) on 30 September 2009 or, if the Extraordinary General Meeting is adjourned, as at 48 hours before the time of such adjourned meeting, shall be entitled to attend or exercise the voting rights attaching to such shares at the Extraordinary General Meeting. Persons who, prior to the listing of the Ordinary Shares on Euronext Amsterdam and the VSE in August 2009, held Austrian depositary certificates representing the Ordinary Shares will now, absent any further action on their part, hold their Ordinary Shares through Euroclear Netherlands and will be required to follow this procedure in order to attend or exercise voting rights at the Extraordinary General Meeting. Shareholders should note that certain account holding banks or financial institutions may block the account of a Shareholder who holds Ordinary Shares through the Euroclear from the time the admitted institution has received instructions from such Shareholder until 48 hours before the time of the Extraordinary General Meeting. Recommendation The Board has approved the Proposals on the unanimous recommendation of a committee comprising the Company s independent directors, chaired by Dr Peter Linneman and advised by Kempen & Co Corporate Finance B.V.. Directors nominated and appointed by the Investors pursuant to the Articles did not participate in the vote of the Board approving the Proposals. The Board considers that the Proposals are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board unanimously recommends all Shareholders to vote in favour of the Resolutions at the Extraordinary General Meeting. Yours sincerely, Chaim Katzman Chairman Page 10

11 PART II LETTER FROM THE CHAIRMAN OF THE INDEPENDENT COMMITTEE ATRIUM EUROPEAN REAL ESTATE LIMITED (a company incorporated with limited liability under the Companies (Jersey) Law 1991, as amended, with registered number and registered with the Dutch Authority for the Financial Markets as a closed-ended investment scheme) Directors: Chaim Katzman (Chairman) Peter Baguley Michael Bar Haim Rachel Lavine Peter Linneman Simon Radford Dipak Rastogi Shanti Sen Thomas William Wernink Andrew Wignall Registered office: Seaton Place St Helier Jersey JE4 0QH 17 September 2009 Dear Shareholder, As explained in the letter from the chairman of the Board, Mr. Katzman, contained in Part I of this Circular, the Board has approved the Proposals on the unanimous recommendation of a committee chaired by me and comprising the Company s independent directors (being the members of the Board who have not been appointed by the Investors). Directors appointed by the Investors did not participate in the vote of the Board approving the Proposals. Independent financial advice in relation to the Proposals has been provided by Kempen & Co Corporate Finance B.V.. Set out below is a description of the background to the Proposals and the reasons why the committee of the independent Directors unanimously recommended to the Board that the Proposals should be approved. Background to the Proposals In August 2007, the previous management of the Company began a strategic review to identify and implement improvements to the Company s management, corporate governance and reporting arrangements and processes, as well as a review of the Company s capital and financing structure. The investment and restructuring package proposed by the Investors, which was announced in March 2008, subsequently approved by Shareholders on 16 July 2008 and implemented in August 2008, was seen as an opportunity for the Company to bring about change in a significantly shorter time-frame than it could achieve on its own and to satisfy the Company's funding requirements at that time. Terms of the arrangements in 2008 included the Investors making an immediate 500 million investment in the Company through the acquisition of convertible bonds with a 10.75% coupon at a time when the credit crunch had significantly reduced the availability of commercial financing. It was also a condition of their investment that the Investors were provided with significant consent and information rights under the terms of the Relationship Agreement with the Company. On completion of this transaction in August 2008, the Company s new internalised management, under the leadership of Rachel Lavine, conducted an assessment of the Company s existing development pipeline and the returns it would be likely to generate, if at all, in light of the global financial crisis. This resulted in a rationalisation of the Company s development pipeline, and consequently a reduction in the Company s anticipated cash requirements for development purposes. Page 11

