UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _________
COMMISSION FILE NO. 33-98136
CHELSEA GCA REALTY PARTNERSHIP, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-3258100
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
103 EISENHOWER PARKWAY, ROSELAND, NEW JERSEY
07068 (ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES - ZIP CODE)
(973) 228-6111
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
There are no outstanding shares of Common Stock or voting securities.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the definitive Proxy Statement of Chelsea GCA Realty, Inc. relating
to its 1999 Annual Meeting of Shareholders are incorporated by reference into
Part III as set forth herein.
<PAGE>
PART I
ITEM 1. BUSINESS
THE OPERATING PARTNERSHIP
Chelsea GCA Realty Partnership, L.P., a Delaware limited partnership (the
"Operating Partnership"or "OP"), is 82.0% owned and managed by its sole general
partner, Chelsea GCA Realty, Inc. ("Chelsea GCA" or the "Company"), a
self-administered and self-managed real estate investment trust ("REIT"). The
Operating Partnership owns, develops, redevelops, leases, markets and manages
upscale and fashion-oriented manufacturers' outlet centers. At the end of 1998,
the Operating Partnership owned and operated 19 centers (the "Properties") with
approximately 4.9 million square feet of gross leasable area ("GLA") in 11
states. At December 31, 1998, the Operating Partnership had approximately
220,000 square feet of new GLA under construction, comprising the 120,000 square
foot third phase of Wrentham Village Premium Outlets and the 100,000 square foot
fourth phase of North Georgia Premium Outlets; these expansions are part of a
total of approximately 400,000 square feet of new space scheduled for completion
in 1999. Additionally, construction has commenced on Orlando Premium Outlets, a
430,000 square foot upscale outlet center located on Interstate 4, midway
between Walt Disney World/Epcot and Sea World in Orlando Florida. Orlando
Premium Outlets is a joint venture project between Chelsea and Simon Property
Group. The Operating Partnership's existing portfolio includes properties in or
near New York City, Los Angeles, San Francisco, Sacramento, Boston, Portland
(Oregon), Atlanta, Washington DC, Cleveland, Honolulu, Napa Valley, Palm Springs
and the Monterey Peninsula.
The Operating Partnership's executive offices are located at 103 Eisenhower
Parkway, Roseland, New Jersey 07068 (telephone 973-228-6111).
RECENT DEVELOPMENTS
Between January 1, 1998 and December 31, 1998, the Operating Partnership added
766,000 square feet of GLA to its portfolio as a result of a 270,000 square foot
new center opening and seven expansions totaling 496,000 square feet, and
reduced by 198,000 square feet of GLA related to two centers held for sale.
A summary of development, acquisition and expansion activity from January 1,
1998 through December 31, 1998 is contained below:
<TABLE>
<CAPTION>
Opening GLA Number
PROPERTY Date(s) (Sq. Ft.) of Stores Certain Tenants
----------------- -------------- ------------ ------------------------------
<S> <C> <C> <C> <C>
As of January 1, 1998 4,308,000 1,162
New center:
Leesburg Corner................. 10/98 270,000 58 Banana Republic, Brooks Brothers,
Donna Karan. Gap, Off 5th-Saks
Fifth Avenue
Expansions:
Woodbury Common................. 2-11/98 268,000 69 Giorgio Armani, Hugo Boss, Last
Call Neiman, Marcus, Off 5th-Saks
Fifth Avenue, Prada
Wrentham Village................ 5/98 126,000 33 Liz Claiborne, Nautica, Sony,
Timberline
Camarillo Premium Outlets....... 9/98 45,000 11 Black & Decker, Nike, Rockport
North Georgia................... 10/98 31,000 7 Nautica, Polo/Ralph Lauren, Tommy
Hilfiger
Folsom Premium Outlets.......... 4/98 19,000 2 Gap, Liz Claiborne
Other (net)..................... 7,000 (8)
-------------- ------------
Total expansions 496,000 114
-------------- ------------
Held for Sale:
Lawrence Riverfront............. (146,000) (39)
Solvang Designer Outlets........ (52,000) (15)
-------------- ------------
Total held for sale........ (198,000) (54)
-------------- ------------
As of December 31, 1998 4,876,000 1,280
============== ============
</TABLE>
<PAGE>
The most recent newly developed or expanded centers are discussed below:
LEESBURG CORNER, LEESBURG, VIRGINIA. Leesburg Corner Premium Outlets, a 270,000
square foot center containing 58 stores, opened in October 1998 and is located
outside Washington, DC. The populations within a 30-mile, 60-mile and 100-mile
radius are approximately 2.4 million, 7.1 million and 9.8 million, respectively.
Average household income within a 30-mile radius is approximately $78,000.
WOODBURY COMMON, CENTRAL VALLEY, NEW YORK. Woodbury Common Premium Outlets, an
841,000 square foot center containing 216 stores opened in November 1985.
Expansions of 268,000, 19,000 and 85,000 square feet opened in 1998, 1995 and
1993, respectively. Woodbury Common is located approximately 50 miles north of
New York City at the Harriman exit of the New York State Thruway. The
populations within a 30-mile, 60-mile and 100-mile radius are approximately 2.4
million, 17.1 million and 25.0 million, respectively. Average household income
within a 30-mile radius is approximately $70,000.
WRENTHAM VILLAGE, WRENTHAM, MASSACHUSETTS. Wrentham Village Premium Outlets, a
353,000 square foot center containing 90 stores, opened in two phases in October
1997 and May 1998. The center is located near the junction of interstates 95 and
495 between Boston and Providence. The populations within a 30-mile, 60-mile and
100-mile radius are approximately 3.9 million, 6.9 million and 10.3 million,
respectively. Average household income within a 30-mile radius is approximately
$52,000.
CAMARILLO, CAMARILLO, CALIFORNIA. Camarillo Premium Outlets, a 410,000 square
foot center containing 114 stores, opened in six phases, from March 1995 through
September 1998. The center is located 48 miles north of Los Angeles, about 55
miles south of Santa Barbara on Highway 101. The populations within a 30-mile,
60-mile and 100-mile radius are approximately 1.1 million, 8.3 million and 14.6
million, respectively. Average household income within a 30-mile radius is
approximately $66,000.
NORTH GEORGIA, DAWSONVILLE, GEORGIA. North Georgia Premium Outlets, a 434,000
square foot center containing 110 stores, opened in three phases, in May 1996,
May 1997 and October 1998. The center is located 40 miles north of Atlanta on
Georgia State Highway 400 bordering Lake Lanier, at the gateway to the North
Georgia mountains. The populations within a 30-mile, 60-mile and 100-mile radius
are approximately 700,000, 3.6 million and 5.8 million, respectively. Average
household income within a 30-mile radius is approximately $55,000.
FOLSOM, FOLSOM, CALIFORNIA. Folsom Premium Outlets, a 246,000 square foot center
containing 68 stores opened in March 1990 and had expansions totaling 22,000 and
19,000 square feet in December 1996 and April 1998, respectively. The center is
located approximately 20 miles east of Sacramento. The populations within a
30-mile, 60-mile and 100-mile radius are approximately 1.5 million, 2.8 million
and 9.0 million, respectively. Average household income within a 30-mile radius
is approximately $54,000.
The Operating Partnership has started construction of approximately 220,000
square feet of new GLA scheduled for completion in 1999, including the 120,000
square foot third phase of Wrentham Village and the 100,000 square foot fourth
phase of North Georgia Premium Outlets. These projects, and others, are in
various stages of development and there can be no assurance they will be
completed or opened, or that there will not be delays in opening or completion.
STRATEGIC ALLIANCE
In May 1997, the Operating Partnership announced the formation of a strategic
alliance with Simon Property Group, Inc. ("Simon") to develop and acquire
high-end outlet centers with GLA of 500,000 square feet or more in the United
States. The Operating Partnership and Simon will be co-managing general
partners, each with 50% ownership of the joint venture and any entities formed
with respect to specific projects; the Operating Partnership will have primary
responsibility for the day-to-day activities of each project. In conjunction
with the alliance, on June 16, 1997, the Operating Partnership completed the
sale of 1.4 million shares of the Company's common stock to Simon for an
aggregate price of $50 million. Proceeds from the sale were used to repay
borrowings under the Credit Facilities. Simon is one of the largest publicly
traded real estate companies in North America as measured by market
capitalization, and at March 1999 owns, has an interest in and or manages
approximately 166 million square feet of retail and mixed-use properties in 35
states.
The Operating Partnership announced in October 1998 that it sold its interest in
and terminated the development of Houston Premium Outlets, a joint venture
project with Simon. Under the terms of the agreement, the Operating Partnership
will receive non-compete payments totaling $21.4 million from The Mills
Corporation; $3.0 million was received at closing, and four annual installments
of $4.6 million are to be received on each January 2, through 2002. The
Operating Partnership has also been reimbursed for its share of land costs,
development costs and fees related to the project.
Construction has commenced on Orlando Premium Outlets ("OPO"), a 430,000 square
foot 50/50 joint venture project between the Operating Partnership and Simon.
OPO is located on Interstate 4, midway between Walt Disney World/Epcot and Sea
World in Orlando, Florida and is scheduled to open in the first half of 2000.
The joint venture has entered into a $82.5 million construction loan agreement
that is expected to fund approximately 75% of the cost of the project. The
balance of costs will be funded equally by the Operating Partnership and Simon.
ORGANIZATION OF THE OPERATING PARTNERSHIP
The Operating Partnership was formed through the merger in 1993 of The Chelsea
Group ("Chelsea") and Ginsburg Craig Associates ("GCA"), two leading outlet
center development companies, providing for greater access to the public and
private capital markets. All of the Properties are held by and all of its
business activities conducted through the Operating Partnership. The Company
(which owned 82.0% in the Operating Partnership as of December 31, 1998) is the
sole general partner of the Operating Partnership and has full and complete
control over the management of the Operating Partnership and each of the
Properties.
THE MANUFACTURERS' OUTLET BUSINESS
Manufacturers' outlets are manufacturer-operated retail stores that sell
primarily first-quality, branded goods at significant discounts from regular
department and specialty store prices. Manufacturers' outlet centers offer
numerous advantages to both consumer and manufacturer: by eliminating the third
party retailer, manufacturers are often able to charge customers lower prices
for brand name and designer merchandise; manufacturers benefit by being able to
sell first quality in-season, as well as out-of-season, overstocked or
discontinued merchandise without compromising their relationships with
department stores or hampering the manufacturers' brand name. In addition,
outlet stores enable manufacturers to optimize the size of production runs while
maintaining control of their distribution channels.
BUSINESS OF THE OPERATING PARTNERSHIP
The Operating Partnership believes its strong tenant relationships, high-quality
property portfolio and managerial expertise give it significant advantages in
the manufacturers' outlet business.
STRONG TENANT RELATIONSHIPS. The Operating Partnership maintains strong tenant
relationships with high-fashion, upscale manufacturers that have a selective
presence in the outlet industry, such as Ann Taylor, Brooks Brothers, Cole Haan,
Donna Karan, Gap, Gucci, Joan & David, Jones New York, Nautica, Polo Ralph
Lauren, Tommy Hilfiger and Versace, as well as with national brand-name
manufacturers such as Phillips-Van Heusen (Bass, Izod, Gant, Van Heusen) and
Sara Lee (Champion, Hanes, Coach Leather). The Operating Partnership believes
that its ability to draw from both groups is an important factor in providing
broad customer appeal and higher tenant sales.
HIGH QUALITY PROPERTY PORTFOLIO. The Properties generated weighted average
reported tenant sales during 1998 of $360 per square foot, the highest in the
industry by a wide margin. As a result, the Operating Partnership has been
successful in attracting some of the world's most sought-after brand-name
designers, manufacturers and retailers and each year has added new names to the
outlet business and its centers. The Operating Partnership believes that the
quality of its centers gives it significant advantages in attracting customers
and negotiating multi-lease transactions with tenants.
MANAGEMENT EXPERTISE. The Operating Partnership believes it has a competitive
advantage in the manufacturers' outlet business as a result of its experience in
the business, long-standing relationships with tenants and expertise in the
development and operation of manufacturers' outlet centers. The Operating
Partnership's senior management has been recognized as leaders in the outlet
industry over the last two decades. Management developed a number of the
earliest and most successful outlet centers in the industry, including Liberty
Village (one of the first manufacturers' outlet centers in the U.S.) in 1981,
Woodbury Common in 1985, and Desert Hills and Aurora Farms in 1990. Since the
IPO, the Operating Partnership has added significantly to its senior management
in the areas of development, leasing and property management without increasing
general and administrative expenses as a percentage of total revenues;
additionally, the Operating Partnership intends to continue to invest in systems
and controls to support the planning, coordination and monitoring of its
activities.
GROWTH STRATEGY
The Operating Partnership seeks growth through increasing rents in its existing
centers; developing new centers and expanding existing centers; and acquiring
and re-developing centers.
INCREASING RENTS AT EXISTING CENTERS. The Operating Partnership's leasing
strategy includes aggressively marketing available space and maintaining a high
level of occupancy; providing for inflation-based contractual rent increases or
periodic fixed contractual rent increases in substantially all leases; renewing
leases at higher base rents per square foot; re-tenanting space occupied by
underperforming tenants; and continuing to sign leases that provide for
percentage rents.
DEVELOPING NEW CENTERS AND EXPANDING EXISTING CENTERS. The Operating Partnership
believes that there continue to be significant opportunities to develop
manufacturers' outlet centers across the United States. The Operating
Partnership intends to undertake such development selectively, and believes that
it will have a competitive advantage in doing so as a result of its development
expertise, tenant relationships and access to capital. The Operating Partnership
expects that the development of new centers and the expansion of existing
centers will continue to be a substantial part of its growth strategy. The
Operating Partnership believes that its development experience and strong tenant
relationships enable it to determine site viability on a timely and
cost-effective basis. However, there can be no assurance that any development or
expansion projects will be commenced or completed as scheduled.
ACQUIRING AND REDEVELOPING CENTERS. The Operating Partnership intends to
selectively acquire individual properties and portfolios of properties that meet
its strategic investment criteria as suitable opportunities arise. The Operating
Partnership believes that its extensive experience in the outlet center
business, access to capital markets, familiarity with real estate markets and
advanced management systems will allow it to evaluate and execute acquisitions
competitively. Furthermore, management believes that the Operating Partnership
will be able to enhance the operation of acquired properties as a result of its
(i) strong tenant relationships with both national and upscale fashion
retailers; and (ii) development, marketing and management expertise as a
full-service real estate organization. Additionally, the Operating Partnership
may be able to acquire properties on a tax-advantaged basis through the issuance
of Operating Partnership units. However, there can be no assurance that any
acquisitions will be consummated or, if consummated, will result in an
advantageous return on investment for the Operating Partnership.
INTERNATIONAL DEVELOPMENT. The Operating Partnership has minority interests
ranging from 5 to 15% in several outlet centers and outlet development projects
in Europe. Two outlet centers, Bicester Village outside of London, England and
La Roca Company Stores outside of Barcelona, Spain, are currently open and
operated by Value Retail PLC and its affiliates. Three new projects and
expansions of the two existing centers are in various stages of development and
are expected to open within the next two years. The Operating Partnership's
total investment in Europe as of March 1999 is approximately $3.5 million. The
Operating Partnership has also agreed to provide up to $22 million in limited
debt service guarantees under a standby facility for loans arranged by Value
Retail PLC to construct outlet centers in Europe. The term of the standby
facility is three years and guarantees shall not be outstanding for longer than
five years after project completion. As of March 1999, the Operating Partnership
has provided limited debt service guaranties of approximately $14 million for
two projects.
During 1998, the Operating Partnership entered into a memorandum of
understanding (expiring in June 1999) with two partners to study the feasibility
of developing new outlet centers in Japan. The partners are currently
researching potential development sites and intend to organize a formal joint
venture when viable projects are located and approved. The Operating
Partnership's current financial commitment is not material.
OPERATING STRATEGY
The Operating Partnership's primary business objectives are to enhance the value
of its properties and operations by increasing cash flow. The Operating
Partnership plans to achieve these objectives through continuing efforts to
improve tenant sales and profitability, and to enhance the opportunity for
higher base and percentage rents.
LEASING. The Operating Partnership pursues an active leasing strategy through
long-standing relationships with a broad range of tenants including
manufacturers of men's, women's and children's ready-to-wear, lifestyle apparel,
footwear, accessories, tableware, housewares, linens and domestic goods. Key
tenants are placed in strategic locations to draw customers into each center and
to encourage shopping at more than one store. The Operating Partnership
continually monitors tenant mix, store size, store location and sales
performance, and works with tenants to improve each center through re-sizing,
re-location and joint promotion.
MARKET AND SITE SELECTION. To ensure a sound long-term customer base, the
Operating Partnership generally seeks to develop sites near densely-populated,
high-income metropolitan areas, and/or at or near major tourist destinations.
While these areas typically impose numerous restrictions on development and
require compliance with complex entitlement and regulatory processes, the
Operating Partnership believes that these areas provide the most attractive
long-term demographic characteristics.
The Operating Partnership generally seeks to develop sites that can support at
least 400,000 square feet of GLA and that offer the long-term opportunity to
dominate their respective markets through a critical mass of tenants.
MARKETING. The Operating Partnership pursues an active, property-specific
marketing strategy using a variety of media including newspapers, television,
radio, billboards, regional magazines, guide books and direct mailings. The
centers are marketed to tour groups, conventions and corporations; additionally,
each property participates in joint destination marketing efforts with other
area attractions and accommodations. Virtually all consumer marketing expenses
incurred by the Operating Partnership are reimbursable by tenants.
PROPERTY DESIGN AND MANAGEMENT. The Operating Partnership believes that
effective property design and management are significant factors in the success
of its properties and works continually to maintain or enhance each center's
physical plant, original architectural theme and high level of on-site services.
Each property is designed to be compatible with its environment and is
maintained to high standards of aesthetics, ambiance and cleanliness in order to
promote longer visits and repeat visits by shoppers. Of the Operating
Partnership's 359 full-time and 94 part-time employees, 259 full-time and 92
part-time employees are involved in on-site maintenance, security,
administration and marketing. Centers are generally managed by an on-site
property manager with oversight from a regional operations manager.
FINANCING
The Operating Partnership's financing strategy is to maintain a strong, flexible
financial position by: (i) maintaining a conservative level of leverage, (ii)
extending and sequencing debt maturity dates, (iii) managing floating interest
rate exposure and (iv) maintaining liquidity. Management believes these
strategies will enable the Operating Partnership to access a broad array of
capital sources, including bank or institutional borrowings, secured and
unsecured debt and equity offerings.
On March 30, 1998, the OP replaced its two unsecured bank revolving lines of
credit, totaling $150 million (the "Credit Facilities"), with a new $160 million
senior unsecured bank line of credit (the "Senior Credit Facility"). The Senior
Credit Facility expires on March 30, 2001 and bears interest on the outstanding
balance, payable monthly, at a rate equal to the London Interbank Offered Rate
("LIBOR") plus 1.05% (6.36% at December 31, 1998) or the prime rate, at the OP's
option. The LIBOR rate spread ranges from 0.85% to 1.25% depending on the
Operating Partnership's Senior Debt rating. A fee on the unused portion of the
Senior Credit Facility is payable quarterly at rates ranging from 0.15% to 0.25%
depending on the balance outstanding. The lenders have an option to extend the
facility annually for an additional year. At December 31, 1998, $74 million was
available under the Senior Credit Facility.
Also on March 30, 1998, the OP entered into a $5 million term loan (the "Term
Loan") which carries the same interest rate and maturity as the Senior Credit
Facility.
In October 1998, due to adverse conditions in the debt markets, the Operating
Partnership elected to redeem the remaining $60 million of Remarketed Floating
Rate Reset Notes (the "Reset Notes"), using borrowings under the Senior Credit
Facility. In November 1998, the Operating Partnership obtained a $60 million 18
month bank term loan bearing interest at LIBOR plus 1.40%. Loan proceeds were
used to repay borrowings under the Senior Credit Facility. The bank term loan
will provide the Operating Partnership additional flexibility to access capital
sources at appropriate times over the next 12 months.
The Operating Partnership completed the sale of 1.4 million shares of the
Company's common stock to Simon, for an aggregate price of $50 million, on June
16, 1997, in conjunction with a strategic alliance. Proceeds from the sale were
used to repay borrowings under the Credit Facilities.
In October 1997, the Company issued 1.0 million shares of 8.375% Series A
Cumulative Redeemable Preferred Stock (the "Preferred Stock"), par value $0.01
per share, having a liquidation preference of $50.00 per share. The Preferred
Stock has no stated maturity and is not convertible into any other securities of
the Operating Partnership. The Preferred Stock is redeemable on or after October
15, 2027 at the Operating Partnership's option. Net proceeds from the offering
were used to repay borrowings under the Operating Partnership's Credit
Facilities.
Also in October 1997, the Operating Partnership completed a $125 million public
debt offering of 7.25% unsecured term notes due October 2007 (the "7.25%
Notes"). The 7.25% Notes were priced to yield 7.29% to investors, 120 basis
points over the then 10-year U.S. Treasury rate. Net proceeds from the offering
were used to repay substantially all borrowings under the Operating
Partnership's Credit Facilities, redeem $40 million of Remarketed Floating Rate
Reset Notes and for general corporate purposes.
COMPETITION
The Properties compete for retail consumer spending on the basis of the diverse
mix of retail merchandising and value oriented pricing. Manufacturers' outlet
centers have established a niche capitalizing on consumer demand for
value-priced goods. The Properties compete for customer spending with other
outlet locations, traditional shopping malls, off-price retailers, and other
sales channels in the retail industry. The Operating Partnership believes that
the Properties are generally the leading manufacturers' outlet centers in each
market. The Operating Partnership carefully considers the degree of existing and
planned competition in each proposed area before deciding to build a new center.
ENVIRONMENTAL MATTERS
The Operating Partnership is not aware of any environmental liabilities relating
to the Properties that would have a material impact on the Operating
Partnership's financial position and results of operations.
PERSONNEL
As of December 31, 1998, the Operating Partnership had 359 full-time and 94
part-time employees. None of the employees are subject to any collective
bargaining agreements, and the Operating Partnership believes it has good
relations with its employees.
ITEM 2. PROPERTIES
The Properties are upscale, fashion-oriented manufacturers' outlet centers
located near large metropolitan areas, including New York, Los Angeles, San
Francisco, Boston, Washington DC, Atlanta, Sacramento, Portland (Oregon), and
Cleveland, or at or near tourists destinations, including Honolulu, Napa Valley,
Palm Springs and the Monterey Peninsula. The Properties were 99% leased as of
December 31, 1998 and contained approximately 1,300 stores with approximately
360 different tenants. During 1998 and 1997, the Properties generated weighted
average tenant sales of $360 per square foot. As of December 31, 1998, the
Operating Partnership had 19 operating outlet centers, excluding the two centers
held for sale. Of the 19 operating centers, 18 are owned 100% in fee; and one,
American Tin Cannery Premium Outlets, is held under a long-term lease. The
Operating Partnership manages all of its Properties.
Approximately 35% and 34% of the Operating Partnership's revenues for the years
ended December 31, 1998 and 1997, respectively, were derived from the Operating
Partnership's two centers with the highest revenues, Woodbury Common Premium
Outlets and Desert Hills Premium Outlets. The loss of either center or a
material decrease in revenues from either center for any reason may have a
material adverse effect on the Operating Partnership. In addition, approximately
34% and 38% of the Operating Partnership's revenues for the years ended December
31, 1998 and 1997, respectively, were derived from the Operating Partnership's
centers in California.
The Operating Partnership does not consider any single store lease to be
material; no individual tenant, combining all of its store concepts, accounts
for more than 6% of the Operating Partnership's gross revenues or total GLA; and
only one tenant occupies more than 5% of the Operating Partnership's total GLA.
In view of these statistics and the Operating Partnership's past success in
re-leasing available space, the Operating Partnership believes the loss of any
individual tenant would not have a significant effect on future operations.
<PAGE>
Set forth in the table below is certain property information as of December
31,1998:
<TABLE>
<CAPTION>
YEAR GLA NO. OF
NAME/LOCATION OPENED (SQ. FT.) STORES CERTAIN TENANTS
----------- ------------ ----------- ----------------------------------------------
<S> <C> <C> <C> <C>
Woodbury Common......................... 1985 841,000 216 Brooks Brothers, Calvin Klein, Coach Leather,
Central Valley, NY (New York City Gap, Gucci, Last Call Neiman Marcus, Polo
Metro area) Ralph Lauren
Desert Hills............................ 1990 474,000 118 Burberry, Coach Leather, Giorgio Armani, Gucci
Cabazon, CA (Palm Springs-Los Nautica, Polo Ralph Lauren, Tommy Hilfiger
Angeles area)
North Georgia........................... 1996 434,000 110 Brooks Brothers, Donna Karan, Gap, Nautica,
Dawsonville, GA (Atlanta metro area) Off 5th-Saks Fifth Avenue, Williams-Sonoma
Camarillo Premium Outlets............... 1995 410,000 114 Ann Taylor, Barneys New York, Bose, Cole-Haan,
Camarillo, CA (Los Angeles metro area) Donna Karan, Jones NY, Off 5th-Saks Fifth
Avenue
Wrentham Village........................ 1997 353,000 90 Brooks Brothers, Calvin Klein, Donna Karan,
Wrentham, MA (Boston/Providence metro Gap, Polo Jeans Co., Sony, Versace
area)
Aurora Premium Outlets.................. 1987 280,000 66 Ann Taylor, Bose, Brooks Brothers, Carters,
Aurora, OH (Cleveland metro area) Liz Claiborne, Off 5th-Saks Fifth Avenue,
Reebok
Clinton Crossing........................ 1996 272,000 67 Coach Leather, Crate & Barrel, Donna Karan,
Clinton, CT (I-95/NY-New England Gap, Off 5th-Saks Fifth Avenue, Polo Ralph
corridor) Lauren
Leesburg Corner......................... 1998 270,000 58 Banana Republic, Brooks Brothers, Gap, Donna
Leesburg, VA (Washington DC area) Karan, Off 5th-Saks Fifth Avenue
Folsom Premium Outlets.................. 1990 246,000 68 Bass, Donna Karan, Gap, Liz Claiborne, Nike,
Folsom, CA (Sacramento metro area) Off 5th-Saks Fifth Avenue
Waikele Premium Outlets................. 1997 (1) 214,000 52 Barneys New York, Bose, Donna Karan, Guess,
Waipahu, HI (Honolulu area) Polo Jeans Co., Off 5th-Saks Fifth Avenue
Petaluma Village........................ 1994 196,000 51 Ann Taylor, Brooks Brothers, Donna Karan,
Petaluma, CA (San Francisco metro area) Off 5th-Saks Fifth Avenue, Reebok
Napa Premium Outlets.................... 1994 171,000 49 Cole-Haan, Dansk, Ellen Tracy, Esprit, J.
Napa, CA (Napa Valley) Crew, Nautica, Timberland, TSE Cashmere
Liberty Village......................... 1981 157,000 58 Calvin Klein, Donna Karan, Ellen Tracy,
Flemington, NJ (New York-Phila. metro Polo Ralph Lauren, Tommy Hilfiger
area)
Columbia Gorge.......................... 1991 164,000 44 Adidas, Carter's, Gap, Harry & David,
Troutdale, OR (Portland metro area) Mikasa
American Tin Cannery.................... 1987 135,000 48 Anne Klein, Carole Little, Joan & David,
Pacific Grove, CA (Monterey Peninsula) London Fog, Reebok, Rockport
Santa Fe Premium Outlets................ 1993 125,000 40 Brooks Brothers, Coach Leather, Dansk, Donna
Santa Fe, NM Karan, Joan & David, London Fog
Patriot Plaza........................... 1986 76,000 11 Lenox, Polo Ralph Lauren, WestPoint Stevens
Williamsburg, VA (Norfolk-Richmond area)
Mammoth Premium Outlets................. 1990 35,000 11 Bass, Polo Ralph Lauren
Mammoth Lakes, CA (Yosemite National Park)
St. Helena Premium Outlets.............. 1992 23,000 9 Brooks Brothers, Coach Leather, Donna Karan,
St. Helena, CA (Napa Valley) Joan & David
------------ -----------
Total................................ 4,876,000 1,280
============ ===========
(1) Acquired in March 1997
The Operating Partnership rents approximately 27,000 square feet of office space
in its headquarters facility in Roseland, New Jersey and approximately 4,000
square feet of office space for its west coast regional office in Newport Beach,
California.
</TABLE>
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Operating Partnership is not presently involved in any material litigation
other than routine litigation arising in the ordinary course of business and
which is either expected to be covered by liability insurance or have no
material impact on the Operating Partnership's financial position and results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY MATTERS
None.
<PAGE>
ITEM 6: SELECTED FINANCIAL DATA
CHELSEA GCA REALTY PARTNERSHIP, L.P.
(IN THOUSANDS EXCEPT PER UNIT, AND NUMBER OF CENTERS)
<TABLE>
<CAPTION>
Year Ended
December 31,
------------------------------------------------------------------
Operating Data: 1998 1997 1996 1995 1994
--------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Rental revenue.......................................... $ 99,976 $ 81,531 $ 63,792 $ 51,361 $ 38,010
Total revenues.......................................... 139,315 113,417 91,356 72,515 53,145
Loss on writedown of assets............................. 15,713 - - - -
Total expenses.......................................... 113,879 78,262 59,996 41,814 28,179
Income before minority interest
and extraordinary item.............................. 25,436 35,155 31,360 29,650 24,966
Minority interest....................................... - (127) (257) (285) (49)
Income before extraordinary item........................ 25,436 35,028 31,103 29,365 24,917
Extraordinary item - loss on retirement of debt (345) (252) (902) - -
Net income.............................................. 25,091 34,776 30,201 29,365 24,917
Preferred distribution.................................. (4,188) (907) - - -
Net income to common unitholders........................ 20,903 33,869 30,201 29,365 24,917
Net income per common unit:
General partner (including $0.02, $0.01, and $0.05
net loss per unit from extraordinary item
in 1998, 1997 and 1996, respectively) $1.11 $1.88 $1.77 $1.75 $1.50
Limited partner (including $0.02, $0.01, and $0.05
net loss per unit from extraordinary item
in 1998, 1997 and 1996, respectively) $1.09 $1.87 $1.76 $1.75 $1.50
OWNERSHIP INTEREST:
General partner......................................... 15,440 14,605 11,802 11,188 10,956
Limited partners........................................ 3,431 3,435 5,316 5,601 5,690
--------- -------- --------- ---------- ---------
Weighted average units outstanding 18,871 18,040 17,118 16,789 16,646
BALANCE SHEET DATA:
Rental properties before accumulated
depreciation........................................ $792,726 $708,933 $512,354 $415,983 $332,834
Total assets............................................ 773,352 688,029 502,212 408,053 330,775
Total liabilities ..................................... 450,410 342,106 240,878 141,577 68,084
Minority interest....................................... - - 5,698 5,441 5,156
Partners' capital....................................... $322,942 $345,923 $255,636 $261,035 $257,535
Distributions declared per common unit $2.76 $2.58 $2.355 $2.135 $1.90
OTHER DATA:
Funds from operations to common unitholders (1) $67,994 $57,417 $48,616 $41,870 $33,631
Cash flows from:
Operating activities................................. $78,731 $56,594 $53,510 $36,797 $32,522
Investing activities................................. (119,807) (199,250) (99,568) (82,393) (79,595)
Financing activities................................. 36,169 143,308 $55,957 $40,474 $ (1,707)
GLA at end of period.................................... 4,876 4,308 3,610 2,934 2,342
Weighted average GLA (2)................................ 4,614 3,935 3,255 2,680 2,001
Centers at end of the period............................ 19 20 18 16 16
New centers opened...................................... 1 1 2 1 3
Centers expanded........................................ 7 5 5 7 4
Center sold............................................. - - - 1 -
Centers held for sale................................... 2 - - - -
Center acquired......................................... - 1 - - -
</TABLE>
<PAGE>
NOTES TO SELECTED FINANCIAL DATA:
(1) Management considers funds from operations ("FFO") an appropriate measure
of performance for an equity real estate investment trust. FFO does not
represent net income or cash flow from operations as defined by generally
accepted accounting principles and should not be considered an alternative
to net income as an indicator of operating performance or to cash from
operations, and is not necessarily indicative of cash flow available to
fund cash needs. See Management's Discussion and Analysis for definition of
FFO.
(2) GLA weighted by months in operation.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in connection with the financial
statements and notes thereto appearing elsewhere in this annual report.
Certain comparisons between periods have been made on a percentage or weighted
average per square foot basis. The latter technique adjusts for square footage
changes at different times during the year.
GENERAL OVERVIEW
At December 31, 1998, the Operating Partnership operated 19 manufacturers'
outlet centers, compared to 20 at the end of 1997 and 18 at the end of 1996. The
Operating Partnership's operating gross leasable area ("GLA") at December 31,
1998 was 4.9 million square feet compared to 4.3 million square feet and 3.6
million square feet at December 31, 1997 and 1996, respectively.
From January 1, 1996 to December 31, 1998, the Operating Partnership grew by
increasing rents at its operating centers, opening four new centers, acquiring
one center and expanding nine centers. The 1.9 million square feet ("sf") of net
GLA added is detailed as follows:
<PAGE>
<TABLE>
<CAPTION>
SINCE
JANUARY 1,
1996 1998 1997 1996
---------------- ---------------- ---------------- ----------------
Changes in GLA (sf in 000's):
NEW CENTERS DEVELOPED:
<S> <C> <C> <C> <C>
Leesburg Corner........................ 270 270 - -
Wrentham Village....................... 227 - 227 -
North Georgia.......................... 292 - - 292
Clinton Crossing........................ 272 - - 272
---------------- ---------------- ---------------- ----------------
TOTAL NEW CENTERS........................ 1,061 270 227 564
CENTERS EXPANDED:
Woodbury Common......................... 270 268 - 2
Wrentham Village........................ 126 126 - -
Camarill1o Premium Outlets.............. 184 45 85 54
North Georgia........................... 142 31 111 -
Folsom Premium Outlets.................. 56 19 15 22
Columbia Gorge.......................... 16 16 - -
Desert Hills............................ 42 6 36 -
Liberty Village......................... 16 - 12 4
Petaluma Village........................ 30 - - 30
Other................................... (17) (15) (2) -
---------------- ---------------- ---------------- ----------------
TOTAL CENTERS EXPANDED 865 496 257 112
CENTERS HELD FOR SALE:
Solvang Designer Outlets................ (52) (52) - -
Lawrence Riverfront..................... (146) (146) - -
---------------- ---------------- ---------------- ----------------
(198) (198) - -
CENTER ACQUIRED:
Waikele Premium Outlets................. 214 - 214 -
---------------- ---------------- ---------------- ----------------
Net GLA added during the period 1,942 568 698 676
OTHER DATA:
GLA at end of period.................... 4,876 4,308 3,610
Weighted average GLA (1)................ 4,614 3,935 3,255
Centers in operation at end of period... 19 20 18
New centers opened...................... 1 1 2
Centers expanded........................ 7 5 5
Centers held for sale................... 2 - -
Center acquired......................... - 1 -
NOTE: (1) Average GLA weighted by months in operation
</TABLE>
The Operating Partnership's centers produced weighted average reported tenant
sales of approximately $360 per square foot in 1998 and 1997 and $345 per square
foot in 1996.
Two of the Operating Partnership's centers, Woodbury Common and Desert Hills,
provided approximately 35%, 34% and 38% of the Operating Partnership's total
revenue for the years 1998, 1997, and 1996, respectively. In addition,
approximately 34%, 38%, and 44% of the Operating Partnership's revenues for the
years ended December 31, 1998, 1997 and 1996, respectively, were derived from
the Operating Partnership's centers in California.
The Operating Partnership does not consider any single store lease to be
material; no individual tenant, combining all of its store concepts, accounts
for more than 6% of the Operating Partnership's gross revenues or total GLA; and
only one tenant occupies more than 5% of the Operating Partnership's total GLA.
In view of these statistics and the Operating Partnership's past success in
re-leasing available space, the Operating Partnership believes the loss of any
individual tenant would not have a significant effect on future operations. The
discussion below is based upon operating income before minority interest and
extraordinary item. The minority interest in net income varies from period to
period as a result of changes in the Operating Partnership's 50% investment in
Solvang prior to June 30, 1997.
COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1997
Operating income before interest, depreciation and amortization increased $18.2
million, or 24.2%, to $93.6 million in 1998 from $75.4 million in 1997. This
increase was primarily the result of expansions and new center openings during
1997 and 1998.
Base rentals increased $15.9 million, or 22.5%, to $86.6 million in 1998 from
$70.7 million in 1997 due to expansions, new center openings in 1997 and 1998,
one acquired center and higher average rents. Base rental revenue per weighted
average square foot increased to $18.77 in 1998 from $17.97 in 1997 as a result
of higher rental rates on new leases and renewals.
Percentage rents increased $2.6 million, or 23.5%, to $13.4 million in 1998 from
$10.8 million in 1997. The increase was primarily due to a new center opening in
1997, increased tenant sales and a higher number of tenants contributing
percentage rents.
Expense reimbursements, representing contractual recoveries from tenants of
certain common area maintenance, operating, real estate tax, promotional and
management expenses, increased $6.3 million, or 21.9%, to $35.3 million in 1998
from $29.0 million in 1997, due to the recovery of operating and maintenance
costs from increased GLA. On a weighted average square foot basis, expense
reimbursements increased 4.1% to $7.66 in 1998 from $7.36 in 1997. The average
recovery of reimbursable expenses was 91.3% in 1998 compared to 92.2% in 1997.
Other income increased $1.1 million to $4.0 million in 1998 from $2.9 million in
1997. The increase was due to income from the agreement not to compete with the
Mills Corporation in the Houston, Texas area and a $0.3 million increase in
outparcel income during 1998.
Interest, in excess of amounts capitalized, increased $4.6 million to $20.0
million in 1998 from $15.4 million in 1997, due to higher debt balances from
increased GLA in operation.
Operating and maintenance expenses increased $7.3 million, or 23.2%, to $38.7
million in 1998 from $31.4 million in 1997. The increase was primarily due to
costs related to increased GLA. On a weighted average square foot basis,
operating and maintenance expenses increased 5.0% to $8.39 in 1998 from $7.99 in
1997 as a result of increased real estate tax and promotion costs.
Depreciation and amortization expense increased $7.5 million to $32.5 million in
1998 from $25.0 million in 1997. The increase was due to depreciation of
expansions and new centers opened in 1997 and 1998.
General and administrative expenses increased $1.0 million to $4.8 million in
1998 from $3.8 million in 1997. On a weighted average square foot basis, general
and administrative expenses increased 8.2% to $1.05 in 1998 from $0.97 in 1997
primarily due to increased personnel, overhead costs and accrual for deferred
compensation.
The loss on writedown of assets of $15.7 million in 1998 is primarily from
valuing two centers held for sale at their estimated fair values and writing off
pre-development costs of an abandoned site.
Other expenses decreased $0.4 million to $2.2 million in 1998 from $2.6 million
in 1997. The decrease was primarily due to recoveries of bad debts previously
written off.
<PAGE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996
Operating income before interest, depreciation and amortization increased $16.7
million, or 28.4%, to $75.4 million in 1997 from $58.7 million in 1996. This
increase was primarily the result of expansions, new center openings and the
purchase of one center.
Base rentals increased $14.3 million, or 25.4%, to $70.7 million in 1997 from
$56.4 million in 1996 due to expansions, new center openings, the acquired
center and higher average rents. Base rental revenue per weighted average square
foot increased to $17.97 in 1997 from $17.32 in 1996 as a result of higher
rental rates on new leases and renewals.
Percentage rents increased $3.4 million, or 46.4%, to $10.8 million in 1997 from
$7.4 million in 1996. The increase was primarily due to increases in tenant
sales, new center openings, expansions at the Operating Partnership's larger
centers, the acquired center and increases in tenants contributing percentage
rents.
Expense reimbursements, representing contractual recoveries from tenants of
certain common area maintenance, operating, real estate tax, promotional and
management expenses, increased $4.2 million, or 17.1%, to $29.0 million in 1997
from $24.8 million in 1996, due to the recovery of operating and maintenance
costs at new and expanded centers. On a weighted average square foot basis,
expense reimbursements decreased 3.3% to $7.36 in 1997 from $7.61 in 1996. The
average recovery of reimbursable expenses was 92.2% in 1997 compared to 91.8% in
1996.
Other income increased $0.1 million to $2.9 million in 1997 from $2.8 million in
1996.
Interest, in excess of amounts capitalized, increased $6.6 million to $15.4
million in 1997 from $8.8 million in 1996, due to higher debt balances from new
centers, expansion openings and one center acquisition financed with borrowings.
Operating and maintenance expenses increased $4.4 million, or 16.5%, to $31.4
million in 1997 from $27.0 million in 1996. The increase was primarily due to
costs related to increased GLA. On a weighted average square foot basis,
operating and maintenance expenses decreased 3.6% to $7.99 in 1997 from $8.29 in
1996 as a result of decreased maintenance and snow removal costs.
Depreciation and amortization expense increased $6.0 million to $25.0 million in
1997 from $19.0 million in 1996, the increase was due to costs related to
increased GLA.
General and administrative expenses increased $0.5 million to $3.8 million in
1997 from $3.3 million in 1996. On a weighted average square foot basis, general
and administrative expenses decreased 5.8% to $0.97 in 1997 from $1.03 in 1996.
Increased personnel and overhead costs were more than offset by additions to
operating GLA.
Other expenses increased $0.7 million to $2.6 million in 1997 from $1.9 million
in 1996. The increase was primarily from legal expenses and additional reserves
for bad debt due to higher revenue.
LIQUIDITY AND CAPITAL RESOURCES
The Operating Partnership believes it has adequate financial resources to fund
operating expenses, distributions, and planned development and construction
activities. Operating cash flow in 1998 of $78.7 million is expected to increase
with a full year of operations of the 776,000 square feet of GLA added during
1998 and scheduled openings of approximately 390,000 square feet in 1999. In
addition, at December 31, 1998 the Operating Partnership had $74 million
available under its Senior Credit Facility, access to the public markets through
shelf registrations covering $200 million of equity and $175 million of debt,
and cash equivalents of $9.6 million.
Operating cash flow is expected to provide sufficient funds for dividends and
distributions. In addition, the Operating Partnership anticipates retaining
sufficient operating cash to fund re-tenanting and lease renewal tenant
improvement costs, as well as capital expenditures to maintain the quality of
its centers. Common distributions declared and recorded in 1998 were $52.1
million or $2.76 per share or unit. The Operating Partnership's 1998
distribution payout ratio as a percentage of net income before minority
interest, loss on writedown of assets and depreciation and amortization,
exclusive of amortization of deferred financing costs, ("FFO") was 76.6%. The
Senior Credit Facility limits aggregate dividends and distributions to the
lesser of (i) 90% of FFO on an annual basis or (ii) 100% of FFO for any two
consecutive quarters.
On March 30, 1998, the OP replaced its two unsecured bank revolving lines of
credit, totaling $150 million (the "Credit Facilities"), with a new $160 million
senior unsecured bank line of credit (the "Senior Credit Facility"). The Senior
Credit Facility expires on March 30, 2001 and bears interest on the outstanding
balance, payable monthly, at a rate equal to the London Interbank Offered Rate
("LIBOR") plus 1.05% (6.36% at December 31, 1998) or the prime rate, at the OP's
option. The LIBOR rate spread ranges from 0.85% to 1.25% depending on the
Operating Partnership's Senior Debt rating. A fee on the unused portion of the
Senior Credit Facility is payable quarterly at rates ranging from 0.15% to 0.25%
depending on the balance outstanding. The lenders have an option to extend the
facility annually for an additional year.
During 1998 the Operating Partnership added approximately 776,000 square feet of
new GLA including a 268,000 square foot expansion at Woodbury Common Premium
Outlets (Central Valley, NY), its flagship center; a 126,000 square foot
expansion at Wrentham Village Premium Outlets (Wrentham, MA), and the completion
and opening of the 270,000 square foot first phase of Leesburg Corner Premium
Outlets (Leesburg, VA), and expansions at five other centers totaling 112,000
square feet.
The Operating Partnership is in the process of planning development for 1999 and
beyond. At December 31, 1998, approximately 220,000 square feet of the Operating
Partnership's planned 1999 development was under construction consisting of the
120,000 square foot third phase of Wrentham Village and the 100,000 square foot
fourth phase of North Georgia Premium Outlets (Dawsonville, GA) These projects
are under development and there can be no assurance that they will be completed
or opened, or that there will not be delays in opening or completion. Excluding
joint venture projects with Simon the Operating Partnership anticipates 1999
development and construction costs of $50 million to $60 million. Funding is
currently expected from borrowings under the Senior Credit Facility, additional
debt offerings, and/or equity offerings.
The Operating Partnership announced in October 1998 that it sold its interest in
and terminated the development of Houston Premium Outlets, a joint venture
project with Simon. Under the terms of the agreement, the Operating Partnership
will receive non-compete payments totaling $21.4 million from The Mills
Corporation; $3.0 million was received at closing, and four annual installments
of $4.6 million are to be received on each January 2, through 2002. The
Operating Partnership has also been reimbursed for its share of land costs,
development costs and fees related to the project.
Construction has commenced on Orlando Premium Outlets ("OPO"), a 430,000 square
foot 50/50 joint venture project between the Operating Partnership and Simon.
OPO is located on Interstate 4, midway between Walt Disney World/Epcot and Sea
World in Orlando, Florida and is scheduled to open in the first half of 2000.
The joint venture has entered into a $82.5 million construction loan agreement
that is expected to fund approximately 75% of the costs of the project. The
balance of costs will be funded equally by the Operating Partnership and Simon.
In October 1998, due to adverse conditions in the debt markets, the Operating
Partnership elected to redeem the remaining $60 million of Reset Notes, using
borrowings under the Senior Credit Facility. In November 1998, the Operating
Partnership obtained a $60 million 18 month bank term loan bearing interest at
LIBOR plus 1.40%. Loan proceeds were used to repay borrowings under the Senior
Credit Facility. The bank term loan will provide the Operating Partnership
additional flexibility to access capital sources at appropriate times over the
next 12 months.
The Operating Partnership has minority interests ranging from 5 to 15% in
several outlet centers and outlet development projects in Europe. Two outlet
centers, Bicester Village outside of London, England and La Roca Company Stores
outside of Barcelona, Spain, are currently open and operated by Value Retail PLC
and its affiliates. Three new projects and expansions of the two existing
centers are in various stages of development and are expected to open within the
next two years. The Operating Partnership's total investment in Europe as of
March 1999 is approximately $3.5 million. The Operating Partnership has also
agreed to provide up to $22 million in limited debt service guarantees under a
standby facility for loans arranged by Value Retail PLC to construct outlet
centers in Europe. The term of the standby facility is three years and
guarantees shall not be outstanding for longer than five years after project
completion. As of March 1999, the Operating Partnership has provided limited
debt service guaranties of approximately $14 million for two projects.
During 1998, the Operating Partnership entered into a memorandum of
understanding (expiring in June 1999) with two partners to study the feasibility
of developing new outlet centers in Japan. The partners are currently
researching potential development sites and intend to organize a formal joint
venture when viable projects are located and approved. The Operating
Partnership's current financial commitment is not material.
To achieve planned growth and favorable returns in both the short and long-term,
the Operating Partnership's financing strategy is to maintain a strong, flexible
financial position by: (i) maintaining a conservative level of leverage; (ii)
extending and sequencing debt maturity dates; (iii) managing exposure to
floating interest rates; and (iv) maintaining liquidity. Management believes
these strategies will enable the Operating Partnership to access a broad array
of capital sources, including bank or institutional borrowings and secured and
unsecured debt and equity offerings, subject to market conditions.
Net cash provided by operating activities was $78.7 million and $56.6 million
for the years ended December 31, 1998 and 1997, respectively. The increase was
primarily due to the growth of the Operating Partnership's GLA to 4.9 million
square feet in 1998 from 4.3 million square feet in 1997. Net cash used in
investing activities decreased $79.4 million for the year ended December 31,
1998 compared to the corresponding 1997 period, primarily as a result of the
Waikele Factory Outlets acquisition in March 1997. For the year ended December
31, 1998, net cash provided by financing activities decreased by $107.1 million
primarily due to borrowings for the Waikele Factory Outlets acquisition and
excess capital raised for development during 1997.
Net cash provided by operating activities was $56.6 million and $53.5 million
for the years ended December 31, 1997 and 1996, respectively. The increase was
primarily due to the growth of the Operating Partnership's GLA to 4.3 million
square feet in 1997 from 3.6 million square feet in 1996 and increases in
accrued interest on the borrowings offset by additions to deferred lease costs.
Net cash used in investing activities decreased $99.7 million for the year ended
December 31, 1997 compared to 1996, primarily as a result of the acquisition of
Waikele Factory Outlets and increased construction activity. Net cash provided
by financing activities increased $87.4 million primarily due to the sale of
common stock to Simon and the sale of Preferred Stock.
YEAR 2000 COMPLIANCE
The year 2000 ("Y2K") issue refers generally to computer applications using only
the last two digits to refer to a year rather than all four digits. As a result,
these applications could fail or create erroneous results if they recognize "00"
as the year 1900 rather than the year 2000. The Operating Partnership has taken
Y2K initiatives in three general areas which represent the areas that could have
an impact on the Operating Partnership: information technology systems,
non-information technology systems and third-party issues. The following is a
summary of these initiatives:
INFORMATION TECHNOLOGY: The Operating Partnership has focused its efforts on the
high-risk areas of the corporate office computer hardware, operating systems and
software applications. The Operating Partnership's assessment and testing of
existing equipment revealed that its hardware, network operating systems and
most of the software applications are Y2K compliant. The exception is the
DOS-based accounting systems which were upgraded and replaced at the beginning
of 1999 to make them compatible with Windows applications primarily used by the
Operating Partnership.
NON-INFORMATION TECHNOLOGY: Non-information technology consists mainly of
facilities management systems such as telephone, utility and security systems
for the corporate office and the outlet centers. The Operating Partnership has
reviewed the corporate facility management systems and made inquiry of the
building owner/manager and concluded that the corporate office building systems
including telephone, utilities, fire and security systems are Y2K compliant. The
Operating Partnership is in the process of identifying date-sensitive systems
and equipment including HVAC units, telephones, security systems and alarms,
fire and flood warning systems and general office systems at its outlet centers.
Assessment and testing of these systems is approximately 75% complete and
expected to be completed by June 30, 1999. Critical non-compliant systems will
be replaced when identified. Based on preliminary assessment, the cost of
replacement is not expected to be significant.
THIRD PARTIES: The Operating Partnership has third-party relationships with
approximately 350 tenants and 4,000 suppliers and contractors. Many of these
third parties are publicly-traded corporations and subject to disclosure
requirements. The Operating Partnership has begun assessment of major third
parties' Y2K readiness including tenants, key suppliers of outsourced services
including stock transfer, debt servicing, banking collection and disbursement,
payroll and benefits, while simultaneously responding to their inquiries
regarding the Operating Partnership's readiness. The majority of the Operating
Partnership's vendors are small suppliers that the Operating Partnership
believes can manually execute their business and are readily replaceable.
Management also believes there is no material risk of being unable to procure
necessary supplies and services. Third-party assessment is approximately 50%
complete and expected to be completed by June 30, 1999. The Operating
Partnership continues to monitor Y2K disclosures in SEC filings of
publicly-owned third parties.
COSTS: The accounting software upgrade and conversion is being executed under
maintenance and support agreements with software vendors. The total cost of the
accounting conversion which the Company had previously commenced during the
third quarter is estimated at approximately $200,000 including the Y2K portion
of the conversion that cannot be readily identified and is not material to the
operating results or financial position of the Operating Partnership.
The identification and remediation of systems at the outlet centers is being
accomplished by in-house business systems personnel and outlet center general
managers whose costs are recorded as normal operating expense. The assessment of
third-party readiness is also being conducted by in-house personnel whose costs
are recorded as normal operating expenses. The Operating Partnership is not yet
in a position to estimate the cost of third-party compliance issues, but has no
reason to believe, based upon its evaluations to date, that such costs will
exceed $100,000.
RISKS: The principal risks to the Operating Partnership relating to the
completion of its accounting software conversion is failure to correctly bill
tenants by December 31, 1999 and to pay invoices when due. Management believes
it has adequate resources, or could obtain the needed resources, to manually
bill tenants and pay bills until the systems became operational.
The principal risks to the Operating Partnership relating to non-information
systems at the outlet centers are failure to identify time-sensitive systems and
inability to find a suitable replacement system. The Operating Partnership
believes that adequate replacement components or new systems are available at
reasonable prices and are in good supply. The Operating Partnership also
believes that adequate time and resources are available to remediate these areas
as needed.
The principal risks to the Operating Partnership in its relationships with third
parties are the failure of third-party systems used to conduct business such as
tenants being unable to stock stores with merchandise, use cash registers and
pay invoices; banks being unable to process receipts and disbursements; vendors
being unable to supply needed materials and services to the centers; and
processing of outsourced employee payroll. Based on Y2K compliance work done to
date, the Operating Partnership has no reason to believe that key tenants, banks
and suppliers will not be Y2K compliant in all material respects or can not be
replaced within an acceptable timeframe. The Operating Partnership will attempt
to obtain compliance certification from suppliers of key services as soon as
such certifications are available.
CONTINGENCY PLANS: The Operating Partnership intends to deal with contingency
planning during 1999 as results of the above assessments are known.
The Operating Partnership's description of its Y2K compliance issue is based
upon information obtained by management through evaluations of internal business
systems and from tenant and vendor compliance efforts. No assurance can be given
that the Operating Partnership will be able to address the Y2K issues for all
its systems in a timely manner or that it will not encounter unexpected
difficulties or significant expenses relating to adequately addressing the Y2K
issue. If the Operating Partnership or the major tenants or vendors with whom
the Operating Partnership does business fail to address their major Y2K issues,
the Operating Partnership's operating results or financial position could be
materially adversely affected.
FUNDS FROM OPERATIONS
Management believes that funds from operations ("FFO") should be considered in
conjunction with net income, as presented in the statements of income included
elsewhere herein, to facilitate a clearer understanding of the operating results
of the Company. Management considers FFO an appropriate measure of performance
for an equity real estate investment trust. FFO, as defined by the National
Association of Real Estate Investment Trusts ("NAREIT"), is net income
applicable to common shareholders (computed in accordance with generally
accepted accounting principles), excluding gains (or losses) from debt
restructuring and sales or writedowns of property, exclusive of outparcel sales,
plus real estate related depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures are calculated to reflect FFO on
the same basis. FFO does not represent net income or cash flow from operations
as defined by generally accepted accounting principles and should not be
considered an alternative to net income as an indicator of operating performance
or to cash from operations, and is not necessarily indicative of cash flow
available to fund cash needs.
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997
--------- -----------
<S> <C> <C>
Income to common unitholders before extraordinary item......... $21,248 $34,121
Add:
Depreciation and amortization (1).............................. 32,486 24,883
Loss on writedown of assets.................................... 15,713
(1,453) (1,587)
Amortization of deferred financing costs and depreciation
of non-rental real estate assets
-------------- ------------
FFO............................................................ $67,994 $57,417
============== ===============
Average units outstanding...................................... 18,871 18,040
Distributions declared per unit................................ $2.76 $2.58
NOTE: (1) Excludes depreciation and minority interest attributed to a
third-party limited partner's interest in a partnership for the year
ended December 31, 1997.
</TABLE>
ECONOMIC CONDITIONS
Substantially all leases contain provisions, including escalations of base rents
and percentage rentals calculated on gross sales, to mitigate the impact of
inflation. Inflationary increases in common area maintenance and real estate tax
expenses are substantially all reimbursed by tenants.
Virtually all tenants have met their lease obligations and the Operating
Partnership continues to attract and retain quality tenants. The Operating
Partnership intends to reduce operating and leasing risks by continually
improving its tenant mix, rental rates and lease terms, and by pursuing
contracts with creditworthy upscale and national brand-name tenants.
<PAGE>
ITEM 7-A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Operating Partnership is exposed to changes in interest rates primarily from
its floating rate debt arrangements. Under its current policies, the Operating
Partnership does not use interest rate derivative instruments to manage exposure
to interest rate changes. A hypothetical 100 basis point adverse move (increase)
in interest rates along the entire rate curve would adversely affect the
Operating Partnership's annual interest cost by approximately $1.2 million
annually.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and financial information of the Operating Partnership
for the years ended December 31, 1998, 1997 and 1996 and the Reports of the
Independent Auditors thereon are included elsewhere herein. Reference is made to
the financial statements and schedules in Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10, 11, 12 AND 13.
The Operating Partnership does not have any directors, executive officers or
stock authorized, issued or outstanding. If the information was required it
would be identical to the information contained in Items 10, 11, 12 and 13 of
the Company's Form 10-K, that will appear in the Company's Proxy Statement
furnished to shareholders in connection with the Company's 1999 Annual Meeting.
Such information is incorporated by reference in this Form 10-K.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1 and 2. The response to this portion of Item 14 is submitted as a separate
section of this report.
3. Exhibits
3.1 Articles of Incorporation of the Company, as amended, including
Articles Supplementary relating to 8 3/8% Series A Cumulative
Redeemable Preferred Stock. Incorporated by reference to Exhibit 3.1
to Form 10K for the year ended December 31, 1997.
3.2 By-laws of the Company. Incorporated by reference to Exhibit 3.2 to
Registration Statement filed by the Company on Form S-11 under the
Securities Act of 1933 (file No. 33-67870) (S-11).
3.3 Agreement of Limited Partnership for the Operating Partnership.
Incorporated by reference to Exhibit 3.3 to S-11.
3.4 Amendments No. 1 and No. 2 to Partnership Agreement dated March 31,
1997 and October 7, 1997. Incorporated by reference to Exhibit 3.4
to Form 10K for the year ended December 31, 1997.
4.1 Form of Indenture among the Company, Chelsea GCA Realty Partnership,
L.P., and State Street Bank and Trust Company, as Trustee.
Incorporated by reference to Exhibit 4.4 to Registration Statement
filed by the Company on Form S-3 under the Securities Act of 1933
(File No. 33-98136).
10.1 Registration Rights Agreement among the Company and recipients of
Units. Incorporated by reference to Exhibit 4.1 to S-11.
10.2 Term Loan Agreement dated November 3, 1998 among Chelsea GCA Realty
Partnership, L.P., BankBoston, N.A., individually and as an agent,
and other Lending Institutions listed therein.
10.3 Credit Agreement dated March 30, 1998 among Chelsea GCA Realty
Partnership, L.P., BankBoston, N.A, individually and as an agent,
and other Lending Institutions listed therein.
10.4 Agreement dated October 23, 1998, among Chelsea GCA Realty
Partnership, L.P., Chelsea GCA Realty, Inc., Simon Property Group,
L.P., the Mills Corporation and related parties.
10.5 Consulting Agreement effective August 1, 1997, between the Company
and Robert Frommer. Incorporated by reference to Exhibit 10.2 to
Form 10K for the year ended December 31, 1997.
10.6 Limited Liability Company Agreement of Simon/Chelsea Development
Co., L.L.C. dated May 16, 1997 between Simon DeBartolo Group, L.P.
and Chelsea GCA Realty Partnership, L.P. Incorporated by reference
to Exhibit 10.3 to Form 10K for the year ended December 31, 1997.
10.7 Subscription Agreement dated as of March 31, 1997 by and among
Chelsea GCA Realty Partnership, L.P., WCC Associates and KM Halawa
Partners. Incorporated by reference to Exhibit 1 to current report
on Form 8-K reporting on an event which occurred March 31, 1997.
10.8 Stock Subscription Agreement dated May 16, 1997 between Chelsea GCA
Realty, Inc. and Simon DeBartolo Group, L.P. Incorporated by
reference to Exhibit 10.5 to Form 10K for the year ended December
31, 1997.
10.9 Limited Liability Company Agreement of S/C Orlando Development,
L.L.C. dated December 23, 1998.
10.10 Limited Partnership Agreement of Simon/Chelsea Orlando Development,
L.P. dated January 22, 1999.
23.1 Consent of Ernst & Young LLP.
(b) Reports on Form 8-K.
None
(c) Exhibits
See (a) 3
(d) Financial Statement Schedules - The response to this portion of Item 14 is
submitted as a separate schedule of this report.
<PAGE>
ITEM 8, ITEM 14(A)(1) AND (2) AND ITEM 14(D)
(A)1. FINANCIAL STATEMENTS
FORM 10-K
REPORT PAGE
CONSOLIDATED FINANCIAL STATEMENTS-CHELSEA GCA REALTY
PARTNERSHIP, L.P.
Report of Independent Auditors..................................... F-1
Consolidated Balance Sheets as of December 31, 1998 and 1997....... F-2
Consolidated Statements of Income for the years ended
December 31, 1998, 1997 and 1996................................. F-3
Consolidated Statements of Partners' Capital for the
years ended December 31, 1998, 1997 and 1996..................... F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996................................. F-5
Notes to Consolidated Financial Statements......................... F-6
(A)2 AND (D) FINANCIAL STATEMENT SCHEDULE
Schedule III-Consolidated Real Estate and Accumulated
Depreciation..................................................... F-16
and F-17
All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements and notes thereto.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE OWNERS
CHELSEA GCA REALTY PARTNERSHIP, L.P.
We have audited the accompanying consolidated balance sheets of Chelsea GCA
Realty Partnership, L.P. as of December 31, 1998 and 1997, and the related
consolidated statements of income, partners' capital and cash flows for each of
the three years in the period ended December 31, 1998. Our audits also included
the financial statement schedule listed in the Index as Item 14(a). These
financial statements and schedule are the responsibility of the management of
Chelsea GCA Realty Partnership, L.P. Our responsibility is to express an opinion
on the financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Chelsea GCA Realty
Partnership, L.P. as of December 31, 1998 and 1997, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1998 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
NEW YORK, NEW YORK
FEBRUARY 10, 1999
<PAGE>
CHELSEA GCA REALTY PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
----------- -----------
Assets
Rental properties:
<S> <C> <C>
Land.................................................................. $109,318 $112,470
Depreciable property.................................................. 683,408 596,463
----------- -----------
Total rental property...................................................... 792,726 708,933
Accumulated depreciation................................................... (102,851) (80,244)
----------- -----------
Rental properties, net..................................................... 689,875 628,689
Cash and equivalents....................................................... 9,631 14,538
Notes receivable-related parties........................................... 4,500 4,781
Deferred costs, net........................................................ 17,766 17,276
Properties held for sale................................................... 8,733 -
Other assets............................................................... 42,847 22,745
----------- -----------
TOTAL ASSETS............................................................... $773,352 $ 688,029
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Unsecured bank debt................................................... $151,035 $ 5,035
7.75% Unsecured Notes due 2001........................................ 99,824 99,743
7.25% Unsecured Notes due 2007........................................ 124,712 124,681
Remarketed Floating Rate Reset Notes.................................. - 60,000
Construction payables................................................. 12,927 17,810
Accounts payable and accrued expenses................................. 19,769 14,442
Obligation under capital lease........................................ 9,612 9,729
Accrued distribution payable.......................................... 3,274 3,276
Other liabilities..................................................... 29,257 7,390
----------- -----------
TOTAL LIABILITIES.......................................................... 450,410 342,106
Commitments and contingencies
Partners' capital:
General partner units outstanding, 15,608 in 1998 and 15,353 in 1997....... 280,391 297,670
Limited partners units outstanding, 3,429 in 1998 and 3,432 in 1997........ 42,551 48,253
----------- -----------
Total partners' capital.................................................... 322,942 345,923
----------- -----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL.................................... $773,352 $ 688,029
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
CHELSEA GCA REALTY PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996
----------------- ---------------- -----------------
Revenues:
<S> <C> <C> <C>
Base rental................................... $86,592 $70,693 $56,390
Percentage rentals............................ 13,384 10,838 7,402
Expense reimbursements........................ 35,342 28,981 24,758
Other income.................................. 3,997 2,905 2,806
----------------- ---------------- -----------------
TOTAL REVENUES..................................... 139,315 113,417 91,356
EXPENSES:
Interest....................................... 19,978 15,447 8,818
Operating and maintenance...................... 38,704 31,423 26,979
Depreciation and amortization.................. 32,486 24,995 18,965
General and administrative..................... 4,849 3,815 3,342
Loss on writedown of assets.................... 15,713 - -
Other.......................................... 2,149 2,582 1,892
----------------- ---------------- -----------------
TOTAL EXPENSES...................................... 113,879 78,262 59,996
Income before minority interest and
extraordinary item............................. 25,436 35,155 31,360
Minority interest................................... - (127) (257)
----------------- ---------------- -----------------
Income before extraordinary item.................... 25,436 35,028 31,103
Extraordinary item-loss on early
extinguishment of debt......................... (345) (252) (902)
----------------- ----------------- -----------------
Net income.......................................... 25,091 34,776 30,201
Preferred unit requirement.......................... (4,188) (907) -
----------------- ---------------- -----------------
NET INCOME TO COMMON UNITHOLDERS $20,903 $33,869 $30,201
================= ================ =================
NET INCOME TO COMMON UNITHOLDERS:
General partner................................ $17,162 $27,449 $20,854
Limited partners............................... 3,741 6,420 9,347
----------------- ---------------- -----------------
TOTAL............................................... $20,903 $33,869 $30,201
================= ================ =================
NET INCOME PER COMMON UNIT:
General partner (including $0.02, $0.01 and $0.05
net loss per unit from extraordinary item in
1998, 1997 and 1996, respectively)................ $1.11 $1.88 $1.77
Limited partners (including $0.02, $0.01 and $0.05
net loss per unit from extraordinary item in
1998, 1997 and 1996, respectively)................ $1.09 $1.87 $1.76
WEIGHTED AVERAGE UNITS OUTSTANDING:
General partner................................... 15,440 14,605 11,802
Limited partners.................................. 3,431 3,435 5,316
----------------- ---------------- -----------------
TOTAL............................................... 18,871 18,040 17,118
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
CHELSEA GCA REALTY PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(IN THOUSANDS)
<TABLE>
<CAPTION>
General Partner'sLimited Partners' Total Partners'
Capital Capital Capital
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance December 31, 1995................................... $176,758 $84,277 $261,035
Contributions............................................... 3,216 1,556 4,772
Net income.................................................. 20,854 9,347 30,201
Distributions............................................... (28,122) (12,250) (40,372)
Transfer of a limited partners' interest.................... 12,634 (12,634) -
--------------- --------------- ---------------
Balance December 31, 1996................................... 185,340 70,296 255,636
Contributions............................................... 103,357 389 103,746
Net income.................................................. 28,356 6,420 34,776
Common distributions........................................ (38,475) (8,853) (47,328)
Preferred distribution...................................... (907) - (907)
Transfer of a limited partners' interest.................... 19,999 (19,999) -
--------------- --------------- ---------------
Balance December 31, 1997................................... 297,670 48,253 345,923
Contributions............................................... 8,266 - 8,266
Net income.................................................. 21,350 3,741 25,091
Common distributions........................................ (42,707) (9,407) (52,114)
Preferred distribution...................................... (4,188) - (4,188)
Transfer of a limited partners' interest.................... - (36) (36)
--------------- --------------- ---------------
Balance December 31, 1998................................... $280,391 $ 42,551 $322,942
=============== =============== ===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
CHELSEA GCA REALTY PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997 1996
----------------- ----------------- -----------------
Cash flows from operating activities
<S> <C> <C> <C>
Net income........................................ $25,091 $34,776 $30,201
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization................ 32,486 24,995 18,965
Minority interest in net income.............. - 127 257
Loss on writedown of assets.................. 15,713 - -
Loss on early extinguishment of debt......... 345 252 902
Additions to deferred lease costs............ (3,178) (6,629) (2,537)
Other operating activities................... 522 319 191
Changes in assets and liabilities:
Straight-line rent receivable............... (1,900) (1,523) (1,595)
Other assets................................ 1,094 287 597
Accounts payable and accrued expenses....... 8,558 3,990 6,529
----------------- ----------------- -----------------
Net cash provided by operating activities......... 78,731 56,594 53,510
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to rental properties.................... (116,339) (195,058) (97,585)
Additions to deferred development costs........... (3,468) (2,237) (1,477)
Advances to related parties....................... - - (67)
Payments from related parties..................... - - 173
Other investing activities........................ - (1,955) (612)
----------------- ----------------- -----------------
Net cash used in investing activities............. (119,807) (199,250) (99,568)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from sale of preferred units......... - 48,406 -
Net proceeds from sale of common units............ 8,287 54,951 2,583
Distributions..................................... (56,366) (48,791) (47,124)
Debt proceeds .................................... 154,000 261,710 292,592
Repayments of debt................................ (68,000) (172,000) (189,000)
Additions to deferred financing costs............. (1,695) (855) (3,660)
Other financing activities........................ (57) (113) 566
----------------- ----------------- -----------------
Net cash provided by financing activities......... 36,169 143,308 55,957
Net (decrease) increase in cash and equivalents.. (4,907) 652 9,899
Cash and equivalents, beginning of period......... 14,538 13,886 3,987
----------------- ----------------- -----------------
Cash and equivalents, end of period............... $9,631 $14,538 $13,886
================= ================= =================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
Chelsea GCA Realty Partnership, L.P. (the "Operating Partnership"or "OP"), which
commenced operations on November 2, 1993, is engaged in the development,
ownership, acquisition and operation of manufacturers' outlet centers. As of
December 31, 1998, the Operating Partnership operated 19 manufacturers' outlet
centers in 11 states. The sole general partner in the Operating Partnership,
Chelsea GCA Realty, Inc. (the "Company") is a self-administered and self-managed
Real Estate Investment Trust.
BASIS OF PRESENTATION
The financial statements contain the accounts of the Operating Partnership and
its majority owned subsidiaries. All significant intercompany transactions and
accounts have been eliminated in consolidation.
Through June 30, 1997, the Operating Partnership was the sole general partner
and had a 50% interest in Solvang Designer Outlets ("Solvang"), a limited
partnership. Accordingly, the accounts of Solvang were included in the
consolidated financial statements of the Operating Partnership. On June 30,
1997, the Operating Partnership acquired the remaining 50% interest in Solvang.
Solvang is not material to the Operating Partnership's operations or financial
position.
Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 1998 using available
market information and appropriate valuation methodologies. Although management
is not aware of any factors that would significantly affect the reasonable fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date and current estimates of fair
value may differ significantly from the amounts presented herein.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
RENTAL PROPERTIES
Rental properties are presented at cost net of accumulated depreciation.
Depreciation is computed on the straight-line basis over the estimated useful
lives of the assets. The Operating Partnership uses 25-40 year estimated lives
for buildings, and 15 and 5-7 year estimated lives for improvements and
equipment, respectively. Expenditures for ordinary maintenance and repairs are
charged to operations as incurred, while significant renovations and
enhancements that improve and/or extend the useful life of an asset are
capitalized and depreciated over the estimated useful life. During 1996, the
Operating Partnership adopted Statement of Financial Accounting Standards No.
121 ("SFAS No. 121"), Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of. SFAS No. 121 requires that the Operating
Partnership review real estate assets for impairment wherever events or changes
in circumstances indicate that the carrying value of assets to be held and used
may not be recoverable. Impaired assets are reported at the lower of cost or
fair value. Assets to be disposed of are reported at the lower of cost or fair
value less cost to sell.
CASH AND EQUIVALENTS
All demand and money market accounts and certificates of deposit with original
terms of three months or less from the date of purchase are considered cash
equivalents. At December 31, 1998 and 1997 cash equivalents consisted of
repurchase agreements which were held by one financial institution, commercial
paper and US Government agency securities which matured in January of the
following year. The carrying amount of such investments approximated fair value.
DEVELOPMENT COSTS
Development costs, including interest, taxes, insurance and other costs incurred
in developing new properties, are capitalized. Upon completion of construction,
development costs are amortized on a straight-line basis over the useful lives
of the respective assets.
CAPITALIZED INTEREST
Interest, including the amortization of deferred financing costs for borrowings
used to fund development and construction, is capitalized as construction in
progress and allocated to individual property costs.
RENTAL EXPENSE
Rental expense is recognized on a straight-line basis over the initial term of
the lease.
DEFERRED LEASE COSTS
Deferred lease costs consist of fees and direct costs incurred to initiate and
renew operating leases, and are amortized on a straight-line basis over the
initial lease term or renewal period as appropriate.
DEFERRED FINANCING COSTS
Deferred financing costs are amortized as interest costs on a straight-line
basis over the terms of the respective agreements. Unamortized deferred
financing costs are expensed when the associated debt is retired before
maturity.
REVENUE RECOGNITION
Leases with tenants are accounted for as operating leases. Minimum rental income
is recognized on a straight-line basis over the lease term. Due and unpaid rents
are included in other assets in the accompanying balance sheet. Certain lease
agreements contain provisions for rents which are calculated on a percentage of
sales and recorded on the accrual basis. Contingent rents are not recognized
until the required thresholds are exceeded. Virtually all lease agreements
contain provisions for reimbursement of real estate taxes, insurance,
advertising and common area maintenance costs.
BAD DEBT EXPENSE
Bad debt expense included in other expense totaled $0.6 million, $0.8 million
and $0.3 million for the years ended December 31, 1998, 1997 and 1996,
respectively. The allowance for doubtful accounts included in other assets
totaled $1.1 million and $0.8 million at December 31, 1998 and 1997,
respectively.
INCOME TAXES
No provision has been made for income taxes in the accompanying consolidated
financial statements since such taxes, if any, are the responsibility of the
individual partners.
NET INCOME PER PARTNERSHIP UNIT
Net income per partnership unit is determined by allocating net income to the
general partner (including the general partner's preferred unit allocation) and
the limited partners based on their weighted average partnership units
outstanding during the respective periods presented.
CONCENTRATION OF OPERATING PARTNERSHIP'S REVENUE AND CREDIT RISK
Approximately 35%, 34% and 38% of the Operating Partnership's revenues for the
years ended December 31, 1998, 1997 and 1996, respectively, were derived from
the Operating Partnership's two centers with the highest revenues, Woodbury
Common and Desert Hills. The loss of either center or a material decrease in
revenues from either center for any reason may have a material adverse effect on
the Operating Partnership. In addition, approximately 34%, 38% and 44% of the
Operating Partnership's revenues for the years ended December 31, 1998, 1997 and
1996, respectively, were derived from the Operating Partnership's centers in
California.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Management of the Operating Partnership performs ongoing credit evaluations of
its tenants and requires certain tenants to provide security deposits. Although
the Operating Partnership's tenants operate principally in the retail industry,
there is no dependence upon any single tenant.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
MINORITY INTEREST
Through June 30, 1997, the Operating Partnership was the sole general partner
and had a 50% interest in Solvang Designer Outlets ("Solvang"), a limited
partnership. Accordingly, the accounts of Solvang were included in the
consolidated financial statements of the Operating Partnership. On June 30,
1997, the Operating Partnership acquired the remaining 50% interest in Solvang.
Solvang is not material to the operations or financial position.
SEGMENT INFORMATION
Effective January 1, 1998, the Operating Partnership adopted the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
131, Disclosures about Segments of an Enterprise and Related Information
("Statement 131"). Statement 131 superseded FASB Statement No. 14, Financial
Reporting for Segments of a Business Enterprise. Statement 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. Statement 131 also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The adoption of Statement 131 did not affect results of operations, financial
position or disclosure of segment information as the Operating Partnership is
engaged in the development, ownership, acquisition and operation of
manufacturers' outlet centers and has one reportable segment, retail real
estate. The Operating Partnership evaluates real estate performance and
allocates resources based on net operating income and weighted average sales per
square foot. The primary sources of revenue are generated from tenant base
rents, percentage rents and reimbursement revenue. Operating expenses primarily
consist of common area maintenance, real estate taxes and promotional expenses.
The retail real estate business segment meets the quantitative threshold for
determining reportable segments. The Operating Partnership's investment in
foreign operations is not material to the consolidated financial statements.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities, which is required
to be adopted in years beginning after June 15, 1999. Statement 133 permits
early adoption as of the beginning of any fiscal quarter after its issuance. The
Operating Partnership expects to adopt the new Statement effective January 1,
2000. The Statement will require the Operating Partnership to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If a derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of the
derivative will either be offset against the change in fair value of the hedged
asset, liability, or firm commitment through earnings, or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The Operating Partnership does not anticipate that the
adoption of the Statement will have a significant effect on its results of
operations or financial position.
3. RENTAL PROPERTIES
The following summarizes the carrying values of rental properties as of December
31 (in thousands):
1998 1997
-------------- -------------
Land and improvements........................... $245,814 $207,186
Buildings and improvements...................... 512,080 434,565
Construction-in-process......................... 25,534 60,615
Equipment and furniture......................... 9,298 6,567
-------------- -------------
Total rental property........................... 792,726 708,933
Accumulated depreciation and amortization (102,851) (80,244)
-------------- -------------
Total rental property, net...................... $689,875 $628,689
============== =============
Interest costs capitalized as part of buildings and improvements were $5.2
million, $4.8 million and $3.9 million for the years ended December 31, 1998,
1997 and 1996, respectively.
Commitments for land, new construction, development, and acquisitions totaled
approximately $35.3 million at December 31, 1998 including the Company's equity
contribution for the Orlando Premium Outlets joint venture with Simon Property
Group.
Depreciation expense (including amortization of the capital lease) amounted to
$29.2 million, $22.3 million and $16.9 million for the years ended December 31,
1998, 1997 and 1996, respectively.
4. WAIKELE ACQUISITION
Pursuant to a Subscription Agreement dated as of March 31, 1997, the Operating
Partnership acquired Waikele Factory Outlets, a manufacturers' outlet shopping
center located in Hawaii. The consideration paid by the Operating Partnership
consisted of the assumption of $70.7 million of indebtedness outstanding with
respect to the property (which indebtedness was repaid in full by the Operating
Partnership immediately after the closing) and the issuance of special
partnership units in the Operating Partnership, having a fair market value of
$0.5 million. Immediately after the closing, the Operating Partnership paid a
special cash distribution of $5.0 million on the special units. The cash used by
the Operating Partnership in the transaction was obtained through borrowings
under the Operating Partnership's Credit Facilities.
The following condensed pro forma (unaudited) information assumes the
acquisition had occurred on January 1, 1996:
<TABLE>
<CAPTION>
1997 1996
-------------- ---------------
<S> <C> <C>
Total revenue................................................. $115,802 $99,589
Income to common unitholders before extraordinary items....... 34,718 32,725
Net income to common unitholders:
General partner............................................ 27,933 21,973
Limited partners........................................... 6,533 9,850
-------------- ---------------
Total......................................................... 34,466 31,823
Net income per unit:
General partner (including $0.01 and $0.05 net loss per unit
from extraordinary item in 1997 and 1996, respectively).. $1.91 $1.86
Limited partners (including $0.01 and $0.05 net loss per unit
from extraordinary item in 1997 and 1996, respectively).. $1.89 $1.85
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. DEFERRED COSTS
The following summarizes the carrying amounts for deferred costs as of December
31 (in thousands):
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Lease costs.................................................... $17,601 $14,712
Financing costs................................................ 10,879 9,184
Development costs.............................................. 3,675 4,348
Other.......................................................... 1,172 991
----------- -----------
Total deferred costs........................................... 33,327 29,235
Accumulated amortization....................................... (15,561) (11,959)
----------- -----------
Total deferred costs, net...................................... $17,766 $17,276
=========== ===========
</TABLE>
PROPERTIES HELD FOR SALE
Properties held for sale represent the fair value, less estimated costs to sell,
of two of the Operating Partnership's outlet centers, Lawrence Riverfront Plaza
("Lawrence") and Solvang.
During the second quarter of 1998, the Operating Partnership decided to sell
Solvang, a 51,000 square foot center in Solvang, California, for net selling
price of $5.6 million. The center had a book value of $10.5 million resulting in
a writedown of $4.9 million in the second quarter of 1998. During the fourth
quarter, the initial purchase offer was withdrawn and the Operating Partnership
received another for a net selling price of $4.0 million requiring a further
writedown of $1.6 million. Closing is scheduled for early 1999. For the year
ended December 31, 1998, Solvang accounted for less than 1% of the Operating
Partnership's revenues and net operating income.
During the fourth quarter of 1998, the Operating Partnership decided to sell
Lawrence, a 146,000 square foot center in Lawrence, Kansas. In December 1998 the
Operating Partnership signed an agreement to sell the property for $4.6 million
net of selling costs of $0.2 million. The sale is scheduled to close in March
1999. Lawrence had a book value of $13.1 million, resulting in an $8.5 million
writedown of the asset in the fourth quarter. For the year ended December 31,
1998, Lawrence accounted for about 1% of the Operating Partnership's revenues
and net operating income.
Management decided to sell these two properties during 1998 as part of the
Operating Partnership's long-term objective of devoting resources and focusing
on productive properties. Management determined that the time and effort
necessary to support these underperforming centers was not worth the economic
benefit to the Operating Partnership. Management also concluded that these
centers would be more useful as office and/or residential space which are
outside the Operating Partnership's area of expertise.
7. NON-COMPETE AGREEMENT
In October 1998, the Operating Partnership signed a definitive agreement to
terminate the development of Houston Premium Outlets, a joint venture project
with Simon Property Group, Inc. Under the terms of the agreement, the Operating
Partnership will receive payments totaling $21.4 million from The Mills
Corporation, to be made over four years, as well as immediate reimbursement for
its share of land costs, development costs and fees related to the project. The
revenue is being recognized on a straight line basis over the term of the
agreement. The Operating Partnership has withdrawn from the Houston development
partnership and agreed to certain restrictions on competing in the Houston
market through the year 2002.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. DEBT
On March 30, 1998, the OP replaced its two unsecured bank revolving lines of
credit, totaling $150 million (the "Credit Facilities"), with a new $160 million
senior unsecured bank line of credit (the "Senior Credit Facility"). The Senior
Credit Facility expires on March 30, 2001 and bears interest on the outstanding
balance, payable monthly, at a rate equal to the London Interbank Offered Rate
("LIBOR") plus 1.05% (6.36% at December 31, 1998) or the prime rate, at the OP's
option. The LIBOR rate spread ranges from 0.85% to 1.25% depending on the
Operating Partnership's Senior Debt rating. A fee on the unused portion of the
Senior Credit Facility is payable quarterly at rates ranging from 0.15% to 0.25%
depending on the balance outstanding. The lenders have an option to extend the
facility annually for an additional year. At December 31, 1998, $74 million was
available under the Senior Credit Facility.
Also on March 30, 1998, the OP entered into a $5 million term loan (the "Term
Loan") which carries the same interest rate and maturity as the Senior Credit
Facility.
In November 1998, the OP obtained a $60 million term loan which expires April
2000 and bears interest on the outstanding balance at a rate equal to LIBOR plus
1.40% (6.71% at December 31, 1998). Proceeds from the loan were used to pay down
borrowings under the Senior Credit Facility.
In January 1996, the OP completed a $100 million public debt offering of 7.75%
unsecured term notes due January 2001 (the "7.75% Notes"), which are guaranteed
by the Operating Partnership. The five-year non-callable 7.75% Notes were priced
at a discount of 99.592 to yield 7.85% to investors. Net proceeds from the
offering were used to pay down substantially all of the borrowings under the
Operating Partnership's secured line of credit. The carrying amount of the 7.75%
Notes approximates their fair value.
In October 1996, the OP completed a $100 million offering of Remarketed Floating
Rate Reset Notes (the "Reset Notes"), which were guaranteed by the Company. The
interest rate reset quarterly and was equal to LIBOR plus 75 basis points during
the first year. In October 1997, the interest rate spread was reduced to LIBOR
plus 48 basis points. Net proceeds from the offering were used to repay all of
the then borrowings under the Credit Facilities and for working capital. In
October 1997, the OP redeemed $40 million of Reset Notes. In October 1998, due
to adverse conditions in the debt markets, the OP elected to redeem the
remaining $60 million of Reset Notes, using borrowings under the Senior Credit
Facility.
In October 1997, the Operating Partnership completed a $125 million public debt
offering of 7.25% unsecured term notes due October 2007 (the "7.25% Notes"). The
7.25% Notes were priced to yield 7.29% to investors, 120 basis points over the
10-year U.S. Treasury rate. Net proceeds from the offering were used to repay
substantially all borrowings under the Operating Partnership's Credit
Facilities, redeem $40 million of Reset Notes and for general corporate
purposes. The carrying amount of the 7.25% Notes approximates their fair value.
Interest paid, excluding amounts capitalized, was $19.8 million, $14.1 million
and $4.8 million for the years ended December 31, 1998, 1997 and 1996,
respectively.
9. PREFERRED STOCK
In October 1997, the Company issued 1.0 million shares of 8.375% Series A
Cumulative Redeemable Preferred Stock (the "Preferred Stock"), par value $0.01
per share, having a liquidation preference of $50.00 per share. The Preferred
Stock has no stated maturity and is not convertible into any other securities of
the Company. The Preferred Stock is redeemable on or after October 15, 2027 at
the Company's option. Net proceeds from the offering were used to repay
borrowings under the Operating Partnership's Credit Facilities.
10. LEASE AGREEMENTS
The Operating Partnership is the lessor and sub-lessor of retail stores under
operating leases with term expiration dates ranging from 1999 to 2018. Most
leases are renewable for five years after expiration of the initial term at the
lessee's option. Future minimum lease receipts under non-cancelable operating
leases as of December 31, 1998, exclusive of renewal option periods, were as
follows (in thousands):
1999............ $ 90,332
2000............ 88,961
2001............ 80,376
2002............ 68,393
2003............ 50,332
Thereafter 97,873
-------------
$ 476,267
=============
In 1987, a Predecessor partnership entered into a lease agreement for property
in California. Land was estimated to be approximately 37% of the fair market
value of the property. The portion of the lease attributed to land is classified
as an operating lease and the remainder as a capital lease. The initial lease
term is 25 years with two options of 5 and 4 1/2 years, respectively. The lease
provides for additional rent based on specific levels of income generated by the
property. No additional rental payments were incurred during 1998, 1997 or 1996.
The Operating Partnership has the option to cancel the lease upon six months
written notice and six months advance payment of the then fixed monthly rent. If
the lease is canceled, the building and leasehold improvements revert to the
lessor.
OPERATING LEASES
Future minimum rental payments under operating leases for land and
administrative offices as of December 31, 1998 were as follows (in thousands):
1999........... $ 1,208
2000........... 1,203
2001........... 786
2002........... 755
2003........... 767
Thereafter 8,021
-------------
$ 12,740
=============
Rental expense amounted to $1.0 million for the years ended December 31, 1998
and 1997 and $1.1 million for the year ended December 31, 1996.
CAPITAL LEASE
A leased property included in rental properties at December 31 consists of the
following (in thousands):
<TABLE>
<CAPTION>
1998 1997
----------------- ----------------
<S> <C> <C>
Building.............................................. $8,621 $8,621
Less accumulated amortization......................... (3,937) (3,592)
----------------- ----------------
Leased property, net.................................. $4,684 $5,029
================= ================
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. LEASE AGREEMENTS (CONTINUED)
Future minimum payments under the capitalized building lease, including the
present value of net minimum lease payments as of December 31, 1998 are as
follows (in thousands):
1999....................................................... $ 1,117
2000....................................................... 1,151
2001....................................................... 1,185
2002....................................................... 1,221
2003....................................................... 1,258
Thereafter................................................. 12,475
----------------
Total minimum lease payments............................... 18,407
Amount representing interest............................... (8,795)
----------------
Present value of net minimum capital lease payments $ 9,612
================
11. COMMITMENTS AND CONTINGENCIES
In November 1998, the Operating Partnership agreed to provide up to $22 million
in limited debt service guarantees under a standby facility for loans arranged
by Value Retail PLC to construct outlet centers in Europe. The term of the
standby facility is three years and guarantees shall not be outstanding for
longer than five years after project completion. As of December 31, 1998, the
Operating Partnership had provided a commitment for a limited debt service
guarantee of approximately $9 million for an outlet project at Disneyland-Paris
in France. This guarantee will not be effective until the project opens, which
is scheduled for late 2000. The Operating Partnership had $1.8 million invested
in Value Retail PLC at December 31, 1998 which is included in other assets.
In August 1995, the Operating Partnership's President & Chief Operating Officer
resigned and entered into a separation agreement with the Operating Partnership
that included consulting services to be provided through 1999, certain
non-compete provisions, and the acquisition of certain undeveloped real estate
assets. Upon completion of development, such real estate assets may be
re-acquired by the Operating Partnership, at its option, in accordance with a
pre-determined formula based on cash flow. Transactions related to the
separation agreement are not material to the financial statements of the
Operating Partnership.
The Operating Partnership is not presently involved in any material litigation
nor, to its knowledge, is any material litigation threatened against the
Operating Partnership or its properties, other than routine litigation arising
in the ordinary course of business. Management believes the costs, if any,
incurred by the Operating Partnership related to any of this litigation will not
materially affect the financial position, operating results or liquidity of the
Operating Partnership.
12. RELATED PARTY INFORMATION
In September 1995, the Operating Partnership transferred property with a book
value of $4.8 million to its former President (a current unitholder) in exchange
for a $4.0 million note secured by units in the Operating Partnership (the
"Secured Note") and an $0.8 million unsecured note receivable (the "Unsecured
Note"). The Secured Note bore interest at a rate of LIBOR plus 250 basis points
per annum, payable monthly, and was due upon the earlier of the maker obtaining
permanent financing on the property, the Operating Partnership repurchasing the
property under an option agreement, the maker selling the property to an
unaffiliated third party, or January 1999. The Unsecured Note bore interest at a
rate of 8.0% per annum and was due upon the earlier of the Operating Partnership
repurchasing the property under an option agreement, the maker selling the
property to an unaffiliated third party, or September 2000. In January 1999, the
Operating Partnership received $4.5 million as payment in full for the two notes
and wrote off $0.3 million.
On June 30, 1997 the Operating Partnership forgave a $3.3 million related party
note and paid $2.4 million in cash to acquire the remaining 50% interest in
Solvang. The Operating Partnership also collected $0.8 million in accrued
interest on the note.
The Operating Partnership had space leased to related parties of approximately
56,000 square feet during the year ended December 31, 1998 and 61,000 square
feet during the years ended December 31, 1997 and 1996, respectively.
Rental income from those tenants, including reimbursement for taxes, common area
maintenance and advertising, totaled $1.8 million, $1.5 million and $1.3 million
during the years ended December 31, 1998, 1997 and 1996, respectively.
The Operating Partnership has a consulting agreement with one of the Company's
directors through December 31, 1999. The agreement calls for monthly payments of
$10,000.
Certain unitholders guarantee Operating Partnership obligations under leases for
one of the properties. The Operating Partnership has indemnified these parties
from and against any liability which they may incur pursuant to these
guarantees.
13. EMPLOYEE STOCK PURCHASE PLAN
The Company's Board of Directors and shareholders approved an Employee Stock
Purchase Plan (the "Purchase Plan"), effective July 1, 1998. The Purchase Plan
covers an aggregate of 500,000 shares of common stock. Eligible employees have
been in the employ of the Company or a participating subsidiary for five months
or more and customarily work more than 20 hours per week. The Purchase Plan
excludes employees who are "highly compensated employees" or own 5% or more of
the voting power of the Company's stock. Eligible employees will purchase shares
through automatic payroll deductions up to a maximum of 10% of weekly base pay.
The Purchase Plan will be implemented by consecutive three-month offerings (each
an "Option Period"). The price at which shares may be purchased shall be the
lower of (a) 85% of the fair market value of the stock on the first day of the
Option Period and (b) 85% of the fair market value of the stock on the last day
of the Option Period. As of December 31, 1998 no employees were enrolled in the
Purchase Plan and no material expense had been incurred. Eligible employee
enrollment is expected to begin during the first quarter of 1999. The Purchase
Plan will terminate after five years unless terminated earlier by the Board of
Directors.
14. 401(k) PLAN
The Company maintains a defined contribution 401(k) savings plan (the "Plan")
which was established to allow eligible employees to make tax-deferred
contributions through voluntary payroll withholdings. All employees of the
Company are eligible to participate in the Plan after completing one year of
service and attaining age 21. Employees who elect to enroll in the Plan may
elect to have from 1% to 15% of their pre-tax gross pay contributed to their
account each pay period. As of January 1, 1998 the Plan was amended to include
an employer discretionary matching contribution in an amount not to exceed 100%
of each participant's first 6% of yearly compensation to the Plan. Matching
contributions of approximately $150,000 are included in the Company's general
and administrative expense.
15. EXTRAORDINARY ITEM
Deferred financing costs of $0.3 million (net of minority interest of $62,000),
$0.2 million (net of minority interest of $48,000) and $0.6 million (net of
minority interest of $295,000) for the years ended December 31, 1998, 1997 and
1996, respectively, were expensed as a result of early debt extinguishments, and
are reflected in the accompanying financial statements as an extraordinary item.
16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following summary represents the results of operations, expressed in
thousands except per share amounts, for each quarter during 1998 and 1997
<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------- ------------
1998
<S> <C> <C> <C> <C>
Base rental revenue........................... $19,266 $20,815 $22,561 $23,950
Total revenues................................ 28,506 32,068 34,921 43,820
Income before extraordinary item to
common unitholders......................... 6,952 2,582 9,902 1,812
Net income to common unitholders.............. 6,952 2,582 9,902 1,467
Income before extraordinary item per
weighted average partnership unit (diluted). $0.37 $0.14 $0.52 $0.10
Net income per weighted average
partnership unit (diluted).................. $0.37 $0.14 $0.52 $0.08
1997
Base rental revenue............................ $15,563 $17,286 $18,096 $19,748
Total revenues................................. 22,649 26,637 28,822 35,309
Income before extraordinary item to
common unitholders.......................... 6,437 6,985 9,380 11,319
Net income to common unitholders............... 6,437 6,985 9,380 11,067
Income before extraordinary item per
weighted average partnership unit (diluted). $0.37 $0.40 $0.50 $0.60
Net income per weighted average
partnership unit (diluted).................. $0.37 $0.40 $0.50 $0.59
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
17. NON-CASH FINANCING AND INVESTING ACTIVITIES
In December 1998 and 1997, the Operating Partnership declared distributions per
unit of $0.69 for each year. The limited partners' distributions were paid in
January of each subsequent year. In December 1996, the Operating Partnership
declared distributions per unit of $0.63, that were paid in January of the
subsequent year.
In June 1997, the Operating Partnership forgave a $3.3 million related party
note receivable as partial consideration to acquire the remaining 50% interest
in Solvang.
Other assets and other liabilities include $6.6 million and $3.9 million in 1998
and 1997, respectively, related to a deferred unit incentive program with
certain key officers to be paid in 2002. Also included is $16.6 million in 1998
related to the present value of future payments to be received from The Mills
Corporation under the Houston non-compete agreement.
During 1997 and 1996, the Operating Partnership issued units with an aggregate
fair market value of $0.5 million, and $1.6 million, respectively, to acquire
properties.
During 1997 and 1996, respectively, 1.4 million and 0.8 million Operating
Partnership units were converted to common shares.
<PAGE>
CHELSEA GCA REALTY PARTNERSHIP, L.P.
SCHEDULE III-CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
Cost Step-Up
Capitalized Related
(Disposed to
of) Acquisition
Initial Subsequent of Gross Amount
Cost to Partnership Carried
to Acquisition Interest at Close of Period
Company (Improvements) (1) December 31, 1998
----------------- --------------- --------------- -----------------------
Life
Used to
Compute
Depre-
ciation
Descrip- Buildings, Buildings, Buildings, Buildings, Date in
tion Fixtures Fixtures Fixtures Fixtures Accumu- of Latest
Outlet and and and and lated Const- Income
Center Encum- Equip- Equip- Equip- Equip- Depre- ruction State-
Name brances Land ment Land ment Land ment Land ment Total ciation ment
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Woodbury
Common, NY $ - $4,448 $16,073 $4,970 $119,607 $ - $ - $9,418 $135,680 $145,098 $23,335 '85, '93, 30
'95, '98
Waikele, HI - 22,800 54,357 - 348 - - 22,800 54,705 77,505 3,129 '98 -
Desert
Hills, CA - 975 - 2,376 59,643 830 4,936 4,181 64,579 68,760 15,279 '90, '94,
'95, '97, '98 40
Wrentham, MA - 157 2,817 3,484 59,728 - - 3,641 62,545 66,186 2,823 '95,'96,
'97, '98 40
Camarillo, CA - 4,000 - 5,085 46,637 - - 9,085 46,637 55,722 5,260 '94, '95,
'96, '97, '98 40
North
Georgia, GA - 2,960 34,726 (39) 12,942 - - 2,921 47,668 50,589 5,588 '95,'96,
'97, '98 40
Clinton, CT - 4,124 43,656 - (154) - - 4,124 43,502 47,626 6,025 '95,'96 40
Leesburg, VA - 6,296 - (1,184) 41,186 - - 5,112 41,186 46,298 445 '96, '97, '98 -
Petaluma
Village, CA - 3,735 - 2,934 30,095 - - 6,669 30,095 36,764 5,026 '93, '95, '96 40
Folsom, CA - 4,169 10,465 2,692 18,461 - - 6,861 28,926 35,787 6,028 '90, '92,
'93, '96, '97 40
Liberty
Village, NJ - 345 405 1,111 19,070 11,015 2,195 12,471 21,670 34,141 4,034 '81, '97,'98 30
Napa, CA - 3,456 2,113 7,908 17,649 - - 11,364 19,762 31,126 3,673 '62, '93, '95 40
Aurora, OH - 637 6,884 879 17,112 - - 1,516 23,996 25,512 4,494 '90, '93,
'94, '95 40
Columbia
Gorge, OR - 934 - 428 13,331 497 2,647 1,859 15,978 17,837 3,590 '91, '94 40
Santa Fe, NM - 74 - 1,300 11,942 491 1,772 1,865 13,714 15,579 2,075 '93, '98 40
American
Tin Cannery,
CA 9,612 - 8,621 - 6,613 - - - 15,234 15,234 6,710 '87, '98 25
Patriot
Plaza, VA - 789 1,854 976 4,246 - - 1,765 6,100 7,865 1,748 '86, '93, '95 40
Mammoth
Lakes, CA - 1,180 530 - 2,411 994 1,430 2,174 4,371 6,545 1,369 '78 40
Corporate
Offices,
NJ, CA - - 60 - 4,627 - - - 4,687 4,687 1,751 - 5
St. Helena, CA - 1,029 1,522 (25) 773 38 78 1,042 2,373 3,415 469 '83 40
Orlando, FL - 100 23 200 (23) - - 300 - 300 - - -
Allen, TX - 150 - - - - - 150 - 150 - - -
----------------------------------------------------------------------------------------------------------
$9,612 $62,358 $184,106 $33,095 $486,244 $13,865 $13,058 $109,318 $683,408 $792,726 $102,851
======================================================================================================================
The aggregate cost of the land, building, fixtures and equipment for federal tax
purposes was approximately $793 million at December 31, 1998.
(1) As part of the formation transaction assets acquired for cash have been
accounted for as a purchase.
</TABLE>
The step-up represents the amount of the purchase price that exceeds the
net book value of the assets acquired (see Note 1).
<PAGE>
CHELSEA GCA REALTY PARTNERSHIP, L.P.
SCHEDULE III-CONSOLIDATED REAL ESTATE
AND ACCUMULATED DEPRECIATION (CONTINUED)
(IN THOUSANDS)
THE CHANGES IN TOTAL REAL ESTATE:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------------- ---------------- ----------------
<S> <C> <C> <C>
Balance, beginning of period $708,933 $512,354 $415,983
Additions............................... 114,342 196,941 96,621
Dispositions and other.................. (30,549) (362) (250)
--------------- ---------------- ----------------
Balance, end of period.................. $792,726 $708,933 $512,354
=============== ================ ================
</TABLE>
THE CHANGES IN ACCUMULATED DEPRECIATION:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------------- ---------------- ----------------
<S> <C> <C> <C>
Balance, beginning of period $ 80,244 $ 58,054 $ 41,373
Additions............................... 29,176 22,314 16,931
Dispositions and other.................. (6,569) (124) (250)
--------------- ---------------- ----------------
Balance, end of period.................. $102,851 $80,244 $58,054
=============== ================ ================
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on the 11th of March 1999.
CHELSEA GCA REALTY PARTNERSHIP, L.P.
By: /S/ DAVID C. BLOOM
David C. Bloom, Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE Title Date
/s/ DAVID C. BLOOM Chairman of the Board MARCH 11, 1999
and Chief Executive Officer
- -------------------------
David C. Bloom
/s/ BARRY M. GINSBURG Vice Chairman MARCH 11, 1999
- -------------------------
Barry M. Ginsburg
/s/ WILLIAM D. BLOOM Executive Vice President- MARCH 11, 1999
- -------------------------
William D. Bloom Strategic Relationships
/s/ LESLIE T. CHAO President MARCH 11, 1999
- -------------------------
Leslie T. Chao
/s/ MICHAEL J. CLARKE Chief Financial Officer MARCH 11, 1999
- -------------------------
Michael J. Clarke
/s/ BRENDAN T. BYRNE Director MARCH 11, 1999
- -------------------------
Brendan T. Byrne
/s/ ROBERT FROMMER Director MARCH 11, 1999
- -------------------------
Robert Frommer
/s/ PHILIP D. KALTENBACHER Director MARCH 11, 1999
- -------------------------
Philip D. Kaltenbacher
/s/ REUBEN S. LEIBOWITZ Director MARCH 11, 1999
- -------------------------
Reuben S. Leibowitz
Exhibit 10.2
TERM LOAN AGREEMENT
AMONG
CHELSEA GCA REALTY PARTNERSHIP, L.P.,
A DELAWARE LIMITED PARTNERSHIP,
AS BORROWER,
AND
BANKBOSTON, N.A.
NATIONSBANK, N.A., SYNDICATION AGENT,
COMMERZBANK AG,
KEYBANK NATIONAL ASSOCIATION,
PNC BANK,
TOGETHER WITH THOSE ASSIGNEES
BECOMING PARTIES HERETO PURSUANT
TO SECTION 11.12, AS LENDERS,
AND
BANKBOSTON, N.A.
AS AGENT
Dated as of November 3, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS....................................................1
1.1 CERTAIN DEFINED TERMS.......................................1
1.2 COMPUTATION OF TIME PERIODS................................22
1.3 TERMS......................................................22
ARTICLE II LOANS........................................................23
2.1 ADVANCE AND REPAYMENT OF LOANS.............................23
2.2 AUTHORIZATION TO SELECT INTEREST RATE OPTIONS..............25
2.3 LENDERS' ACCOUNTING........................................25
2.4 INTEREST ON THE LOANS......................................25
2.5 FEES.......................................................29
2.6 PAYMENTS...................................................30
2.7 INCREASED CAPITAL..........................................30
2.8 NOTICE OF INCREASED COSTS..................................31
ARTICLE III UNENCUMBERED PROPERTIES AND PORTFOLIO PROPERTIES............31
3.1. LISTING OF UNENCUMBERED PROPERTIES.........................31
3.2. WAIVERS BY REQUISITE LENDERS...............................31
3.3. REJECTION OF UNENCUMBERED PROPERTIES.......................31
3.4 UPDATED LISTS OF UNENCUMBERED PROPERTIES AND PORTFOLIO
PROPERTIES.................................................32
ARTICLE IV CONDITIONS TO LOANS..........................................32
4.1 CONDITIONS TO DISBURSEMENT OF LOANS........................32
ARTICLE V REPRESENTATIONS AND WARRANTIES................................34
5.1 BORROWER ORGANIZATION; PARTNERSHIP POWERS..................34
5.2 BORROWER AUTHORITY.........................................34
5.3 REIT ORGANIZATION; CORPORATE POWERS........................34
5.4 REIT AUTHORITY.............................................34
5.5 OWNERSHIP OF BORROWER, EACH SUBSIDIARY AND PARTNERSHIP.....35
5.6 NO CONFLICT................................................35
5.7 CONSENTS AND AUTHORIZATIONS................................35
5.8 GOVERNMENTAL REGULATION....................................35
5.9 PRIOR FINANCIALS...........................................35
5.10 PROJECTIONS AND FORECASTS..................................36
5.11 PRIOR OPERATING STATEMENTS.................................36
5.12 RENT ROLLS.................................................36
5.13 LITIGATION; ADVERSE EFFECTS................................36
5.14 NO MATERIAL ADVERSE CHANGE.................................36
5.15 PAYMENT OF TAXES...........................................37
5.16 MATERIAL ADVERSE AGREEMENTS................................37
5.17 PERFORMANCE................................................37
5.18 FEDERAL RESERVE REGULATIONS................................37
5.19 UNSECURED TERM NOTES.......................................37
5.20 REQUIREMENTS OF LAW........................................37
5.21 PATENTS, TRADEMARKS, PERMITS, ETC..........................38
5.22 ENVIRONMENTAL MATTERS......................................38
5.23 UNENCUMBERED PROPERTIES....................................38
5.24 SOLVENCY...................................................38
5.25 TITLE TO ASSETS; NO LIENS..................................38
5.26 USE OF PROCEEDS............................................38
5.27 REIT CAPITALIZATION........................................39
5.28 ERISA......................................................39
5.29 STATUS AS A REIT...........................................39
5.30 OWNERSHIP..................................................39
5.31 NYSE LISTING...............................................39
5.32 CURRENT CONSTRUCTION PROJECTS..............................39
5.33 YEAR 2000 COMPLIANCE.......................................39
ARTICLE VI REPORTING COVENANTS..........................................40
6.1 FINANCIAL STATEMENTS AND OTHER FINANCIAL AND OPERATING
INFORMATION................................................40
6.2 ENVIRONMENTAL NOTICES......................................44
6.3 CONFIDENTIALITY............................................45
ARTICLE VII AFFIRMATIVE COVENANTS........................................45
7.1 EXISTENCE..................................................45
7.2 QUALIFICATION, NAME........................................45
7.3 COMPLIANCE WITH LAWS, ETC..................................45
7.4 PAYMENT OF TAXES AND CLAIMS................................45
7.5 MAINTENANCE OF PROPERTIES; INSURANCE.......................46
7.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.....46
7.7 MAINTENANCE OF PERMITS, ETC................................46
7.8 CONDUCT OF BUSINESS........................................47
7.9 USE OF PROCEEDS............................................47
7.10 SECURITIES LAW COMPLIANCE..................................47
7.11 CONTINUED STATUS AS A REIT; PROHIBITED TRANSACTIONS........47
7.12 NYSE LISTED COMPANY........................................47
7.13 PROPERTY MANAGEMENT........................................47
7.14 INTEREST RATE CONTRACTS....................................47
ARTICLE VIII NEGATIVE COVENANTS.........................................48
8.1 LIENS......................................................48
8.2 TRANSFERS OF WOODBURY COMMON...............................48
8.3 RESTRICTIONS ON FUNDAMENTAL CHANGES........................48
8.4 ERISA......................................................48
8.5 AMENDMENT OF CONSTITUENT DOCUMENTS.........................49
8.6 DISPOSAL OF PARTNERSHIP INTERESTS OR STOCK IN SUBSIDIARIES.49
8.7 MARGIN REGULATIONS.........................................49
8.8 WITH RESPECT TO THE REIT...................................50
8.9 ADDITIONAL UNSECURED BANK DEBT.............................50
8.10 RESTRICTIONS ON INDEBTEDNESS...............................50
8.11 CONSTRUCTION PROJECTS......................................52
8.12 DISCONTINUITY IN MANAGEMENT................................52
ARTICLE IX FINANCIAL COVENANTS..........................................52
9.1 VALUE OF ALL UNENCUMBERED PROPERTIES.......................53
9.2 MINIMUM DEBT SERVICE COVERAGE .............................53
9.3 MINIMUM FAIR MARKET NET WORTH .............................53
9.4 TOTAL LIABILITIES TO ADJUSTED ASSET VALUE RATIO............53
9.5 MAXIMUM SECURED BORROWER DEBT..............................53
9.6 OPERATING CASH FLOW TO DEBT SERVICE RATIO..................53
9.7 EBITDA TO FIXED CHARGES RATIO..............................53
9.8 AGGREGATE OCCUPANCY RATE...................................53
9.9 DISTRIBUTIONS..............................................53
9.10 PERMITTED INVESTMENTS......................................54
9.11 CIP BUDGET AMOUNT TO ADJUSTED ASSET VALUE..................54
9.12 CALCULATION................................................54
ARTICLE X EVENTS OF DEFAULT; RIGHTS AND REMEDIES........................55
10.1 EVENTS OF DEFAULT..........................................55
10.2 RIGHTS AND REMEDIES........................................58
10.3 RESCISSION.................................................59
ARTICLE XI AGENCY PROVISIONS............................................59
11.1 APPOINTMENT................................................59
11.2 NATURE OF DUTIES...........................................59
11.3 LOAN DISBURSEMENT..........................................60
11.4 DISTRIBUTION AND APPORTIONMENT OF PAYMENTS.................61
11.5 RIGHTS, EXCULPATION, ETC...................................61
11.6 RELIANCE...................................................62
11.7 INDEMNIFICATION............................................62
11.8 AGENT INDIVIDUALLY.........................................62
11.9 SUCCESSOR AGENT; RESIGNATION OF AGENT; REMOVAL OF AGENT....63
11.10 CONSENT AND APPROVALS......................................63
11.11 AGENCY PROVISIONS RELATING TO CERTAIN ENFORCEMENT ACTIONS..65
11.12 ASSIGNMENTS AND PARTICIPATIONS.............................65
11.13 RATABLE SHARING............................................68
11.14 DELIVERY OF DOCUMENTS......................................69
11.15 NOTICE OF EVENTS OF DEFAULT................................69
ARTICLE XII MISCELLANEOUS...............................................69
12.1 EXPENSES...................................................69
12.2 INDEMNITY..................................................70
12.3 CHANGE IN ACCOUNTING PRINCIPLES............................71
12.4 AMENDMENTS AND WAIVERS.....................................71
12.5 INDEPENDENCE OF COVENANTS..................................72
12.6 NOTICES AND DELIVERY.......................................72
12.7 SURVIVAL OF WARRANTIES, INDEMNITIES AND AGREEMENTS.........73
12.8 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE......73
12.9 PAYMENTS SET ASIDE.........................................73
12.10 SEVERABILITY...............................................73
12.11 HEADING....................................................74
12.12 GOVERNING LAW..............................................74
12.13 LIMITATION OF LIABILITY....................................74
12.14 SUCCESSORS AND ASSIGNS.....................................74
12.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF
JURY TRIAL AND CERTAIN DAMAGE CLAIMS.......................74
12.16 COUNTERPARTS; EFFECTIVENESS; INCONSISTENCIES...............75
12.17 CONSTRUCTION...............................................75
12.18 OBLIGATIONS UNSECURED......................................75
12.19 ENTIRE AGREEMENT...........................................76
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibits:
A - Form of Assignment and Assumption
B - Form of Compliance Certificate
C - Form of Loan Notes
D - Form of Notice of Interest Rate Selection
E - Form of Fixed Rate Notice
Schedules:
1 - List of Unencumbered Properties
1.1 - List of Portfolio Properties which are not
Unencumbered Properties
5.5 - Partnerships and Subsidiaries
5.22 - Environmental Matters
5.32 - Current Construction Projects
<PAGE>
TERM LOAN AGREEMENT
THIS TERM LOAN AGREEMENT is dated as of November 3, 1998 and is among
CHELSEA GCA REALTY PARTNERSHIP, L.P., a Delaware limited partnership
("Borrower"), each of the Lenders, as hereinafter defined, and BANKBOSTON, N.A.
a national banking association ("BankBoston") in its capacity as agent and as a
Lender.
RECITALS
A. The Borrower is the borrower under certain credit facilities (each
having BankBoston as lender or as agent for the lenders) which closed on March
30, 1998 consisting of (i) an unsecured revolving credit facility in the amount
of up to $160,000,000 (the "REVOLVING FACILITY") and (ii) an unsecured term loan
in the amount of $5,034,536.
B. On October 23, 1998 Borrower used the proceeds of a borrowing under
the Revolving Facility to redeem Borrower's Remarketed Floating Rate Reset Notes
due 2001 in the aggregate principal amount of $60,000,000.
C. Borrower has requested that such borrowing under the Revolving
Facility be refinanced with the unsecured term loan provided for herein (the
"FACILITY"), and the Lenders are willing to provide the requested Facility on
the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. The following terms used in this Agreement
shall have the following meanings (such meanings to be applicable, except to the
extent otherwise indicated in a definition of a particular term, both to the
singular and the plural forms of the terms defined):
"ACCOMMODATION OBLIGATIONS", as applied to any Person, means any
Indebtedness or other contractual obligation or liability, contingent or
otherwise, of another Person in respect of which that Person is liable,
including, without limitation, any such Indebtedness, obligation or liability
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable, including in respect of any Partnership in which
that Person is a general partner, Contractual Obligations (contingent or
otherwise) arising through any agreement to purchase, repurchase or otherwise
acquire such Indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, or other financial condition, or to
make payment other than for value received.
"ACCOUNTANTS" means Ernst & Young LLP, any other "big five" accounting
firm or another firm of certified public accountants of national standing
selected by Borrower and acceptable to Agent.
"ACQUISITION PRICE" means the aggregate purchase price for an asset
including bona fide purchase money financing provided by the seller and all (or
Borrower's Share of, as applicable) existing Indebtedness pertaining to such
asset.
"ADJUSTED ASSET VALUE" means, as at any date of determination, the sum
(without duplication of any item) of (i) cash and Cash Equivalents owned by
Borrower (excluding any tenant deposits), (ii) the outstanding principal balance
of the notes receivable reflected on the Prior Financials and such other notes
receivable hereafter owned by Borrower as may be approved by the Requisite
Lenders, (iii) an amount equal to (A) Operating Cash Flow for the most recently
ended Fiscal Quarter (as adjusted by Borrower to take into account any
acquisitions or dispositions of Properties owned by Borrower or any of its
Subsidiaries which adjustments must be approved by the Agent in its reasonable
discretion), TIMES (B) four (4), DIVIDED BY (C) 0.095, and (iv) an amount equal
to the lesser of (A) the aggregate Simon Partnership Values of all of the Simon
Partnerships or (B) fifteen percent (15%) of the sum of items (i), (ii) and
(iii) of this definition of Adjusted Asset Value.
"AFFILIATES" as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling", "controlled by" and "under common control
with"), as applied to any Person, means (i) the possession, directly or
indirectly, of the power to vote twenty-five percent (25%) or more of the
Securities having voting power for the election of directors of such Person or
otherwise to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities or by contract
or otherwise, or (ii) the ownership of a general partnership interest or a
limited partnership interest (or other ownership interest) representing
twenty-five percent (25%) or more of the outstanding limited partnership
interests or other ownership interests of such Person. In addition, any
corporation, partnership or other entity in which the ownership interests of
Borrower and its Subsidiaries represents ten percent(10%) or more of the
outstanding ownership interests shall be deemed to be an Affiliate of Borrower.
"AGENT" means BankBoston in its capacity as agent for the Lenders
under this Agreement, and shall include any successor Agent appointed pursuant
hereto and shall be deemed to refer to BankBoston in its individual capacity as
a Lender where the context so requires.
"AGGREGATE OCCUPANCY RATE" means, with respect to the Unencumbered
Properties at any time, the ratio, as of such date of determination, expressed
as a percentage, of (i) the gross leasable area of all Unencumbered Properties
occupied by tenants paying rent pursuant to Leases other than Materially
Defaulted Leases, to (ii) the aggregate gross leasable area of all Unencumbered
Properties, excluding from both (i) and (ii) the gross leasable area of
Construction Projects prior to the date which is 3 months after the Rent
Stabilization Date for such Construction Project. Only premises which are
actually open for business shall be counted as occupied.
"AGREEMENT" means this Term Loan Agreement as the same may be amended,
supplemented or modified from time to time.
"APPLICABLE LIBOR RATE MARGIN" means, as of any date of determination,
1.40%.
"ASSIGNMENT AND ASSUMPTION" means an Assignment and Assumption in the
form of EXHIBIT A hereto (with blanks appropriately filled in) delivered to
Agent in connection with each assignment of a Lender's interest under this
Agreement pursuant to SECTION 11.12.
"ATC PARTNERSHIP" means Cannery Row Associates, a California limited
partnership in which the Borrower is the sole limited partner (having a 99%
interest) and the REIT is the sole general partner (having a 1% interest).
"BANKBOSTON TERM LOAN" means the term loan from BankBoston to Borrower
in the principal amount of $5,034,536 pursuant to a Term Loan Agreement dated
March 30, 1998 and any replacements, extensions or refinancing thereof.
"BASE RATE" means, on any day, the higher of (i) the base rate of
interest per annum established from time to time by BankBoston at its principal
office in Boston, Massachusetts, and designated as its "base rate" as in effect
on such day, or (ii) the Federal Funds Rate in effect on such day PLUS one-half
percent (0.5%) per annum.
"BASE RATE LOANS" means those Loans bearing interest at the Base Rate.
"BENEFIT PLAN" means any employee pension benefit plan as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) in respect of which a
Person or an ERISA Affiliate is, or within the immediately preceding five (5)
years was, an "employer" as defined in Section 3(5) of ERISA.
"BORROWER DEBT" means (without duplication) all Indebtedness of
Borrower or any Subsidiary of Borrower, without offset or reduction in respect
of prepaid interest, restructuring fees or similar items MINUS, in the case of
Nonrecourse Indebtedness of a Partnership that is otherwise included in
Indebtedness of Borrower, the amount of such Indebtedness in excess of
Borrower's Share thereof, provided, however, Borrower Debt shall not include
Indebtedness consisting of an Accommodation Obligation with respect to the
Indebtedness of a Simon Partnership.
"BORROWER'S SHARE" means, in the case of a Partnership or a Simon
Partnership, Borrower's percentage ownership interest in such Partnership or
such Simon Partnership. "BUSINESS DAY" means (i) with respect to any payment or
rate determination of LIBOR Loans, a day, other than a Saturday or Sunday, on
which Agent is open for business at its head office and on which dealings in
Dollars are carried on in the London interbank market, and (ii) for all other
purposes any day excluding Saturday, Sunday and any day which is a legal holiday
under the laws of the Commonwealth of Massachusetts, or is a day on which
banking institutions located in Massachusetts are required or authorized by law
or other governmental action to close.
"CAPITAL LEASES", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by an
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year after the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within ninety (90) days after the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from any two of Standard & Poor's Corporation,
Moody's Investors Services, Inc., Duff and Phelps, or Fitch Investors (or, if at
any time no two of the foregoing shall be rating such obligations, then from
such other nationally recognized rating services as may be acceptable to Agent)
and not listed for possible down-grade in Credit Watch published by Standard &
Poor's Corporation; (iii) commercial paper, other than commercial paper issued
by Borrower or any of its Affiliates, maturing no more than ninety (90) days
after the date of creation thereof and, at the time of acquisition, having a
rating of at least A-1 or P-1 from either Standard & Poor's Corporation or
Moody's Investor's Service, Inc. (or, if at any time neither Standard & Poor's
Corporation nor Moody's Investor's Service, Inc. shall be rating such
obligations, then the highest rating from such other nationally recognized
rating services as may be acceptable to Agent); (iv) domestic and Eurodollar
certificates of deposit or time deposits or bankers' acceptances maturing within
ninety (90) days after the date of acquisition thereof, overnight securities
repurchase agreements, or reverse repurchase agreements secured by any of the
foregoing types of securities or debt instruments issued, in each case, by (A)
any commercial bank organized under the laws of the United States of America or
any state thereof or the District of Columbia having combined capital and
surplus of not less than Two Hundred Fifty Million Dollars ($250,000,000) or (B)
any Lender, and (v) deposits in existing Merrill Lynch money market accounts
maintained by Borrower, such deposits being the proceeds from the exercise of
stock options pursuant to Borrower's employee stock option plans.
"CIP BUDGET AMOUNT" means the total budgeted cost (as such budget
shall be updated from time to time) of all Current Construction Projects
(excluding Expansion Projects) owned by Borrower or any of its Subsidiaries or
by any GP Partnership or Simon Partnership or with respect to which Borrower or
any of its Subsidiaries has any type of funding obligation, construction
management obligation or obligation to assure project completion or leasing,
provided, however, that with respect to Current Construction Projects owned by a
Simon Partnership for which the respective financial responsibilities of Simon
and its Subsidiaries on the one hand and Borrower and its Subsidiaries on the
other hand are in proportion to the respective ownership interests in the
applicable Simon Partnership, there shall be excluded from the CIP Budget Amount
the portion of such budgeted cost in excess of Borrower's Share in the
applicable Simon Partnership. Such costs shall include, without limitation, all
land acquisition costs (but may exclude costs of land used for expansion
projects which was not purchased for the purpose of such expansion project),
design and permitting costs, construction period real estate taxes, leasing
costs including brokers' commissions and tenant improvements, allowances or
reimbursements, construction costs and opening costs. With respect to any
Construction Projects financed with Indebtedness other than the Revolving
Facility, such costs shall also include construction period interest and all
fees and expenses associated with such Indebtedness.
"CLOSING DATE" means November 3, 1998.
"COMMISSION" means the Securities and Exchange Commission.
"COMMITMENT" means, with respect to any Lender, the principal amount
set out under such Lender's name under the heading "Loan Commitment" on the
signature pages attached to this Agreement.
"COMPLETION DATE" means, with respect to a Construction Project, the
date on which certificates of occupancy (or the equivalent) have been issued for
at least 90% of the gross leasable area of such Construction Project.
"COMPLIANCE CERTIFICATE" means a certificate in the form of EXHIBIT B
delivered to Agent by Borrower pursuant to SECTION 2.1.2, SECTION 3.4, SECTION
6.1.4, SECTION 6.1.11 or any other provision of this Agreement and covering
Borrower's compliance with the financial covenants contained in ARTICLE IX.
"CONFIDENTIAL INFORMATION" has the meaning ascribed to such term in
SECTION 6.3.
"CONSTRUCTION PROJECT" means a project consisting of the construction
of new buildings, additions to existing buildings, and/or rehabilitation of
existing buildings (other than normal refurbishing and tenant fit-up work when
one retail tenant leases space previously occupied by another retail tenant).
"CONTAMINANT" means any pollutant (as that term is defined in 42
U.S.C. 9601(33)) or toxic pollutant (as that term is defined in 33 U.S.C.
1362(13)), hazardous substance (as that term is defined in 42 U.S.C. 9601(14)),
hazardous chemical (as that term is defined by 29 CFR Section 1910.1200(c)),
toxic substance, hazardous waste (as that term is defined in 42 U.S.C. 6903(5)),
radioactive material, special waste, petroleum (including crude oil or any
petroleum-derived substance, waste, or breakdown or decomposition product
thereof), any constituent of any such substance or waste, including, but not
limited to, polychlorinated biphenyls and asbestos, or any other substance or
waste deleterious to the environment the release, disposal or remediation of
which is now or at any time becomes subject to regulation under any
Environmental Law.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, lease, contract, undertaking, document or instrument to which
that Person is a party or by which it or any of its properties is bound, or to
which it or any of its properties is subject (including, without limitation, any
restrictive covenant affecting such Person or any of its properties).
"COURT ORDER" means any judgment, writ, injunction, decree, rule or
regulation of any court or Governmental Authority binding upon or applicable to
the Person in question.
"CURRENT CONSTRUCTION PROJECT" means a Construction Project from the
time of commencement of construction (of footings and foundations with respect
to Construction Projects consisting of new buildings) for such Construction
Project until the Rent Stabilization Date of such Construction Project.
"DEBT SERVICE" means, for any period, Interest Expense for such period
PLUS scheduled principal amortization (I.E., excluding any balloon payment due
at maturity) for such period on all Borrower Debt.
"DEFAULTING LENDER" means any Lender which fails or refuses to perform
its obligations under this Agreement within the time period specified for
performance of such obligation or, if no time frame is specified, if such
failure or refusal continues for a period of five (5) Business Days after notice
from Agent.
"DOL" means the United States Department of Labor and any successor
department or agency.
"DOLLARS" AND "$" means the lawful money of the United States of
America.
"EBITDA" means, at any time, for the most recent Fiscal Quarter, the
Borrower's earnings (or loss) before interest, taxes, depreciation and
amortization, calculated for such period on a consolidated basis in conformity
with GAAP and excluding earnings attributable to Simon Partnerships or minority
interests MINUS gains (and PLUS losses) from extraordinary items or asset sales
or write-ups or forgiveness of Indebtedness, MINUS percentage rent income for
such Fiscal Quarter, PLUS twenty-five percent (25%) of the total percentage rent
income during such Fiscal Quarter and the three immediately preceding Fiscal
Quarters.
"ELIGIBLE ASSIGNEE" means (i) (A) (1) a commercial bank organized
under the laws of the United States or any state thereof; (2) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; or (3) a commercial bank organized under the laws of any other
country or a political subdivision thereof, PROVIDED that (x) such bank is
acting through a branch or agency located in the United States, or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; that (B) in each case, is (1) reasonably acceptable to Agent and
Borrower, and (2) has total assets in excess of $10,000,000,000 and a rating on
its (or its parent's) senior unsecured debt obligations of at least BBB by one
of the Rating Agencies; or (ii) any Lender or Affiliate of any Lender; PROVIDED
that no Affiliate of Borrower shall be an Eligible Assignee.
"ENVIRONMENTAL LAWS" has the meaning set forth in SECTION 5.22.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for (i) any liability under Environmental Laws, or (ii) damages
arising from, or costs incurred by such Governmental Authority in response to, a
Release or threatened Release of a Contaminant into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE" of any Person means any (i) corporation which is,
becomes, or is deemed to be a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Internal Revenue Code)
as such Person, (ii) partnership, trade or business (whether or not
incorporated) which is, becomes or is deemed to be under common control (within
the meaning of Section 414(c) of the Internal Revenue Code) with such Person,
(iii) other Person which is, becomes or is deemed to be a member of the same
"affiliated service group" (as defined in Section 414(m) of the Internal Revenue
Code) as such Person, or (iv) any other organization or arrangement described in
Section 414(o) of the Internal Revenue Code which is, becomes or is deemed to be
required to be aggregated pursuant to regulations issued under Section 414(o) of
the Internal Revenue Code with such Person pursuant to Section 414(o) of the
Internal Revenue Code.
"EVENT OF DEFAULT" means any of the occurrences set forth in ARTICLE X
after the expiration of any applicable grace period expressly provided therein.
"EXECUTIVE OFFICERS" mean David C. Bloom, William D. Bloom, Barry M.
Ginsburg, Leslie T. Chao and Thomas J. Davis.
"EXPANSION PROJECTS" means Construction Projects consisting of the
construction of additional buildings or building additions at a Portfolio
Property or a Simon Property which has been open and operating as a retail
center with a Property Occupancy Rate of at least 90% as of the start of such
Construction Project so long as the increase in the gross leasable area of such
Property as a result of such Construction Project does not exceed 150,000 square
feet.
"FACILITY" means the term loan facility of Sixty Million Dollars
($60,000,000) described in SECTION 2.1.1.
"FAIR MARKET NET WORTH" means the Borrower's Adjusted Asset Value less
Total Liabilities.
"FDIC" means the Federal Deposit Insurance Corporation or any
successor thereto.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal Funds brokers of recognized
standing selected by Agent.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any governmental authority succeeding to its functions.
"FEE LETTER" means a certain fee letter between the Borrower and the
Agent dated October 20, 1998, as amended, modified or replaced from time to
time.
"FINANCIAL STATEMENTS" has the meaning given to such term in SECTION
6.1.2.
"FISCAL QUARTER" means each three-month period ending on March 31,
June 30, September 30 and December 31.
"FISCAL YEAR" means the fiscal year of Borrower which shall be the
twelve (12) month period ending on the last day of December in each year.
"FIXED CHARGES" means, for any period, Debt Service PLUS scheduled
dividends or distributions due with respect to preferred partnership units in
the Borrower or preferred stock in the REIT.
"FIXED RATE NOTICE" means, with respect to a LIBOR Loan pursuant to
SECTION 2.1.2, a notice substantially in the form of EXHIBIT E.
"FIXED RATE PREPAYMENT FEE" has the meaning given to such term in
SECTION 2.4.8(C).
"FOREIGN AFFILIATES" means Value Retail PLC, a corporation formed
under the laws of Great Britain and any other partnership or entity which may be
sponsored by or affiliated with Value Retail PLC and any other Affiliate (which
may need to be approved by Agent pursuant to SECTION 8.3) which may develop, own
or finance one or more Foreign Properties.
"FOREIGN INVESTMENTS" means the aggregate amount of all Investments by
Borrower in Borrower's Foreign Affiliates plus the face amount of all Letters of
Credit issued under the Revolving Credit Agreement (or letters of credit issued
by any other Person with respect to which Borrower is directly or contingently
liable) for the benefit of such Foreign Affiliates, plus the aggregate
Acquisition Prices of all Foreign Properties owned by Borrower or its
Subsidiaries.
"FOREIGN PROPERTIES" means all Properties which are not located within
the boundaries of the United States.
"FUNDS FROM OPERATIONS" means, for any period, the Borrower's Funds
From Operations determined in accordance with the definition approved by the
National Association of Real Estate Investment Trusts.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, local, municipal or other political subdivision thereof or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GP PARTNERSHIP" means any Partnership in which Borrower, the REIT or
any Subsidiary of Borrower or the REIT is a general partner. As provided in
SECTION 8.8.1 the REIT may not become a partner in any additional Partnerships.
"GUARANTOR SUBSIDIARY" means a Wholly-Owned Subsidiary which executes
and delivers a guaranty of the Obligations in favor of the Agent and the
Lenders, which guaranty shall be substantially in the form of the Guaranty from
the REIT and shall be accompanied by certificates and a legal opinion reasonably
acceptable to the Agent.
"GUARANTY" means the Guaranty of even date herewith executed by the
REIT in favor of the Agent and the Lenders.
"INDEBTEDNESS", as applied to any Person (determined on a consolidated
basis and without duplication), means the sum of (i) all indebtedness,
obligations or other liabilities of such Person for borrowed money, (ii) all
indebtedness, obligations or other liabilities of such Person evidenced by
Securities or other similar instruments, (iii) all reimbursement obligations and
other liabilities of such Person with respect to letters of credit or banker's
acceptances issued for such Person's account, (iv) all obligations of such
Person to pay the deferred purchase price of Property or services or to
reimburse tenants for the costs of improvements constructed by such tenants on
the Property of such Person, (v) all obligations in respect of Capital Leases of
such Person, (vi) all Accommodation Obligations of such Person, (vii) all
indebtedness, obligations or other liabilities of such Person or others secured
by a Lien on any asset of such Person, whether or not such indebtedness,
obligations or liabilities are assumed by, or are a personal liability of, such
Person (including, without limitation, the principal amount of any assessment or
similar indebtedness encumbering any property), (viii) all indebtedness,
obligations or other liabilities (other than interest expense liability) in
respect of Interest Rate Contracts and foreign currency exchange agreements, and
(ix) ERISA obligations currently due and payable. Indebtedness shall not include
accrued ordinary operating expenses payable on a current basis.
"INTEREST EXPENSE" means, for any period, total interest expense,
whether paid, accrued or capitalized (including the interest component of
Capital Leases) in respect of Borrower Debt, including, without limitation,
amortization of loan acquisition costs, all commissions, discounts and other
fees and charges owed with respect to letters of credit, net costs under
Interest Rate Contracts, and unused facility fees payable to the lenders
pursuant to the Revolving Credit Agreement.
"INTEREST PERIOD" means, relative to any LIBOR Loans, the period
beginning on (and including) the date on which such LIBOR Loans are made as, or
converted into, LIBOR Loans, and ending on (but excluding) the day which
numerically corresponds to such date thirty (30), sixty (60) or ninety (90) days
thereafter, in either case as Borrower may select in its relevant Notice of
Interest Rate Selection pursuant to SECTION 2.1.2; PROVIDED, HOWEVER, that:
(a) if such Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
following Business Day; and
(b) no Interest Period may end later than the then
applicable Termination Date.
"INTEREST RATE CONTRACTS" means, collectively, interest rate swap,
collar, cap or similar agreements providing interest rate protection.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended from time to time hereafter, and any successor statute.
"INVESTMENT" means, as applied to any Person, any direct or indirect
purchase or other acquisition by that Person of Securities, or of a beneficial
interest in Securities, of any other Person, and any direct or indirect loan,
advance (other than deposits with financial institutions available for
withdrawal on demand, prepaid expenses, advances to employees and similar items
made or incurred in the ordinary course of business), or capital contribution by
such Person to any other Person, including all Indebtedness and accounts owed by
that other Person which are not current assets or did not arise from sales of
goods or services to that Person in the ordinary course of business.
"INVESTMENT MORTGAGES" mean notes receivable or other indebtedness
secured by mortgages or other security interests directly or indirectly owned by
Borrower or any Subsidiary of Borrower, including certificates of interest in
real estate mortgage investment conduits.
"INVESTMENT PARTNERSHIP" means any Partnership in which Borrower or
any Subsidiary of Borrower has an ownership interest, whose financial results
are not consolidated under GAAP in the Financial Statements. Investment
Partnerships do not include Simon Partnerships.
"IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.
"LAND" means unimproved real estate, including future phases of a
partially completed project, owned by Borrower or any Subsidiary of Borrower for
the purpose of future development of improvements. For purposes of the foregoing
definition, "unimproved" shall mean Land on which the construction of building
improvements has not commenced or land on which construction has been
discontinued for a continuous period longer than sixty (60) days prior to
completion.
"LEASE" means a lease or license between Borrower and a tenant or
licensee with respect to premises located within a Portfolio Property.
"LENDER TAXES" has the meaning given to such term in SECTION 2.4.7.
"LENDERS" means BankBoston and any other bank, finance company,
insurance or other financial institution which is or becomes a party to this
Agreement by execution of a counterpart signature page hereto or an Assignment
and Assumption, as assignee. With respect to matters requiring the consent to or
approval of all Lenders at any given time, all then existing Defaulting Lenders
will be disregarded and excluded, and, for voting purposes only, "all Lenders"
shall be deemed to mean "all Lenders other than Defaulting Lenders".
"LETTER OF CREDIT" means a letter of credit issued by the Lender for
the account of Borrower pursuant to the Revolving Credit Agreement.
"LIABILITIES AND COSTS" means all claims, judgments, liabilities,
obligations, responsibilities, losses, damages (including lost profits),
punitive or treble damages, costs, disbursements and expenses (including,
without limitation, reasonable attorneys, experts' and consulting fees and costs
of investigation and feasibility studies), fines, penalties and monetary
sanctions, interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future.
"LIBOR" means, relative to any Interest Period for any LIBOR Loan, the
per annum rate (reserve adjusted as hereinbelow provided) of interest quoted by
Agent, rounded upwards, if necessary, to the nearest one-sixteenth of one
percent (0.0625%) at which Dollar deposits in immediately available funds are
offered to Agent by leading banks in the Eurodollar interbank market two (2)
Business Days prior to the beginning of such Interest Period, for delivery on
the first day of such Interest Period for a period approximately equal to such
Interest Period and in an amount equal or comparable to the LIBOR Loan to which
such Interest Period relates. The foregoing rate of interest shall be reserve
adjusted by dividing LIBOR by one (1.00) minus the LIBOR Reserve Percentage,
with such quotient to be rounded upward to the nearest whole multiple of
one-hundredth of one percent (0.01%). All references in this Agreement or other
Loan Documents to LIBOR shall mean and include the aforesaid reserve adjustment.
"LIBOR LOAN" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to LIBOR.
"LIBOR OFFICE" means, relative to any Lender, the office of such
Lender designated as such on the counterpart signature pages hereto or such
other office of a Lender as designated from time to time by notice from such
Lender to Agent, whether or not outside the United States, which shall be making
or maintaining LIBOR Loans of such Lender.
"LIBOR RESERVE PERCENTAGE" means, relative to any Interest Period for
LIBOR Loans made by any Lender, the reserve percentage (expressed as a decimal)
equal to the actual aggregate reserve requirements (including all basic,
emergency, supplemental, marginal and other reserves and taking into account any
transactional adjustments or other scheduled changes in reserve requirements)
announced within Agent as the reserve percentage applicable to Agent as
specified under regulations issued from time to time by the Federal Reserve
Board. The LIBOR Reserve Percentage shall be based on Regulation D of the
Federal Reserve Board or other regulations from time to time in effect
concerning reserves for "Eurocurrency Liabilities" from related institutions as
though Agent were in a net borrowing position.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, security interest, encumbrance (including, but
not limited to, easements, rights-of-way, zoning restrictions and the like),
lien (statutory or other), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including without
limitation any conditional sale or other title retention agreement, the interest
of a lessor under a Capital Lease, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement or document having similar effect (other than a financing statement
filed by a "true" lessor pursuant to Section 9408 of the Uniform Commercial
Code) naming the owner of the asset to which such Lien relates as debtor, under
the Uniform Commercial Code or other comparable law of any jurisdiction.
"LOAN ACCOUNT" has the meaning given to such term in SECTION 2.3.
"LOAN DOCUMENTS" means this Agreement, the Loan Notes, the Guaranty
and all other agreements, instruments and documents (together with amendments
and supplements thereto and replacements thereof) now or hereafter executed by
the Borrower, which evidences or relates to the Obligations.
"LOAN NOTES" means the promissory notes evidencing the Loans in the
aggregate original principal amount of Sixty Million Dollars ($60,000,000)
executed by Borrower in favor of Lenders, as they may be amended, supplemented,
replaced or modified from time to time. The initial Loan Notes and any
replacements thereof shall be substantially in the form of EXHIBIT C.
"LOANS" means the Loans made pursuant to the Facility.
"LONG TERM UNSECURED INDEBTEDNESS" means all Unsecured Indebtedness
which at the time of determination has a maturity of not less than five (5)
years.
"MAJORITY PARTNERSHIP" means any Partnership in which Borrower has an
ownership interest, whose financial results are consolidated under GAAP in the
Financial Statements.
"MATERIAL ADVERSE EFFECT" means, with respect to a Person or Property,
a material adverse effect upon the condition (financial or otherwise),
operations, performance or properties of such Person or Property. The phrase
"has a Material Adverse Effect" or "will result in a Material Adverse Effect" or
words substantially similar thereto shall in all cases be intended to mean "has
resulted, or will or could reasonably be anticipated to result, in a Material
Adverse Effect", and the phrase "has no (or does not have a) Material Adverse
Effect" or "will not result in a Material Adverse Effect" or words substantially
similar thereto shall in all cases be intended to mean "does not or will not or
could not reasonably be anticipated to result in a Material Adverse Effect".
"MATERIALLY DEFAULTED LEASES" means Leases under which the tenant has
failed to make any payment of base rent, percentage rent or additional rent when
due and such failure has continued for more than ninety (90) days after the due
date of the applicable payment or any Lease which the Borrower has terminated
based on any default by the Tenant thereunder.
"MULTIEMPLOYER PLAN" means an employee benefit plan defined in Section
4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years
was, contributed to by a Person or an ERISA Affiliate of such Person.
"NET OPERATING INCOME" means with respect to any Fiscal Quarter of the
Borrower and with respect to any one or more of its Properties, (i) the total
rental and other operating income from the operation of such Properties after
deducting all expenses and other proper charges incurred by the Borrower in
connection with the operation of such Properties during such Fiscal Quarter,
including, without limitation, property operating expenses, real estate taxes
and bad debt expenses, but before payment or provision for debt service, income
taxes, and depreciation, amortization, and other non-cash expenses, all as
determined in accordance with generally accepted accounting principles, MINUS
(ii) percentage rent income of such Properties for such Fiscal Quarter, PLUS
(iii) twenty-five percent (25%) of the total percentage rent income of such
Properties during such Fiscal Quarter and the three immediately preceding Fiscal
Quarters, minus (iv) the Replacement Reserve Amount for such Properties. With
respect to Properties located outside of the United States, Net Operating Income
shall be converted from the currency in which the applicable income and expenses
are paid to Dollars using the currency exchange rates in effect as of the end of
the applicable Fiscal Quarter.
"NET OFFERING PROCEEDS" means all cash proceeds received by the REIT
as a result of the sale of common, preferred or other classes of stock in the
REIT (if and only to the extent reflected in stockholders' equity on the
consolidated balance sheet of the REIT prepared in accordance with GAAP) LESS
customary costs and discounts of issuance paid by the REIT, all of which
proceeds shall have been concurrently contributed by the REIT to Borrower as
additional capital.
"NON-RETAIL PROPERTIES" means Portfolio Properties which are not
intended to be used as or in connection with a retail Property including
residential or other Properties in the vicinity of Construction Projects
acquired to facilitate the obtaining of governmental permits or the resolution
of zoning or land use issues related to such Construction Projects.
"NONRECOURSE INDEBTEDNESS" means Indebtedness with respect to which
recourse for payment is contractually limited to specific assets encumbered by a
Lien securing such Indebtedness.
"NOTICE OF INTEREST RATE SELECTION" means a notice substantially in
the form of EXHIBIT D given pursuant to SECTION 2.1.2.
"OBLIGATIONS" means, from time to time, all Indebtedness of Borrower
owing to Agent, any Lender or any Person entitled to indemnification pursuant to
SECTION 12.2, or any of their respective successors, transferees or assigns, of
every type and description, whether or not evidenced by any note, guaranty or
other instrument, arising under or in connection with this Agreement or any
other Loan Document, whether or not for the payment of money, whether direct or
indirect (including those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising and however acquired. The
term includes, without limitation, all interest, charges, expenses, fees,
reasonable attorneys' fees and disbursements, reasonable fees and disbursements
of expert witnesses and other consultants, and any other sum now or hereinafter
chargeable to Borrower under or in connection with this Agreement or any other
Loan Document.
"OFFICER'S CERTIFICATE" means a certificate signed by a specified
officer of a Person certifying as to the matters set forth therein.
"OPERATING CASH FLOW" means, at any time, for the most recent Fiscal
Quarter, EBITDA MINUS cash income taxes paid during such Fiscal Quarter and not
deducted on the Financial Statements in determining earnings for such Fiscal
Quarter or any prior period MINUS the Replacement Reserve Amount for the
Portfolio Properties.
"PARTNERSHIP" means any general or limited partnership, joint venture,
corporation, limited liability company or limited liability partnership in which
Borrower, the REIT or any Subsidiary of Borrower or the REIT has an ownership
interest and which is not a Wholly-Owned Subsidiary, excluding, however, the
Simon Partnerships.
"PARTNERSHIP AGREEMENT" means, with respect to any Partnership, on a
collective basis, its partnership agreement, its agreement of limited
partnership agreement and certificate of limited partnership (if any), its
operating or management agreement and articles or certificate of organization,
or other organizational or governance document(s).
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the functions thereof.
"PERMIT" means any permit, approval, authorization, license, variance
or permission required from a Governmental Authority under an applicable
Requirement of Law.
"PERMITTED LIENS" means:
(a) Liens (other than Environmental Liens and any Lien
imposed under ERISA) for taxes, assessments or charges of any
Governmental Authority or claims not yet due or not yet required to be
paid pursuant to SECTION 7.4;
(b) Liens (other than any Lien imposed under ERISA)
incurred or deposits made in the ordinary course of business (including
without limitation surety bonds and appeal bonds) in connection with
workers' compensation, unemployment insurance and other types of social
security benefits or to secure the performance of tenders, bids,
leases, contracts (other than for the repayment of Indebtedness),
statutory obligations;
(c) any laws, ordinances, easements, rights of way,
restrictions, exemptions, reservations, conditions, defects or
irregularities in title, limitations, covenants or other matters that,
in the aggregate, do not in the reasonable opinion of Borrower (i)
materially interfere with the occupation, use and enjoyment of the
Property or other assets encumbered thereby, by the Person owning such
Property or other assets, in the normal course of its business or (ii)
materially impair the value of the Property subject thereto;
(d) Liens imposed by laws, such as mechanics' liens and
other similar liens arising in the ordinary course of business which
either (i) have been in existence for less than 120 days from the date
of filing or (ii) have been in existence for longer than said 120 days
so long as the aggregate amount of all such Liens is less than $100,000
for each Construction Project and the Borrower is in good faith
contesting the validity or amount thereof by appropriate proceedings,
provided however that any Lien permitted under this paragraph must be
discharged prior to foreclosure thereof;
(e) Leases to tenants which are not Affiliates of Borrower
existing on the date hereof or subsequently entered into in the
ordinary course of business;
(f) Liens securing judgments or awards permitted by
SECTION 8.10(D); and
(g) Liens securing purchase money Indebtedness permitted
by SECTION 8.10(F) provided that each such Lien shall encumber only the
specific item of equipment purchased with the proceeds of the
Indebtedness secured thereby.
"PERSON" means any natural person, employee, corporation, limited
partnership, general partnership, joint stock company, limited liability
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, or
any other non-governmental entity, or any Governmental Authority.
"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA
(other than a Multiemployer Plan) in respect of which Borrower or an ERISA
Affiliate, as applicable, is an "employer" as defined in Section 3(5) of ERISA.
"PORTFOLIO OCCUPANCY RATE" means, with respect to the Portfolio
Properties at any time, the ratio, as of such date, expressed as a percentage,
of (i) the gross leasable area of all Portfolio Properties occupied by tenants
paying rent pursuant to Leases other than Materially Defaulted Leases, to (ii)
the aggregate gross leasable area of all Portfolio Properties excluding from
both (i) and (ii) the gross leasable area of Construction Projects thereon prior
to the date which is 3 months after the Rent Stabilization Date for such
Construction Project. Only premises which are actually open for business shall
be counted as occupied. Non-Retail Properties shall be excluded from Portfolio
Properties for purposes of this definition.
"PORTFOLIO PROPERTIES" means real property improved with one or more
completed buildings that is owned directly or indirectly, in whole or in part,
by Borrower, any Subsidiary of Borrower or any Partnership, including the
Unencumbered Properties and the Properties listed on SCHEDULE 1.1, as such
schedule may be updated from time to time to reflect the acquisition or
disposition of Portfolio Properties. Portfolio Properties do not include the
Simon Properties.
"PREPAYMENT DATE" has the meaning given to such term in SECTION
2.4.8(C).
"PRIOR FINANCIALS" has the meaning given to such term in SECTION 5.9.
"PRO FORMA UNSECURED DEBT SERVICE CHARGES" means, for any Fiscal
Quarter of the Borrower, the sum of (a) an amount determined by the Borrower
(and approved by the Agent in its sole discretion) based on a twenty-five (25)
year mortgage style amortization schedule, calculated on the outstanding
principal amount of all Unsecured Indebtedness excluding Long Term Unsecured
Indebtedness and an interest rate equal to the greater of (i) the weighted
average annual interest rate actually applicable to all Unsecured Indebtedness
excluding Long Term Unsecured Indebtedness during such Fiscal Quarter or (ii)
the then current ten (10) year U.S. Treasury bill yield plus one and
three-quarters percent (1.75%) plus (b) one-quarter of the actual debt service
charges due during the current fiscal year pursuant to the Long Term Unsecured
Indebtedness.
"PRO RATA SHARE" means, with respect to any Lender, a fraction
(expressed as a percentage), the numerator of which shall be the amount of such
Lender's Loans outstanding and the denominator of which shall be the aggregate
amount of all of the Lenders' Loans outstanding.
"PROCEEDINGS" means, collectively, all actions, suits and proceedings
before, and investigations commenced or threatened by or before, any court or
Governmental Authority with respect to a Person.
"PROPERTY" means, as to any Person, all real or personal property
(including, without limitation, buildings, facilities, structures, equipment and
other assets, tangible or intangible) owned by such Person.
"PROPERTY OCCUPANCY RATE" means, with respect to any Portfolio
Property or Simon Property at any time, the ratio, as of such date, expressed as
a percentage, of (i) the gross leasable area of such Portfolio Property or Simon
Property occupied by tenants paying rent pursuant to Leases other than
Materially Defaulted Leases, to (ii) the aggregate gross leasable area of such
Portfolio Property or Simon Property, excluding from both (i) and (ii) the gross
leasable area of Construction Projects prior to the date which is 3 months after
the Rent Stabilization Date for such Construction Project. Only premises which
are actually open for business shall be counted as occupied.
"RATING AGENCY" means either of (i) Standard & Poor's, a division of
The McGraw-Hill Companies, Inc. or (ii) Moody's Investors Services, Inc.
"RECOURSE SIMON DEBT AMOUNT" means the aggregate amount of the
Indebtedness of any Simon Partnership for which the Borrower has recourse
liability pursuant to a guaranty or other Accommodation Obligation provided,
however, that with respect to any such Indebtedness guaranteed jointly and
severally by Borrower and Simon (and with respect to which Borrower would have a
contribution claim against Simon) the Recourse Simon Debt Amount shall exclude
the amount of such guaranteed Indebtedness in excess of Borrower's Share in the
applicable Simon Partnership.
"REGULATIONS T, U AND X" mean such Regulations of the Federal Reserve
Board as in effect from time to time.
"REIT" means Chelsea GCA Realty, Inc., a Maryland corporation.
"RELEASE" means the release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment or into or out of any property, including the
movement of Contaminants through or in the air, soil, surface water, groundwater
or property.
"REMEDIAL ACTION" means any action required by applicable
Environmental Laws to (i) clean up, remove, treat or in any other way address
Contaminants in the indoor or outdoor environment; (ii) prevent the Release or
threat of Release or minimize the further Release of Contaminants so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; or (iii) perform preremedial studies and
investigations and post-remedial monitoring and care.
"RENT STABILIZATION DATE" means, with respect to each Construction
Project, the date which shall be (i) the first day of a Fiscal Quarter (ii) not
more than six (6) months after the date on which the first certificate of
occupancy (or the equivalent) has been issued for any portion of such
Construction Project and (iii) set forth in a notice from Borrower to Agent
given prior to such Rent Stabilization Date.
"REPLACEMENT RESERVE AMOUNT" means, with respect to any Property or
group of Properties for any Fiscal Quarter, a reserve for replacement reserves,
leasing costs and recurring capital expenditures equal to the product of $0.075
TIMES the gross leasable area of such Property or group of Properties excluding
the gross leasable area of any Construction Project thereon prior to the Rent
Stabilization Date with respect to such Construction Project.
"REPORTABLE EVENT" means any of the events described in Section
4043(b) of ERISA, other than an event for which the thirty (30) day notice
requirement is waived by regulations.
"REQUIREMENTS OF LAW" mean, as to any Person, the charter and by-laws,
Partnership Agreement or other organizational or governing documents of such
Person, and any law, rule or regulation, Permit, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject, including without limitation, the Securities
Act, the Securities Exchange Act, Regulations T, U and X, FIRREA and any
certificate of occupancy, zoning ordinance, building, environmental or land use
requirement or Permit or occupational safety or health law, rule or regulation.
"REQUISITE LENDERS" mean, collectively, Lenders whose Pro Rata Shares,
in the aggregate, are at least sixty-six and two-thirds percent (66-2/3%),
PROVIDED that, in determining such percentage at any given time, all then
existing Defaulting Lenders will be disregarded and excluded and the Pro Rata
Shares of Lenders shall be redetermined, for voting purposes only, to exclude
the Pro Rata Shares of such Defaulting Lenders and PROVIDED, FURTHER, that the
Agent must always be among the Requisite Lenders except that after an Event of
Default described in SECTION 10.1.1 decisions by the Requisite Lenders to
accelerate and/or exercise remedies pursuant to SECTION 10.2.1 shall be made
without regard to whether the Agent is among the Requisite Lenders.
"REVOLVING CREDIT AGREEMENT" means the Credit Agreement dated as of
March 30, 1998, among Borrower, the Agent and the lenders party thereto, as
hereafter amended pursuant to its terms.
"REVOLVING FACILITY" means the Borrower's revolving line of credit
facility in the maximum principal amount of $160,000,000, a portion of which may
be used for Letters of Credit, all as provided in the Revolving Credit
Agreement.
"SECURED BORROWER DEBT" means all Borrower Debt that is secured by a
Lien on any Property.
"SECURITIES" means any stock, shares, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities", or any certificates of interest, shares, or
participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing, but shall not include any evidence of the Obligations, PROVIDED that
Securities shall not include Cash Equivalents, Investment Mortgages or interests
in Partnerships.
"SECURITIES ACT" means the Securities Act of 1933, as amended to the
date hereof and from time to time hereafter, and any successor statute.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended to the date hereof and from time to time hereafter, and any successor
statute.
"SIMON" means Simon Property Group, L.P.
"SIMON PARTNERSHIP" means each limited liability company general or
limited partnership, corporation or joint venture in which ownership interests
are held by (i) Borrower or one of its Wholly-Owned Subsidiaries and (ii) Simon
or one of its wholly-owned Subsidiaries.
"SIMON PARTNERSHIP CASH FLOW" means, at any time, with respect to any
Simon Partnership, for the most recent Fiscal Quarter, Simon Partnership EBITDA
of such Simon Partnership MINUS the Replacement Reserve Amount for the Simon
Property owned by such Simon Partnership.
"SIMON PARTNERSHIP EBITDA" means, at any time, with respect to any
Simon Partnership, for the most recent Fiscal Quarter, such Simon Partnership's
earnings (or loss) before interest, taxes, depreciation and amortization,
calculated for such period on a consolidated basis in conformity with GAAP minus
gains (and PLUS losses) from extraordinary items or asset sales or write-ups or
forgiveness of Indebtedness, MINUS percentage rent income for such Fiscal
Quarter, PLUS twenty-five percent (25%) of the total percentage rent income
during such Fiscal Quarter and the three immediately preceding Fiscal Quarters.
"SIMON PARTNERSHIP VALUE" means, as at any date of determination, with
respect to any Simon Partnership, the Borrower's Share of an amount equal to the
excess, if any, of (i) (A) Simon Partnership Cash Flow of such Simon Partnership
for the most recently ended Fiscal Quarter, TIMES (B) four (4), DIVIDED BY (C)
0.095, MINUS (ii) all Indebtedness and other liabilities of such Simon
Partnership. "SIMON PROPERTY" means any Property owned by a Simon Partnership.
"SOLVENT" means, as to any Person at the time of determination, that
such Person (i) owns property the value of which (both at fair valuation and at
present fair saleable value) is greater than the amount required to pay all of
such Person's liabilities (including contingent liabilities and debts); (ii) is
able to pay all of its debts as such debts mature; and (iii) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
"SUBSIDIARY" of a Person means any corporation, Partnership, trust or
other non-Partnership entity of which a majority of the stock (or equivalent
ownership or controlling interest) having voting power to elect a majority of
the Board of Directors (if a corporation) or to select the trustee or equivalent
controlling interest, shall, at the time such reference becomes operative, be
directly or indirectly owned or controlled by such Person.
"TAXES" means all federal, state, local and foreign income and gross
receipts taxes.
"TERMINATION DATE" has the meaning given to such term in SECTION
2.1.4.
"TERMINATION EVENT" means (i) any Reportable Event, (ii) the
withdrawal of a Person, or an ERISA Affiliate from a Benefit Plan during a plan
year in which it was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA, (iii) the occurrence of an obligation arising under Section 4041 of
ERISA of a Person or an ERISA Affiliate to provide affected parties with a
written notice of an intent to terminate a Benefit Plan in a distress
termination described in Section 4041(c) of ERISA, (iv) the institution by the
PBGC of proceedings to terminate any Benefit Plan under Section 4042 of ERISA,
(v) any event or condition which constitutes grounds under Section 4042 of ERISA
for the appointment of a trustee to administer a Benefit Plan, (vi) the partial
or complete withdrawal of such Person or any ERISA Affiliate from a
Multiemployer Plan, or (vii) the adoption of an amendment by any Person or any
ERISA Affiliate to terminate any Benefit Plan.
"TOTAL LIABILITIES" means (i) all Indebtedness of Borrower and its
Subsidiaries (excluding Indebtedness relating to the Indebtedness of Simon
Partnerships), whether or not such Indebtedness would be included as a liability
on the balance sheet of Borrower in accordance with GAAP, plus (ii) all other
liabilities of every nature and kind of Borrower and its Subsidiaries that would
be included as liabilities on the balance sheet of Borrower in accordance with
GAAP plus (iii) the Recourse Simon Debt Amount.
"UNENCUMBERED NET OPERATING INCOME" means, with respect to any Fiscal
Quarter of the Borrower, the sum of the Net Operating Income of all of its
Properties which were Unencumbered Properties hereunder during such Fiscal
Quarter.
"UNENCUMBERED PROPERTY" means a Property which at the date of
determination, (i) is owned in fee by Borrower or by a Guarantor Subsidiary,
(ii) is improved with one or more completed retail buildings of a type
consistent with Borrower's business strategy; (iii) is not directly or
indirectly subject to any Lien (other than Permitted Liens) or to any negative
pledge agreement or other agreement (other than this Agreement) that prohibits
the creation of any Lien thereon; (iv) is a Property with respect to which each
of the representations contained in SECTION 5.22 and in SECTION 5.23 hereof is
true and accurate as of such date of determination; (v) may be legally conveyed
separately from any other Real Estate without the need to obtain any subdivision
approval, zoning variance or other consent or approval from an unrelated Person;
(vi) is located in the United States, and (vii) to the extent requested by the
Agent, the Borrower has delivered to the Agent historical operating and leasing
information relating to such Unencumbered Property, in form and substance
satisfactory to the Agent.
"UNENCUMBERED PROPERTY VALUE" means, with respect to any Unencumbered
Property at any time, an amount computed as follows: (a) the Net Operating
Income of such Unencumbered Property for the most recent Fiscal Quarter for
which financial statements have been delivered to the Agent pursuant to SECTION
6.1; (b) then multiplying by four (4); and (c) dividing such product by 0.095.
With respect to any Unencumbered Property which, during the applicable Fiscal
Quarter, has been acquired by Borrower or has had the building or buildings
being constructed thereon completed and occupied by tenants, Borrower may
compute the Unencumbered Property Value for such Unencumbered Property based on
a pro forma Net Operating Income for such Fiscal Quarter, which computation must
be approved by the Agent.
"UNMATURED EVENT OF DEFAULT" means an event which, with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
"UNSECURED INDEBTEDNESS" means all Indebtedness of Borrower or of any
of its Subsidiaries which is not secured by a Lien on any Properties including,
without limitation, the Loans, the loans under the Revolving Facility, the
Borrower's reimbursement obligations relating to the Letters of Credit issued
pursuant to the Revolving Facility, the BankBoston Term Loan, the Unsecured Term
Notes and any Indebtedness evidenced by any bonds, debentures, notes or other
debt securities which may be hereafter issued by Borrower or by the REIT.
Unsecured Indebtedness shall not include accrued ordinary operating expenses
payable on a current basis.
"UNSECURED TERM NOTE INDENTURE" means the Indenture dated as of
January 23, 1996 among the Borrower, the REIT and State Street Bank and Trust
Company, as trustee, as supplemented by First Supplemental Indenture dated as of
January 23, 1996, by Second Supplemental Indenture dated as of October 23, 1996
and by Third Supplemental Indenture dated as of October 21, 1997, and as
hereafter amended or further supplemented.
"UNSECURED TERM NOTE SECURED DEBT LIMITATION" means the provision
contained in the Unsecured Term Note Indenture which limits the Borrower's
"Secured Debt" to not more than 40% of its "Adjusted Total Assets" (as such
quoted terms are defined in said Indenture). If the Unsecured Term Note
Indenture is amended to reduce the permitted amount of Secured Borrower Debt
this defined term shall automatically be deemed to incorporate such amendment,
but if the Unsecured Term Note Indenture is amended to increase the permitted
amount of Secured Borrower Debt this definition shall not be deemed to
incorporate such amendment until the same has been approved by the Requisite
Lenders.
"UNSECURED TERM NOTES" means, collectively, (i) Borrower's 7 3/4%
notes due 2001 in the aggregate principal amount of $100,000,000, (ii)
Borrower's 7 1/4% notes due 2007 in the aggregate principal amount of
$125,000,000 and (iii) any other unsecured indebtedness of the Borrower which at
the time of its issuance matures not earlier than 24 months after the then
applicable Termination Date.
"VALUE OF ALL UNENCUMBERED PROPERTIES" means, when determined as of
the end of a Fiscal Quarter, an amount computed as follows: (a) Unencumbered Net
Operating Income; (b) then multiplying by four (4); and (c) dividing such
product by 0.095. When determined as of a date which is during a Fiscal Quarter
based on an updated list of Unencumbered Properties attached to the applicable
Compliance Certificate, the Value of All Unencumbered Properties most recently
computed as provided in the preceding sentence of this definition will be
adjusted by subtracting the Unencumbered Property Value of the previous
Unencumbered Properties which have been deleted from such list and by adding the
Unencumbered Property Value of the Unencumbered Properties which have been added
to such list
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary which is 100% owned by
Borrower.
"WOODBURY COMMON" means the Property owned by Borrower located at the
intersection of NY State Route 32 and the New York State Thruway in the Town of
Woodbury, Orange County, New York, including all expansions and additions
thereto.
"YEAR 2000 COMPLIANT" has the meaning given to such term in SECTION
5.33.
1.2 COMPUTATION OF TIME PERIODS. In this Agreement, in the computation
of periods of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each mean "to
and including". Periods of days referred to in this Agreement shall be counted
in calendar days unless Business Days are expressly prescribed.
1.3 TERMS.
1.3.1 Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given them in
accordance with GAAP. All references herein to Borrower, the REIT or any other
Person, in connection with any financial or related covenant, representation or
calculation, shall be understood to mean and refer to Borrower, the REIT and
such other Person on a consolidated basis in accordance with GAAP, unless
otherwise specifically provided and subject in all events to any adjustments
herein set forth.
1.3.2 Any time the phrase "to the best of Borrower's knowledge"
or a phrase similar thereto is used herein, it means: "to the actual knowledge
of the then executive or senior officers of Borrower and the REIT, after
reasonable inquiry of those agents, employees or contractors of the REIT or
Borrower who could reasonably be anticipated to have knowledge with respect to
the subject matter or circumstances in question and after review of those
documents or instruments which could reasonably be anticipated to be relevant to
the subject matter or circumstances in question provided that such reasonable
inquiry need not be undertaken at the time of each Compliance Certificate."
1.3.3 In each case where the consent or approval of Agent, all
Lenders and/or Requisite Lenders is required, or their non-obligatory action is
requested by Borrower, such consent, approval or action shall be in the sole and
absolute discretion of Agent and, as applicable, each Lender, unless otherwise
specifically indicated.
1.3.4 Any time the word "or" is used herein, unless the context
otherwise clearly requires, it has the inclusive meaning represented by the
phrase "and/or". The words "hereof", "herein", "hereby", "hereunder" and similar
terms refer to this Agreement as a whole and not to any particular provision of
this Agreement. Article, section, subsection, clause, exhibit and schedule
references are to this Agreement unless otherwise specified. Any reference in
this Agreement to this Agreement or to any other Loan Document includes any and
all amendments, modifications, supplements, renewals or restatements thereto or
thereof, as applicable.
ARTICLE II
LOANS
2.1 ADVANCE AND REPAYMENT OF LOANS.
2.1.1 ADVANCE OF LOANS. Subject to the terms and conditions set
forth in this Agreement, Lenders hereby severally agree to make the Loans to
Borrower on the Closing Date. Loans under this Agreement shall be made by
Lenders simultaneously and in the full amount of their respective Commitments,
it being understood that no Lender shall be responsible for any failure by any
other Lender to perform its obligation to make a Loan hereunder and that the
Commitment of any Lender shall not be increased or decreased as a result of the
failure by any other Lender to perform its obligation to make a Loan. The Loans
may be voluntarily prepaid pursuant to SECTION 2.6.1 and, any amounts so prepaid
may not be reborrowed. The principal balance of the Loans shall be payable in
full on the Termination Date. The Loans will be evidenced by the Loan Notes.
2.1.2 NOTICE OF SELECTION OF INTEREST RATE.
(a) (i) Borrower shall give Agent,
at 115 Perimeter Center Place, N.E., Suite 500, Atlanta, GA 30346,
Attn: Lori Y. Litow (Fax No. (770)390-8434) or such other address as
Agent shall designate, an original or facsimile NOTICE OF INTEREST RATE
SELECTION no later than 9:00 A.M. (Eastern time), not less than three
(3) nor more than five (5) Business Days prior to the proposed Closing
Date and prior to the expiration of each Interest Period thereafter.
The Agent shall promptly provide a copy of each Notice of Interest Rate
Selection to each Lender.
(ii) Notwithstanding the foregoing or any
other provision hereof to the contrary a Notice of Interest Rate
Selection may be given not less than two (2) Business Days prior to
Closing Date or the expiration of an Interest Period if such notice
elects a Base Rate Loan.
(iii) Each Notice of Interest Rate
Selection shall specify whether the Loan to be made on the Closing Date
(or thereafter continued or converted) will be a Base Rate Loan or a
LIBOR Loan and, if a LIBOR Loan, the Interest Period.
(b) Borrower may elect (i) to convert a
LIBOR Loan into a Base Rate Loan, (ii) to convert a Base Rate Loan to a LIBOR
Loan, or (iii) to continue any LIBOR Loan for an additional Interest Period,
PROVIDED, HOWEVER, that the aggregate amount of the Loans being converted into
or continued as LIBOR Loans shall equal Four Million Dollars ($4,000,000) or an
integral multiple of One Million Dollars ($1,000,000) in excess thereof. The
applicable Interest Period for the continuation of any LIBOR Loan shall commence
on the day on which the next preceding Interest Period expires. The conversion
of a LIBOR Loan to a Base Rate Loan shall only occur on the last Business Day of
the Interest Period relating to such LIBOR Loan; such conversion shall occur
automatically in the absence of an election under CLAUSE (III) above. Each
election under CLAUSE (II) or CLAUSE (III) above shall be made by Borrower
giving Agent an original or facsimile Notice of Interest Rate Selection no later
than 9:00 A.M. (Eastern time), not less than three (3) nor more than five (5)
Business Days prior to the date of a conversion to or continuation of a LIBOR
Loan, specifying, in each case (1) the amount of the conversion or continuation,
(2) the Interest Period therefor, and (3) the date of the conversion or
continuation (which date shall be a Business Day).
(c) Upon receipt of a Notice of Interest Rate
Selection in proper form requesting LIBOR Loans under SUBPARAGRAPH (A) or (B)
above, Agent shall determine the LIBOR applicable to the Interest Period for
such LIBOR Loans, and shall, prior to the beginning of such Interest Period,
give (by facsimile) a FIXED RATE NOTICE in respect thereof to Borrower and
Lenders; PROVIDED, HOWEVER, that failure to give such notice to Borrower shall
not affect the validity of such rate. Each determination by Agent of the LIBOR
shall be conclusive and binding upon the parties hereto in the absence of
manifest error.
2.1.3 MAKING OF THE LOANS. Subject to SECTION 11.3, Agent shall
make the proceeds of the Loans available to Borrower on the Closing Date and
shall disburse such funds in Dollars in immediately available funds to repay
loans outstanding under the Revolving Facility.
2.1.4. TERM. The outstanding balance of the Loans shall be
payable in full on the earliest to occur of (i) April 30, 2000, (ii) the
acceleration of the Loans pursuant to SECTION 10.2.1, or (iii) Borrower's
written notice to Agent (pursuant to SECTION 2.6.1) of Borrower's election to
prepay all accrued obligations and terminate this Agreement (the "TERMINATION
DATE").
2.2 AUTHORIZATION TO SELECT INTEREST RATE OPTIONS. Each of Borrower's
President, Chief Financial Officer, Senior Vice President-Finance and Treasurer
are hereby authorized by Borrower to sign Notices of Interest Rate Selection.
Borrower may provide Agent with documentation satisfactory to Agent indicating
the names of other officers or employees of Borrower authorized by Borrower to
sign Notices of Interest Rate Selection, and Agent and Lenders shall be entitled
to rely on such documentation until notified in writing by Borrower of any
change(s) of the persons so authorized. Agent shall be entitled to act on the
instructions of anyone identifying himself or herself as one of the Persons
authorized to execute a Notice of Interest Rate Selection, and Borrower shall be
bound thereby in the same manner as if such Person were actually so authorized.
Borrower agrees to indemnify, defend and hold Lenders and Agent harmless from
and against any and all Liabilities and Costs which may arise or be created by
the acceptance of instructions in any Notice of Interest Rate Selection, unless
caused by the gross negligence of the Person to be indemnified.
2.3 LENDERS' ACCOUNTING. Agent shall maintain a loan account (the
"LOAN ACCOUNT") on its books in which shall be recorded (i) the names and
addresses of each Lender and the principal amount of the Loans owing to each
Lender from time to time, and (ii) all advances and repayments of principal and
payments of accrued interest under the Loans, as provided in this Agreement.
2.4 INTEREST ON THE LOANS.
2.4.1 BASE RATE LOANS. Subject to SECTION 2.4.4, all Base Rate
Loans shall bear interest on the average daily unpaid principal amount thereof
from the date made until paid in full at a fluctuating rate per annum equal to
the Base Rate. Base Rate Loans shall be made in minimum amounts of Four Million
Dollars ($4,000,000) or an integral multiple of One Million ($1,000,000) in
excess thereof.
2.4.2 LIBOR LOANS. Subject to SECTIONS 2.4.4 and 2.4.8, all LIBOR
Loans shall bear interest on the unpaid principal amount thereof during the
Interest Period applicable thereto at a rate per annum equal to the sum of LIBOR
for such Interest Period PLUS the Applicable LIBOR Rate Margin. LIBOR Loans
shall be in tranches of Four Million Dollars ($4,000,000) or One Million Dollar
($1,000,000) increments in excess thereof. No more than three (3) LIBOR Loan
tranches shall be outstanding at any one time. Notwithstanding anything to the
contrary contained herein and subject to the Default Interest provisions
contained in SECTION 2.4.4, if an Event of Default occurs and as a result
thereof the Loans are declared due and payable, all LIBOR Loans will convert to
Base Rate Loans upon the expiration of the applicable Interest Periods therefor
or the date all Loans become due, whichever occurs first.
2.4.3 INTEREST PAYMENTS. Subject to SECTION 2.4.4, interest
accrued on all Loans shall be payable by Borrower, in the manner provided in
SECTION 2.6.2, in arrears on the first Business Day of the first calendar month
following the Closing Date, the first Business Day of each succeeding calendar
month thereafter, and on the Termination Date.
2.4.4 DEFAULT INTEREST. Notwithstanding the rates of interest
specified in SECTIONS 2.4.1 and 2.4.2 and the payment dates specified in SECTION
2.4.3, effective immediately upon the occurrence and during the continuance of
any Event of Default, the principal balance of all Loans then outstanding and,
to the extent permitted by applicable law, any interest payments on the Loans
not paid when due shall bear interest payable upon demand at a rate which is
four percent (4%) per annum in excess of the Base Rate. All other amounts due
Agent or Lenders (whether directly or for reimbursement) under this Agreement or
any of the other Loan Documents if not paid when due, or if no time period is
expressed, if not paid within thirty (30) days after demand, shall bear interest
from and after demand at the rate set forth in this SECTION 2.4.4.
2.4.5 LATE FEE. Borrower acknowledges that late payment to Agent
will cause Agent and Lenders to incur costs not contemplated by this Agreement.
Such costs include, without limitation, processing and accounting charges.