12 In January 2009, in place of the rights issue contemplated at the time of the Investors initial investment, the Company negotiated arrangements with the Investors to place 10,300,000 Ordinary Shares in a partial exchange of 72,100,000 in principal amount of Convertible Bonds and a corresponding reduction in the voting rights attached to the Special Voting Shares and the cancellation of 25,066,667 Warrants of the 30,000,000 Warrants then held by the Investors. In addition, since August 2008, the Company has purchased in aggregate 366 million in principal amount of 2006 Notes and 60 million in principal amount of Convertible Bonds. The Company s management has focussed on strengthening the Company s balance sheet and enhancing cash flow as well as improving corporate governance and believes it is necessary to address the significant interest burden posed by the Convertible Bonds and reduce the control rights held by the Investors through the Relationship Agreement. In addition, the Proposals will simplify Atrium s voting structure and mean that one share equals one vote. This puts Atrium in an improved position to achieve further growth, either organically or by utilising its strong cash position, and, if required, by raising less expensive and less restrictive debt, to take advantage of acquisition opportunities. Benefits of the Proposals The Board believes that the benefits to the Company and Shareholders of the Proposals include the following: a total saving of 176 million from 1 October 2009 or 46 million per year, equivalent to 0.12 per Ordinary Share per year (assuming 372,052,992 Ordinary Shares in issue), in future interest payments on the Convertible Bonds until August 2013 when the Convertible Bonds would otherwise first become redeemable. This saving would increase to a total of 268 million if the Convertible Bonds were held to maturity in August 2015; a total saving of 29.3 million or 7.7 million per year from 1 October 2009 to maturity, equivalent to 0.02 per Ordinary Share per year (assuming 372,052,992 Ordinary Shares in issue), in future interest payments on the 2006 Notes until maturity in August 2013, assuming the partial tender is accepted in full; a reduction in the Company s average borrowing rate of interest from 7.62% to 5.65%, following the exchange of the Convertible Bonds, and to 5.49%, assuming the partial tender is accepted in full; an improvement in the Company s cash flow which will allow immediate and future cash returns to all shareholders through the payment of the Special Dividend and future dividends; a stronger and more efficient balance sheet with significantly decreased leverage; a reduction of leverage that will create room for Atrium to raise new financing on more attractive terms; a large increase in equity value, resulting in the stronger alignment of the Investors interests, given their increased equity stake, with those of the Company s other shareholders; and an improved corporate governance structure, more autonomy for the Board and a clear mechanism for the reduction of the number of seats the Investors have on the Board in relation to their shareholding, coupled with an agreement to cancel all terms of the Relationship Agreement, should the Investors shareholding fall below 20,000,000 Ordinary Shares. Yours sincerely, Dr. Peter Linneman Director Page 12

13 PART III CHANGES TO THE RELATIONSHIP AGREEMENT The rights of the Investors under amended Relationship Agreement, which has been entered into conditional on Closing, differ from the rights of the Investors under the existing Relationship Agreement as set out in the table below. The Relationship Agreement will terminate in full in the event that the aggregate shareholding of the Investors falls below 20,000,000 Ordinary Shares for more than 90 consecutive trading days on the markets on which the Ordinary Shares are then traded. Matters on which the consent of the Investors are required under the existing Relationship Agreement If total indebtedness of the Company and its Group is at any time to exceed 60 per cent. of the value of the Company and its Group s real estate portfolio (including both investment properties and developments in progress) as shown in the books of account of members of the Company and its Group and calculated on a consolidated basis Any change in either the memorandum or articles of association of any member of the Company or its Group which affects the rights and obligations of the Investors Any liquidation, winding up, moratorium, dissolution, consolidation or amalgamation in any jurisdiction of the Company or any member of its Group, any appointment of a receiver, administrator, administrative receiver, trustee or similar officer to, and any corporate restructuring of, the Company or any of member its Group Any material change in the business of any Company or its Group, which is to own, manage and develop retail real estate assets in Central and Eastern Europe Any material commitment or incurring of liability by the Company or its Group outside of the ordinary course of business of the Company and its Group Any change to the share capital, issuance of new equity or capital by the Company, including Ordinary Shares (whether fully or partly paid), certificates, rights, options or warrants to purchase Ordinary Shares or certificates and other convertible or quasiequity securities, and any issuance by the Company or any member of its Group of shares, certificates, rights, options or warrants to purchase shares or certificates and any other convertible or quasi-equity securities. The sale or financing in a single or series of transactions directly or indirectly of more than 10 per cent. of the net assets of the Company at that time calculated on a consolidated basis The acquisition of any assets (including any investment in or acquisition of, shares or securities issued by a person, any making of capital contribution to any person, any investment in or acquisition of, any business or whole or part of the assets of business of any person or any assets constituting a division or operating unit of the business of any person) in a single or series Position under the amended Relationship Agreement Removed Removed Removed Consent right removed; extended to special resolution of shareholders as a whole and to be included in the Articles Removed Consent right removed. Right to consent to the issuance of any securities by the Company or members of its Group introduced as a special resolution of shareholders as a whole and to be included in the Articles Threshold increased to 20% of the Company s gross asset value Threshold increased to 20% of the Company s gross asset value Page 13