Therefore, if Borrower fails timely to pay any sum due and payable hereunder
through the Termination Date, unless waived by Agent pursuant to SECTION 11.11.1
or Requisite Lenders, a late charge of four cents ($.04) for each dollar of any
principal payment, interest or other charge due hereon and which is not paid
within ten (10) days after such payment is due, shall be charged by Agent (for
the benefit of Lenders) and paid by Borrower for the purpose of defraying the
expense incident to handling such delinquent payment; PROVIDED, HOWEVER, that no
late charges shall be assessed with respect to any period during which Borrower
is obligated to pay interest at the rate specified in SECTION 2.4.4, or in
respect of any failure to pay all Obligations on the Termination Date. Borrower
and Agent agree that this late charge represents a reasonable sum considering
all of the circumstances existing on the date hereof and represents a fair and
reasonable estimate of the costs that Agent and Lenders will incur by reason of
late payment. Borrower and Agent further agree that proof of actual damages
would be costly and inconvenient. Acceptance of any late charge shall not
constitute a waiver of the default with respect to the overdue installment, and
shall not prevent Agent from exercising any of the other rights available
hereunder or any other Loan Document. Such late charge shall be paid without
prejudice to any other rights of Agent.
2.4.6 COMPUTATION OF INTEREST. Interest shall be computed on the
basis of the actual number of days elapsed in the period during which interest
or fees accrue and a year of three hundred sixty (360) days. In computing
interest on any Loan, the date of the making of the Loan shall be included and
the date of payment shall be excluded; PROVIDED, HOWEVER, that if a Loan is
repaid on the same day on which it is made, one (1) day's interest shall be paid
on that Loan. Notwithstanding any provision in this SECTION 2.4, interest in
respect of any Loan shall not exceed the maximum rate permitted by applicable
law.
2.4.7 CHANGES; LEGAL RESTRICTIONS. In the event that after the
Closing Date (i) the adoption of or any change in any law, treaty, rule,
regulation, guideline or determination of a court or Governmental Authority or
any change in the interpretation or application thereof by a court or
Governmental Authority, or (ii) compliance by Agent or any Lender with any
request or directive made or issued after the Closing Date from any central bank
or other Governmental Authority or quasi-governmental authority:
(a) subjects Agent or any Lender to any tax, duty or
other charge of any kind with respect to the Facility, this
Agreement or any of the other Loan Documents or the Loans, or
changes the basis of taxation of payments to Agent or such Lender
of principal, fees, interest or any other amount payable
hereunder, except for net income, gross receipts, gross profits
or franchise taxes imposed by any jurisdiction and not
specifically based upon loan transactions (all such non-excepted
taxes, duties and other charges being hereinafter referred to as
"LENDER TAXES");
(b) imposes, modifies or holds applicable, in the
determination of Agent or any Lender, any reserve, special
deposit, compulsory loan, FDIC insurance, capital allocation or
similar requirement (other than a requirement of the type
described in SECTION 2.7) against assets held by, or deposits or
other liabilities in or for the account of, advances or loans by,
or other credit extended by, or any other acquisition of funds
by, Agent or such Lender or any applicable lending office; or
(c) imposes on Agent or any Lender any other condition
(OTHER THAN ONE DESCRIBED IN SECTION 2.7) materially more
burdensome in nature, extent or consequence than those in
existence as of the Closing Date,
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing, maintaining or participating in the Loans or to
reduce any amount receivable thereunder; THEN, in any such case, Borrower shall
promptly pay to Agent or such Lender, as applicable, upon demand, such amount or
amounts (based upon a reasonable allocation thereof by Agent or such Lender to
the financing transactions contemplated by this Agreement and affected by this
SECTION 2.4.7) as may be necessary to compensate Agent or such Lender for any
such additional cost incurred or reduced amounts received; PROVIDED, HOWEVER,
that if the payment of such compensation may not be legally made whether by
modification of the applicable interest rate or otherwise, then all affected
Loans shall become immediately due and payable by Borrower. Agent or such Lender
shall deliver to Borrower and in the case of a delivery by Lender, such Lender
shall also deliver to Agent, a written statement of the claimed additional costs
incurred or reduced amounts received and the basis therefor as soon as
reasonably practicable after such Lender obtains knowledge thereof. If Agent or
any Lender subsequently recovers any amount of Lender Taxes previously paid by
Borrower pursuant to this SECTION 2.4.7, whether before or after termination of
this Agreement, then, upon receipt of good funds with respect to such recovery,
Agent or such Lender will refund such amount to Borrower if no Event of Default
or Unmatured Event of Default then exists or, if an Event of Default or
Unmatured Event of Default then exists, such amount will be credited to the
Obligations in the manner determined by Agent or such Lender.
2.4.8 CERTAIN PROVISIONS REGARDING LIBOR LOANS.
(a) LIBOR LENDING UNLAWFUL. If any Lender shall
determine (which determination shall, upon notice thereof to
Borrower and Agent, be conclusive and binding on the parties
hereto) that the introduction of or any change in or in the
interpretation of any law makes it unlawful, or any central bank
or other Governmental Authority asserts that it is unlawful, for
such Lender to make or maintain any Loan as a LIBOR Loan, (i) the
obligations of such Lenders to make or maintain any Loans as
LIBOR Loans shall, upon such determination, forthwith be
suspended until such Lender shall notify Agent that the
circumstances causing such suspension no longer exist, and (ii)
if required by such law or assertion, the LIBOR Loans of such
Lender shall automatically convert into Base Rate Loans in which
case no Fixed Rate Prepayment Fee shall be due upon such
conversion.
(b) DEPOSITS UNAVAILABLE. If Agent shall have
determined in good faith that adequate means do not exist for
ascertaining the interest rate applicable hereunder to LIBOR
Loans, then, upon notice from Agent to Borrower the obligations
of all Lenders to make or maintain Loans as LIBOR Loans shall
forthwith be suspended until Agent shall notify Borrower that the
circumstances causing such suspension no longer exist. Agent will
give such notice when it determines, in good faith, that such
circumstances no longer exist; PROVIDED, HOWEVER, that Agent
shall not have any liability to any Person with respect to any
delay in giving such notice.
(c) FIXED RATE PREPAYMENT FEE. Borrower acknowledges
that prepayment or acceleration of a LIBOR Loan during an
Interest Period shall result in Lenders incurring additional
costs, expenses and/or liabilities and that it is extremely
difficult and impractical to ascertain the extent of such costs,
expenses and/or liabilities. Therefore, on the date a LIBOR Loan
is prepaid or the date all sums payable hereunder become due and
payable, by acceleration or otherwise ("PREPAYMENT DATE"),
Borrower will pay to Agent, for the account of each Lender, (in
addition to all other sums then owing), an amount ("FIXED RATE
PREPAYMENT FEE") determined by the Agent to be the amount, if
any, by which (i) the amount of interest which would have accrued
on the prepaid LIBOR Loan for the remainder of the Interest
Period at the rate applicable to such LIBOR Loan exceeds (ii) the
amount of interest that would accrue for the same period on any
readily marketable bond or other obligation of the United States
of America designated by the Agent in its sole discretion at or
about the time of such payment, such bond or other obligation of
the United States of America to be in an amount equal (as nearly
as may be) to the amount of principal so paid or not borrowed and
to have a maturity comparable to the remainder of such Interest
Period, and the interest to accrue thereon to take account of
amortization of any discount from par or accretion of premium
above par at which the same is selling at the time designation.
(d) Upon the written notice to Borrower from Agent,
Borrower shall immediately pay to Agent, for the account of
Lenders, the Fixed Rate Prepayment Fee. Such written notice
(which shall include calculations in reasonable detail) shall, in
the absence of manifest error, be conclusive and binding on the
parties hereto.
(e) Borrower understands, agrees and acknowledges the
following: (i) no Lender has any obligation to purchase, sell
and/or match funds in connection with the use of LIBOR as a basis
for calculating the rate of interest on a LIBOR Loan; (ii) LIBOR
is used merely as a reference in determining such rate; and (iii)
Borrower has accepted LIBOR as a reasonable and fair basis for
calculating such rate and a Fixed Rate Prepayment Fee. Borrower
further agrees to pay the Fixed Rate Prepayment Fee and Lender
Taxes, if any, whether or not a Lender elects to purchase, sell
and/or match funds.
2.4.9 WITHHOLDING TAX EXEMPTION. At least five (5) Business Days prior
to the first day on which interest or fees are payable hereunder for the account
of any Lender, each Lender that is not incorporated under the laws of the United
States of America, or a state thereof, agrees that it will deliver to Agent and
Borrower two (2) duly completed copies of United States Internal Revenue Service
Form 1001 or Form 4224, certifying in either case that such Lender is entitled
to receive payments under this Agreement without deduction or withholding of any
United States federal income taxes. Each Lender which so delivers a Form 1001 or
Form 4224 further undertakes to deliver to Agent and Borrower two (2) additional
copies of such form (or any applicable successor form) on or before the date
that such form expires (currently, three (3) successive calendar years for Form
1001 and one (1) calendar year for Form 4224) or becomes obsolete or after the
occurrence of any event requiring a change in the most recent forms so delivered
by it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by Agent or Borrower, in each case certifying that such
Lender is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such Lender advises Agent that it is not capable of receiving payments without
any deduction or withholding of United States federal income taxes. If any
Lender cannot deliver such form, then Borrower may withhold from such payments
such amounts as are required by the Internal Revenue Code.
2.5 FEES.
2.5.1 FACILITY FEE. On the Closing Date Borrower shall pay to
Agent, for the account of each Lender, a fee calculated at the rate of 75 basis
points of the amount of the Facility and the Agent shall pay to each Lender its
Pro Rata Share of such facility fee.
2.5.2 AGENCY AND ARRANGEMENT FEES. Borrower shall pay Agent such
fees as are provided for in the Fee Letter between Agent and Borrower, as in
existence from time to time.
2.5.3 PAYMENT OF FEES. The fees described in this SECTION 2.5
represent compensation for services rendered and to be rendered separate and
apart from the lending of money or the provision of credit and do not constitute
compensation for the use, detention or forbearance of money, and the obligation
of Borrower to pay the fees described herein shall be in addition to, and not in
lieu of, the obligation of Borrower to pay interest, other fees and expenses
otherwise described in this Agreement. All fees shall be payable when due in
immediately available funds and shall be non-refundable when paid. If Borrower
fails to make any payment of fees or expenses specified or referred to in this
Agreement due to Agent or Lenders, including without limitation those referred
to in this SECTION 2.5, in SECTION 12.1, or otherwise under this Agreement or
any separate fee agreement between Borrower and Agent or any Lender relating to
this Agreement, when due, the amount due shall bear interest until paid at the
Base Rate and, after ten (10) days at the rate specified in SECTION 2.4.4 (but
not to exceed the maximum rate permitted by applicable law), and shall
constitute part of the Obligations.
2.6 PAYMENTS.
2.6.1 VOLUNTARY PREPAYMENTS. Borrower may, upon not less than
three (3) Business Days prior written notice to Agent not later than 11:00 A.M.
(Eastern time) on the date given, at any time and from time to time, prepay the
Loans in whole or in part. As provided in SECTION 11.13, any partial prepayment
will be shared among the Lenders ratably in accordance with their Pro Rata
Shares. Any notice of prepayment given to Agent under this SECTION 2.6.1 shall
specify the date of prepayment and the principal amount of the prepayment. In
the event of a prepayment of LIBOR Loans, Borrower shall concurrently pay any
Fixed Rate Prepayment Fee payable in respect thereof. Agent shall provide to
each Lender a confirming copy of such notice on the same Business Day such
notice is received.
2.6.2 MANNER AND TIME OF PAYMENT. All payments of principal,
interest and fees hereunder payable to Agent or the Lenders shall be made
without condition or reservation of right and free of set-off or counterclaim,
in Dollars and by wire transfer (pursuant to Agent's written wire transfer
instructions) of immediately available funds, to Agent, for the account of each
Lender, not later than 11:00 A.M. (Eastern time) on the date due; and funds
received by Agent after that time and date shall be deemed to have been paid on
the next succeeding Business Day.
2.6.3 PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment to be
made by Borrower hereunder shall be stated to be due on a day which is not a
Business Day, payments shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of the payment of
interest hereunder and of any of the fees specified in SECTION 2.5, as the case
may be.
2.7 INCREASED CAPITAL. If either (i) the introduction of or any change
in or in the interpretation of any law or regulation or (ii) compliance by Agent
or any Lender with any guideline or request from any central bank or other
Governmental Authority made or issued after the Closing Date affects or would
affect the amount of capital required or expected to be maintained by Agent or
such Lender or any corporation controlling Agent or such Lender, and Agent or
such Lender determines that the amount of such capital is increased by or based
upon the existence of Agent's obligations hereunder or such Lender's Commitment,
then, upon demand by Agent or such Lender, Borrower shall immediately pay to
Agent or such Lender, from time to time as specified by Agent or such Lender,
additional amounts sufficient to compensate Agent or such Lender in the light of
such circumstances, to the extent that Agent or such Lender determines such
increase in capital to be allocable to the existence of Agent's obligations
hereunder or such Lender's Commitment. A certificate as to such amounts
submitted to Borrower by Agent or such Lender shall, in the absence of manifest
error, be conclusive and binding for all purposes.
2.8 NOTICE OF INCREASED COSTS. Each Lender agrees that, as promptly as
reasonably practicable after it becomes aware of the occurrence of an event or
the existence of a condition which would cause it to be affected by any of the
events or conditions described in SECTION 2.4.7 or 2.4.8 or SECTION 2.7, it will
notify Borrower, and provide a copy of such notice to Agent, of such event and
the possible effects thereof, PROVIDED that the failure to provide such notice
shall not affect Lender's rights to reimbursement provided for herein.
ARTICLE III
UNENCUMBERED PROPERTIES AND PORTFOLIO PROPERTIES
3.1. LISTING OF UNENCUMBERED PROPERTIES. The Borrower represents and
warrants that each of the Properties listed on SCHEDULE 1 will on the Closing
Date satisfy all of the conditions set forth in the definition of Unencumbered
Property. From time to time during the term of this Agreement additional
Properties may become Unencumbered Properties and certain Properties which
previously satisfied the conditions set forth in the definition of Unencumbered
Property may cease to be Unencumbered Properties by virtue of property
dispositions, creation of Liens or other reasons. There shall be attached to
each Compliance Certificate delivered pursuant hereto an updated listing of the
Unencumbered Properties relied upon by the Borrower in computing the Value of
All Unencumbered Properties and the Unencumbered Net Operating Income stated in
such Compliance Certificate.
3.2. WAIVERS BY REQUISITE LENDERS. If any Property fails to satisfy
any of the requirements contained in the definition of Unencumbered Property
then the applicable Property may nevertheless be deemed to be Unencumbered
Property hereunder if the Requisite Lenders grant the necessary waivers and vote
to accept such Property as an Unencumbered Property.
3.3. REJECTION OF UNENCUMBERED PROPERTIES. If at any time the Agent
determines that any Property listed as an Unencumbered Property by the Borrower
does not satisfy all of the requirements of the definition of Unencumbered
Property (to the extent not waived by the Requisite Lenders pursuant to SECTION
3.2) it may reject an Unencumbered Property by notice to the Borrower and if the
Agent so requests the Borrower shall revise the applicable Compliance
Certificate to reflect the resulting change in the Value of All Unencumbered
Properties and the Unencumbered Net Operating Income.
3.4 UPDATED LISTS OF UNENCUMBERED PROPERTIES AND PORTFOLIO PROPERTIES.
SCHEDULE 1 contains a list of the Unencumbered Properties and SCHEDULE 1.1 sets
forth a list of the Portfolio Properties (other than the Unencumbered
Properties) each as of the date hereof. Promptly upon the acquisition or
disposition of any of the Portfolio Properties and promptly upon the creation of
any Lien or other event which causes any of the Portfolio Properties which
previously qualified as an Unencumbered Property to no longer satisfy the
definition of Unencumbered Property, Borrower shall deliver to Agent an updated
SCHEDULE 1 and/or SCHEDULE 1.1 and any other information as may be reasonably
requested by Agent relating to such change in the list of Unencumbered
Properties and/or Portfolio Properties, including a Compliance Certificate.
ARTICLE IV
CONDITIONS TO LOANS
4.1 CONDITIONS TO DISBURSEMENT OF LOANS. The obligation of Lenders to
make the disbursement of the Loans on the Closing Date shall be subject to
satisfaction of each of the following conditions precedent, provided, however
that if evidence of qualification and good standing is not available from all
required states by the Closing Date, the Agent may permit such evidence to be
delivered a reasonable time after the Closing Date:
4.1.1 BORROWER DOCUMENTS. Borrower shall have executed and/or
delivered to Agent each of the following, in form and substance acceptable to
Agent:
(a) this Agreement;
(b) the Loan Notes;
(c) Certified copy of Borrower's Limited
Partnership Agreement, as amended;
(d) Certified copy of Borrower's Certificate of
Limited Partnership from the Delaware Secretary
of State;
(e) Evidence of qualification and good standing of
Borrower in Delaware and in each state
where any Unencumbered Property is located.
4.1.2 REIT DOCUMENTS. The REIT shall have executed and/or
delivered to Agent each of the following, in form and substance acceptable to
Agent:
(a) The Guaranty
(b) Articles of Incorporation, as amended, of the
REIT, as certified by the Secretary of State of
Maryland;
(c) By-laws of the REIT as certified by the
Secretary of the REIT;
(d) Good Standing Certificate for the REIT from
the Secretary of State of Maryland;
(e) Evidence of qualification and good standing of
the REIT in each state where any Unencumbered
Property is located;
(f) Certificate of Secretary regarding corporate
resolutions of the REIT, and the incumbency of
its officers as certified by the Secretary of
the REIT.
4.1.3 COMPLIANCE CERTIFICATE. Borrower shall have delivered to
Agent a Compliance Certificate demonstrating compliance with the financial
covenants in ARTICLE IX on the Closing Date.
4.1.4 MATERIAL ADVERSE CHANGES. No change (other than as
reflected in the Prior Financials), as determined by Agent shall have occurred,
during the period commencing December 31, 1997, and ending on the Closing Date,
which has a Material Adverse Effect on Borrower or the REIT.
4.1.5 LITIGATION PROCEEDINGS. There shall not have been
instituted or threatened, during the period commencing December 31, 1997, and
ending on the Closing Date, any litigation or proceeding in any court or
Governmental Authority affecting or threatening to affect Borrower or the REIT
which has a Material Adverse Effect, as reasonably determined by Agent.
4.1.6 NO EVENT OF DEFAULT; SATISFACTION OF FINANCIAL COVENANTS.
On the Closing Date, no Event of Default or Unmatured Event of Default shall
exist and all of the financial covenants contained in ARTICLE IX shall be
satisfied.
4.1.7 FEES. Agent shall have received the facility fee required
by SECTION 2.5.1, certain fees in the amount separately agreed to in the Fee
Letter between Agent and Borrower, and all expenses of Agent incurred prior to
such Closing Date in connection with this Agreement (including without
limitation all attorneys' fees and costs), shall have been paid by Borrower. The
Agent shall pay to each Lender its Pro Rata Share of the facility fee.
4.1.8 OPINION OF COUNSEL. Agent shall have received, on behalf of
Agent and Lenders, favorable opinions of counsel for Borrower and the REIT dated
as of the Closing Date, in form and substance satisfactory to Agent. 4.1.9
REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in
this Agreement and the other Loan Documents shall be true and correct in all
material respects.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to make the Loans, Borrower hereby represents and
warrants to Lenders as follows:
5.1 BORROWER ORGANIZATION; PARTNERSHIP POWERS. Borrower (i) is a
limited partnership duly organized, validly existing and in good standing under
the laws of the State of Delaware, (ii) is duly qualified to do business as a
foreign limited partnership and in good standing under the laws of each
jurisdiction in which any Portfolio Property is located or in which Borrower
owns or leases real property or in which the nature of its business requires it
to be so qualified, except for those jurisdictions where failure to so qualify
and be in good standing would not have a Material Adverse Effect on Borrower,
and (iii) has all requisite partnership power and authority to own and operate
its property and assets and to conduct its business as presently conducted.
5.2 BORROWER AUTHORITY. Borrower has the requisite partnership power
and authority to execute, deliver and perform each of the Loan Documents to
which it is or will be a party. The execution, delivery and performance thereof,
and the consummation of the transactions contemplated thereby, have been duly
approved by the general partner of Borrower, and no other partnership
proceedings or authorizations on the part of Borrower or its general or limited
partners are necessary to consummate such transactions. Each of the Loan
Documents to which Borrower is a party has been duly executed and delivered by
Borrower and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency and
other laws affecting creditors' rights generally.
5.3 REIT ORGANIZATION; CORPORATE POWERS. The REIT (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Maryland, (ii) is duly qualified to do business as a foreign
corporation and in good standing under the laws of each jurisdiction in which
any Portfolio Property is located or in which Borrower or the REIT owns or
leases real property or in which the nature of its business requires it to be so
qualified, except for those jurisdictions where failure to so qualify and be in
good standing would not have a Material Adverse Effect on the REIT, and (iii)
has all requisite corporate power and authority to own and operate its property
and assets, to perform its duties as general partner of Borrower and to conduct
its business as presently conducted.
5.4 REIT AUTHORITY. The REIT has the requisite corporate power and
authority to execute, deliver and perform the Guaranty and, in its capacity as
general partner of the Borrower, each of the other Loan Documents. The
execution, delivery and performance thereof, and the consummation of the
transactions contemplated thereby, have been duly approved by the Board of
Directors of the REIT, and no other corporate proceedings on the part of the
REIT are necessary to consummate such transactions. Each of the Loan Documents
to which the REIT is a party has been duly executed and delivered by Borrower
and constitutes its legal, valid and binding obligation, enforceable against it
in accordance with its terms, subject to bankruptcy, insolvency and other laws
affecting creditors' rights generally.
5.5 OWNERSHIP OF BORROWER, EACH SUBSIDIARY AND PARTNERSHIP. SCHEDULE
5.5 sets forth the general partners and limited partners (or other holders of
ownership interests) of each Subsidiary or Partnership and their respective
ownership percentages and there are no other partnership (or other ownership)
interests outstanding. Except as set forth or referred to in the Partnership
Agreement of any Partnership, no partnership (or other ownership) interest (or
any securities, instruments, warrants, option or purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for such interests) of any such Person is subject to issuance
under any security, instrument, warrant, option or purchase rights, conversion
or exchange rights, call, commitment or claim of any right, title or interest
therein or thereto. All of the partnership (or other ownership) interests in
Borrower and each Partnership and all of the stock of each subsidiary have been
issued in compliance with all applicable Requirements of Law.
5.6 NO CONFLICT. The execution, delivery and performance by Borrower
of the Loan Documents to which it is or will be a party, and each of the
transactions contemplated thereby, do not and will not (i) conflict with or
violate Borrower's limited partnership agreement or certificate of limited
partnership or other organizational documents or the REIT's articles of
incorporation, by-laws or other organizational documents, as the case may be, or
(ii) conflict with, result in a breach of or constitute (with or without notice
or lapse of time or both) a default under any Requirement of Law, Contractual
Obligation or Court Order of or binding upon Borrower or the REIT, or (iii)
require termination of any Contractual Obligation, or (iv) result in or require
the creation or imposition of any Lien whatsoever upon any of the Portfolio
Properties or assets of Borrower, other than Permitted Liens or Liens created by
the Loan Documents.
5.7 CONSENTS AND AUTHORIZATIONS. Each of Borrower and the REIT has
obtained all consents and authorizations required pursuant to its Contractual
Obligations with any other Person, and shall have obtained all consents and
authorizations of, and effected all notices to and filings with, any
Governmental Authority, as may be necessary to allow Borrower and the REIT to
lawfully execute, deliver and perform the Loan Documents.
5.8 GOVERNMENTAL REGULATION. Neither Borrower, the REIT nor any
Partnership is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act, the Investment
Company Act of 1940 or any other federal or state statute or regulation such
that its ability to incur indebtedness is limited or its ability to consummate
the transactions contemplated by the Loan Documents is materially impaired.
5.9 PRIOR FINANCIALS. The Consolidated Balance Sheet, Statement of
operations and Statement of Cash Flows of (i) the REIT contained in the REIT's
Form 10K for the period ending December 31, 1997 and in the REIT's Form 10Q for
the period ending June 30, 1998 and (ii) the Borrower contained in the
Borrower's Form 10K for the period ending December 31, 1997 and in the
Borrower's Form 10Q for the period ending June 30, 1998 (the APRIOR FINANCIALS")
delivered to Agent prior to the date hereof were prepared in accordance with
GAAP and fairly present the assets, liabilities and financial condition of the
REIT on a consolidated basis, at such date and the results of its operations and
its cash flows, on a consolidated basis, for the period then ended.
5.10 PROJECTIONS AND FORECASTS. Each of the projections and forecasts
delivered to Agent prior to the date hereof (1) has been prepared by Borrower in
light of the past business and performance of Borrower on a consolidated basis
and (2) represent as of the date thereof, the reasonable good faith estimates of
Borrower's financial personnel.
5.11 PRIOR OPERATING STATEMENTS. Each of the consolidating operating
statements pertaining to the Portfolio Properties delivered to Agent prior to
the date hereof was prepared in accordance with GAAP in effect on the date such
operating statement of each Portfolio Property was prepared and fairly presents
the results of operations of such Portfolio Property for the period then ended.
5.12 RENT ROLLS. The Rent Rolls for the Portfolio Properties as of
June 30, 1998 previously delivered to the Agent pursuant to the Revolving
Facility (i) have been prepared in accordance with the books and records of the
Portfolio Properties, and (ii) fairly present the leasing status of the
Portfolio Properties as of the date thereof. Since the date of said Rent Rolls
there has been no substantial adverse change to the leasing status of the
Portfolio Properties.
5.13 LITIGATION; ADVERSE EFFECTS.
(a) There is no action, suit, Proceeding,
governmental investigation or arbitration, at law or in equity,
or before or by any Governmental Authority, pending or, to the
best of Borrower's knowledge, threatened against Borrower, the REIT or
any Portfolio Property, which, if adversely determined, would (i)
result in a Material Adverse Effect on Borrower or the REIT, (ii)
materially and adversely affect the ability of any party to any of the
Loan Documents to perform its obligations thereunder, or (iii)
materially and adversely affect the ability of Borrower to perform its
obligations contemplated in the Loan Documents.
(b) Neither Borrower nor the REIT is (1) in
violation of any applicable law, which violation has a Material
Adverse Effect on Borrower or the REIT, or (ii) in default with respect
to any Court Order.
5.14 NO MATERIAL ADVERSE CHANGE. Since December 31, 1997, there has
occurred no event (other than as reflected in the Prior Financials) which has a
Material Adverse Effect on Borrower or the REIT, and no material adverse change
in Borrower's ability to perform its obligations under the Loan Documents to
which it is a party or the transactions contemplated thereby.
5.15 PAYMENT OF TAXES. All tax returns and reports to be filed by
Borrower and the REIT have been timely filed, and all taxes, assessments, fees
and other governmental charges shown on such returns or otherwise payable by
Borrower have been paid when due and payable (other than real property taxes,
which may be paid prior to delinquency so long as no penalty or interest shall
attach thereto), except such taxes, if any, as are reserved against in
accordance with GAAP and are being contested in good faith by appropriate
proceedings or such taxes, the failure to make payment of which when due and
payable will not have, in the aggregate, a Material Adverse Effect on Borrower
or the REIT. Borrower has no knowledge of any proposed tax assessment against
Borrower or the REIT that will have a Material Adverse Effect on Borrower or the
REIT.
5.16 MATERIAL ADVERSE AGREEMENTS. Neither the Borrower nor the REIT is
a party to or subject to any Contractual Obligation or other restriction
contained in the Borrower's limited partnership agreement or certificate of
limited partnership, the REIT's Articles of Incorporation or bylaws or similar
governing documents which has a Material Adverse Effect on Borrower or the
ability of Borrower to perform its obligations under the Loan Documents.
5.17 PERFORMANCE. Neither Borrower nor the REIT is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Contractual Obligation applicable to it, and no
condition exists which, with the giving of notice or the lapse of time or both,
would constitute a default under such Contractual Obligation in each case,
except where the consequences, direct or indirect, of such default or defaults,
if any, will not have a Material Adverse Effect on Borrower or the REIT.
5.18 FEDERAL RESERVE REGULATIONS. Neither Borrower nor the REIT is
engaged primarily in the business of extending credit for the purpose of
purchasing or carrying any "margin stock" as defined in Regulation U. No part of
the proceeds of the Loan hereunder will be used for any purpose that violates,
or which is inconsistent with, the provisions of Regulation X or any other
regulation of the Federal Reserve Board.
5.19 UNSECURED TERM NOTES. The Unsecured Term Notes were issued in
compliance with all applicable Requirements of Law and there is no existing
"Event of Default" as defined in the Unsecured Term Note Indenture. There have
been no further supplements or amendments to the Unsecured Term Note Indenture
except as set forth in the definition of Unsecured Term Note Indenture.
5.20 REQUIREMENTS OF LAW. Borrower and the REIT are in compliance with
all Requirements of Law (including without limitation the Securities Act and the
Securities Exchange Act, and the applicable rules and regulations thereunder,
state securities law and "Blue Sky" laws) applicable to it and its respective
businesses, in each case, where the failure to so comply will have a Material
Adverse Effect on any such Person. The REIT has made all filings with and
obtained all consents of the Commission required under the Securities Act and
the Securities Exchange Act in connection with the execution, delivery and
performance by the REIT of the Loan Documents.
5.21 PATENTS, TRADEMARKS, PERMITS, ETC. Borrower and the REIT own, are
licensed or otherwise have the lawful right to use, or have all permits and
other governmental approvals, patents, trademarks, trade names, copyrights,
technology, know-how and processes used in or necessary for the conduct of each
such Person's business as currently conducted, the absence of which would have a
Material Adverse Effect upon such Person. The use of such permits and other
governmental approvals, patents, trademarks, trade names, copyrights,
technology, know-how and processes by each such Person does not infringe on the
rights of any Person, subject to such claims and infringements as do not, in the
aggregate, give rise to any liability on the part of any such Person which would
have a Material Adverse Effect on any such Person.
5.22 ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE 5.22, to
the best of Borrower's knowledge, (i) the operations of Borrower and its
Subsidiaries and Partnerships and the Simon Partnerships comply in all material
respects with all applicable local, state and federal environmental, health and
safety Requirements of Law ("ENVIRONMENTAL LAWS"); (ii) none of the Portfolio
Properties or the Simon Properties are subject to any Remedial Action or other
Liabilities and Costs arising from the Release or threatened Release of a
Contaminant into the environment in violation of any Environmental Laws; (iii)
neither Borrower, the REIT nor any Partnership or Subsidiary has filed any
notice under applicable Environmental Laws reporting a Release of a Contaminant
into the environment in violation of any Environmental Laws, except as the same
may have been heretofore remedied; (iv) there is not now on or in any of the
Portfolio Properties or the Simon Properties (except in compliance in all
material respects with all applicable Environmental Laws): (A) any underground
storage tanks, (B) any asbestos-containing material, or (C) any polychlorinated
biphenyls (PCB's) used in hydraulic oils, electrical transformers or other
equipment owned by such Person; and (v) neither Borrower, the REIT nor any
Partnership or Subsidiary has received any notice or claim to the effect that it
is or may be liable to any Person as a result of the Release or threatened
Release of a Contaminant into the environment.
5.23 UNENCUMBERED PROPERTIES. Each of the Properties listed on
SCHEDULE 1 (i) qualifies as an Unencumbered Property (ii) has a Property
Occupancy Rate of at least eighty-five percent (85%) and (iii) is free of any
material defects in the roof, foundation, structural elements and masonry walls
of the buildings thereon or their hvac, electrical, sprinkler or plumbing
systems.
5.24 SOLVENCY. Borrower is and will be Solvent after giving effect to
the disbursements of the Loans and the payment and accrual of all fees then
payable.
5.25 TITLE TO ASSETS; NO LIENS. Borrower has good, indefeasible and
merchantable title to all Properties owned or leased by it, and each of the
Unencumbered Properties is free and clear of all Liens, except Permitted Liens,
and there are no negative pledge agreements affecting any of the Unencumbered
Properties, except for SECTION 8.1 hereof and similar provisions in the
Revolving Credit Agreement and in the term loan agreement for the BankBoston
Term Loan.
5.26 USE OF PROCEEDS. Borrower's use of the proceeds of the Loans are,
and will continue to be, legal and proper uses (and to the extent necessary,
duly authorized by Borrower's partners) and such uses are consistent with all
applicable laws and statutes and SECTION 7.9.
5.27 REIT CAPITALIZATION. All of the capital stock of the REIT has
been issued in compliance with all applicable Requirements of Law.
5.28 ERISA. Neither the REIT nor any ERISA Affiliate thereof
(including, for all purposes under this SECTION 5.28, Borrower) has in the past
five (5) years maintained or contributed to or currently maintains or
contributes to any Benefit Plan. No Investment Partnership has or is likely to
incur any liability with respect to any Benefit Plan maintained or contributed
to by such Investment Partnership or its ERISA Affiliates, which would have a
Material Adverse Effect on Borrower. Neither the REIT nor any ERISA Affiliate
thereof has during the past five (5) years maintained or contributed to or
currently maintains or contributes to any employee welfare benefit plan within
the meaning of Section 3(1) of ERISA which provides benefits to retirees.
Neither the REIT nor any ERISA Affiliate thereof is now contributing nor has it
ever contributed to or been obligated to contribute to any Multiemployer Plan,
no employees or former employees of the REIT, or such ERISA Affiliate have been
covered by any Multiemployer Plan in respect of their employment by the REIT,
and no ERISA Affiliate of the REIT has or is likely to incur any withdrawal
liability with respect to any Multiemployer Plan which would have a Material
Adverse Effect on the REIT.
5.29 STATUS AS A REIT. The REIT (i) is a real estate investment trust
as defined in Section 856 of the Internal Revenue Code (or any successor
provision thereto), (ii) has not revoked its election to be a real estate
investment trust, (iii) has not engaged in any "prohibited transactions" as
defined in Section 856(b)(6)(iii) of the Internal Revenue Code (or any successor
provision thereto), and (iv) for its current "tax year" (as defined in the
Internal Revenue Code) is and for all prior tax years subsequent to its election
to be a real estate investment trust has been entitled to a dividends paid
deduction which meets the requirements of Section 857 of the Internal Revenue
Code.
5.30 OWNERSHIP. The REIT does not own or have any interest in any
other Person, other than its general partnership interests in Borrower and in
the ATC Partnership.
5.31 NYSE LISTING. The common stock of the REIT is and will continue
to be listed for trading on either the New York Stock Exchange or the American
Stock Exchange.
5.32 CURRENT CONSTRUCTION PROJECTS. SCHEDULE 5.32 sets forth a
description of all of the Current Construction Projects and all of the
Construction Projects presently planned for 1998 including with respect to each
project: its location, gross leasable area, total budgeted cost, construction
commencement date and expected Rent Stabilization Date which information shall
be deemed to be updated to reflect information set forth in Compliance
Certificates delivered to Agent.
5.33 YEAR 2000 COMPLIANCE. Borrower has (i) initiated a review and
assessment of all areas within its and each of its Affiliates' business and
operations (including those affected by suppliers and vendors) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Borrower or any of its Affiliates (or its suppliers and
vendors) may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem
on a timely basis, and (iii) to date, implemented that plan in accordance with
that timetable. The Borrower reasonably believes that all computer applications
(including those of its suppliers and vendors) that are material to its or any
of its Affiliates' business and operations will on a timely basis be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000 (that is, be "Year 2000 Compliant"), except to the extent that a failure
to do so could not reasonably be expected to have a Material Adverse Effect.
ARTICLE VI
REPORTING COVENANTS
Borrower covenants and agrees that, on and after the date hereof,
until payment in full of all of the Obligations and termination of this
Agreement:
6.1 FINANCIAL STATEMENTS AND OTHER FINANCIAL AND OPERATING
INFORMATION. Borrower shall maintain or cause to be maintained a system of
accounting established and administered in accordance with sound business
practices and consistent with past practice to permit preparation of quarterly
and annual financial statements in conformity with GAAP, and each of the
financial statements described below shall be prepared on a consolidated basis
for the REIT and for the Borrower from such system and records. Borrower shall
deliver or cause to be delivered to Agent (with copies sufficient for each
Lender):
6.1.1 SEMI-ANNUAL RENT ROLLS. As soon as practicable, and in any
event within fifty (50) days after the end of each Fiscal Quarter ending on June
30 or December 31 rent rolls (on Borrower's detailed form of rent roll) for each
Portfolio Property dated as of the last day of such Fiscal Quarter, in form and
substance satisfactory to Agent, certified by the REIT's chief financial
officer, senior vice president or treasurer. Copies of the rent rolls will be
provided only to those Lenders which expressly request copies thereof.
6.1.2 QUARTERLY FINANCIAL STATEMENTS CERTIFIED BY CFO. As soon as
practicable, and in any event within fifty (50) days after the end of each of
the first three Fiscal Quarters, consolidated balance sheets, statements of
operations and statements of cash flow for the REIT and the Borrower ("FINANCIAL
STATEMENTS"), which may be in the form provided to the Commission on the REIT's
Form 10Q and the Borrower's Form 10Q (unless the Borrower is not required to
file a Form 10Q), and certified by the REIT's chief financial officer, senior
vice president or treasurer.
6.1.3 ANNUAL FINANCIAL STATEMENTS. Within ninety (90) days after
the close of each Fiscal Year, annual Financial Statements of the REIT and of
the Borrower, on a consolidated basis (in the form provided to the Commission on
the REIT's Form 10K and the Borrower's Form 10K), audited and certified without
qualification by the Accountants provided, however, that at such time as the
Borrower is no longer required to file a Form 10K with the Commission, Borrower
may deliver only the REIT's audited Financial Statement accompanied by a letter
from the Accountants stating that with the exception of the minority interest
line there is no material difference between the Financial Statements of
Borrower and such audited Financial Statements of the REIT. To the extent Agent
desires additional details or supporting information with respect to
Partnerships or individual Portfolio Properties or the Simon Properties not
contained in the REIT's or Borrower's Form 10K, Borrower shall provide Agent
with such details or supporting information as Agent requests which is
reasonably available to Borrower.
6.1.4 OFFICER'S CERTIFICATE. (i) Together with each delivery of
any Financial Statement pursuant to SECTIONS 6.1.2 and 6.1.3, (A) an Officer's
Certificate of the REIT stating that each of the Financial Statements delivered
to Agent therewith (i) has been prepared in accordance with the books and
records of the REIT and Borrower on a consolidated basis, and (ii) fairly
presents the financial condition of the REIT and Borrower on a consolidated
basis, at the dates thereof (and, if applicable, subject to normal year-end
adjustments) and the results of its operations and cash flows, on a consolidated
basis, for the period then ended; (B) an Officer's Certificate of the REIT,
stating that the executive officer who is the signatory thereto (which officer
shall be the chief executive officer, the chief operating officer, the chief
financial officer, any senior vice president or the treasurer of the REIT) has
reviewed, or caused under his supervision to be reviewed, the terms of this
Agreement and the other principal Loan Documents, and has made, or caused to be
made under his supervision, a review in reasonable detail of the transactions
and condition of Borrower and the REIT, during the accounting period covered by
such Financial Statements, and that such review has not disclosed the existence
during or at the end of such accounting period, and that the signers do not have
knowledge of the existence as of the date of the Officer's Certificate, of any
condition or event which constitutes an Event of Default or Unmatured Event of
Default, or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action has been taken, is being
taken and is proposed to be taken with respect thereto; and (C) a Compliance
Certificate demonstrating in reasonable detail (which detail shall include
actual calculation and supporting information) compliance during and at the end
of such accounting periods with the financial covenants contained in ARTICLE IX.
6.1.5 BORROWING PROJECTIONS. At least ten (10) days prior to the
end of each Fiscal Year, projections of Borrower, on a consolidated basis,
detailing expected borrowing and repayment of the loans under the Revolving
Facility for the following Fiscal Year together with an Officer's Certificate of
the REIT stating that such projections (1) have been prepared by Borrower in
light of the past business and performance of Borrower on a consolidated basis
and (2) represent, as of the date thereof, the reasonable good faith estimates
of Borrower's financial personnel. Borrower shall also provide such additional
supporting details as Agent may reasonably request.
6.1.6 COMPLIANCE WITH UNENCUMBERED PROPERTY REQUIREMENTS.
Promptly upon becoming aware of any condition or event which causes any of the
Properties listed as Unencumbered Properties on the most recent Compliance
Certificate to no longer comply with the requirements set forth in the
definition of Unencumbered Properties, an Officer's Certificate specifying the
relevant information and a revised Compliance Certificate.
6.1.7 KNOWLEDGE OF EVENT OF DEFAULT. Promptly upon Borrower
obtaining knowledge (i) of any condition or event which constitutes an Event of
Default or Unmatured Event of Default, or becoming aware that any Lender has
given notice or taken any other action with respect to a claimed Event of
Default or Unmatured Event of Default or (ii) of any condition or event which
has a Material Adverse Effect on Borrower or the REIT, an Officer's Certificate
specifying the nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such Lender and the nature of
such claimed Event of Default, Unmatured Event of Default, event or condition,
and what action Borrower and/or the REIT has taken, is taking and proposes to
take with respect thereto.
6.1.8 LITIGATION, ARBITRATION OR GOVERNMENT INVESTIGATION.
Promptly upon Borrower or the REIT obtaining knowledge of (i) the institution
of, or threat of, any material action, suit, proceeding, governmental
investigation or arbitration against or affecting Borrower or the REIT not
previously disclosed in writing by Borrower to Agent pursuant to this SECTION
6.1.8, or (ii) any material development in any action, suit, proceeding,
governmental investigation or arbitration already disclosed, which, in either
case, has a Material Adverse Effect on Borrower or the REIT, a notice thereof to
Agent and such other information as may be reasonably available to it to enable
Agent, Lenders and their counsel to evaluate such matters.
6.1.9 ESTABLISHMENT OF BENEFIT PLAN AND INCREASE IN CONTRIBUTIONS
TO THE BENEFIT PLAN. Not less than ten (10) days prior to the effective date
thereof, a notice to Agent of the establishment of a Benefit Plan (or the
incurrence of any obligation to contribute to a Multiemployer Plan) by Borrower,
the REIT or any ERISA Affiliate. Within thirty (30) days after the first to
occur of an amendment of any then existing Benefit Plan of Borrower, the REIT or
any ERISA Affiliate which will result in an increase in the benefits under such
Benefit Plan or a notification of any such increase, or the establishment of any
new Benefit Plan by Borrower, the REIT or any ERISA Affiliate or the
commencement of contributions to any Benefit Plan to which Borrower, the REIT or
any ERISA Affiliate was not previously contributing, a copy of said amendment,
notification or Benefit Plan. For so long as any such Benefit Plan exists,
prompt notice of any Termination Event, prohibited transaction, funding waiver
request, unfavorable determination letter or withdrawal liability under a
Multiemployer Plan.
6.1.10 FAILURE OF THE REIT TO QUALIFY AS REAL ESTATE INVESTMENT
TRUST. Promptly upon, and in any event within forty-eight (48) hours after
Borrower first has actual knowledge of (i) the REIT failing to continue to
qualify as a real estate investment trust as defined in Section 856 of the
Internal Revenue Code (or any successor provision thereof), (ii) any act by the
REIT causing its election to be taxed as a real estate investment trust to be
terminated, (iii) any act causing the REIT to be subject to the taxes imposed by
Section 857(b)(6) of the Internal Revenue Code (or any successor provision
thereto), or (iv) the REIT failing to be entitled to a dividends paid deduction
which meets the requirements of Section 857 of the Internal Revenue Code, a
notice of any such occurrence or circumstance.
6.1.11 ASSET ACQUISITIONS AND DISPOSITIONS, INDEBTEDNESS, ETC.
Without limiting ARTICLE VIII or any other restriction in the Loan Documents,
and in all events not later than the same Business Day on which there is public
disclosure of any material Investments (other than in Cash Equivalents),
acquisitions, dispositions, disposals, divestitures or similar transactions
involving Property, the creation of Liens on any of the Portfolio Properties,
other than Non-Retail Properties, the execution of any long term leases of real
estate in which the Borrower or its Subsidiary is the lessee, the raising of
additional equity or the incurring or repayment of material Indebtedness, by or
with Borrower, any GP Partnership or Subsidiary or the REIT, telephonic or
facsimile notice thereof to Lori Y. Litow or such other person(s) as Agent may
designate from time to time, and, if requested by Agent, promptly upon
consummation of such transaction, a Compliance Certificate demonstrating in
reasonable detail (which detail shall include actual calculations) compliance,
after giving effect to such proposed transaction(s), with the covenants
contained in ARTICLE IX.
6.1.12 OTHER INFORMATION. Such other information, reports,
contracts, schedules, lists, documents, agreements and instruments in the
possession of the REIT or Borrower with respect to (i) the Portfolio Properties
or the Simon Properties, (ii) any material change in the REIT's investment,
finance or operating policies, or (iii) Borrower's or the REIT's business,
condition (financial or otherwise), operations, performance, properties or
prospects as Agent may from time to time reasonably request, including, without
limitation, annual information with respect to cash flow projections, budgets,
operating statements (current year and immediately preceding year), rent rolls,
lease expiration reports, leasing status reports, tenant sales reports (to the
extent available), note payable summaries, equity funding requirements,
contingent liability summaries, line of credit summaries, tenant improvement
allowance summaries, note receivable summaries, schedules of outstanding letters
of credit, summaries of cash and Cash Equivalents, projections of management and
leasing fees and overhead budgets. Provided that Agent gives Borrower reasonable
prior notice and an opportunity to participate, Borrower hereby authorizes Agent
to communicate with the Accountants and authorizes the Accountants to disclose
to Agent any and all financial statements and other information of any kind,
including copies of any management letter or the substance of any oral
information, that such accountants may have with respect to Borrower's or the
REIT's condition (financial or otherwise), operations, properties, performance
and prospects. At Agent's request, Borrower shall deliver a letter addressed to
the Accountants instructing them to disclose such information in compliance with
this SECTION 6.1.12.
6.1.13 PRESS RELEASES; SEC FILINGS AND FINANCIAL STATEMENTS.
Telephonic or telecopy notice to Agent concurrent with or prior to issuance of
any material press release concerning the REIT or Borrower and, as soon as
practicable after filing with the Commission, all reports and notices, proxy
statements, registration statements and prospectuses of the REIT. All materials
sent or made available generally by the REIT to the holders of its publicly-held
Securities or to a trustee under any indenture or filed with the Commission,
including all periodic reports required to be filed with the commission, will be
delivered to Agent and Lenders as soon as available.
6.1.14 ACCOUNTANT REPORTS. Copies of all reports prepared by the
Accountants and submitted to Borrower or the REIT in connection with each
annual, interim or special audit or review of the financial statements or
practices of Borrower or the REIT, including the comment letter submitted by the
Accountants in connection with their annual audit.
6.1.15 TERMINATION OR MODIFICATION OF EARTHQUAKE COVERAGE.
Promptly upon, and in any event within thirty (30) days after Borrower first has
knowledge of the termination or modification (with respect to the amount of
either the coverage provided or the applicable deductible) of the coverage
provided by the blanket property insurance rider regarding earthquake insurance
for Portfolio Properties located in "Zone 1" maintained by Borrower as of the
date of this Agreement, a notice of such termination or modification.
6.1.16 YEAR 2000 PROBLEM. Promptly upon Borrower obtaining
knowledge that any computer application (including those of its suppliers and
vendors) that is material to its or any of its Affiliates' business and
operations will not be Year 2000 Compliant on a timely basis, (except to the
extent that such failure could not reasonably be expected to have a Material
Adverse Effect) a notice thereof to Agent and such other information as may be
reasonably available to enable Agent and Lenders to evaluate such matters.
6.1.17 DELIVERIES TO THE AGENT AND THE LENDERS. For so long as
BankBoston is both the Agent under the Revolving Credit Agreement and the Agent
hereunder, it may consider any item delivered to it as Agent pursuant to the
Revolving Credit Agreement to also constitute a delivery to it as Agent
hereunder, provided that Agent may also require that separate or duplicate
documents be delivered hereunder. For so long as any Lender hereunder is also a
lender under the Revolving Credit Agreement it may consider any item delivered
to it as a lender pursuant to the Revolving Credit Agreement to also constitute
a delivery to it as a Lender hereunder, provided that any Lender may also
require that separate or duplicate documents be delivered hereunder.
6.2 ENVIRONMENTAL NOTICES. Borrower shall notify Agent, in writing, as
soon as practicable, and in any event within ten (10) days after Borrower's or
the REIT's learning thereof, of any: (i) written notice or claim to the effect
that Borrower or the REIT is or may be liable to any Person as a result of any
material Release or threatened Release of any Contaminant into the environment;
(ii) written notice that Borrower or the REIT is subject to investigation by any
Governmental Authority evaluating whether any Remedial Action is needed to
respond to the Release or threatened Release of any Contaminant into the
environment; (iii) written notice that any Portfolio Property or any Simon
Property is subject to an Environmental Lien; (iv) written notice that Borrower,
any Subsidiary or Partnership, any Simon Partnership or the REIT has received a
notice of violation of any Environmental Laws by Borrower, any Subsidiary or
Partnership or the REIT; (v) commencement or written threat of any judicial or
administrative proceeding alleging a violation of any Environmental Laws; (vi)
written notice from a Governmental Authority of any changes to any existing
Environmental Laws that will have a Material Adverse Effect on the operations of
Borrower or the REIT; or (vii) any proposed acquisition of stock, assets, real
estate or leasing of property, or any other action by Borrower that, to the best
of Borrower's knowledge, could subject Borrower, any Subsidiary or Partnership
or the REIT to environmental, health or safety Liabilities and Costs that will
have a Material Adverse Effect on Borrower or the REIT.
6.3 CONFIDENTIALITY. Confidential Information obtained by Agent or
Lenders pursuant to this Agreement or in connection with the Facility shall not
be disseminated by Agent or Lenders and shall not be disclosed to third parties
except to regulators, taxing authorities and other governmental agencies having
jurisdiction over Agent or such Lender or otherwise in response to Requirements
of Law, to their respective auditors and legal counsel and in connection with
regulatory, administrative and judicial proceedings as necessary or relevant
including enforcement proceedings relating to the Loan Documents, and to any
prospective assignee of or participant in a Lender's interest under this
Agreement or any prospective purchaser of the assets or a controlling interest
in any Lender, PROVIDED that such prospective assignee, participant or purchaser
first agrees to be bound by the provisions of this SECTION 6.3. For purposes
hereof, "CONFIDENTIAL INFORMATION" shall mean all nonpublic information obtained
by Agent or Lenders, unless and until such information becomes publicly known,
other than as a result of unauthorized disclosure by Agent or Lenders of such
information.
ARTICLE VII
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, on and after the date hereof,
until payment in full of all of the Obligations and termination of this
Agreement:
7.1 EXISTENCE. Each of Borrower and the REIT shall at all times
maintain its existence and preserve and keep in full force and effect its rights
and franchises. Borrower shall remain a Delaware limited partnership with the
REIT as its sole general partner.
7.2 QUALIFICATION, NAME. Each of Borrower and the REIT shall qualify
and remain qualified to do business in each jurisdiction in which any Portfolio
Property is located or in which the nature of its business requires it to be so
qualified except for those jurisdictions where failure to so qualify would not
have a material Adverse Effect on Borrower. Borrower will transact business
solely in its own name or in the commonly known name of one of the Portfolio
Properties.
7.3 COMPLIANCE WITH LAWS, ETC. Each of Borrower and REIT shall (i)
comply with all Requirements of Law, and all restrictive covenants affecting it
or its properties, performance, prospects, assets or operations, and (ii) obtain
as needed all Permits necessary for its operations and maintain such in good
standing, except where the failure to do so will not have a Material Adverse
Effect on Borrower.
7.4 PAYMENT OF TAXES AND CLAIMS. Each of Borrower and the REIT shall
pay (i) all taxes, assessments and other governmental charges imposed upon it or
on any of its properties or assets or in respect of any of its franchises,
business, income or property before any penalty or interest accrues thereon, and
(ii) all claims (including, without limitation, claims for labor, services,
materials and supplies) for sums which have become due and payable and which by
law have or may become a Lien other than a judgment lien upon any of Borrower's
properties or assets, prior to the time when any penalty or fine shall be
incurred with respect thereto, provided, however that the payment of such taxes,
assessments, charges and claims may be deferred so long as the validity or
amount thereof shall currently be contested in good faith by appropriate
proceedings and if Borrower shall have set aside in its books adequate reserves
specifically with respect thereto, but Borrower shall pay such matters prior to
the foreclosure of a Lien which may have attached as security therefor.
7.5 MAINTENANCE OF PROPERTIES; INSURANCE. Borrower shall maintain in
good repair, working order and condition, excepting ordinary wear and tear, all
of the Portfolio Properties and will make or cause to be made all appropriate
repairs, renewals and replacements thereof. Borrower shall maintain commercially
reasonable and appropriate amounts of "all risk" property and liability
insurance, which insurance shall include in any event:
(a) with respect to each Property: (i) property and casualty
insurance (including coverage for flood and water damage for any
Portfolio Property located within a 100-year flood plain) in an amount
not less than the replacement costs of the improvements thereon (subject
to reasonable deductibles and, in the case of flood insurance, subject to
the maximum coverages available under the National Flood Insurance
Program), and (ii) loss of rental insurance income in an amount not less
than one year's gross revenues of such Portfolio Property; and
(b) comprehensive general liability insurance in an amount not
less than $20,000,000 per occurrence, including all insurance pursuant to
umbrella and excess liability policies.
At the request of Agent, Borrower shall provide, evidence of insurance,
including certificates of insurance and binders.
7.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Borrower
shall permit, and shall cause the REIT and each Subsidiary or Partnership to
permit, any authorized representative(s) designated by any Lender to visit and
inspect any of its properties, to inspect financial and accounting records and
leases, and to make copies and take extracts therefrom, all at such times after
reasonable advance notice during normal business hours and as often as any
Lender may reasonably request. In connection therewith, Borrower shall pay all
expenses of the Agent (but not of the other Lenders) of the types described in
SECTION 12.1 subject to the limitation that prior to an Event of Default the
Borrower shall not be required to reimburse expenses for inspections of
Properties made more frequently than annually. Borrower will keep proper books
of record and account in which entries, in conformity with GAAP and as otherwise
required by this Agreement and applicable Requirements of Law, shall be made of
all dealings and transactions in relation to its businesses and activities and
as otherwise required under SECTION 6.1.
7.7 MAINTENANCE OF PERMITS, ETC. Each of Borrower and the REIT will
maintain in full force and effect all Permits, franchises, patents, trademarks,
trade names, copyrights, authorizations or other rights necessary for the
operation of its business, except where the failure to obtain any of the
foregoing would not have a Material Adverse Effect on Borrower; and notify Agent
in writing, promptly after learning thereof, of the suspension, cancellation,
revocation or discontinuance of or of any pending or threatened action or
proceeding seeking to suspend, cancel, revoke or discontinue any material
Permit, patent, trademark, trade name, copyright, governmental approval,
franchise authorization or right.
7.8 CONDUCT OF BUSINESS. Except for Permitted Investments pursuant to
SECTION 9.10 and Investments in cash and Cash Equivalents, Borrower shall engage
only in the business of direct ownership, operation and development of retail
properties and any other business activities of Borrower will remain incidental
thereto.
7.9 USE OF PROCEEDS. Borrower shall use the proceeds of the Loans only
for repayment of loans outstanding under the Revolving Facility.
7.10 SECURITIES LAW COMPLIANCE. Each of the Borrower and the REIT
shall comply in all material respects with all rules and regulations of the
Commission and file all reports required by the Commission relating to the
Borrower's or the REIT's publicly-held Securities.
7.11 CONTINUED STATUS AS A REIT; PROHIBITED TRANSACTIONS. The REIT (i)
will continue to be a real estate investment trust as defined in Section 856 of
the Internal Revenue Code (or any successor provision thereto), (ii) will not
revoke its election to be a real estate investment trust, (iii) will not engage
in any "prohibited transactions" as defined in Section 856(b)(6)(iii) of the
Internal Revenue Code (or any successor provision thereto), and (iv) will
continue to be entitled to a dividend paid deduction meeting the requirements of
Section 857 of the Internal Revenue Code.
7.12 NYSE LISTED COMPANY. The common stock of the REIT shall at all
times be listed for trading on the New York Stock Exchange.
7.13 PROPERTY MANAGEMENT. All Portfolio Properties (other than
Non-Retail Properties) in which the direct or indirect ownership interest of
Borrower exceeds fifty percent (50%) shall be directly managed by Borrower.
7.14 INTEREST RATE CONTRACTS. At all times when LIBOR for 30 day
Interest Periods has, for 30 consecutive days, exceeded eight and one-quarter
percent (8.25%), Borrower shall maintain in effect Interest Rate Contracts which
are satisfactory to the Agent covering at least forty percent (40%) of the
aggregate amount of variable interest rate Indebtedness of Borrower (including
the Facility, the Revolving Facility and the BankBoston Term Loan) then
outstanding plus any additional loans under the Revolving Facility which are
projected to be advanced thereunder within 90 days after the acquisition of such
Interest Rate Contracts. In determining whether such Interest Rate Contracts are
satisfactory, the Agent shall not require that the terms thereof extend beyond
the Termination Date.
ARTICLE VIII
NEGATIVE COVENANTS
Borrower covenants and agrees that, on and after the date hereof,
until payment in full of all of the Obligations and termination of this
Agreement:
8.1 LIENS. Neither Borrower nor the REIT shall(i) directly or
indirectly create, incur, assume or permit to exist any Lien, except for
Permitted Liens, on or with respect to all or any portion of Woodbury Common;
(ii) directly or indirectly create, assume or permit to exist any agreement
(other than the Loan Documents and the Unsecured Term Note Secured Debt
Limitation set forth in the Unsecured Term Note Indenture) prohibiting the
creation of any Lien on Woodbury Common. This SECTION 8.1 shall only be
applicable so long as Borrower's senior long-term unsecured debt obligations are
rated below BBB or Baa2 by one or both of the Rating Agencies.
8.2 TRANSFERS OF WOODBURY COMMON. Borrower shall not transfer,
directly or indirectly, all or any interest in Woodbury Common except Leases to
tenants which are not Affiliates of Borrower entered into in the ordinary course
of business.
8.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Neither Borrower nor the REIT
shall, without the prior written consent of the Agent
(a) Enter into any merger or consolidation or liquidate, wind-up
or dissolve (or suffer any liquidation or dissolution);
(b) Change its Fiscal Year;
(c) Except for Permitted Investments, engage in any line of
business other than as expressly permitted under SECTION 7.8;
(d) Create or acquire any Subsidiary or become a partner or
member in any Partnership (except a Simon Partnership) PROVIDED, however
that the Agent shall not unreasonably withhold its consent under this
paragraph (d) after a review of all information requested by the Agent
regarding the applicable entity including the names of others having an
ownership interest therein, the proposed structure of the entity, the
size, location and leasing of the Property owned or proposed to be owned
by such entity and the terms of any existing or contemplated Indebtedness
of such entity.
8.4 ERISA. Neither the Borrower nor the REIT shall permit any ERISA
Affiliates to do any of the following to the extent that such act or failure to
act would result in the aggregate, after taking into account any other such acts
or failure to act, in a Material Adverse Effect on Borrower or the REIT:
(a) Engage, or knowingly permit an ERISA Affiliate to engage, in
any prohibited transaction described in Section 406 of the ERISA or
Section 4975 of the Internal Revenue Code which is not exempt under
Section 407 or 408 of ERISA or Section 4975(d) of the Internal Revenue
Code for which a class exemption is not available or a private exemption
has not been previously obtained from the DOL;
(b) Permit to exist any accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Internal Revenue
Code), whether or not waived;
(c) Fail, or permit an ERISA Affiliate to fail, to pay timely
required contributions or annual installments due with respect to any
waived funding deficiency to any Plan if such failure could result in the
imposition of a Lien or otherwise would have a Material Adverse Effect on
Borrower or the REIT;
(d) Terminate, or permit an ERISA Affiliate to terminate, any
Benefit Plan which would result in any liability of Borrower or an ERISA
Affiliate under Title IV of ERISA or the REIT; or
(e) Fail, or permit any ERISA Affiliate to fail, to pay any
required installment under section (m) of Section 412 of the Internal
Revenue Code or any other payment required under Section 412 of the
Internal Revenue Code on or before the due date for such installment or
other payment, if such failure could result in the imposition of a Lien
or otherwise would have a Material Adverse Effect on Borrower or the
REIT.
8.5 AMENDMENT OF CONSTITUENT DOCUMENTS. Except for any such amendment
that is required (i) under any Requirement of Law imposed by any Governmental
Authority or (ii) in order to maintain compliance with SECTION 7.11: (1) neither
Borrower nor any Partnership shall amend its Partnership Agreement (including,
without limitation, as to the admission of any new partner, directly or
indirectly), and (2) the REIT shall not amend its articles of incorporation or
by-laws; in any such case, except amendments which do not materially affect the
ability of the Borrower or the REIT to perform its obligations under the Loan
Documents or other amendments which have received the prior written consent of
the Agent.
8.6 DISPOSAL OF PARTNERSHIP INTERESTS OR STOCK IN SUBSIDIARIES.
Neither Borrower nor the REIT will directly or indirectly convey, sell,
transfer, assign, pledge or otherwise encumber or dispose of any of its
partnership (or other ownership) interests or stock in any Partnership or
Subsidiary without first providing the notice and (if required) Compliance
Certificate pursuant to SECTION 6.1.11 with such disposition or encumbrance of
such partnership interest or stock being treated the same as disposition or
encumbrance of the Property owned by the applicable Partnership or Subsidiary.
8.7 MARGIN REGULATIONS. No portion of the proceeds of any Loans shall
be used in any manner which might cause the extension of credit or the
application of such proceeds to violate Regulation U or X or any other
regulation of the Federal Reserve Board or to violate the Securities Exchange
Act or the Securities Act, in each case as in effect on the Closing Date.
8.8 WITH RESPECT TO THE REIT:
8.8.1 The REIT shall not own any material assets (other than its
interest in the ATC Partnership) or engage in any line of business other than
owning partnership interests in Borrower.
8.8.2 The REIT shall not directly or indirectly create, incur,
assume or otherwise become or remain directly or indirectly liable with respect
to, any Indebtedness, except the Obligations and other Borrower Debt.
8.8.3 The REIT shall not directly or indirectly create, incur,
assume or permit to exist any Lien (other than Permitted Liens) on or with
respect to any of its Property or assets.
8.8.4 The REIT will not directly or indirectly convey, sell,
transfer, assign, pledge or otherwise encumber or dispose of any of its
partnership interests in Borrower so as to reduce its interest in Borrower to
less than 60%.
8.9 ADDITIONAL UNSECURED BANK DEBT. Neither Borrower nor any
Subsidiaries of Borrower shall create, incur, assume or otherwise become liable
for any unsecured line of credit or other unsecured loan from any bank or
financial institution, other than the Facility, the Revolving Facility and the
BankBoston Term Loan, nor shall the Borrower cause any letter of credit to be
issued by any bank or financial institution for the account of Borrower or any
Subsidiaries of Borrower, other than the Letters of Credit issued under the
Revolving Credit Agreement.
8.10 RESTRICTIONS ON INDEBTEDNESS. Except with the prior written
consent of Requisite Lenders, the Borrower will not create, incur, assume,
guarantee or become or remain liable, contingently or otherwise, or agree not to
do any of same, with respect to any Indebtedness other than:
(a) Indebtedness to the Lenders arising under this
Agreement, Indebtedness to the lenders under the Revolving Credit Agreement,
Indebtedness to BankBoston arising under the BankBoston Term Loan and
Indebtedness to the holders of the Unsecured Term Notes arising thereunder;
(b) current liabilities of the Borrower incurred in the
ordinary course of business but not incurred through (i) the borrowing of money,
or (ii) the obtaining of credit except for credit on an open account basis
customarily extended and in fact extended in connection with normal purchases of
goods and services;
(c) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials and supplies to
the extent that payment therefor shall not at the time be required to be made in
accordance with the provisions of SECTION 7.4;
(d) Indebtedness in respect of judgments or awards that
have been in force for less than the applicable period for taking an appeal so
long as execution is not levied thereunder or in respect of which the Borrower
shall at the time in good faith be prosecuting an appeal or proceedings for
review and in respect of which a stay of execution shall have been obtained
pending such appeal or review;
(e) Endorsements for collection, deposit or negotiation
and warranties of products or services, in each case incurred in the ordinary
course of business;
(f) Indebtedness consisting of purchase money financing
for equipment used in the ordinary course of Borrower's business provided that
the amount of each such financing may not exceed 100% of the cost of the
purchased property.
(g) Nonrecourse Indebtedness of Borrower secured by a
Lien on a Portfolio Property (other than Woodbury Common for so long as SECTION
8.1 remains in effect) which is completely non-recourse to the Borrower and to
the REIT to the extent the same does not create a violation of SECTIONS 9.4,
9.5, 9.6 OR 9.7 provided that (i) upon the creation or assumption of any such
Indebtedness Borrower shall provide the Agent with a notice describing the terms
of such Indebtedness and the security therefor and a copy of the promissory note
or other instrument containing the nonrecourse provisions, and (ii) if the terms
of such Indebtedness include financial covenants, such covenants are determined
by the Agent in its sole discretion to be less stringent than the covenants set
forth in ARTICLE IX.
(h) Indebtedness of Borrower other than Nonrecourse
Indebtedness for borrowed money to the extent the same does not create a
violation of SECTIONS 9.4, 9.5, 9.6 OR 9.7 provided that (i) upon the creation
or assumption of any such Indebtedness Borrower shall provide the Agent with a
notice describing the terms of such Indebtedness, (ii) such Indebtedness must be
permitted under the terms of the Unsecured Term Notes, (iii) if the terms of
such Indebtedness include financial covenants such covenants are determined by
the Agent, in its sole discretion, to be not more stringent than the covenants
set forth in ARTICLE IX, and (iv) except for facilities having BankBoston as
sole lender or as agent for a group of lenders, such Indebtedness has a term
which matures at least twenty-four (24) months after the Termination Date.
(i) Indebtedness consisting of purchase money financing
for Land intended for development in connection with future Construction
Projects to the extent the same does not create a violation of SECTIONS 9.4,
9.5, 9.6 OR 9.7 provided that (i) the amount of such Indebtedness does not
exceed 100% of the cost of the purchased Land, (ii) the Indebtedness is secured
by a Lien on the purchased Land, (iii) the aggregate amount of the Indebtedness
described in this paragraph outstanding at any time shall not exceed
$15,000,000.00, and (iv) upon the creation of any such Indebtedness Borrower
shall provide the Agent with a notice describing the terms of such Indebtedness.
(j) Indebtedness of Borrower related to the Indebtedness of any Simon
Partnership to the extent the same does not create a violation of SECTION 9.4
provided that the respective recourse liability of Simon and Borrower with
respect thereto shall be in proportion to their respective percentage ownership
interests in the applicable Simon Partnership.
8.11 CONSTRUCTION PROJECTS. Borrower shall not commence construction
of any Construction Project if the addition of the budgeted project costs for
such project to the CIP Budget Amount would result in a violation of SECTION
9.11. At all times when the Portfolio Occupancy Rate is less than ninety-five
percent (95%) Borrower shall not commence construction of any Construction
Project prior to the earlier of (a) the date that premises which in the
aggregate constitute at least twenty percent (20%) of the gross leasable area of
such Construction Project are subject to executed leases under which (i)
occupancy by the tenant thereunder is conditioned only upon completion of
construction of the relevant improvements and (ii) such tenant is otherwise
unconditionally committed to take occupancy upon completion of such construction
or (b) the date that the Portfolio Occupancy Rate again exceeds ninety-five
percent (95%).
8.12 DISCONTINUITY IN MANAGEMENT. In the event that any three of the
five Executive Officers shall cease to be active on a full time, continuous
basis in the senior management of Borrower and the REIT ("DISCONTINUITY IN
MANAGEMENT"), Borrower shall have up to one hundred eighty (180) days to obtain
the approval of Requisite Lenders to additional executives, such that the
remaining and new management executives, as a group, have substantial and
sufficient knowledge, experience and capabilities in the management of a
publicly-held company engaged in the operation of a multi-asset real estate
business of the type engaged in by Borrower. In the event Borrower shall fail to
obtain approval of Requisite Lenders as aforesaid within said 180-day period,
then Borrower shall, at the election and upon the demand of Requisite Lenders,
pay in full all Obligations under the Loan Documents not later than sixty (60)
days after the end of such 180-day period, whereupon this Agreement shall be
terminated. Any Lender which abstains or otherwise fails to respond to any
request by Borrower for approval under this SECTION 8.12 within ten (10)
Business Days shall be counted among the Requisite Lenders approving the
proposed additional executives. In the event that Barry Ginsburg should retire
prior to the time that there has been any other changes in the Executive
Officers, the Borrower may designate another officer to replace Mr. Ginsburg
among the Executive Officers and such replacement shall not be counted when
determining whether there has been a Discontinuity in Management.
ARTICLE IX
FINANCIAL COVENANTS
Borrower covenants and agrees that, on and after the date of this
Agreement and until payment in full of all the Obligations and the termination
of this Agreement:
9.1. VALUE OF ALL UNENCUMBERED PROPERTIES. The Borrower will not at
any time permit the Value of All Unencumbered Properties to be less than one
hundred seventy five percent (175%) of the outstanding balance of Unsecured
Indebtedness.
9.2. MINIMUM DEBT SERVICE COVERAGE. The Borrower will not at any time
permit the outstanding principal amount of the Unsecured Indebtedness to exceed
an amount such that: (a) the Unencumbered Net Operating Income, divided by (b)
Pro Forma Unsecured Debt Service Charges would be less than 1.5 for any Fiscal
Quarter.
9.3 MINIMUM FAIR MARKET NET WORTH. Borrower will maintain a Fair
Market Net Worth of not less than Three Hundred Million Dollars ($300,000,000)
plus seventy-five percent (75%) of Net Offering Proceeds received by Borrower or
the REIT after the Closing Date.
9.4 TOTAL LIABILITIES TO ADJUSTED ASSET VALUE RATIO. Borrower will not
at any time permit its Total Liabilities to exceed fifty-five percent (55%) of
Adjusted Asset Value.
9.5 MAXIMUM SECURED BORROWER DEBT. The Secured Borrower Debt shall not
exceed thirty percent (30%) of Adjusted Asset Value.
9.6 OPERATING CASH FLOW TO DEBT SERVICE RATIO. The ratio of Operating
Cash Flow to Debt Service shall not be less than 2.0:1 for any Fiscal Quarter.
9.7 EBITDA TO FIXED CHARGES RATIO. The ratio of EBITDA to Fixed
Charges shall not be less than 1.75:1 for any Fiscal Quarter.
9.8 AGGREGATE OCCUPANCY RATE. The Aggregate Occupancy Rate of the
Unencumbered Properties shall not be less than ninety percent (90%).
9.9 DISTRIBUTIONS.
9.9.1 Subject to SECTION 9.9.2, aggregate distributions to common
shareholders of the REIT and all partners of Borrower holding common units other
than the REIT shall not exceed the lesser of (i) ninety percent (90%) of Funds
From Operations for any Fiscal Year or (ii) one hundred percent (100%) of Funds
From Operations for more than two (2) consecutive Fiscal Quarters. For purposes
of this SECTION 9.9, the term "distributions" shall mean and include all
dividends and other distributions to, and the repurchase of stock or partnership
interests from, the holder of any equity interests in Borrower or the REIT.
9.9.2 Aggregate distributions during the continuance of any Event
of Default shall not exceed the lesser of (i) the aggregate amount permitted to
be made during the continuance thereof under SECTION 9.9.1, and (ii) the minimum
amount that the REIT must distribute to its shareholders in order to maintain
compliance with SECTION 7.11. If the Loans are not paid in full on the
Termination Date, no distributions shall be made thereafter except to the extent
expressly authorized in advance by Agent.
9.10 PERMITTED INVESTMENTS. Notwithstanding the limitations set forth
in SECTION 7.8, Borrower may make the following Permitted Investments, so long
as (i) the aggregate amount of all Permitted Investments does not exceed, at any
time, twenty-five percent (25%) of Adjusted Asset Value, and (ii) the aggregate
amount of each of the following categories of Permitted Investments does not
exceed the specified percentage of Adjusted Asset Value, in each case as of the
date made:
Maximum
Percentage of
Permitted Investment Adjusted Asset Value
Land and Non-Retail Properties: 15%
Foreign Investments: 10%
Investment Mortgages: 10%
Partnerships (other than Simon Partnerships): 15%.
For purposes of calculating compliance with the foregoing: (1) the amount of
each Investment will be deemed to be the original Acquisition Price thereof; (2)
in the case of each Investment in Land, Investment Mortgages and Partnerships,
the nature of underlying real property asset and the conduct of business in
respect thereof shall in all respects comply with the limitations set forth in
SECTION 7.8; and (3) Investments in Foreign Affiliates (other than in Foreign
Affiliates which are Wholly-Owned Subsidiaries) shall be counted as both an
investment in Partnerships and as a Foreign Investment but shall be counted only
once when determining the overall 25% limit. In addition, Borrower may also make
Investments in Simon Partnerships and such Investments shall not be subject to,
or counted against, the limitations on the amount of Permitted Investments
described in this SECTION 9.10.
9.11 CIP BUDGET AMOUNT TO ADJUSTED ASSET VALUE. The ratio of the CIP
Budget Amount to Adjusted Asset Value shall not exceed 0.25:1.
9.12 CALCULATION. Each of the foregoing ratios and financial
requirements shall be calculated as of the last day of each Fiscal Quarter,
provided, however that each of the foregoing ratios and financial requirements
which is affected by an increase in the outstanding balance of Unsecured
Indebtedness or by the sale or encumbrance of a Portfolio Property shall also be
recalculated as of the time of such event. For purposes of determining
compliance with SECTION 9.6, the period covered thereby shall be the immediately
preceding Fiscal Quarter.
ARTICLE X
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
10.1 EVENTS OF DEFAULT. Each of the following occurrences shall
constitute an Event of Default under this Agreement:
10.1.1 FAILURE TO MAKE PAYMENTS WHEN DUE. Borrower shall fail to
pay (i) any amount due on the Termination Date, (ii) any principal when due, or
(iii) any interest on any Loan, or any fee or other amount payable under any
Loan Documents, within five (5) days after the same becomes due.
10.1.2 REIT AND FINANCIAL COVENANTS. Borrower or the REIT shall
breach any covenant set forth in SECTION 7.11 or in ARTICLE IX (excluding
SECTION 9.8).
10.1.3 AGGREGATE OCCUPANCY RATE. Borrower shall fail to satisfy
the financial covenant regarding the Aggregate Occupancy Rate set forth in
SECTION 9.8 and such failure shall continue for sixty (60) days.
10.1.4 OTHER DEFAULTS. Borrower or the REIT shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on Borrower or the REIT under this Agreement or under any of the other Loan
Documents (other than as described in any other provision of this SECTION 10.1),
and with respect to agreements, covenants or obligations for which no time
period for performance is otherwise provided, such failure shall continue for
fifteen (15) days after Borrower or the REIT knew of such failure (or such
lesser period of time as is mandated by applicable Requirements of Law);
PROVIDED, however, if such failure is capable of cure but is not capable of cure
within such fifteen (15) day period, then if Borrower promptly undertakes action
to cure such failure and thereafter diligently prosecutes such cure to
completion within forty-five (45) days after Borrower or the REIT knew of such
failure, then Borrower shall not be in default hereunder.
10.1.5 BREACH OF REPRESENTATION OR WARRANTY. Any representation
or warranty made or deemed made by Borrower or the REIT to Agent or any Lender
herein or in any of the other Loan Documents or in any statement, certificate or
financial statements at any time given by Borrower pursuant to any of the Loan
Documents shall be false or misleading in any material respect on the date as of
which made.
10.1.6 DEFAULT AS TO OTHER INDEBTEDNESS. (i) Borrower, the REIT
or any GP Partnership shall have (A) failed to pay when due (beyond any
applicable grace period), any amount in respect of any Indebtedness (other than
Nonrecourse Indebtedness) of such party other than the Obligations if the
aggregate amount of such other Indebtedness is Ten Million Dollars ($10,000,000)
or more; or (B) otherwise defaulted (beyond any applicable grace period) under
any Indebtedness of such party other than the Obligations if (1) the aggregate
amount of such other Indebtedness is Ten Million Dollars ($10,000,000) or more,
and (2) the holder of such Indebtedness has accelerated such Indebtedness; or
(ii) any such other Indebtedness shall have otherwise become payable, or be
required to be purchased or redeemed, prior to its scheduled maturity; or (iii)
the holder(s) of any Lien, in any amount, commence foreclosure of such Lien upon
any Property having an aggregate value in excess of Ten Million Dollars
($10,000,000); or (iv) any "Event of Default" shall exist under the Unsecured
Term Note Indenture, or (v) any "Event of Default" shall exist under the Term
Loan Agreement relating to the BankBoston Term Loan; or (vi) any "Event of
Default" shall exist under the Revolving Credit Agreement.
10.1.7 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(a) An involuntary case shall be commenced against the
REIT, Borrower or any GP Partnership, and the petition shall not
be dismissed within sixty (60) days after commencement of the
case, or a court having jurisdiction shall enter a decree or
order for relief in respect of any such Person in an involuntary
case, under any applicable bankruptcy, insolvency or other
similar law now or hereinafter in effect; or any other similar
relief shall be granted under any applicable federal, state or
foreign law; or
(b) A decree or order of a court having jurisdiction in
the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar
powers over the REIT, Borrower or any GP Partnership, or over all
or a substantial part of the property of any such Person, shall
be entered; or an interim receiver, trustee or other custodian of
any such Person or of all or a substantial part of the property
of any such Person, shall be appointed or a warrant of
attachment, execution or similar process against any substantial
part of the property of any such Person, shall be issued and any
such event shall not be stayed, vacated, dismissed, bonded or
discharged within sixty (60) days of entry, appointment or
issuance.
10.1.8 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. The
REIT, Borrower, or any GP Partnership shall have an order for relief entered
with respect to it or commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or shall consent to
the entry of an order for relief in an involuntary case, or to the conversion of
an involuntary case to a voluntary case, under any such law, or shall consent to
the appointment of or taking of possession by a receiver, trustee or other
custodian for all or a substantial part of its property; any such Person shall
make any assignment for the benefit of creditors or shall be unable or fail, or
admit in writing its inability, to pay its debts as such debts become due; or
the general partner (or Person(s) serving in a similar capacity) of Borrower or
the REIT's Board of Directors (or any committee thereof) adopts any resolution
or otherwise authorizes any action to approve any of the foregoing.
10.1.9 JUDGMENTS AND ATTACHMENTS. (i) Any money judgment (other
than a money judgment covered by insurance but only if the insurer has admitted
liability with respect to such money judgment), writ or warrant of attachment,
or similar process involving in any case an amount in excess of One Million
Dollars ($1,000,000) shall be entered or filed against the REIT, Borrower, or
any GP Partnership or their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of thirty (30) days, or (ii) any
judgment or order of any court or administrative agency awarding material
damages shall be entered against any such Person in any action under the Federal
securities laws seeking rescission of the purchase or sale of, or for damages
arising from the purchase or sale of, any Securities, such judgment or order
shall have become final after exhaustion of all available appellate remedies
and, in Agent's judgment, the payment of such judgment or order would have a
Material Adverse Effect on such Person.
10.1.10 DISSOLUTION. Any order, judgment or decree shall be
entered against the REIT, Borrower, or any GP Partnership decreeing its
involuntary dissolution or split up and such order shall remain undischarged and
unstayed for a period in excess of thirty (30) days; or the REIT or Borrower
shall otherwise dissolve or cease to exist.
10.1.11 LOAN DOCUMENTS; FAILURE OF SUBORDINATION. If for any
reason (i) any Loan Document shall cease to be in full force and effect, or (ii)
any Obligation shall be subordinated in right of payment to any other unsecured
liability of the Borrower.
10.1.12 ERISA LIABILITIES. Any Termination Event occurs which
will or is reasonably likely to subject Borrower, the REIT or any ERISA
Affiliate to a liability which Agent reasonably determines will have a Material
Adverse Effect on Borrower or the REIT, or the plan administrator of any Benefit
Plan applies for approval under Section 412(d) of the Internal Revenue Code for
a waiver of the minimum funding standards of Section 412(a) of the Internal
Revenue Code and Agent reasonably determines that the business hardship upon
which the Section 412(d) waiver was based will or would reasonably be
anticipated to subject Borrower or the REIT to a liability which Agent
determines will have a Material Adverse Effect on Borrower or the REIT.
10.1.13 ENVIRONMENTAL LIABILITIES. Borrower, the REIT or any
Subsidiary or Partnership becomes subject to any Liabilities and Costs which
Agent reasonably deems to have a Material Adverse Effect on such Person arising
out of or related to the Release at any Property of any Contaminant into the
environment, or any Remedial Action in response thereto, or any other violation
of any Environmental Laws.
10.1.14 SOLVENCY; MATERIAL ADVERSE CHANGE. Borrower or the REIT
shall cease to be Solvent, or there shall have occurred any material adverse
change in the business, operations, properties, assets or condition (financial
or otherwise) of Borrower or the REIT.
An Event of Default shall be deemed "continuing" until cured or
waived in writing in accordance with SECTION 12.4.
10.2 RIGHTS AND REMEDIES.
10.2.1 ACCELERATION, ETC. Upon the occurrence of any Event of
Default described in the foregoing SECTION 10.1.7 or 10.1.8 with respect to the
REIT or Borrower, the unpaid principal amount of and any and all accrued
interest on the Loans shall automatically become immediately due and payable,
with all additional interest from time to time accrued thereon and without
presentment, demand or protest or other requirements of any kind (including,
without limitation, valuation and appraisement, diligence, presentment, notice
of intent to demand or accelerate or notice of acceleration), all of which are
hereby expressly waived by Borrower; and upon the occurrence and during the
continuance of any other Event of Default, Agent shall, at the request, or may,
with the consent of Requisite Lenders, by written notice to Borrower, declare
the unpaid principal amount of, any and all accrued and unpaid interest on the
Loans and all of the other Obligations to be, and the same shall thereupon be,
immediately due and payable with all additional interest from time to time
accrued thereon and without presentment, demand, or protest or other
requirements of any kind (including without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and of acceleration), all of which are hereby expressly waived by Borrower.
Without limiting Agent's authority hereunder, on or after the Termination Date,
Agent shall, at the request, or may, with the consent, of Requisite Lenders
exercise any or all rights and remedies under the Loan Documents or applicable
law. Upon the occurrence of and during the continuance of an Event of Default,
Agent shall be entitled to request and receive, by or through Borrower or
appropriate legal process, any and all information concerning the REIT, Borrower
or any property of any of them, which is reasonably available to or obtainable
by Borrower.
10.2.2 WAIVER OF DEMAND. Demand, presentment, protest and notice
of nonpayment are hereby waived by Borrower. Borrower also waives, to the extent
permitted by law, the benefit of all exemption laws.
10.2.3 WAIVERS, AMENDMENTS AND REMEDIES. No delay or omission of
Agent or Lenders to exercise any right under any Loan Document shall impair such
right or be construed to be a waiver of any Event of Default or an acquiescence
therein, and any single or partial exercise of any such right shall not preclude
other or further exercise thereof or the exercise of any other right, and no
waiver, amendment or other variation of the terms, conditions or provisions of
the Loan Documents whatsoever shall be valid unless in writing signed by Agent
after obtaining written approval thereof or the signature thereon of those
Lenders required to approve such waiver, amendment or other variation, and then
only to the extent in such writing specifically set forth. All remedies
contained in the Loan Documents or by law afforded shall be cumulative and all
shall be available to Agent and Lenders until the Obligations have been paid in
full and this Agreement has been terminated.
10.3 RESCISSION. If at any time after acceleration of the maturity of
the Loans, Borrower shall pay all arrears of interest and all payments on
account of principal of the Loans which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Unmatured Events of Default (other than nonpayment of principal of
and accrued interest on the Loans due and payable solely by virtue of
acceleration) shall be remedied or waived pursuant to SECTION 12.4, then by
written notice to Borrower, Requisite Lenders may elect, in their sole
discretion, to rescind and annul the acceleration and its consequences; but such
action shall not affect any subsequent Event of Default or Unmatured Event of
Default or impair any right or remedy consequent thereon. The provisions of the
preceding sentence are intended merely to bind Lenders to a decision which may
be made at the election of Requisite Lenders; they are not intended to benefit
Borrower and do not give Borrower the right to require Lenders to rescind or
annul any acceleration hereunder, even if the conditions set forth herein are
met.
ARTICLE XI
AGENCY PROVISIONS
11.1 APPOINTMENT.
11.1.1 Each Lender hereby (i) designates and appoints BankBoston
as Agent of such Lender under this Agreement and the Loan Documents, (ii)
authorizes and directs Agent to enter into the Loan Documents other than this
Agreement for the benefit of Lenders, and (iii) authorizes Agent to take such
action on its behalf under the provisions of this Agreement and the Loan
Documents and to exercise such powers as are set forth herein or therein,
together with such other powers as are reasonably incidental thereto, subject to
the limitations referred to in SECTIONS 11.10.1 and 11.10.2. Agent agrees to act
as such on the express conditions contained in this ARTICLE XI.
11.1.2 The provisions of this ARTICLE XI are solely for the
benefit of Agent and Lenders, and Borrower shall not have any rights to rely on
or enforce any of the provisions hereof (other than as expressly set forth in
SECTIONS 11.3 and 11.9, PROVIDED, HOWEVER, that the foregoing shall in no way
limit Borrower's obligations under this ARTICLE XI. In performing its functions
and duties under this Agreement, Agent shall act solely as Agent of Lenders and
does not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for Borrower or any other Person.
11.2 NATURE OF DUTIES. Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in the
Loan Documents. Subject to the provisions of SECTIONS 11.5 and 11.7, Agent shall
administer the Loans in the same manner as it administers its own loans.
Promptly following the effectiveness of this Agreement, Agent shall send to each
Lender its originally executed Note and the executed original, to the extent the
same are available in sufficient numbers, of each other Loan Document other than
the Notes in favor of other Lenders. Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Lender. Nothing in this
Agreement or any of the Loan Documents, expressed or implied, is intended or
shall be construed to impose upon Agent any obligation in respect of this
Agreement or any of the Loan Documents except as expressly set forth herein or
therein. Each Lender shall make its own independent investigation of the
financial condition and affairs of the REIT, Borrower and each Portfolio
Property in connection with the making and the continuance of the Loans
hereunder and shall make its own appraisal of the creditworthiness of the REIT
and Borrower, and, except as specifically provided herein, Agent shall not have
any duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before the Closing Date or at any time or
times thereafter.
11.3 LOAN DISBURSEMENT.
11.3.1 Not later than 1:00 P.M. (Eastern time) on the Closing
Date each Lender shall make available to Agent, the full amount of such Lender's
Commitment in immediately available funds. Unless Agent shall have been notified
by any Lender prior to such time for funding that such Lender does not intend to
make available to Agent such Lender's Loan, Agent may assume that such Lender
has made such amount available to Agent. In any case where a Lender does not for
any reason make available to Agent such Lender's Loan, Agent, in its sole
discretion, may, but shall not be obligated to, fund to Borrower such Lender's
Loan. If the amount so funded by Agent is not in fact made available to Agent by
the responsible Lender, then Borrower agrees to repay to Agent such amount,
together with interest thereon at the Base Rate for each day from the date such
amount is made available to Borrower until the date such amount is repaid to
Agent, not later than three (3) Business Days following Agent's demand to
Borrower that such repayment be made. In addition, such Lender agrees to pay to
Agent forthwith on demand such corresponding amount, together with interest
thereon at the Federal Funds Rate. If such Lender shall pay to Agent such
corresponding amount, such amount so paid shall constitute such Lender's Loan,
and if both such Lender and Borrower shall have paid and repaid, respectively,
such corresponding amount, Agent shall promptly return to Borrower such
corresponding amount in same day funds; interest paid by Borrower in respect of
such corresponding amount shall be prorated, as of the date of payment thereof
by such Lender to Agent. In the event that Agent shall not have funded such
Lender's Pro Rata Share under this SECTION 11.3.1, then Borrower shall not be
obligated to accept a late funding of such Lender's Pro Rata Share if such
funding is made more than two (2) Business Days following the applicable Funding
Date. If Borrower declines to accept such delinquent funding, Agent shall
promptly return to such Lender the amount of such funding. Nothing in this
SECTION 11.3.1 shall alter the respective rights and obligations of the parties
hereunder in respect of a Defaulting Lender.
11.3.2 Nothing in this SECTION 11.3 shall be deemed to relieve
any Lender of its obligation hereunder to make its Loan on the Closing Date, nor
shall any Lender be responsible for the failure of any other Lender to perform
its obligations to make any Loan hereunder, and the Commitment of any Lender
shall not be increased or decreased as a result of the failure by any other
Lender to perform its obligation to make its Loan.
11.4 DISTRIBUTION AND APPORTIONMENT OF PAYMENTS. Payments actually
received by Agent for the account of Lenders shall be paid to them promptly
after receipt thereof by Agent, but in any event within two (2) Business Days,
PROVIDED that Agent shall pay to Lenders interest thereon, at the lesser of (i)
Federal Funds Rate and (ii) the rate of interest applicable to such Loans, from
the Business Day following receipt of such funds by Agent until such funds are
paid in immediately available funds to Lenders. Subject to SECTION 11.4.2, all
payments of principal and interest in respect of outstanding Loans, all payments
of the fees described in this Agreement, and all payments in respect of any
other Obligations shall be allocated among such of Lenders as are entitled
thereto, in proportion to their respective Pro Rata Shares or otherwise as
provided herein. Agent shall promptly distribute, but in any event within two
(2) Business Days, to each Lender at its primary address set forth on the
appropriate signature page hereof or on the Assignment and Assumption, or at
such other address as a Lender may request in writing, such funds as it may be
entitled to receive, PROVIDED that Agent shall in any event not be bound to
inquire into or determine the validity, scope or priority of any interest or
entitlement of any Lender and may suspend all payments and seek appropriate
relief (including, without limitation, instructions from Requisite Lenders or
all Lenders, as applicable, or an action in the nature of interpleader) in the
event of any doubt or dispute as to any apportionment or distribution
contemplated hereby. The order of priority herein is set forth solely to
determine the rights and priorities of Lenders as among themselves and may at
any time or from time to time be changed by Lenders as they may elect, in
writing in accordance with SECTION 12.4, without necessity of notice to or
consent of or approval by Borrower or any other Person. All payments or other
sums received by Agent for the account of Lenders shall not constitute property
or assets of Agent and shall be held by Agent, solely in its capacity as agent
for itself and the other Lenders, subject to the Loan Documents.
11.5 RIGHTS, EXCULPATION, ETC. Neither Agent, any Affiliate of Agent,
nor any of their respective officers, directors, employees, agents, attorneys or
consultants, shall be liable to any Lender for any action taken or omitted by
them hereunder or under any of the Loan Documents, or in connection herewith or
therewith, except that Agent shall be liable for its gross negligence or willful
misconduct. In the absence of gross negligence or willful misconduct, Agent
shall not be liable for any apportionment or distribution of payments made by it
in good faith pursuant to SECTION 11.4, and if any such apportionment or
distribution is subsequently determined to have been made in error the sole
recourse of any Person to whom payment was due, but not made, shall be to
recover from the recipients of such payments any payment in excess of the amount
to which they are determined to have been entitled. Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any of the
other Loan Documents, or any of the transactions contemplated hereby and
thereby; or for the financial condition of the REIT, Borrower or any of their
Affiliates. Agent shall not be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
this Agreement or any of the Loan Documents or the financial condition of the
REIT, Borrower or any of their Affiliates, or the existence or possible
existence of any Unmatured Event of Default or Event of Default.
11.6 RELIANCE. Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents, telecopies or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement or any of the Loan Documents and its duties
hereunder or thereunder, upon advice of legal counsel (including counsel for
Borrower), independent public accountant and other experts selected by it.
11.7 INDEMNIFICATION. To the extent that Agent is not reimbursed and
indemnified by Borrower, Lenders will reimburse, within ten (10) Business Days
after notice from Agent, and indemnify and defend Agent for and against any and
all Liabilities and Costs (other than losses in the collection of principal and
interest on the Loans which losses shall be shared among all Lenders including
the Agent as provided in SECTIONS 11.4 and 11.13) which may be imposed on,
incurred by, or asserted against it in any way relating to or arising out of
this Agreement or any of the other Loan Documents or any action taken or omitted
by Agent or under this Agreement or any of the other Loan Documents, in
proportion to each Lender's Pro Rata Share; PROVIDED that no Lender shall be
liable for any portion of such Liabilities and Costs resulting from Agent's
gross negligence or willful misconduct or in respect of normal administrative
costs and expenses incurred by Agent (prior to any Event of Default or any
Unmatured Event of Default) in connection with its performance of administrative
duties under this Agreement and the other Loan Documents. The obligations of
Lenders under this SECTION 11.7 shall survive the payment in full of all
Obligations and the termination of this Agreement. In the event that after
payment and distribution of any amount by Agent to Lenders, any Lender or third
party, including Borrower, any creditor of Borrower or a trustee in bankruptcy,
recovers from Agent any amount found to have been wrongfully paid to Agent or
disbursed by Agent to Lenders, then Lenders, in proportion to their respective
Pro Rata Shares, shall reimburse Agent for all such amounts. Notwithstanding the
foregoing, Agent shall not be obligated to advance Liabilities and Costs and may
require the deposit by each Lender of its Pro Rata Share of any material
Liabilities and Costs anticipated by Agent before they are incurred or made
payable.
11.8 AGENT INDIVIDUALLY. With respect to its Pro Rata Share of the
Obligations hereunder and the Loans made by it, Agent shall have and may
exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender. The terms "Lenders", "Requisite Lenders" or any similar terms may
include Agent in its individual capacity as a Lender or one of the Requisite
Lenders. Agent and any Lender and its Affiliates may accept deposits from, lend
money to, and generally engage in any kind of banking, trust or other business
with Borrower or any of its Affiliates as if it were not acting as Agent or
Lender pursuant hereto.
11.9 SUCCESSOR AGENT; RESIGNATION OF AGENT; REMOVAL OF AGENT.
11.9.1 Agent may resign from the performance of all its functions
and duties hereunder at any time by giving at least thirty (30) Business Days,
prior written notice to Lenders and Borrower, and shall automatically cease to
be Agent hereunder in the event a petition in bankruptcy shall be filed by or
against Agent or the Federal Deposit Insurance Corporation or any other
Governmental Authority shall assume control of Agent or Agent's interests under
the Facility. Further, Lenders whose aggregate outstanding Loans constitute at
least sixty-six and two-thirds percent (66-2/3%) of the outstanding Loans of all
Lenders excluding the Agent may remove Agent for cause at any time by giving at
least thirty (30) Business Days' prior written notice to Agent, Borrower and all
other Lenders. If Agent enters into one or more assignments pursuant to SECTION
11.12 having the effect of reducing its outstanding Loans to less than
$8,000,000 then any Lender whose outstanding Loans exceed those of Agent may
remove Agent by notice given within thirty (30) days after such Lender receives
notice of the assignments which reduce the Agent's outstanding Loans below such
level. Such resignation or removal shall take effect upon the acceptance by a
successor Agent appointed pursuant to SECTION 11.9.2 or 11.9.3.
11.9.2 Upon any such notice of resignation by or removal of
Agent, Requisite Lenders shall appoint a successor Agent with the consent of
Borrower, which consent shall not be unreasonably withheld or delayed AND which
consent shall not be required if there shall then exist any Event of Default.
Any successor Agent must be a bank (i) the senior debt obligations of which (or
such bank's parent's senior unsecured debt obligations) are rated not less than
BBB by one of the Rating Agencies and (ii) which has total assets in excess of
Ten Billion Dollars ($10,000,000,000). Such successor Agent shall separately
confirm in writing with Borrower the fee to be paid to such Agent pursuant to
SECTION 2.5.2.
11.9.3 If a successor Agent shall not have been so appointed
within said thirty (30) Business Day period, the retiring or removed Agent,
shall then appoint a successor Agent who shall meet the requirements described
in SECTION 11.9.2 and who shall serve as Agent until such time, if any, as
Requisite Lenders, appoint a successor Agent as provided above.
11.10 CONSENT AND APPROVALS.
11.10.1 Each of the following shall require the approval or
consent of Requisite Lenders:
(a) Approval of notes receivable pursuant to definition
of Adjusted Asset Value (SECTION 1.1);
(b) Consent to Indebtedness (SECTION 8.10);
(c) Approval of additional executives upon a
Discontinuity in Management (SECTION 8.12);
(d) Acceleration following an Event of Default (SECTION
10.2.1) or rescission of such acceleration (SECTION 10.3);
(e) Approval of the exercise of rights and remedies
under the Loan Documents following an Event of Default (SECTION
10.2.1);
(f) Appointment of a successor Agent (SECTION 11.9);
(g) Except as referred to in SECTION 11.10.2 or
11.11.1, approval of any amendment, modification or termination of
this Agreement, or waiver of any provision herein (SECTION 12.4).
11.10.2 Each amendment, modification or waiver specifically
enumerated in SECTION 12.4.1 shall require the consent of all Lenders.
11.10.3 In addition to the required consents or approvals
referred to in SECTION 11.10.1, Agent may at any time request instructions from
Requisite Lenders with respect to any actions or approvals which, by the terms
of this Agreement or of any of the Loan Documents, Agent is permitted or
required to take or to grant without instructions from any Lenders, and if such
instructions are promptly requested, Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from taking any
action or withholding any approval under any of the Loan Documents until it
shall have received such instructions from Requisite Lenders. Without limiting
the foregoing, no Lender shall have any right of action whatsoever against Agent
as a result of Agent acting or refraining from acting under this Agreement or
any of the other Loan Documents in accordance with the instructions of Requisite
Lenders or, where applicable, all Lenders. Agent shall promptly notify each
Lender at any time that the Requisite Lenders have instructed Agent to act or
refrain from acting pursuant to this SECTION 11.10.3.
11.10.4 Each Lender agrees that any action taken by Agent at the
direction or with the consent of Requisite Lenders in accordance with the
provisions of this Agreement or any Loan Document, and the exercise by Agent at
the direction or with the consent of Requisite Lenders of the powers set forth
herein or therein, together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all Lenders, except for actions
specifically requiring the approval of all Lenders. All communications from
Agent to Lenders requesting Lenders' determination, consent, approval or
disapproval (i) shall be given in the form of a written notice to each Lender,
(ii) shall be accompanied by a description of the matter or thing as to which
such determination, approval, consent or disapproval is requested, or shall
advise each Lender where such matter or thing may be inspected, or shall
otherwise describe the matter or issue to be resolved, (iii) shall include, if
reasonably requested by a Lender and to the extent not previously provided to
such Lender, written materials and a summary of all oral information provided to
Agent by Borrower in respect of the matter or issue to be resolved, and (iv) may
include Agent's recommended course of action or determination in respect
thereof. Each Lender shall reply promptly, but in any event within ten (10)
Business Days (the "LENDER REPLY Period"). Unless a Lender shall give written
notice to Agent that it objects to the recommendation or determination of Agent
(together with a written explanation of the reasons behind such objection)
within the Lender Reply Period, such Lender shall be deemed to have approved of
or consented to such recommendation or determination. With respect to decisions
requiring the approval of Requisite Lenders or all Lenders, Agent shall submit
its recommendation or determination for approval of or consent to such
recommendation or determination to all Lenders and upon receiving the required
approval or consent shall follow the course of action or determination
recommended to Lenders by Agent or such other course of action recommended by
Requisite Lenders, and each non-responding Lender shall be deemed to have
concurred with such recommended course of action.
11.11 AGENCY PROVISIONS RELATING TO CERTAIN ENFORCEMENT ACTIONS.
11.11.1 Agent is hereby authorized on behalf of all Lenders,
without the necessity of any notice to or further consent from any Lender, to
waive the imposition of late fees provided for in SECTION 2.4.5 up to a maximum
of three (3) times during the term of this Agreement.
11.11.2 Should Agent (i) employ counsel for advice or other
representation (whether or not any suit has been or shall be filed) with respect
to any of the Loan Documents, or (ii) commence any proceeding or in any way seek
to enforce its rights or remedies under the Loan Documents, each Lender, upon
demand therefor from time to time, shall contribute its share (based on its Pro
Rata Share) of the reasonable costs and/or expenses of any such advice or other
representation, enforcement or acquisition, including, but not limited to, fees
of receivers, court costs and fees and expenses of attorneys to the extent not
otherwise reimbursed by Borrower; PROVIDED that Agent shall not be entitled to
reimbursement of its attorneys' fees and expenses incurred in connection with
the resolution of disputes between Agent and other Lenders unless Agent shall be
the prevailing party in any such dispute. Any loss of principal and interest
resulting from any Event of Default shall be shared by Lenders in accordance
with their respective Pro Rata Shares.
11.12 ASSIGNMENTS AND PARTICIPATIONS.
11.12.1 Each Lender may assign, to one or more Eligible
Assignees, all or a portion of its rights and obligations under this Agreement
(including without limitation all or a portion of the Loans owing to it) and
other Loan Documents; PROVIDED, HOWEVER, that (i) each such assignment shall be
of a constant, and not a varying, percentage of the assigning Lender's rights
and obligations under this Agreement and other Loan Documents, and the
assignment shall cover the same percentage of such Lender's Loans, (ii) unless
Agent and Borrower otherwise consent (except that after an Event of Default only
the consent of Agent shall be required), the aggregate amount of the Loans of
the assigning Lender being assigned pursuant to each such assignment (determined
as of the date of the Assignment and Assumption with respect to such assignment)
shall in no event be less than Five Million Dollars ($5,000,000) and shall be an
integral multiple of One Million Dollars ($1,000,000), (iii) after giving effect
to such assignment, the aggregate amount of the Loans retained by the assigning
Lender shall in no event be less than Five Million Dollars ($5,000,000), (iv)
the parties to each such assignment shall execute and deliver to Agent, for its
approval and acceptance, an Assignment and Assumption, and (v) Agent shall
receive from the assignor a processing fee of Three Thousand Dollars ($3,000).
Upon such execution, delivery, approval and acceptance, and upon the effective
date specified in the applicable Assignment and Assumption, (X) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Assumption, have the rights and obligations of a Lender hereunder, and (Y) the
assigning Lender thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Assumption,
relinquish its rights and be released from its obligations under this Agreement.
11.12.2 By executing and delivering an Assignment and Assumption,
the assigning Lender thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Assumption, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document or any other instrument or document furnished pursuant hereto;
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the REIT or Borrower
or the performance or observance by the REIT or Borrower of any of their
respective obligations under any Loan Document or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in ARTICLE V or delivered pursuant to ARTICLE VI to the
date of such assignment and such other Loan Documents and other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Assumption; (iv) such assignee will,
independently and without reliance upon Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee appoints and
authorizes Agent to take such action as Agent on its behalf and to exercise such
powers under this Agreement and the other Loan Documents as are delegated to
Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
11.12.3 Agent shall maintain, at its address referred to on the
counterpart signature pages hereof, a copy of each Assignment and Assumption
delivered to and accepted by it and shall record in the Loan Account the names
and addresses of each Lender and the principal amount of the Loans owing to,
such Lender from time to time. Borrower, Agent and Lenders may treat each Person
whose name is recorded in the Loan Account as a Lender hereunder for all
purposes of this Agreement.
11.12.4 Upon its receipt of an Assignment and Assumption executed
by an assigning Lender and an assignee, Agent shall, if such Assignment and
Assumption has been properly completed and is in substantially the form of
EXHIBIT A, (i) accept such Assignment and Assumption, (ii) record the
information contained therein in the Loan Account, and (iii) give prompt notice
thereof to Borrower. Upon request, Borrower will execute and deliver to Agent an
appropriate replacement promissory note or replacement promissory notes in favor
of each assignee (and assignor, if such assignor is retaining a portion of its
Loans) reflecting such assignee's (and assigner's) Pro Rata Share(s) of the
Facility. Upon execution and delivery of such replacement promissory notes the
original promissory note or notes evidencing all or a portion of the Loans being
assigned shall be cancelled and returned to Borrower.
11.12.5 Each Lender may sell participations to one or more banks
or other entities in or to all or a portion of its rights and obligations under
this Agreement (including without limitation all or a portion of the Loans owing
to it) and other Loan Documents; PROVIDED, HOWEVER, that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) Borrower, Agent and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and with regard to any and all
payments to be made under this Agreement, and (iv) the holder of any such
participation shall not be entitled to voting rights under this Agreement except
for voting rights with respect to (A) increases in the Facility; (B) extensions
of the Termination Date; and (C) decreases in the interest rates described in
this Agreement. No participant shall be entitled to vote on any matter until the
Lender with which such participant is participating in the Facility and the
Loans confirms such participant's status as a participant hereunder.
11.12.6 Borrower will use reasonable efforts to cooperate with
Agent and Lenders in connection with the assignment of interests under this
Agreement or the sale of participations herein.
11.12.7 Anything in this Agreement to the contrary
notwithstanding, and without the need to comply with any of the formal or
procedural requirements of this Agreement, including this SECTION 11.12, any
Lender may at any time and from time to time pledge and assign all or any
portion of its rights under all or any of the Loan Documents to a Federal
Reserve Bank; PROVIDED that no such pledge or assignment shall release such
Lender from its obligations thereunder. To facilitate any such pledge or
assignment, Agent shall, at the request of such Lender, enter into a letter
agreement with the Federal Reserve Bank in substantially the form of the exhibit
to Appendix C to the Federal Reserve Bank of New York Operating circular No. 12.
11.12.8 Anything in this Agreement to the contrary
notwithstanding, any Lender may assign all or any portion of its rights and
obligations under this Agreement to another branch or Affiliate of such Lender,
PROVIDED that (i) at the time of such assignment such Lender is not a Defaulting
Lender, (ii) such Lender gives Agent and Borrower at least fifteen (15) days'
prior written notice of any such assignment, (iii) the parties to each such
assignment execute and deliver to Agent an Assignment and Assumption, and (iv)
Agent receives from assignor a processing fee of Three Thousand Dollars
($3,000).
11.12.9 No assignee of any rights and obligations under this
Agreement shall be permitted to subassign such rights and obligations.
11.12.10 No Lender shall be permitted to assign or sell all or
any portion of its rights and obligations under this Agreement to Borrower or
any Affiliate of Borrower.
11.13 RATABLE SHARING. Subject to SECTIONS 11.3 and 11.4, Lenders
agree among themselves that (i) with respect to all amounts received by them
which are applicable to the payment of the Obligations, equitable adjustment
will be made so that, in effect, all such amounts will be shared among them
ratably in accordance with their Pro Rata Shares, whether received by voluntary
payment, by counterclaim or cross action or by the enforcement of any or all of
the Obligations, (ii) if any of them shall by voluntary payment or by the
exercise of any right of counterclaim or otherwise, receive payment of a
proportion of the aggregate amount of the Obligations held by it which is
greater than its Pro Rata Share of the payments on account of the Obligations,
the one receiving such excess payment shall purchase, without recourse or
warranty, an undivided interest and participation (which it shall be deemed to
have done simultaneously upon the receipt of such payment) in such Obligations
owed to the others so that all such recoveries with respect to such Obligations
shall be applied ratably in accordance with their Pro Rata Shares; PROVIDED,
that if all or part of such excess payment received by the purchasing party is
thereafter recovered from it, those purchases shall be rescinded and the
purchase prices paid for such participations shall be returned to that party to
the extent necessary to adjust for such recovery, but without interest except to
the extent the purchasing party is required to pay interest in connection with
such recovery. Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this SECTION 11.13 may, to the fullest extent
permitted by law, exercise all its rights of payment with respect to such
participation as fully as if such Lender were the direct creditor of Borrower in
the amount of such participation.
11.14 DELIVERY OF DOCUMENTS. Agent shall as soon as reasonably
practicable distribute to each Lender at its primary address set forth on the
appropriate counterpart signature page hereof, or at such other address as a
Lender may request in writing, (i) all documents to which such Lender is a party
or of which such Lender is a beneficiary set forth in SECTION 4.1, (ii) all
documents of which Agent receives copies from Borrower pursuant to SECTION 6.1
(except as provided in SECTION 6.1.1) and SECTION 12.6, (iii) all other
documents or information which Agent is required to send to Lenders pursuant to
the terms of this Agreement; (iv) other information or documents received by
Agent at the request of any Lender, and (v) all notices received by Agent
pursuant to SECTION 6.2. In addition, within fifteen (15) Business Days after
receipt of a request in writing from a Lender for written information or
documents provided by or prepared by Borrower or the REIT, Agent shall deliver
such written information or documents to such requesting Lender if Agent has
possession of such written information or documents in its capacity as Agent or
as a Lender.
11.15 NOTICE OF EVENTS OF DEFAULT. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Unmatured Event of Default or Event
of Default (other than nonpayment of principal of or interest on the Loans)
unless Agent has received notice in writing from a Lender or Borrower referring
to this Agreement or the other Loan Documents, describing such event or
condition and expressly stating that such notice is a notice of an Unmatured
Event of Default or Event of Default. Should Agent receive such notice of the
occurrence of an Unmatured Event of Default or Event of Default, or should Agent
send Borrower a notice of Unmatured Event of Default or Event of Default, Agent
shall promptly give notice thereof to each Lender.
ARTICLE XII
MISCELLANEOUS
12.1 EXPENSES.
12.1.1 GENERALLY. Borrower agrees upon demand to pay, or
reimburse Agent for, all of Agent's external audit, legal and investigation
expenses and for all other reasonable out-of-pocket costs and expenses of every
type and nature (including, without limitation, the reasonable fees, expenses
and disbursements of Agent's internal appraisers, environmental advisors or
legal counsel) incurred by Agent at any time (whether prior to, on or after the
date of this Agreement) in connection with (i) its own audit and investigation
of Borrower and the Portfolio Properties provided that prior to an Event of
Default Borrower shall not be required to reimburse expenses for any inspections
of the Portfolio Properties by Agent's loan officers or other employees which
are made more frequently than annually; (ii) the negotiation, preparation and
execution of this Agreement (including, without limitation, the satisfaction or
attempted satisfaction of any of the conditions set forth in ARTICLE IV) and the
other Loan Documents and the making of the Loans; (iii) administration of this
Agreement, the other Loan Documents and the Loans, including, without
limitation, consultation with attorneys in connection therewith; and (iv) the
protection, collection or enforcement of any of the Obligations.
12.1.2 AFTER EVENT OF DEFAULT. Borrower further agrees to pay, or
reimburse Agent and Lenders, for all reasonable out-of-pocket costs and
expenses, including without limitation reasonable attorneys' fees and
disbursements incurred by Agent or Lenders after the occurrence of an Event of
Default (i) in enforcing any Obligation or exercising or enforcing any other
right or remedy available by reason of such Event of Default; (ii) in connection
with any refinancing or restructuring of the credit arrangements provided under
this Agreement in the nature of a "work-out" or in any insolvency or bankruptcy
proceeding; (iii) in commencing, defending or intervening in any litigation or
in filing a petition, complaint, answer, motion or other pleadings in any legal
proceeding relating to Borrower, the REIT or any Affiliate and related to or
arising out of the transactions contemplated hereby; or (iv) in taking any other
action in or with respect to any suit or proceeding (whether in bankruptcy or
otherwise).
12.2 INDEMNITY. Borrower further agrees to defend, protect, indemnify
and hold harmless Agent, each and all of the Lenders, each of their respective
Affiliates and participants and each of the respective officers, directors,
employees, agents, attorneys and consultants (including, without limitation,
those retained in connection with the satisfaction or attempted satisfaction of
any of the conditions set forth in ARTICLE IV) of each of the foregoing
(collectively called the "INDEMNITEES") from and against any and all Liabilities
and Costs imposed on, incurred by, or asserted against such Indemnitees (whether
based on any federal or state laws or other statutory regulations, including,
without limitation, securities and commercial laws and regulations, under common
law or in equity, and based upon contract or otherwise, including any
Liabilities and Costs arising as a result of a "prohibited transaction" under
ERISA to the extent arising from or in connection with the past, present or
future operations of the REIT or Borrower or their respective predecessors in
interest) in any manner relating to or arising out of this Agreement or the
other Loan Documents, or any act, event or transaction related or attendant
thereto, the making of and participation in the Loans and the management of the
Loans, or the use or intended use of the proceeds of the Loans (collectively,
the "INDEMNIFIED MATTERS"); PROVIDED, HOWEVER, that Borrower shall have no
obligation to an Indemnitee hereunder with respect to (i) matters for which such
Indemnitee has been compensated pursuant to or for which an exemption is
provided in SECTION 2.4.7 or any other provision of this Agreement, (ii)
Indemnified Matters to the extent caused by or resulting from the willful
misconduct or gross negligence of that Indemnitee, as determined by a court of
competent jurisdiction, and (iii) Indemnified Matters arising from any dispute
among the Lenders not attributable to the actions or omissions of Borrower or
the REIT. To the extent that the undertaking to indemnify, pay and hold harmless
set forth in the preceding sentence may be unenforceable because it is violative
of any law or public policy, Borrower shall contribute the maximum portion which
it is permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees. 12.3 CHANGE
IN ACCOUNTING PRINCIPLES. Except as otherwise provided herein, if any changes in
accounting principles from those used in the preparation of the most recent
financial statements delivered to Agent pursuant to the terms hereof are
hereinafter required or permitted by the rules, regulations, pronouncements and
opinions of the Financial Accounting Standards Board or the American Institute
of Certified Public Accountants (or successors thereto or agencies with similar
functions) and are adopted by the REIT or Borrower with the agreement of its
independent certified public accountants and such changes result in a change in
the method of calculation of any of the financial covenants, standards or terms
found herein, the parties hereto agree to enter into negotiations in order to
amend such provisions so as to equitably reflect such changes with the desired
result that the criteria for evaluating the financial condition of the REIT or
Borrower shall be the same after such changes as if such changes had not been
made; PROVIDED, HOWEVER, that no change in GAAP that would affect the method of
calculation of any of the financial covenants, standards or terms shall be given
effect in such calculations until such provisions are amended pursuant to
SECTION 12.4, to so reflect such change in accounting principles.
12.4 AMENDMENTS AND WAIVERS. (i) No amendment or modification of any
provision of this Agreement shall be effective without the written agreement of
Requisite Lenders (after notice to all Lenders) and Borrower (except for
amendments to SECTION 11.4.1 which do not require the consent of Borrower), and
(ii) no termination or waiver of any provision of this Agreement, or consent to
any departure by Borrower therefrom (except as expressly provided in SECTION
11.11.1 with respect to waivers of late fees), shall in any event be effective
without the written concurrence of Requisite Lenders (after notice to all
Lenders), which Requisite Lenders shall have the right to grant or withhold at
their sole discretion, EXCEPT THAT:
12.4.1 The following amendments, modifications or waivers shall
require the consent of all Lenders:
(a) increasing the Facility or increasing any Lender's
Commitment without the consent of the affected Lender;
(b) changing the principal amount or final maturity of
the Loans;
(c) reducing the interest rates applicable to the
Loans;
(d) reducing the rates on which fees payable pursuant
hereto are determined;
(e) forgiving or delaying any amount payable or
receivable under ARTICLE II (other than late fees);
(f) changing the definition of "Requisite Lenders",
"Pro Rata Shares" or "Event of Default";
(g) changing any provision contained in this SECTION
12.4;
(h) releasing any obligor or guarantor under any Loan
Document or amending the Guaranty to reduce the guarantor's liability
thereunder;
(i) consent to assignment by Borrower of all of its
duties and Obligations hereunder pursuant to SECTION 12.14; or
(j) changing any of the financial covenants set forth
in ARTICLE IX or any of the definitions used in the computation of
such covenants or waiving any failure of the Borrower to comply with
any one of such covenants for two or more consecutive Fiscal Quarters.
12.4.2 No amendment, modification, termination or waiver of any
provision of ARTICLE XI or any other provision referring to Agent shall be
effective without the written concurrence of Agent, but only if such amendment,
modification, termination or waiver alters the obligations or rights of Agent.
Any waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given. No notice to or demand on Borrower
in any case shall entitle Borrower to any other further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this SECTION 12.4 shall be binding on
each assignee, transferee or recipient of Agent's or any Lender's interest under
this Agreement or the Loans at the time outstanding.
12.5 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of an Event of Default or Unmatured Event of Default if such
action is taken or condition exists, and if a particular action or condition is
expressly permitted under any covenant, unless expressly limited to such
covenant, the fact that it would not be permitted under the general provisions
of another covenant shall not constitute an Event of Default or Unmatured Event
of Default if such action is taken or condition exists.
12.6 NOTICES AND DELIVERY. Unless otherwise specifically provided
herein, any consent, notice or other communication herein required or permitted
to be given shall be in writing and may be personally served, telecopied or sent
by courier service or United States mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy (or
on the next Business Day if such telecopy is received on a non-Business Day or
after 5:00 p.m. (at the office of the recipient) on a Business Day) or four (4)
Business Days after deposit in the United States mail (registered or certified,
with postage prepaid and properly addressed). Notices to Agent pursuant to
ARTICLE II shall not be effective until received by Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this SECTION 12.6) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
address as may be designated by such party in a written notice to all of the
other parties. All deliveries to be made to Agent for distribution to the
Lenders shall be made to Agent at the addresses specified for notice on the
signature page hereto and in addition, a sufficient number of copies of each
such delivery shall be delivered to Agent for delivery to each Lender at the
address specified for deliveries on the signature page hereto or such other
address as may be designated by Agent in a written notice.
12.7 SURVIVAL OF WARRANTIES, INDEMNITIES AND AGREEMENTS. All
agreements, representations, warranties and indemnities made or given herein
shall survive the execution and delivery of this Agreement and the other Loan
Documents and the making and repayment of the Loans hereunder and such
indemnities shall survive termination hereof.
12.8 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES Cumulative. No failure
or delay on the part of Agent or any Lender in the exercise of any power, right
or privilege under any of the Loan Documents shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under the Loan Documents are
cumulative to and not exclusive of any rights or remedies otherwise available.
12.9 PAYMENTS SET ASIDE. To the extent that Borrower makes a payment
or payments to Agent or the Lenders or Agent or the Lenders exercise their
rights of setoff, and such payment or payments or the proceeds of such setoff or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the Obligation or part
thereof originally intended to be satisfied, and all rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such setoff had not occurred.
12.10 SEVERABILITY. In case any provision in or obligation under this
Agreement or the other Loan Documents shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby, PROVIDED,
HOWEVER, that if the rates of interest or any other amount payable hereunder, or
the collectibility thereof, are declared to be or become invalid, illegal or
unenforceable, Lenders' obligations to make Loans shall not be enforceable.
12.11 HEADING. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
12.12 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS.
12.13 LIMITATION OF LIABILITY. To the extent permitted by applicable
law, no claim may be made by Borrower, any Lender or any other Person against
Agent or any Lender, or the affiliates, directors, officers, employees,
attorneys or agents of any of them, for any special, indirect, consequential or
punitive damages in respect of any claim for breach of contract or any other
theory of liability arising out of or related to the transactions contemplated
by this Agreement, or any act, omission or event occurring in connection
therewith; and Borrower and each Lender hereby waive, release and agree not to
sue upon any claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in its favor.
12.14 SUCCESSORS AND ASSIGNS. This Agreement and the other Loan
Documents shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and permitted assigns of Agent and Lenders. The terms and
provisions of this Agreement shall inure to the benefit of any assignee or
transferee of the Loans of Lenders under this Agreement, and in the event of
such transfer or assignment, the rights and privileges herein conferred upon
Agent and Lenders shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof. Borrower's rights
or any interest therein hereunder, and Borrower's duties and Obligations
hereunder, shall not be assigned without the consent of all Lenders.
12.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY
TRIAL AND CERTAIN DAMAGE CLAIMS. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST
BORROWER WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE, AND
ALL JUDICIAL PROCEEDINGS BROUGHT BY BORROWER WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT SHALL BE, BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION HAVING SITUS WITHIN THE COMMONWEALTH OF MASSACHUSETTS,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER ACCEPTS, FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
FINAL JUDGMENT RENDERED THEREBY FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS
AVAILABLE. BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS NOTICE ADDRESS
SPECIFIED ON THE SIGNATURE PAGES HEREOF. BORROWER, AGENT AND LENDERS EACH
IRREVOCABLY WAIVES (i) TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND (ii) ANY OBJECTION (INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. EXCEPT TO THE EXTENT EXPRESSLY
PROHIBITED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY ACTION OR PROCEEDING REFERRED TO IN THE PRECEDING SENTENCE ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN,
OR IN ADDITION TO, ACTUAL DAMAGES, INCLUDING ANY DAMAGES PURSUANT TO M.G.L.
C.93A ET SEQ. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF AGENT OR ANY LENDER TO
BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.
12.16 COUNTERPARTS; EFFECTIVENESS; INCONSISTENCIES. This Agreement and
any amendments, waivers, consents or supplements may be executed in
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such together shall constitute but one and the same
instrument. This Agreement shall become effective when Borrower, the initial
Lenders and Agent have duly executed and delivered execution pages of this
Agreement to each other (delivery by Borrower to Lenders and by any Lender to
Borrower and any other Lender being deemed to have been made by delivery to
Agent). This Agreement and each of the other Loan Documents shall be construed
to the extent reasonable to be consistent one with the other, but to the extent
that the terms and conditions of this Agreement are actually and directly
inconsistent with the terms and conditions of any other Loan Document, this
Agreement shall govern.
12.17 CONSTRUCTION. The parties acknowledge that each party and its
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments or exhibits hereto.
12.18 OBLIGATIONS UNSECURED. It is the intent of the parties that the
Obligations shall constitute unsecured obligations of Borrower. Neither the
restrictions and prohibitions set forth herein with respect to the creation,
incurrence, assumption or existence of any Lien on any Property of Borrower or
any other Person, nor those set forth in any other Loan Document, are intended
to create or constitute a Lien of any nature upon any Property of Borrower or
any other Person, and no such restriction or prohibition shall be deemed to
constitute any such Lien. This SECTION 12.18 shall not be deemed to prevent the
Agent or any Lender from obtaining a Lien as security for the Obligations at any
time hereafter pursuant to a mutual agreement among the parties hereto expressly
providing for such Lien or during the continuance of any Event of Default.
12.19 ENTIRE AGREEMENT. This Agreement, taken together with all of the
other Loan Documents and all certificates and other documents delivered by
Borrower to Agent (including documents incorporating separate agreements
relating to the payment of fees), embodies the entire agreement and supersede
all prior agreements, written and oral, relating to the subject matter hereof.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed on the date
set forth above.
BORROWER: CHELSEA GCA REALTY PARTNERSHIP, L.P.,
a Delaware limited partnership
By: CHELSEA GCA REALTY, INC.,
a Maryland corporation, its general
partner
By____________________________
Its_________________________
ADDRESS FOR NOTICE AND DELIVERY:
103 Eisenhower Parkway
Roseland, NJ 07068
Attn: Michael J. Clarke,
Senior Vice President
Tel: (973)228-6111
Fax: (973)228-1694
<PAGE>
AGENT/LENDER: BANKBOSTON, N.A.
By_________________________________
Its______________________________
ADDRESS FOR NOTICE AND DELIVERY:
100 Federal Street
Boston, MA 02110
Attn: Real Estate Division
with a copy to the following address:
115 Perimeter Center Place N.E.
Suite 500
Atlanta, GA 30346
Attn: Lori Y. Litow
Telephone: (770) 390-6544
Telecopy: (770) 390-8434
Pro Rata Share: 20%
Loan Commitment: $12,000,000
LIBOR OFFICE:
BankBoston, N.A.
100 Federal Street
Boston, MA 02110
<PAGE>
LENDER: KEYBANK NATIONAL ASSOCIATION
By_________________________________
Its______________________________
ADDRESS FOR NOTICE AND DELIVERY:
Address:
127 Public Square
Cleveland, OH 44114
Attn: Mary Ellen Fowler
Telephone: (216) 689-4975
Telecopy: (216) 689-3566
Pro Rata Share: 20%
Loan Commitment: $12,000,000
LIBOR OFFICE:
Address:
127 Public Square
Cleveland, OH 44114
Attn: Mary Ellen Fowler
Telephone: (216) 689-4975
Telecopy: (216) 689-3566
<PAGE>
LENDER: PNC BANK
By_________________________________
Its______________________________
ADDRESS FOR NOTICE AND DELIVERY:
Address:
Two Tower Center, 18th Floor
East Brunswick, NJ 08816
Attn: Greg McMannus
Telephone: (732) 220-3542
Telecopy: (732) 220-3744
Pro Rata Share: 20%
Loan Commitment: $12,000,000
LIBOR OFFICE:
Address:
Two Tower Center, 18th Floor
East Brunswick, NJ 08816
Attn: Greg McMannus
Telephone: (732) 220-3542
Telecopy: (732) 220-3744
<PAGE>
LENDER: NATIONSBANK, N.A.
By_______________________________
Printed Name_____________________
Title____________________________
ADDRESS FOR NOTICE AND DELIVERY:
Address: 600 Peachtree Street, N.E.
6th Floor, South
GA1-006-06-25
Atlanta, GA 30308
Attn: S. Ellen Porter
Telephone: (404) 607-4127
Telecopy: (404) 607-4145
Pro Rata Share: 20%
Loan Commitment: $12,000,000
LIBOR OFFICE:
Address: 600 Peachtree Street, N.E.
6th Floor, South
Atlanta, GA 30308
Attn: S. Ellen Porter
<PAGE>
LENDER: COMMERZBANK AG, NEW YORK BRANCH
By_______________________________
Printed Name_____________________
Title____________________________
By_______________________________
Printed Name_____________________
Title____________________________
ADDRESS FOR NOTICE AND DELIVERY:
Address: Two World Financial Center
34th Floor
New York, NY 10281
Attn: Douglas P. Traynor
Telephone:(212)266-7569
Telecopy: (212)266-7530
Pro Rata Share: 20%
Loan Commitment: $12,000,000
LIBOR OFFICE:
Address: Two World Financial Center
34th Floor
New York, NY 10281
Attn: Douglas P. Traynor
Exhibit 10.3
CREDIT AGREEMENT
AMONG
CHELSEA GCA REALTY PARTNERSHIP, L.P.,
A DELAWARE LIMITED PARTNERSHIP,
AS BORROWER,
AND
BANKBOSTON, N.A.
TOGETHER WITH THOSE ASSIGNEES
BECOMING PARTIES HERETO PURSUANT
TO SECTION 11.12, AS LENDERS,
AND
BANKBOSTON, N.A.
AS AGENT
Dated as of March 30, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.....................................................1
1.1 CERTAIN DEFINED TERMS........................................1
1.2 COMPUTATION OF TIME PERIODS.................................23
1.3 TERMS.......................................................23
ARTICLE II LOANS AND LETTERS OF CREDIT...................................24
2.1 LOAN ADVANCES AND REPAYMENT.................................24
2.2 AUTHORIZATION TO OBTAIN LOANS...............................26
2.3 LENDERS' ACCOUNTING.........................................27
2.4 INTEREST ON THE LOANS.......................................27
2.5 FEES........................................................31
2.6 PAYMENTS....................................................32
2.7 INCREASED CAPITAL...........................................33
2.8 NOTICE OF INCREASED COSTS...................................33
2.9 LETTERS OF CREDIT...........................................33
2.10 RENEWAL OF THE FACILITY.....................................36
ARTICLE III UNENCUMBERED PROPERTIES AND PORTFOLIO PROPERTIES.............37
3.1. LISTING OF UNENCUMBERED PROPERTIES..........................37
3.2. WAIVERS BY REQUISITE BANKS..................................37
3.3. REJECTION OF UNENCUMBERED PROPERTIES........................37
3.4 UPDATED LISTS OF UNENCUMBERED PROPERTIES AND PORTFOLIO
PROPERTIES..................................................37
ARTICLE IV CONDITIONS TO LOANS...........................................37
4.1 CONDITIONS TO INITIAL DISBURSEMENT OF LOANS.................38
4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF CREDIT.....39
ARTICLE V REPRESENTATIONS AND WARRANTIES.................................41
5.1 BORROWER ORGANIZATION; PARTNERSHIP POWERS...................41
5.2 BORROWER AUTHORITY..........................................41
5.3 REIT ORGANIZATION; CORPORATE POWERS.........................41
5.4 REIT AUTHORITY..............................................41
5.5 OWNERSHIP OF BORROWER, EACH SUBSIDIARY AND PARTNERSHIP......42
5.6 NO CONFLICT.................................................42
5.7 CONSENTS AND AUTHORIZATIONS.................................42
5.8 GOVERNMENTAL REGULATION.....................................42
5.9 PRIOR FINANCIALS............................................43
5.10 PROJECTIONS AND FORECASTS...................................43
5.11 PRIOR OPERATING STATEMENTS..................................43
5.12 RENT ROLLS..................................................43
5.13 LITIGATION; ADVERSE EFFECTS.................................43
5.14 NO MATERIAL ADVERSE CHANGE..................................43
5.15 PAYMENT OF TAXES............................................44
5.16 MATERIAL ADVERSE AGREEMENTS.................................44
5.17 PERFORMANCE.................................................44
5.18 FEDERAL RESERVE REGULATIONS.................................44
5.19 UNSECURED TERM NOTES........................................44
5.20 REQUIREMENTS OF LAW.........................................45
5.21 PATENTS, TRADEMARKS, PERMITS, ETC...........................45
5.22 ENVIRONMENTAL MATTERS.......................................45
5.23 UNENCUMBERED PROPERTIES.....................................45
5.24 SOLVENCY....................................................46
5.25 TITLE TO ASSETS; NO LIENS...................................46
5.26 USE OF PROCEEDS.............................................46
5.27 REIT CAPITALIZATION.........................................46
5.28 ERISA.......................................................46
5.29 STATUS AS A REIT............................................46
5.30 OWNERSHIP...................................................46
5.31 NYSE LISTING................................................47
5.32 CURRENT CONSTRUCTION PROJECTS...............................47
ARTICLE VI REPORTING COVENANTS...........................................47
6.1 FINANCIAL STATEMENTS AND OTHER FINANCIAL AND OPERATING
INFORMATION.................................................47
6.2 ENVIRONMENTAL NOTICES.......................................51
6.3 CONFIDENTIALITY.............................................52
ARTICLE VII AFFIRMATIVE COVENANTS........................................52
7.1 EXISTENCE...................................................52
7.2 QUALIFICATION, NAME.........................................52
7.3 COMPLIANCE WITH LAWS, ETC...................................52
7.4 PAYMENT OF TAXES AND CLAIMS.................................52
7.5 MAINTENANCE OF PROPERTIES; INSURANCE........................53
7.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS......53
7.7 MAINTENANCE OF PERMITS, ETC.................................54
7.8 CONDUCT OF BUSINESS.........................................54
7.9 USE OF PROCEEDS.............................................54
7.10 SECURITIES LAW COMPLIANCE...................................54
7.11 CONTINUED STATUS AS A REIT; PROHIBITED TRANSACTIONS.........54
7.12 NYSE LISTED COMPANY.........................................54
7.13 PROPERTY MANAGEMENT.........................................54
7.14 INTEREST RATE CONTRACTS.....................................55
ARTICLE VIII NEGATIVE COVENANTS..........................................55
8.1 LIENS.......................................................55
8.2 TRANSFERS OF WOODBURY COMMON................................55
8.3 RESTRICTIONS ON FUNDAMENTAL CHANGES.........................55
8.4 ERISA.......................................................56
8.5 AMENDMENT OF CONSTITUENT DOCUMENTS..........................56
8.6 DISPOSAL OF PARTNERSHIP INTERESTS OR STOCK IN SUBSIDIARIES..57
8.7 MARGIN REGULATIONS..........................................57
8.8 WITH RESPECT TO THE REIT....................................57
8.9 ADDITIONAL UNSECURED BANK DEBT..............................57
8.10 RESTRICTIONS ON INDEBTEDNESS................................58
8.11 CONSTRUCTION PROJECTS.......................................59
8.12 DISCONTINUITY IN MANAGEMENT.................................59
ARTICLE IX FINANCIAL COVENANTS...........................................60
9.5 MAXIMUM SECURED BORROWER DEBT...............................60
9.6 OPERATING CASH FLOW TO DEBT SERVICE RATIO...................61
9.7 EBITDA TO FIXED CHARGES RATIO...............................61
9.8 AGGREGATE OCCUPANCY RATE....................................61
9.9 DISTRIBUTIONS...............................................61
9.10 PERMITTED INVESTMENTS.......................................61
9.12 CALCULATION.................................................62
ARTICLE X EVENTS OF DEFAULT; RIGHTS AND REMEDIES.........................62
10.1 EVENTS OF DEFAULT...........................................62
10.2 RIGHTS AND REMEDIES.........................................65
10.3 RESCISSION..................................................67
ARTICLE XI AGENCY PROVISIONS.............................................67
11.1 APPOINTMENT.................................................67
11.2 NATURE OF DUTIES............................................68
11.3 LOAN DISBURSEMENTS..........................................68
11.4 DISTRIBUTION AND APPORTIONMENT OF PAYMENTS..................69
11.5 RIGHTS, EXCULPATION, ETC....................................71
11.6 RELIANCE....................................................71
11.7 INDEMNIFICATION.............................................71
11.8 AGENT INDIVIDUALLY..........................................72
11.9 SUCCESSOR AGENT; RESIGNATION OF AGENT; REMOVAL OF AGENT.....72
11.10 CONSENT AND APPROVALS.......................................73
11.11 AGENCY PROVISIONS RELATING TO CERTAIN ENFORCEMENT ACTIONS...74
11.12 ASSIGNMENTS AND PARTICIPATIONS..............................75
11.13 RATABLE SHARING.............................................78
11.14 DELIVERY OF DOCUMENTS.......................................78
11.15 NOTICE OF EVENTS OF DEFAULT.................................78
ARTICLE XII MISCELLANEOUS................................................79
12.1 EXPENSES....................................................79
12.2 INDEMNITY...................................................80
12.3 CHANGE IN ACCOUNTING PRINCIPLES.............................80
12.4 AMENDMENTS AND WAIVERS......................................81
12.5 INDEPENDENCE OF COVENANTS...................................82
12.6 NOTICES AND DELIVERY........................................82
12.7 SURVIVAL OF WARRANTIES, INDEMNITIES AND AGREEMENTS..........82
12.8 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.......83
12.9 PAYMENTS SET ASIDE..........................................83
12.10 SEVERABILITY................................................83
12.11 HEADING.....................................................83
12.12 GOVERNING LAW...............................................83
12.13 LIMITATION OF LIABILITY.....................................83
12.14 SUCCESSORS AND ASSIGNS......................................84
12.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF
JURY TRIAL AND CERTAIN DAMAGE CLAIMS........................84
12.16 COUNTERPARTS; EFFECTIVENESS; INCONSISTENCIES................85
12.17 CONSTRUCTION................................................85
12.18 OBLIGATIONS UNSECURED.......................................85
12.19 ENTIRE AGREEMENT............................................85
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibits:
A - Form of Assignment and Assumption
B - Form of Compliance Certificate
C - Form of Loan Notes
D - Form of Notice of Borrowing
E - Form of Fixed Rate Notice
F - Form of Letter of Credit Request
Schedules:
1 - List of Unencumbered Properties
1.1 - List of Portfolio Properties which are not Unencumbered
Properties
5.5 - Partnerships and Subsidiaries
5.22 - Environmental Matters
5.32 - Current Construction Projects
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of March 30, 1998 and is among
CHELSEA GCA REALTY PARTNERSHIP, L.P., a Delaware limited partnership
("Borrower"), each of the Lenders, as hereinafter defined, and BANKBOSTON, N.A.
a national banking association ("BankBoston") in its capacity as agent and as a
Lender.
RECITALS
A. The Borrower is the borrower under certain credit facilities (each
having BankBoston as agent for the applicable lenders) which mature on March 29,
1998 (collectively, the "PRIOR FACILITIES") consisting of (i) an unsecured
revolving credit facility in the amount of up to $100,000,000 (which includes a
term loan in the amount of $5,034,536); and (iii) an unsecured revolving credit
facility in the amount of up to $50,000,000.
B. Borrower has requested that the existing revolving credit
facilities be replaced with the unsecured revolving credit facility provided for
herein (the "FACILITY") and that the outstanding indebtedness thereunder be
refinanced with the initial advance of loans under the Facility, and the Lenders
are willing to provide the requested Facility on the terms and conditions set
forth herein.
C. The existing term loan will be refinanced with a $5,034,536 term
loan from BankBoston to Borrower pursuant to a Term Loan Agreement of even date
herewith (the "BankBoston Term Loan").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. The following terms used in this Agreement
shall have the following meanings (such meanings to be applicable, except to the
extent otherwise indicated in a definition of a particular term, both to the
singular and the plural forms of the terms defined):
"ACCOMMODATION OBLIGATIONS", as applied to any Person, means any
Indebtedness or other contractual obligation or liability, contingent or
otherwise, of another Person in respect of which that Person is liable,
including, without limitation, any such Indebtedness, obligation or liability
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable, including in respect of any Partnership in which
that Person is a general partner, Contractual Obligations (contingent or
otherwise) arising through any agreement to purchase, repurchase or otherwise
acquire such Indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, or other financial condition, or to
make payment other than for value received.
"ACCOUNTANTS" means Ernst & Young LLP, any other "big six" accounting
firm or another firm of certified public accountants of national standing
selected by Borrower and acceptable to Agent.
"ACQUISITION PRICE" means the aggregate purchase price for an asset
including bona fide purchase money financing provided by the seller and all (or
Borrower's Share of, as applicable) existing Indebtedness pertaining to such
asset.
"ADJUSTED ASSET VALUE" means, as at any date of determination, the sum
(without duplication of any item) of (i) cash and Cash Equivalents owned by
Borrower (excluding any tenant deposits), (ii) the outstanding principal balance
of the notes receivable reflected on the December 31, 1997 Financials and such
other notes receivable hereafter owned by Borrower as may be approved by the
Requisite Lenders, (iii) an amount equal to (A) Operating Cash Flow for the most
recently ended Fiscal Quarter (as adjusted by Borrower to take into account any
acquisitions or dispositions of Properties owned by Borrower or any of its
Subsidiaries which adjustments must be approved by the Agent in its reasonable
discretion), TIMES (B) four (4), DIVIDED BY (C) 0.095, and (iv) an amount equal
to the lesser of (A) the aggregate Simon Partnership Values of all of the Simon
Partnerships or (B) fifteen percent (15%) of the sum of items (i), (ii) and
(iii) of this definition of Adjusted Asset Value.
"AFFILIATES" as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling", "controlled by" and "under common control
with"), as applied to any Person, means (i) the possession, directly or
indirectly, of the power to vote twenty-five percent (25%) or more of the
Securities having voting power for the election of directors of such Person or
otherwise to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities or by contract
or otherwise, or (ii) the ownership of a general partnership interest or a
limited partnership interest (or other ownership interest) representing
twenty-five percent (25%) or more of the outstanding limited partnership
interests or other ownership interests of such Person. In addition, any
corporation, partnership or other entity in which the ownership interests of
Borrower and its Subsidiaries represents ten percent(10%) or more of the
outstanding ownership interests shall be deemed to be an Affiliate of Borrower.
"AGENT" means BankBoston in its capacity as agent for the Lenders
under this Agreement, and shall include any successor Agent appointed pursuant
hereto and shall be deemed to refer to BankBoston in its individual capacity as
a Lender where the context so requires.
"AGGREGATE OCCUPANCY RATE" means, with respect to the Unencumbered
Properties at any time, the ratio, as of such date, expressed as a percentage,
of (i) the gross leasable area of all Unencumbered Properties occupied by
tenants paying rent pursuant to Leases other than Materially Defaulted Leases,
to (ii) the aggregate gross leasable area of all Unencumbered Properties,
excluding from both (i) and (ii) the gross leasable area of Construction
Projects prior to the date which is 3 months after the Rent Stabilization Date
for such Construction Project. Only premises which are actually open for
business shall be counted as occupied.
"AGREEMENT" means this Credit Agreement as the same may be amended,
supplemented or modified from time to time.
"APPLICABLE LIBOR RATE MARGIN" means, as of any date of determination:
(i) 0.85%, if Borrower's senior long-term unsecured debt obligations are rated
at least BBB+ or Baa1 by one or both of the Rating Agencies, (ii) 0.95%, if
Borrower's senior long-term unsecured debt obligations are rated at least BBB or
Baa2 by one or both of the Rating Agencies, (iii) 1.05%, if Borrower's senior
long-term unsecured debt obligations are rated at least BBB- or Baa3 by one or
both of the Rating Agencies, (iv) 1.25% if Borrower's senior long-term unsecured
debt obligations are rated at least Ba1/Ba2 or BB+/BB by one or both of the
Rating Agencies or (v) 1.50%, in any other case (including, without limitation,
if Borrower's senior long-term unsecured debt obligations are not rated by
either of the Rating Agencies).
"ASSIGNMENT AND ASSUMPTION" means an Assignment and Assumption in the
form of EXHIBIT A hereto (with blanks appropriately filled in) delivered to
Agent in connection with each assignment of a Lender's interest under this
Agreement pursuant to SECTION 11.12.
"ATC PARTNERSHIP" means Cannery Row Associates, a California limited
partnership in which the Borrower is the sole limited partner (having a 99%
interest) and the REIT is the sole general partner (having a 1% interest).
"BANKBOSTON TERM LOAN" means the term loan from BankBoston to Borrower
in the principal amount of $5,046,536 pursuant to a Term Loan Agreement of even
date herewith and any replacements, extensions or refinancing thereof. Such Term
Loan Agreement provides for the same interest rate and substantially the same
terms and conditions as set forth in this Agreement.
"BASE RATE" means, on any day, the higher of (i) the base rate of
interest per annum established from time to time by BankBoston at its principal
office in Boston, Massachusetts, and designated as its "base rate" as in effect
on such day, or (ii) the Federal Funds Rate in effect on such day PLUS one-half
percent (0.5%) per annum.
"BASE RATE LOANS" means those Loans bearing interest at the Base Rate.
"BENEFIT PLAN" means any employee pension benefit plan as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) in respect of which a
Person or an ERISA Affiliate is, or within the immediately preceding five (5)
years was, an "employer" as defined in Section 3(5) of ERISA.
"BORROWER DEBT" means (without duplication) all Indebtedness of
Borrower or any Subsidiary of Borrower, without offset or reduction in respect
of prepaid interest, restructuring fees or similar items MINUS, in the case of
Nonrecourse Indebtedness of a Partnership that is otherwise included in
Indebtedness of Borrower, the amount of such Indebtedness in excess of
Borrower's Share thereof, provided, however, Borrower Debt shall not include
Indebtedness consisting of an Accommodation Obligation with respect to the
Indebtedness of a Simon Partnership.
"BORROWER'S SHARE" means, in the case of a Partnership or a Simon
Partnership, Borrower's percentage ownership interest in such Partnership or
such Simon Partnership.
"BORROWING" means a borrowing of Loans under the Facility.
"BUSINESS DAY" means (i) with respect to any Borrowing, payment or
rate determination of LIBOR Loans, a day, other than a Saturday or Sunday, on
which Agent is open for business at its head office and on which dealings in
Dollars are carried on in the London interbank market, and (ii) for all other
purposes any day excluding Saturday, Sunday and any day which is a legal holiday
under the laws of the Commonwealth of Massachusetts, or is a day on which
banking institutions located in Massachusetts are required or authorized by law
or other governmental action to close.
"CAPITAL LEASES", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by an
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year after the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within ninety (90) days after the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from any two of Standard & Poor's Corporation,
Moody's Investors Services, Inc., Duff and Phelps, or Fitch Investors (or, if at
any time no two of the foregoing shall be rating such obligations, then from
such other nationally recognized rating services as may be acceptable to Agent)
and not listed for possible down-grade in Credit Watch published by Standard &
Poor's Corporation; (iii) commercial paper, other than commercial paper issued
by Borrower or any of its Affiliates, maturing no more than ninety (90) days
after the date of creation thereof and, at the time of acquisition, having a
rating of at least A-1 or P-1 from either Standard & Poor's Corporation or
Moody's Investor's Service, Inc. (or, if at any time neither Standard & Poor's
Corporation nor Moody's Investor's Service, Inc. shall be rating such
obligations, then the highest rating from such other nationally recognized
rating services as may be acceptable to Agent); (iv) domestic and Eurodollar
certificates of deposit or time deposits or bankers' acceptances maturing within
ninety (90) days after the date of acquisition thereof, overnight securities
repurchase agreements, or reverse repurchase agreements secured by any of the
foregoing types of securities or debt instruments issued, in each case, by (A)
any commercial bank organized under the laws of the United States of America or
any state thereof or the District of Columbia having combined capital and
surplus of not less than Two Hundred Fifty Million Dollars ($250,000,000) or (B)
any Lender, and (v) deposits in existing Merrill Lynch money market accounts
maintained by Borrower, such deposits being the proceeds from the exercise of
stock options pursuant to Borrower's employee stock option plans.
"CIP BUDGET AMOUNT" means the total budgeted cost (as such budget
shall be updated from time to time) of all Current Construction Projects
(excluding Expansion Projects) owned by Borrower or any of its Subsidiaries or
by any GP Partnership or Simon Partnership or with respect to which Borrower or
any of its Subsidiaries has any type of funding obligation, construction
management obligation or obligation to assure project completion or leasing,
provided, however, that with respect to Current Construction Projects owned by a
Simon Partnership for which the respective financial responsibilities of Simon
and its Subsidiaries on the one hand and Borrower and its Subsidiaries on the
other hand are in proportion to the respective ownership interests in the
applicable Simon Partnership, there shall be excluded from the CIP Budget Amount
the portion of such budgeted cost in excess of Borrower's Share in the
applicable Simon Partnership. Such costs shall include, without limitation, all
land acquisition costs (but may exclude costs of land used for expansion
projects which was not purchased for the purpose of such expansion project),
design and permitting costs, construction period real estate taxes, leasing
costs including brokers' commissions and tenant improvements, allowances or
reimbursements, construction costs and opening costs. With respect to any
Construction Projects financed with Indebtedness other than this Facility, such
costs shall also include construction period interest and all fees and expenses
associated with such Indebtedness.
"CLOSING DATE" means March 30, 1998.
"COMMISSION" means the Securities and Exchange Commission.
"COMMITMENT" means, with respect to any Lender, the principal amount
set out under such Lender's name under the heading "Loan Commitment" on the
signature pages attached to this Agreement or to any Amendment pursuant to
SECTION 2.10 or as set forth on an Assignment and Assumption executed by such
Lender, as assignee.
"COMPLETION DATE" means, with respect to a Construction Project, the
date on which certificates of occupancy (or the equivalent) have been issued for
at least 90% of the gross leasable area of such Construction Project.
"COMPLIANCE CERTIFICATE" means a certificate in the form of EXHIBIT B
delivered to Agent by Borrower pursuant to SECTION 2.1.2, SECTION 2.9.2, SECTION
3.1, SECTION 6.1.4, SECTION 6.1.11 or any other provision of this Agreement and
covering Borrower's compliance with the financial covenants contained in ARTICLE
IX.
"CONFIDENTIAL INFORMATION" has the meaning ascribed to such term in
SECTION 6.3.
"CONSTRUCTION PROJECT" means a project consisting of the construction
of new buildings, additions to existing buildings, and/or rehabilitation of
existing buildings (other than normal refurbishing and tenant fit-up work when
one retail tenant leases space previously occupied by another retail tenant).
"CONTAMINANT" means any pollutant (as that term is defined in 42
U.S.C. 9601(33)) or toxic pollutant (as that term is defined in 33 U.S.C.
1362(13)), hazardous substance (as that term is defined in 42 U.S.C. 9601(14)),
hazardous chemical (as that term is defined by 29 CFR Section 1910.1200(c)),
toxic substance, hazardous waste (as that term is defined in 42 U.S.C. 6903(5)),
radioactive material, special waste, petroleum (including crude oil or any
petroleum-derived substance, waste, or breakdown or decomposition product
thereof), any constituent of any such substance or waste, including, but not
limited to, polychlorinated biphenyls and asbestos, or any other substance or
waste deleterious to the environment the release, disposal or remediation of
which is now or at any time becomes subject to regulation under any
Environmental Law.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, lease, contract, undertaking, document or instrument to which
that Person is a party or by which it or any of its properties is bound, or to
which it or any of its properties is subject (including, without limitation, any
restrictive covenant affecting such Person or any of its properties).
"COURT ORDER" means any judgment, writ, injunction, decree, rule or
regulation of any court or Governmental Authority binding upon or applicable to
the Person in question.
"CURRENT CONSTRUCTION PROJECT" means a Construction Project from the
time of commencement of construction of footings and foundations for such
Construction Project until the Rent Stabilization Date of such Construction
Project.
"DEBT SERVICE" means, for any period, Interest Expense for such period
PLUS scheduled principal amortization (I.E., excluding any balloon payment due
at maturity) for such period on all Borrower Debt.
"DECEMBER 31, 1997 FINANCIALS" has the meaning given to such term in
SECTION 5.9.
"DEFAULTING LENDER" means any Lender which fails or refuses to perform
its obligations under this Agreement within the time period specified for
performance of such obligation or, if no time frame is specified, if such
failure or refusal continues for a period of five (5) Business Days after notice
from Agent.
"DOL" means the United States Department of Labor and any successor
department or agency.
"DOLLARS" AND "$" means the lawful money of the United States of
America.
"DRAWING DATE" means the date on which a draft under a Letter of
Credit is paid by the Agent.
"EBITDA" means, at any time, for the most recent Fiscal Quarter, the
Borrower's earnings (or loss) before interest, taxes, depreciation and
amortization, calculated for such period on a consolidated basis in conformity
with GAAP and excluding earnings attributable to Simon Partnerships or minority
interests MINUS gains (and PLUS losses) from extraordinary items or asset sales
or write-ups or forgiveness of Indebtedness, MINUS percentage rent income for
such Fiscal Quarter, PLUS twenty-five percent (25%) of the total percentage rent
income during such Fiscal Quarter and the three immediately preceding Fiscal
Quarters.
"ELIGIBLE ASSIGNEE" means (i) (A) (1) a commercial bank organized
under the laws of the United States or any state thereof; (2) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; or (3) a commercial bank organized under the laws of any other
country or a political subdivision thereof, PROVIDED that (x) such bank is
acting through a branch or agency located in the United States, or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; that (B) in each case, is (1) reasonably acceptable to Agent and
Borrower, and (2) has total assets in excess of $10,000,000,000 and a rating on
its (or its parent's) senior unsecured debt obligations of at least BBB by one
of the Rating Agencies; or (ii) any Lender or Affiliate of any Lender; PROVIDED
that no Affiliate of Borrower shall be an Eligible Assignee.
"ENVIRONMENTAL LAWS" has the meaning set forth in SECTION 5.22.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for (i) any liability under Environmental Laws, or (ii) damages
arising from, or costs incurred by such Governmental Authority in response to, a
Release or threatened Release of a Contaminant into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE" of any Person means any (i) corporation which is,
becomes, or is deemed to be a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Internal Revenue Code)
as such Person, (ii) partnership, trade or business (whether or not
incorporated) which is, becomes or is deemed to be under common control (within
the meaning of Section 414(c) of the Internal Revenue Code) with such Person,
(iii) other Person which is, becomes or is deemed to be a member of the same
"affiliated service group" (as defined in Section 414(m) of the Internal Revenue
Code) as such Person, or (iv) any other organization or arrangement described in
Section 414(o) of the Internal Revenue Code which is, becomes or is deemed to be
required to be aggregated pursuant to regulations issued under Section 414(o) of
the Internal Revenue Code with such Person pursuant to Section 414(o) of the
Internal Revenue Code.
"EVENT OF DEFAULT" means any of the occurrences set forth in ARTICLE X
after the expiration of any applicable grace period expressly provided therein.
"EXECUTIVE OFFICERS" mean David C. Bloom, William D. Bloom, Barry M.
Ginsburg, Leslie T. Chao and Thomas J. Davis.
"EXIT DATE has the meaning given to such term in SECTION 2.10.
"EXPANSION PROJECTS" means Construction Projects consisting of the
construction of additional buildings or building additions at a Portfolio
Property or a Simon Property which has been open and operating as a retail
center with a Property Occupancy Rate of at least 90% as of the start of such
Construction Project so long as the increase in the gross leasable area of such
Property as a result of such Construction Project does not exceed 150,000 square
feet.
"FACILITY" means the loan facility of One Hundred Sixty Million
Dollars ($160,000,000) described in SECTION 2.1.1.
"FAIR MARKET NET WORTH" means the Borrower's Adjusted Asset Value less
Total Liabilities.
"FDIC" means the Federal Deposit Insurance Corporation or any
successor thereto.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal Funds brokers of recognized
standing selected by Agent.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any governmental authority succeeding to its functions.
"FEE LETTER" means a certain fee letter between the Borrower and the
Agent dated February 26, 1998, as amended, modified or replaced from time to
time.
"FINANCIAL STATEMENTS" has the meaning given to such term in SECTION
6.1.2.
"FISCAL QUARTER" means each three-month period ending on March 31,
June 30, September 30 and December 31.
"FISCAL YEAR" means the fiscal year of Borrower which shall be the
twelve (12) month period ending on the last day of December in each year.
"FIXED CHARGES" means, for any period, Debt Service PLUS scheduled
dividends or distributions due with respect to preferred partnership units in
the Borrower or preferred stock in the REIT.
"FIXED RATE NOTICE" means, with respect to a LIBOR Loan pursuant to
SECTION 2.1.2, a notice substantially in the form of EXHIBIT E.
"FIXED RATE PREPAYMENT FEE" has the meaning given to such term in
SECTION 2.4.8(C).
"FOREIGN AFFILIATES" means Value Retail PLC, a corporation formed
under the laws of Great Britain and any other partnership or entity which may be
sponsored by or affiliated with Value Retail PLC and any other Affiliate (which
may need to be approved by Agent pursuant to SECTION 8.3) which may develop, own
or finance one or more Foreign Properties.
"FOREIGN INVESTMENTS" means the aggregate amount of all Investments by
Borrower in Borrower's Foreign Affiliates plus the face amount of all Letters of
Credit issued hereunder (or letters of credit issued by any other Person with
respect to which Borrower is directly or contingently liable) for the benefit of
such Foreign Affiliates, plus the aggregate Acquisition Prices of all Foreign
Properties owned by Borrower or its Subsidiaries.
"FOREIGN PROPERTIES" means all Properties which are not located within
the boundaries of the United States.
"FUNDING DATE" means, with respect to any Loan made after the Closing
Date, the date of the funding of such Loan.
"FUNDS FROM OPERATIONS" means, for any period, the Borrower's Funds
From Operations determined in accordance with the definition approved by the
National Association of Real Estate Investment Trusts.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, local, municipal or other political subdivision thereof or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GP PARTNERSHIP" means any Partnership in which Borrower, the REIT or
any Subsidiary of Borrower or the REIT is a general partner. As provided in
SECTION 8.8.1 the REIT may not become a partner in any additional Partnerships.
"GUARANTOR SUBSIDIARY" means a Wholly-Owned Subsidiary which executes
and delivers a guaranty of the Obligations in favor of the Agent and the
Lenders, which guaranty shall be substantially in the form of the Guaranty from
the REIT and shall be accompanied by certificates and a legal opinion reasonably
acceptable to the Agent.
"GUARANTY" means the Guaranty of even date herewith executed by the
REIT in favor of the Agent and the Lenders.
"INDEBTEDNESS", as applied to any Person (determined on a consolidated
basis and without duplication), means the sum of (i) all indebtedness,
obligations or other liabilities of such Person for borrowed money, (ii) all
indebtedness, obligations or other liabilities of such Person evidenced by
Securities or other similar instruments, (iii) all reimbursement obligations and
other liabilities of such Person with respect to letters of credit or banker's
acceptances issued for such Person's account, (iv) all obligations of such
Person to pay the deferred purchase price of Property or services or to
reimburse tenants for the costs of improvements constructed by such tenants on
the Property of such Person, (v) all obligations in respect of Capital Leases of
such Person, (vi) all Accommodation Obligations of such Person, (vii) all
indebtedness, obligations or other liabilities of such Person or others secured
by a Lien on any asset of such Person, whether or not such indebtedness,
obligations or liabilities are assumed by, or are a personal liability of, such
Person (including, without limitation, the principal amount of any assessment or
similar indebtedness encumbering any property), (viii) all indebtedness,
obligations or other liabilities (other than interest expense liability) in
respect of Interest Rate Contracts and foreign currency exchange agreements, and
(ix) ERISA obligations currently due and payable. Indebtedness shall not include
accrued ordinary operating expenses payable on a current basis.
"INTEREST EXPENSE" means, for any period, total interest expense,
whether paid, accrued or capitalized (including the interest component of
Capital Leases) in respect of Borrower Debt, including, without limitation,
amortization of loan acquisition costs, all commissions, discounts and other
fees and charges owed with respect to letters of credit, net costs under
Interest Rate Contracts, and Unused Facility Fees payable to Lenders.
"INTEREST PERIOD" means, relative to any LIBOR Loans comprising part
of the same Borrowing, the period beginning on (and including) the date on which
such LIBOR Loans are made as, or converted into, LIBOR Loans, and ending on (but
excluding) the day which numerically corresponds to such date thirty (30), sixty
(60) or ninety (90) days thereafter, in either case as Borrower may select in
its relevant Notice of Borrowing pursuant to SECTION 2.1.2; PROVIDED, HOWEVER,
that:
(a) if such Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
following Business Day; and
(b) no Interest Period may end later than the then
applicable Termination Date.
"INTEREST RATE CONTRACTS" means, collectively, interest rate swap,
collar, cap or similar agreements providing interest rate protection.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended from time to time hereafter, and any successor statute.
"INVESTMENT" means, as applied to any Person, any direct or indirect
purchase or other acquisition by that Person of Securities, or of a beneficial
interest in Securities, of any other Person, and any direct or indirect loan,
advance (other than deposits with financial institutions available for
withdrawal on demand, prepaid expenses, advances to employees and similar items
made or incurred in the ordinary course of business), or capital contribution by
such Person to any other Person, including all Indebtedness and accounts owed by
that other Person which are not current assets or did not arise from sales of
goods or services to that Person in the ordinary course of business.
"INVESTMENT MORTGAGES" mean notes receivable or other indebtedness
secured by mortgages or other security interests directly or indirectly owned by
Borrower or any Subsidiary of Borrower, including certificates of interest in
real estate mortgage investment conduits.
"INVESTMENT PARTNERSHIP" means any Partnership in which Borrower or
any Subsidiary of Borrower has an ownership interest, whose financial results
are not consolidated under GAAP in the Financial Statements. Investment
Partnerships do not include Simon Partnerships.
"IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.
"ISSUANCE DATE" means the date of issuance of any Letters of Credit.
"LAND" means unimproved real estate, including future phases of a
partially completed project, owned by Borrower or any Subsidiary of Borrower for
the purpose of future development of improvements. For purposes of the foregoing
definition, "unimproved" shall mean Land on which the construction of building
improvements has not commenced or land on which construction has been
discontinued for a continuous period longer than sixty (60) days prior to
completion.
"LEASE" means a lease or license between Borrower and a tenant or
licensee with respect to premises located within a Portfolio Property.
"LENDER TAXES" has the meaning given to such term in SECTION 2.4.7.
"LENDERS" means BankBoston and any other bank, finance company,
insurance or other financial institution which is or becomes a party to this
Agreement by execution of a counterpart signature page hereto or an Assignment
and Assumption, as assignee. With respect to matters requiring the consent to or
approval of all Lenders at any given time, all then existing Defaulting Lenders
will be disregarded and excluded, and, for voting purposes only, "all Lenders"
shall be deemed to mean "all Lenders other than Defaulting Lenders".
"LETTER OF CREDIT" means a letter of credit issued by the Agent for
the account of Borrower pursuant to SECTION 2.9.
"LIABILITIES AND COSTS" means all claims, judgments, liabilities,
obligations, responsibilities, losses, damages (including lost profits),
punitive or treble damages, costs, disbursements and expenses (including,
without limitation, reasonable attorneys, experts' and consulting fees and costs
of investigation and feasibility studies), fines, penalties and monetary
sanctions, interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future.
"LIBOR" means, relative to any Interest Period for any LIBOR Loan
included in any Borrowing, the per annum rate (reserve adjusted as hereinbelow
provided) of interest quoted by Agent, rounded upwards, if necessary, to the
nearest one-sixteenth of one percent (0.0625%) at which Dollar deposits in
immediately available funds are offered to Agent by leading banks in the
Eurodollar interbank market two (2) Business Days prior to the beginning of such
Interest Period, for delivery on the first day of such Interest Period for a
period approximately equal to such Interest Period and in an amount equal or
comparable to the LIBOR Loan to which such Interest Period relates. The
foregoing rate of interest shall be reserve adjusted by dividing LIBOR by one
(1.00) minus the LIBOR Reserve Percentage, with such quotient to be rounded
upward to the nearest whole multiple of one-hundredth of one percent (0.01%).
All references in this Agreement or other Loan Documents to LIBOR shall mean and
include the aforesaid reserve adjustment.
"LIBOR LOAN" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to LIBOR.
"LIBOR OFFICE" means, relative to any Lender, the office of such
Lender designated as such on the counterpart signature pages hereto or such
other office of a Lender as designated from time to time by notice from such
Lender to Agent, whether or not outside the United States, which shall be making
or maintaining LIBOR Loans of such Lender.
"LIBOR RESERVE PERCENTAGE" means, relative to any Interest Period for
LIBOR Loans made by any Lender, the reserve percentage (expressed as a decimal)
equal to the actual aggregate reserve requirements (including all basic,
emergency, supplemental, marginal and other reserves and taking into account any
transactional adjustments or other scheduled changes in reserve requirements)
announced within Agent as the reserve percentage applicable to Agent as
specified under regulations issued from time to time by the Federal Reserve
Board. The LIBOR Reserve Percentage shall be based on Regulation D of the
Federal Reserve Board or other regulations from time to time in effect
concerning reserves for "Eurocurrency Liabilities" from related institutions as
though Agent were in a net borrowing position.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, security interest, encumbrance (including, but
not limited to, easements, rights-of-way, zoning restrictions and the like),
lien (statutory or other), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including without
limitation any conditional sale or other title retention agreement, the interest
of a lessor under a Capital Lease, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement or document having similar effect (other than a financing statement
filed by a "true" lessor pursuant to Section 9408 of the Uniform Commercial
Code) naming the owner of the asset to which such Lien relates as debtor, under
the Uniform Commercial Code or other comparable law of any jurisdiction.
"LOAN ACCOUNT" has the meaning given to such term in SECTION 2.3.
"LOAN DOCUMENTS" means this Agreement, the Loan Notes, the Guaranty
and all other agreements, instruments and documents (together with amendments
and supplements thereto and replacements thereof) now or hereafter executed by
the Borrower, which evidences or relates to the Obligations.
"LOAN NOTES" means the promissory notes evidencing the Loans in the
aggregate original principal amount of One Hundred Sixty Million Dollars
($160,000,000) executed by Borrower in favor of Lenders, as they may be amended,
supplemented, replaced or modified from time to time. The initial Loan Notes and
any replacements thereof shall be substantially in the form of EXHIBIT C.
"LOANS" means the Loans made pursuant to the Facility.
"LONG TERM UNSECURED INDEBTEDNESS" means all Unsecured Indebtedness
which at the time of determination has a maturity of not less than five (5)
years.
"MAJORITY PARTNERSHIP" means any Partnership in which Borrower has an
ownership interest, whose financial results are consolidated under GAAP in the
Financial Statements.
"MATERIAL ADVERSE EFFECT" means, with respect to a Person or Property,
a material adverse effect upon the condition (financial or otherwise),
operations, performance or properties of such Person or Property. The phrase
"has a Material Adverse Effect" or "will result in a Material Adverse Effect" or
words substantially similar thereto shall in all cases be intended to mean "has
resulted, or will or could reasonably be anticipated to result, in a Material
Adverse Effect", and the phrase "has no (or does not have a) Material Adverse
Effect" or "will not result in a Material Adverse Effect" or words substantially
similar thereto shall in all cases be intended to mean "does not or will not or
could not reasonably be anticipated to result in a Material Adverse Effect".
"MATERIALLY DEFAULTED LEASES" means Leases under which the tenant has
failed to make any payment of base rent, percentage rent or additional rent when
due and such failure has continued for more than ninety (90) days after the due
date of the applicable payment or any Lease which the Borrower has terminated
based on any default by the Tenant thereunder.
"MAXIMUM LOAN AMOUNT" means, at any time, the amount of the Facility
from time to time less the aggregate face amount of Letters of Credit
outstanding hereunder provided, however, that after any Event of Default has
occurred and until the same shall have been remedied or waived pursuant to
SECTION 12.4, the Maximum Loan Amount shall be zero.
"MULTIEMPLOYER PLAN" means an employee benefit plan defined in Section
4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years
was, contributed to by a Person or an ERISA Affiliate of such Person.
"NET OPERATING INCOME" means with respect to any Fiscal Quarter of the
Borrower and with respect to any one or more of its Properties, (i) the total
rental and other operating income from the operation of such Properties after
deducting all expenses and other proper charges incurred by the Borrower in
connection with the operation of such Properties during such Fiscal Quarter,
including, without limitation, property operating expenses, real estate taxes
and bad debt expenses, but before payment or provision for debt service, income
taxes, and depreciation, amortization, and other non-cash expenses, all as
determined in accordance with generally accepted accounting principles, MINUS
(ii) percentage rent income of such Properties for such Fiscal Quarter, PLUS
(iii) twenty-five percent (25%) of the total percentage rent income of such
Properties during such Fiscal Quarter and the three immediately preceding Fiscal
Quarters, minus (iv) the Replacement Reserve Amount for such Properties. With
respect to Properties located outside of the United States, Net Operating Income
shall be converted from the currency in which the applicable income and expenses
are paid to Dollars using the currency exchange rates in effect as of the end of
the applicable Fiscal Quarter.
"NET OFFERING PROCEEDS" means all cash proceeds received by the REIT
as a result of the sale of common, preferred or other classes of stock in the
REIT (if and only to the extent reflected in stockholders' equity on the
consolidated balance sheet of the REIT prepared in accordance with GAAP) LESS
customary costs and discounts of issuance paid by the REIT, all of which
proceeds shall have been concurrently contributed by the REIT to Borrower as
additional capital.
"NON PRO RATA LOAN" means a Loan with respect to which fewer than all
Lenders have funded their respective Pro Rata Shares of such Loans and the
failure of the non-funding Lender or Lenders to fund its or their respective Pro
Rata Shares of such Loan constitutes a breach of this Agreement.
"NON-RETAIL PROPERTIES" means Portfolio Properties which are not
intended to be used as or in connection with a retail Property including
residential or other Properties in the vicinity of Construction Projects
acquired to facilitate the obtaining of governmental permits or the resolution
of zoning or land use issues related to such Construction Projects.
"NONRECOURSE INDEBTEDNESS" means Indebtedness with respect to which
recourse for payment is contractually limited to specific assets encumbered by a
Lien securing such Indebtedness.
"NON-RENEWING LENDER" has the meaning given to such term in SECTION
2.10.
"NOTICE OF BORROWING" means, with respect to a proposed Borrowing
pursuant to SECTION 2.1.2, a notice substantially in the form of EXHIBIT D.
"OBLIGATIONS" means, from time to time, all Indebtedness of Borrower
owing to Agent, any Lender or any Person entitled to indemnification pursuant to
SECTION 12.2, or any of their respective successors, transferees or assigns, of
every type and description, whether or not evidenced by any note, guaranty or
other instrument, arising under or in connection with this Agreement or any
other Loan Document, whether or not for the payment of money, whether direct or
indirect (including those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising and however acquired. The
term includes, without limitation, all interest, charges, expenses, fees,
reasonable attorneys' fees and disbursements, reasonable fees and disbursements
of expert witnesses and other consultants, and any other sum now or hereinafter
chargeable to Borrower under or in connection with this Agreement or any other
Loan Document.
"OFFICER'S CERTIFICATE" means a certificate signed by a specified
officer of a Person certifying as to the matters set forth therein.
"OPERATING CASH FLOW" means, at any time, for the most recent Fiscal
Quarter, EBITDA MINUS cash income taxes paid during such Fiscal Quarter and not
deducted on the Financial Statements in determining earnings for such Fiscal
Quarter or any prior period MINUS the Replacement Reserve Amount for the
Portfolio Properties.
"PARTNERSHIP" means any general or limited partnership, joint venture,
corporation, limited liability company or limited liability partnership in which
Borrower, the REIT or any Subsidiary of Borrower or the REIT has an ownership
interest and which is not a Wholly-Owned Subsidiary, excluding, however, the
Simon Partnerships.
"PARTNERSHIP AGREEMENT" means, with respect to any Partnership, on a
collective basis, its partnership agreement, its agreement of limited
partnership agreement and certificate of limited partnership (if any), its
operating or management agreement and articles or certificate of organization,
or other organizational or governance document(s).
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the functions thereof.
"PERMIT" means any permit, approval, authorization, license, variance
or permission required from a Governmental Authority under an applicable
Requirement of Law.
"PERMITTED LIENS" means:
(a) Liens (other than Environmental Liens and any Lien
imposed under ERISA) for taxes, assessments or charges of any
Governmental Authority or claims not yet due or not yet required to be
paid pursuant to SECTION 7.4;
(b) Liens (other than any Lien imposed under ERISA)
incurred or deposits made in the ordinary course of business (including
without limitation surety bonds and appeal bonds) in connection with
workers' compensation, unemployment insurance and other types of social
security benefits or to secure the performance of tenders, bids,
leases, contracts (other than for the repayment of Indebtedness),
statutory obligations;
(c) any laws, ordinances, easements, rights of way,
restrictions, exemptions, reservations, conditions, defects or
irregularities in title, limitations, covenants or other matters that,
in the aggregate, do not in the reasonable opinion of Borrower (i)
materially interfere with the occupation, use and enjoyment of the
Property or other assets encumbered thereby, by the Person owning such
Property or other assets, in the normal course of its business or (ii)
materially impair the value of the Property subject thereto;
(d) Liens imposed by laws, such as mechanics' liens and
other similar liens arising in the ordinary course of business which
either (i) have been in existence for less than 120 days from the date
of filing or (ii) have been in existence for longer than said 120 days
so long as the aggregate amount of all such Liens is less than $100,000
for each Construction Project and the Borrower is in good faith
contesting the validity or amount thereof by appropriate proceedings,
provided however that any Lien permitted under this paragraph must be
discharged prior to foreclosure thereof;
(e) Leases to tenants which are not Affiliates of Borrower
existing on the date hereof or subsequently entered into in the
ordinary course of business;
(f) Liens securing judgments or awards permitted by
SECTION 8.10(D); and
(g) Liens securing purchase money Indebtedness permitted
by SECTION 8.10(F) provided that each such Lien shall encumber only the
specific item of equipment purchased with the proceeds of the
Indebtedness secured thereby.
"PERSON" means any natural person, employee, corporation, limited
partnership, general partnership, joint stock company, limited liability
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, or
any other non-governmental entity, or any Governmental Authority.
"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA
(other than a Multiemployer Plan) in respect of which Borrower or an ERISA
Affiliate, as applicable, is an "employer" as defined in Section 3(5) of ERISA.