14 of transactions directly or indirectly which in any of the forgoing cases has an aggregate value equal to or greater than 10 per cent. of the net assets of the Company and its Group at that time calculated on a consolidated basis Any commitment or incurring of liability or obligation by the Company in excess of 200 million and any increase in an existing commitment or liability or obligation of any Company by more than 200 million The payment of any dividend or distribution or purchase or redemption or buy-back or repayment of any capital instrument of the Company or its Group The entry into any agreement or arrangement or commitment to enter into or to obtain an option to enter into by the Company of any material joint venture, material partnership, material consortium or other similar arrangement where materiality shall be measured by reference to an amount equal to 10 per cent. of the net asset value of the Company immediately prior to the relevant action occurring The entry into any agreement or arrangement or commitment to enter into or to obtain an option to enter into by the Company or any member of its Group, any material transaction with either of the Investors or any of their respective affiliates, where materiality shall be measured by reference to an amount equal to 10 per cent. of the net asset value of the Company immediately prior to the relevant action occurring The selection of a venue for the re-listing of the Ordinary Shares or certificates Any change in the tax jurisdiction of the Company that would have a material adverse impact on Shareholders The appointment or replacement of the Chief Executive Officer of the Company The appointment of any auditor to the Company other than KPMG, Deloitte, Ernst & Young or PricewaterhouseCoopers Any change to the structure of the Board of directors of the Company (which does not include changes to the identity of the persons appointed as directors of the Company), save for the annual election or re-election of independent directors by the shareholders Removed Removed Threshold increased to 20% of the Company s gross asset value Retained Removed Retained Retained and clarified that appointment includes the appointment of an interim CEO Removed Removed Page 14

15 Amendments to the Articles are being proposed: PART IV PROPOSED AMENDMENTS TO THE ARTICLES (i) (ii) Effective from conclusion of the Extraordinary General Meeting, to reflect the conversion of the Company into a no par value company, to facilitate the payment of dividends by the Company and to make certain non-substantive changes. Conditional and effective upon Closing, to assist in the facilitation of, and reflect the consequences of, the Exchange Transaction. A. Changes to be effective from conclusion of the Extraordinary General Meeting 1. Amendments will be made to the Articles that are consequential to the Company becoming a no par value company. 2. Amendments will be made to the Articles to facilitate the payment of dividends and distributions from the Company s capital as well as from the Company s profits. Changes to be effective conditional and effective upon Closing of the Exchange Transaction 1. Provisions in the existing Articles relating to the Convertible Bonds, deferred shares and Special Voting Shares will be deleted (including, without limitation, in relation to the provisions regarding the voting and transfer of the Special Voting Shares), to reflect the fact that the Convertible Bonds held by the Investors and all Special Voting Shares will be cancelled as a result of the Exchange Transaction. 2. The terms on which the Investors are entitled to appoint Directors and the basis on which those Directors may be removed contained in the existing Articles will be terminated and new rights will be given to the Investors to reflect the fact that they will hold only Ordinary Shares, so that they may appoint: o four directors with at least 80,000,000 Ordinary Shares; o three directors with at least 60,000,000 Ordinary Shares; o two directors with at least 40,000,000 Ordinary Shares; and o one director with at least 20,000,000 Ordinary Shares. In addition, the Investors may determine the chairman of the Board of Directors and a majority of the nomination committee for so long as they hold an aggregate of at least 55,000,000 Ordinary Shares. In the event that the Investors aggregate interests in the Ordinary Shares fall below any of the above thresholds, the removal of the relevant director or directors will occur at the annual general meeting of the Company next following the date on which the Investors cease to be entitled to appoint the relevant number of Directors (assuming such Director is not otherwise re-elected at that annual general meeting). To the extent that the Company subdivides or consolidates its Ordinary Shares, the thresholds referred to above will be amended to reflect the effect of such subdivision or consolidation. The maximum number of directors that the Company may have at any time will be set at ten. As a result of determining the Investors Board appointment rights by reference to their aggregate holding of Ordinary Shares, rather than their Total Investment as currently provided for in the Articles, the references in the Articles to the valuation of the Investors Total Investment by an Page 15