"PORTFOLIO OCCUPANCY RATE" means, with respect to the Portfolio
Properties at any time, the ratio, as of such date, expressed as a percentage,
of (i) the gross leasable area of all Portfolio Properties occupied by tenants
paying rent pursuant to Leases other than Materially Defaulted Leases, to (ii)
the aggregate gross leasable area of all Portfolio Properties excluding from
both (i) and (ii) the gross leasable area of Construction Projects thereon prior
to the date which is 3 months after the Rent Stabilization Date for such
Construction Project. Only premises which are actually open for business shall
be counted as occupied. Non-Retail Properties shall be excluded from Portfolio
Properties for purposes of this definition.
"PORTFOLIO PROPERTIES" means real property improved with one or more
completed buildings that is owned directly or indirectly, in whole or in part,
by Borrower, any Subsidiary of Borrower or any Partnership, including the
Unencumbered Properties and the Properties listed on SCHEDULE 1.1, as such
schedule may be updated from time to time to reflect the acquisition or
disposition of Portfolio Properties. Portfolio Properties do not include the
Simon Properties.
"PREPAYMENT DATE" has the meaning given to such term in SECTION
2.4.8(C).
"PRO FORMA UNSECURED DEBT SERVICE CHARGES" means, for any Fiscal
Quarter of the Borrower, the sum of (a) an amount determined by the Borrower
(and approved by the Agent in its sole discretion) based on a twenty-five (25)
year mortgage style amortization schedule, calculated on the outstanding
principal amount of all Unsecured Indebtedness excluding Long Term Unsecured
Indebtedness and an interest rate equal to the greater of (i) the weighted
average annual interest rate actually applicable to all Unsecured Indebtedness
excluding Long Term Unsecured Indebtedness during such Fiscal Quarter or (ii)
the then current ten (10) year U.S. Treasury bill yield plus one and
three-quarters percent (1.75%) plus (b) one-quarter of the actual debt service
charges due during the current fiscal year pursuant to the Long Term Unsecured
Indebtedness.
"PRO RATA SHARE" means, with respect to any Lender, a fraction
(expressed as a percentage), the numerator of which shall be the amount of such
Lender's Commitment and the denominator of which shall be the aggregate amount
of all of the Lenders' Commitments.
"PROCEEDINGS" means, collectively, all actions, suits and proceedings
before, and investigations commenced or threatened by or before, any court or
Governmental Authority with respect to a Person.
"PROPERTY" means, as to any Person, all real or personal property
(including, without limitation, buildings, facilities, structures, equipment and
other assets, tangible or intangible) owned by such Person.
"PROPERTY OCCUPANCY RATE" means, with respect to any Portfolio
Property or Simon Property at any time, the ratio, as of such date, expressed as
a percentage, of (i) the gross leasable area of such Portfolio Property or Simon
Property occupied by tenants paying rent pursuant to Leases other than
Materially Defaulted Leases, to (ii) the aggregate gross leasable area of such
Portfolio Property or Simon Property, excluding from both (i) and (ii) the gross
leasable area of Construction Projects prior to the date which is 3 months after
the Rent Stabilization Date for such Construction Project. Only premises which
are actually open for business shall be counted as occupied.
"RATING AGENCY" means either of (i) Standard & Poor's, a division of
The McGraw-Hill Companies, Inc. or (ii) Moody's Investors Services, Inc.
"RECOURSE SIMON DEBT AMOUNT" means the aggregate amount of the
Indebtedness of any Simon Partnership for which the Borrower has recourse
liability pursuant to a guaranty or other Accommodation Obligation provided,
however, that with respect to any such Indebtedness guaranteed jointly and
severally by Borrower and Simon (and with respect to which Borrower would have a
contribution claim against Simon) the Recourse Simon Debt Amount shall exclude
the amount of such guaranteed Indebtedness in excess of Borrower's Share in the
applicable Simon Partnership.
"REGULATIONS G, T, U AND X" mean such Regulations of the Federal
Reserve Board as in effect from time to time.
"REIT" means Chelsea GCA Realty, Inc., a Maryland corporation.
"RELEASE" means the release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment or into or out of any property, including the
movement of Contaminants through or in the air, soil, surface water, groundwater
or property.
"REMEDIAL ACTION" means any action required by applicable
Environmental Laws to (i) clean up, remove, treat or in any other way address
Contaminants in the indoor or outdoor environment; (ii) prevent the Release or
threat of Release or minimize the further Release of Contaminants so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; or (iii) perform preremedial studies and
investigations and post-remedial monitoring and care.
"RENEWAL DATE" has the meaning given to such term in SECTION 2.10.
"RENT STABILIZATION DATE" means, with respect to each Construction
Project, the date which shall be (i) the first day of a Fiscal Quarter (ii) not
more than six (6) months after the date on which the first certificate of
occupancy (or the equivalent) has been issued for any portion of such
Construction Project and (iii) set forth in a notice from Borrower to Agent
given prior to such Rent Stabilization Date.
"REPLACEMENT RESERVE AMOUNT" means, with respect to any Property or
group of Properties for any Fiscal Quarter, a reserve for replacement reserves,
leasing costs and recurring capital expenditures equal to the product of $0.075
TIMES the gross leasable area of such Property or group of Properties excluding
the gross leasable area of any Construction Project thereon prior to the Rent
Stabilization Date with respect to such Construction Project.
"REPORTABLE EVENT" means any of the events described in Section
4043(b) of ERISA, other than an event for which the thirty (30) day notice
requirement is waived by regulations.
"REQUIREMENTS OF LAW" mean, as to any Person, the charter and by-laws,
Partnership Agreement or other organizational or governing documents of such
Person, and any law, rule or regulation, Permit, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject, including without limitation, the Securities
Act, the Securities Exchange Act, Regulations G, T, U and X, FIRREA and any
certificate of occupancy, zoning ordinance, building, environmental or land use
requirement or Permit or occupational safety or health law, rule or regulation.
"REQUISITE LENDERS" mean, collectively, Lenders whose Pro Rata Shares,
in the aggregate, are at least sixty-six and two-thirds percent (66-2/3%),
PROVIDED that, in determining such percentage at any given time, all then
existing Defaulting Lenders will be disregarded and excluded and the Pro Rata
Shares of Lenders shall be redetermined, for voting purposes only, to exclude
the Pro Rata Shares of such Defaulting Lenders and PROVIDED, FURTHER, that the
Agent must always be among the Requisite Lenders except that after an Event of
Default described in SECTION 10.1.1 decisions by the Requisite Lenders to
accelerate and/or exercise remedies pursuant to SECTION 10.2.1 shall be made
without regard to whether the Agent is among the Requisite Lenders.
"REVOLVING LOANS" means the Revolving Loans made pursuant to the
Facility under SECTION 2.1.1.
"SECURED BORROWER DEBT" means all Borrower Debt that is secured by a
Lien on any Property.
"SECURITIES" means any stock, shares, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities", or any certificates of interest, shares, or
participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing, but shall not include any evidence of the Obligations, PROVIDED that
Securities shall not include Cash Equivalents, Investment Mortgages or interests
in Partnerships.
"SECURITIES ACT" means the Securities Act of 1933, as amended to the
date hereof and from time to time hereafter, and any successor statute.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended to the date hereof and from time to time hereafter, and any successor
statute.
"SENIOR LOANS" has the meaning given to such term in SECTION 11.4.2.
"SIMON" means Simon DeBartolo Group, L.P.
"SIMON PARTNERSHIP" means each limited liability company general or
limited partnership, corporation or joint venture in which ownership interests
are held by (i) Borrower or one of its Wholly-Owned Subsidiaries and (ii) Simon
or one of its wholly-owned Subsidiaries.
"SIMON PARTNERSHIP CASH FLOW" means, at any time, with respect to any
Simon Partnership, for the most recent Fiscal Quarter, Simon Partnership EBITDA
of such Simon Partnership MINUS the Replacement Reserve Amount for the Simon
Property owned by such Simon Partnership.
"SIMON PARTNERSHIP EBITDA" means, at any time, with respect to any
Simon Partnership, for the most recent Fiscal Quarter, such Simon Partnership's
earnings (or loss) before interest, taxes, depreciation and amortization,
calculated for such period on a consolidated basis in conformity with GAAP minus
gains (and PLUS losses) from extraordinary items or asset sales or write-ups or
forgiveness of Indebtedness, MINUS percentage rent income for such Fiscal
Quarter, PLUS twenty-five percent (25%) of the total percentage rent income
during such Fiscal Quarter and the three immediately preceding Fiscal Quarters.
"SIMON PARTNERSHIP VALUE" means, as at any date of determination, with
respect to any Simon Partnership, the Borrower's Share of an amount equal to the
excess, if any, of (i) (A) Simon Partnership Cash Flow of such Simon Partnership
for the most recently ended Fiscal Quarter, TIMES (B) four (4), DIVIDED BY (C)
0.095, MINUS (ii) all Indebtedness and other liabilities of such Simon
Partnership.
"SIMON PROPERTY" means any Property owned by a Simon Partnership.
"SOLVENT" means, as to any Person at the time of determination, that
such Person (i) owns property the value of which (both at fair valuation and at
present fair saleable value) is greater than the amount required to pay all of
such Person's liabilities (including contingent liabilities and debts); (ii) is
able to pay all of its debts as such debts mature; and (iii) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
"SUBSIDIARY" of a Person means any corporation, Partnership, trust or
other non-Partnership entity of which a majority of the stock (or equivalent
ownership or controlling interest) having voting power to elect a majority of
the Board of Directors (if a corporation) or to select the trustee or equivalent
controlling interest, shall, at the time such reference becomes operative, be
directly or indirectly owned or controlled by such Person.
"TAXES" means all federal, state, local and foreign income and gross
receipts taxes.
"TERMINATION DATE" has the meaning given to such term in SECTION
2.1.4.
"TERMINATION EVENT" means (i) any Reportable Event, (ii) the
withdrawal of a Person, or an ERISA Affiliate from a Benefit Plan during a plan
year in which it was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA, (iii) the occurrence of an obligation arising under Section 4041 of
ERISA of a Person or an ERISA Affiliate to provide affected parties with a
written notice of an intent to terminate a Benefit Plan in a distress
termination described in Section 4041(c) of ERISA, (iv) the institution by the
PBGC of proceedings to terminate any Benefit Plan under Section 4042 of ERISA,
(v) any event or condition which constitutes grounds under Section 4042 of ERISA
for the appointment of a trustee to administer a Benefit Plan, (vi) the partial
or complete withdrawal of such Person or any ERISA Affiliate from a
Multiemployer Plan, or (vii) the adoption of an amendment by any Person or any
ERISA Affiliate to terminate any Benefit Plan.
"TOTAL LIABILITIES" means (i) all Indebtedness of Borrower and its
Subsidiaries (excluding Indebtedness relating to the Indebtedness of Simon
Partnerships), whether or not such Indebtedness would be included as a liability
on the balance sheet of Borrower in accordance with GAAP, plus (ii) all other
liabilities of every nature and kind of Borrower and its Subsidiaries that would
be included as liabilities on the balance sheet of Borrower in accordance with
GAAP plus (iii) the Recourse Simon Debt Amount.
"UNENCUMBERED NET OPERATING INCOME" means, with respect to any Fiscal
Quarter of the Borrower, the sum of the Net Operating Income of all of its
Properties which were Unencumbered Properties hereunder during such Fiscal
Quarter.
"UNENCUMBERED PROPERTY" means a Property which at the date of
determination, (i) is owned in fee by Borrower or by a Guarantor Subsidiary,
(ii) is improved with one or more completed retail buildings of a type
consistent with Borrower's business strategy; (iii) is not directly or
indirectly subject to any Lien (other than Permitted Liens) or to any negative
pledge agreement or other agreement (other than this Agreement) that prohibits
the creation of any Lien thereon; (iv) is a Property with respect to which each
of the representations contained in SECTION 5.22 and in SECTION 5.23 hereof is
true and accurate as of such date of determination; (v) may be legally conveyed
separately from any other Real Estate without the need to obtain any subdivision
approval, zoning variance or other consent or approval from an unrelated Person;
(vi) is located in the United States, and (vii) to the extent requested by the
Agent, the Borrower has delivered to the Agent historical operating and leasing
information relating to such Unencumbered Property, in form and substance
satisfactory to the Agent.
"UNENCUMBERED PROPERTY VALUE" means, with respect to any Unencumbered
Property at any time, an amount computed as follows: (a) the Net Operating
Income of such Unencumbered Property for the most recent Fiscal Quarter for
which financial statements have been delivered to the Agent pursuant to SECTION
6.1; (b) then multiplying by four (4); and (c) dividing such product by 0.095.
With respect to any Unencumbered Property which, during the applicable Fiscal
Quarter, has been acquired by Borrower or has had the building or buildings
being constructed thereon completed and occupied by tenants, Borrower may
compute the Unencumbered Property Value for such Unencumbered Property based on
a pro forma Net Operating Income for such Fiscal Quarter, which computation must
be approved by the Agent.
"UNMATURED EVENT OF DEFAULT" means an event which, with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
"UNSECURED INDEBTEDNESS" means all Indebtedness of Borrower or of any
of its Subsidiaries which is not secured by a Lien on any Properties including,
without limitation, the Loans, the Borrower's reimbursement obligations relating
to the Letters of Credit, the BankBoston Term Loan, the Unsecured Term Notes and
any Indebtedness evidenced by any bonds, debentures, notes or other debt
securities which may be hereafter issued by Borrower or by the REIT. Unsecured
Indebtedness shall not include accrued ordinary operating expenses payable on a
current basis.
"UNSECURED TERM NOTE INDENTURE" means the Indenture dated as of
January 23, 1996 among the Borrower, the REIT and State Street Bank and Trust
Company, as trustee, as supplemented by First Supplemental Indenture dated as of
January 23, 1996, by Second Supplemental Indenture dated as of October 23, 1996
and by Third Supplemental Indenture dated as of October 21, 1997, and as
hereafter amended or further supplemented.
"UNSECURED TERM NOTE SECURED DEBT LIMITATION" means the provision
contained in the Unsecured Term Note Indenture which limits the Borrower's
"Secured Debt" to not more than 40% of its "Adjusted Total Assets" (as such
quoted terms are defined in said Indenture). If the Unsecured Term Note
Indenture is amended to reduce the permitted amount of Secured Borrower Debt
this defined term shall automatically be deemed to incorporate such amendment,
but if the Unsecured Term Note Indenture is amended to increase the permitted
amount of Secured Borrower Debt this definition shall not be deemed to
incorporate such amendment until the same has been approved by the Requisite
Lenders.
"UNSECURED TERM NOTES" means, collectively, (i) Borrower's 7 3/4%
notes due 2001 in the aggregate principal amount of $100,000,000, (ii)
Borrower's Remarketed Floating Rate Reset Notes due 2001 in the aggregate
principal amount of $60,000,000, (iii) Borrower's 7 1/4% notes due 2007 in the
aggregate principal amount of $125,000,000 and (iv) any other unsecured
indebtedness of the Borrower which at the time of its issuance matures not
earlier than 24 months after the then applicable Termination Date.
"UNUSED AMOUNT" has the meaning given to such term in SECTION 2.5.1.
"UNUSED FACILITY FEE" has the meaning given to such term in SECTION
2.5.1.
"VALUE OF ALL UNENCUMBERED PROPERTIES" means, when determined as of
the end of a Fiscal Quarter, an amount computed as follows: (a) Unencumbered Net
Operating Income; (b) then multiplying by four (4); and (c) dividing such
product by 0.095. When determined as of a date which is during a Fiscal Quarter
based on an updated list of Unencumbered Properties attached to the applicable
Compliance Certificate, the Value of All Unencumbered Properties most recently
computed as provided in the preceding sentence of this definition will be
adjusted by subtracting the Unencumbered Property Value of the previous
Unencumbered Properties which have been deleted from such list and by adding the
Unencumbered Property Value of the Unencumbered Properties which have been added
to such list
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary which is 100% owned by
Borrower.
"WOODBURY COMMON" means the Property owned by Borrower located at the
intersection of NY State Route 32 and the New York State Thruway in the Town of
Woodbury, Orange County, New York, including all expansions and additions
thereto.
1.2 COMPUTATION OF TIME PERIODS. In this Agreement, in the computation
of periods of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each mean "to
and including". Periods of days referred to in this Agreement shall be counted
in calendar days unless Business Days are expressly prescribed.
1.3 TERMS.
1.3.1 Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given them in
accordance with GAAP. All references herein to Borrower, the REIT or any other
Person, in connection with any financial or related covenant, representation or
calculation, shall be understood to mean and refer to Borrower, the REIT and
such other Person on a consolidated basis in accordance with GAAP, unless
otherwise specifically provided and subject in all events to any adjustments
herein set forth.
1.3.2 Any time the phrase "to the best of Borrower's knowledge"
or a phrase similar thereto is used herein, it means: "to the actual knowledge
of the then executive or senior officers of Borrower and the REIT, after
reasonable inquiry of those agents, employees or contractors of the REIT or
Borrower who could reasonably be anticipated to have knowledge with respect to
the subject matter or circumstances in question and after review of those
documents or instruments which could reasonably be anticipated to be relevant to
the subject matter or circumstances in question provided that such reasonable
inquiry need not be undertaken at the time of each Compliance Certificate."
1.3.3 In each case where the consent or approval of Agent, all
Lenders and/or Requisite Lenders is required, or their non-obligatory action is
requested by Borrower, such consent, approval or action shall be in the sole and
absolute discretion of Agent and, as applicable, each Lender, unless otherwise
specifically indicated.
1.3.4 Any time the word "or" is used herein, unless the context
otherwise clearly requires, it has the inclusive meaning represented by the
phrase "and/or". The words "hereof", "herein", "hereby", "hereunder" and similar
terms refer to this Agreement as a whole and not to any particular provision of
this Agreement. Article, section, subsection, clause, exhibit and schedule
references are to this Agreement unless otherwise specified. Any reference in
this Agreement to this Agreement or to any other Loan Document includes any and
all amendments, modifications, supplements, renewals or restatements thereto or
thereof, as applicable.
ARTICLE II
LOANS AND LETTERS OF CREDIT
2.1 LOAN ADVANCES AND REPAYMENT.
2.1.1 MAXIMUM LOAN AMOUNT. Subject to the terms and conditions
set forth in this Agreement, Lenders hereby agree to make Loans to Borrower from
time to time during the period from the Closing Date to the Business Day next
preceding the Termination Date, in an aggregate outstanding principal amount
which shall not exceed the Maximum Loan Amount at any time. All Loans under this
Agreement shall be made by Lenders simultaneously and proportionately to their
respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any failure by any other Lender to perform its obligation to
make a Loan hereunder and that the Commitment of any Lender shall not be
increased or decreased as a result of the failure by any other Lender to perform
its obligation to make a Loan. Loans may be voluntarily prepaid pursuant to
SECTION 2.6.1 and, subject to the provisions of this Agreement, any amounts so
prepaid may be reborrowed under this SECTION 2.1.1. The principal balance of the
Loans shall be payable in full on the Termination Date. The Loans will be
evidenced by the Loan Notes.
2.1.2 NOTICE OF BORROWING.
(a) (i) Whenever Borrower desires to
borrow under this SECTION 2.1, but in no event more than three (3)
times during any one (1) calendar month, Borrower shall give Agent, at
115 Perimeter Center Place, N.E., Suite 500, Atlanta, GA 30346, Attn:
Lori Y. Litow (Fax No. (770)390-8434) or such other address as Agent
shall designate, an original or facsimile NOTICE OF BORROWING no later
than 9:00 A.M. (Eastern time), not less than three (3) nor more than
five (5) Business Days prior to the proposed Funding Date of each Loan.
Each Notice of Borrowing shall be accompanied by a Compliance
Certificate which shall update the information as of the end of a
Fiscal Quarter provided in the Compliance Certificate most recently
delivered pursuant to SECTION 6.1.4 to demonstrate on a pro forma basis
compliance with the covenant set forth in SECTION 9.4 after the advance
of the requested Loan, provided, however, that no such Compliance
Certificate will be required if the aggregate amount of the requested
Loan and all other Loans advanced and Letters of Credit issued since
the most recently delivered Compliance Certificate is less than
$25,000,000. Such pro forma Compliance Certificate shall take into
account all borrowings and loan repayments, the issuance, expiration or
cancellation of any Letters of Credit and all Property acquisitions and
sales which may have occurred between the end of the last Fiscal
Quarter and the proposed Funding Date. The Agent shall notify each
Lender by telephone or facsimile with regard to each Notice of
Borrowing not later than 11:00 A.M. (Eastern Time) on the second
Business Day preceding the proposed Funding Date.
(ii) Notwithstanding the
foregoing or any other provision hereof to the contrary a Notice of
Borrowing may be given not less than two (2) Business Days prior to the
proposed Funding Date of a Loan if the additional Borrowing shall be
requested as a Base Rate Loan.
(iii) Each Notice of Borrowing
shall specify (1) the Funding Date (which shall be a Business Day) in
respect of the Loan, (2) the amount of the proposed Loan, PROVIDED that
the aggregate amount of such proposed Loan shall equal Four Million
Dollars ($4,000,000) or integral multiples of One Million Dollars
($1,000,000) in excess thereof, (3) whether the Loan to be made
thereunder will be a Base Rate Loan or a LIBOR Loan and, if a LIBOR
Loan, the Interest Period, (4) to which account of Borrower the funds
are to be directed, and (5) the proposed use of such Loan. Any Notice
of Borrowing pursuant to this SECTION 2.1.2 shall be irrevocable.
(b) Borrower may elect (i) to convert LIBOR Loans
or any portion thereof into Base Rate Loans, (ii) to convert Base Rate
Loans or any portion thereof to LIBOR Loans, or (iii) to continue any LIBOR
Loans or any portion thereof for an additional Interest Period, PROVIDED,
HOWEVER, that the aggregate amount of the Loans being converted into or
continued as LIBOR Loans shall equal Four Million Dollars ($4,000,000) or an
integral multiple of One Million Dollars ($1,000,000) in excess thereof. The
applicable Interest Period for the continuation of any LIBOR Loan shall commence
on the day on which the next preceding Interest Period expires. The conversion
of a LIBOR Loan to a Base Rate Loan shall only occur on the last Business Day of
the Interest Period relating to such LIBOR Loan; such conversion shall occur
automatically in the absence of an election under CLAUSE (III) above. Each
election under CLAUSE (II) or CLAUSE (III) above shall be made by Borrower
giving Agent an original or facsimile Notice of Borrowing no later than 9:00
A.M. (Eastern time), not less than three (3) nor more than five (5) Business
Days prior to the date of a conversion to or continuation of a LIBOR Loan,
specifying, in each case (1) the amount of the conversion or continuation, (2)
the Interest Period therefor, and (3) the date of the conversion or continuation
(which date shall be a Business Day).
(c) Upon receipt of a Notice of Borrowing
in proper form requesting LIBOR Loans under SUBPARAGRAPH (A) or (B) above,
Agent shall determine the LIBOR applicable to the Interest Period for
such LIBOR Loans, and shall, prior to the beginning of such Interest Period,
give (by facsimile) a FIXED RATE NOTICE in respect thereof to Borrower and
Lenders; PROVIDED, HOWEVER, that failure to give such notice to Borrower shall
not affect the validity of such rate. Each determination by Agent of the LIBOR
shall be conclusive and binding upon the parties hereto in the absence of
manifest error.
2.1.3 MAKING OF LOANS. Subject to SECTION 11.3, Agent shall make
the proceeds of Loans available to Borrower on such Funding Date and shall
disburse such funds in Dollars in immediately available funds to Borrower's
commercial demand account at BankBoston or such other account specified in the
Notice of Borrowing acceptable to Agent.
2.1.4. TERM. The outstanding balance of the Loans shall be
payable in full on the earliest to occur of (i) the third anniversary of the
Closing Date, or, if the Facility has been renewed pursuant to SECTION 2.10, the
third anniversary of the last Renewal Date, (ii) the acceleration of the Loans
pursuant to SECTION 10.2.1, or (iii) Borrower's written notice to Agent
(pursuant to SECTION 2.6.1) of Borrower's election to prepay all accrued
obligations and terminate all Commitments (the "TERMINATION DATE").
2.2 AUTHORIZATION TO OBTAIN LOANS. Each of Borrower's President, Chief
Financial Officer, Senior Vice President-Finance and Treasurer are hereby
authorized by Borrower to sign Notices of Borrowing and Letter of Credit
Requests. Borrower may provide Agent with documentation satisfactory to Agent
indicating the names of other officers or employees of Borrower authorized by
Borrower to sign Notices of Borrowing and Letter of Credit Requests, and Agent
and Lenders shall be entitled to rely on such documentation until notified in
writing by Borrower of any change(s) of the persons so authorized. Agent shall
be entitled to act on the instructions of anyone identifying himself or herself
as one of the Persons authorized to execute a Notice of Borrowing or Letter of
Credit Request, and Borrower shall be bound thereby in the same manner as if
such Person were actually so authorized. Borrower agrees to indemnify, defend
and hold Lenders and Agent harmless from and against any and all Liabilities and
Costs which may arise or be created by the acceptance of instructions in any
Notice of Borrowing or Letter of Credit Request, unless caused by the gross
negligence of the Person to be indemnified.
2.3 LENDERS' ACCOUNTING. Agent shall maintain a loan account (the
"LOAN ACCOUNT") on its books in which shall be recorded (i) the names and
addresses and the Commitments of Lenders, and principal amount of Loans owing to
each Lender from time to time, and (ii) all advances and repayments of principal
and payments of accrued interest under the Loans, as well as payments of the
Unused Facility Fee, as provided in this Agreement.
2.4 INTEREST ON THE LOANS.
2.4.1 BASE RATE LOANS. Subject to SECTION 2.4.4, all Base Rate
Loans shall bear interest on the average daily unpaid principal amount thereof
from the date made until paid in full at a fluctuating rate per annum equal to
the Base Rate. Base Rate Loans shall be made in minimum amounts of Four Million
Dollars ($4,000,000) or an integral multiple of One Million ($1,000,000) in
excess thereof.
2.4.2 LIBOR LOANS. Subject to SECTIONS 2.4.4 and 2.4.8, all LIBOR
Loans shall bear interest on the unpaid principal amount thereof during the
Interest Period applicable thereto at a rate per annum equal to the sum of LIBOR
for such Interest Period PLUS the Applicable LIBOR Rate Margin. LIBOR Loans
shall be in tranches of Four Million Dollars ($4,000,000) or One Million Dollar
($1,000,000) increments in excess thereof. No more than eight (8) LIBOR Loan
tranches shall be outstanding at any one time. Notwithstanding anything to the
contrary contained herein and subject to the Default Interest provisions
contained in SECTION 2.4.4, if an Event of Default occurs and as a result
thereof the Commitments are terminated, all LIBOR Loans will convert to Base
Rate Loans upon the expiration of the applicable Interest Periods therefor or
the date all Loans become due, whichever occurs first.
2.4.3 INTEREST PAYMENTS. Subject to SECTION 2.4.4, interest
accrued on all Loans shall be payable by Borrower, in the manner provided in
SECTION 2.6.2, in arrears on the first Business Day of the first calendar month
following the Closing Date, the first Business Day of each succeeding calendar
month thereafter, and on the Termination Date.
2.4.4 DEFAULT INTEREST. Notwithstanding the rates of interest
specified in SECTIONS 2.4.1 and 2.4.2 and the payment dates specified in SECTION
2.4.3, effective immediately upon the occurrence and during the continuance of
any Event of Default, the principal balance of all Loans then outstanding and,
to the extent permitted by applicable law, any interest payments on the Loans
not paid when due shall bear interest payable upon demand at a rate which is
four percent (4%) per annum in excess of the Base Rate. All other amounts due
Agent or Lenders (whether directly or for reimbursement) under this Agreement or
any of the other Loan Documents if not paid when due, or if no time period is
expressed, if not paid within thirty (30) days after demand, shall bear interest
from and after demand at the rate set forth in this SECTION 2.4.4.
2.4.5 LATE FEE. Borrower acknowledges that late payment to Agent
will cause Agent and Lenders to incur costs not contemplated by this Agreement.
Such costs include, without limitation, processing and accounting charges.
Therefore, if Borrower fails timely to pay any sum due and payable hereunder
through the Termination Date, unless waived by Agent pursuant to SECTION 11.11.1
or Requisite Lenders, a late charge of four cents ($.04) for each dollar of any
principal payment, interest or other charge due hereon and which is not paid
within ten (10) days after such payment is due, shall be charged by Agent (for
the benefit of Lenders) and paid by Borrower for the purpose of defraying the
expense incident to handling such delinquent payment; PROVIDED, HOWEVER, that no
late charges shall be assessed with respect to any period during which Borrower
is obligated to pay interest at the rate specified in SECTION 2.4.4, or in
respect of any failure to pay all Obligations on the Termination Date. Borrower
and Agent agree that this late charge represents a reasonable sum considering
all of the circumstances existing on the date hereof and represents a fair and
reasonable estimate of the costs that Agent and Lenders will incur by reason of
late payment. Borrower and Agent further agree that proof of actual damages
would be costly and inconvenient. Acceptance of any late charge shall not
constitute a waiver of the default with respect to the overdue installment, and
shall not prevent Agent from exercising any of the other rights available
hereunder or any other Loan Document. Such late charge shall be paid without
prejudice to any other rights of Agent.
2.4.6 COMPUTATION OF INTEREST. Interest shall be computed on the
basis of the actual number of days elapsed in the period during which interest
or fees accrue and a year of three hundred sixty (360) days. In computing
interest on any Loan, the date of the making of the Loan shall be included and
the date of payment shall be excluded; PROVIDED, HOWEVER, that if a Loan is
repaid on the same day on which it is made, one (1) day's interest shall be paid
on that Loan. Notwithstanding any provision in this SECTION 2.4, interest in
respect of any Loan shall not exceed the maximum rate permitted by applicable
law. Changes in the Applicable LIBOR Rate Margin shall take effect as of the
date on which the condition set forth in the relevant clause of the definition
of each such term is satisfied.
2.4.7 CHANGES; LEGAL RESTRICTIONS. In the event that after the
Closing Date (i) the adoption of or any change in any law, treaty, rule,
regulation, guideline or determination of a court or Governmental Authority or
any change in the interpretation or application thereof by a court or
Governmental Authority, or (ii) compliance by Agent or any Lender with any
request or directive made or issued after the Closing Date from any central bank
or other Governmental Authority or quasi-governmental authority:
(a) subjects Agent or any Lender to any tax,
duty or other charge of any kind with respect to the Facility,
this Agreement or any of the other Loan Documents or the Loans, or
changes the basis of taxation of payments to Agent or such Lender of
principal, fees, interest or any other amount payable hereunder, except
for net income, gross receipts, gross profits or franchise taxes
imposed by any jurisdiction and not specifically based upon loan
transactions (all such non-excepted taxes, duties and other charges
being hereinafter referred to as "LENDER TAXES");
(b) imposes, modifies or holds applicable,
in the determination of Agent or any Lender, any reserve,
special deposit, compulsory loan, FDIC insurance, capital allocation or
similar requirement (other than a requirement of the type described in
SECTION 2.7) against assets held by, or deposits or other liabilities
in or for the account of, advances or loans by, or other credit
extended by, or any other acquisition of funds by, Agent or such Lender
or any applicable lending office; or
(c) imposes on Agent or any Lender any other
condition (OTHER THAN ONE DESCRIBED IN SECTION 2.7) materially more
burdensome in nature, extent or consequence than those in existence as
of the Closing Date,
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing, maintaining or participating in the Loans or to
reduce any amount receivable thereunder; THEN, in any such case, Borrower shall
promptly pay to Agent or such Lender, as applicable, upon demand, such amount or
amounts (based upon a reasonable allocation thereof by Agent or such Lender to
the financing transactions contemplated by this Agreement and affected by this
SECTION 2.4.7) as may be necessary to compensate Agent or such Lender for any
such additional cost incurred or reduced amounts received; PROVIDED, HOWEVER,
that if the payment of such compensation may not be legally made whether by
modification of the applicable interest rate or otherwise, then Lenders shall
have no further obligation to make Loans that cause Agent or any Lender to incur
such increased cost, and all affected Loans shall become immediately due and
payable by Borrower. Agent or such Lender shall deliver to Borrower and in the
case of a delivery by Lender, such Lender shall also deliver to Agent, a written
statement of the claimed additional costs incurred or reduced amounts received
and the basis therefor as soon as reasonably practicable after such Lender
obtains knowledge thereof. If Agent or any Lender subsequently recovers any
amount of Lender Taxes previously paid by Borrower pursuant to this SECTION
2.4.7, whether before or after termination of this Agreement, then, upon receipt
of good funds with respect to such recovery, Agent or such Lender will refund
such amount to Borrower if no Event of Default or Unmatured Event of Default
then exists or, if an Event of Default or Unmatured Event of Default then
exists, such amount will be credited to the Obligations in the manner determined
by Agent or such Lender.
2.4.8 CERTAIN PROVISIONS REGARDING LIBOR LOANS.
(a) LIBOR LENDING UNLAWFUL. If any Lender
shall determine (which determination shall, upon notice thereof
to Borrower and Agent, be conclusive and binding on the parties hereto)
that the introduction of or any change in or in the interpretation of
any law makes it unlawful, or any central bank or other Governmental
Authority asserts that it is unlawful, for such Lender to make or
maintain any Loan as a LIBOR Loan, (i) the obligations of such Lenders
to make or maintain any Loans as LIBOR Loans shall, upon such
determination, forthwith be suspended until such Lender shall notify
Agent that the circumstances causing such suspension no longer exist,
and (ii) if required by such law or assertion, the LIBOR Loans of such
Lender shall automatically convert into Base Rate Loans in which case
no Fixed Rate Prepayment Fee shall be due upon such conversion.
(b) DEPOSITS UNAVAILABLE. If Agent shall
have determined in good faith that adequate means do not exist
for ascertaining the interest rate applicable hereunder to LIBOR Loans,
then, upon notice from Agent to Borrower the obligations of all Lenders
to make or maintain Loans as LIBOR Loans shall forthwith be suspended
until Agent shall notify Borrower that the circumstances causing such
suspension no longer exist. Agent will give such notice when it
determines, in good faith, that such circumstances no longer exist;
PROVIDED, HOWEVER, that Agent shall not have any liability to any
Person with respect to any delay in giving such notice.
(c) FIXED RATE PREPAYMENT FEE. Borrower
acknowledges that prepayment or acceleration of a LIBOR Loan
during an Interest Period shall result in Lenders incurring additional
costs, expenses and/or liabilities and that it is extremely difficult
and impractical to ascertain the extent of such costs, expenses and/or
liabilities. (For all purposes of this subparagraph (c), any Loan not
being made as a LIBOR Loan in accordance with the Notice of Borrowing
therefor, as a result of Borrower's cancellation thereof, shall be
treated as if such LIBOR Loan had been prepaid.) Therefore, on the date
a LIBOR Loan is prepaid or the date all sums payable hereunder become
due and payable, by acceleration or otherwise ("PREPAYMENT DATE"),
Borrower will pay to Agent, for the account of each Lender, (in
addition to all other sums then owing), an amount ("FIXED RATE
PREPAYMENT FEE") determined by the Agent to be the amount, if any, by
which (i) the amount of interest which would have accrued on the
prepaid LIBOR Loan for the remainder of the Interest Period at the rate
applicable to such LIBOR Loan exceeds (ii) the amount of interest that
would accrue for the same period on any readily marketable bond or
other obligation of the United States of America designated by the
Agent in its sole discretion at or about the time of such payment, such
bond or other obligation of the United States of America to be in an
amount equal (as nearly as may be) to the amount of principal so paid
or not borrowed and to have a maturity comparable to the remainder of
such Interest Period, and the interest to accrue thereon to take
account of amortization of any discount from par or accretion of
premium above par at which the same is selling at the time designation.
(d) Upon the written notice to Borrower
from Agent, Borrower shall immediately pay to Agent, for the account of
Lenders, the Fixed Rate Prepayment Fee. Such written notice (which
shall include calculations in reasonable detail) shall, in the absence
of manifest error, be conclusive and binding on the parties hereto.
(e) Borrower understands, agrees and
acknowledges the following: (i) no Lender has any obligation to
purchase, sell and/or match funds in connection with the use of LIBOR
as a basis for calculating the rate of interest on a LIBOR Loan; (ii)
LIBOR is used merely as a reference in determining such rate; and (iii)
Borrower has accepted LIBOR as a reasonable and fair basis for
calculating such rate and a Fixed Rate Prepayment Fee. Borrower further
agrees to pay the Fixed Rate Prepayment Fee and Lender Taxes, if any,
whether or not a Lender elects to purchase, sell and/or match funds.
2.4.9 WITHHOLDING TAX EXEMPTION. At least five (5) Business Days
prior to the first day on which interest or fees are payable hereunder for the
account of any Lender, each Lender that is not incorporated under the laws of
the United States of America, or a state thereof, agrees that it will deliver to
Agent and Borrower two (2) duly completed copies of United States Internal
Revenue Service Form 1001 or Form 4224, certifying in either case that such
Lender is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes. Each Lender which so
delivers a Form 1001 or Form 4224 further undertakes to deliver to Agent and
Borrower two (2) additional copies of such form (or any applicable successor
form) on or before the date that such form expires (currently, three (3)
successive calendar years for Form 1001 and one (1) calendar year for Form 4224)
or becomes obsolete or after the occurrence of any event requiring a change in
the most recent forms so delivered by it, and such amendments thereto or
extensions or renewals thereof as may be reasonably requested by Agent or
Borrower, in each case certifying that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes, unless an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on which any
such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender advises Agent that
it is not capable of receiving payments without any deduction or withholding of
United States federal income taxes. If any Lender cannot deliver such form, then
Borrower may withhold from such payments such amounts as are required by the
Internal Revenue Code.
2.5 FEES.
2.5.1 UNUSED FACILITY FEE. From and after the Closing Date and
until the Obligations are paid in full and this Agreement is terminated or, if
sooner, the date the Commitments terminate, and subject to SECTION 11.4.2,
Borrower shall pay to Agent, for the account of each Lender, a fee calculated at
the rates set forth below per annum based on an amount equal to (i) the amount
of the Facility MINUS (ii) the average daily principal balance of all Loans
MINUS (iii) the average daily face amount of Letters of Credit outstanding
hereunder (said difference being the "UNUSED AMOUNT"), as determined for each
Fiscal Quarter. The aforesaid fee (the "UNUSED FACILITY FEE") shall be payable,
in the manner provided in SECTION 2.6.2, in arrears on the first Business Day in
each Fiscal Quarter, beginning with the first Fiscal Quarter after the Closing
Date, and on the date of payment in full of all obligations to Lenders pursuant
to SECTION 2.1.4 with the Unused Facility Fee to be prorated to the date of such
payment in such case. The rates for the Unused Facility Fee shall be as follows:
UNUSED AMOUNT FEE RATE
less than 1/3 of the amount of the Facility 15 basis points
at least 1/3 of the amount of the Facility
but less than 2/3 of the amount of the Facility 20 basis points
at least 2/3 of the amount of the Facility 25 basis points
2.5.2 AGENCY FEES. Borrower shall pay Agent such fees as are
provided for in the Fee Letter between Agent and Borrower, as in existence from
time to time.
2.5.3 RENEWAL FEES. On each Renewal Date the Borrower shall pay
to the Agent the renewal fee in the amount set forth in the Fee Letter and the
Agent shall pay to each Lender which approved the requested renewal a renewal
fee in the amount set forth in such Lender's commitment letter to the Agent.
2.5.4 PAYMENT OF FEES. The fees described in this SECTION 2.5
represent compensation for services rendered and to be rendered separate and
apart from the lending of money or the provision of credit and do not constitute
compensation for the use, detention or forbearance of money, and the obligation
of Borrower to pay the fees described herein shall be in addition to, and not in
lieu of, the obligation of Borrower to pay interest, other fees and expenses
otherwise described in this Agreement. All fees shall be payable when due in
immediately available funds and shall be non-refundable when paid. If Borrower
fails to make any payment of fees or expenses specified or referred to in this
Agreement due to Agent or Lenders, including without limitation those referred
to in this SECTION 2.5, in SECTION 12.1, or otherwise under this Agreement or
any separate fee agreement between Borrower and Agent or any Lender relating to
this Agreement, when due, the amount due shall bear interest until paid at the
Base Rate and, after ten (10) days at the rate specified in SECTION 2.4.4 (but
not to exceed the maximum rate permitted by applicable law), and shall
constitute part of the Obligations. The Unused Facility Fee and the fees
referred to in SECTION 2.5.2 which are expressed as a per annum charge shall be
calculated on the basis of the actual number of days elapsed in a three hundred
sixty (360) day year.
2.6 PAYMENTS.
2.6.1 VOLUNTARY PREPAYMENTS. Borrower may, upon not less than
three (3) Business Days prior written notice to Agent not later than 11:00 A.M.
(Eastern time) on the date given, at any time and from time to time, prepay any
Loans in whole or in part. Any notice of prepayment given to Agent under this
SECTION 2.6.1 shall specify the date of prepayment and the principal amount of
the prepayment. In the event of a prepayment of LIBOR Loans, Borrower shall
concurrently pay any Fixed Rate Prepayment Fee payable in respect thereof. Agent
shall provide to each Lender a confirming copy of such notice on the same
Business Day such notice is received.
2.6.2 MANNER AND TIME OF PAYMENT. All payments of principal,
interest and fees hereunder payable to Agent or the Lenders shall be made
without condition or reservation of right and free of set-off or counterclaim,
in Dollars and by wire transfer (pursuant to Agent's written wire transfer
instructions) of immediately available funds, to Agent, for the account of each
Lender, not later than 11:00 A.M. (Eastern time) on the date due; and funds
received by Agent after that time and date shall be deemed to have been paid on
the next succeeding Business Day.
2.6.3 PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment to be
made by Borrower hereunder shall be stated to be due on a day which is not a
Business Day, payments shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of the payment of
interest hereunder and of any of the fees specified in SECTION 2.5, as the case
may be.
2.7 INCREASED CAPITAL. If either (i) the introduction of or any
change in or in the interpretation of any law or regulation or (ii) compliance
by Agent or any Lender with any guideline or request from any central bank or
other Governmental Authority made or issued after the Closing Date affects or
would affect the amount of capital required or expected to be maintained by
Agent or such Lender or any corporation controlling Agent or such Lender, and
Agent or such Lender determines that the amount of such capital is increased by
or based upon the existence of Agent's obligations hereunder or such Lender's
Commitment, then, upon demand by Agent or such Lender, Borrower shall
immediately pay to Agent or such Lender, from time to time as specified by Agent
or such Lender, additional amounts sufficient to compensate Agent or such Lender
in the light of such circumstances, to the extent that Agent or such Lender
determines such increase in capital to be allocable to the existence of Agent's
obligations hereunder or such Lender's Commitment. A certificate as to such
amounts submitted to Borrower by Agent or such Lender shall, in the absence of
manifest error, be conclusive and binding for all purposes.
2.8 NOTICE OF INCREASED COSTS. Each Lender agrees that, as promptly as
reasonably practicable after it becomes aware of the occurrence of an event or
the existence of a condition which would cause it to be affected by any of the
events or conditions described in SECTION 2.4.7 or 2.4.8 or SECTION 2.7, it will
notify Borrower, and provide a copy of such notice to Agent, of such event and
the possible effects thereof, PROVIDED that the failure to provide such notice
shall not affect Lender's rights to reimbursement provided for herein.
2.9 LETTERS OF CREDIT
2.9.1 TERMS OF LETTERS OF CREDIT. Up to $20,000,000 of the
Facility may be used by Borrower for the issuance of Letters of Credit by the
Agent for the account of the Borrower subject to the terms and conditions set
forth herein. Each Letter of Credit shall be denominated in dollars and shall be
a standby letter of credit issued to support the obligations of Borrower (i) in
connection with any purpose for which Loan proceeds may be used hereunder, or
(ii) to advance loans to Foreign Affiliates, or to make other forms of Foreign
Investment, provided that upon the issuance of a Letter of Credit for the
purpose set forth in this clause (ii) the face amount thereof shall be added to
the amount of Foreign Investments as of the time of issuance when determining
compliance with SECTION 9.10. Each Letter of Credit shall have an initial term
of not more than one (1) year, and shall expire no later than five (5) Business
Days prior to the Termination Date. Although the Agent shall be the issuing bank
of the Letter of Credit, each Lender hereby accepts for its own account and risk
an undivided interest equal to its Pro Rata Share in the Agent's obligations and
rights under each Letter of Credit issued hereunder. Each Lender unconditionally
and irrevocably agrees with the Agent that, if a draft is paid under any Letter
of Credit, such Lender shall promptly pay to the Agent an amount equal to such
Lender's Pro Rata Share of the amount of such draft or any part thereof. Upon
the issuance of each Letter of Credit hereunder, there shall be reserved from
each Lender's Commitment an amount equal to such Lender's Pro Rata Share of the
face amount of the Letter of Credit. Such reserved amounts shall remain in place
and shall be unavailable for borrowing under SECTION 2.1 until the date that the
Letter of Credit expires, is fully drawn or is terminated.
2.9.2 LETTER OF CREDIT REQUEST. The Borrower shall give to the
Agent a written notice in the form of EXHIBIT F hereto of each Letter of Credit
requested hereunder (a "LETTER OF CREDIT REQUEST") no less than six (6) Business
Days prior to the proposed Issuance Date of the requested Letter of Credit,
provided that Agent may, in its sole discretion, reduce said 6 Business Day
period to not less than 3 Business Days. Each Letter of Credit Request shall
specify (i) the name and address of the beneficiary of the requested Letter of
Credit, (ii) the face amount of the requested Letter of Credit, (iii) the
proposed Issuance Date and expiration date of the requested Letter of Credit,
(iv) the proposed form of the requested Letter of Credit, and (v) the permitted
purpose for which the Letter of Credit will be used, and shall be accompanied by
a Compliance Certificate demonstrating on a pro forma basis compliance with the
covenant set forth in SECTION 9.4 after issuance of the requested Letter of
Credit provided, however, that no such Compliance Certificate will be required
if the aggregate amount of the requested Letter of Credit and all other Loans
advanced and Letters of Credit issued since the most recently delivered
Compliance Certificate is less than $25,000,000.. Such pro forma Compliance
Certificate shall take into account all borrowings and loan repayments, the
issuance, expiration or cancellation of Letters of Credit (including the
requested Letter of Credit), and all Property acquisitions and sales which may
have occurred between the end of the last Fiscal Quarter and the proposed
Issuance Date. The Agent may also require that the Borrower complete its
standard letter of credit application form and submit the same together with the
Letter of Credit Request. The Agent shall provide a copy of the Letter of Credit
Request to the Lenders at least two (2) Business Days before the Issuance Date
of the Letter of Credit. If the issuance of the requested Letter of Credit will
not cause the outstanding principal of the Loans to exceed the Maximum Loan
Amount and the Agent determines, in its discretion, that it is willing to issue
the requested Letter of Credit, and that it is satisfied with the proposed form
thereof, the Letter of Credit shall be issued by the Agent and each of the
Lenders shall then be obligated to the Agent with respect to its Pro Rata Share
of the Letter of Credit as provided above in SECTION 2.9.1.
2.9.3 LETTER OF CREDIT FEES. On or before the Issuance Date of
any requested Letters of Credit, the Borrower shall pay to the Agent for its own
account an issuance fee equal to fifteen basis points (.15%) of the face amount
of the Letter of Credit. On or before the date of any renewal or extension of a
Letter of Credit, the Borrower shall pay to the Agent for its own account a
renewal fee equal to seven and one half basis points (.075%) of the face amount
of the Letter of Credit. The Borrower shall pay to the Agent for the account of
the Lenders a Letter of Credit fee equal to the then prevailing Applicable LIBOR
Rate Margin per annum of the face amount of the Letter of Credit, which Letter
of Credit fee shall be due and payable on the Issuance Date of the Letter of
Credit and on the date of each renewal or extension thereof, and shall be
prorated for any partial year based on a 360-day year and paid for the actual
number of days elapsed. Promptly after its receipt thereof the Agent shall
distribute such Letter of Credit fee to the Lenders in accordance with their
respective Pro Rata Shares. Such fees shall be nonrefundable and shall not be
further prorated in the event that the Letter of Credit terminates prior to its
scheduled expiration date. The Borrower also agrees to reimburse the Agent for
all reasonable fees, costs, expenses and disbursements of the Agent in issuing,
effecting payment under, amending or otherwise administering any Letter of
Credit.
2.9.4 DRAWING. Promptly after each Drawing Date the Agent shall
notify the Lenders and the Borrower of the amount of the draft paid by the Agent
on such Drawing Date. The payment of a draft under a Letter of Credit shall
constitute an advance of a Loan which shall bear interest as a Base Rate Loan
from the Drawing Date. On the Drawing Date each Lender shall pay to the Agent
its Pro Rata Share of the amount of the draft under the Letter of Credit so
paid. If the Agent receives such payment from any Lender on a date after the
Drawing Date, such Lender shall pay to the Agent on demand interest on said
amount at the Federal Funds Rate. Each Lender's obligation to pay its Pro Rata
Share of each draft under a Letter of Credit shall not be subject to the
satisfaction of any conditions set forth in this Agreement and shall not depend
on whether there may then be an Event of Default or an Unmatured Event of
Default. Within three (3) Business Days after each Drawing Date, the Borrower
shall deliver to the Agent a written explanation of the facts and circumstances
relating to such drawing and a Compliance Certificate and any other information
requested by the Agent for the purpose of allowing the Lenders to determine
whether the drawing or related events have resulted in an Event of Default. The
Agent shall promptly provide copies of such explanation and information to the
Lenders.
2.9.5 BORROWER'S OBLIGATIONS REGARDING LETTERS OF CREDIT. The
Borrower's obligations under this SECTION 2.9 shall be absolute and
unconditional under any and all circumstances and irrespective of any set-off,
counterclaim or defense to payment which the Borrower may have or have had
against the Agent, any Lender or any beneficiary of a Letter of Credit. The
Borrower also agrees that the Agent shall not be responsible for, and the
Borrower's reimbursement obligations hereunder shall not be affected by, among
other things, (i) the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or (ii) any dispute between or among the Borrower
and any beneficiary of any Letter of Credit or any other party to which such
Letter of Credit may be transferred or (iii) any claims whatsoever of the
Borrower against any beneficiary of such Letter of Credit or any such
transferee. The Agent shall not be liable for any error, omission, interruption
or delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors,
omissions, interruptions or delays caused by the Agent's gross negligence or
willful misconduct. The Borrower agrees that any action taken or omitted by the
Agent under or in connection with any Letter of Credit or the related drafts or
documents, if done in the absence of gross negligence or willful misconduct and
in accordance with the standards of care specified in the Uniform Customs and
Practices for Documentary Credits as the same may be amended from time to time,
shall be binding on the Borrower and shall not result in any liability of the
Agent to the Borrower.
2.10 RENEWAL OF THE FACILITY. The Facility may be renewed
annually as of any anniversary of the Closing Date with the approval of the
Agent and all Lenders and as otherwise set forth in this Section. If the
Borrower desires such a renewal, it shall notify the Agent on or before February
1 of the applicable year. If the Agent decides to seek its own internal credit
approval for the requested renewal, the Agent shall notify the Lenders and
within thirty (30) days thereafter each Lender shall notify the Agent whether it
approves the renewal. Any Lender which fails to approve the requested renewal
shall be deemed to grant the Agent the right to acquire such Lender's rights and
interests hereunder by assignment pursuant to SECTION 11.12 for consideration
equal to the outstanding balance of Loans owed to such Lender. If the Requisite
Lenders fail to approve the requested renewal, then the Facility shall not be
renewed. If all Lenders approve such renewal, then the Facility shall be renewed
and such anniversary of the Closing Date shall be a "RENEWAL DATE" hereunder. If
the Requisite Lenders approve a requested renewal but one or more Lenders fail
to approve such renewal (each a "NON-RENEWING LENDER"), the Borrower shall have
the following options, to be exercised within fifteen (15) days after the Agent
gives the Borrower a notice of the Lenders' response to the renewal request:
(a) The Borrower may withdraw its request for the renewal.
(b) The Borrower may elect to renew the Facility in part with
respect to the Commitments of those Lenders which have approved the requested
renewal. In such event the Commitments of the Non-Renewing Lenders (the
"Expiring Commitments") shall expire effective upon the second anniversary of
the applicable Renewal Date (the "EXIT DATE"). Unless the Expiring Commitments
are resyndicated pursuant to SECTION 2.11, the amount of the Facility shall be
decreased on the Exit Date by an amount equal to the Expiring Commitments. On
the Exit Date the Borrower shall pay to the Non-Renewing Lender the amount of
all Loans owed to it hereunder (with interest and any Fixed Rate Prepayment Fee
thereon), the Non-Renewing Lender shall cancel its Loan Note and shall no longer
be a Lender hereunder and the Pro Rata Shares of the remaining Lenders will be
adjusted accordingly. If the Borrower elects to renew the Facility in part as
provided in this paragraph then the applicable anniversary of the Closing Date
shall be a "RENEWAL DATE" hereunder.
2.11 RESYNDICATION OF EXPIRING COMMITMENTS. If Borrower elects to renew
the facility in part pursuant to paragraph (b) of SECTION 2.10, then at least
ninety (90) days prior to the Exit Date, the Borrower shall notify the Agent as
to whether it desires that the Agent commit to underwrite a resyndication of the
Expiring Commitments. If the Agent decides, in its sole discretion, to seek its
own internal credit approval for a commitment to underwrite the resyndication of
the Expiring Commitments, the Agent and the Borrower shall negotiate an
agreement with respect to the amount of resyndication fees to be paid by the
Borrower to the Agent in connection therewith. If such agreement is reached and
the Agent commits to underwrite such resyndication, then on the Exit Date (or
another date designated by the Agent prior to the Exit Date) each Non-Renewing
Lender shall assign its Commitment and Loans hereunder to the Agent or to an
Eligible Assignee designated by the Agent and shall receive from such assignee
an amount equal to the outstanding principal balance of Loans owed to such
Non-Renewing Lender. The Assignment and Assumption Agreement to be executed in
connection with such assignment shall confirm that the Commitment thereby being
assumed by the assignee thereunder shall not expire on the Exit Date but shall
remain in effect until the Termination Date then applicable hereunder.
ARTICLE III
UNENCUMBERED PROPERTIES AND PORTFOLIO PROPERTIES
3.1. LISTING OF UNENCUMBERED PROPERTIES. The Borrower represents and
warrants that each of the Properties listed on SCHEDULE 1 will on the Closing
Date satisfy all of the conditions set forth in the definition of Unencumbered
Property. From time to time during the term of this Agreement additional
Properties may become Unencumbered Properties and certain Properties which
previously satisfied the conditions set forth in the definition of Unencumbered
Property may cease to be Unencumbered Properties by virtue of property
dispositions, creation of Liens or other reasons. There shall be attached to
each Compliance Certificate delivered pursuant hereto an updated listing of the
Unencumbered Properties relied upon by the Borrower in computing the Value of
All Unencumbered Properties and the Unencumbered Net Operating Income stated in
such Compliance Certificate.
3.2. WAIVERS BY REQUISITE LENDERS. If any Property fails to satisfy
any of the requirements contained in the definition of Unencumbered Property
then the applicable Property may nevertheless be deemed to be Unencumbered
Property hereunder if the Requisite Lenders grant the necessary waivers and vote
to accept such Property as an Unencumbered Property.
3.3. REJECTION OF UNENCUMBERED PROPERTIES. If at any time the Agent
determines that any Property listed as an Unencumbered Property by the Borrower
does not satisfy all of the requirements of the definition of Unencumbered
Property (to the extent not waived by the Requisite Lenders pursuant to SECTION
3.2) it may reject an Unencumbered Property by notice to the Borrower and if the
Agent so requests the Borrower shall revise the applicable Compliance
Certificate to reflect the resulting change in the Value of All Unencumbered
Properties and the Unencumbered Net Operating Income.
3.4 UPDATED LISTS OF UNENCUMBERED PROPERTIES AND PORTFOLIO PROPERTIES.
SCHEDULE 1 contains a list of the Unencumbered Properties and SCHEDULE 1.1 sets
forth a list of the Portfolio Properties (other than the Unencumbered
Properties) each as of the date hereof. Promptly upon the acquisition or
disposition of any of the Portfolio Properties and promptly upon the creation of
any Lien or other event which causes any of the Portfolio Properties which
previously qualified as an Unencumbered Property to no longer satisfy the
definition of Unencumbered Property, Borrower shall deliver to Agent an updated
SCHEDULE 1 and/or SCHEDULE 1.1 and any other information as may be reasonably
requested by Agent relating to such change in the list of Unencumbered
Properties and/or Portfolio Properties, including a Compliance Certificate.
ARTICLE IV
CONDITIONS TO LOANS
4.1 CONDITIONS TO INITIAL DISBURSEMENT OF LOANS. The obligation of
Lenders to make the initial disbursement of the Loans on the Closing Date shall
be subject to satisfaction of each of the following conditions precedent:
4.1.1 BORROWER DOCUMENTS. Borrower shall have executed and/or
delivered to Agent each of the following, in form and substance acceptable to
Agent:
(a) this Agreement;
(b) the Loan Notes;
(c) Certified copy of Borrower's Limited Partnership
Agreement, as amended;
(d) Certified copy of Borrower's Certificate of
Limited Partnership from the Delaware Secretary
of State;
(e) Evidence of qualification and good standing of
Borrower in Delaware and in each state where
any Unencumbered Property is located.
4.1.2 REIT DOCUMENTS. The REIT shall have executed and/or
delivered to Agent each of the following, in form and substance acceptable to
Agent:
(a) The Guaranty
(b) Articles of Incorporation, as amended, of the
REIT, as certified by the Secretary of State of
Maryland;
(c) By-laws of the REIT as certified by the
Secretary of the REIT;
(d) Good Standing Certificate for the REIT from the
Secretary of State of Maryland;
(e) Evidence of qualification and good standing of
the REIT in each state where any Unencumbered
Property is located;
(f) Certificate of Secretary regarding corporate
resolutions of the REIT, and the incumbency of
its officers as certified by the Secretary of
the REIT.
4.1.3 COMPLIANCE CERTIFICATE. Borrower shall have delivered to
Agent a Compliance Certificate demonstrating compliance with the financial
covenants in ARTICLE IX on the Closing Date.
4.1.4 MATERIAL ADVERSE CHANGES. No change, as determined by Agent
shall have occurred, during the period commencing December 31, 1997, and ending
on the Closing Date, which has a Material Adverse Effect on Borrower or the
REIT.
4.1.5 LITIGATION PROCEEDINGS. There shall not have been
instituted or threatened, during the period commencing December 31, 1997, and
ending on the Closing Date, any litigation or proceeding in any court or
Governmental Authority affecting or threatening to affect Borrower or the REIT
which has a Material Adverse Effect, as reasonably determined by Agent.
4.1.6 NO EVENT OF DEFAULT; SATISFACTION OF FINANCIAL COVENANTS.
On the Closing Date, no Event of Default or Unmatured Event of Default shall
exist and all of the financial covenants contained in ARTICLE IX shall be
satisfied.
4.1.7 FEES. Agent shall have received certain fees in the amount
separately agreed to in the Fee Letter between Agent and Borrower, and all
expenses of Agent incurred prior to such Closing Date in connection with this
Agreement (including without limitation all attorneys' fees and costs), shall
have been paid by Borrower. The Agent shall pay to each Lender the facility fees
set forth in the respective commitment letters from the Lenders to Agent.
4.1.8 OBLIGATIONS UNDER EXISTING FACILITY. Agent shall have
received an amount (which may include proceeds of the initial Loan hereunder)
equal to all unpaid indebtedness of Borrower under the Prior Facilities,
together with instructions to apply such sum to the payment of such obligations
in full.
4.1.9 OPINION OF COUNSEL. Agent shall have received, on behalf of
Agent and Lenders, favorable opinions of counsel for Borrower and the REIT dated
as of the Closing Date, in form and substance satisfactory to Agent.
4.1.10 REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement and the other Loan Documents shall be
true and correct in all material respects.
4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF CREDIT. The
obligation of each Lender to make any Loan requested to be made by it and the
obligation of the Agent to issue any Letter of Credit requested by Borrower, on
any date, is subject to satisfaction of the following conditions precedent as of
such date:
4.2.1 DOCUMENTS. With respect to a request for a Loan, Agent
shall have received, on or before the Funding Date and in accordance with the
provisions of SECTION 2.1.2, an original and duly executed Notice of Borrowing.
With respect to a request for a Letter of Credit, Agent shall have received, on
or before the Issuance Date and in accordance with the provisions of SECTION
2.9.2 an original and duly executed Letter of Credit Request.
4.2.2 ADDITIONAL MATTERS. As of the Funding Date for any Loan and
after giving effect to the Loans being requested and as of the Issuance Date of
any Letter of Credit after giving effect to the issuance of the requested Letter
of Credit:
(a) REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties contained in this Agreement and in any
other Loan Document (other than representations and warranties which
expressly speak only as of a different date and other than for changes
permitted or contemplated by this Agreement) shall be true and correct
in all material respects on and as of such Funding Date or such
Issuance Date, as though made on and as of such date;
(b) NO DEFAULT. No Event of Default or Unmatured
Event of Default shall have occurred and be continuing or
would result from the making of the requested Loan or the issuance of
the requested Letter of Credit, and all of the financial covenants
contained in ARTICLE IX shall be satisfied; and
(c) NO MATERIAL ADVERSE CHANGE. Since the Closing
Date, no change shall have occurred which shall have a
Material Adverse Effect on Borrower or REIT, as determined by Agent,
other than any such change the occurrence of which has been waived by
Requisite Lenders in connection with any prior Borrowing.
Each submission by Borrower to Agent of a Notice of Borrowing with respect to a
Loan and the acceptance by Borrower of the proceeds of each such Loan made
hereunder and each submission by Borrower to Agent of a Letter of Credit Request
shall constitute a representation and warranty by Borrower as of the Funding
Date in respect of such Loan that all the conditions contained in this SECTION
4.2.2 have been satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to make the Loans and issue the Letters of Credit,
Borrower hereby represents and warrants to Lenders as follows:
5.1 BORROWER ORGANIZATION; PARTNERSHIP POWERS. Borrower (i) is a
limited partnership duly organized, validly existing and in good standing under
the laws of the State of Delaware, (ii) is duly qualified to do business as a
foreign limited partnership and in good standing under the laws of each
jurisdiction in which any Portfolio Property is located or in which Borrower
owns or leases real property or in which the nature of its business requires it
to be so qualified, except for those jurisdictions where failure to so qualify
and be in good standing would not have a Material Adverse Effect on Borrower,
and (iii) has all requisite partnership power and authority to own and operate
its property and assets and to conduct its business as presently conducted.
5.2 BORROWER AUTHORITY. Borrower has the requisite partnership power
and authority to execute, deliver and perform each of the Loan Documents to
which it is or will be a party. The execution, delivery and performance thereof,
and the consummation of the transactions contemplated thereby, have been duly
approved by the general partner of Borrower, and no other partnership
proceedings or authorizations on the part of Borrower or its general or limited
partners are necessary to consummate such transactions. Each of the Loan
Documents to which Borrower is a party has been duly executed and delivered by
Borrower and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency and
other laws affecting creditors' rights generally.
5.3 REIT ORGANIZATION; CORPORATE POWERS. The REIT (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Maryland, (ii) is duly qualified to do business as a foreign
corporation and in good standing under the laws of each jurisdiction in which
any Portfolio Property is located or in which Borrower or the REIT owns or
leases real property or in which the nature of its business requires it to be so
qualified, except for those jurisdictions where failure to so qualify and be in
good standing would not have a Material Adverse Effect on the REIT, and (iii)
has all requisite corporate power and authority to own and operate its property
and assets, to perform its duties as general partner of Borrower and to conduct
its business as presently conducted.
5.4 REIT AUTHORITY. The REIT has the requisite corporate power and
authority to execute, deliver and perform the Guaranty and, in its capacity as
general partner of the Borrower each of the other Loan Documents. The execution,
delivery and performance thereof, and the consummation of the transactions
contemplated thereby, have been duly approved by the Board of Directors of the
REIT, and no other corporate proceedings on the part of the REIT are necessary
to consummate such transactions. Each of the Loan Documents to which the REIT is
a party has been duly executed and delivered by Borrower and constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
its terms, subject to bankruptcy, insolvency and other laws affecting creditors'
rights generally.
5.5 OWNERSHIP OF BORROWER, EACH SUBSIDIARY AND PARTNERSHIP. SCHEDULE
5.5 sets forth the general partners and limited partners (or other holders of
ownership interests) of each Subsidiary or Partnership and their respective
ownership percentages and there are no other partnership (or other ownership)
interests outstanding. Except as set forth or referred to in the Partnership
Agreement of any Partnership, no partnership (or other ownership) interest (or
any securities, instruments, warrants, option or purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for such interests) of any such Person is subject to issuance
under any security, instrument, warrant, option or purchase rights, conversion
or exchange rights, call, commitment or claim of any right, title or interest
therein or thereto. All of the partnership (or other ownership) interests in
Borrower and each Partnership and all of the stock of each subsidiary have been
issued in compliance with all applicable Requirements of Law.
5.6 NO CONFLICT. The execution, delivery and performance by Borrower
of the Loan Documents to which it is or will be a party, and each of the
transactions contemplated thereby, do not and will not (i) conflict with or
violate Borrower's limited partnership agreement or certificate of limited
partnership or other organizational documents or the REIT's articles of
incorporation, by-laws or other organizational documents, as the case may be, or
(ii) conflict with, result in a breach of or constitute (with or without notice
or lapse of time or both) a default under any Requirement of Law, Contractual
Obligation or Court Order of or binding upon Borrower or the REIT, or (iii)
require termination of any Contractual Obligation, or (iv) result in or require
the creation or imposition of any Lien whatsoever upon any of the Portfolio
Properties or assets of Borrower, other than Permitted Liens or Liens created by
the Loan Documents.
5.7 CONSENTS AND AUTHORIZATIONS. Each of Borrower and the REIT has
obtained all consents and authorizations required pursuant to its Contractual
Obligations with any other Person, and shall have obtained all consents and
authorizations of, and effected all notices to and filings with, any
Governmental Authority, as may be necessary to allow Borrower and the REIT to
lawfully execute, deliver and perform the Loan Documents.
5.8 GOVERNMENTAL REGULATION. Neither Borrower, the REIT nor any
Partnership is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act, the Investment
Company Act of 1940 or any other federal or state statute or regulation such
that its ability to incur indebtedness is limited or its ability to consummate
the transactions contemplated by the Loan Documents is materially impaired.
5.9 PRIOR FINANCIALS. The December 31, 1997 Consolidated Balance
Sheet, Statement of operations and Statement of Cash Flows of (i) the REIT
contained in the REIT's Form 10K and (ii) the Borrower contained in the
Borrower's Form 10K (the "DECEMBER 31, 1997 FINANCIALS") delivered to Agent
prior to the date hereof were prepared in accordance with GAAP and fairly
present the assets, liabilities and financial condition of the REIT on a
consolidated basis, at such date and the results of its operations and its cash
flows, on a consolidated basis, for the period then ended.
5.10 PROJECTIONS AND FORECASTS. Each of the projections and forecasts
delivered to Agent prior to the date hereof (1) has been prepared by Borrower in
light of the past business and performance of Borrower on a consolidated basis
and (2) represent as of the date thereof, the reasonable good faith estimates of
Borrower's financial personnel.
5.11 PRIOR OPERATING STATEMENTS. Each of the consolidating operating
statements pertaining to the Portfolio Properties delivered to Agent prior to
the date hereof was prepared in accordance with GAAP in effect on the date such
operating statement of each Portfolio Property was prepared and fairly presents
the results of operations of such Portfolio Property for the period then ended.
5.12 RENT ROLLS. The Rent Rolls for the Portfolio Properties as of
December 31, 1997 previously delivered to the Agent pursuant to the Prior
Facilities (i) have been prepared in accordance with the books and records of
the Portfolio Properties, and (ii) fairly present the leasing status of the
Portfolio Properties as of the date thereof. Since the date of said Rent Rolls
there has been no substantial adverse change to the leasing status of the
Portfolio Properties.
5.13 LITIGATION; ADVERSE EFFECTS.
(a) There is no action, suit, Proceeding,
governmental investigation or arbitration, at law or in
equity, or before or by any Governmental Authority, pending or, to the
best of Borrower's knowledge, threatened against Borrower, the REIT or
any Portfolio Property, which, if adversely determined, would (i)
result in a Material Adverse Effect on Borrower or the REIT, (ii)
materially and adversely affect the ability of any party to any of the
Loan Documents to perform its obligations thereunder, or (iii)
materially and adversely affect the ability of Borrower to perform its
obligations contemplated in the Loan Documents.
(b) Neither Borrower nor the REIT is (i)
in violation of any applicable law, which violation has a Material
Adverse Effect on Borrower or the REIT, or (ii) in default with respect
to any Court Order.
5.14 NO MATERIAL ADVERSE CHANGE. Since December 31, 1997, there has
occurred no event which has a Material Adverse Effect on Borrower or the REIT,
and no material adverse change in Borrower's ability to perform its obligations
under the Loan Documents to which it is a party or the transactions contemplated
thereby.
5.15 PAYMENT OF TAXES. All tax returns and reports to be filed by
Borrower and the REIT have been timely filed, and all taxes, assessments, fees
and other governmental charges shown on such returns or otherwise payable by
Borrower have been paid when due and payable (other than real property taxes,
which may be paid prior to delinquency so long as no penalty or interest shall
attach thereto), except such taxes, if any, as are reserved against in
accordance with GAAP and are being contested in good faith by appropriate
proceedings or such taxes, the failure to make payment of which when due and
payable will not have, in the aggregate, a Material Adverse Effect on Borrower
or the REIT. Borrower has no knowledge of any proposed tax assessment against
Borrower or the REIT that will have a Material Adverse Effect on Borrower or the
REIT.
5.16 MATERIAL ADVERSE AGREEMENTS. Neither the Borrower nor the REIT is
a party to or subject to any Contractual Obligation or other restriction
contained in the Borrower's limited partnership agreement or certificate of
limited partnership, the REIT's Articles of Incorporation or bylaws or similar
governing documents which has a Material Adverse Effect on Borrower or the
ability of Borrower to perform its obligations under the Loan Documents.
5.17 PERFORMANCE. Neither Borrower nor the REIT is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Contractual Obligation applicable to it, and no
condition exists which, with the giving of notice or the lapse of time or both,
would constitute a default under such Contractual Obligation in each case,
except where the consequences, direct or indirect, of such default or defaults,
if any, will not have a Material Adverse Effect on Borrower or the REIT.
5.18 FEDERAL RESERVE REGULATIONS. No part of the proceeds of the Loan
hereunder will be used to purchase or carry any "margin security" as defined in
Regulation G or for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry any margin security or for any
other purpose which might constitute this transaction a "purpose credit" within
the meaning of said Regulation G. Neither Borrower nor the REIT is engaged
primarily in the business of extending credit for the purpose of purchasing or
carrying any "margin stock" as defined in Regulation U. No part of the proceeds
of the Loan hereunder will be used for any purpose that violates, or which is
inconsistent with, the provisions of Regulation X or any other regulation of the
Federal Reserve Board.
5.19 UNSECURED TERM NOTES. The Unsecured Term Notes were issued in
compliance with all applicable Requirements of Law and there is no existing
"Event of Default" as defined in the Unsecured Term Note Indenture.
5.20 REQUIREMENTS OF LAW. Borrower and the REIT are in compliance with
all Requirements of Law (including without limitation the Securities Act and the
Securities Exchange Act, and the applicable rules and regulations thereunder,
state securities law and "Blue Sky" laws) applicable to it and its respective
businesses, in each case, where the failure to so comply will have a Material
Adverse Effect on any such Person. The REIT has made all filings with and
obtained all consents of the Commission required under the Securities Act and
the Securities Exchange Act in connection with the execution, delivery and
performance by the REIT of the Loan Documents.
5.21 PATENTS, TRADEMARKS, PERMITS, ETC. Borrower and the REIT own, are
licensed or otherwise have the lawful right to use, or have all permits and
other governmental approvals, patents, trademarks, trade names, copyrights,
technology, know-how and processes used in or necessary for the conduct of each
such Person's business as currently conducted, the absence of which would have a
Material Adverse Effect upon such Person. The use of such permits and other
governmental approvals, patents, trademarks, trade names, copyrights,
technology, know-how and processes by each such Person does not infringe on the
rights of any Person, subject to such claims and infringements as do not, in the
aggregate, give rise to any liability on the part of any such Person which would
have a Material Adverse Effect on any such Person.
5.22 ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE 5.22, to
the best of Borrower's knowledge, (i) the operations of Borrower and its
Subsidiaries and Partnerships and the Simon Partnerships comply in all material
respects with all applicable local, state and federal environmental, health and
safety Requirements of Law ("ENVIRONMENTAL LAWS"); (ii) none of the Portfolio
Properties or the Simon Properties are subject to any Remedial Action or other
Liabilities and Costs arising from the Release or threatened Release of a
Contaminant into the environment in violation of any Environmental Laws; (iii)
neither Borrower, the REIT nor any Partnership or Subsidiary has filed any
notice under applicable Environmental Laws reporting a Release of a Contaminant
into the environment in violation of any Environmental Laws, except as the same
may have been heretofore remedied; (iv) there is not now on or in any of the
Portfolio Properties or the Simon Properties (except in compliance in all
material respects with all applicable Environmental Laws): (A) any underground
storage tanks, (B) any asbestos-containing material, or (C) any polychlorinated
biphenyls (PCB's) used in hydraulic oils, electrical transformers or other
equipment owned by such Person; and (v) neither Borrower, the REIT nor any
Partnership or Subsidiary has received any notice or claim to the effect that it
is or may be liable to any Person as a result of the Release or threatened
Release of a Contaminant into the environment.
5.23 UNENCUMBERED PROPERTIES. Each of the Properties listed on
SCHEDULE 1 (i) qualifies as an Unencumbered Property (ii) has a Property
Occupancy Rate of at least eighty-five percent (85%) and (iii) is free of any
material defects in the roof, foundation, structural elements and masonry walls
of the buildings thereon or their hvac, electrical, sprinkler or plumbing
systems.
5.24 SOLVENCY. Borrower is and will be Solvent after giving effect to
the disbursements of the Loans and the payment and accrual of all fees then
payable.
5.25 TITLE TO ASSETS; NO LIENS. Borrower has good, indefeasible and
merchantable title to all Properties owned or leased by it, and each of the
Unencumbered Properties is free and clear of all Liens, except Permitted Liens.
5.26 USE OF PROCEEDS. Borrower's use of the proceeds of the Loans are,
and will continue to be, legal and proper uses (and to the extent necessary,
duly authorized by Borrower's partners) and such uses are consistent with all
applicable laws and statutes and SECTION 7.9.
5.27 REIT CAPITALIZATION. All of the capital stock of the REIT has
been issued in compliance with all applicable Requirements of Law.
5.28 ERISA. Neither the REIT nor any ERISA Affiliate thereof
(including, for all purposes under this SECTION 5.28, Borrower) has in the past
five (5) years maintained or contributed to or currently maintains or
contributes to any Benefit Plan. No Investment Partnership has or is likely to
incur any liability with respect to any Benefit Plan maintained or contributed
to by such Investment Partnership or its ERISA Affiliates, which would have a
Material Adverse Effect on Borrower. Neither the REIT nor any ERISA Affiliate
thereof has during the past five (5) years maintained or contributed to or
currently maintains or contributes to any employee welfare benefit plan within
the meaning of Section 3(1) of ERISA which provides benefits to retirees.
Neither the REIT nor any ERISA Affiliate thereof is now contributing nor has it
ever contributed to or been obligated to contribute to any Multiemployer Plan,
no employees or former employees of the REIT, or such ERISA Affiliate have been
covered by any Multiemployer Plan in respect of their employment by the REIT,
and no ERISA Affiliate of the REIT has or is likely to incur any withdrawal
liability with respect to any Multiemployer Plan which would have a Material
Adverse Effect on the REIT.
5.29 STATUS AS A REIT. The REIT (i) is a real estate investment trust
as defined in Section 856 of the Internal Revenue Code (or any successor
provision thereto), (ii) has not revoked its election to be a real estate
investment trust, (iii) has not engaged in any "prohibited transactions" as
defined in Section 856(b)(6)(iii) of the Internal Revenue Code (or any successor
provision thereto), and (iv) for its current "tax year" (as defined in the
Internal Revenue Code) is and for all prior tax years subsequent to its election
to be a real estate investment trust has been entitled to a dividends paid
deduction which meets the requirements of Section 857 of the Internal Revenue
Code.
5.30 OWNERSHIP. The REIT does not own or have any interest in any
other Person, other than its general partnership interests in Borrower and in
the ATC Partnership.
5.31 NYSE LISTING. The common stock of the REIT is and will continue
to be listed for trading on either the New York Stock Exchange or the American
Stock Exchange.
5.32 CURRENT CONSTRUCTION PROJECTS. SCHEDULE 5.32 sets forth a
description of all of the Current Construction Projects and all of the
Construction Projects presently planned for 1998 including with respect to each
project: its location, gross leasable area, total budgeted cost, construction
commencement date and expected Rent Stabilization Date which information shall
be deemed to be updated to reflect information set forth in Compliance
Certificates delivered to Agent.
ARTICLE VI
REPORTING COVENANTS
Borrower covenants and agrees that, on and after the date hereof,
until payment in full of all of the Obligations, the expiration of the
Commitments and termination of this Agreement:
6.1 FINANCIAL STATEMENTS AND OTHER FINANCIAL AND OPERATING
INFORMATION. Borrower shall maintain or cause to be maintained a system of
accounting established and administered in accordance with sound business
practices and consistent with past practice to permit preparation of quarterly
and annual financial statements in conformity with GAAP, and each of the
financial statements described below shall be prepared on a consolidated basis
for the REIT and for the Borrower from such system and records. Borrower shall
deliver or cause to be delivered to Agent (with copies sufficient for each
Lender):
6.1.1 SEMI-ANNUAL RENT ROLLS. As soon as practicable, and in any
event within fifty (50) days after the end of each Fiscal Quarter ending on June
30 or December 31 rent rolls (on Borrower's detailed form of rent roll) for each
Portfolio Property dated as of the last day of such Fiscal Quarter, in form and
substance satisfactory to Agent, certified by the REIT's chief financial
officer, senior vice president or treasurer. Copies of the rent rolls will be
provided only to those Lenders which expressly request copies thereof.
6.1.2 QUARTERLY FINANCIAL STATEMENTS CERTIFIED BY CFO. As soon as
practicable, and in any event within fifty (50) days after the end of each of
the first three Fiscal Quarters, consolidated balance sheets, statements of
operations and statements of cash flow for the REIT and the Borrower ("FINANCIAL
STATEMENTS"), which may be in the form provided to the Commission on the REIT's
Form 10Q and the Borrower's Form 10Q (unless the Borrower is not required to
file a Form 10Q), and certified by the REIT's chief financial officer, senior
vice president or treasurer.
6.1.3 ANNUAL FINANCIAL STATEMENTS. Within ninety (90) days after
the close of each Fiscal Year, annual Financial Statements of the REIT and of
the Borrower, on a consolidated basis (in the form provided to the Commission on
the REIT's Form 10K and the Borrower's Form 10K), audited and certified without
qualification by the Accountants provided, however, that at such time as the
Borrower is no longer required to file a Form 10K with the Commission, Borrower
may deliver only the REIT's audited Financial Statement accompanied by a letter
from the Accountants stating that with the exception of the minority interest
line there is no material difference between the Financial Statements of
Borrower and such audited Financial Statements of the REIT. To the extent Agent
desires additional details or supporting information with respect to
Partnerships or individual Portfolio Properties or the Simon Properties not
contained in the REIT's or Borrower's Form 10K, Borrower shall provide Agent
with such details or supporting information as Agent requests which is
reasonably available to Borrower.
6.1.4 OFFICER'S CERTIFICATE. (i) Together with each delivery of
any Financial Statement pursuant to SECTIONS 6.1.2 and 6.1.3, (A) an Officer's
Certificate of the REIT stating that each of the Financial Statements delivered
to Agent therewith (i) has been prepared in accordance with the books and
records of the REIT and Borrower on a consolidated basis, and (ii) fairly
presents the financial condition of the REIT and Borrower on a consolidated
basis, at the dates thereof (and, if applicable, subject to normal year-end
adjustments) and the results of its operations and cash flows, on a consolidated
basis, for the period then ended; (B) an Officer's Certificate of the REIT,
stating that the executive officer who is the signatory thereto (which officer
shall be the chief executive officer, the chief operating officer, the chief
financial officer, any senior vice president or the treasurer of the REIT) has
reviewed, or caused under his supervision to be reviewed, the terms of this
Agreement and the other principal Loan Documents, and has made, or caused to be
made under his supervision, a review in reasonable detail of the transactions
and condition of Borrower and the REIT, during the accounting period covered by
such Financial Statements, and that such review has not disclosed the existence
during or at the end of such accounting period, and that the signers do not have
knowledge of the existence as of the date of the Officer's Certificate, of any
condition or event which constitutes an Event of Default or Unmatured Event of
Default, or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action has been taken, is being
taken and is proposed to be taken with respect thereto; and (C) a Compliance
Certificate demonstrating in reasonable detail (which detail shall include
actual calculation and supporting information) compliance during and at the end
of such accounting periods with the financial covenants contained in ARTICLE IX.
6.1.5 BORROWING PROJECTIONS. At least ten (10) days prior to the
end of each Fiscal Year, projections of Borrower, on a consolidated basis,
detailing expected borrowing and repayment of the Loans for the following Fiscal
Year together with an Officer's Certificate of the REIT stating that such
projections (1) have been prepared by Borrower in light of the past business and
performance of Borrower on a consolidated basis and (2) represent, as of the
date thereof, the reasonable good faith estimates of Borrower's financial
personnel. Borrower shall also provide such additional supporting details as
Agent may reasonably request.
6.1.6 COMPLIANCE WITH UNENCUMBERED PROPERTY REQUIREMENTS.
Promptly upon becoming aware of any condition or event which causes any of the
Properties listed as Unencumbered Properties on the most recent Compliance
Certificate to no longer comply with the requirements set forth in the
definition of Unencumbered Properties, an Officer's Certificate specifying the
relevant information and a revised Compliance Certificate.
6.1.7 KNOWLEDGE OF EVENT OF DEFAULT. Promptly upon Borrower
obtaining knowledge (i) of any condition or event which constitutes an Event of
Default or Unmatured Event of Default, or becoming aware that any Lender has
given notice or taken any other action with respect to a claimed Event of
Default or Unmatured Event of Default or (ii) of any condition or event which
has a Material Adverse Effect on Borrower or the REIT, an Officer's Certificate
specifying the nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such Lender and the nature of
such claimed Event of Default, Unmatured Event of Default, event or condition,
and what action Borrower and/or the REIT has taken, is taking and proposes to
take with respect thereto.
6.1.8 LITIGATION, ARBITRATION OR GOVERNMENT INVESTIGATION.
Promptly upon Borrower or the REIT obtaining knowledge of (i) the institution
of, or threat of, any material action, suit, proceeding, governmental
investigation or arbitration against or affecting Borrower or the REIT not
previously disclosed in writing by Borrower to Agent pursuant to this SECTION
6.1.8, or (ii) any material development in any action, suit, proceeding,
governmental investigation or arbitration already disclosed, which, in either
case, has a Material Adverse Effect on Borrower or the REIT, a notice thereof to
Agent and such other information as may be reasonably available to it to enable
Agent, Lenders and their counsel to evaluate such matters.
6.1.9 ESTABLISHMENT OF BENEFIT PLAN AND INCREASE IN CONTRIBUTIONS
TO THE BENEFIT PLAN. Not less than ten (10) days prior to the effective date
thereof, a notice to Agent of the establishment of a Benefit Plan (or the
incurrence of any obligation to contribute to a Multiemployer Plan) by Borrower,
the REIT or any ERISA Affiliate. Within thirty (30) days after the first to
occur of an amendment of any then existing Benefit Plan of Borrower, the REIT or
any ERISA Affiliate which will result in an increase in the benefits under such
Benefit Plan or a notification of any such increase, or the establishment of any
new Benefit Plan by Borrower, the REIT or any ERISA Affiliate or the
commencement of contributions to any Benefit Plan to which Borrower, the REIT or
any ERISA Affiliate was not previously contributing, a copy of said amendment,
notification or Benefit Plan. For so long as any such Benefit Plan exists,
prompt notice of any Termination Event, prohibited transaction, funding waiver
request, unfavorable determination letter or withdrawal liability under a
Multiemployer Plan.
6.1.10 FAILURE OF THE REIT TO QUALIFY AS REAL ESTATE INVESTMENT
TRUST. Promptly upon, and in any event within forty-eight (48) hours after
Borrower first has actual knowledge of (i) the REIT failing to continue to
qualify as a real estate investment trust as defined in Section 856 of the
Internal Revenue Code (or any successor provision thereof), (ii) any act by the
REIT causing its election to be taxed as a real estate investment trust to be
terminated, (iii) any act causing the REIT to be subject to the taxes imposed by
Section 857(b)(6) of the Internal Revenue Code (or any successor provision
thereto), or (iv) the REIT failing to be entitled to a dividends paid deduction
which meets the requirements of Section 857 of the Internal Revenue Code, a
notice of any such occurrence or circumstance.
6.1.11 ASSET ACQUISITIONS AND DISPOSITIONS, INDEBTEDNESS, ETC.
Without limiting ARTICLE VIII or any other restriction in the Loan Documents,
and in all events not later than the same Business Day on which there is public
disclosure of any material Investments (other than in Cash Equivalents),
acquisitions, dispositions, disposals, divestitures or similar transactions
involving Property, the creation of Liens on any of the Portfolio Properties,
other than Non-Retail Properties, the execution of any long term leases of real
estate in which the Borrower or its Subsidiary is the lessee, the raising of
additional equity or the incurring or repayment of material Indebtedness, by or
with Borrower, any GP Partnership or Subsidiary or the REIT, telephonic or
facsimile notice thereof to Lori Y. Litow or such other person(s) as Agent may
designate from time to time, and, if requested by Agent, promptly upon
consummation of such transaction, a Compliance Certificate demonstrating in
reasonable detail (which detail shall include actual calculations) compliance,
after giving effect to such proposed transaction(s), with the covenants
contained in ARTICLE IX.
6.1.12 OTHER INFORMATION. Such other information, reports,
contracts, schedules, lists, documents, agreements and instruments in the
possession of the REIT or Borrower with respect to (i) the Portfolio Properties
or the Simon Properties, (ii) any material change in the REIT's investment,
finance or operating policies, or (iii) Borrower's or the REIT's business,
condition (financial or otherwise), operations, performance, properties or
prospects as Agent may from time to time reasonably request, including, without
limitation, annual information with respect to cash flow projections, budgets,
operating statements (current year and immediately preceding year), rent rolls,
lease expiration reports, leasing status reports, tenant sales reports (to the
extent available), note payable summaries, equity funding requirements,
contingent liability summaries, line of credit summaries, tenant improvement
allowance summaries, note receivable summaries, schedules of outstanding letters
of credit, summaries of cash and Cash Equivalents, projections of management and
leasing fees and overhead budgets. Provided that Agent gives Borrower reasonable
prior notice and an opportunity to participate, Borrower hereby authorizes Agent
to communicate with the Accountants and authorizes the Accountants to disclose
to Agent any and all financial statements and other information of any kind,
including copies of any management letter or the substance of any oral
information, that such accountants may have with respect to Borrower's or the
REIT's condition (financial or otherwise), operations, properties, performance
and prospects. At Agent's request, Borrower shall deliver a letter addressed to
the Accountants instructing them to disclose such information in compliance with
this SECTION 6.1.12.
6.1.13 PRESS RELEASES; SEC FILINGS AND FINANCIAL STATEMENTS.
Telephonic or telecopy notice to Agent concurrent with or prior to issuance of
any material press release concerning the REIT or Borrower and, as soon as
practicable after filing with the Commission, all reports and notices, proxy
statements, registration statements and prospectuses of the REIT. All materials
sent or made available generally by the REIT to the holders of its publicly-held
Securities or to a trustee under any indenture or filed with the Commission,
including all periodic reports required to be filed with the commission, will be
delivered to Agent and Lenders as soon as available.
6.1.14 ACCOUNTANT REPORTS. Copies of all reports prepared by the
Accountants and submitted to Borrower or the REIT in connection with each
annual, interim or special audit or review of the financial statements or
practices of Borrower or the REIT, including the comment letter submitted by the
Accountants in connection with their annual audit.
6.1.15 TERMINATION OR MODIFICATION OF EARTHQUAKE COVERAGE.
Promptly upon, and in any event within thirty (30) days after Borrower first has
knowledge of the termination or modification (with respect to the amount of
either the coverage provided or the applicable deductible) of the coverage
provided by the blanket property insurance rider regarding earthquake insurance
for Portfolio Properties located in "Zone 1" maintained by Borrower as of the
date of this Agreement, a notice of such termination or modification.
6.2 ENVIRONMENTAL NOTICES. Borrower shall notify Agent, in writing, as
soon as practicable, and in any event within ten (10) days after Borrower's or
the REIT's learning thereof, of any: (i) written notice or claim to the effect
that Borrower or the REIT is or may be liable to any Person as a result of any
material Release or threatened Release of any Contaminant into the environment;
(ii) written notice that Borrower or the REIT is subject to investigation by any
Governmental Authority evaluating whether any Remedial Action is needed to
respond to the Release or threatened Release of any Contaminant into the
environment; (iii) written notice that any Portfolio Property or any Simon
Property is subject to an Environmental Lien; (iv) written notice that Borrower,
any Subsidiary or Partnership, any Simon Partnership or the REIT has received a
notice of violation of any Environmental Laws by Borrower, any Subsidiary or
Partnership or the REIT; (v) commencement or written threat of any judicial or
administrative proceeding alleging a violation of any Environmental Laws; (vi)
written notice from a Governmental Authority of any changes to any existing
Environmental Laws that will have a Material Adverse Effect on the operations of
Borrower or the REIT; or (vii) any proposed acquisition of stock, assets, real
estate or leasing of property, or any other action by Borrower that, to the best
of Borrower's knowledge, could subject Borrower, any Subsidiary or Partnership
or the REIT to environmental, health or safety Liabilities and Costs that will
have a Material Adverse Effect on Borrower or the REIT.
6.3 CONFIDENTIALITY. Confidential Information obtained by Agent or
Lenders pursuant to this Agreement or in connection with the Facility shall not
be disseminated by Agent or Lenders and shall not be disclosed to third parties
except to regulators, taxing authorities and other governmental agencies having
jurisdiction over Agent or such Lender or otherwise in response to Requirements
of Law, to their respective auditors and legal counsel and in connection with
regulatory, administrative and judicial proceedings as necessary or relevant
including enforcement proceedings relating to the Loan Documents, and to any
prospective assignee of or participant in a Lender's interest under this
Agreement or any prospective purchaser of the assets or a controlling interest
in any Lender, PROVIDED that such prospective assignee, participant or purchaser
first agrees to be bound by the provisions of this SECTION 6.3. For purposes
hereof, "CONFIDENTIAL INFORMATION" shall mean all nonpublic information obtained
by Agent or Lenders, unless and until such information becomes publicly known,
other than as a result of unauthorized disclosure by Agent or Lenders of such
information.
ARTICLE VII
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, on and after the date hereof,
until payment in full of all of the Obligations, the expiration of the
Commitments and termination of this Agreement:
7.1 EXISTENCE. Each of Borrower and the REIT shall at all times
maintain its existence and preserve and keep in full force and effect its rights
and franchises. Borrower shall remain a Delaware limited partnership with the
REIT as its sole general partner.
7.2 QUALIFICATION, NAME. Each of Borrower and the REIT shall qualify
and remain qualified to do business in each jurisdiction in which any Portfolio
Property is located or in which the nature of its business requires it to be so
qualified except for those jurisdictions where failure to so qualify would not
have a material Adverse Effect on Borrower. Borrower will transact business
solely in its own name or in the commonly known name of one of the Portfolio
Properties.
7.3 COMPLIANCE WITH LAWS, ETC. Each of Borrower and REIT shall (i)
comply with all Requirements of Law, and all restrictive covenants affecting it
or its properties, performance, prospects, assets or operations, and (ii) obtain
as needed all Permits necessary for its operations and maintain such in good
standing, except where the failure to do so will not have a Material Adverse
Effect on Borrower.
7.4 PAYMENT OF TAXES AND CLAIMS. Each of Borrower and the REIT shall
pay (i) all taxes, assessments and other governmental charges imposed upon it or
on any of its properties or assets or in respect of any of its franchises,
business, income or property before any penalty or interest accrues thereon, and
(ii) all claims (including, without limitation, claims for labor, services,
materials and supplies) for sums which have become due and payable and which by
law have or may become a Lien other than a judgment lien upon any of Borrower's
properties or assets, prior to the time when any penalty or fine shall be
incurred with respect thereto, provided, however that the payment of such taxes,
assessments, charges and claims may be deferred so long as the validity or
amount thereof shall currently be contested in good faith by appropriate
proceedings and if Borrower shall have set aside in its books adequate reserves
specifically with respect thereto, but Borrower shall pay such matters prior to
the foreclosure of a Lien which may have attached as security therefor.
7.5 MAINTENANCE OF PROPERTIES; INSURANCE. Borrower shall maintain in
good repair, working order and condition, excepting ordinary wear and tear, all
of the Portfolio Properties and will make or cause to be made all appropriate
repairs, renewals and replacements thereof. Borrower shall maintain commercially
reasonable and appropriate amounts of "all risk" property and liability
insurance, which insurance shall include in any event:
(a) with respect to each Property: (1)
property and casualty insurance (including coverage for flood and
water damage for any Portfolio Property located within a 100-year flood
plain) in an amount not less than the replacement costs of the
improvements thereon (subject to reasonable deductibles and, in the
case of flood insurance, subject to the maximum coverages available
under the National Flood Insurance Program), and (ii) loss of rental
insurance income in an amount not less than one year's gross revenues
of such Portfolio Property; and
(b) comprehensive general liability insurance
in an amount not less than $20,000,000 per occurrence, including all
insurance pursuant to umbrella and excess liability policies.
At the request of Agent, Borrower shall provide, evidence of insurance,
including certificates of insurance and binders.
7.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Borrower
shall permit, and shall cause the REIT and each Subsidiary or Partnership to
permit, any authorized representative(s) designated by any Lender to visit and
inspect any of its properties, to inspect financial and accounting records and
leases, and to make copies and take extracts therefrom, all at such times after
reasonable advance notice during normal business hours and as often as any
Lender may reasonably request. In connection therewith, Borrower shall pay all
expenses of the Agent (but not of the other Lenders) of the types described in
SECTION 12.1 subject to the limitation that prior to an Event of Default the
Borrower shall not be required to reimburse expenses for inspections of
Properties made more frequently than annually. Borrower will keep proper books
of record and account in which entries, in conformity with GAAP and as otherwise
required by this Agreement and applicable Requirements of Law, shall be made of
all dealings and transactions in relation to its businesses and activities and
as otherwise required under SECTION 6.1.
7.7 MAINTENANCE OF PERMITS, ETC. Each of Borrower and the REIT will
maintain in full force and effect all Permits, franchises, patents, trademarks,
trade names, copyrights, authorizations or other rights necessary for the
operation of its business, except where the failure to obtain any of the
foregoing would not have a Material Adverse Effect on Borrower; and notify Agent
in writing, promptly after learning thereof, of the suspension, cancellation,
revocation or discontinuance of or of any pending or threatened action or
proceeding seeking to suspend, cancel, revoke or discontinue any material
Permit, patent, trademark, trade name, copyright, governmental approval,
franchise authorization or right.
7.8 CONDUCT OF BUSINESS. Except for Permitted Investments pursuant to
SECTION 9.10 and Investments in cash and Cash Equivalents, Borrower shall engage
only in the business of direct ownership, operation and development of retail
properties and any other business activities of Borrower will remain incidental
thereto.
7.9 USE OF PROCEEDS. Borrower shall use the proceeds of the Loans only
for predevelopment costs, development costs, acquisitions, working capital,
equity Investments and repayment of Indebtedness, including required interest
and/or principal payments thereon.
7.10 SECURITIES LAW COMPLIANCE. Each of the Borrower and the REIT
shall comply in all material respects with all rules and regulations of the
Commission and file all reports required by the Commission relating to the
Borrower's or the REIT's publicly-held Securities.
7.11 CONTINUED STATUS AS A REIT; PROHIBITED TRANSACTIONS. The REIT (i)
will continue to be a real estate investment trust as defined in Section 856 of
the Internal Revenue Code (or any successor provision thereto), (ii) will not
revoke its election to be a real estate investment trust, (iii) will not engage
in any "prohibited transactions" as defined in Section 856(b)(6)(iii) of the
Internal Revenue Code (or any successor provision thereto), and (iv) will
continue to be entitled to a dividend paid deduction meeting the requirements of
Section 857 of the Internal Revenue Code.
7.12 NYSE LISTED COMPANY. The common stock of the REIT shall at all
times be listed for trading on the New York Stock Exchange.
7.13 PROPERTY MANAGEMENT. All Portfolio Properties (other than
Non-Retail Properties) in which the direct or indirect ownership interest of
Borrower exceeds fifty percent (50%) shall be directly managed by Borrower.
7.14 INTEREST RATE CONTRACTS. At all times when LIBOR for 30 day
Interest Periods has, for 30 consecutive days, exceeded eight and one-quarter
percent (8.25%), Borrower shall maintain in effect Interest Rate Contracts which
are satisfactory to the Agent covering at least forty percent (40%) of the
aggregate amount of variable interest rate Indebtedness of Borrower (including
the Facility and the BankBoston Term Loan) then outstanding plus any additional
Loans which are projected to be advanced hereunder within 90 days after the
acquisition of such Interest Rate Contracts. In determining whether such
Interest Rate Contracts are satisfactory, the Agent shall not require that the
terms thereof extend beyond the Termination Date.
ARTICLE VIII
NEGATIVE COVENANTS
Borrower covenants and agrees that, on and after the date hereof,
until payment in full of all of the Obligations, the expiration of the
Commitments and termination of this Agreement:
8.1 LIENS. Neither Borrower nor the REIT shall(i) directly or
indirectly create, incur, assume or permit to exist any Lien, except for
Permitted Liens, on or with respect to all or any portion of Woodbury Common;
(ii) directly or indirectly create, assume or permit to exist any agreement
(other than the Loan Documents and the Unsecured Term Note Secured Debt
Limitation set forth in the Unsecured Term Note Indenture) prohibiting the
creation of any Lien on Woodbury Common. This SECTION 8.1 shall only be
applicable so long as Borrower's senior long-term unsecured debt obligations are
rated below BBB or Baa2 by one or both of the Rating Agencies.
8.2 TRANSFERS OF WOODBURY COMMON. Borrower shall not transfer,
directly or indirectly, all or any interest in Woodbury Common except Leases to
tenants which are not Affiliates of Borrower entered into in the ordinary course
of business.
8.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Neither Borrower nor the REIT
shall, without the prior written consent of the Agent
(a) Enter into any merger or consolidation or
liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution);
(b) Change its Fiscal Year;
(c) Except for Permitted Investments, engage in any
line of business other than as expressly permitted under SECTION 7.8;
(d) Create or acquire any Subsidiary or
become a partner or member in any Partnership (except a Simon
Partnership) PROVIDED, however that the Agent shall not unreasonably
withhold its consent under this paragraph (d) after a review of all
information requested by the Agent regarding the applicable entity
including the names of others having an ownership interest therein, the
proposed structure of the entity, the size, location and leasing of the
Property owned or proposed to be owned by such entity and the terms of
any existing or contemplated Indebtedness of such entity.
8.4 ERISA. Neither the Borrower nor the REIT shall permit any ERISA
Affiliates to do any of the following to the extent that such act or failure to
act would result in the aggregate, after taking into account any other such acts
or failure to act, in a Material Adverse Effect on Borrower or the REIT:
(a) Engage, or knowingly permit an ERISA
Affiliate to engage, in any prohibited transaction described in
Section 406 of the ERISA or Section 4975 of the Internal Revenue Code
which is not exempt under Section 407 or 408 of ERISA or Section
4975(d) of the Internal Revenue Code for which a class exemption is not
available or a private exemption has not been previously obtained from
the DOL;
(b) Permit to exist any accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the
Internal Revenue Code), whether or not waived;
(c) Fail, or permit an ERISA Affiliate
to fail, to pay timely required contributions or annual installments
due with respect to any waived funding deficiency to any Plan if such
failure could result in the imposition of a Lien or otherwise would
have a Material Adverse Effect on Borrower or the REIT;
(d) Terminate, or permit an ERISA Affiliate to
terminate, any Benefit Plan which would result in any liability of
Borrower or an ERISA Affiliate under Title IV of ERISA or the REIT; or
(e) Fail, or permit any ERISA Affiliate to
fail, to pay any required installment under section (m) of Section
412 of the Internal Revenue Code or any other payment required under
Section 412 of the Internal Revenue Code on or before the due date for
such installment or other payment, if such failure could result in the
imposition of a Lien or otherwise would have a Material Adverse Effect
on Borrower or the REIT.
8.5 AMENDMENT OF CONSTITUENT DOCUMENTS. Except for any such amendment
that is required (i) under any Requirement of Law imposed by any Governmental
Authority or (ii) in order to maintain compliance with SECTION 7.11: (1) neither
Borrower nor any Partnership shall amend its Partnership Agreement (including,
without limitation, as to the admission of any new partner, directly or
indirectly), and (2) the REIT shall not amend its articles of incorporation or
by-laws; in any such case, except amendments which do not materially affect the
ability of the Borrower or the REIT to perform its obligations under the Loan
Documents or other amendments which have received the prior written consent of
the Agent.
8.6 DISPOSAL OF PARTNERSHIP INTERESTS OR STOCK IN SUBSIDIARIES.
Neither Borrower nor the REIT will directly or indirectly convey, sell,
transfer, assign, pledge or otherwise encumber or dispose of any of its
partnership (or other ownership) interests or stock in any Partnership or
Subsidiary without first providing the notice and (if required) Compliance
Certificate pursuant to SECTION 6.1.11 with such disposition or encumbrance of
such partnership interest or stock being treated the same as disposition or
encumbrance of the Property owned by the applicable Partnership or Subsidiary.
8.7 MARGIN REGULATIONS. No portion of the proceeds of any Loans shall
be used in any manner which might cause the extension of credit or the
application of such proceeds to violate Regulation G, U or X or any other
regulation of the Federal Reserve Board or to violate the Securities Exchange
Act or the Securities Act, in each case as in effect on the applicable Funding
Date.
8.8 WITH RESPECT TO THE REIT:
8.8.1 The REIT shall not own any material assets (other than its
interest in the ATC Partnership) or engage in any line of business other than
owning partnership interests in Borrower.
8.8.2 The REIT shall not directly or indirectly create, incur,
assume or otherwise become or remain directly or indirectly liable with respect
to, any Indebtedness, except the Obligations and other Borrower Debt.
8.8.3 The REIT shall not directly or indirectly create, incur,
assume or permit to exist any Lien (other than Permitted Liens) on or with
respect to any of its Property or assets.
8.8.4 The REIT will not directly or indirectly convey, sell,
transfer, assign, pledge or otherwise encumber or dispose of any of its
partnership interests in Borrower so as to reduce its interest in Borrower to
less than 60%.
8.9 ADDITIONAL UNSECURED BANK DEBT. Neither Borrower nor any
Subsidiaries of Borrower shall create, incur, assume or otherwise become liable
for any unsecured line of credit or other unsecured loan from any bank or
financial institution, other than the Facility and the BankBoston Term Loan, nor
shall the Borrower cause any letter of credit to be issued by any bank or
financial institution for the account of Borrower or any Subsidiaries of
Borrower, other than the Letters of Credit.
8.10 RESTRICTIONS ON INDEBTEDNESS. Except with the prior written
consent of Requisite Lenders, the Borrower will not create, incur, assume,
guarantee or become or remain liable, contingently or otherwise, or agree not to
do any of same, with respect to any Indebtedness other than:
(a) Indebtedness to the Lenders arising under this
Agreement, Indebtedness to BankBoston arising under the BankBoston Term Loan and
Indebtedness to the holders of the Unsecured Term Notes arising thereunder;
(b) current liabilities of the Borrower incurred in the
ordinary course of business but not incurred through (i) the borrowing of money,
or (ii) the obtaining of credit except for credit on an open account basis
customarily extended and in fact extended in connection with normal purchases of
goods and services;
(c) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials and supplies to
the extent that payment therefor shall not at the time be required to be made in
accordance with the provisions of SECTION 7.4;
(d) Indebtedness in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal so long
as execution is not levied thereunder or in respect of which the Borrower shall
at the time in good faith be prosecuting an appeal or proceedings for review and
in respect of which a stay of execution shall have been obtained pending such
appeal or review;
(e) Endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary course
of business;
(f) Indebtedness consisting of purchase money financing for
equipment used in the ordinary course of Borrower's business provided that the
amount of each such financing may not exceed 100% of the cost of the purchased
property.
(g) Nonrecourse Indebtedness of Borrower secured by a Lien
on a Portfolio Property (other than Woodbury Common for so long as SECTION 8.1
remains in effect) which is completely non-recourse to the Borrower and to the
REIT to the extent the same does not create a violation of SECTIONS 9.4, 9.5,
9.6 OR 9.7 provided that (i) upon the creation or assumption of any such
Indebtedness Borrower shall provide the Agent with a notice describing the terms
of such Indebtedness and the security therefor and a copy of the promissory note
or other instrument containing the nonrecourse provisions, and (ii) if the terms
of such Indebtedness include financial covenants, such covenants are determined
by the Agent in its sole discretion to be less stringent than the covenants set
forth in ARTICLE IX.
(h) Indebtedness of Borrower other than Nonrecourse
Indebtedness for borrowed money to the extent the same does not create a
violation of SECTIONS 9.4, 9.5, 9.6 OR 9.7 provided that (i) upon the creation
or assumption of any such Indebtedness Borrower shall provide the Agent with a
notice describing the terms of such Indebtedness, (ii) such Indebtedness must be
permitted under the terms of the Unsecured Term Notes, (iii) if the terms of
such Indebtedness include financial covenants such covenants are determined by
the Agent, in its sole discretion, to be less stringent than the covenants set
forth in ARTICLE IX, and (iv) except for facilities having BankBoston as sole
lender or as agent for a group of lenders, such Indebtedness has a term which
matures at least twenty-four (24) months after the then applicable Termination
Date.
(i) Indebtedness consisting of purchase money financing for
Land intended for development in connection with future Construction Projects to
the extent the same does not create a violation of SECTIONS 9.4, 9.5, 9.6 OR 9.7
provided that (i) the amount of such Indebtedness does not exceed 100% of the
cost of the purchased Land, (ii) the Indebtedness is secured by a Lien on the
purchased Land, (iii) the aggregate amount of the Indebtedness described in this
paragraph outstanding at any time shall not exceed $15,000,000.00, and (iv) upon
the creation of any such Indebtedness Borrower shall provide the Agent with a
notice describing the terms of such Indebtedness.
(j) Indebtedness of Borrower related to the Indebtedness of
any Simon Partnership to the extent the same does not create a violation of
SECTION 9.4 provided that the respective recourse liability of Simon and
Borrower with respect thereto shall be in proportion to their respective
percentage ownership interests in the applicable Simon Partnership.
8.11 CONSTRUCTION PROJECTS. Borrower shall not commence construction
of any Construction Project if the addition of the budgeted project costs for
such project to the CIP Budget Amount would result in a violation of SECTION
9.11. At all times when the Portfolio Occupancy Rate is less than ninety-five
percent (95%) Borrower shall not commence construction of any Construction
Project prior to the earlier of (a) the date that premises which in the
aggregate constitute at least twenty percent (20%) of the gross leasable area of
such Construction Project are subject to executed leases under which (i)
occupancy by the tenant thereunder is conditioned only upon completion of
construction of the relevant improvements and (ii) such tenant is otherwise
unconditionally committed to take occupancy upon completion of such construction
or (b) the date that the Portfolio Occupancy Rate again exceeds ninety-five
percent (95%).
8.12 DISCONTINUITY IN MANAGEMENT. In the event that any three of the
five Executive Officers shall cease to be active on a full time, continuous
basis in the senior management of Borrower and the REIT ("DISCONTINUITY IN
MANAGEMENT"), Borrower shall have up to one hundred eighty (180) days to obtain
the approval of Requisite Lenders to additional executives, such that the
remaining and new management executives, as a group, have substantial and
sufficient knowledge, experience and capabilities in the management of a
publicly-held company engaged in the operation of a multi-asset real estate
business of the type engaged in by Borrower. In the event Borrower shall fail to
obtain approval of Requisite Lenders as aforesaid within said 180-day period,
then Borrower shall, at the election and upon the demand of Requisite Lenders,
pay in full all Obligations under the Loan Documents not later than sixty (60)
days after the end of such 180-day period, whereupon this Agreement and all
Commitments hereunder shall be terminated. Any Lender which abstains or
otherwise fails to respond to any request by Borrower for approval under this
SECTION 8.12 within ten (10) Business Days shall be counted among the Requisite
Lenders approving the proposed additional executives. In the event that Barry
Ginsburg should retire prior to the time that there has been any other changes
in the Executive Officers, the Borrower may designate another officer to replace
Mr. Ginsburg among the Executive Officers and such replacement shall not be
counted when determining whether there has been a Discontinuity in Management.
ARTICLE IX
FINANCIAL COVENANTS
Borrower covenants and agrees that, on and after the date of this
Agreement and until payment in full of all the Obligations, the expiration of
all Commitments, the termination of all Letters of Credit and the termination of
this Agreement:
9.1. VALUE OF ALL UNENCUMBERED PROPERTIES. The Borrower will not at
any time permit the Value of All Unencumbered Properties to be less than one
hundred seventy five percent (175%) of the outstanding balance of Unsecured
Indebtedness.
9.2. MINIMUM DEBT SERVICE COVERAGE. The Borrower will not at any time
permit the outstanding principal amount of the Unsecured Indebtedness to exceed
an amount such that: (a) the Unencumbered Net Operating Income, divided by (b)
Pro Forma Unsecured Debt Service Charges would be less than 1.5 for any Fiscal
Quarter.
9.3 MINIMUM FAIR MARKET NET WORTH. Borrower will maintain a Fair
Market Net Worth of not less than Three Hundred Million Dollars ($300,000,000)
plus seventy-five percent (75%) of Net Offering Proceeds received by Borrower
after the Closing Date.
9.4 TOTAL LIABILITIES TO ADJUSTED ASSET VALUE RATIO. Borrower will not
at any time permit its Total Liabilities to exceed fifty-five percent (55%) of
Adjusted Asset Value.
9.5 MAXIMUM SECURED BORROWER DEBT. The Secured Borrower Debt shall not
exceed thirty percent (30%) of Adjusted Asset Value.
9.6 OPERATING CASH FLOW TO DEBT SERVICE RATIO. The ratio of Operating
Cash Flow to Debt Service shall not be less than 2.0:1 for any Fiscal Quarter.
9.7 EBITDA TO FIXED CHARGES RATIO. The ratio of EBITDA to Fixed
Charges shall not be less than 1.75:1 for any Fiscal Quarter.
9.8 AGGREGATE OCCUPANCY RATE. The Aggregate Occupancy Rate of the
Unencumbered Properties shall not be less than ninety percent (90%).
9.9 DISTRIBUTIONS.
9.9.1 Subject to SECTION 9.9.2, aggregate distributions to common
shareholders of the REIT and all partners of Borrower holding common units other
than the REIT shall not exceed the lesser of (i) ninety percent (90%) of Funds
From Operations for any Fiscal Year or (ii) one hundred percent (100%) of Funds
From Operations for more than two (2) consecutive Fiscal Quarters. For purposes
of this SECTION 9.9, the term "distributions" shall mean and include all
dividends and other distributions to, and the repurchase of stock or partnership
interests from, the holder of any equity interests in Borrower or the REIT.
9.9.2 Aggregate distributions during the continuance of any Event
of Default shall not exceed the lesser of (i) the aggregate amount permitted to
be made during the continuance thereof under SECTION 9.9.1, and (ii) the minimum
amount that the REIT must distribute to its shareholders in order to maintain
compliance with SECTION 7.11. If the Loans are not paid in full on the
Termination Date, no distributions shall be made thereafter except to the extent
expressly authorized in advance by Agent.
9.10 PERMITTED INVESTMENTS. Notwithstanding the limitations set forth
in SECTION 7.8, Borrower may make the following Permitted Investments, so long
as (i) the aggregate amount of all Permitted Investments does not exceed, at any
time, twenty-five percent (25%) of Adjusted Asset Value, and (ii) the aggregate
amount of each of the following categories of Permitted Investments does not
exceed the specified percentage of Adjusted Asset Value, in each case as of the
date made:
Maximum
Percentage of
Permitted Investment Adjusted Asset Value
Land and Non-Retail Properties: 15%
Foreign Investments: 10%
Investment Mortgages: 10%
Partnerships (other than Simon Partnerships): 15%.
For purposes of calculating compliance with the foregoing: (1) the amount of
each Investment will be deemed to be the original Acquisition Price thereof; (2)
in the case of each Investment in Land, Investment Mortgages and Partnerships,
the nature of underlying real property asset and the conduct of business in
respect thereof shall in all respects comply with the limitations set forth in
SECTION 7.8; and (3) Investments in Foreign Affiliates (other than in Foreign
Affiliates which are Wholly-Owned Subsidiaries) shall be counted as both an
investment in Partnerships and as a Foreign Investment but shall be counted only
once when determining the overall 25% limit. In addition, Borrower may also make
Investments in Simon Partnerships and such Investments shall not be subject to,
or counted against, the limitations on the amount of Permitted Investments
described in this SECTION 9.10.
9.11 CIP BUDGET AMOUNT TO ADJUSTED ASSET VALUE. The ratio of the CIP
Budget Amount to Adjusted Asset Value shall not exceed 0.25:1.
9.12 CALCULATION. Each of the foregoing ratios and financial
requirements shall be calculated as of the last day of each Fiscal Quarter,
provided, however that each of the foregoing ratios and financial requirements
which is affected by an increase in the outstanding balance of the Loans, by the
issuance of a Letter of Credit or by the sale or encumbrance of a Portfolio
Property shall also be recalculated as of the time of such event. For purposes
of determining compliance with SECTION 9.6, the period covered thereby shall be
the immediately preceding Fiscal Quarter.
ARTICLE X
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
10.1 EVENTS OF DEFAULT. Each of the following occurrences shall
constitute an Event of Default under this Agreement:
10.1.1 FAILURE TO MAKE PAYMENTS WHEN DUE. Borrower shall fail to
pay (i) any amount due on the Termination Date, (ii) any principal when due, or
(iii) any interest on any Loan, or any fee or other amount payable under any
Loan Documents, within five (5) days after the same becomes due.
10.1.2 REIT AND FINANCIAL COVENANTS. Borrower or the REIT shall
breach any covenant set forth in SECTION 7.11 or in ARTICLE IX (excluding
SECTION 9.8).
10.1.3 AGGREGATE OCCUPANCY RATE. Borrower shall fail to satisfy
the financial covenant regarding the Aggregate Occupancy Rate set forth in
SECTION 9.8 and such failure shall continue for sixty (60) days.
10.1.4 OTHER DEFAULTS. Borrower or the REIT shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on Borrower or the REIT under this Agreement or under any of the other Loan
Documents (other than as described in any other provision of this SECTION 10.1),
and with respect to agreements, covenants or obligations for which no time
period for performance is otherwise provided, such failure shall continue for
fifteen (15) days after Borrower or the REIT knew of such failure (or such
lesser period of time as is mandated by applicable Requirements of Law);
PROVIDED, however, if such failure is capable of cure but is not capable of cure
within such fifteen (15) day period, then if Borrower promptly undertakes action
to cure such failure and thereafter diligently prosecutes such cure to
completion within forty-five (45) days after Borrower or the REIT knew of such
failure, then Borrower shall not be in default hereunder.
10.1.5 BREACH OF REPRESENTATION OR WARRANTY. Any representation
or warranty made or deemed made by Borrower or the REIT to Agent or any Lender
herein or in any of the other Loan Documents or in any statement, certificate or
financial statements at any time given by Borrower pursuant to any of the Loan
Documents shall be false or misleading in any material respect on the date as of
which made.
10.1.6 DEFAULT AS TO OTHER INDEBTEDNESS. (i) Borrower, the REIT
or any GP Partnership shall have (A) failed to pay when due (beyond any
applicable grace period), any amount in respect of any Indebtedness (other than
Nonrecourse Indebtedness) of such party other than the Obligations if the
aggregate amount of such other Indebtedness is Ten Million Dollars ($10,000,000)
or more; or (B) otherwise defaulted (beyond any applicable grace period) under
any Indebtedness of such party other than the Obligations if (1) the aggregate
amount of such other Indebtedness is Ten Million Dollars ($10,000,000) or more,
and (2) the holder of such Indebtedness has accelerated such Indebtedness; or
(ii) any such other Indebtedness shall have otherwise become payable, or be
required to be purchased or redeemed, prior to its scheduled maturity; or (iii)
the holder(s) of any Lien, in any amount, commence foreclosure of such Lien upon
any Property having an aggregate value in excess of Ten Million Dollars
($10,000,000); or (iv) any "Event of Default" shall exist under the Unsecured
Term Note Indenture, or (v) any "Event of Default" shall exist under the Term
Loan Agreement relating to the BankBoston Term Loan.
10.1.7 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(a) An involuntary case shall be
commenced against the REIT, Borrower or any GP Partnership, and the
petition shall not be dismissed within sixty (60) days after
commencement of the case, or a court having jurisdiction shall enter a
decree or order for relief in respect of any such Person in an
involuntary case, under any applicable bankruptcy, insolvency or other
similar law now or hereinafter in effect; or any other similar relief
shall be granted under any applicable federal, state or foreign law; or
(b) A decree or order of a court having
jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having
similar powers over the REIT, Borrower or any GP Partnership, or over
all or a substantial part of the property of any such Person, shall be
entered; or an interim receiver, trustee or other custodian of any such
Person or of all or a substantial part of the property of any such
Person, shall be appointed or a warrant of attachment, execution or
similar process against any substantial part of the property of any
such Person, shall be issued and any such event shall not be stayed,
vacated, dismissed, bonded or discharged within sixty (60) days of
entry, appointment or issuance.
10.1.8 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. The
REIT, Borrower, or any GP Partnership shall have an order for relief entered
with respect to it or commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or shall consent to
the entry of an order for relief in an involuntary case, or to the conversion of
an involuntary case to a voluntary case, under any such law, or shall consent to
the appointment of or taking of possession by a receiver, trustee or other
custodian for all or a substantial part of its property; any such Person shall
make any assignment for the benefit of creditors or shall be unable or fail, or
admit in writing its inability, to pay its debts as such debts become due; or
the general partner (or Person(s) serving in a similar capacity) of Borrower or
the REIT's Board of Directors (or any committee thereof) adopts any resolution
or otherwise authorizes any action to approve any of the foregoing.
10.1.9 JUDGMENTS AND ATTACHMENTS. (i) Any money judgment (other
than a money judgment covered by insurance but only if the insurer has admitted
liability with respect to such money judgment), writ or warrant of attachment,
or similar process involving in any case an amount in excess of One Million
Dollars ($1,000,000) shall be entered or filed against the REIT, Borrower, or
any GP Partnership or their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of thirty (30) days, or (ii) any
judgment or order of any court or administrative agency awarding material
damages shall be entered against any such Person in any action under the Federal
securities laws seeking rescission of the purchase or sale of, or for damages
arising from the purchase or sale of, any Securities, such judgment or order
shall have become final after exhaustion of all available appellate remedies
and, in Agent's judgment, the payment of such judgment or order would have a
Material Adverse Effect on such Person.
10.1.10 DISSOLUTION. Any order, judgment or decree shall be
entered against the REIT, Borrower, or any GP Partnership decreeing its
involuntary dissolution or split up and such order shall remain undischarged and
unstayed for a period in excess of thirty (30) days; or the REIT or Borrower
shall otherwise dissolve or cease to exist.
10.1.11 LOAN DOCUMENTS; FAILURE OF SUBORDINATION. If for any
reason (i) any Loan Document shall cease to be in full force and effect, or (ii)
any Obligation shall be subordinated in right of payment to any other unsecured
liability of the Borrower.
10.1.12 ERISA LIABILITIES. Any Termination Event occurs which
will or is reasonably likely to subject Borrower, the REIT or any ERISA
Affiliate to a liability which Agent reasonably determines will have a Material
Adverse Effect on Borrower or the REIT, or the plan administrator of any Benefit
Plan applies for approval under Section 412(d) of the Internal Revenue Code for
a waiver of the minimum funding standards of Section 412(a) of the Internal
Revenue Code and Agent reasonably determines that the business hardship upon
which the Section 412(d) waiver was based will or would reasonably be
anticipated to subject Borrower or the REIT to a liability which Agent
determines will have a Material Adverse Effect on Borrower or the REIT.
10.1.13 ENVIRONMENTAL LIABILITIES. Borrower, the REIT or any
Subsidiary or Partnership becomes subject to any Liabilities and Costs which
Agent reasonably deems to have a Material Adverse Effect on such Person arising
out of or related to the Release at any Property of any Contaminant into the
environment, or any Remedial Action in response thereto, or any other violation
of any Environmental Laws.
10.1.14 SOLVENCY; MATERIAL ADVERSE CHANGE. Borrower or the REIT
shall cease to be Solvent, or there shall have occurred any material adverse
change in the business, operations, properties, assets or condition (financial
or otherwise) of Borrower or the REIT.
An Event of Default shall be deemed "continuing" until cured or
waived in writing in accordance with SECTION 12.4.
10.2 RIGHTS AND REMEDIES.
10.2.1 ACCELERATION, ETC. Upon the occurrence of any Event of
Default described in the foregoing SECTION 10.1.7 or 10.1.8 with respect to the
REIT or Borrower, the Commitments shall automatically and immediately terminate
and the unpaid principal amount of and any and all accrued interest on the Loans
shall automatically become immediately due and payable, with all additional
interest from time to time accrued thereon and without presentment, demand or
protest or other requirements of any kind (including, without limitation,
valuation and appraisement, diligence, presentment, notice of intent to demand
or accelerate or notice of acceleration), all of which are hereby expressly
waived by Borrower, and the obligations of Lenders to make any Loans hereunder
shall thereupon terminate; and upon the occurrence and during the continuance of
any other Event of Default, Agent shall, at the request, or may, with the
consent of Requisite Lenders, by written notice to Borrower, (i) declare that
the Commitments are terminated, whereupon the Commitments and the obligation of
Lenders to make any Loan hereunder shall immediately terminate, and/or (ii)
declare the unpaid principal amount of, any and all accrued and unpaid interest
on the Loans and all of the other Obligations to be, and the same shall
thereupon be, immediately due and payable with all additional interest from time
to time accrued thereon and without presentment, demand, or protest or other
requirements of any kind (including without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and of acceleration), all of which are hereby expressly waived by Borrower.
Without limiting Agent's authority hereunder, on or after the Termination Date,
Agent shall, at the request, or may, with the consent, of Requisite Lenders
exercise any or all rights and remedies under the Loan Documents or applicable
law. Upon the occurrence of and during the continuance of an Event of Default,
Agent shall be entitled to request and receive, by or through Borrower or
appropriate legal process, any and all information concerning the REIT, Borrower
or any property of any of them, which is reasonably available to or obtainable
by Borrower.
10.2.2 WAIVER OF DEMAND. Demand, presentment, protest and notice
of nonpayment are hereby waived by Borrower. Borrower also waives, to the extent
permitted by law, the benefit of all exemption laws.
10.2.3 WAIVERS, AMENDMENTS AND REMEDIES. No delay or omission of
Agent or Lenders to exercise any right under any Loan Document shall impair such
right or be construed to be a waiver of any Event of Default or an acquiescence
therein, and any single or partial exercise of any such right shall not preclude
other or further exercise thereof or the exercise of any other right, and no
waiver, amendment or other variation of the terms, conditions or provisions of
the Loan Documents whatsoever shall be valid unless in writing signed by Agent
after obtaining written approval thereof or the signature thereon of those
Lenders required to approve such waiver, amendment or other variation, and then
only to the extent in such writing specifically set forth. All remedies
contained in the Loan Documents or by law afforded shall be cumulative and all
shall be available to Agent and Lenders until the Obligations have been paid in
full, the Commitments have expired or terminated and this Agreement has been
terminated.
10.2.4 CASH COLLATERAL ACCOUNT FOR LETTERS OF CREDIT. In the
event that any Letters of Credit are in effect at the time of an acceleration of
the maturity of the Loans, the amounts which shall thereupon become immediately
due and payable by the Borrower shall include a sum equal to the aggregate face
amount of such then effective Letters of Credit. Such sum shall be deposited in
a cash collateral account to be opened by the Agent. Amounts held in such cash
collateral account shall be applied by the Agent on each Drawing Date thereafter
to pay any drafts presented pursuant to the Letters of Credit. After all Letters
of Credit have been fully drawn upon, expired or otherwise terminated, any
balance remaining in such cash collateral account shall be applied in the same
manner as proceeds from the enforcement of the Loan Documents.
10.3 RESCISSION. If at any time after acceleration of the
maturity of the Loans, Borrower shall pay all arrears of interest and all
payments on account of principal of the Loans which shall have become due
otherwise than by acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Unmatured Events of Default (other than nonpayment
of principal of and accrued interest on the Loans due and payable solely by
virtue of acceleration) shall be remedied or waived pursuant to SECTION 12.4,
then by written notice to Borrower, Requisite Lenders may elect, in their sole
discretion, to rescind and annul the acceleration and its consequences; but such
action shall not affect any subsequent Event of Default or Unmatured Event of
Default or impair any right or remedy consequent thereon. The provisions of the
preceding sentence are intended merely to bind Lenders to a decision which may
be made at the election of Requisite Lenders; they are not intended to benefit
Borrower and do not give Borrower the right to require Lenders to rescind or
annul any acceleration hereunder, even if the conditions set forth herein are
met.
ARTICLE XI
AGENCY PROVISIONS
11.1 APPOINTMENT.
11.1.1 Each Lender hereby (i) designates and appoints BankBoston
as Agent of such Lender under this Agreement and the Loan Documents, (ii)
authorizes and directs Agent to enter into the Loan Documents other than this
Agreement for the benefit of Lenders, and (iii) authorizes Agent to take such
action on its behalf under the provisions of this Agreement and the Loan
Documents and to exercise such powers as are set forth herein or therein,
together with such other powers as are reasonably incidental thereto, subject to
the limitations referred to in SECTIONS 11.10.1 and 11.10.2. Agent agrees to act
as such on the express conditions contained in this ARTICLE XI.
11.1.2 The provisions of this ARTICLE XI are solely for the
benefit of Agent and Lenders, and Borrower shall not have any rights to rely on
or enforce any of the provisions hereof (other than as expressly set forth in
SECTIONS 11.3 and 11.9, PROVIDED, HOWEVER, that the foregoing shall in no way
limit Borrower's obligations under this ARTICLE XI. In performing its functions
and duties under this Agreement, Agent shall act solely as Agent of Lenders and
does not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for Borrower or any other Person.
11.2 NATURE OF DUTIES. Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in the
Loan Documents. Subject to the provisions of SECTIONS 11.5 and 11.7, Agent shall
administer the Loans in the same manner as it administers its own loans.
Promptly following the effectiveness of this Agreement, Agent shall send to each
Lender its originally executed Note and the executed original, to the extent the
same are available in sufficient numbers, of each other Loan Document other than
the Notes in favor of other Lenders. Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Lender. Nothing in this
Agreement or any of the Loan Documents, expressed or implied, is intended or
shall be construed to impose upon Agent any obligation in respect of this
Agreement or any of the Loan Documents except as expressly set forth herein or
therein. Each Lender shall make its own independent investigation of the
financial condition and affairs of the REIT, Borrower and each Portfolio
Property in connection with the making and the continuance of the Loans
hereunder and shall make its own appraisal of the creditworthiness of the REIT
and Borrower, and, except as specifically provided herein, Agent shall not have
any duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before the Closing Date or at any time or
times thereafter.
11.3 LOAN DISBURSEMENTS.
11.3.1 Not later than 1:00 P.M. (Eastern time) on the next
Business Day following receipt of a Notice of Borrowing, Agent shall send a copy
thereof by facsimile to each other Lender and shall otherwise notify each Lender
of the proposed Borrowing and the Funding Date. Each Lender shall make available
to Agent (or the funding bank or entity designated by Agent), the amount of such
Lender's Pro Rata Share of such Borrowing in immediately available funds not
later than the times designated in SECTION 11.3.2. Unless Agent shall have been
notified by any Lender prior to such time for funding in respect of any
Borrowing that such Lender does not intend to make available to Agent such
Lender's Pro Rata Share of such Borrowing, Agent may assume that such Lender has
made such amount available to Agent. In any case where a Lender does not for any
reason make available to Agent such Lender's Pro Rata Share of such Borrowing,
Agent, in its sole discretion, may, but shall not be obligated to, fund to
Borrower such Lender's Pro Rata Share of such Borrowing. If the amount so funded
by Agent is not in fact made available to Agent by the responsible Lender, then
Borrower agrees to repay to Agent such amount, together with interest thereon at
the Base Rate for each day from the date such amount is made available to
Borrower until the date such amount is repaid to Agent, not later than three (3)
Business Days following Agent's demand to Borrower that such repayment be made.
In addition, such Lender agrees to pay to Agent forthwith on demand such
corresponding amount, together with interest thereon at the Federal Funds Rate.
If such Lender shall pay to Agent such corresponding amount, such amount so paid
shall constitute such Lender's Pro Rata Share of such Borrowing, and if both
such Lender and Borrower shall have paid and repaid, respectively, such
corresponding amount, Agent shall promptly return to Borrower such corresponding
amount in same day funds; interest paid by Borrower in respect of such
corresponding amount shall be prorated, as of the date of payment thereof by
such Lender to Agent. In the event that Agent shall not have funded such
Lender's Pro Rata Share under this SECTION 11.3.1, then Borrower shall not be
obligated to accept a late funding of such Lender's Pro Rata Share if such
funding is made more than two (2) Business Days following the applicable Funding
Date. If Borrower declines to accept such delinquent funding, Agent shall
promptly return to such Lender the amount of such funding. Nothing in this
SECTION 11.3.1 shall alter the respective rights and obligations of the parties
hereunder in respect of a Defaulting Lender or a Non-Pro Rata Loan.
11.3.2 Requests by Agent for funding by Lenders of Loans will be
made by telecopy. Each Lender shall make the amount of its Loan available to
Agent in Dollars and in immediately available funds, to such bank and account,
as Agent may designate, not later than 1:00 P.M. (Eastern time) on the Funding
Date designated in the Notice of Borrowing with respect to such Loan, provided
that to the extent the Agent is late in providing any Lender with notice the
applicable time in advance of any Funding Date specified in SECTION 2.1.2(A),
such Lender shall not be obligated to make such amount available to the Agent
until said time on the Business Day which is the same number of Business Days
after the Funding Date as Agent was late in providing such notice.
11.3.3 Nothing in this SECTION 11.3 shall be deemed to relieve
any Lender of its obligation hereunder to make its Pro Rata Share of Loans on
any Funding Date, nor shall any Lender be responsible for the failure of any
other Lender to perform its obligations to make any Loan hereunder, and the
Commitment of any Lender shall not be increased or decreased as a result of the
failure by any other Lender to perform its obligation to make a Loan.
11.4 DISTRIBUTION AND APPORTIONMENT OF PAYMENTS.
11.4.1 Subject to SECTION 11.4.2, payments actually received by
Agent for the account of Lenders shall be paid to them promptly after receipt
thereof by Agent, but in any event within two (2) Business Days, PROVIDED that
Agent shall pay to Lenders interest thereon, at the lesser of (i) Federal Funds
Rate and (ii) the rate of interest applicable to such Loans, from the Business
Day following receipt of such funds by Agent until such funds are paid in
immediately available funds to Lenders. Subject to SECTION 11.4.2, all payments
of principal and interest in respect of outstanding Loans, all payments of the
fees described in this Agreement, and all payments in respect of any other
Obligations shall be allocated among such of Lenders as are entitled thereto, in
proportion to their respective Pro Rata Shares or otherwise as provided herein.
Agent shall promptly distribute, but in any event within two (2) Business Days,
to each Lender at its primary address set forth on the appropriate signature
page hereof or on the Assignment and Assumption, or at such other address as a
Lender may request in writing, such funds as it may be entitled to receive,
PROVIDED that Agent shall in any event not be bound to inquire into or determine
the validity, scope or priority of any interest or entitlement of any Lender and
may suspend all payments and seek appropriate relief (including, without
limitation, instructions from Requisite Lenders or all Lenders, as applicable,
or an action in the nature of interpleader) in the event of any doubt or dispute
as to any apportionment or distribution contemplated hereby. The order of
priority herein is set forth solely to determine the rights and priorities of
Lenders as among themselves and may at any time or from time to time be changed
by Lenders as they may elect, in writing in accordance with SECTION 12.4,
without necessity of notice to or consent of or approval by Borrower or any
other Person. All payments or other sums received by Agent for the account of
Lenders shall not constitute property or assets of Agent and shall be held by
Agent, solely in its capacity as agent for itself and the other Lenders, subject
to the Loan Documents.
11.4.2 Notwithstanding any provision hereof to the contrary,
until such time as a Defaulting Lender has funded its Pro Rata Share of a Loan
which was previously a Non Pro Rata Loan, or all other Lenders have received
payment in full (whether by repayment or prepayment) of the principal and
interest due in respect of such Non Pro Rata Loan, all of the Obligations owing
to such Defaulting Lender hereunder shall be subordinated in right of payment,
as provided in the following sentence, to the prior payment in full of all
principal, interest and fees in respect of all Non Pro Rata Loans in which the
Defaulting Lender has not funded its Pro Rata Share (such principal, interest
and fees being referred to as "Senior Loans"). All amounts paid by Borrower and
otherwise due to be applied to the Obligations owing to the Defaulting Lender
pursuant to the terms hereof shall be distributed by Agent to the other Lenders
in accordance with their respective Pro Rata Shares (recalculated for purposes
hereof to exclude the Defaulting Lender's Commitment), until all Senior Loans
have been paid in full. This provision governs only the relationship among
Agent, each Defaulting Lender, and the other Lenders; nothing hereunder shall
limit the obligation of Borrower to repay all Loans in accordance with the terms
of this Agreement. The provisions of this section shall apply and be effective
regardless of whether an Event of Default occurs and is then continuing, and
notwithstanding (i) any other provision of this Agreement to the contrary, (ii)
any instruction of Borrower as to its desired application of payments or (iii)
the suspension of such Defaulting Lender's right to vote on matters which are
subject to the consent or approval of Requisite Lenders or all Lenders. No
Unused Facility Fee shall accrue in favor of, or be payable to, such Defaulting
Lender from the date of any failure to fund Loans or reimburse Agent for any
Liabilities and Costs as herein provided until such failure has been cured, and
Agent shall be entitled to (1) withhold or setoff, and to apply to the payment
of the defaulted amount and any related interest, any amounts to be paid to such
Defaulting Lender under this Agreement, and (2) bring an action or suit against
such Defaulting Lender in a court of competent jurisdiction to recover the
defaulted amount and any related interest. In addition, the Defaulting Lender
shall indemnify, defend and hold Agent and each of the other Lenders harmless
from and against any and all Liabilities and Costs, plus interest thereon at the
Default Rate, which they may sustain or incur by reason of or as a direct
consequence of the Defaulting Lender's failure or refusal to abide by its
obligations under this Agreement.
11.5 RIGHTS, EXCULPATION, ETC. Neither Agent, any Affiliate of Agent,
nor any of their respective officers, directors, employees, agents, attorneys or
consultants, shall be liable to any Lender for any action taken or omitted by
them hereunder or under any of the Loan Documents, or in connection herewith or
therewith, except that Agent shall be liable for its gross negligence or willful
misconduct. In the absence of gross negligence or willful misconduct, Agent
shall not be liable for any apportionment or distribution of payments made by it
in good faith pursuant to SECTION 11.4, and if any such apportionment or
distribution is subsequently determined to have been made in error the sole
recourse of any Person to whom payment was due, but not made, shall be to
recover from the recipients of such payments any payment in excess of the amount
to which they are determined to have been entitled. Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any of the
other Loan Documents, or any of the transactions contemplated hereby and
thereby; or for the financial condition of the REIT, Borrower or any of their
Affiliates. Agent shall not be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
this Agreement or any of the Loan Documents or the financial condition of the
REIT, Borrower or any of their Affiliates, or the existence or possible
existence of any Unmatured Event of Default or Event of Default.
11.6 RELIANCE. Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents, telecopies or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement or any of the Loan Documents and its duties
hereunder or thereunder, upon advice of legal counsel (including counsel for
Borrower), independent public accountant and other experts selected by it.
11.7 INDEMNIFICATION. To the extent that Agent is not reimbursed and
indemnified by Borrower, Lenders will reimburse, within ten (10) Business Days
after notice from Agent, and indemnify and defend Agent for and against any and
all Liabilities and Costs (other than losses in the collection of principal and
interest on the Loans which losses shall be shared among all Lenders including
the Agent as provided in SECTIONS 11.4 and 11.13) which may be imposed on,
incurred by, or asserted against it in any way relating to or arising out of
this Agreement or any of the other Loan Documents or any action taken or omitted
by Agent or under this Agreement or any of the other Loan Documents, in
proportion to each Lender's Pro Rata Share; PROVIDED that no Lender shall be
liable for any portion of such Liabilities and Costs resulting from Agent's
gross negligence or willful misconduct or in respect of normal administrative
costs and expenses incurred by Agent (prior to any Event of Default or any
Unmatured Event of Default) in connection with its performance of administrative
duties under this Agreement and the other Loan Documents. The obligations of
Lenders under this SECTION 11.7 shall survive the payment in full of all
Obligations and the termination of this Agreement. In the event that after
payment and distribution of any amount by Agent to Lenders, any Lender or third
party, including Borrower, any creditor of Borrower or a trustee in bankruptcy,
recovers from Agent any amount found to have been wrongfully paid to Agent or
disbursed by Agent to Lenders, then Lenders, in proportion to their respective
Pro Rata Shares, shall reimburse Agent for all such amounts. Notwithstanding the
foregoing, Agent shall not be obligated to advance Liabilities and Costs and may
require the deposit by each Lender of its Pro Rata Share of any material
Liabilities and Costs anticipated by Agent before they are incurred or made
payable.
11.8 AGENT INDIVIDUALLY. With respect to its Pro Rata Share of the
Commitments hereunder and the Loans made by it, Agent shall have and may
exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender. The terms "Lenders", "Requisite Lenders" or any similar terms may
include Agent in its individual capacity as a Lender or one of the Requisite
Lenders. Agent and any Lender and its Affiliates may accept deposits from, lend
money to, and generally engage in any kind of banking, trust or other business
with Borrower or any of its Affiliates as if it were not acting as Agent or
Lender pursuant hereto.
11.9 SUCCESSOR AGENT; RESIGNATION OF AGENT; REMOVAL OF AGENT.
11.9.1 Agent may resign from the performance of all its functions
and duties hereunder at any time by giving at least thirty (30) Business Days,
prior written notice to Lenders and Borrower, and shall automatically cease to
be Agent hereunder in the event a petition in bankruptcy shall be filed by or
against Agent or the Federal Deposit Insurance Corporation or any other
Governmental Authority shall assume control of Agent or Agent's interests under
the Facility. Further, Lenders whose aggregate Commitments constitute at least
sixty-six and two-thirds percent (66-2/3%) of the Commitments of all Lenders
excluding the Agent may remove Agent for cause at any time by giving at least
thirty (30) Business Days' prior written notice to Agent, Borrower and all other
Lenders. If Agent enters into one or more assignments pursuant to SECTION 11.12
having the effect of reducing its Commitment to less than $20,000,000 then any
Lender whose Commitment exceeds that of Agent may remove Agent by notice given
within thirty (30) days after such Lender receives notice of the assignments
which reduce the Agent's Commitment below such level. Such resignation or
removal shall take effect upon the acceptance by a successor Agent appointed
pursuant to SECTION 11.9.2 or 11.9.3.
11.9.2 Upon any such notice of resignation by or removal of
Agent, Requisite Lenders shall appoint a successor Agent with the consent of
Borrower, which consent shall not be unreasonably withheld or delayed AND which
consent shall not be required if there shall then exist any Event of Default.
Any successor Agent must be a bank (i) the senior debt obligations of which (or
such bank's parent's senior unsecured debt obligations) are rated not less than
BBB by one of the Rating Agencies and (ii) which has total assets in excess of
Ten Billion Dollars ($10,000,000,000). Such successor Agent shall separately
confirm in writing with Borrower the fee to be paid to such Agent pursuant to
SECTION 2.5.2.
11.9.3 If a successor Agent shall not have been so appointed
within said thirty (30) Business Day period, the retiring or removed Agent,
shall then appoint a successor Agent who shall meet the requirements described
in SECTION 11.9.2 and who shall serve as Agent until such time, if any, as
Requisite Lenders, appoint a successor Agent as provided above.
11.10 CONSENT AND APPROVALS.
11.10.1 Each of the following shall require the approval or
consent of Requisite Lenders:
(a) Approval of notes receivable pursuant to
definition of Adjusted Asset Value (SECTION 1.1);
(b) Consent to Indebtedness (SECTION 8.10);
(c) Approval of additional executives upon a
Discontinuity in Management (SECTION 8.12);
(d) Acceleration following an Event of Default
(SECTION 10.2.1) or rescission of such acceleration (SECTION 10.3);
(e) Approval of the exercise of rights and remedies
under the Loan Documents following an Event of Default
(SECTION 10.2.1);
(f) Appointment of a successor Agent (SECTION 11.9);
(g) Except as referred to in SECTION 11.10.2 or
11.11.1, approval of any amendment, modification or termination of
this Agreement, or waiver of any provision herein (SECTION 12.4).
11.10.2 Each amendment, modification or waiver specifically
enumerated in SECTION 12.4.1 shall require the consent of all Lenders.
11.10.3 In addition to the required consents or approvals
referred to in SECTION 11.10.1, Agent may at any time request instructions from
Requisite Lenders with respect to any actions or approvals which, by the terms
of this Agreement or of any of the Loan Documents, Agent is permitted or
required to take or to grant without instructions from any Lenders, and if such
instructions are promptly requested, Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from taking any
action or withholding any approval under any of the Loan Documents until it
shall have received such instructions from Requisite Lenders. Without limiting
the foregoing, no Lender shall have any right of action whatsoever against Agent
as a result of Agent acting or refraining from acting under this Agreement or
any of the other Loan Documents in accordance with the instructions of Requisite
Lenders or, where applicable, all Lenders. Agent shall promptly notify each
Lender at any time that the Requisite Lenders have instructed Agent to act or
refrain from acting pursuant to this SECTION 11.10.3.
11.10.4 Each Lender agrees that any action taken by Agent at the
direction or with the consent of Requisite Lenders in accordance with the
provisions of this Agreement or any Loan Document, and the exercise by Agent at
the direction or with the consent of Requisite Lenders of the powers set forth
herein or therein, together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all Lenders, except for actions
specifically requiring the approval of all Lenders. All communications from
Agent to Lenders requesting Lenders' determination, consent, approval or
disapproval (i) shall be given in the form of a written notice to each Lender,
(ii) shall be accompanied by a description of the matter or thing as to which
such determination, approval, consent or disapproval is requested, or shall
advise each Lender where such matter or thing may be inspected, or shall
otherwise describe the matter or issue to be resolved, (iii) shall include, if
reasonably requested by a Lender and to the extent not previously provided to
such Lender, written materials and a summary of all oral information provided to
Agent by Borrower in respect of the matter or issue to be resolved, and (iv) may
include Agent's recommended course of action or determination in respect
thereof. Each Lender shall reply promptly, but in any event within ten (10)
Business Days (the "LENDER REPLY Period"). Unless a Lender shall give written
notice to Agent that it objects to the recommendation or determination of Agent
(together with a written explanation of the reasons behind such objection)
within the Lender Reply Period, such Lender shall be deemed to have approved of
or consented to such recommendation or determination. With respect to decisions
requiring the approval of Requisite Lenders or all Lenders, Agent shall submit
its recommendation or determination for approval of or consent to such
recommendation or determination to all Lenders and upon receiving the required
approval or consent shall follow the course of action or determination
recommended to Lenders by Agent or such other course of action recommended by
Requisite Lenders, and each non-responding Lender shall be deemed to have
concurred with such recommended course of action.
11.11 AGENCY PROVISIONS RELATING TO CERTAIN ENFORCEMENT ACTIONS.
11.11.1 Agent is hereby authorized on behalf of all Lenders,
without the necessity of any notice to or further consent from any Lender, to
waive the imposition of late fees provided for in SECTION 2.4.5 up to a maximum
of three (3) times during the term of this Agreement.
11.11.2 Should Agent (i) employ counsel for advice or other
representation (whether or not any suit has been or shall be filed) with respect
to any of the Loan Documents, or (ii) commence any proceeding or in any way seek
to enforce its rights or remedies under the Loan Documents, each Lender, upon
demand therefor from time to time, shall contribute its share (based on its Pro
Rata Share) of the reasonable costs and/or expenses of any such advice or other
representation, enforcement or acquisition, including, but not limited to, fees
of receivers, court costs and fees and expenses of attorneys to the extent not
otherwise reimbursed by Borrower; PROVIDED that Agent shall not be entitled to
reimbursement of its attorneys' fees and expenses incurred in connection with
the resolution of disputes between Agent and other Lenders unless Agent shall be
the prevailing party in any such dispute. Any loss of principal and interest
resulting from any Event of Default shall be shared by Lenders in accordance
with their respective Pro Rata Shares.
11.12 ASSIGNMENTS AND PARTICIPATIONS.
11.12.1 Each Lender may assign, to one or more Eligible
Assignees, all or a portion of its rights and obligations under this Agreement
(including without limitation all or a portion of its Commitment and the Loans
owing to it) and other Loan Documents; PROVIDED, HOWEVER, that (i) each such
assignment shall be of a constant, and not a varying, percentage of the
assigning Lender's rights and obligations under this Agreement and other Loan
Documents, and the assignment shall cover the same percentage of such Lender's
Commitment and Loans, (ii) unless Agent and Borrower otherwise consent (except
that after an Event of Default only the consent of Agent shall be required), the
aggregate amount of the Commitment of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Assumption with respect to such assignment) shall in no event be less than
Ten Million Dollars ($10,000,000) and shall be an integral multiple of One
Million Dollars ($1,000,000), (iii) after giving effect to such assignment, the
aggregate amount of the Commitment retained by the assigning Lender shall in no
event be less than Twelve Million Dollars ($12,000,000), (iv) the parties to
each such assignment shall execute and deliver to Agent, for its approval and
acceptance, an Assignment and Assumption, and (v) Agent shall receive from the
assignor a processing fee of Three Thousand Dollars ($3,000). Upon such
execution, delivery, approval and acceptance, and upon the effective date
specified in the applicable Assignment and Assumption, (X) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Assumption, have the rights and obligations of a Lender hereunder, and (Y) the
assigning Lender thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Assumption,
relinquish its rights and be released from its obligations under this Agreement.
11.12.2 By executing and delivering an Assignment and Assumption,
the assigning Lender thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Assumption, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document or any other instrument or document furnished pursuant hereto;
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the REIT or Borrower
or the performance or observance by the REIT or Borrower of any of their
respective obligations under any Loan Document or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in ARTICLE V or delivered pursuant to ARTICLE VI to the
date of such assignment and such other Loan Documents and other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Assumption; (iv) such assignee will,
independently and without reliance upon Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee appoints and
authorizes Agent to take such action as Agent on its behalf and to exercise such
powers under this Agreement and the other Loan Documents as are delegated to
Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
11.12.3 Agent shall maintain, at its address referred to on the
counterpart signature pages hereof, a copy of each Assignment and Assumption
delivered to and accepted by it and shall record in the Loan Account the names
and addresses of each Lender and the Commitment of, and principal amount of the
Loans owing to, such Lender from time to time. Borrower, Agent and Lenders may
treat each Person whose name is recorded in the Loan Account as a Lender
hereunder for all purposes of this Agreement.
11.12.4 Upon its receipt of an Assignment and Assumption executed
by an assigning Lender and an assignee, Agent shall, if such Assignment and
Assumption has been properly completed and is in substantially the form of
EXHIBIT A, (i) accept such Assignment and Assumption, (ii) record the
information contained therein in the Loan Account, and (iii) give prompt notice
thereof to Borrower. Upon request, Borrower will execute and deliver to Agent an
appropriate replacement promissory note or replacement promissory notes in favor
of each assignee (and assignor, if such assignor is retaining a portion of its
Commitment and Loans) reflecting such assignee's (and assigner's) Pro Rata
Share(s) of the Facility. Upon execution and delivery of such replacement
promissory notes the original promissory note or notes evidencing all or a
portion of the Commitments and Loans being assigned shall be cancelled and
returned to Borrower.
11.12.5 Each Lender may sell participations to one or more banks
or other entities in or to all or a portion of its rights and obligations under
this Agreement (including without limitation all or a portion of its Commitment
and the Loans owing to it) and other Loan Documents; PROVIDED, HOWEVER, that (i)
such Lender's obligations under this Agreement (including without limitation its
Commitment to Borrower hereunder) shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) Borrower, Agent and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and with regard to any and all
payments to be made under this Agreement, and (iv) the holder of any such
participation shall not be entitled to voting rights under this Agreement except
for voting rights with respect to (A) increases in the Facility; (B) extensions
of the Termination Date; and (C) decreases in the interest rates described in
this Agreement. No participant shall be entitled to vote on any matter until the
Lender with which such participant is participating in the Facility and the
Loans confirms such participant's status as a participant hereunder.
11.12.6 Borrower will use reasonable efforts to cooperate with
Agent and Lenders in connection with the assignment of interests under this
Agreement or the sale of participations herein.
11.12.7 Anything in this Agreement to the contrary
notwithstanding, and without the need to comply with any of the formal or
procedural requirements of this Agreement, including this SECTION 11.12, any
Lender may at any time and from time to time pledge and assign all or any
portion of its rights under all or any of the Loan Documents to a Federal
Reserve Bank; PROVIDED that no such pledge or assignment shall release such
Lender from its obligations thereunder. To facilitate any such pledge or
assignment, Agent shall, at the request of such Lender, enter into a letter
agreement with the Federal Reserve Bank in substantially the form of the exhibit
to Appendix C to the Federal Reserve Bank of New York Operating circular No. 12.
11.12.8 Anything in this Agreement to the contrary
notwithstanding, any Lender may assign all or any portion of its rights and
obligations under this Agreement to another branch or Affiliate of such Lender,
PROVIDED that (i) at the time of such assignment such Lender is not a Defaulting
Lender, (ii) such Lender gives Agent and Borrower at least fifteen (15) days'
prior written notice of any such assignment, (iii) the parties to each such
assignment execute and deliver to Agent an Assignment and Assumption, and (iv)
Agent receives from assignor a processing fee of Three Thousand Dollars
($3,000).
11.12.9 No assignee of any rights and obligations under this
Agreement shall be permitted to subassign such rights and obligations.
11.12.10 No Lender shall be permitted to assign or sell all or
any portion of its rights and obligations under this Agreement to Borrower or
any Affiliate of Borrower.
11.13 RATABLE SHARING. Subject to SECTIONS 11.3 and 11.4, Lenders
agree among themselves that (i) with respect to all amounts received by them
which are applicable to the payment of the Obligations, equitable adjustment
will be made so that, in effect, all such amounts will be shared among them
ratably in accordance with their Pro Rata Shares, whether received by voluntary
payment, by counterclaim or cross action or by the enforcement of any or all of
the Obligations, (ii) if any of them shall by voluntary payment or by the
exercise of any right of counterclaim or otherwise, receive payment of a
proportion of the aggregate amount of the Obligations held by it which is
greater than its Pro Rata Share of the payments on account of the Obligations,
the one receiving such excess payment shall purchase, without recourse or
warranty, an undivided interest and participation (which it shall be deemed to
have done simultaneously upon the receipt of such payment) in such Obligations
owed to the others so that all such recoveries with respect to such Obligations
shall be applied ratably in accordance with their Pro Rata Shares; PROVIDED,
that if all or part of such excess payment received by the purchasing party is
thereafter recovered from it, those purchases shall be rescinded and the
purchase prices paid for such participations shall be returned to that party to
the extent necessary to adjust for such recovery, but without interest except to
the extent the purchasing party is required to pay interest in connection with
such recovery. Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this SECTION 11.13 may, to the fullest extent
permitted by law, exercise all its rights of payment with respect to such
participation as fully as if such Lender were the direct creditor of Borrower in
the amount of such participation.
11.14 DELIVERY OF DOCUMENTS. Agent shall as soon as reasonably
practicable distribute to each Lender at its primary address set forth on the
appropriate counterpart signature page hereof, or at such other address as a
Lender may request in writing, (i) all documents to which such Lender is a party
or of which such Lender is a beneficiary set forth in SECTION 4.1, (ii) all
documents of which Agent receives copies from Borrower pursuant to SECTION 6.1
(except as provided in SECTION 6.1.1) and SECTION 12.6, (iii) all other
documents or information which Agent is required to send to Lenders pursuant to
the terms of this Agreement; (iv) other information or documents received by
Agent at the request of any Lender, and (v) all notices received by Agent
pursuant to SECTION 6.2. In addition, within fifteen (15) Business Days after
receipt of a request in writing from a Lender for written information or
documents provided by or prepared by Borrower or the REIT, Agent shall deliver
such written information or documents to such requesting Lender if Agent has
possession of such written information or documents in its capacity as Agent or
as a Lender.
11.15 NOTICE OF EVENTS OF DEFAULT. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Unmatured Event of Default or Event
of Default (other than nonpayment of principal of or interest on the Loans)
unless Agent has received notice in writing from a Lender or Borrower referring
to this Agreement or the other Loan Documents, describing such event or
condition and expressly stating that such notice is a notice of an Unmatured
Event of Default or Event of Default. Should Agent receive such notice of the
occurrence of an Unmatured Event of Default or Event of Default, or should Agent
send Borrower a notice of Unmatured Event of Default or Event of Default, Agent
shall promptly give notice thereof to each Lender.
ARTICLE XII
MISCELLANEOUS
12.1 EXPENSES.
12.1.1 GENERALLY. Borrower agrees upon demand to pay, or reimburse
Agent for, all of Agent's external audit, legal and investigation expenses and
for all other reasonable out-of-pocket costs and expenses of every type and
nature (including, without limitation, the reasonable fees, expenses and
disbursements of Agent's internal appraisers, environmental advisors or legal
counsel) incurred by Agent at any time (whether prior to, on or after the date
of this Agreement) in connection with (i) its own audit and investigation of
Borrower and the Portfolio Properties provided that prior to an Event of Default
Borrower shall not be required to reimburse expenses for any inspections of the
Portfolio Properties by Agent's loan officers or other employees which are made
more frequently than annually; (ii) the negotiation, preparation and execution
of this Agreement (including, without limitation, the satisfaction or attempted
satisfaction of any of the conditions set forth in ARTICLE IV) and the other
Loan Documents and the making of the Loans; (iii) administration of this
Agreement, the other Loan Documents and the Loans, including, without
limitation, consultation with attorneys in connection therewith; and (iv) the
protection, collection or enforcement of any of the Obligations.
12.1.2 AFTER EVENT OF DEFAULT. Borrower further agrees to pay, or
reimburse Agent and Lenders, for all reasonable out-of-pocket costs and
expenses, including without limitation reasonable attorneys' fees and
disbursements incurred by Agent or Lenders after the occurrence of an Event of
Default (i) in enforcing any Obligation or exercising or enforcing any other
right or remedy available by reason of such Event of Default; (ii) in connection
with any refinancing or restructuring of the credit arrangements provided under
this Agreement in the nature of a "work-out" or in any insolvency or bankruptcy
proceeding; (iii) in commencing, defending or intervening in any litigation or
in filing a petition, complaint, answer, motion or other pleadings in any legal
proceeding relating to Borrower, the REIT or any Affiliate and related to or
arising out of the transactions contemplated hereby; or (iv) in taking any other
action in or with respect to any suit or proceeding (whether in bankruptcy or
otherwise).
12.2 INDEMNITY. Borrower further agrees to defend, protect, indemnify
and hold harmless Agent, each and all of the Lenders, each of their respective
Affiliates and participants and each of the respective officers, directors,
employees, agents, attorneys and consultants (including, without limitation,
those retained in connection with the satisfaction or attempted satisfaction of
any of the conditions set forth in ARTICLE IV) of each of the foregoing
(collectively called the "INDEMNITEES") from and against any and all Liabilities
and Costs imposed on, incurred by, or asserted against such Indemnitees (whether
based on any federal or state laws or other statutory regulations, including,
without limitation, securities and commercial laws and regulations, under common
law or in equity, and based upon contract or otherwise, including any
Liabilities and Costs arising as a result of a "prohibited transaction" under
ERISA to the extent arising from or in connection with the past, present or
future operations of the REIT or Borrower or their respective predecessors in
interest) in any manner relating to or arising out of this Agreement or the
other Loan Documents, or any act, event or transaction related or attendant
thereto, the making of and participation in the Loans and the management of the
Loans, or the use or intended use of the proceeds of the Loans (collectively,
the "INDEMNIFIED MATTERS"); PROVIDED, HOWEVER, that Borrower shall have no
obligation to an Indemnitee hereunder with respect to (i) matters for which such
Indemnitee has been compensated pursuant to or for which an exemption is
provided in SECTION 2.4.7 or any other provision of this Agreement, (ii)
Indemnified Matters to the extent caused by or resulting from the willful
misconduct or gross negligence of that Indemnitee, as determined by a court of
competent jurisdiction, and (iii) Indemnified Matters arising from any dispute
among the Lenders not attributable to the actions or omissions of Borrower or
the REIT. To the extent that the undertaking to indemnify, pay and hold harmless
set forth in the preceding sentence may be unenforceable because it is violative
of any law or public policy, Borrower shall contribute the maximum portion which
it is permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees.
12.3 CHANGE IN ACCOUNTING PRINCIPLES. Except as otherwise provided
herein, if any changes in accounting principles from those used in the
preparation of the most recent financial statements delivered to Agent pursuant
to the terms hereof are hereinafter required or permitted by the rules,
regulations, pronouncements and opinions of the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) and are adopted by the REIT or
Borrower with the agreement of its independent certified public accountants and
such changes result in a change in the method of calculation of any of the
financial covenants, standards or terms found herein, the parties hereto agree
to enter into negotiations in order to amend such provisions so as to equitably
reflect such changes with the desired result that the criteria for evaluating
the financial condition of the REIT or Borrower shall be the same after such
changes as if such changes had not been made; PROVIDED, HOWEVER, that no change
in GAAP that would affect the method of calculation of any of the financial
covenants, standards or terms shall be given effect in such calculations until
such provisions are amended pursuant to SECTION 12.4, to so reflect such change
in accounting principles.
12.4 AMENDMENTS AND WAIVERS. (i) No amendment or modification of any
provision of this Agreement shall be effective without the written agreement of
Requisite Lenders (after notice to all Lenders) and Borrower (except for
amendments to SECTION 11.4.1 which do not require the consent of Borrower), and
(ii) no termination or waiver of any provision of this Agreement, or consent to
any departure by Borrower therefrom (except as expressly provided in SECTION
11.11.1 with respect to waivers of late fees), shall in any event be effective
without the written concurrence of Requisite Lenders (after notice to all
Lenders), which Requisite Lenders shall have the right to grant or withhold at
their sole discretion, EXCEPT THAT:
12.4.1 The following amendments, modifications or waivers shall
require the consent of all Lenders:
(a) increasing the Facility or increasing any
Lender's Commitment without the consent of the affected Lender;
(b) changing the principal amount or final maturity
of the Loans;
(c) reducing the interest rates applicable to the
Loans;
(d) reducing the rates on which fees payable pursuant
hereto are determined;
(e) forgiving or delaying any amount payable or
receivable under ARTICLE II (other than late fees);
(f) changing the definition of "Requisite Lenders",
"Pro Rata Shares" or "Event of Default";
(g) changing any provision contained in this
SECTION 12.4;
(h) releasing any obligor or guarantor under any
Loan Document or amending the Guaranty to reduce the guarantor's
liability thereunder;
(i) consent to assignment by Borrower of all of its
duties and Obligations hereunder pursuant to SECTION 12.14; or
(j) changing any of the financial covenants
set forth in ARTICLE IX or any of the definitions used in the
computation of such covenants or waiving any failure of the Borrower to
comply with any one of such covenants for two or more consecutive
Fiscal Quarters.
12.4.2 No amendment, modification, termination or waiver of any
provision of ARTICLE XI or any other provision referring to Agent shall be
effective without the written concurrence of Agent, but only if such amendment,
modification, termination or waiver alters the obligations or rights of Agent.
Any waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given. No notice to or demand on Borrower
in any case shall entitle Borrower to any other further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this SECTION 12.4 shall be binding on
each assignee, transferee or recipient of Agent's or any Lender's Commitment
under this Agreement or the Loans at the time outstanding.
12.5 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of an Event of Default or Unmatured Event of Default if such
action is taken or condition exists, and if a particular action or condition is
expressly permitted under any covenant, unless expressly limited to such
covenant, the fact that it would not be permitted under the general provisions
of another covenant shall not constitute an Event of Default or Unmatured Event
of Default if such action is taken or condition exists.
12.6 NOTICES AND DELIVERY. Unless otherwise specifically provided
herein, any consent, notice or other communication herein required or permitted
to be given shall be in writing and may be personally served, telecopied or sent
by courier service or United States mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy (or
on the next Business Day if such telecopy is received on a non-Business Day or
after 5:00 p.m. (at the office of the recipient) on a Business Day) or four (4)
Business Days after deposit in the United States mail (registered or certified,
with postage prepaid and properly addressed). Notices to Agent pursuant to
ARTICLE II shall not be effective until received by Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this SECTION 12.6) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
address as may be designated by such party in a written notice to all of the
other parties. All deliveries to be made to Agent for distribution to the
Lenders shall be made to Agent at the addresses specified for notice on the
signature page hereto and in addition, a sufficient number of copies of each
such delivery shall be delivered to Agent for delivery to each Lender at the
address specified for deliveries on the signature page hereto or such other
address as may be designated by Agent in a written notice.
12.7 SURVIVAL OF WARRANTIES, INDEMNITIES AND AGREEMENTS. All
agreements, representations, warranties and indemnities made or given herein
shall survive the execution and delivery of this Agreement and the other Loan
Documents and the making and repayment of the Loans hereunder and such
indemnities shall survive termination hereof.
12.8 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES Cumulative. No failure
or delay on the part of Agent or any Lender in the exercise of any power, right
or privilege under any of the Loan Documents shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under the Loan Documents are
cumulative to and not exclusive of any rights or remedies otherwise available.
12.9 PAYMENTS SET ASIDE. To the extent that Borrower makes a payment
or payments to Agent or the Lenders or Agent or the Lenders exercise their
rights of setoff, and such payment or payments or the proceeds of such setoff or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the Obligation or part
thereof originally intended to be satisfied, and all rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such setoff had not occurred.
12.10 SEVERABILITY. In case any provision in or obligation under this
Agreement or the other Loan Documents shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby, PROVIDED,
HOWEVER, that if the rates of interest or any other amount payable hereunder, or
the collectibility thereof, are declared to be or become invalid, illegal or
unenforceable, Lenders' obligations to make Loans shall not be enforceable.
12.11 HEADING. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
12.12 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS.
12.13 LIMITATION OF LIABILITY. To the extent permitted by applicable
law, no claim may be made by Borrower, any Lender or any other Person against
Agent, Co-Agent or any Lender, or the affiliates, directors, officers,
employees, attorneys or agents of any of them, for any special, indirect,
consequential or punitive damages in respect of any claim for breach of contract
or any other theory of liability arising out of or related to the transactions
contemplated by this Agreement, or any act, omission or event occurring in
connection therewith; and Borrower and each Lender hereby waive, release and
agree not to sue upon any claim for any such damages, whether or not accrued and
whether or not known or suspected to exist in its favor.
12.14 SUCCESSORS AND ASSIGNS. This Agreement and the other Loan
Documents shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and permitted assigns of Agent and Lenders. The terms and
provisions of this Agreement shall inure to the benefit of any assignee or
transferee of the Loans and the Commitments of Lenders under this Agreement, and
in the event of such transfer or assignment, the rights and privileges herein
conferred upon Agent and Lenders shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
Borrower's rights or any interest therein hereunder, and Borrower's duties and
Obligations hereunder, shall not be assigned without the consent of all Lenders.
12.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY
TRIAL AND CERTAIN DAMAGE CLAIMS. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST
BORROWER WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE, AND
ALL JUDICIAL PROCEEDINGS BROUGHT BY BORROWER WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT SHALL BE, BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION HAVING SITUS WITHIN THE COMMONWEALTH OF MASSACHUSETTS,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER ACCEPTS, FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
FINAL JUDGMENT RENDERED THEREBY FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS
AVAILABLE. BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS NOTICE ADDRESS
SPECIFIED ON THE SIGNATURE PAGES HEREOF. BORROWER, AGENT AND LENDERS EACH
IRREVOCABLY WAIVES (i) TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND (ii) ANY OBJECTION (INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. EXCEPT TO THE EXTENT EXPRESSLY
PROHIBITED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY ACTION OR PROCEEDING REFERRED TO IN THE PRECEDING SENTENCE ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN,
OR IN ADDITION TO, ACTUAL DAMAGES, INCLUDING ANY DAMAGES PURSUANT TO M.G.L.
C.93A ET SEQ. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF AGENT OR ANY LENDER TO
BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.
12.16 COUNTERPARTS; EFFECTIVENESS; INCONSISTENCIES. This Agreement and
any amendments, waivers, consents or supplements may be executed in
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such together shall constitute but one and the same
instrument. This Agreement shall become effective when Borrower, the initial
Lenders and Agent have duly executed and delivered execution pages of this
Agreement to each other (delivery by Borrower to Lenders and by any Lender to
Borrower and any other Lender being deemed to have been made by delivery to
Agent). This Agreement and each of the other Loan Documents shall be construed
to the extent reasonable to be consistent one with the other, but to the extent
that the terms and conditions of this Agreement are actually and directly
inconsistent with the terms and conditions of any other Loan Document, this
Agreement shall govern.
12.17 CONSTRUCTION. The parties acknowledge that each party and its
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments or exhibits hereto.
12.18 OBLIGATIONS UNSECURED. It is the intent of the parties that the
Obligations shall constitute unsecured obligations of Borrower. Neither the
restrictions and prohibitions set forth herein with respect to the creation,
incurrence, assumption or existence of any Lien on any Property of Borrower or
any other Person, nor those set forth in any other Loan Document, are intended
to create or constitute a Lien of any nature upon any Property of Borrower or
any other Person, and no such restriction or prohibition shall be deemed to
constitute any such Lien. This SECTION 12.18 shall not be deemed to prevent the
Agent or any Lender from obtaining a Lien as security for the Obligations at any
time hereafter pursuant to a mutual agreement among the parties hereto expressly
providing for such Lien or during the continuance of any Event of Default.
12.19 ENTIRE AGREEMENT. This Agreement, taken together with all of the
other Loan Documents and all certificates and other documents delivered by
Borrower to Agent (including documents incorporating separate agreements
relating to the payment of fees), embodies the entire agreement and supersede
all prior agreements, written and oral, relating to the subject matter hereof.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed on the date
set forth above.
BORROWER: CHELSEA GCA REALTY PARTNERSHIP, L.P.,
a Delaware limited partnership
By: CHELSEA GCA REALTY, INC., a
Maryland corporation, its general partner
By____________________________
Its_________________________
ADDRESS FOR NOTICE AND DELIVERY:
103 Eisenhower Parkway
Roseland, NJ 07068
Attn: Michael J. Clarke,
Senior Vice President
Tel: (973)228-6111
Fax: (973)228-1694
<PAGE>
AGENT/LENDER: BANKBOSTON, N.A.
By_________________________________
Its______________________________
ADDRESS FOR NOTICE AND DELIVERY:
100 Federal Street
Boston, MA 02110
Attn: Real Estate Division
with a copy to the following address:
115 Perimeter Center Place N.E.
Suite 500
Atlanta, GA 30346
Attn: Lori Y. Litow
Telephone: (770) 390-6544
Telecopy: (770) 390-8434
Pro Rata Share: 59.375%
Loan Commitment: $95,000,000
LIBOR OFFICE:
BankBoston, N.A.
100 Federal Street
Boston, MA 02110
<PAGE>
LENDER: KEYBANK NATIONAL ASSOCIATION
By_________________________________
Its______________________________
ADDRESS FOR NOTICE AND DELIVERY:
Address:
127 Public Square
Cleveland, OH 44114
Attn: Maryellen Fowler
Telephone: (216) 689-4975
Telecopy: (216) 689-3566
Pro Rata Share: 15.625%
Loan Commitment: $25,000,000
LIBOR OFFICE:
Address:
127 Public Square
Cleveland, OH 44114
Attn: Maryellen Fowler
Telephone: (216) 689-4975
Telecopy: (216) 689-3566
<PAGE>
LENDER: PNC BANK
By_________________________________
Its______________________________
ADDRESS FOR NOTICE AND DELIVERY:
Address:
Two Tower Center, 18th Floor
East Brunswick, NJ 08816
Attn: Greg McMannus
Telephone: (732) 220-3542
Telecopy: (732) 220-3744
Pro Rata Share: 15.625%
Loan Commitment: $25,000,000
LIBOR OFFICE:
Address:
Two Tower Center, 18th Floor
East Brunswick, NJ 08816
Attn: Greg McMannus
Telephone: (732) 220-3542
Telecopy: (732) 220-3744
<PAGE>
LENDER: TOKAI BANK OF CALIFORNIA
By_________________________________
Its______________________________
ADDRESS FOR NOTICE AND DELIVERY:
Address:
505 Montgomery Street
San Francisco, CA
Attn: Richard A. Israel
Telephone: (415) 399-0699
Telecopy: (415) 291-8187
Pro Rata Share: 9.375%
Loan Commitment: $15,000,000
LIBOR OFFICE:
Address:
505 Montgomery Street
San Francisco, CA
Attn: Richard A. Israel
Telephone: (415) 399-0699
Telecopy: (415) 399-1627
Exhibit 10.4
AGREEMENT
Agreement dated as of October 23, 1998, by and among Chelsea GCA
Realty Partnership, L.P., a Delaware limited partnership ("Chelsea"), Chelsea
GCA Realty, Inc., a Maryland corporation ("Chelsea, Inc."), Simon Property
Group, L.P., a Delaware limited partnership ("Simon"), Simon/Chelsea Houston
Development L.P., a Texas limited partnership (the "Partnership"), Mills Texas
Acquisitions Limited Partnership, a Delaware limited partnership ("Mills"), The
Mills Limited Partnership, a Delaware limited partnership ("Mills LP"), The
Mills Corporation, a Delaware corporation, and Simon Property Group (Texas) L.P.