16 independent expert for purposes of ascertaining the Investors Board appointment rights will be deleted. 3. A new concept of Shareholder Reserved Matters will be introduced into the amended Articles, which will provide that the consent of members in general meeting by special resolution, or by written resolution of members holding at least two-thirds of the voting rights of the Company, shall be required for: (a) (b) any material change in the business of any Group Company, which is to own, manage and develop retail real estate assets in Central and Eastern Europe (and any ancillary activities in connection therewith); and the issue of any securities by the Company or the issue of any securities by any other Group Company, save for: (i) (ii) (iii) (iv) any issue of securities pursuant to the Company s employee share option plan approved by Shareholders on 6 April 2009; any issue of securities on conversion of the Company s per cent. subordinated convertible bonds due 2015; any issue of securities pursuant to a transaction which has been approved by the Investors pursuant to the Relationship Agreement among the Company and CPI and Gazit; and any issue of securities by a Group Company to another Group Company in the ordinary course of business. For these purposes, securities shall mean equity or capital of a Group Company, including shares (whether fully or partly paid), certificates, any rights, options or warrants to purchase shares or certificates and any other convertible or quasi-equity securities issued by a Group Company and Group Company means the Company and its affiliates. Page 16

17 PART V ADDITIONAL INFORMATION 1. GENERAL 1.1 No person has been authorised to give any information or to make any representation in relation to the Proposals other than those contained in this Circular and, if given or made, such information or representations must not be relied upon as having been authorised. The publication and distribution of this Circular shall not under any circumstances imply that the information contained in this Circular is correct as at any time subsequent to the date hereof or that there has not been any change in the affairs of the Company or the Group since the date hereof. 1.2 The issued share capital of the Company currently consists of 227,199,287 Ordinary Shares and 8,043 Special Voting Shares. On Closing, the issued share capital of the Company will consist of 372,052,992 Ordinary Shares, assuming that no Ordinary Shares are issued or cancelled by the Company from the date of this Circular until the date of Closing. 2. DOCUMENTS AVAILABLE FOR INSPECTION 2.1 Copies of the documents listed below will be available for inspection at the offices of Aztec Financial Services (Jersey) Limited at Seaton Place, St Helier, Jersey, JE4 0QH, contact: during normal business hours on any Business Day from the date of this Circular until the date of the Extraordinary General Meeting and copies will also be available for inspection at the Extraordinary General Meeting. The documents available for inspection are: (a) (b) (c) a copy of this Circular; a copy of the Memorandum and Articles; and a copy of the proposed amendments to the Articles. Copies of these documents are also available free of charge in the Netherlands from the Company s paying agent, Kempen & Co N.V., Beethovenstraat 300, 1077 WZ Amsterdam, P.O. Box 75666, 1070 AR Amsterdam, The Netherlands. Page 17

18 PART VI DEFINITIONS The following definitions apply throughout this Circular and the Form of Proxy unless the context requires otherwise: 2006 Notes the notes issued under the Company 2006 medium term note programme Annual Dividend Articles Atrium Board, Board of Directors or Directors Business Day Circular Closing Company Convertible Bonds CPI Euronext Amsterdam Exchange Transaction Extraordinary General Meeting Form of Proxy Gazit Group Investors Jersey Companies Law Memorandum and Articles Notice the dividend which the Company intends to pay to Shareholders from the fourth quarter of 2009 of 0.12 per Ordinary Share per year to be paid in quarterly instalments subject to Closing and to future review and, if appropriate, to modification the articles of association of the Company Atrium European Real Estate Limited the directors of the Company as at the date of this Circular a day, other than a Saturday, Sunday or public holiday in England and Wales, Jersey, Austria or the Netherlands and on which the banks are open in London, Amsterdam and Vienna for general commercial business this document closing of the Exchange Transaction Atrium European Real Estate Limited the outstanding million in principal amount of the Company s % subordinated convertible securities held by the Investors and their affiliates CPI CEE Management LLC Euronext Amsterdam by NYSE Euronext, the regulated market of Euronext Amsterdam N.V. the transaction between the Company and the Investors in relation to the Investors Convertible Bonds, Warrants and Special Voting Shares, as described in Part I of this Circular the Extraordinary General Meeting of the Company convened for 12 noon (Jersey time) on 2 October 2009 the form of proxy for use by Shareholders in relation to the Extraordinary General Meeting Gazit Midas Limited the Company and its subsidiaries from time to time CPI CEE Management LLC, Gazit Midas Limited and their respective affiliates The Companies (Jersey) Law 1991, as amended the memorandum and articles of association of the Company as at the date of this Circular the notice of the Extraordinary General Meeting set out in this Circular Page 18