("Simon Texas").
W I T N E S S E T H :
WHEREAS, the parties hereto have been involved in a dispute relating
to the construction by the Partnership of a shopping center in Harris County,
Texas (the "Center"); and
WHEREAS, the parties are involved in a lawsuit brought by Mills LP
against various parties, including Chelsea and Simon, filed in the 334th
Judicial District of Harris County, Texas, Docket Number 98-40212 (the
"Lawsuit"); and
WHEREAS, the Lawsuit includes allegations, which the defendants
dispute, that defendants, in developing the Center, were engaged in tortious
interference with a contract, tortious interference with prospective business
relations and utilization of confidential information of Mills LP; and
WHEREAS, S/C Houston Development LLC, a Delaware limited liability
company ("Houston Development"), is the sole general partner of the Partnership,
and Chelsea Texas Holdings, LLC, a Delaware limited liability company ("Chelsea
Texas") whose sole member is Chelsea, and Simon Texas owned by Simon and
Affiliates (as defined herein), are the sole limited partners of the
Partnership; and
WHEREAS, Chelsea and Simon Texas are the sole members of Houston
Development; and
WHEREAS, the parties hereto desire to settle the Lawsuit and any and
all claims relating thereto, and therefore to have Mills purchase Chelsea's
interest in the Center and to have Chelsea agree to be bound by, and continue to
comply with, the restrictive covenant provision contained herein;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and conditions herein contained, the parties agree as follows:
1. ACQUISITION OF INTEREST. Chelsea hereby sells, transfers and
assigns to Mills all of its right, title and interest in and to Houston
Development and Chelsea Texas, which constitute all the interests, direct and
indirect, of Chelsea and its Affiliates in and to the Partnership so that Mills
owns Chelsea Texas which is a limited partner in the Partnership and a member of
Houston Development. It is the intent of Chelsea and its Affiliates to transfer
to Mills all of their interests and rights in the Center. In addition, Chelsea
hereby transfers and assigns and agrees to deliver to Houston Development that
certain promissory note dated August 12, 1998 in the principal amount of up to
$30,000,000, that certain Deed of Trust executed by the Partnership to John M.
Nolan, as trustee for the benefit of Chelsea, dated August 12, 1998 and all
other documents executed in connection therewith. Any amounts drawn down under
the note are included in the Maximum (as defined herein). Simon and Simon Texas
hereby consent to such transfers, which consent is subject to execution and
delivery of the S/M Agreement (as defined herein), in form and substance
satisfactory to Simon in its sole and absolute discretion. In consideration
thereof, Mills hereby agrees to reimburse Chelsea for all direct expenses
incurred by Chelsea in connection with the Center (including costs incurred by
Chelsea relating to the Lawsuit) (the "Chelsea Expenses") and 50% of all third
party development and construction costs incurred by Chelsea on behalf of the
Partnership or by the Partnership with respect to the Center on or prior to the
date hereof, including, but not limited to, fees and expenses paid or incurred
in connection with the acquisition of the land upon which the Center was to be
constructed (including the cost of the land), architects, consultants, advisors,
appraisers, title insurers, surveyors, attorneys, engineers, construction loan
financing and any other third parties (collectively, the "Third Party
Expenses"); provided, however, that the Chelsea Expenses and 50% of the Third
Party Expenses shall not exceed an aggregate of $9,137,500 (the "Maximum"). The
Chelsea Expenses and Third Party Expenses include all expenses anticipated to be
incurred in connection with the termination or cancellation of all contracts and
leases entered into by Chelsea on behalf of the Partnership or by the
Partnership with respect to the Center. The Maximum does not include the
obligations of the Partnership set forth on Schedule A attached hereto which are
to be performed after the date hereof and for which Chelsea shall not have any
further liability. Chelsea shall terminate all existing contracts relating to
the construction of the Center, including all tenant leases; provided, however,
that if the Partnership requests that Chelsea not terminate a contract, then
Chelsea shall not terminate such contract and it shall not have any further
liability with respect to such contract for matters which occur after the date
hereof. Nothing in this Agreement shall prohibit Mills LP or its Affiliates from
entering into leases with any tenants whose leases were terminated hereunder.
Mills is herewith wire transferring to an account designated by Chelsea, in
immediately available funds, the Maximum. In addition, as additional
consideration for Chelsea transferring its interest in the Partnership to Mills,
Mills is herewith wire transferring to an account designated by Chelsea, in
immediately available funds, the amount of $2,500,000. If Chelsea for accounting
purposes reports a gain on the sale of its interests hereunder, then the amount
of such gain shall promptly be paid to Mills or Mills may set-off such amount
against any Annual Payments. Chelsea and Simon severally represent and warrant
to Mills and each other as follows: (i) neither they nor the Partnership has any
obligations to construct the Center or any other facility at such location; (ii)
the fourth and fifth recitals are true and correct; (iii) the option to acquire
additional land has not been exercised; (iv) they are not in breach or violation
of the agreement of limited partnership for the Partnership or the operating
agreement for Houston Development or any other agreements between Chelsea, Simon
or the Partnership with respect to the Center; (v) each of them is responsible
for 50% of the costs relating to the Center incurred prior to the date hereof,
including anticipated costs and the termination costs involved in connection
with the leases and contracts and the payment to the lender if the loan
commitment is not closed, and (vi) each of them has not taken any action to
encumber the assets of the Partnership, except for the existing deed of trust.
Chelsea further covenants with Simon that it will use, to the extent not already
paid directly to third parties, the reimbursement received from Mills to pay
Chelsea's 50% obligations of the costs relating to the Center referenced in
clause (v) above. Each of Simon and Chelsea agrees to indemnify the other for
all costs incurred in excess of their 50% share. Chelsea represents and warrants
to Mills that it and its Affiliates are transferring the interests contained in
this Section 1 free and clear of all taxes, claims, liens and security interests
and that no consents are needed to transfer the same, except for the consent of
Simon and Simon Texas.
2. RESTRICTIVE COVENANT PAYMENTS. Ancillary to the transfer of
Chelsea's interest in the Partnership and the Center and in settlement of the
Lawsuit, the parties have agreed to enter into the restrictive covenant (the
"Restrictive Covenant") contained in Section 3 hereof. Notwithstanding anything
to the contrary contained herein, nothing contained herein shall constitute an
admission by Chelsea or Simon of any liability under the Lawsuit. As
consideration of Chelsea's agreement to enter into the Restrictive Covenant
contained in Section 3 hereof and Chelsea's annual satisfaction of such
covenant, Mills agrees to pay to Chelsea $3,000,000 for such covenant on the
date hereof, by wire transfer to an account designated by Chelsea, in
immediately available funds, and four annual payments of $4,600,000 each on each
of January 2, 1999, January 2, 2000, January 2, 2001 and January 2, 2002, as
adjusted below (the "Annual Payments"), for Chelsea's annual satisfaction of the
covenant contained in Section 3 hereof for each respective calendar year
containing each such payment date; provided, however, that each Annual Payment
shall not exceed 3-1/2% of the gross revenues projected by Chelsea to be
received in the year in which such Annual Payment is to be made (the "3-1/2%
Amount"); provided, further, however, that (i) if the Annual Payment is limited
by the 3-1/2% Amount in a given year, then the excess of the Annual Payment for
such year (without regard to the limitation) over the 3-1/2% Amount shall be
treated as an addition to the Annual Payment in respect of the next succeeding
year, so long as such next succeeding year is prior to calendar year 2004, and
shall be payable in the same manner (and subject to the same limitation) as the
Annual Payment, and (ii) if prior to the end of a year Chelsea shall have
determined that the amount paid to Chelsea in any year as the Annual Payment for
such year exceeded or will exceed the 3-1/2% Amount (as calculated based on
updated projections for such year), such excess shall promptly be paid by
Chelsea to Mills, with interest at the rate of 6% per annum, and then such
excess shall be treated as an addition to the Annual Payment in respect of the
next succeeding year, subject to the provisions of clause (i) above. Chelsea
agrees to notify Mills on or prior to December 15 of each year if the Annual
Payment with respect to the payment to be made on January 2 of the following
year is projected to exceed the 3-1/2% Amount. The Annual Payments to be paid to
Chelsea shall be secured by shares of Common Stock (the "Common Stock") of The
Mills Corporation having a market value on the date hereof of $21,160,000 (the
"Escrowed Shares"), which Escrowed Shares are being placed in escrow pursuant to
an Escrow Agreement (the "Escrow Agreement") being executed concurrently
herewith. Based on the market price of a share of Common Stock on the date
hereof, 1,007,620 shares of Common Stock initially are being deposited by The
Mills Corporation in escrow; provided, however, that if during the term of the
Escrow Agreement the Market Value (as defined in the Escrow Agreement) of the
Escrowed Shares for the 20 consecutive trading days preceding December 15 of any
year shall fall below 115% of the Annual Payments remaining to be made
(calculated solely for this purpose without any limitation on the amount
thereof) (the "Remaining Annual Payments"), then The Mills Corporation, within
10 days thereafter, shall deposit into escrow additional shares of Common Stock
so that the Market Value at that time will equal 115% of the Remaining Annual
Payments. The Mills Corporation agrees that if any Escrowed Shares are to be
released to Chelsea from escrow, at the time of such release such Escrowed
Shares will be registered for resale by Chelsea pursuant to a Registration
Rights Agreement being executed concurrently herewith. The Mills Corporation
represents and warrants to Chelsea that the Escrowed Shares are (i) duly
authorized, validly issued, fully paid and non-assessable and free and clear of
all taxes, claims, liens and security interests, (ii) will be listed in the
United States (subject to notice of issuance) on all stock exchanges, including
the Nasdaq Stock Market, if any, on which the Common Stock is listed at the time
of issuance and (iii) when and if released from the Escrow Agreement to Chelsea,
Chelsea will acquire good and marketable title thereto, free and clear of all
taxes, claims, liens and security interests. At any time while Annual Payments
are payable, Mills shall have the right to replace the Escrowed Shares by an
irrevocable letter or letters of credit (the "Letter of Credit") in the
aggregate original face amount of the Remaining Annual Payments, in form and
substance satisfactory to Chelsea, which Letter of Credit shall provide for (x)
four equal annual draw downs in each of January 1999, January 2000, January 2001
and January 2002 or (y) four separate letters of credit expiring seriatim on
each of January 31, 1999, January 31, 2000, January 31, 2001 and January 31,
2002. Upon issuance of the Letter of Credit, the Escrow Agreement will be
terminated. The payment of the additional consideration provided for in this
Section 2 is conditioned upon the continued performance by Chelsea of the
obligations under Section 3 through December 31, 2002. Mills shall not have the
right to set-off or deduct from any Annual Payments any amounts allegedly owed
to Mills by Chelsea arising out of Chelsea's breach of its indemnification
obligations contained in this Agreement unless and until Mills shall have
delivered to Chelsea at least 10 days prior written notice setting forth the
terms of Chelsea's alleged breach and, thereafter, Mills deposits the amount of
such claimed breach in an escrow account with a bank or financial institution.
3. RESTRICTIVE COVENANT. The parties acknowledge that this Agreement
arises out of a Lawsuit challenging the right of Chelsea and Simon to build the
Center allegedly in contravention of Mills' rights, which Chelsea and Simon
dispute, and that it is necessary to enter into this Restrictive Covenant to
further the goals of the settlement of the Lawsuit. Chelsea agrees with Mills,
Simon and the Partnership that for a period commencing on the date hereof and
terminating December 31, 2002, that it shall not directly or indirectly or
through any Affiliate, own any interest in, manage, operate or control any
Chelsea-type center, manufacturers outlet center or "Mills-type center" (which
Mills-type center means a center substantially similar in the mix of tenants to
the projects owned and operated by Mills or its Affiliates on the date hereof)
(collectively the "Restricted Centers") within the radius of the site of the
Center (the "Territory") as specified below; provided, however, that the
foregoing (i) shall not prevent Chelsea from investing in securities if such
class of securities in which the investment is so made is listed on a national
securities exchange or is issued by a company registered under Section 12(g) of
the Securities Exchange Act of 1934, so long as such investment holdings do not,
in the aggregate, constitute more than 5% of the voting stock of any company's
securities, (ii) shall not apply to any Restricted Centers owned or acquired by
any entity which is not an Affiliate of Chelsea and which acquires substantially
all the assets of Chelsea or into which Chelsea is consolidated or merged or
(iii) shall not apply to any Restricted Centers owned or acquired by an entity
acquired by Chelsea; provided, further, however, that subclauses (ii) and (iii)
shall not permit the development or redevelopment of Restricted Centers by such
entities. The radius of the Territory shall be as follows: (i) until December
31, 1999, 50 miles, (ii) thereafter until December 31, 2000, 40 miles, (iii)
thereafter until December 31, 2001, 30 miles and (iv) thereafter 20 miles. If
Chelsea or any Affiliate violates any provisions of this Section 3, Mills shall
be relieved of any further obligation to pay any unpaid amounts due under
Section 2 hereof; provided, however, that if such violation occurs on or prior
to December 31, 2000, then in addition Chelsea shall also pay to Mills the
lesser of (i) $12,200,000 or (ii) all amounts previously paid to Chelsea
pursuant to Section 2 of this Agreement; provided, further, however, that
Chelsea shall not have any further liability for such violation. The parties
agree that the amounts to be paid upon violation of this Restrictive Covenant
are liquidated damages and not a penalty and that actual damages that can
reasonably be anticipated as the result of a breach are difficult to ascertain
at the date of this Agreement, but these amounts are a reasonable estimate of
the actual damages that Mills would incur. In addition, Mills shall also have
the right to seek injunctive relief. If any of Mills, Simon or the Partnership
institutes a lawsuit or seeks arbitration relating to the violation of this
Restrictive Covenant and is successful, Chelsea shall be responsible for the
attorneys fees and expenses of Mills, Simon or the Partnership.
4. INDEMNIFICATION. Subject to Chelsea's compliance with its
obligation to pay for 50% of the Partnership's costs as set forth in Section 1
hereof, the Partnership hereby agrees to indemnify and hold Chelsea harmless
from and reimburse Chelsea for all matters to the extent such matters accrue or
arise from conduct or events arising after the date hereof, including any
obligations set forth on Schedule A hereto. Chelsea hereby agrees to indemnify
and hold Mills and its Affiliates harmless from any and all matters relating to
the Center (including, without limitation, liabilities, claims of tenants and
expenses in excess of the Maximum) to the extent such matters accrue or arise
from conduct or events on or prior to the date hereof except for those matters
set forth on Schedule A; provided, however, that Chelsea will not have any
liability hereunder for incremental expenses resulting from any action taken by
Mills or the Partnership after the date hereof.
5. LAWSUIT. Promptly after the execution of this Agreement, the
parties will dismiss the Lawsuit with prejudice and without costs, and file all
appropriate documents to effectuate this.
5A. MILLS LP RELEASE. Mills LP releases and discharges each of
the parties to this Agreement, its parents, subsidiaries, Affiliates,
predecessors, successors, assigns, present and former employees, officers,
directors, agents, attorneys and insurers (collectively, "Mills Releasees") from
all actions, causes of action, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, liens,
controversies, agreements, promises, variances, trespasses, damages, judgments,
extents, executions, claims and demands whatsoever, in law or equity, which
Mills LP ever had, now have or hereafter can, shall or may have, for, upon, or
by reason of any matter, cause or thing arising out of or relating to the facts
asserted in the Lawsuit, any claims or counterclaims relating to the Center that
could have been asserted in the Lawsuit, and any facts occurring on or before
the date of this Agreement relating to permitting or other governmental
approvals for development at the Center site. Notwithstanding the foregoing,
nothing in this release shall affect any claim or right Mills LP may have (a)
under this Agreement, (b) under the Joint Venture Agreement between Mills LP and
Simon dated November 30, 1995 concerning any shopping center development other
than the Center, (c) under the Agreement ("S/M Agreement") between Mills LP,
Simon Texas and Simon dated the date hereof or (d) against Simon for any matters
relating to the Partnership or Houston Development occurring on or prior to the
date hereof.
5B. CHELSEA RELEASE. Chelsea and Chelsea, Inc. release and
discharge each of the parties to this Agreement, its parents, subsidiaries,
Affiliates, predecessors, successors, assigns, present and former employees,
officers, directors, agents, attorneys and insurers (collectively, "Chelsea
Releasees") from all actions, causes of action, suits, debts, dues, sums of
money, accounts, reckonings, bonds, bills, specialties, covenants, contracts,
liens, controversies, agreements, promises, variances, trespasses, damages,
judgments, extents, executions, claims and demands whatsoever, in law or equity,
which Chelsea or Chelsea, Inc. ever had, now have or hereafter can, shall or may
have, for, upon, or by reason of any matter, cause or thing arising out of or
relating to the facts asserted in the Lawsuit, any claims or counterclaims
relating to the Center that could have been asserted in the Lawsuit, and any
facts occurring on or before the date of this Agreement relating to permitting
or other governmental approvals for development at the Center site.
Notwithstanding the foregoing, nothing in this release shall affect any claim or
right Chelsea or Chelsea, Inc. may have (a) under this Agreement or (b) against
Simon for any matters relating to the Partnership or Houston Development
occurring on or prior to the date hereof.
5C. SIMON RELEASE. Simon releases and discharges each of the
parties to this Agreement, its parents, subsidiaries, Affiliates, predecessors,
successors, assigns, present and former employees, officers, directors, agents,
attorneys and insurers (collectively, "Simon Releasees") from all actions,
causes of action, suits, debts, dues, sums of money, accounts, reckonings,
bonds, bills, specialties, covenants, contracts, liens, controversies,
agreements, promises, variances, trespasses, damages, judgments, extents,
executions, claims and demands whatsoever, in law or equity, which Simon ever
had, now have or hereafter can, shall or may have, for, upon, or by reason of
any matter, cause or thing arising out of or relating to the facts asserted in
the Lawsuit, any claims or counterclaims relating to the Center that could have
been asserted in the Lawsuit, and any facts occurring on or before the date of
this Agreement relating to permitting or other governmental approvals for
construction of the Center site. Notwithstanding the foregoing, nothing in this
release shall affect any right Simon may have (a) under this Agreement, (b)
under the Joint Venture Agreement between Mills LP and Simon dated November 30,
1995 concerning any shopping center development other than the Center, (c) under
the S/M Agreement or (d) against Chelsea for any matters relating to the
Partnership or Houston Development occurring on or prior to the date hereof.
5D. CAPACITY OF PARTIES. The provisions of this Agreement shall
apply to all parties both directly and indirectly; accordingly, if a party is
subject to a restriction, has undertaken an obligation or has granted a right
pursuant to the provisions of this Agreement, then every current or future
Affiliate of such party shall be subject to the same provisions of this
Agreement (i.e., such party cannot avoid a provision of this Agreement by acting
through an Affiliate.) For purposes of this Agreement, "Affiliate" shall have
the same meaning as contained in Rule 144 under the Securities Act of 1933, as
amended, which term includes David Bloom.
6. CONFIDENTIALITY. All leasing information provided by Chelsea
relating to the Center shall remain the confidential and proprietary information
of Chelsea and neither Mills nor Simon shall, directly or indirectly, without
the prior consent of Chelsea, use or disclose to any other person or entity any
of such leasing information, except as required by law or except for information
disclosed to Mills or Simon by a source other than Chelsea who, to the knowledge
of Mills or Simon, was not restricted from disclosing such information;
provided, however, that Simon shall have the right to use leasing information of
which it has knowledge for any purpose with respect to development at other
locations. Mills hereby agrees and acknowledges that confidential leasing
information disclosed by Chelsea to Simon will not be disclosed to Mills by
Simon.
7. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their successors and permitted assigns,
the Mills Releasees, Simon Releasees and Chelsea Releasees; provided, however,
that Mills may not assign its rights or obligations hereunder without the
consent of Chelsea and Simon, except that Mills may assign its right to acquire
the interests specified in Section 1 to an Affiliate, which assignment shall not
release Mills from any of its obligations hereunder.
8. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to its subject matter and may only be changed
by a writing signed by the party to be charged.
9. NOTICES. All notices, requests, demands, documents and other
communications given or due hereunder shall hereafter be made in writing and
shall be deemed to have been duly given when hand delivered, when received if
sent by telecopier or by same day or overnight recognized commercial courier
service or three business days after being mailed by certified or registered
mail, return receipt requested, postage prepaid:
If to Simon or Simon Texas:
Simon Property Group, L.P.
National City Center
115 West Washington Street
Indianapolis, Indiana 46204
Attn: Chief Executive Officer
with a copy to:
Simon Property Group, L.P.
National City Center
115 West Washington Street
Indianapolis, Indiana 46204
Attn: General Counsel
If to Mills or Mills LP:
The Mills Corporation
1300 Wilson Blvd., Suite 400
Arlington, Virginia 22209
Attn: President
with a copy to:
The Mills Corporation
1300 Wilson Blvd., Suite 400
Arlington, Virginia 22209
Attn: General Counsel
If to Chelsea or Chelsea, Inc.:
Chelsea GCA Realty Partnership,
L.P.
103 Eisenhower Parkway
Roseland, New Jersey 07068
Attn: Chairman of the Board
with a copy to:
Martin H. Neidell, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
10. NO THIRD PARTY BENEFICIARIES. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement, except (a) those designated as Mills Releasees, Chelsea
Releasees or Simon Releasees under Section 5A, 5B and 5C hereof and (b) as
provided in Section 5D and Section 7 hereof. Without limiting the foregoing, it
is agreed that Westside and its Affiliates and Cinemark and its Affiliates are
not third party beneficiaries of this Agreement.
11. HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning hereof.
12. INTERPRETATION. Except for the Restrictive Covenant contained in
Section 3 (which is provided for below), if any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provisions had never been contained herein. Moreover, if any one or more of the
provisions contained in this Agreement, except for the Restrictive Covenant
contained in Section 3 (which is provided for below), shall for any reason be
held to be excessively broad as to duration, geographical scope, activity or
subject, that provision shall be construed by limiting and reducing it, so as to
cause it to be enforceable to the extent compatible with applicable law.
Notwithstanding the foregoing provisions of this Section 12 if Chelsea violates
the original terms of the Restrictive Covenant contained in Section 3 (whether
or not the Restrictive Covenant contained in Section 3 is held to be invalid,
illegal or unenforceable in any respect or is held to be excessively broad as to
duration, geographical scope, activity or subject), Mills shall be relieved of
any further obligation to pay any unpaid amounts due under Section 2 hereof;
provided, however, that if such violation occurs on or prior to December 31,
2000, then Chelsea shall also pay to Mills the lesser of (i) $12,200,000 or (ii)
all amounts previously paid to Chelsea pursuant to Section 2 of this Agreement
and Chelsea shall not have any further liability in damages; provided further,
however, that if Chelsea continues to abide by the original terms of the
Restrictive Covenant set forth herein, Mills shall continue to make the payments
set forth in Section 3 hereof.
13. COUNTERPARTS. This Agreement may be executed in counterparts, all
of which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the same
counterpart.
14. ARBITRATION. Mindful of the high cost of litigation, not only in
dollars but time and energy as well, the parties intend to and do hereby
establish a quick, final and binding out-of- court dispute resolution procedure
to be followed in the unlikely event any controversy should arise out of or
concerning the performance of this Agreement. Accordingly, the parties do hereby
covenant and agree that any controversy, dispute or claim of whatever nature
arising out of, in connection with or in relation to the interpretation,
performance or breach of this Agreement, including any claim based on contract,
tort or statute, other than injunctive relief for which a court action may be
commenced, shall be settled, at the request of any party to this Agreement,
through arbitration by a dispute resolution process administered by
Jams/Endispute or any other mutually agreed upon arbitration firm involving
final and binding arbitration conducted in New York, New York, administered by
and in accordance with the then existing rules of practice and procedure of such
arbitration firm and judgment upon any award rendered by the arbitrator may be
entered by any state or federal court having jurisdiction thereof. Nothing in
this Agreement shall prevent Mills, Simon or the Partnership at any time from
seeking injunctive relief, either instead of, or in addition to, any other
remedy provided for herein.
15. FURTHER ASSURANCES. Each party agrees at any time and from time to
time after the date hereof, upon the reasonable request of any party, to do,
execute, and deliver all such further documents as may be required to carry out
the terms of this Agreement. In addition promptly after the date hereof, Chelsea
shall deliver to Simon, on behalf of the Partnership, all documents (other than
leasing information) in its possession relating to the Center. Mills agrees that
Simon shall be entitled to receive all documents on behalf of the Partnership.
16. GOVERNING LAW. This Agreement and its validity, construction and
performance shall be governed in all respects by the internal laws of the State
of Delaware without giving effect to any principles of conflict of laws.
17. EXPENSES. Each of the parties to this Agreement shall bear its own
costs and expenses relating to the execution and delivery of this Agreement,
including its legal fees and expenses, and that none of such costs and expenses
are Partnership obligations. In any dispute under this Agreement, whether in an
arbitration or action at law or in equity, the prevailing party shall be
entitled to be reimbursed for its legal fees and expenses.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
CHELSEA GCA REALTY PARTNERSHIP, L.P.
By: Chelsea GCA Realty, Inc., its General Partner
By:______________________________
CHELSEA GCA REALTY, INC.
By:______________________________
SIMON PROPERTY GROUP L.P.
By: Simon Property Group, Inc., its General Partner
By:______________________________
SIMON PROPERTY GROUP (TEXAS) L.P., a Texas
limited partnership
By: GOLDEN RING MALL COMPANY LIMITED
PARTNERSHIP, an Indiana limited partnership,
General Partner
By: SIMON PROPERTY GROUP
(DELAWARE), INC., a Delaware
corporation, General Partner
By:_______________________________
Its:_______________________________
SIMON/CHELSEA HOUSTON DEVELOPMENT,
L.P., a Texas limited partnership
By: S/C Houston Development LLC, a Delaware
limited liability company, its General Partner
By: Chelsea GCA Realty Partnership, L.P.,
a Delaware limited partnership, its
Operating Member
By: Chelsea GCA Realty, Inc., a Maryland
corporation, its General Partner
By:_____________________________
Name:
Title:
MILLS TEXAS ACQUISITIONS LIMITED
PARTNERSHIP
By: Mills Texas Acquisitions, L.L.C., its
General Partner
By: The Mills Limited Partnership, its Manager
By: The Mills Corporation, its General Partner
By:________________________________
Thomas E. Frost, Senior Vice President
THE MILLS LIMITED PARTNERSHIP
By: The Mills Corporation, its General Partner
By:_________________________________
THE MILLS CORPORATION
By:_________________________________
Exhibit 10.9
LIMITED LIABILITY COMPANY AGREEMENT
OF
S/C ORLANDO DEVELOPMENT LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT ("Agreement") is entered into
as of December 23, 1998 by and between SIMON PROPERTY GROUP, L.P., a Delaware
limited partnership ("Simon"), and CHELSEA GCA REALTY PARTNERSHIP, L.P., a
Delaware limited partnership ("Chelsea"). Simon and Chelsea and any other
persons or entities who shall in the future execute and deliver this Agreement
pursuant to the provisions hereof shall hereinafter collectively be referred to
as the "Members."
WHEREAS, the Members have formed a limited liability company pursuant
to the provisions of the Delaware Limited Liability Act (the "Act" or the
"Delaware LLC Act") under the name "S/C Orlando Development LLC" (the "Company")
pursuant to a Certificate of Formation, dated December 21, 1998 and filed
December 23, 1998 (the "Certificate"); and
WHEREAS, the Members desire to continue the Company for the purposes
hereinafter set forth, subject to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the foregoing, and of the
covenants and agreements hereinafter set forth, it is hereby agreed as follows:
ARTICLE 1.
DEFINITIONS; EXHIBITS
Section 1.1 CERTAIN DEFINITIONS.
Unless the context otherwise specifies or requires, capitalized terms
used herein shall have the respective meanings assigned thereto in EXHIBIT A,
attached hereto, and incorporated herein by reference, for all purposes of this
Agreement (such definitions to be equally applicable to both the singular and
the plural forms of the terms defined). Unless otherwise specified, all
references herein to Articles or Sections are to Articles or Sections of this
Agreement.
Section 1.2 OTHER DEFINITIONS.
In addition to the terms defined in EXHIBIT A, other terms will have
the definitions provided elsewhere in this Agreement.
Section 1.3 EXHIBITS.
Attached hereto and forming an integral part of this Agreement are
various exhibits which are listed in the Table of Contents for this Agreement,
all of which are incorporated into this Agreement as fully as if the content
thereof were set out in full herein at each point of reference thereto.
ARTICLE 2.
FORMATION; NAME; PLACE OF BUSINESS
Section 2.1 FORMATION OF COMPANY; CERTIFICATE OF FORMATION.
The Members of the Company hereby:
(a) acknowledge the formation of the Company by the Members as a
limited liability company pursuant to the Delaware LLC Act by virtue
of the filing of the Certificate with the appropriate public office in
Delaware on December 23, 1998;
(b) confirm and agree to their status as Members of the Company;
(c) execute this Agreement for the purpose of continuing the
existence of the Company and establishing the rights, duties, and
relationship, of the Members; and
(d) (i) agree that if the laws of any jurisdiction in which the
Company transacts business so require, the Company also shall cause to
be filed, with the appropriate office in that jurisdiction, any
documents necessary for the Company to qualify to transact business
under such laws; and (ii) agree and obligate themselves to execute,
acknowledge, and cause to be filed for record, in the place or places
and manner prescribed by law, any amendments to the Certificate as may
be required, either by the Delaware LLC Act, by the laws of any
jurisdiction in which the Company transacts business, or by this
Agreement, to reflect changes in the information contained therein or
otherwise to comply with the requirements of law for the continuation,
preservation, and operation of the Company as a limited liability
company under the Delaware LLC Act.
Section 2.2 NAME OF COMPANY.
The name under which the Company shall conduct its business is "S/C
Orlando Development LLC". The business of the Company may be conducted under any
other name permitted by the Delaware LLC Act that is deemed necessary or
desirable by the Members. The Company promptly shall cause to be executed,
filed, and recorded any assumed or fictitious name certificates required by the
laws of the State of Delaware or any state in which the Company conducts
business.
Section 2.3 PLACE OF BUSINESS.
The location of the principal place of business of the Company shall
be c/o Chelsea GCA Realty, Inc., 103 Eisenhower Parkway, Roseland, New Jersey
07068. The Members may hereafter change the principal place of business of the
Company to such other place or places within the United States as the Members
may from time to time determine, and, if necessary, the Members shall amend the
Certificate in accordance with the applicable requirements of the Delaware LLC
Act. The Members may establish and maintain such other offices and additional
places of business of the Company, either within or without the State of
Delaware, as they deem appropriate.
Section 2.4 REGISTERED OFFICE AND REGISTERED AGENT.
The street address of the initial registered office of the Company
shall be 1209 Orange Street, Wilmington, Delaware 19801, and the Company's
registered agent at such address shall be the Corporation Trust Company.
ARTICLE 3.
PURPOSES AND POWERS OF COMPANY
Section 3.1 PURPOSES.
Subject to the provisions of this Agreement, the purposes of the
Company are limited and include only the following: investing in, acquiring,
holding, owning, developing, operating, maintaining, improving, leasing, selling
as a means of recovering the Members' investment and a profit thereon,
exchanging and otherwise using the Project, for profit and as an investment, and
doing any and all other acts or things which may be incidental or necessary to
carry on the business of the Company as herein contemplated. The Members
acknowledge and agree that the Company will be acting as the general partner of
the Partnership, and that the Partnership will own the Project.
Section 3.2 POWERS.
The Company shall have the power to do any and all acts and things
necessary, appropriate, advisable, or convenient for the furtherance and
accomplishment of the purposes of the Company, including, without limitation, to
engage in any kind of activity and to enter into and perform obligations of any
kind necessary to or in connection with, or incidental to, the accomplishment of
the purposes of the Company, so long as said activities and obligations may be
lawfully engaged in or performed by a limited liability company under the
Delaware LLC Act.
Section 3.3 LIMITS OF COMPANY.
(a) The relationship between and among the Members as members of
a limited liability company shall be limited to carrying on the
business of the Company in accordance with the terms of this
Agreement. Such relationship shall be construed and deemed to be a
limited liability company only for such sole and limited purpose.
(b) The Members shall each devote such time to the Company as is
reasonably necessary to carry out the provisions of this Agreement.
Each of the Members understands that the other Member or its
Affiliates may be interested, directly or indirectly, in various other
businesses and undertakings not included in the Company. Each Member
also understands that the conduct of the business of the Company may
involve business dealings with such other businesses or undertakings.
The Members hereby agree that the creation of the Company and the
assumption by each of the Members of their duties hereunder shall be
without prejudice to their rights (or the rights of their Affiliates)
to have such other interests and activities and to receive and enjoy
profits or compensation therefrom, and except as otherwise expressly
agreed in writing by the Members, each Member waives any rights it
might otherwise have to share or participate in such other interests
or activities of the other Member or its Affiliates. Except as
otherwise expressly agreed in writing by the Members, the Members may
engage in or possess any interest in any other business of any nature
or description independently or with others including, but not limited
to, the ownership, financing, leasing, operation, management or
development of real property which may compete with the business of
the Company, and neither the Company nor the other Member shall have
any right by virtue of this Agreement in and to any such other
business or the income or profits derived therefrom.
Section 3.4 NO INDIVIDUAL AUTHORITY.
Neither Member shall, without the express, prior written consent of
the other Member, take any action for or on behalf of or in the name of the
Company, the Partnership or the other Member, or assume, undertake or enter into
any commitment, debt, duty or obligation binding upon the Company and/or the
Partnership, except for (a) actions expressly provided for in this Agreement,
(b) actions by either Member within the scope of such authority as may have been
granted in this Agreement, and (c) actions Approved by the Members, and any
action taken in violation of the foregoing limitation shall be void. Each Member
shall indemnify and hold harmless the other Member from and against any and all
claims, demands, losses, damages, liabilities, lawsuits and other proceedings,
judgments and awards, and costs and expenses (including, but not limited to,
reasonable attorneys' fees and all court costs) arising directly or indirectly,
in whole or in part, out of any breach of the foregoing provisions by such
Member. This provision shall survive dissolution of the Company.
Section 3.5 RESPONSIBILITY OF MEMBERS.
(a) Except for Project costs previously incurred by a Member
which are reflected in the Development Budget, the Company and each
Member shall not be responsible or liable for any responsibility,
indebtedness, or other obligation of any other Member incurred prior
to, on the date of or after the execution of this Agreement, except
for those which are undertaken or incurred on behalf of the Company
and/or the Partnership after the date of this Agreement under or
pursuant to the terms of this Agreement, or assumed in writing by both
Members, and each Member hereby indemnifies and agrees to hold the
other Member, and the Company and the Partnership harmless from all
such obligations and indebtedness except as aforesaid.
(b) Each Member will notify the other Member as quickly as
reasonably possible upon receipt of any notice, (i) of the filing of
any action in law or in equity naming the Company, the Partnership, or
any Member as a party relating in any way to the business of the
Company or the Partnership; (ii) of any actions to impose liens of any
kind whatsoever or of the imposition of any lien whatsoever against
the Company, the Partnership or their assets, including the Project;
(iii) of any casualty, damage or injury to persons or property on or
related to the Project; or (iv) of the default by the Company of any
of its material obligations to creditors or other third parties. Each
Member will endeavor to notify the other Member verbally promptly upon
learning of any of the foregoing actions, or the threat thereof,
which, in such Member's judgment, is material to the Company or the
other Member.
ARTICLE 4.
TERM OF COMPANY
The existence of the Company commenced on December 23, 1998, the date
upon which the Certificate was duly filed with the Recording Office, and shall
continue until December 31, 2050, or such later date as Approved by the Members
(the "Termination Date"), unless dissolved and liquidated before the Termination
Date in accordance with the provisions of ARTICLE 11.
ARTICLE 5.
CAPITAL
Section 5.1 MEMBERS' INITIAL PERCENTAGE INTERESTS.
The Initial Percentage Interests of the Members for purposes of applying
the provisions of this Agreement are set forth below:
MEMBER INITIAL PERCENTAGE INTERESTS
Simon 50%
Chelsea 50%
The Initial Percentage Interests are subject to adjustment as provided herein.
Section 5.2 CAPITAL CONTRIBUTIONS.
(a) INITIAL CAPITAL CONTRIBUTIONS.
(i) Concurrently with the execution and delivery of this
Agreement, Chelsea has contributed $56,250.00 to the Company
("Chelsea Initial Contribution").
(ii) Concurrently with the execution and delivery of this
Agreement, Simon has contributed $56,250.00 to the Company, which
amount is equal to the Chelsea Initial Contribution (the "Simon
Initial Contribution").
(iii) As set forth in Section 3.1, the Company will be
acting as general of the Partnership which will own the Project.
Pursuant to Section 8.6 hereof and the succeeding paragraphs of
this Section, the Members will review and approve Budget(s) for
the Project. Beyond the initial capital contributions referenced
in this Section, the Members will contribute capital as necessary
to fund the interest of the Company as general partner of the
Partnership in accordance with an Approved Budget as hereinafter
set forth.
(b) PRE-CONSTRUCTION EXPENDITURES.
(i) During the Pre-Construction Period of the Project, the
Members shall contribute cash capital contributions in an amount
sufficient to fund that portion of the Total Project Costs
allocated to the General Partner pursuant to the Partnership
Agreement (the "Company Portion"), which costs are incurred from
time to time in advance of the Construction Period pursuant to an
applicable Pre-Construction Budget which has been Approved by the
Members. Such expenditures, including the net cash equity
investment of any Member in any portion of the Land which is
contributed to the Company by such Member, shall be credited as
cash capital contributions made by the Members to the Company. To
the extent that any Member and its Affiliates have contributed
less than 50% of such predevelopment expenditures, such Member
shall thereafter contribute 100% of necessary costs until the
capital contributions made by and credited to Simon and Chelsea
are equal. Thereafter, such contributions shall be divided among
them pro rata in accordance with their respective Initial
Percentage Interests.
(ii) In no event shall either party be required to
contribute amounts during the Pre-Construction Period in respect
of either (A) any fees which may be payable to either party in
connection with the Project and which are identified in the
Development Budget or (B) any other costs or expenses for which
the Development and/or Leasing Fees are supposed to reimburse the
Members or their Affiliates. Such costs described in subsections
(A) or (B) hereof shall be reimbursed to the appropriate Member
from the initial disbursement of construction financing or from
contributions by the Members pursuant to SECTION 5.2(C) hereof.
(c) CONSTRUCTION PERIOD.
(i) During the Construction Period of the Project, the
Members shall contribute cash capital contributions in the
aggregate to the Company in an amount equal to the Company
Portion of (i) the Total Project Costs incurred from time to
time, less (ii) the amount of any construction financing, public
finance assistance or other financing sources obtained for the
Partnership, or other sources of funds as to which the Members
shall agree, which contributions will be divided among them pro
rata in accordance with their respective Initial Percentage
Interests. The Operating Member may seek third party construction
financing in the amounts and upon the terms and conditions
Approved by the Members, which approval shall not be unreasonably
withheld so long as such terms and conditions are consistent with
the Development Budget. In the event any such construction loan
proceeds are less than the balance of the Total Project Costs,
the Members shall fund the Company Portion of the shortfall by
making additional capital contributions to the Company pro rata
in accordance with their Initial Percentage Interests. All such
amounts contributed to the capital of the Company pursuant to
this Section shall be credited to the Capital Account of each
Member when and as such contributions are made by such Member.
(ii) To the extent that guarantees are required in
connection with any such construction financing, Simon Property
Group, L.P. and/or Simon Property Group, Inc and/or SD Property
Group, Inc. and/or SPG Properties, Inc. ("Simon Group"), and
Chelsea GCA Realty Partnership L.P. and/or Chelsea GCA Realty,
Inc. ("Chelsea Group") or their respective successors shall each
be obligated to provide such guarantees on a several or joint and
several basis in accordance with their respective Initial
Percentage Interests and pursuant to the requirements of the
applicable lender. Should any such obligations be subject to a
joint and several guarantee by the Simon Group and the Chelsea
Group or their Affiliates in connection with the construction
financing for the Project, or otherwise (it being agreed that
neither the Simon Group, the Chelsea Group nor any Member shall
be required to provide a joint and several guaranty without its
prior Approval), the Simon Group and the Chelsea Group or their
respective successors shall each agree to indemnify and hold the
other and its Affiliates harmless from and against any loss,
cost, claim, damage or expense thereunder (including reasonable
attorneys' fees) in excess of one-half (1/2) of the costs so
guaranteed and incurred by both the Simon Group, the Chelsea
Group and/or their respective Affiliates or their respective
successors. If the Simon Group, the Chelsea Group, or an
Affiliate thereof fails to perform under such indemnity, the
Affiliated Member shall be deemed a Non-Funding Member and a
Non-Contributing Member for purposes of this ARTICLE 5.
(d) COMPLETION OF CONSTRUCTION. Upon completion of construction
of the Project, the Members shall seek to obtain third party
non-recourse permanent financing in the amounts and upon the terms and
conditions Approved by the Members, which approval shall not be
unreasonably withheld so long as such terms and conditions are
consistent with the financing assumptions set forth in the Development
Budget. The Members shall be obligated to make additional capital
contributions to the Company pro rata in accordance with their
Percentage Interests in order that the Company's Portion of the Total
Project Costs which is not financed by such permanent financing shall
be funded by equity.
Section 5.3 ADDITIONAL FUNDS.
(a) During the Operating Period of the Project, in the event
additional funds are required to operate the Project in accordance
with expenditures delineated in one or more Budgets or for other
purposes Approved by the Members, the Members hereby agree to provide
on a pro rata basis in accordance with their Percentage Interests
additional capital contributions in the amount necessary to satisfy
the Company's Portion of such obligations. If such additional funds
are necessary, any Member may send a notice thereof to the other
Member setting forth the purposes for which the additional funds are
required and a report stating the amount required as well as the
anticipated cash receipts and obligations for the quarter next
following the date of the notice with the reasons, if ascertainable,
that the available funds of the Company will be insufficient to meet
the obligations for which the additional funds have been requested.
(b) If additional funds are needed for the Company as set forth
in SECTION 5.3(A), each Member shall be obligated to contribute
additional capital to the Company pursuant to the procedure set forth
in SECTION 5.4 below.
Section 5.4 CAPITAL CALLS.
(a) GENERAL. If the Members are required to contribute capital
under this Agreement, the Members shall make capital contributions in
accordance with the provisions herein and in the same percentages as
their respective Initial Percentage Interests and in such amounts
which are sufficient to provide such funds. Chelsea and any Affiliate
Transferee(s) of part of Chelsea's Percentage Interest, on the one
hand, and Simon and any Affiliate Transferee(s) of part of Simon's
Percentage Interest, on the other hand, shall be jointly and severally
liable for making any of their respective required contributions to
the Company under this ARTICLE 5.
(b) NOTICE BY OPERATING MEMBER. If capital contributions are
required to be made pursuant to this ARTICLE 5, notice shall be given
to each Member in the manner provided in SECTION 12.1. Such notice
shall specify in reasonable detail the amount and purpose of any such
capital contributions. Each Member shall, within ten (10) calendar
days (time being of the essence) after the receipt of such notice,
deposit, by wire transfer of immediately available federal funds into
the Company's bank account, the capital contribution specified in the
notice, to be credited to the contributing Member's capital account.
(c) CONSTRUCTION OVERRUNS. Notwithstanding anything to the
contrary set forth herein, excepting, however, the provisions of
Section 8.4, in the event that the aggregate capital contributions for
which notice is given exceed an approved Budget, then, except as
hereinafter set forth in this Section or elsewhere in this Agreement,
neither Member hereto shall have any obligation to fund such excess
unless and until (i) a modification to the Budget covering such excess
is approved by both Members hereto or (ii) pursuant to Section 12.1
hereof an arbitrator or a count having jurisdiction over the Members
and/or the Project determines (after appeals, if any, which have been
appropriately taken, are exhausted) that the excess (and the proposed
modification to the Budget) is reasonable and must be funded.
However, during the Construction Period (and prior to approval of
a modification to Budget by both Members or a decision by an
arbitratoror a count having jurisdiction), the Operating Member may
fund such excess as necessary to permit the Company and/or the
Partnership to pay its debts, meet its obligations when due and
complete construction of the Project. If the parties subsequently
approve a modification to Budget or an arbitrator or court having
jurisdiction over the Members and/or the Project determines that the
excess (and the proposed modification to the Budget) is reasonable and
must be funded, then that portion of the excess which the other Member
and its Affiliate(s) are obligated to contribute (and which the
Operating Partner previously funded) shall be treated as a
Contribution Loan by the Operating Partner to the other Member and as
a Contribution Loan, on a joint and several basis, from the Operating
Partner to any Affiliate of such Member which is a Partner in the
Partnership pursuant to Section 5.4(e) and interest shall accrue from
the date that funds were advanced by the Operating Partner on behalf
of the Company and/or the Partnership, as the case maybe. In addition,
the Operating Partner shall be entitled to all other rights set forth
in Section 5.4(e) or elsewhere in this Agreement with respect to the
making of a Contribution Loan. If it is subsequently determined that
the excess and the proposed modification to Budget is not reasonable,
then the excess funded by the Operating Member shall not be credited
to the Capital Account of such Member and the Operating Member shall
not be entitled to any allocation of Net Profit or distribution of
Cash Flow by virtue of same.
If, during the Operating Period, either Member disputes the need
for any additional capital contributions requested pursuant to this
SECTION 5.4(C), pending the resolution of such dispute the Member
disputing the need for additional capital shall nevertheless
contribute its additional capital within the time period specified in
SECTION 5.4(B) and the Company shall hold the contributions of both
Members in an interest-bearing account, or shall otherwise invest such
contributions as Approved by the Members, separate from other cash
deposits of the Company until such dispute is resolved; provided,
however, that during the Operating Period, the Company shall have the
right to use the Members' contributions to the extent necessary,
subject to the budgetary limitations which are set forth in SECTION
8.9 below, to permit the Company to pay its debts and to meet its
obligations when due. If and to the extent that it is ultimately
determined that such additional capital was not required in whole or
in part, the amount of such capital contributed by each Member that
was determined to be not required, less each Member's proportionate
share (based on such Member's Percentage Interest) of any portion of
the Members' contributed capital which was expended in accordance with
the foregoing, shall be promptly refunded to each Member, together
with a proportionate share of interest, if any, earned thereon while
on deposit with the Company.
(d) DILUTION.
(i) If a Member fails to fund its pro rata share of any capital
contributions and such failure continues for a period of thirty (30)
days (the first such failure by either Member, if uncured, being
hereinafter referred to as an "Initial Uncured Default"), such Member
shall be considered to be a "Non-Funding Member" and the other Member
(the "Funding Member") if it has funded its pro rata share of such
contribution, shall be entitled to fund the Non-Funding Member's share
of such capital contribution. The Percentage Interest of each Member
shall thereupon be recalculated as set forth below. The Funding Member
is hereby constituted and appointed as attorney-in-fact, such
appointment being coupled with an interest, to execute, acknowledge
and deliver all instruments and documents necessary to effect such
recalculation of Percentage Interests as herein provided.
(ii) The recalculation of the Percentage Interests on the
Percentage Interest Adjustment Date shall be done as follows: First,
the total amount of capital contributions made by each Member as of
the Percentage Interest Adjustment Date shall be calculated. Second,
the Non-Funding Member's Percentage Interest shall be reduced, and the
Funding Member's Percentage Interest shall be increased, to reflect
each Member's percentage of the total contributions made by both
Members as of the Percentage Interest Adjustment Date.
(iii)The Adjusted Percentage Interests of the Members shall
be expressed in terms of a decimal rounded to the nearest fourth
digit. An example illustrating the operation of this provision is
attached hereto as EXHIBIT C.
(iv) (1) If due to the operation of this SECTION 5.4(C) a
Non-Funding Member's Initial Percentage Interest is diluted, the
other Member shall have the right and option for a period of 60
days after such dilution occurs to purchase the Non-Funding
Member's interest in the Company at a price equal to the total
amount of cash capital contributions which had been contributed
to the Company by the Non-Funding Member at that point in time,
less the amount of any distributions of Cash Flow or Capital
Proceeds previously made to the Non-Funding Member.
(2) In order to elect to purchase the interest in the
Company of a Non-Funding Member pursuant to this SECTION 5.4(D),
the Funding Member shall send written notice of election to the
Non-Funding Member prior to expiration of such 60-day period. In
the event a Funding Member elects to purchase a Non-Funding
Member's interest, such election pursuant to this SECTION 5.4(D)
shall create a binding contract for the purchase and sale of the
Non-Funding Member's interest in the Company. The closing of such
purchase and sale shall take place at the office where the
principal place of business of the Company is located on the date
specified by the Funding Member in its election notice which date
shall not be less than 20 days nor more than 60 days following
the date of such notice, unless the Members agree to a different
mutually acceptable date. The form and substance of the closing
documents shall be reasonably satisfactory to the Funding Member
and shall consist of an assignment and bill of sale (both with
covenants against grantor's acts) from the Non-Funding Member to
the Funding Member (or its nominee or designee), together with
such other instruments and documents as may be reasonably
necessary or desirable to effectuate the sale. The purchase price
shall be payable by federal wire transfer of immediately
available funds to an account designated by the Non-Funding
Member, against delivery of all the closing documents. At either
Member's request, the Company's bank or the title company which
issued the owner's title policy to the Company may be appointed
as escrow agent to receive all closing documents and the purchase
price in escrow in order to make simultaneous delivery of closing
documents and disbursement of funds at the closing or the next
business day thereafter. The instruments and documents shall be
legally sufficient to convey all of the Non-Funding Member's
interest in the Company (and the Project) to the Funding Member
(or its nominee or designee), free and clear of all deeds of
trust, security interests, liens, charges and encumbrances. The
provisions of this SECTION 5.4(D) shall be enforceable by a
decree of specific performance and neither Member shall assert in
defense thereto that there exists an adequate remedy at law.
(e) CONTRIBUTION LOANS.
(i) If either Member (a "Non-Contributing Member") fails to
make any additional capital contribution within the time
specified in SECTION 5.4(b) and such failure continues for a
period of thirty (30) days after an Initial Uncured Default, the
other Member who makes the requested contribution of additional
capital (the "Contributing Member") shall have the right but not
the obligation to advance directly to the Company the funds
required from the Non-Contributing Member as a loan
("Contribution Loan") to the Non-Contributing Member. If and when
a Contribution Loan is made, the Non-Contributing Member shall be
deemed to have waived the right to make the requested capital
contribution as of the date of such loan. Such Contribution Loan
shall bear interest, compounded annually, at a rate equal to the
Prime Rate plus four (4) percentage points per annum.
Contribution Loans may be prepaid by the Non-Contributing Member
at any time after the date the Contribution Loan is made. If not
repaid by the Non-Contributing Member, the Contribution Loan
shall be repaid pursuant to SECTION 5.4(F) or other applicable
provisions of this Agreement, but otherwise shall be and remain a
recourse obligation of the Non-Contributing Member.
(ii) If the Contributing Member does not elect to advance
the full amount of the additional funds required from the
Non-Contributing Member, the Contributing Member may withdraw its
additional capital contribution.
(iii)Notwithstanding any other provision of this Agreement
to the contrary, if as of the date which is one hundred eighty
(180) days after the making of a Contribution Loan, such
Contribution Loan shall not have been paid in full, the
Contributing Member shall have the right for a period of sixty
(60) days to have such Contribution Loan (or the portion thereof
remaining unpaid) converted on the books of the Company to a
capital contribution by the Contributing Member, in which event
the Percentage Interest of the Non-Contributing Member shall be
adjusted and recalculated in accordance with SECTION 5.4(D) of
this Agreement, and the Contributing Member shall be entitled to
exercise all rights and remedies thereunder, including without
limitation the purchase option described in SECTION 5.4(D)(IV).
In order to elect to convert a Contribution Loan to a capital
contribution pursuant to this SECTION 5.4(E)(III), the
Contributing Member shall send written notice of election to the
Non-Contributing Member prior to the expiration of such 60-day
period.
(iv) The rights set forth in this SECTION 5.4(E) are in lieu
of the exercise of rights set forth in SECTION 5.4(D) and may not
be exercised in addition to such rights.
(f) REPAYMENT THROUGH DISTRIBUTIONS. A Contribution Loan shall be
repaid on a first priority basis out of any subsequent distributions
to which the Non-Contributing Member for whose account the
Contribution Loan was made would otherwise be entitled in accordance
with this Agreement, which amounts shall be applied first to accrued
interest and then to principal, until the Contribution Loan is paid in
full. Each Non-Contributing Member irrevocably assigns its rights to
distributions from the Company to the Contributing Member for the
purpose of effectuating this repayment. Repayment of either Member's
Contribution Loan shall also be secured by the Non-Contributing
Member's Percentage Interest in the Company, and the Non-Contributing
Member hereby grants a security interest in such Percentage Interest
and all distributions related thereto to the Contributing Member who
has advanced such Contribution Loan and hereby irrevocably appoints
the Contributing Member, and any of its agents, officers or employees,
as its attorney-in-fact, such appointment being coupled with an
interest, to execute, acknowledge and deliver any documents,
instruments and agreements including, but not limited to, any note
evidencing the Contribution Loan, and such Uniform Commercial Code
financing statements, continuation statements, and other security
instruments or documents as may be appropriate to perfect and continue
such security interest in favor of the Contributing Member.
(g) TRANSFEREES AND ASSIGNEES. If there shall be a Transfer of
part of the Percentage Interest of either Member pursuant to ARTICLE
10 below to an Affiliate of such Member, all of the calculations
necessary at any time or from time to time under this SECTION 5.4
shall be made without regard to any such partial Transfer. Any
dilution of the Percentage Interest of either Member pursuant to this
SECTION 5.4 shall be made effective against the aggregate Percentage
Interest of the Transferor and any Affiliate Transferee of which the
Company has been notified or, failing any such agreement, or notice
thereof, as the Funding Member, acting on behalf of the Company, may
elect. It is the intent and agreement of the Members that all of the
rights and obligations hereunder, including without limitation
participation in management, rights to give or receive notices and
contribution obligations, and the various consequences arising from
the failure of a Member to make a required capital contribution to the
Company hereunder are to be interpreted and applied as if Chelsea and
any Chelsea Affiliate that owns a part of its Percentage Interest, on
the one hand, and Simon and any Simon Affiliate that owns a part of
its Percentage Interest, on the other, is a single entity having a
Percentage Interest in an amount equal to the aggregate Percentage
Interests owned by such Member and its respective Transferees.
(h) NO THIRD PARTY RIGHTS. The right of the Company or the
Members to require any additional contributions under the terms of
this Agreement shall not be construed as conferring any rights or
benefits to or upon any party not a party to this Agreement including,
but not limited to, any tenant of any part of the Project, or the
holder of any obligations secured by a deed of trust or other lien or
encumbrance upon or affecting the Company, any Percentage Interest, or
the Project, or any part thereof or interest therein, or any other
creditor of the Company.
(i) ROLE IN MANAGEMENT. Notwithstanding any other provision of
this Agreement to the contrary, including without limitation ARTICLE 8
hereof, a Non-Funding Member or Non-Contributing Member (hereinafter,
a "Defaulting Member") shall thereafter have no further approval
rights, right to make decisions or role in management of the Company
or the Partnership until such funding or contribution default has been
cured. For the purpose of this paragraph if an Affiliate of a Member
has failed to satisfy its funding obligations under the Partnership
Agreement, then such Member shall also be deemed a Defaulting Member.
Without limitation of the foregoing, in such event (i) if the
Defaulting Member is the Operating Member, the other Member (the
"Non-Defaulting Member") shall have the right to remove the Defaulting
Member as the Operating Member (and to become the Operating Member
itself) in accordance with SECTION 8.9 hereof and to terminate the
Management Agreement and Development Agreement with any Affiliate of
the Defaulting Member in accordance with SECTION 8.11(A) and SECTION
8.12(a), (ii) the Non-Defaulting Member shall have the right to apply
any fees payable to the Defaulting Member or its Affiliate in
accordance with this Agreement to any amounts owed by the Defaulting
Member, (iii) the Non-Defaulting Member shall have the right to make
all decisions of the Company and the Members, and (iv) no Defaulting
Member shall have the right to initiate the buy-sell procedure
pursuant to SECTION 10.6hereof.
(j) FAILURE TO FUND UNDER PARTNERSHIP AGREEMENT. Notwithstanding
anything to the contrary set forth in this Section, in the event that an
Affiliate of either Member fails to make a required capital contribution under
the Partnership Agreement and is deemed a Defaulting Partner, then such Member
shall be deemed a "Defaulting Member" hereunder, to the same extent as if such
Member had failed to fund a Capital Contribution required of it hereunder, and
the other Member shall be entitled to exercise the rights and remedies set forth
in Section 5.4 hereof. Similarly, in the event that either Member fails to make
a required capital contribution under this Agreement and is deemed a Defaulting
Member, then any Affiliate of such Member which is a Partner in the Partnership
shall be deemed a Defaulting Partner under the Partnership Agreement to the same
extent as if such Partner had failed to fund a capital contribution required of
it thereunder and the other Partner(s) shall be entitled to exercise all
applicable rights and remedies set forth in Section 6.4 of the Partnership
Agreement.
Section 5.5 NO INTEREST ON CAPITAL.
Interest earned on Company funds shall inure solely to the benefit of
the Company, and except as specifically provided herein above, no interest shall
be paid upon any contributions or advances to the capital of the Company nor
upon any undistributed or reinvested income or profits of the Company.
Section 5.6 REDUCTION OF CAPITAL ACCOUNTS.
Any distribution to a Member, whether pursuant to SECTIONS 6.5 or 6.6
or any other Section of this Agreement, shall reduce the amount of such Member's
Capital Account in accordance with SECTION 2.A. of the Tax Allocations Exhibit,
but no adjustment in the Percentage Interest of any Member shall be made on
account of any such distribution, except as otherwise specifically provided in
this Agreement.
Section 5.7 NEGATIVE CAPITAL ACCOUNTS.
Any Member having a deficit or negative balance in its Capital Account
shall not be required to restore such deficit capital amount or otherwise to
contribute capital to the Company to restore its Capital Account.
Section 5.8 LIMIT ON CONTRIBUTIONS AND OBLIGATIONS OF MEMBERS.
Except as expressly provided in SECTIONS 5.2, 5.3(A) and 5.4 hereof
and this SECTION 5.8, the Members shall have no liability or obligation to the
Company or to the other Members (i) to make additional capital contributions to
the Company, (ii) to make any loans to the Company or (iii) to endorse or
guarantee the payment of any loan to the Company. Each Member shall be
personally liable to the other Members (but not to any third parties) for its
pro rata share of the Company liabilities (such share to be determined as of the
time the liabilities are incurred) based on its Initial Percentage Interest in
the Company.
<PAGE>
ARTICLE 6.
PROFITS, LOSSES, DISTRIBUTIONS, AND ALLOCATIONS
Section 6.1 NET PROFIT.
All Net Profit of the Company for each Fiscal Year shall be allocated
to the Members as follows:
(a) First, to each Member until the cumulative Net Profit
allocated to each Member pursuant to this clause (a) is equal to the
cumulative Net Loss allocated to such Member pursuant to clause (b) of
SECTION 6.2 and SECTION 6.3 (such Net Profits to be allocated first
with respect to Net Loss allocated pursuant to SECTION 6.3 and
thereafter in reverse chronological order of the allocation of the Net
Loss which has not been previously offset by an allocation under this
SECTION 6.1(A)); and
(b) Thereafter, among the Members in accordance with their
respective Percentage Interests.
Section 6.2 NET LOSS.
After giving effect to the special allocations set forth in EXHIBIT B, all
Net Loss of the Company for each Fiscal Year shall be allocated to the Members
as follows:
(a) First, to each Member until the cumulative Net Loss allocated
to each Member pursuant to this clause (i) is equal to the cumulative
Net Profit allocated to such Member pursuant to clause (ii) of SECTION
6.1 (such Net Loss to be allocated in reverse chronological order of
the allocation of the Net Profit which has not been previously offset
by an allocation under this SECTION 6.2(A));
(b) Second, to each Member in accordance with their respective
positive Adjusted Capital Account balances until such balances are
reduced to zero; and
(c) Thereafter, among the Members in accordance with their
respective Percentage Interests.
Section 6.3 LIMITATION ON NET LOSS ALLOCATION.
Notwithstanding any provision of this Agreement to the contrary, in no
event shall Net Loss be allocated to a Member if such allocation would result in
such Member's having a negative Adjusted Capital Account Balance at the end of
any Fiscal Year. All Net Loss in excess of the limitation set forth in this
SECTION 6.3 shall be allocated to any remaining Member with a positive Adjusted
Capital Account, and if all such Adjusted Capital Account balances are zero or
negative to the Members under SECTION 6.2(C).
Section 6.4 OTHER ALLOCATION RULES.
Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of the Partnership within the meaning of
Regulations Section 1.752-3(a)(3), the Members' interests in the Net Profits of
the Company are the same as the Members' Percentage Interests.
Section 6.5 DISTRIBUTION OF CASH FLOW.
Except as provided in SECTION 11.2(D), the Company shall distribute
Cash Flow to the Members as and when Approved by the Members, not less
frequently than quarterly, in the following order of priority:
(a) First, to pay any accrued but unpaid interest on, and then to
pay the unpaid principal balance, if any, of any and all loans made by
any Member to the Company in accordance with this Agreement, provided,
however, that any Contribution Loans shall not be regarded as loans to
the Company and shall be repaid on a first priority basis out of any
Cash Flow to which the Non-Contributing Member for whose account the
Contribution Loan was made would otherwise be entitled to in
accordance with SECTION 6.5(B) of this Agreement, which amounts shall
be applied first to accrued interest and then to principal, until the
Contribution Loan is paid in full; and
(b) Second, to the Members in accordance with their respective
Percentage Interests.
Section 6.6 DISTRIBUTION OF CAPITAL PROCEEDS.
Except as provided in SECTION 11.2(D), the Company shall distribute to
the Members Capital Proceeds received by the Company within thirty (30) calendar
days after receipt (but not prior to the Percentage Interest Adjustment Date) in
the following order of priority:
(a) First, to pay any accrued but unpaid interest on, and then to
pay the unpaid principal balance, if any, of any and all loans made by
any Member to the Company in accordance with this Agreement, provided,
however, that any Contribution Loans shall not be regarded as loans to
the Company and shall be repaid on a first priority basis out of any
Capital Proceeds to which the Non-Contributing Member for whose
account the Contribution Loan was made would otherwise be entitled to
in accordance with SECTIONS 6.6(B) through 6.6(D) of this Agreement,
which amounts shall be applied first to accrued interest and then to
principal, until the Contribution Loan is paid in full;
(b) Second, to the Members in repayment of their respective
Capital Contribution Balances, in accordance with their respective
Percentage Interests; and
(c) Third, to the Members in accordance with their respective
Percentage Interests.
ARTICLE 7.
COMPANY BOOKS; ACCOUNTING/FINANCIAL STATEMENTS
Section 7.1 BOOKS AND RECORDS.
The Company shall keep books and records at the Company's principal
place of business which are usually maintained by persons engaged in similar
businesses, in form and substance Approved by the Members and setting forth a
true, accurate and complete account of the Company's business and affairs
including a fair presentation of all income, expenditures, assets and
liabilities thereof. Such books and records shall be maintained, and its income,
gain, losses and deductions shall be determined and accounted for on the accrual
basis in accordance with generally accepted accounting principles consistently
applied. Each Member and its authorized representatives shall have the right at
all reasonable times to have access to, inspect, audit and copy the Company's
books, records, files, securities, vouchers, canceled checks, employment
records, bank statements, bank deposit slips, bank reconciliations, cash
receipts and disbursement records, and other documents (the "Documents"). Each
Member and its authorized representatives shall also have the right, in
connection with an examination and audit of the Documents, to question during
normal business hours, upon at least ten (10) days notice, the employees, if
any, of the Company and to question any other Person and the employees of such
other Person having custody or control of any Documents, or responsibility for
preparing the same. The Documents shall also be open for inspection during
normal business hours, upon at least ten (10) days notice, by the legal or
accounting representatives of a Withdrawing Member or any Member to the extent
necessary and relevant to such Member's withdrawal from the Company and the
winding up of such Member's affairs with the Company. Each Member shall be
entitled to any additional information necessary for the Member to adjust its
financial basis statement to a tax basis as the Member's individual needs may
dictate.
Section 7.2 TAX RETURNS.
The Independent Accountants shall either prepare or review and sign,
as requested by the Members, the federal, state and local income tax returns of
the Company, and the Company shall use its reasonable efforts to cause the
Independent Accountants to either prepare or review and sign such tax returns by
March 31 of each year, and cause such tax returns to be filed on a timely basis
with the appropriate governmental authorities. In all events, should tax returns
not be filed by March 31, good faith estimates of the information to be provided
in such tax returns shall be provided to each Member no later than March 31 of
each year. Copies of each such return shall be furnished for review and Approval
by the Members prior to filing.
Section 7.3 REPORTS.
(a) During the Pre-Construction Period and the Construction Period
the Company shall cause to be prepared and sent to each Member such
reports as may be required pursuant to the Development Agreement.
(b) During the Operating Period, the Company shall cause to be
prepared and sent to each Member, by the Member designated to undertake
such task on behalf of the Company, the following unaudited statements and
reports:
(i) within fifteen (15) calendar days after the last day of
each calendar month during the term of the Company's existence, a
statement of income and expense (x) showing the actual results of
the operations of the Company for the calendar month then ended
and cumulatively to date for the then elapsed portion of the
current Fiscal Year and (y) comparing on an itemized basis, all
costs and expenses incurred during such month and for such Fiscal
Year with the Budgets for such month and such Fiscal Year, with a
narrative explanation of any variations to such Budgets; and
(ii) within fifteen (15) calendar days after the last day of
each calendar month during the Term, a balance sheet showing the
financial position of the Company as of such last day; and
(iii)such other reports as any Member may reasonably request
from time to time.
(c) Each monthly report furnished to the Members by such
designated Member shall also state, to the best knowledge of such
designated Member, whether any default exists with respect to any
material obligation of the Company and whether any material litigation
is pending against the Company or the Project. Such designated Member
shall, upon obtaining knowledge of the occurrence of any event which,
if not cured or resolved, would be required by the preceding sentence
to be described in the next monthly report to be furnished pursuant to
this SECTION 7.3(B), promptly notify each Member of such occurrence.
Section 7.4 AUDITS.
After the end of each Fiscal Year the Operating Member shall cause an
audit to be made by the Independent Accountants covering the assets, liabilities
and net worth of the Company and its operations during such Fiscal Year, and all
other matters customarily included in such audits. By February 20 of each Fiscal
Year, the Operating Member shall deliver, or cause to be delivered to each
Member the following financial statements with respect to the Company: a balance
sheet and statements of income and expense, changes in the financial position of
the Company, and the Members' capital position as of the end of and for the
prior Fiscal Year, together with, if requested or required pursuant to the
preceding sentence of this SECTION 7.4, the report of the Independent
Accountants covering the results of such audit and certifying such financial
statements as having been prepared in accordance with generally accepted
accounting principles consistently applied.
Section 7.5 BANK ACCOUNTS.
All funds of the Company shall be deposited in its name in an account
or accounts maintained with a financial institution Approved by the Members.
Funds of the Company shall not be commingled with funds of any other Person.
Checks shall be drawn upon the Company account or accounts only for the purposes
of the Company and shall be signed by either Member or by its duly authorized
representative, provided, however, that funds shall only be spent pursuant to
applicable Budgets which have been Approved by the Members or otherwise pursuant
to Section 8.4, 8.9(b)(iii), and the emergency authority granted to a Member
pursuant to SECTION 8.7 of this Agreement.
Section 7.6 TAX ELECTIONS.
If there is a distribution of any property of the Company within the
meaning of Section 734 of the Code, or if there is a Transfer of an interest in
the Company within the meaning of Section 743 of the Code, then with the
Approval of the Members the Company shall cause to be filed an election under
Section 754 of the Code to provide for an optional adjustment to the basis of
the property or Company interest as appropriate.
Section 7.7 TAX MATTERS MEMBER.
Pursuant to Section 6231(a)(7)(A) of the Code, the Members hereby
designate Chelsea as the Company's "Tax Matters Partner."
ARTICLE 8.
MANAGEMENT OF THE COMPANY
Section 8.1 MANAGEMENT OF THE COMPANY.
(a) GENERAL. The overall management and control of the business
and affairs of the Company (and correspondingly of the Partnership)
shall be vested in the Members. The Members may, by written
resolution, except for those matters specifically required to be
Approved by the Members, delegate to one of the Members (hereinafter
called the "Operating Member") the authority to manage and administer
the affairs of the Company and the Partnership. Upon such delegation
and until the same shall have been revoked by the Members or the
Member to which such delegation was made shall become a Defaulting
Member or a Non-Contributing Member, all decisions with respect to the
management of the Company and/or the Partnership that are approved by
the Operating Member shall be binding on the Company, the Partnership
and the Non-Operating Member, except as otherwise provided in this
Agreement. At such time as a delegation hereunder shall have been made
and so long as it remains outstanding, all actions provided hereunder
to be taken by the Company either individually or in its capacity as
General Partner of the Partnership, shall be carried out by the
Operating Member.
(b) MEMBER REPRESENTATIVES. The Members shall, by written
resolution, each designate in writing from time to time its
representative for purposes of all actions, approvals and decisions
under this Agreement, plus an alternate. Each representative shall be
fully authorized to provide, on behalf of the Member which he or she
represents, any consent or approval which may be required hereunder,
and any action or decision so taken by a representative shall be
binding upon the Member which he or she represents. Each Member may
change its authorized representative or alternate at any time by
written notice to the other Member.
(c) ACTIONS BY THE MEMBERS.
(i) Either Member may initiate a request that the Members
approve any matter or take any other action respecting the
business and affairs of the Company and/or the Partnership which
is required for Approval by the Members pursuant to this
Agreement. Any such request may be made at a regularly scheduled
meeting of the Members or in writing. Any written request must be
labeled "REQUEST FOR ACTION BY MEMBERS" and must include a
narrative explanation of the approval or action which is being
requested. If pursuant to such a request the Member desires to
schedule a special meeting of the Members, such request must be
received by the other Member at least ten (10) calendar days
prior to the proposed date for such special meeting. Conversely,
a Member receiving a request for Approval or action by the
Members which does not request that a special meeting be held may
then request a special meeting by written notice to the other
Member which must be received at least five (5) calendar days
before the date proposed for such special meeting. Each Member
shall use its best efforts to comply with a request by the other
Member that a special meeting of the Members be held.
(ii) If there is a need for any Approval or action by the
Members and no special meeting therefor is requested by either
Member, the representatives of the Members shall use their best
efforts to respond within ten (10) business days after the date
the representatives are notified of the need for such Approval or
other action either in writing or at a regularly scheduled
meeting of the Members. If a representative has not responded
within said ten (10) business day period or if a special meeting
has been properly requested with respect to such proposed
Approval or other action but has not been held within ten (10)
days after the date requested for such special meeting, then the
Member requesting such Approval or other action may at any time
thereafter notify the other Member that failure of such other
Member's representative to respond within ten (10) business days
after such notice shall be deemed to be Approval by such other
Member of the matter or action requested. Such notice must be
labeled "FAILURE TO ACT BY MEMBER REPRESENTATIVE" and must
include a narrative explanation of the Approval or action which
is being requested. If the other Member's representative fails to
respond within said ten (10) business day period, such matter or
action requested shall be deemed Approved.
(iii)In order for the other Member's representative to be
deemed to have responded, the representative must affirmatively
agree to the Approval or other action (or have failed to respond
within the time frame identified in subparagraph (ii)), or deny
same. If the other Member's representative denies the Approval or
other action, he must specify his reasons for doing so and
suggest an alternative to the Approval or action in question. In
such event, the time frames and sequence of events previously
specified in subparagraph (ii) of this Section shall apply. The
Member who initiated the request for Approval or other action
shall have ten (10) business days within which to respond to the
counterproposal. If the Member has not responded within said ten
(10) business day period, then the Member suggesting the
alternative may notify the other Member that failure to respond
shall be deemed Approval, in accordance with the procedure
previously set forth. If the parties are unable to agree on the
Approval or other action after following the sequence outlined,
then each Member shall have the right to pursue any rights or
remedies that may be set forth herein or available at law or in
equity.
(d) MEETINGS. Regular meetings of the Members shall be held at
the Company's principal place of business or at such other place as
shall be Approved by the Members and at intervals as may be Approved
by the Members, but not less than once each calendar quarter. Dates,
times and places of such regular meetings shall be Approved by the
Members. No meeting of the Members shall be held unless each Member is
represented. Both regular and special meetings may be held by means of
a conference telephone or similar equipment if all persons
participating in the meeting can hear each other at the same time.
Section 8.2 THE OPERATING MEMBER.
(a) The Members shall by written resolution from time to time
designate one of the Members as the Operating Member of the Company.
Such designated Member shall continue to serve as the Operating Member
until (i) the Members mutually agree that such designated Member shall
cease to serve as the Operating Member; (ii) the Company is dissolved
and wound up in accordance with the provisions of ARTICLE 11 hereof;
or (iii) such designated Member is removed as Operating Member
pursuant to SECTION 8.10 below. Upon the removal of such designated
Member as the Operating Member in accordance with the foregoing, the
other Member shall automatically become the Operating Member of the
Company. Subject to the provisions of SECTIONS 8.4, 8.5, and 8.6 of
this Agreement, but notwithstanding delegation of certain obligations
and responsibilities by the Operating Member pursuant to SECTION
8.2(B) below, the operation of the Company and the Partnership and
management of the Company's and the Partnership's business and affairs
shall rest with and remain the obligation and responsibility of the
Operating Member, subject to such further limitations as may be set
forth in the resolution designating such Operating Member.
(b) Without limiting the generality of the foregoing, AND SUBJECT
TO THE PROVISIONS OF SECTIONS 8.4 AND 8.6 HEREINBELOW, the Operating
Member shall have the following rights and powers, subject to the
terms, conditions, restrictions and limitations of this Agreement and
shall devote such time to the performance of said rights and services
as may be necessary, which it may exercise at the cost, expense and
risk of the Company:
(i) To protect and preserve the assets of the Company, and
the Partnership and to incur liabilities (other than for borrowed
money) in the ordinary course of business of the Company and the
Partnership consistent with the Budgets for the Project which
have been Approved by the Members;
(ii) To collect all rentals and all other income accruing to
the Company and/or the Partnership and to pay all construction
costs and expenses of operations consistent with the Budgets
which have been Approved by the Members and as otherwise set
forth herein;
(iii)With the Approval of the Members, to prepare (or have
prepared) and file all tax returns for and on behalf of the
Company and the Partnership (but not the tax returns or other
reports of the individual Members);
(iv) To administer all matters pertaining to insurance with
respect to the Project, including obtaining and paying for
policies of insurance insuring against (1) loss or damage by
fire, windstorm, tornado and hail, and against loss or damage by
such other, further and additional risks as now are or hereafter
may be embraced by the standard extended coverage forms of
endorsements, as may be required by the Company's lenders and
Approved by the Members, and consistent with the Budgets Approved
by the Members; and (2) liability to the public, tenants or any
other person and risk to its properties incident to the operation
of the Project in such amounts and upon such terms as are
customary for the protection against such risks of liability and
loss and Approved by the Members, and consistent with the Budgets
Approved by the Members;
(v) Subject to the applicable Budgets which have been
Approved by the Members, to employ, terminate the engagement of,
supervise and compensate such persons, firms or corporations for
and in connection with the business of the Company and the
Partnership as it may reasonably deem necessary or desirable;
(vi) Subject to the applicable Budgets which have been
Approved by the Members, to repair and replace all fixtures and
equipment situated on or constituting a part of the Project (and
in connection therewith the Operating Member will consider using
the bundled services contracts available through Simon, subject,
however, to such contracts complying with the conditions set
forth in the Management Agreement);
(vii)Subject to the applicable Budgets which have been
Approved by the Members, to acquire such tangible personal
property and intangible personal property as may be necessary or
desirable to carry on the business of the Company and the
Partnership and sell, exchange or otherwise dispose of such
personal properties in the ordinary course of business;
(viii) To keep all books of account and other records of the
Company and the Partnership ;
(ix) To negotiate and contract with all utility companies
servicing the Project (and in connection therewith the Operating
Member will consider using the bundled services contracts
available through Simon, subject, however, to such contracts
complying with the conditions set forth in the Management
Agreement);
(x) To pay all debts and other obligations of the Company,
and/or the Partnership including amounts due under the financing
and other loans to the Company and/or the Partnership and costs
of formation of the Company and the Partnership and, subject to
the applicable Budget which has been Approved by the Members, of
ownership, improvement, operation and maintenance of the Project;
(xi) To pay all taxes, levies, assessments, rents and other
impositions applicable to the Company and/or the Partnership,
paying same before delinquency and prior to the addition thereto
of interest or penalties and undertake when appropriate and
subject to Approval of the Members any action or proceeding
seeking to reduce such taxes, assessments, rents or other
impositions;
(xii)To deposit all monies received by the Operating Member
for or on behalf of the Company and/or the Partnership in such
financial institutions as may be Approved by the Members, to
invest any excess funds and to disburse and pay all funds on
deposit on behalf of and in the name of the Company and/or the
Partnership in such amounts and at such times as the same are
required in connection with the ownership, maintenance and
operation of the Project;
(xiii) Subject to the Approval of the other Member, to
negotiate financing terms for the Project; and
(xiv) To lease portions of the Project pursuant to the
leasing guidelines established from time to time by the Members
as part of a Budget which has been Approved by the Members and on
the form lease, or such variations(s) thereto, which has been
Approved by the Members.
(c) Documents to which the Company is a party shall be executed
and performed on behalf of the Company, acting in its individual
capacity or as general partner of the Partnership by all of the
Members or by the Operating Member, or by the Non-Operating Member,
where the Members or this Agreement give the Operating Member or the
Non-Operating Member, as the case may be, the right to do so. No
person, firm, partnership, corporation or other entity shall be
required to inquire into the authority of the Members or a Member to
execute and perform any document on behalf of the Companyacting in its
individual capacity or as general partner of the Partnership. Except
as otherwise expressly provided in this Agreement, no Member or
representative thereof shall have the authority or right to bind or
act for the Company or any of the other Members.
(d) The Operating Member shall devote itself to the business and
purposes of the Company and the Partnership, as set forth in SECTION
3.1 above, to the extent reasonably necessary for the efficient
carrying on thereof, without compensation except as otherwise provided
herein. Whenever requested by the Non-Operating Member, the Operating
Member shall render a just and faithful account of all dealings and
transactions relating to the business of the Company and the
Partnership. The acts of the Operating Member shall bind the Company
and the Partnership when within the scope of the Operating Member's
authority expressly granted unless expressly prohibited hereunder.
Section 8.3 DUTIES OF OPERATING MEMBER; CHELSEA AS INITIAL OPERATING MEMBER.
The Operating Member, at the expense of and on behalf of the Company,
and the Partnership shall implement or cause to be implemented all decisions
Approved by the Members and delegated to the Operating Member by the Members,
and shall conduct or cause to be conducted the management of the business and
affairs of the Company and the Partnership in accordance with and as limited by
this Agreement. Chelsea is hereby appointed as the Operating Member of the
Company to implement all decisions Approved by the Members and shall have
primary responsibility for the development, leasing and management of the
Project.
Section 8.4 AUTHORIZATION FOR EXPENDITURES.
Except for expenditures made and obligations incurred pursuant to a
Budget, as revised or exceeded pursuant to Section 5.4 (c), SECTION 8.7 or
8.9(B)(III), the Operating Member shall not make any expenditure or incur any
obligation on behalf of the Company or the Partnership unless previously
Approved by the Members, provided that the Operating Member shall have the
right, without the prior Approval of the Members, to make expenditures and incur
obligations not authorized by a Budget (i) to the extent necessary to pay
utilities, taxes, and insurance premiums to the extent such charges exceed the
amounts budgeted therefor in the applicable Budget, (ii) to pay for other
non-capital expenditures in an amount up to 10% or cumulative expenditures of
$25,000 (whichever is less) in excess of the amount authorized under the
Applicable Budget for such expenditures or (iii) to pay for annual capital
expenditures of up to $50,000 in the aggregate for items not contemplated in, or
in excess of amounts reserved for certain line items in, the applicable Budget.
The Operating Member will be reimbursed for out-of-pocket expenses incurred on
behalf of the Company and/or the Partnership in accordance with an Approved
Budget. The Operating Member may from time to time seek broader fiscal authority
from the Members when it is appropriate to do so in connection with the
performance of its duties hereunder. In any event, the Operating Member shall
not expend more than the amount the Operating Member in good faith believes to
be the fair and reasonable market value at the time and place of contracting for
any goods purchased or services engaged on behalf of the Company and/or the
Partnership , and shall, upon request, provide the other Member with reasonable
documentation evidencing such expenditures.
Section 8.5 RIGHTS NOT ASSIGNABLE.
Except as provided in SECTION 10.2(A) or 10.2(B), the rights and
obligations of the Operating Member qua Operating Member under this Agreement
shall not be assignable voluntarily or by operation of law by the Operating
Member without the express prior written Approval of the Members, and any
attempted assignment without such Approval shall be void.
Section 8.6 MAJOR DECISIONS AND PROHIBITED ACTS.
All Major Decisions with respect to the Company's (and the
Partnership's) business and operations shall require the Approval of the
Members. As used herein, the term "Major Decisions" shall mean the following
decisions regarding the acquisition, development, ownership, management, leasing
and operation of the Project, except those matters expressly delegated to the
Operating Member and/or its Affiliate pursuant to the terms of this Agreement,
the Development Agreement and/or the Management Agreement. Accordingly, if a
decision is identified as a Major Decision, neither Member shall have the right
or the power to make any commitment or engage in any undertaking on behalf of
the Company, acting in its individual capacity or as general partner of the
Partnership with respect to a Major Decision unless and until the same has been
authorized by Approval of the Members. Without the Approval of the Members with
respect to SECTIONS 8.6(A) through 8.6(U) below, neither Member shall cause the
Company acting in its individual capacity or as general partner of the
Partnership to:
(a) Commit to acquire any additional real property or interest in
any real property other than the Land or access thereto;
(b) Commit to borrow any funds on behalf of the Company or the
Partnership other than (i) the Construction/Term Loan, (ii) from a
Member as set forth in this Agreement, or (iii) from a Third Party
Lender as set forth in Section 5.2 of this Agreement.
(c) Sell the Project or any part thereof or interest therein
except as provided in the Right of First Refusal provision set forth
in Section 10.3 or the Buy-Sell provision set forth in Section 10.6
hereof;
(d) Mortgage the Land and the Company's or the Partnership's
interest in the Project (except in connection with the
Construction/Term Loan or any Third Party Loan, and any extensions,
modifications, renewals or replacements thereof);
(e) Approve any Budget or any amendment or supplement thereto
prepared on behalf of the Company or the Partnership;
(f) Terminate or cause the termination of any lease for space at
the Project, unless the tenant under such lease is in default, or
execute or cause the execution of any lease, sublease, assignment of
lease, extension of lease, extension of sublease, amendment of lease
or sublease, of the Project, unless such lease, sublease, assignment,
extension or amendment to be executed is (a) within the leasing
guidelines established from time to time by the Members with respect
to the Project as part of an Approved Budget for the Project, (b) in
the case of a lease or license, on the form lease (or form license
agreement) with such variation(s) thereto as approved by the Members
from time to time for such Project, and (x) with a tenant whose
tenancy will be compatible with the overall Project, (d) for 10,100 or
less square feet, and (y) does not violate the provisions of any other
lease of the Project;
(g) Enter into any transaction or agreement with any Affiliate of
the Members except the Management Agreement with the Operating Member
and the Development Agreement with the Operating Member or as provided
in any Approved Budget or as otherwise provided in this Agreement;
(h) Incur any expenses on behalf of the Company or the
Partnership not specifically authorized in this Agreement or in any
Approved Budget;
(i) Amend or otherwise modify this Agreement;
(j) Partition any of the assets of the Company or the
Partnership;
(k) Admit any additional or substitute Member of the Company or
the Partnership;
(l) Sell all or any part of any interest in the Company or the
Partnership, except as specifically authorized by this Agreement;
(m) Except as specifically authorized by this Agreement, select
any successor managing agent to the Operating Member. It is
acknowledged by the Members that, except as specifically authorized by
this Agreement, the Operating Member shall continue to be the managing
agent of the Project so long as Operating Member is a Member in the
Company and owns or has an interest in the Project unless any
management agreement with the Operating Member terminates pursuant to
the provisions thereof, other than by reason of the passage of time.
(n) Settle a condemnation case or insured casualty loss involving
more than One Million Dollars ($1,000,000) and/or decide to
reconstruct the Project in such case;
(o) Select or terminate any Accountant for the Company or the
Partnership; provided, however, in the event the Members cannot agree
on the selection of an Accountant within thirty (30) days after the
receipt of proposals from proposed Accountants, the Operating Member
shall have the sole right to select the Accountant. The Members hereby
designate Ernst & Young as the Accountants for the Company and the
Partnership to serve until such time as the Members shall determine
otherwise;
(p) Amend or terminate the Development Agreement or the
Management Agreement except as expressly authorized in this Agreement;
(q) Approve or enter into (except as permitted in the Development
Agreement) any contracts for the construction or development of the
Project. Specifically, the Approval of both Members shall be required
for contracts, which are with the architect for the Project, any
engineer for the Project, the general contractor of the Project or
which would, individually, impose an aggregate liability on the
Company in excess of $1,000,000.00.
(r) Approve: (i) the site plan and/or schematic building drawings
for the Project which shall be submitted by the Operating Member to
the other Member as part of the Final Project Program; or (ii) the
design development drawings for the Project.
(s) Enter into or modify any redevelopment agreement, or other
documents related to any tax increment financing available for the
benefit of the Company, the Partnership or Project;
(t) Modify, cancel, terminate or enter into any new or modified
property or liability insurance for the Project, the Partnership or
the Company, except as provided in the Budget Approved by the Members;
or
(u) File a petition in bankruptcy or for reorganization or for
the appointment of a receiver, custodian or trustee of all or a
portion of the Company's or the Partnership's property, or an
assignment for the benefit of creditors.
The Members must be reasonable in approving or refusing to approve any
Major Decision.
Section 8.7 EMERGENCY AUTHORITY.
Notwithstanding the provisions of SECTIONS 8.4 or 8.6 hereof, the
Operating Member shall have the right to take such actions and make such
emergency expenditures as it, in its reasonable judgment, deems necessary for
the protection of life or health or the preservation of Company and/or the
Partnership assets if, under the circumstances, in the good faith estimation of
the Operating Member, there is insufficient time to allow the Operating Member
to obtain the Approval of the Members to such action, a good faith attempt has
been made to contact the other Member and any delay would materially increase
the risk to life or health or materially increase the magnitude or likelihood of
property damage or other potential loss involved; provided, however, that the
Operating Member shall notify the other Member of such action contemporaneously
therewith or as soon as reasonably practicable thereafter.
Section 8.8 AUTHORIZED ACTS.
No Member shall be liable to the Company, the Partnership or to any
other Member for any act performed, or omitted to be performed, by it in the
conduct of its duties as a Member, if such act or omission is within the scope
of authority of such Member hereunder and if such act or omission is not
performed or made fraudulently or in bad faith. The Company and the Partnership
, and not the Members, shall indemnify and save harmless each Member from all
personal liability, loss, cost, expense or damage incurred or sustained by
reason of any act performed, or omitted to be performed by it in the permitted
conduct of its duties hereunder except for acts or omissions done or made
fraudulently or in bad faith. Such indemnity, or the denial thereof, shall not
be construed to limit or diminish the coverage of any Member under any insurance
effected or maintained by the Company and/or the Partnership.
Section 8.9 BUDGETS.
(a) The Members shall, by written resolution, Approve a
Pre-Construction Budget and a Development Budget for the Project,
which Budgets the Members acknowledge are subject to change only as
Approved by the Members. The Development Budget is intended to cover
all expenditures of the Project through the completion of construction
of the Project, including, without limitation, those expenditures
included in a Pre-Construction Budget and Prospective Project Budget
for the Project. The Members agree that the Development Budget has
been approved and a copy is attached to the Development Agreement. Any
revisions to the Approved Development Budgets shall be submitted to
the Non-Operating Member in accordance with the procedure set forth in
the Development Agreement. No later than sixty (60) calendar days
prior to the Project Completion Date, the Operating Member shall
submit to the Non-Operating Member a proposed Operating Budget for the
then remaining Fiscal Year covering anticipated expenses of the
Company in owning, operating and maintaining the Project. No later
than sixty (60) days prior to the commencement of each Fiscal Year the
Operating Member shall submit to the Non-Operating Member a proposed
Operating Budget for such Fiscal Year for the Project. Further,
projections of current Fiscal Year revenues and expenses shall be
prepared by the Operating Member and submitted to the Non-Operating
Member on June 1 and November 1 of each Fiscal Year covering the
balance of such fiscal year.
(b) After submission of the proposed Operating Budgets to the
Non-Operating Member, the following procedures shall be followed in
adopting such Operating Budgets:
(i) Within twenty (20) calendar days after the proposed
Operating Budgets are submitted to the Non-Operating Member, the
Non-Operating Member shall either approve each such proposed
Operating Budget or notify the Operating Member of any proposed
revisions therein that it deems necessary. If the Non-Operating
Member fails to approve or reject any proposed Operating Budget
or to make proposed revisions thereto within twenty (20) calendar
days after it is submitted to the Non-Operating Member, such
proposed Operating Budget shall be deemed Approved and shall
thereafter constitute the "Operating Budget" for the Fiscal Year
in question for all purposes hereof. Any objections to the
proposed Operating Budget must be made on a line item basis, and
any line items not objected to shall be deemed Approved by the
Members.
(ii) If the Non-Operating Member approves a proposed
Operating Budget, or the Non-Operating Member makes proposed
revisions thereto and the Operating Member does not make
objections to such proposed revisions within ten (10) calendar
days after it receives them, such proposed Operating Budget, and
revisions if any, shall be deemed Approved by the Members and
shall be deemed thereafter to constitute the "Budget" for the
Fiscal Year in question for all purposes hereof.
(iii)If either Member makes any objection to any proposed
revisions to any proposed Operating Budget, the Members shall
cooperate with each other to resolve any questions with respect
to such proposed revisions and shall use their best efforts to
agree upon such Operating Budget for the Fiscal Year in question
prior to the beginning of the Fiscal Year to which such Operating
Budget relates. If the Members fail to agree upon an Operating
Budget for any Fiscal Year prior to the commencement thereof,
then, pending final resolution of any dispute in the manner
provided herein, the Operating Member shall continue to manage,
maintain, supervise, direct, and operate the activities for which
such Operating Budget was proposed in accordance with the
approved Operating Budget for such activities or asset(s), if
any, for the previous Fiscal Year until a new Operating Budget is
approved; except that the Operating Member shall be authorized
during any interim period to pay related expenses which
reasonably exceed the prior year's budgeted amounts for interest
payments, taxes, utility charges, insurance and other items not
within the reasonable control of the Company or the Partnership
as well as pay for increases in contract services and personnel
costs to the extent reasonably required to maintain the same
level of service provided during the previous Fiscal Year.
(c) The Operating Member may from time to time submit to the
Non-Operating Member revisions to an Approved Operating Budget for its
approval. The Non-Operating Member shall promptly reject or approve
the same or make such changes to the proposal as it may deem
reasonably necessary and proper within the time frame contemplated by
subparagraph (b) hereof. If the Non-Operating Member fails to approve
or reject any proposed revisions or to suggest additional
modifications thereto within twenty (20) calendar days after submittal
to the Non-Operating Member, then such revisions shall be deemed
Approved by the Members. The proposal, as finally approved or changed
by the Members, shall be incorporated into and become part of such
Budget for the remaining period of the Fiscal Year in question.
<PAGE>
Section 8.10 REMOVAL OF OPERATING MEMBER.
The Non-Operating Member shall have the right, to be exercised by written
notice to the Operating Member, to remove the Operating Member and to appoint
itself as the Operating Member of the Company at such time as:
(a) The Operating Member Transfers its Percentage Interest
without the consent of the Non-Operating Member, except Transfers
permitted as a matter of right under SECTION 10.2 below;
(b) The Operating Member becomes a Non-Funding Member or
Non-Contributing Member pursuant to SECTION 5.4;
(c) The Operating Member commits a breach of fiduciary duty or an
act of gross negligence or willful misconduct;
(d) The Operating Member experiences a Change in Control; or
(e) Grounds exist for discharging any Affiliate of the Operating
Member under any Development Agreement or the Management Agreement,
pursuant to SECTION 8.11 or SECTION 8.12 hereof, including without
limitation the conditions described in subsections (a), (b), (c) or
(d) hereof.
Section 8.11 DEVELOPMENT AGREEMENT.
(a) If an Affiliate of a Member or a Member is to render services
to the Partnership in connection with the initial development or
redevelopment of the Project, then the Members shall, by written
resolution, Approve a Development Agreement with such Affiliate or
Member who shall be designated as the "Developer" thereunder. The
Member which is not an Affiliate of the Developer shall be responsible
for supervising the performance of the Developer under a Development
Agreement and for monitoring expenditures incurred by or on behalf of
the Partnership by the Developer to determine whether such
expenditures are contemplated in, and within the limits prescribed by,
the applicable Budget Approved by the Members.
(b) Supplementing the provisions of a Development Agreement which
authorize termination thereof, if the Developer thereunder fails to
cure an "Event of Default," as such term is defined in a Development
Agreement, the Member which is not the Developer or an Affiliate of
the Developer shall have the right to exercise the termination rights
of the Partnership, discharge on behalf of the Company acting as
general partner of the Partnership and to discharge the Developer from
its duties thereunder and appoint a new Developer for the Project,
including the Member or an Affiliate of such non-affiliated Member,
under an agreement on the same terms as the Development Agreement.
Such non-affiliated Member may exercise such option by giving the
other Member notice of its election. If a new Developer appointed
pursuant to this SECTION 8.11 is a Member or an Affiliate of a Member,
the other Member shall, if grounds subsequently exist under the new
Development Agreement with such new Developer which allow for
termination, have the right to exercise the termination rights of the
Company as general partner of the Partnership, discharge the new
Developer from its duties thereunder and appoint on behalf of the
Partnership, a replacement Developer (including an Affiliate) under an
agreement on the same terms.
(c) The Members acknowledge and agree that simultaneously with
the execution of this Agreement, the Company, as general partner of
the Partnership, is executing a Development Agreement appointing an
Affiliate of the Operating Member as Developer of the Project and
appointing an Affiliate of the Non-Operating Member as Co-Developer.
The Members further agree that they may subsequently decide to
develop, in one or more phases, certain of the out-parcels which
constitute a portion of the Land for purposes which include, but are
not limited to, the development of restaurants and/or for other retail
projects (a "Subsequent Project"). In such case, the Company, acting
as general partner of the Partnership, may negotiate a second
development agreement with an Affiliate of the Operating Member on
substantially the same terms and conditions as are set forth in the
Development Agreement and the Developer under the new Development
Agreement shall be entitled to the same fees payable to the Developer
under the existing Development Agreement.
Section 8.12 MANAGEMENT AGREEMENT.
(a) If a Member or an Affiliate of a Member is to render services
to the Company or the Partnership in connection with the management of
the Project, then the Members shall, by written resolution, approve a
Management Agreement with such Member or Affiliate who shall be
designated as the Manager thereunder. The Member which is not the
Manager or an Affiliate of the Manager shall be responsible for
supervising the performance of the Manager under a Management
Agreement and for monitoring expenditures incurred by or on behalf of
the Partnership by the Manager to determine whether such expenditures
are contemplated in, and within the limits prescribed by, the
applicable Budget Approved by the Members.
(b) Supplementing the provisions of any Management Agreement
entered into under SECTION 8.12(A), if grounds exist under the
Management Agreement which allow for termination, the Member which is
not the Manager or an Affiliate of the Manager shall have the right to
exercise the termination rights of the Company and the Partnership
discharge on behalf of the Company acting in its capacity as general
partner of the Partnership, the Manager from its duties thereunder and
appoint a new Manager for the Project, including an Affiliate of such
Member, under an agreement on the same terms as the Management
Agreement. Such non-affiliated Member may exercise such option by
giving the other Member notice of its election. If a new Manager
appointed pursuant to this SECTION 8.12(A) is a Member or an Affiliate
of a Member, the other Member shall, if grounds subsequently exist
under the new Management Agreement with such new Manager which allow
for termination, have the right to exercise the termination rights of
the Company and as general partner of the Partnership, discharge the
new Manager from its duties thereunder and appoint a replacement
Manager on behalf of the Partnership (including an Affiliate) under an
agreement on the same terms.
Section 8.13 CONSTRUCTION CONTRACT, ARCHITECT'S CONTRACT AND ENGINEER'S
CONTRACT.
The Members shall, by written resolution, approve the Construction
Contract and the Architect's and the Engineer's Contract(s) for the Project.
Section 8.14 FEES AND EXPENSE REIMBURSEMENTS FOR MEMBERS.
While it is contemplated that the Operating Member shall be primarily
responsible for implementing the decisions of the Members and carrying out their
directives with respect to the acquisition, development, construction, leasing
and management of each Project, the Members acknowledge that they or their
Affiliates will both render valuable services to the Company in connection with
the Project. The Members, or such Affiliates, shall be compensated for such
services in the form of fees, cost recoveries, expense reimbursements or other
means in amounts and upon such other terms and conditions as are set forth in
the Development Budget and the Operating Budgets(s) Approved by the Members, and
subject to Section 9.1 hereof.
ARTICLE 9.
COMPENSATION; REIMBURSEMENTS; CONTRACTS WITH AFFILIATES
Section 9.1 COMPENSATION, REIMBURSEMENTS.
(a) COMPENSATION. Except as may be expressly provided for in
SECTION 9.1(B) below or in the agreements referred to in SECTION 9.2,
or in another written agreement Approved by the Members, no payment
will be made by the Company, to either Member for the services of such
Member or any member, shareholder, director or employee, or Affiliate
of such Member.
(b) REIMBURSEMENTS.
(i) Subject to the provisions of this Agreement, each of the
Members shall be reimbursed promptly by the Company, , for all
reasonable out-of-pocket costs and expenses incurred by each on
behalf of the Company in accordance with Budgets which have been
Approved by the Members so long as such costs and expenses are
not intended to be paid for from fees otherwise payable to such
Member or its Affiliates as set forth in the Development
Agreement and the Management Agreement, respectively.
(ii) Neither Member shall be entitled to reimbursement of
any costs or expenses incurred by such Member in connection with
the preparation and negotiation of this Agreement or any of the
Exhibits hereto.
(iii)Requests for reimbursement hereunder shall be paid
within thirty (30) days after submission of a request therefore
accompanied by reasonable back-up documentation, subject to
necessary third-party approvals.
Section 9.2 NO CONTRACTS WITH AFFILIATES.
Except as provided in SECTIONS 8.11 and 8.12, neither Member shall
enter into any agreement or other arrangement for the furnishing to or by the
Company of goods or services with any Person who is an Affiliate of such Member
unless such agreement or arrangement has been Approved by the other Member after
the nature of the relationship or affiliation has been disclosed; provided,
however, if an Affiliate of either Member is in the business of providing
services of a kind needed by the Company, such Affiliate will have the right to
provide those services to the Company at market rates of compensation and terms
and conditions Approved by the Members.
ARTICLE 10.
SALE, TRANSFER OR MORTGAGE
Section 10.1 GENERAL.
Except as expressly permitted in this Agreement, no Member shall
directly or indirectly sell, assign, transfer, mortgage, convey, charge or
otherwise encumber or contract to do or permit any of the foregoing, whether
voluntarily or by operation of law (herein sometimes collectively called a
"Transfer"), or suffer any Affiliate or other third party to Transfer, any part
or all of its Percentage Interest or its share of capital, profits, losses,
allocations or distributions hereunder without the express prior written consent
of the other Member, which consent may be withheld for any or no reason
whatsoever. Any attempt to Transfer in violation of this ARTICLE 10 shall be
null and void. The giving of consent in any one or more instances of Transfer
shall not limit or waive the need for such consent in any other or subsequent
instances.
Section 10.2 PERMITTED TRANSFERS BY THE MEMBERS.
(a) TRANSFERS BY CHELSEA. Without the consent of Simon, Chelsea
may from time to time Transfer its Percentage Interest, in whole or in
part (i) to a Chelsea Affiliate or (ii) from a Chelsea Affiliate to
another Chelsea Affiliate so long as such transfer does not result
from, or occur in connection with, a Change in Control as defined in
Subparagraph (i)(A) or (i)(c) of Paragraph 4 of Exhibit A hereof. Any
Transfer under SECTION 10.2(A) shall not relieve Chelsea of its
obligations under this Agreement.
(b) TRANSFERS BY SIMON. Without the consent of Chelsea, Simon may
from time to time Transfer its Percentage Interest, in whole or in
part (i) to a Simon Affiliate, or (ii) from a Simon Affiliate to
another Simon Affiliate so long as such transfer does not result from,
or occur in connection with, a `Change in Control as defined in
Subparagraph (ii)(A) or (ii)(C)of Paragraph (l) of Exhibit A hereof.
Any Transfer under SECTION 10.2(B) shall not relieve Simon of its
obligations under this Agreement.
(c) AGREEMENTS WITH TRANSFEREES.
(i) If pursuant to the provisions of this SECTION 10.2, any
Member (the "Transferor") shall purport to make a Transfer of any
part of its Percentage Interest to any Person ("Transferee"), no
such Transfer shall entitle the Transferee to any benefits or
rights hereunder until:
(1) the Transferee agrees in writing to assume and be
bound by all the obligations of the Transferor and be
subject to all the restrictions to which the Transferor is
subject under the terms of this Agreement and any agreements
with respect to the Project to which the Transferor is then
subject or is then required to be a party; and
(2) the Transferor and Transferee enter into a written
agreement with the other Member and the Company which
provides (x) that the Transferor is irrevocably designated
the proxy of the Transferee to exercise all voting and other
approval rights appurtenant to the Percentage Interest
acquired by the Transferee, (y) that the Transferor shall
remain liable for all obligations arising under this
Agreement prior to or after such Transfer in respect of the
Percentage Interest so transferred, and (z) that the
Transferee shall indemnify the Members from and against all
claims, losses, liabilities, damages, costs and expenses
(including reasonable attorneys' fees and court costs) which
may arise as a result of any breach by the Transferee of its
obligations hereunder.
(ii) No Transferee of any Percentage Interest shall make any
further disposition except in accordance with the terms and
conditions hereof.
(iii)All costs and expenses incurred by the Company, or the
non-transferring Member, in connection with any Transfer of a
Percentage Interest, including any filing or recording costs and
the fees and disbursements of counsel, shall be paid by the
Transferor.
Section 10.3 FIRST RIGHT OF REFUSAL PROCEDURE.
(a) FIRST REFUSAL NOTICE. Except as provided in SECTIONS 10.2(A)
and 10.2(B), if, subsequent to the date which is 6 (six) full calendar
years after the Project Completion Date, either Simon or Chelsea
desires to sell all of its and its Affiliates' Percentage Interest in
the Company it shall give written notice (the "First Refusal Notice")
of such intention to the other Member (the Member issuing the First
Refusal Notice is hereinafter called the "Offeror" and the Member
receiving the First Refusal Notice is hereinafter called the
"Offeree"). The First Refusal Notice must set forth (i) the price (the
"Refusal Price") and terms upon which the Offeror has received a
bona-fide, third party, arms-length offer to purchase such Percentage
Interest (the Percentage Interest in the Company subject to the First
Refusal Notice is hereinafter called the "Subject Interest") subject
to all liabilities of the Company as of that date, (ii) a copy of such
third-party offer, and (iii) the name and address of the proposed
purchaser, provided, that the Offeror shall deal with only one such
purchaser at a time. The Refusal Price set forth therein must be
payable with cash consideration only, although, at the Offeror's
election, payment of portions of such cash consideration may be
deferred and paid, with interest, in one or more installments after
closing. Moreover, in furtherance of SECTION 10.3(E) below, so as to
avoid a termination of the Company for federal income tax purposes
pursuant to Section 708(b)(1)(B) of the Code the First Refusal Notice
must propose a structure for the sale of the Subject Interest so that
the sale when combined with previous sales will not cause there to be
a sale or exchange of more than a forty-nine percent (49%) interest in
the Net Profits or capital of the Company in any 12-month period, or,
alternatively to fairly compensate the Offeree for the cost (including
loss of benefits and/or increased taxes) of any such tax termination.
Any First Refusal Notice providing for non-cash consideration, in
whole or in part, (except as permitted in this SECTION 10.3(A)) or a
sale that would cause a combined sale or exchange of more than a
forty-nine percent (49%) interest in any 12-month period (except as
permitted in this SECTION 10.3(A)) shall not be effective to institute
the First Refusal procedures. If the First Refusal Notice provides
that payment of a portion of the Refusal Price is to be deferred, then
the required collateral for such deferred payment shall be described
in the First Refusal Notice and shall be the Subject Interest to be
purchased and/or a certificate of deposit, irrevocable stand-by letter
of credit, or other type of collateral which is generally available,
liquid, and not unique. Such First Refusal Notice shall constitute an
offer by the Offeror to sell to the Offeree the Subject Interest
specified in the First Refusal Notice for such price and terms,
exclusive of any brokerage or similar commission provided for therein.
Notwithstanding anything to the contrary set forth herein, neither
Member may sell its Percentage Interest in the Company pursuant to the
provisions of this Section unless any Affiliate which is a Partner in
the Partnership also sells its interest in the Partnership pursuant to
the First Right of Refusal Procedure set forth in the Partnership
Agreement, and any attempt to do so shall be null and void. Neither
Chelsea nor Simon may give a First Refusal Notice during the
Construction Period nor until six (6) years after the Project
Completion Date.
(b) ELECTION BY OFFEREE.
(i) For a period of thirty (30) days following the date of
receipt by the Offeree of the First Refusal Notice (the "First
Refusal Period"), the Offeree shall have the option to purchase
all, but not less than all, of the Subject Interest specified in
the First Refusal Notice for the price and on the terms stated in
the First Refusal Notice. In the alternative the Offeree shall
also have the option to sell its entire Percentage Interest in
the Company to the Purchaser as set forth in subparagraph (d)
hereof. If the Offeree elects to purchase the Subject Interest it
must so notify the Offeror in writing (the "First Refusal
Exercise Notice") within said 30-day period, which notice must be
accompanied by a First Refusal Deposit (defined below). If the
Offeree fails to send a First Refusal Exercise Notice or to
deliver a First Refusal Deposit within said 30-day period it
shall be deemed to have elected not to purchase. "First Refusal
Deposit" shall mean an amount equal to 5% of the price set forth
in the First Refusal Notice.
(c) CLOSING.
(i) If the Offeree elects to so purchase the Subject
Interest, the transfer of the Subject Interest specified in the
First Refusal Notice from the Offeror to the Offeree shall be
closed and consummated in the principal office of the Company at
11:00 a.m., local time, on the sixtieth (60th) day following the
date of the First Refusal Exercise Notice (or if such date is not
a business day, the business day next following such day), or on
such earlier day as may be selected by the Offeree. At the
closing, the Offeree shall deliver to the Offeror (i) such
portion of the Refusal Price which is payable at closing in
accordance with the terms of the First Refusal Notice in cash
(U.S. dollars) by wire transfer representing immediately
available Federal Reserve System funds and (ii) the promissory
note and the applicable security instruments, if any, required by
the First Refusal Notice. Simultaneously with the receipt of such
payment, the Offeror shall deliver the Subject Interest to the
Offeree free and clear of all liens, security interests and
competing claims (other than security interests granted in favor
of the Offeree to secure any Contribution Loans made by the
Offeree on behalf of the Offeror and not fully credited as
hereinafter provided) and shall deliver to the Offeree such
instruments of transfer and such evidence of due authorization,
execution and delivery and of the absence of any such liens,
security interests or competing claims as the Offeree shall
reasonably request. The Refusal Price paid at closing shall be
reduced by the amount of any outstanding Contribution Loans made
by the Offeree to the Offeror, together with all accrued interest
thereon and the costs (including loss of benefits and/or
increased taxes), if any, associated with any termination under
Section 708(b) (1) (B) of the Code caused by the transfer.
(ii) If, by virtue of the election of the Offeree to
purchase any Subject Interest in accordance with the provisions
of this SECTION 10.3, the holder of any loan to the Company under
which the Offeror has personal liability has the right to, and
notifies the Company of its intent to accelerate the loan, it
shall be a condition to the closing that the Offeree repay such
loan (plus any deferred and accrued and unpaid interest thereon
and any required prepayment premium and/or yield maintenance
fees), or have the Offeror released from personal liability for
payment of the loan by a written instrument reasonably
satisfactory to the Offeror, at the closing of the sale of such
Subject Interest.
(d) SALE OF PROJECT TO THIRD PARTY
(i) During the First Refusal Period, the Offeree shall also
have the option to sell its entire Percentage Interest in the
Company to the Purchaser. If the Offeree elects to sell its
Percentage Interest to the Purchaser, it must notify the Offeror
in writing (the "Sale Notice") within the First Refusal Period.
If Offeree fails to send a Sale Notice within said time 30-day
period, it shall be deemed to have elected not to sell its
Percentage Interest. In order for the Offeree to elect to sell
its Percentage Interest in the Company, any Affiliates of the
Offeree which are Partners in the Partnership must also elect to
sell all interest which they hold in the Partnership.
(ii) If the Offeree elects to sell its Percentage Interest,
the Offeror shall proceed to consummate a sale of both the
Subject Interest and the Offeree's Percentage Interest to the
Purchaser at a purchase price equal to the product of (i) the
Refusal Price and (ii) the quotient resulting from the division
of (x) one (1) by (y) the percentage interest in the Company
represented by the Subject Interest, subject to all liabilities
of the Company as of the date of the First Refusal Notice. For
example, if the Refusal Price for the Offeror's Percentage
Interest is $1,000,000 and Offeror's Percentage Interest equals
50%, then the interest held by the Company in the Partnership may
be sold at a purchase price equal to $2,000,000 ($1,000,000 times
1.00/.50). The purchase price shall be payable as set forth in
Section 10.3 (a); provided however, that if a portion of the
purchase price is to be deferred, then the required collateral
for such deferred payment shall be a mortgage on the Project
and/or a certificate of deposit, irrevocable stand-by letter of
credit or other type of collateral which is generally available,
liquid and not unique and no more than 50% of the purchase price
may be deferred. The form of the contract of sale shall be
subject to the reasonable approval of the Offeree, and the
contract shall be executed, and close, within the time frames,
identified in Subparagraph (e)(i) of this section. If the holder
of any loan to the Company under which a Member or Members or
their Affiliates have personal liability has the right to and
notifies the Company of its intent to accelerate the loan, it
shall be a condition to the closing that the Purchaser repay such
loan and obtain releases of any guarantees made in connection
therewith. Costs incurred in connection with the drafting and
negotiation of the contract of sale (excluding, however, costs
incurred by the Offeree in commenting on same) and any
conveyance, transfer or similar taxes payable in connection with
the closing shall be expenses of the Company. The interests of
any Affiliates of Offeror and Offeree which are Partners in the
Partnership shall be sold at the purchase price and under the
terms and conditions set forth in the First Right of Refusal
Procedure in the Partnership Agreement.
(e) SALE OF SUBJECT INTEREST TO THIRD PARTY.
(i) If the Offeree fails to exercise its right to purchase
the Subject Interest, or if the Offeree exercises its right to
purchase but through no fault of the Offeror subsequently fails
to purchase the Subject Interest within the time specified, or
the Offeree fails to offer to sell its entire Percentage Interest
to the Purchaser, or any Affiliates of Offeree which are Partners
in the Partnership fail to offer to sell the interest held by
such Affiliates, then the Offeror shall have the right, for four
(4) months after the expiration of the First Refusal Period, to
obtain a bona fide, binding contract for the sale of such Subject
Interest to the third party which is identified as the
prospective purchaser in the First Refusal Notice, so long as
such third party is not an Affiliate of the Offeror (a
"Purchaser") for a price and on terms and conditions consistent
with SECTION 10.3(A) which are no less favorable to the Offeror
than those stated in the First Refusal Notice, except that any
such contract must provide for a closing of the purchase and sale
of such Subject Interest within sixty (60) days after the date of
such contract; PROVIDED, that if the Offeree fails to purchase
the Offeror's Subject Interest in breach of a commitment by the
Offeree to do so the Offeror shall have, as its sole remedy, the
right to retain the First Refusal Deposit as liquidated damages
and not as a penalty, and in addition thereto the above
four-month limitation on the Offeror's rights to obtain a binding
contract with a third party shall be extended to six (6) months.
(ii) In the event the Offeror proposes to consummate a sale
of the Subject Interest to the Purchaser identified pursuant to
SECTION 10.3(A) hereof within the time specified and in a manner
otherwise consistent with the requirements of SECTIONS 10.3(D)(I)
above, the Purchaser shall not be entitled to any benefits or
rights under this Agreement unless and until:
(1) The Offeree shall reasonably approve the form and
content of the instruments of transfer;
(2) The Purchaser in writing accepts and adopts all of
the terms and conditions of this Agreement, as the same may
have been amended, including, without limitation, the
restrictions on transfer set forth in SECTION 10.1, and
acknowledges that the Offeror's rights under this SECTION
10.3 are transferable, but shall not be available for a
period of two (2) years, to such Purchaser;
(3) The Offeror or the Purchaser, as the case may be,
pays all debts of the Offeror then due and payable to the
Company or to the Offeree (including interest accrued
thereon) and all capital contributions then due and payable
by the Offeror to the Company;
(4) The Offeror or the Purchaser pays all reasonable
expenses incurred by the Offeree from the date the Offeree
last declines to purchase the Subject Interest through the
date on which the Subject Interest is transferred to the
Purchaser, including, without limitation, legal and
accounting fees, and pays all costs incurred by the Company
as the result of such transfer, including, without
limitation, real or personal property transfer taxes, if
any, imposed on the Company by virtue of the transfer and
the cost of preparing and filing any and all tax returns
which are required to be filed as a result of such sale; and
(5) If required by the Offeree, the Purchaser delivers
an opinion of counsel to the Company, which counsel and
opinion are satisfactory to the Offeree, that an exemption
from registration or qualification under the Securities Act
of 1933, as amended, and under all applicable statutes,
rules or laws of any state which may be applicable thereto
is available.
(ii) In the event the Offeror is the Operating Member, the
Non-Operating Member shall have the right to become the Operating
Member and the Manager (or to have an Affiliate become the
Manager) upon sale of the Subject Interest by giving notice of
exercise to the Offeror.
(f) REINSTATEMENT OF FIRST REFUSAL PROCEDURE. In the event the
Offeror fails within the time specified in SECTION 10.3(D) OR SECTION
10.3(E), AS APPLICABLE, to consummate such proposed sale, through no
fault of the Offeree, the Offeror shall reimburse the Offeree for its
above-described costs and shall, prior to any subsequent proposed sale
of the Subject Interest be required to extend to the Offeree, and the
Offeree shall have, the rights of First Refusal set forth in this
SECTION 10.3. Except as otherwise permitted by this Agreement, any
sale, assignment or other transfer by either Member of its Percentage
Interest or any portion thereof in violation of the restrictions and
procedures set forth in this SECTION 10.3 shall be void.
Section 10.4 RESTRAINING ORDER.
If either Member shall at any time Transfer or attempt to Transfer its
Percentage Interest or part thereof in violation of the provisions of this
Agreement and any rights hereby granted, then the other Member shall, in
addition to all rights and remedies at law and in equity, be entitled to a
decree or order restraining and enjoining such Transfer and the offending Member
shall not plead in defense thereto that there would be an adequate remedy at
law; it being hereby expressly acknowledged and agreed that damages at law will
be an inadequate remedy for a breach or threatened breach of the violation of
the provisions concerning Transfer set forth in this Agreement.
Section 10.5 NO TERMINATION.
Neither Member shall Transfer all or any part of its Percentage
Interest to any party other than the other Member, whether or not the Transfer
would otherwise be permitted hereunder, if the Transfer would result in a
termination of the Company under Section 708(b)(1)(B) of the Code, unless the
Transferor reasonably compensates the other Member for the costs (including loss
of benefits and/or increased taxes), if any, associated with any resulting tax
termination under Section 708(b) (1) (B). Unless so compensated, at the request
of the other Member and as a condition of the consummation of any Transfer of
all or any part of a Percentage Interest to any party other than the other
Member, the Member proposing to Transfer all or any part of its Percentage
Interest shall at its cost provide an unqualified opinion of counsel, which must
be reasonably satisfactory to the other Member, that the Transfer would not
result in such a termination and, in addition to the other Member's rights under
SECTION 10.4, the Member proposing to Transfer all or any part of its Percentage
Interest to any party other than the other Member shall indemnify and hold
harmless the other Member from and against any and all loss, cost, liability or
expense (including, but not limited to, reasonable attorneys' fees and court
costs) which such other Member may suffer if the Transfer would, either by
itself or together with any other prior Transfer of a Percentage Interest in the
Company of which the transferring Member has knowledge at the time of the
Transfer, cause such a termination.
Section 10.6 BUY-SELL.
(a) At any time during the Operating Period, in the event that a
good faith dispute shall exist between the Members regarding one of
the Major Decisions identified in Section 8.6(b), 8.6(d) or 8.6(m) and
the Members are unable to agree upon the action to be taken by the
Company (hereinafter, a "Deadlock"), and at any time following the
date which is six (6) full calendar years after the Project Completion
Date, whether or not a Deadlock shall exist between the Members,
either Member (the "Offeror"), provided such Member is not then a
Defaulting Member, may by giving the other Member (the "Offeree")
written notice (the "Sale Notice") implement the sale procedures which
are set forth in this SECTION 10.6. However prior to implementing the
sale procedures the Member wishing to cause such buy-sell shall first
be obligated to notify the other Member of its desire to sell its
interest and the Members shall thereafter commence good faith
discussions to determine whether or not they mutually agree upon the
terms and conditions for the sale of one Member's interest in the
Company to the other Member. If the Members are unable to agree, then
upon the earlier to occur of thirty (30) days after commencement of
discussions or on the date either party notifies the other that it
doesn't want to continue discussions the Offeror may deliver the Sale
Notice which shall state the cash price (determined or to be
determined as set forth in subparagraph (d) below) at which the
Offeror would be willing to sell its entire interest in the Company to
the Offeree or to purchase the Offeree's entire interest in the
Company.
(b) No Member may make a Sale Notice described in SECTION 10.6(A)
during the Construction Period or, except as previously specified in
Section 10.6(a) or hereafter specified in Section 10.6(c) for six (6)
years after the Project Completion Date.
(c) If there is a merger, consolidation, or other business
reorganization of Chelsea or Chelsea, Inc., or Simon, Simon, Inc., SD
Inc. or SPG, as a result of which a Change in Control occurs (as
defined in Exhibit A) then the non-merging, non-consolidating, or
non-reorganizing Partner may, at its option implement the Buy-Sell
procedures set forth in this Section 10.6 regardless of the period of
time that has elapsed subsequent to the Project Completion Date.
(d) If any Member shall choose to deliver a Sale Notice, upon
receipt of the Sale Notice given and delivered pursuant to SECTION
10.6(A), the Offeree shall be obligated to elect, in accordance with
the provisions of this SECTION 10.6, either to purchase the Offeror's
entire interest in the Company or to sell its entire interest in the
Company to the Offeror for cash at the closing described in SECTION
10.7.
(e) The purchase price (the "PURCHASE PRICE") for any purchase
and sale of the interest in the Company of a Member under this SECTION
10.6 shall be equal to the cash amount set forth in the Sale Notice
(less the outstanding principal balance of the mortgage, transfer
taxes, recording fees, and prepayment premiums or other amounts
payable to the lender, which amount shall be adjusted for the
respective Percentage Interests of the Members).
(f) The Offeree shall give written notice of its election to the
Offeror within 30 days after receipt of the Offer. Failure of the
Offeree to give notice that such Offeree has elected to purchase the
Offeror's entire interest in the Company shall be conclusively deemed
to be an election of the Offeree to sell to the Offeror its entire
interest in the Company.
(g) If the holder of any loan to the Company under which the
selling Member or its Affiliates has personal liability, has the right
to, and notifies the Company of its intent to accelerate such loan, it
shall be a condition to the closing that the purchasing Member repay
such loan (plus any deferred and accrued and unpaid interest thereon
and any prepayment premium and/or yield maintenance fees) at the
closing, or to have the selling Member and any Affiliates released
from liability for payment of the loan and any guaranties given in
connection therewith by a written instrument reasonably satisfactory
to the selling Member, and the failure to do so will cause such Member
to be a Defaulting Member. The purchasing Member agrees to indemnify
the selling Member and its Affiliates and hold each of them harmless
from and against any damage, loss or liability to any of them as a
result of the indemnifying party's failure to repay such loan at the
closing in accordance with the provisions hereof. In addition, the
selling Member may, in its sole and absolute discretion, and without
prejudice to any other legal or equitable remedies it may have, refuse
to proceed with the closing unless simultaneously therewith any such
loan is so repaid.
(h) The Offeree's election pursuant to subparagraph (f) shall
create a binding contract for the purchase by Offeree of Offeror's
Entire Interest or sale, as the case may be, of the Offeree's Entire
Interest in the Company on the terms set forth in this SECTION 10.6.
If the Offeree shall thereafter be in breach of its obligation to
close the purchase or sale in accordance with such election, such
Member shall be a Defaulting Member and in addition to all other
rights and remedies herein provided, the Offeror shall have all
remedies at law or in equity. In the event the Offeror shall be in
breach of its obligation to close the purchase or sale herein
provided, then such Member shall be a Defaulting Member, and in
addition to all other rights and remedies herein provided, the Offeree
shall have all remedies available in law or at equity.
(i) Notwithstanding the foregoing, the rights granted pursuant to
this Section may not be exercised unless any Affliate of the Offeror
which holds an interest as a Partner in the Partnership also offers
the entire interest held by it in the Partnership in accordance with
the Buy-Sell provisions set forth in the Partnership Agreement.
Section 10.7 CLOSING OF PURCHASE OF A MEMBER'S INTEREST.
(a) The closing of any sale of a Member's interest pursuant to
SECTION 10.6 shall be held at the office where the principal place of
business of the Company is located on the 120th day after the election
by the Offeree (unless the Members agree to a different mutually
acceptable date), unless such 120th day is not a business day, in
which event the closing shall take place on the first business day
following such 120th day. Within 30 days prior to such closing, there
shall be a preliminary closing at which the Members shall act
diligently and in good faith to agree upon the form and substance of
all documents necessary to effectuate the closing.
(b) At the closing, an assignment and, if requested by the
purchasing Member, a bill of sale (both with covenants against
grantor's acts) from the selling Member to the purchasing Member of
the selling Member's interest therein, together with such other
instruments and documents as may be reasonably necessary or desirable
to effectuate the sale and transfer to the purchasing Member, shall be
deposited in escrow under an escrow agreement and with an escrow agent
approved by the Members, which approval shall not be unreasonably
withheld. If there is any dispute between the Members, any title
company which issued a fee title policy to the Company or acted as
co-insurer or reinsurer may be designated by any Member as the escrow
agent. The instruments and documents to be deposited in escrow at the
closing shall be legally sufficient to convey all of the selling
Member's interest in the Company to the purchasing Member, free and
clear of all mortgages, deeds of trust, liens and encumbrances. The
purchase price shall be paid to the selling Member by federal wire
transfer of immediately available funds to an account designated by
the selling Member.
(c) In the event there are any conveyance, transfer or similar
taxes payable as an incident to the conveyances at the preliminary
closing or the closing, such taxes shall be expenses of the Company.
In the event that any title insurance company insuring the title of
the Company to the Project shall refuse to endorse its policy of title
insurance to reinsure the Company's title to the Project effective
immediately after the transfer to the purchasing Member without
exception other than as set forth in the original policy of title
insurance (other than exceptions for real estate taxes, rights of
tenants in possession, as tenants only, any surviving deeds of trust,
mortgages, liens or charges against the Project, any easements created
by the Company and Approved by the Members, and any other matter
Approved by the Members at any time or from time to time), then the
assignment from the Offeror to the purchasing Member shall contain
general warranties of its title to its interest in the Company and the
Project.
Section 10.8 ASSUMPTION OF LIABILITIES.
(a) At any closing held pursuant to SECTION 10.7, the purchasing
Member shall, by a legally enforceable agreement, assume the payment
of all obligations of the Company accruing after closing, including,
without limitation, any indebtedness under any lien on the Project
identified in the Offer to the extent that the Members have personal
liability therefor, and shall further secure the release of the
selling Member's guaranties, if any.
(b) If, at the time of the purchase of the selling Member's
interest, the Project is subject to any mortgage, deed of trust, lien
or charge, other than those which were in existence at the time of the
Sale Notice and used to calculate the Purchase Price, the purchasing
Member shall discharge, assume, or take subject to such mortgage, deed
of trust, lien or charge and reduce the amount of the Purchase Price
otherwise payable pursuant to SECTION 10.6(D) by the selling Member's
pro rata share of the amount of money as would be required to
discharge such mortgage, deed of trust, lien or charge (including,
without limitation, any and all prepayment premiums or penalties). In
addition, if such an encumbrance shall have been placed by the selling
Member in contravention of the terms and provisions of this Agreement,
then the purchasing Member shall also have all of the rights provided
in SECTION 10.6 with respect to a default by the selling Member, and
the purchasing Member shall not be required to close the purchase and
sale of the interest of the selling Member in the Company.
(c) Unless the Sale Notice provides otherwise, if the Project is
damaged by fire or other casualty, or if any party possessing the
right of eminent domain or such similar right shall give notice of an
intention to take or acquire a part of the Project, and such damage
occurs, or such notice is given between the date of the Sale Notice
and the closing, the following shall apply:
(i) If the Project is damaged by an insured casualty (or an
uninsured casualty not resulting in significant damage, which for
the purposes of this subsection only shall mean damage the cost
to repair of which would not exceed $1,000,000), or if the taking
or acquisition shall not involve a substantial portion of the
Project resulting in an other than substantial reduction in
income, then the Offeree shall be required to complete the
transaction and accept an assignment of the insurance or
condemnation proceeds, in which case the Purchase Price shall be
reduced by a portion of the uninsured casualty, if any, equal to
the amount of the uninsured casualty multiplied by the selling
Member's Adjusted Percentage Interest, and shall be further
reduced by the sum of all deductible amounts specified under the
policies of insurance multiplied by the selling Member's Adjusted
Percentage Interest.
(ii) If the Project is damaged by an uninsured casualty
resulting in significant damage, or if the taking or acquisition
shall or may result in a substantial reduction in the income
producing capacity of the Project, then the purchasing Member
shall have the option to either (1) accept the Selling Member's
interest in the Project in an "as is" condition together with any
insurance proceeds, settlements and awards (in which case the
Purchase Price shall be reduced by the sum of all deductible
amounts specified under policies of insurance multiplied by the
selling Member's Adjusted Percentage Interest), or (2) cancel the
purchase.
In the event that the purchase is canceled by the purchasing Member
in accordance with this SECTION 10.8(C), the terms of this Agreement shall
remain in effect and continue to be binding on the parties.
ARTICLE 11.
DISSOLUTION
Section 11.1 DISSOLUTION AND TERMINATION; CONTINUATION OF BUSINESS.
(a) CAUSES OF DISSOLUTION AND TERMINATION. Except as set forth in
this ARTICLE 11 and ARTICLE 10, neither Member shall have the right
and each Member hereby agrees not to withdraw from the Company, nor to
dissolve, terminate or liquidate, or to petition a court for the
dissolution, termination or liquidation of the Company, except as
provided in this Agreement, and neither Member at any time shall have
the right to petition or to take any action to subject the Company's
assets or any part thereof, including the Project, or any part
thereof, to the authority of any court of bankruptcy, insolvency,
receivership or similar proceeding. The Company shall be dissolved and
terminated only upon the earlier occurrence of any of the following
dates or events:
(i) December 31, 2050 or such later date as Approved by the
Members;
(ii) a dissolution of the Company is Approved by the
Members;
(iii)one or both of the Members elect to dissolve the
Company pursuant to any provision of this Agreement permitting
such election to be made;
(iv) the sale or other disposition (exclusive of an exchange
for other real property or the granting of a lien or security
interest in the Project) by the Company of all or substantially
all of the Project and other assets of the Company;
(v) the "Bankruptcy" (as hereinafter defined), dissolution
or liquidation of a Member;
(vi) the occurrence of any event that, under the Delaware
LLC Act, would cause the dissolution of the Company or that would
make it unlawful for the business of the Company to be continued;
or
For the purposes of this Agreement, the term "Bankruptcy" shall
mean, and the Member shall be deemed "Bankrupt" upon, (i) the entry of
a decree or order for relief of the Member by a court of competent
jurisdiction in any involuntary case involving the Member under any
bankruptcy, insolvency, or other similar law now or hereafter in
effect; (ii) the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or other similar agent for the
Member or for any substantial part of the Member's assets or property;
(iii) the ordering of the winding up or liquidation of the Member's
affairs; (iv) the filing with respect to the Member of a petition in
any such involuntary bankruptcy case, which petition remains
undismissed for a period of 90 days or which is dismissed or suspended
pursuant to Section 305 of the Federal Bankruptcy Code (or any
corresponding provision of any future United States bankruptcy law);
(v) the commencement by the Member of a voluntary case under any
bankruptcy, insolvency, or other similar law now or hereafter in
effect; (vi) the consent by the Member to the entry of an order for
relief in an involuntary case under any such law or to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator, or other similar agent for the Member or for
any substantial part of the Member's assets or property; (vii) the
making by the Member of any general assignment for the benefit of
creditors; or (viii) the failure by the Member generally to pay its
debts as such debts become due.
(b) RIGHT TO CONTINUE BUSINESS OF THE COMPANY. Upon an event
described in SECTIONS 11.1(A)(I), 11.1(A)(V) or 11.1(A)(VI) (but not
an event described in SECTION 11.1(A)(VI) that makes it unlawful for
the business of the Company to be continued), the Company thereafter
shall be dissolved and liquidated unless, within 90 days after the
event described in any of such Sections, an election to continue the
business of the Company shall be made in writing by the remaining
Members holding fifty percent (50%) or more of the Percentage
Interests. If such an election to continue the Company is made, then
the Company shall continue until another event causing dissolution in
accordance with this ARTICLE 11 shall occur.
Section 11.2 PROCEDURE IN DISSOLUTION AND LIQUIDATION.
(a) WINDING UP. Upon dissolution of the Company pursuant to
SECTION 11.1 hereof, the Company shall immediately commence to wind up
its affairs and the Members shall proceed with reasonable promptness
to liquidate the business of the Company and (at least to the extent
necessary to pay any debts and liabilities of the Company) to convert
the Company's assets into cash. A reasonable time shall be allowed for
the orderly liquidation of the business and assets of the Company in
order to reduce any risk of loss that might otherwise be attendant
upon such a liquidation.
(b) MANAGEMENT RIGHTS DURING WINDING UP. During the period of the
winding up of the affairs of the Company, the Operating Member shall
manage the Company and shall make with due diligence and in good faith
all decisions relating to the conduct of any business or operations
during the winding up period and to the sale or other disposition of
Company assets; provided, however, that if the termination of the
Company results from an Event of Default of a Member, the defaulting
Membershall have no further right to participate in the management or
affairs of the Company and the non-defaulting Member shall manage the
Company during the period of winding up. Each Member hereby waives any
claims it may have against the other that may arise out of the
management of the Company by the other, pursuant to this SECTION
11.2(B), so long as such other Member and its representatives act in
good faith.
(c) WORK IN PROGRESS. If the Company is dissolved for any reason
while there is development or construction work in progress, winding
up of the affairs and termination of the business of the Company may
include completion of the work in progress to the extent the Members
or non-defaulting Member, as the case may be, may determine same to be
necessary to permit a sale or other disposition of the Project which
is most beneficial to the Members.
(d) DISTRIBUTIONS IN LIQUIDATION. The assets of Company shall be
applied or distributed in liquidation in the following manner and in
the following order of priority:
(i) In payment of debts and obligations of the Company owed
to third parties, which shall include either Member as the holder
of any secured loan, and to the expenses of liquidation in the
order of priority as provided by law; then
(ii) To the setting up of any reserves for a period of up to
twelve (12) months which the Members or the non-defaulting
Member, as the case may be, may deem necessary for any contingent
or unforeseen liabilities or obligations of the Company; then
(iii)In payment of any debts or obligations of the Company
to either Member, and then
(iv) To the Members pro rata in proportion to the positive
balances in their respective Capital Accounts until said Capital
Accounts have been reduced to zero.
Losses attributable to the expenditure of funds held under the
reserve in SECTION 11.2(D)(II) shall be allocated to each Member to
the extent such expenditure will reduce the amount of cash eventually
distributed to each Member.
Notwithstanding the foregoing, if there are any outstanding
Contribution Loans at the time of any distribution pursuant to this
SECTION 11.2(D), the Member to whom such Contribution Loans are owed
shall be entitled to payment of the Contribution Loans on a priority
basis out of the distributions to which the Member for whose benefit
the Contribution Loans were made is entitled, to be applied to the
Contribution Loans in order of priority based on the chronological
order in which they were made, the earliest to be paid first in full,
and to each Contribution Loan in payment first of interest and then of
principal.
<PAGE>
(e) NON-CASH ASSETS. Every reasonable effort shall be made to
dispose of the assets of the Company so that the distribution may be
made to the Members in cash. If at the time of the termination of the
Company, the Company owns any assets in the form of work in progress,
notes, deeds to secure debt or other non-cash assets, such assets, if
any, shall be distributed in kind to the Members, in lieu of cash,
proportionately to their right to receive the assets of the Company on
an equitable basis reflecting the Fair Market Value of the assets so
distributed. In the alternative, the Members may cause the Company to
distribute some or all of its non-cash assets to the Members as
tenants-in-common subject to such terms, covenants and conditions as
the Members may adopt.
Section 11.3 DISPOSITION OF DOCUMENTS AND RECORDS.
All Documents of the Company shall be retained upon termination of the
Company for a period of not less than seven (7) years by a party mutually
acceptable to the Members. The costs and expenses of personnel and storage costs
associated therewith shall be shared by the Members equally. The Documents shall
be available during normal business hours to all Members for inspection and
copying at such Member's cost and expense. If either Member for any reason
ceases as provided herein to be a Member at any time prior to termination of the
Company ("Non-Surviving Member"), and the Company is continued without the
Non-Surviving Member, the other Member ("Surviving Member") agrees that the
Documents of the Company up to the date of the termination of the Non-Surviving
Member's interest shall be maintained by the Surviving Member, its successors
and assigns, for a period of not less than seven (7) years thereafter; provided,
however, that if there is an Internal Revenue Service examination or audit, or
notice thereof, which requires access to the Documents, the Documents shall be
retained until the examination or audit is completed and any tax liability
finally determined, and provided further, the Non-Surviving Member shall
reimburse the Surviving Member for one-half of personnel and storage costs
associated herewith. The Documents shall be available for inspection,
examination and copying by the Non-Surviving Member or its representatives upon
reasonable notice in the same manner as herein provided during said seven (7)
year period.
Section 11.4 DATE OF TERMINATION.
The Company shall be terminated when its cash and other assets have
been applied and distributed in accordance with the provisions of SECTION
11.2(D). The establishment of any reserves in accordance with the provisions of
SECTION 11.2(D) shall not have the effect of extending the Termination Date of
the Company, but any unexpended reserve amount shall be distributed in the order
and priority provided in such Section upon expiration of the period of such
reserves.
<PAGE>
ARTICLE 12.
GENERAL PROVISIONS
Section 12.1 Voluntary Dispute Resolution.
(a) All disputes and controversies relating to the interpretation,
construction, performance or breach of this Agreement, the Development
Agreement or the Management Agreement may be resolved by submission to
binding arbitration at the offices of JAMS/ENDISPUTE located in
Delaware ("JAMS"); provided that both members agree to subject
themselves to such dispute resolution procedure. If agreement is
reached between the Members that they will subject themselves to an
arbitration proceeding, either party can initiate arbitration by
sending written notice of an intention to arbitrate by registered or
certified mail to the other party hereto and to JAMS. The notice must
contain a description of the dispute and the remedy sought. If and when
a demand for arbitration is made by either party, the parties agree to
abide by the then-current rules and procedures established by JAMS for
discovery, the conduct of the arbitration hearing, and appeal of the
arbitration award. The parties may agree on a retired judge from the
JAMS panel. If they are unable to agree, JAMS will provide a list of
three available judges and each party may strike one. The remaining
judge will serve as the arbitrator at the settlement conference.
(b) The arbitration shall be governed by Delaware law, shall be submitted
to arbitration in Delaware and judgment upon the award rendered by the
arbitrator may be entered in any federal or state court having
jurisdiction thereof. The parties agree that arbitration must be
initiated within nine (9) months after the claimed breach occurred and
that the failure to initiate arbitration within said period constitutes
an absolute bar to the institution of any new proceeding.
(c) The prevailing party in any arbitration proceeding shall be entitled to
reasonable attorneys' fees and costs as determined by the arbitrator as
part of its decision in the arbitration.
Section 12.2 NOTICES.
Any notice, consent, approval, or other communication which is
provided for or required by this Agreement must be in writing and may be
delivered in person to any party or may be sent by a facsimile transmission,
telegram, courier or registered or certified U.S. mail, with postage prepaid,
return receipt requested. Any such notice or other written communications shall
be deemed received by the party to whom it is sent (i) in the case of personal
delivery, on the date of delivery to the party to whom such notice is addressed
as evidenced by a written receipt signed on behalf of such party, (ii) in the
case of facsimile transmission or telegram, the next business day after the date
of transmission, (iii) in the case of courier delivery, the date receipt is
acknowledged by the party to whom such notice is addressed as evidenced by a
written receipt signed on behalf of such party, and (iv) in the case of
registered or certified mail, the earlier of the date receipt is acknowledged on
the return receipt for such notice or five (5) business days after the date of
posting by the United States Post Office. For purposes of notices, the addresses
of the parties hereto shall be as follows, which addresses may be changed at any
time by written notice given in accordance with this provision:
If to Simon:
Simon Property Group, L.P.
c/o Simon Property Group, Inc.
National City Center
115 West Washington Street
Indianapolis, Indiana 46204
Attention: Chief Executive Officer
Facsimile No.: (317) 263-7177
With a copy to:
Simon Property Group, L.P.
c/o Simon Property Group, Inc.
National City Center
115 West Washington Street
Indianapolis, Indiana 46204
Attention: General Counsel
Facsimile No.: (317) 685-7221
If to Chelsea:
Chelsea GCA Realty Partnership, L.P.
103 Eisenhower Parkway
Roseland, New Jersey 07068
Attention: Chief Executive Officer
Facsimile No.: (201) 228-1694
With a copy to:
Chelsea GCA Realty Partnership, L.P.
103 Eisenhower Parkway
Roseland, New Jersey 07068
Attention: General Counsel
Facsimile No.: (201) 228-3891
Failure of, or delay in delivery of any copy of a notice or other
written communication shall not impair the effectiveness of such notice or
written communication given to any party to this Agreement as specified herein.
Section 12.3 ENTIRE AGREEMENT.
This Agreement (including all Exhibits referred to herein and attached
hereto, which Exhibits are part of this Agreement for all purposes) contains the
entire understanding between the Members with respect to the Project and
supersedes any prior understanding and agreements between them respecting the
within subject matter. There are no representations, agreements, arrangements or
understandings, oral or written, between the Members relating to the subject of
this Agreement which are not fully expressed herein.
Section 12.4 SEVERABILITY.
This Agreement is intended to be performed in accordance with, and
only to the extent permitted by, all applicable Laws of the State of Delaware.
If any provision of this Agreement, or the application thereof to any person or
circumstances shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby, but
rather shall be enforced to the greatest extent permitted by law; provided,
however, that the above-described invalidity or unenforceability does not
diminish in any material respect the ability of the Members to achieve the
purposes for which this Company was formed.
Section 12.5 SUCCESSORS AND ASSIGNS.
Subject to the restrictions on Transfer set forth in ARTICLE 10, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the parties hereto.
Section 12.6 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which shall constitute one
and the same agreement.
Section 12.7 ADDITIONAL DOCUMENTS AND ACTS.
In connection with this Agreement, as well as all transactions
contemplated by this Agreement, each Member agrees to execute and deliver such
additional documents and instruments and to perform such additional acts as may
be necessary or appropriate to effectuate, carry out and perform all of the
terms, provisions and conditions of this Agreement, and all such transactions.
Section 12.8 INTERPRETATION.
This Agreement and the rights and obligations of the respective
parties hereunder shall be governed by and interpreted and enforced in
accordance with the Laws of the State of Delaware.
Section 12.9 TERMS.
Common nouns and pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular, and plural, as the identity of the person or
persons, firm or corporation may in the context require. Any reference to the
Code or Laws shall include all amendments, modifications, or replacements of the
specific sections and provisions concerned.
Section 12.10 AMENDMENT.
This Agreement, the Development Agreement and the Management Agreement
may not be amended, altered or modified except by instrument in writing and
signed by the Members.
Section 12.11 REFERENCES TO THIS AGREEMENT.
Numbered or lettered articles, sections and subsections herein
contained refer to articles, sections and subsections of this Agreement unless
otherwise expressly stated. The words "herein," "hereof," "hereunder," "hereby,"
"this Agreement" and other similar references shall be construed to mean and
include this Agreement and all amendments thereof and Exhibits thereto unless
the context shall clearly indicate or require otherwise.
Section 12.12 HEADINGS.
All headings herein are inserted only for convenience and ease of
reference and are not to be considered in the construction or interpretation of
any provision of this Agreement.
Section 12.13 NO THIRD PARTY BENEFICIARY.
This Agreement is made solely and specifically between and for the
benefit of the parties hereto, and their respective successors and assigns
subject to the express provisions hereof relating to successors and assigns, and
no other Person whatsoever shall have any rights, interest, or claims hereunder
or be entitled to any benefits under or on account of this Agreement as a third
party beneficiary or otherwise.
Section12.14 NO WAIVER.
No consent or waiver, either expressed or implied, by any Member to or
of any breach or default by any other Member in the performance by such other
Member of the obligations thereof under this Agreement shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such other Member of the same or any other obligations of such
other Member under this Agreement. Failure on the part of any Member to complain
of any act or failure to act of any other Member, failure on the part of any
complaining Member to continue to complain or to pursue complaints with respect
to any act or failure to act of any other Member, or failure on the part of any
Member to declare any other Member in default, irrespective of how long such
failure continues, shall not constitute a waiver by such Member of the rights
and remedies thereof under this Agreement or otherwise at law or in equity.
Section12.15 TIME OF ESSENCE.
Time is of the essence of this Agreement.
Section 12.16 ATTORNEY'S FEES.
The prevailing party in any litigation initiated to interpret and/or
enforce the provisions of this Agreement shall be entitled to reasonable
attorney's fees and costs.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized corporate officers, each on the day
and year first above written.
Simon: SIMON PROPERTY GROUP, L.P., a
Delaware limited partnership
By: SIMON PROPERTY GROUP, INC., a
Delaware corporation, General Partner
By:________________________
Its:_______________________
Chelsea: CHELSEA GCA REALTY PARTNERSHIP,
L.P., a Delaware limited partnership
By: CHELSEA GCA REALTY, INC., a
Maryland corporation, sole general partner
By:__________________________
Its:_________________________
<PAGE>
EXHIBIT A
DEFINITIONS
When used in this Agreement, the following terms will have the meanings set
forth below:
(a) "ACT" shall mean the Delaware Limited Liability Act.
(b) "ADJUSTED PROJECT COST" shall mean Total Project Cost minus Development
Fees.
(c) "ADJUSTED PERCENTAGE INTEREST" shall mean the aggregate percentage
interest(s) in the Company owned by each Member after the calculation
made pursuant to SECTION 5.4(C).
(d) "AFFILIATE(S)" shall mean a Chelsea Affiliate or a Simon Affiliate, or
a Person or Persons directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with
the Person(s) in question. The term "control", as used in the
immediately preceding sentence, means, (i) with respect to a Person
that is a corporation, the right to exercise, directly or indirectly,
more than 50% of the rights attributable to the shares of the
controlled corporation and, with respect to a Person that is not a
corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of the
controlled Person, or (ii) owning a majority of the equity interest in
such Person.
(e) "AGREEMENT" shall mean this Limited Liability Company Agreement, as
amended from time to time.
(f) "Approval or APPROVED BY THE MEMBERS" or "APPROVAL OF THE MEMBERS"
shall mean approval by all of the Members acting through their duly
authorized representatives.
(g) "BUDGETS" shall mean the following budgets of the Company from time to
time:
(i) "DEVELOPMENT BUDGET", which shall mean the budget of Total
Project Costs estimated to be incurred with respect to the
Project including, without limitation, that portion of Total
Project Costs included in the Pre-Construction Budget which shall
be Approved by the Members by written resolution, subject to
revision from time to time by Approval of the Members; and
(ii) "OPERATING BUDGET", which shall mean the annual budgets of the
Company for the Project which shall be Approved by the Members by
written resolution, and which shall be comprised of: (A) an
estimate of all receipts from and expenditures for the ownership,
management, maintenance and operation of the Project and the
Company for such Fiscal Year and (B) an estimate of all capital
replacements, substitutions and/or additions to the Project, or
any component thereof, which are to be accomplished during such
Fiscal Year; and
(iii)"PRE-CONSTRUCTION BUDGET", which shall mean the budget of costs
and expenses estimated to be incurred with respect to the Project
during the Pre-Construction Period which shall be Approved by the
Members by written resolution, subject to revision from time to
time by Approval of the Members.
(iv) "PROSPECTIVE PROJECT BUDGET", which shall mean costs incurred for
this Project pursuant to SECTION 5.2(2) of the Limited Liability
Company of Simon/Chelsea Development Co., L.L.C. or the maximum
amount of costs and expenses estimated to be incurred with
respect to the Project during the Prospective Project Period,
which shall be Approved by the Members, subject to revision from
time to time by Approval of the Members.
(h) "CAPITAL ACCOUNT" shall have the meaning specified in SECTION 1 of the
Tax Allocations Exhibit.
(i) "CAPITAL CONTRIBUTION BALANCE" shall mean, as to each Member, the
amount of the aggregate capital contributions made by such Member from
time to time, reduced by all cash distributions to such Member other
than (i) distributions of Cash Flow pursuant to SECTION 6.5 hereof and
(ii) the repayment of, or any payment of interest on, any Contribution
Loans or any loans to the Company made by such Member.
(j) "CAPITAL PROCEEDS" shall mean the net proceeds from:
(i) loans to the Company in excess of current or reasonably
anticipated Company needs (including reasonable reserves for
Company debt obligations and working capital as determined by the
Members) or excess funds received from refinancing of any Company
indebtedness (x) after the payment of, or provision for the
payment of, all costs and expenses incurred by the Company in
connection with such refinancing, and (y) after deduction or
retention of such sums as are deemed necessary to be retained as
a reserve for the conduct of the business of the Company; and
(ii) any sale, exchange, condemnation or other disposition of the
Project, or any portion thereof or any interest therein, any
equipment used thereon, or any other capital asset of the Company
or from claims on policies of insurance maintained by the Company
for damage to or destruction of capital assets of the Company or
the loss of title thereto (to the extent that such proceeds
exceed the actual or estimated costs of repairing or replacing
the assets damaged or destroyed if, pursuant to this Agreement,
such assets are repaired or replaced) (x) after the payment of,
or provision for the payment of, all costs and expenses incurred
by the Company in connection with such sale or other disposition
or the receipt of such insurance proceeds, as the case may be,
and (y) after deduction or retention of such sums as are deemed
necessary to be retained as a reserve for the conduct of the
business of the Company.
(k) "CASH FLOW" shall mean for any period the Gross Receipts of the Company
for such period less Operating Expenses for such period.
(l) "CHANGE IN CONTROL" shall mean any event or occurrence, the result of
which is that: (i) as to Chelsea only, (A) during the Pre-Construction
Period and the Construction Period, none of David Bloom, William Bloom,
Leslie Chao or Tom Davis is an executive officer of Chelsea or its
general partner with the power and authority to conduct the day-to-day
activities of, and make binding decisions for, Chelsea, (B) at any time
during the term of this Agreement, there occurs a Transfer of the
Percentage Interest of Chelsea or the Percentage Interest of any
Chelsea Affiliate, other than a Transfer permitted pursuant to SECTION
10.2 of this Agreement, or (C) at any time during the term of this
Agreement, there occurs a merger, consolidation or other business
reorganization of Chelsea GCA Realty Partnership, L.P. ("Chelsea") or
Chelsea GCA Realty. Inc. ("Chelsea, Inc.") in which (x) Chelsea or
Chelsea, Inc. or a Chelsea Affiliate is not the surviving entity or (y)
a majority of the directors and officers of the surviving entity have
not been nominated and appointed by Chelsea or Chelsea, Inc.; and (ii)
as to Simon only, (A) during the Pre-Construction Period and the
Construction Period, none of Melvin Simon, Herbert Simon, David Simon
or Richard Sokolov is an executive officer of Simon or its general
partner with the power and authority to conduct the day-to-day
activities of, and make binding decisions for, Simon, (B) at any time
during the term of this Agreement, there occurs a Transfer of the
Percentage Interest of Simon or any Simon Affiliate, other than a
Transfer permitted pursuant to SECTION 10.2 of this Agreement, or (C)
at any time during the term of this Agreement, there occurs a merger,
consolidation or other business reorganization of the Simon Property
Group, L.P. ("Simon") or Simon Property Group, Inc. ("Simon Inc.")
and/or SD Property Group ("SD Inc.") and/or SPG Properties, Inc.
("SPG") in which Simon or Simon Inc. or SD Inc. or SPG or a Simon
Affiliate is not the surviving entity or (y) a majority of the
directors and officers of the surviving entity have not been nominated
and appointed by Simon, Simon Inc., SD Inc. or SPG.
(m) "CHELSEA" shall mean Chelsea GCA Realty Partnership, L.P., a Delaware
limited partnership whose sole general partner is Chelsea GCA Realty,
Inc., a Maryland corporation.
(n) "CHELSEA AFFILIATE" shall mean (i) Chelsea, (ii) Chelsea GCA Realty,
Inc., (iii) any other Person which, directly or indirectly, through one
or more intermediaries, controls or is controlled by or is under common
control with any of the aforesaid specifically identified Chelsea
Affiliates. The term "control", as used in the immediately preceding
sentence, means, (i) with respect to a Person that is a corporation,
the right to the exercise, directly or indirectly, of more than 50% of
the rights attributable to the shares of the controlled corporation
and, with respect to a Person that is not a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of the controlled Person, or
(ii) having a majority of the equity interest in such Person.
(o) "COMPANY" shall mean the limited liability company formed pursuant to
the terms hereof for the limited purposes and scope set forth herein.
(p) "CONSTRUCTION OVERRAGES" shall mean the excess costs and expenses over
an Approved Development Budget which the Operating Member has funded
pursuant to the provisions of Section 5.4 ( c).
(q) "CONSTRUCTION PERIOD" shall mean the period commencing upon the
earliest to occur of (i) the date of closing of a third-party
construction loan in accordance with SECTION 5.2(D) or (ii) the actual
start of construction of the site work or any portion of the Project's
buildings and improvements, or (iii) entry into commitments with third
parties for the construction of any portion of the Project's buildings
and improvements, and ending on the later to occur of (x) the opening
for business with the public of any portion of the Project or (y) the
Project Completion Date.
(r) "CONTRIBUTION LOAN" shall have the meaning specified in SECTION 5.4(D).
(s) "CONTRIBUTING MEMBER" shall have the meaning specified in SECTION
5.4(D).
(t) "DEVELOPER" shall, collectively, mean a Member or an Affiliate of
Member engaged as Developer of the Project pursuant to the Development
Agreement.
(u) "DEVELOPMENT AGREEMENT" shall mean the agreement entered into by and
between the Developer and the Company with respect to the management of
the development and construction activities of the Project, as Approved
by the Members pursuant to SECTION 8.11.
(v) "DEVELOPMENT BUDGET" shall have the meaning specified in (f) above.
(w) "DOCUMENTS" shall have the meaning specified in SECTION 7.1.
(x) "FAIR MARKET VALUE" shall have the meaning specified in SECTION 10.1.
(y) "FINAL PROJECT PROGRAM" shall mean the development of the final project
program (which shall include, among other things, the basic terms and
conditions for any financing required to complete the development and
construction of the Project and evidence reasonably acceptable to the
Members, that such financing can be obtained) site plan and schematic
building design and final Development Budget and construction schedule,
which shall be prepared at least 60 days prior to the commencement of
the Construction Period.
(z) "FISCAL YEAR" shall mean the twelve month period ending December 31 of
each year; provided that the first Fiscal Year shall be the period
beginning on the date the Company is formed and ending on December 31,
1998, and the last Fiscal Year shall be the period beginning on January
1 of the calendar year in which the final liquidation and termination
of the Company is completed and ending on the date such final
liquidation and termination is completed (to the extent any computation
or other provision hereof provides for an action to be taken on a
Fiscal Year basis, an appropriate proration or other adjustment shall
be made in respect of the first or final Fiscal Year to reflect that
such period is less than a full calendar year period).
(aa) "GROSS RECEIPTS" shall mean receipts (other than Capital Proceeds) from
the conduct of the business of the Company from all sources.
(bb) "INDEPENDENT ACCOUNTANTS" shall mean Ernst & Young or other nationally
recognized accounting firm designated pursuant to this Agreement.
(cc) "INITIAL PERCENTAGE INTEREST" shall mean the aggregate initial
percentage interest(s) in the Company owned by each Member as set forth
in SECTION 5.
(dd) "LAND" shall mean the approximately 70 acres of land on which the
Project is to be constructed, as same may be subsequently increased
pursuant to the Approval of both Member.
(ee) "LAWS" shall mean federal, state and local statutes, case law, rules,
regulations, ordinances, codes and the like which are in full force and
effect from time to time and which affect the Project or the ownership
or operation thereof.
(ff) "MAJOR DECISIONS" shall have the meaning specified in SECTION 8.6.
(gg) "MANAGEMENT AGREEMENT" shall mean the agreement entered into by and
between the Manager and the Company with respect to the management,
operation, maintenance and servicing of the Project, as Approved by the
Members pursuant to SECTION 8.12.
(hh) "MANAGER" shall mean, collectively, a Member or an Affiliate of Member
engaged as the Manager of the Project pursuant to the Management
Agreement.
(ii) "MEMBER" shall mean Simon, Chelsea or any other Person from time to
time owning a Percentage Interest as permitted by this Agreement.
(jj) "MEMBERS" shall mean, collectively, Simon, Chelsea and any other Person
from time to time owning a Percentage Interest as permitted by this
Agreement.
(kk) "NET PROFIT" or "NET LOSS" shall mean for each Fiscal Year the
Company's taxable income or taxable loss for such Fiscal Year,
determined in accordance with EXHIBIT B.
(ll) "NON-CONTRIBUTING MEMBER" shall have the meaning specified in SECTION
5.4(D)(I).
(mm) "NON-OPERATING MEMBER" shall mean any Member which is not the Operating
Member. The initial Non-Operating Member shall be Simon.
(nn) "OPERATING BUDGET" shall have the meaning specified in (G)(II) above.
(oo) "OPERATING EXPENSES" shall mean all expenditures of any kind made with
respect to the operations of the Company in the normal course of
business including, but not limited to, debt service (principal and
interest) payable on indebtedness of the Company, ad valorem taxes,
insurance premiums, repair and maintenance expense, management fees or
salaries, advertising expenses, professional fees, wages, and utility
costs, plus such sums as are deemed reasonably necessary as a reserve
to be retained for the conduct of the business of the Company, and
capital expenditures and investments in other assets. Such expenses
shall be determined on a cash basis and shall not include any non-cash
items such as depreciation or amortization.
(pp) "OPERATING MEMBER" shall mean the Member designated as such by written
resolution of the Members pursuant to SECTION 8.1(A) and SECTION 8.2,
subject to the provisions of SECTION 5.4(H) and 8.10 with respect to
its removal or withdrawal from such position.
(qq) "OPERATING PERIOD" shall mean the period commencing on the later to
occur of (I) the opening for business with the public of any portion of
the Project and (ii) the Project Completion Date and ending on the date
that the Project is no longer open for business.
(rr) "PARTNERSHIP" shall mean Simon/Chelsea Orlando Development Limited
Partnership, a Florida limited partnership.
(ss) "PARTNERSHIP AGREEMENT" shall mean that certain Agreement of Limited
Partnership dated as of January 22, 1999 by and among the Company, as
general partner, and Simon Property Group, L.P., a Delaware limited
partnership, and Chelsea GCA Realty Partnership, L.P., a Delaware
limited partnership, as limited partners.
(tt) "PERCENTAGE INTEREST" shall mean the Initial Percentage Interest or
Adjusted Percentage Interest, as the case may be.
(uu) "PERCENTAGE INTEREST ADJUSTMENT DATE" shall mean the date of funding of
a Non-Funding Member's share of a capital contribution by a Funding
Member in accordance with SECTION 5.4(C)(I) hereof.
(vv) "PERSON" shall mean an individual, partnership, corporation, trust,
unincorporated association, limited liability corporation, joint stock
company or other entity or association.
(ww) "PRE-CONSTRUCTION PERIOD" shall mean the period commencing upon the
date of this Agreement and ending upon the commencement of the
Construction Period.
(xx) "PRIME RATE" shall mean the per annum interest rate which is publicly
announced (whether or not actually charged in each instance) from time
to time (adjusted daily) by The Chase Manhattan Bank, as its "prime
rate". In the event such bank discontinues the quotation of such rate
or in the event the same ceases to be readily ascertainable, the
Operating Member shall designate, subject to the approval of the
Non-Operating Member (which approval shall not be unreasonably withheld
or delayed), as the Prime Rate, either another bank's quotation of such
rate or equivalent rate of interest which is readily ascertainable and
is appropriate, as the case may be.
(yy) "PROJECT" shall mean the Land located in Orange County, Florida, all
infra-structure necessary or appropriate in connection with the
development of such Land, the approximately 432,000 square foot Orlando
Premium Outlets manufacturers outlet shopping center constructed
thereon, the surface and structural parking facilities and all
equipment and personal property necessary or desirable for the
operation of the Houston Premium Outlets. The Members agree that they
may, subsequent to the date hereof, decide to develop certain of the
out-parcels which constitute a portion of the Land as restaurants
and/or for other retail projects. In such case the term "Project" may,
at the option of Members hereof, also be deemed to refer to such
subsequent development.
(zz) "PROJECT COMPLETION DATE" shall mean the date upon which the Project
has been substantially completed in accordance with the Plans and
Specifications, as certified by the Project's architect.
(aaa) "SIMON" shall mean Simon Property Group L.P., a Delaware limited
partnership whose sole managing general partner is Simon Property
Group, Inc., a Delaware corporation and whose sole non-managing
partners are SD Property Group, Inc., an Ohio corporation and SPG
Properties, Inc., a Maryland corporation.
(bbb) "SIMON AFFILIATE" shall mean (i) Simon; (ii) Simon Property Group, Inc.
(or any of its Affiliates (collectively, "SPG"), (iii) SD Property
Group, Inc., (iv) SPG Properties, Inc., (v) any successor to Simon in
connection with a bona fide reorganization, recapitalization,
acquisition or merger, (vi) any Person which acquires all or
substantially all of the assets of Simon or SPG and (vii) any other
Person which, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control
with any of the aforesaid specifically identified Simon Affiliates. The
term "control", as used in the immediately preceding sentence, means,
(i) with respect to a Person that is a corporation, the right to the
exercise, directly or indirectly, of more than 50% of the rights
attributable to the shares of the controlled corporation and, with
respect to a Person that is not a corporation, the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of the controlled Person, or (ii) having a
majority of the equity interest in such Person.
(ccc) "TAX ALLOCATIONS EXHIBIT" shall mean the provisions on Capital Accounts
and special allocations rules attached hereto as EXHIBIT B.
(ddd) "TERMINATION DATE" shall have the meaning specified in ARTICLE 4.
(eee) "TOTAL PROJECT COSTS" shall mean all costs which have been or are
estimated to be incurred by the Company with respect to the
acquisition, design, development, construction, debt financing,
leasing, and completion of the Project, which Total Project Costs
(including without limitation tenant allowances) are initially
estimated on the Development Budget. Total Project Costs shall include
the Development and Leasing Fees referenced in the Development
Agreement.
(fff) "TRANSFER" shall have the meaning specified in SECTION 10.1.
(ggg) "TRANSFEREE" shall have the meaning specified in SECTION 10.2(C).
(hhh) "TRANSFEROR" shall have the meaning specified in SECTION 10.2(C).
<PAGE>
EXHIBIT B
CAPITAL ACCOUNTS; SPECIAL ALLOCATION RULES
1. DEFINITIONS
The following definitions shall be applied to the terms used in this
EXHIBIT B. Capitalized terms not defined shall have the meaning set forth in the
Agreement.
"ADJUSTED CAPITAL ACCOUNT" means the Capital Account maintained for
each Member as of the end of each Company Year (i) increased by any amounts
which such Member is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii)
decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), l.704-l(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Member,
the deficit balance, if any, in such Member's Adjusted Capital Account as of the
end of the relevant Company Year.
"ADJUSTED PROPERTY" means any property the Carrying Value of which has
been adjusted pursuant to SECTION 2.D of this EXHIBIT B. Once an Adjusted
Property is deemed distributed by, and recontributed to, the Company for federal
income tax purposes upon a termination thereof pursuant to Section 708 of the
Code, such property shall thereafter constitute a Contributed Property until the
Carrying Value of such property is further adjusted pursuant to SECTION 2.D of
this EXHIBIT B.
"AGREED VALUE" means (i) in the case of any Contributed Property, as
of the time of its contribution to the Company, the 704(c) Value of such
property, reduced by any liabilities either assumed by the Company upon such
contribution or to which such property is subject when contributed, and (ii) in
the case of any property distributed to a Member by the Company, the Company's
Carrying Value of such property at the time such property is distributed,
reduced by any indebtedness either assumed by such Member upon such distribution
or to which such property is subject at the time of distribution as determined
under Section 752 of the Code and the Regulations thereunder.
"BOOK-TAX DISPARITIES" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date.
"CARRYING VALUE" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property, reduced (but not below
zero) by all Depreciation with respect to such Property charged to the Members'
Capital Accounts following the contribution of or adjustment with respect to
such property, and (ii) with respect to any other Company property, the adjusted
basis of such property for federal income tax purposes, all as of the time of
determination. The Carrying Value of any property shall be adjusted from time to
time in accordance with SECTION 2.D of this EXHIBIT B, and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Company properties, as deemed appropriate by the Operating
Member.
"COMPANY MINIMUM GAIN" has the meaning set forth in Regulations
Section 1.704-2(b)(2) for "partnership minimum gain," and the amount of Company
Minimum Gain, as well as any net increase or decrease in a Company Minimum Gain,
for a Company Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(d).
"COMPANY YEAR" means the fiscal year of the Company, which shall be
the calendar year.
"CONTRIBUTED PROPERTY" means each property or other asset (excluding
cash) contributed or deemed contributed to the Company (including deemed
contributions to the Company on termination and reconstitution thereof pursuant
to Section 708 of the Code). Once the Carrying Value of a Contributed Property
is adjusted pursuant to SECTION 2.D of this EXHIBIT B, such property shall no
longer constitute a Contributed Property, but shall be deemed an Adjusted
Property for such purposes.
"CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
"DEPRECIATION" means, for each fiscal year an amount equal to the
federal income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the Operating Member.
"MEMBER MINIMUM GAIN" means an amount, with respect to each Member
Nonrecourse Debt, equal to the Company Minimum Gain that would result if such
Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations Section 1.704-2(i)(3).
"MEMBER NONRECOURSE DEBT" has the meaning set forth Regulations
Section 1.704-2(b)(4) for "partner nonrecourse debt."
"MEMBER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i)(2) for "partner nonrecourse deductions," and the
amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse
Debt for a Company Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(i)(2).
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Company
Year shall be determined in accordance with the rules of Regulations Section
1.704-2(c).
"NONRECOURSE LIABILITY" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"REGULATIONS" means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"RESIDUAL GAIN" or "RESIDUAL LOSS" means any item of gain or loss, as
the case may be, of the Company recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to SECTION 6.B.(1)(A) OR 6.B.(2)(A) of this EXHIBIT B to eliminate
Book-Tax Disparities.
"704(C) VALUE" of any Contributed Property means the fair market value
of such property at the time of contribution as determined by the Operating
Member, using such reasonable method of valuation as it may adopt; provided,
however, that the 704(c) Value of any property deemed contributed to the Company
for federal income tax purposes upon termination and reconstitution thereof
pursuant to Section 708 of the Code shall be determined in accordance with
SECTION 2.D of this EXHIBIT B.
"UNREALIZED GAIN" attributable to any item of Company property means,
as of any date of determination, the excess, if any, of (i) the fair market
value of such property (as determined under this EXHIBIT B) as of such date,
over (ii) the Carrying Value of such property (prior to any adjustment to be
made pursuant to this EXHIBIT B) as of such date.
"UNREALIZED LOSS" attributable to any item of Company property means,
as of any date of determination, the excess, if any, of (i) the Carrying Value
of such property (prior to any adjustment to be made pursuant to this EXHIBIT B)
as of such date, over (ii) the fair market value of such property (as determined
under this EXHIBIT B) as of such date.
2. CAPITAL ACCOUNTS OF THE MEMBERS
A. The Company shall maintain for each Member a separate Capital
Account in accordance with the rules of Regulations Section l.704-l(b)(2)(iv).
Such Capital Account shall be increased by (i) the amount of all Capital
Contributions and any other deemed contributions made by such Member to the
Company pursuant to this Agreement and (ii) all items of Company income and gain
(including income and gain exempt from tax) computed in accordance with SECTION
2.B hereof and allocated to such Member pursuant to SECTION 6.1 of the Agreement
and/or SECTION 5 of this EXHIBIT B, and decreased by (x) the amount of cash or
Agreed Value of all actual and deemed distributions of property made to such
Member pursuant to this Agreement and (y) all items of Company deduction and
loss computed in accordance with SECTION 2.B hereof and allocated to such Member
pursuant to SECTION 6.2 of the Agreement and/or SECTION 5 of this EXHIBIT B.
B. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Members' Capital Accounts, unless
otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes determined in
accordance with Section 703(a) of the Code (for this purpose, all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:
(1) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of income,
gain, loss and deduction shall be made without regard to any
election under Section 754 of the Code which may be made by the
Company, provided that the amounts of any adjustments to the
adjusted bases of the assets of the Company made pursuant to
Section 734 of the Code as a result of the distribution of
property by the Company to a Member (to the extent that such
adjustments have not previously been reflected in the Members'
Capital Accounts) shall be reflected in the Capital Accounts of
the Members in the manner, and subject to the limitations,
prescribed in Regulations Section l.704-1(b)(2)(iv) (m)(4).
(2) The computation of all items of income, gain, and deduction shall
be made without regard to the fact that items described in
Sections 705(a)(l)(B) or 705(a)(2)(B) of the Code are not
includable in gross income or are neither currently deductible
nor capitalized for federal income tax purposes.
(3) Any income, gain or loss attributable to the taxable disposition
of any Company property shall be determined as if the adjusted
basis of such property as of such date of disposition were equal
in amount to the Company's Carrying Value with respect to such
property as of such date.
(4) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation
for such fiscal year.
(5) In the event the Carrying Value of any Company property is
adjusted pursuant to SECTION 2.D hereof, the amount of any such
adjustment shall be taken into account as gain or loss from the
disposition of such asset.
(6) Any items specially allocated under SECTION 6 of this EXHIBIT B
hereof shall not be taken into account.
C. Generally, a transferee (including an assignee) of a Company interest
shall succeed to a pro rata portion of the Capital Account of the transferor;
provided, however, that, if the transfer causes a termination of the Company
under Section 708(b)(l)(B) of the Code, the Company's properties shall be deemed
solely for federal income tax purposes, to have been distributed in liquidation
of the Company to the holders of Company interests (including such transferee)
and recontributed by such Persons in reconstitution of the Company. In such
event, the Carrying Values of the Company properties shall be adjusted pursuant
to SECTION 2.D.(2) hereof immediately prior to such deemed distribution
pursuant. The Capital Accounts of such reconstituted Company shall be maintained
in accordance with the principles of this EXHIBIT B.
D. (1) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in SECTION 2.D.(2), the
Carrying Values of all Company assets shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Company property, as of the times of the
adjustments provided in SECTION 2.D.(2) hereof, as if such
Unrealized Gain or Unrealized Loss had been recognized on an
actual sale of each such property and allocated pursuant to
SECTION 6.1 OR 6.2 of the Agreement and/or SECTION 5 of this
EXHIBIT B.
(2) Such adjustments shall be made as of the following times: (a)
immediately prior to the acquisition of an additional interest in
the Company by any new or existing Member in exchange for more
than a de minimis Capital Contribution; (b) immediately prior to
the distribution by the Company to a Member of more than a de
minimis amount of property as consideration for an interest in
the Company; and (c) immediately prior to the liquidation of the
Company within the meaning of Regulations Section
1.704-l(b)(2)(ii)(g), provided, however, that adjustments
pursuant to clauses (a) and (b) above shall be made only if the
Operating Member determines that such adjustments are necessary
or appropriate to reflect the relative economic interests of the
Members in the Company.
(3) In accordance with Regulations Section 1.704 -l(b)(2)(iv)(e), the
Carrying Value of Company assets distributed in kind shall be
adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Company property, as of the
time any such asset is distributed.
(4) In determining Unrealized Gain or Unrealized Loss for purposes of
this EXHIBIT B, the aggregate cash amount and fair market value
of all Company assets (including cash or cash equivalents) shall
be determined by the Operating Member using such reasonable
method of valuation as it may adopt.
E. The provisions of this Agreement (including this EXHIBIT B)
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Operating Member shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities which are secured by contributed or distributed
property or which are assumed by the Company and/or one or more of the Members)
are computed in order to comply with such Regulations, the Operating Member may
make such modification, provided that it is not likely to have a material effect
on the amounts distributable to any Member pursuant to the Agreement upon the
dissolution of the Company. The Operating Member also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of Company capital reflected on
the Company's balance sheet, as computed for book purposes, in accordance with
Regulations Section l.704-l(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section l.704-1(b).
3. NO INTEREST
No interest shall be paid by the Company on Capital Contributions or
on balances in Members' Capital Accounts.
4. NO WITHDRAWAL
No Member shall be entitled to withdraw any part of its Capital
Contribution or its Capital Account or to receive any distribution from the
Company, except as expressly provided in the Agreement.
5. SPECIAL ALLOCATION RULES
Notwithstanding any other provision of the Agreement or this EXHIBIT
B, the following special allocations shall be made in the following order:
A. MINIMUM GAIN CHARGEBACK. Notwithstanding the provisions of
ARTICLE 6 of the Agreement or any other provisions of this
EXHIBIT B, if there is a net decrease in Company Minimum Gain
during any Company Year, each Member shall be specially allocated
items of Company income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Member's
share of the net decrease in Company Minimum Gain, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the
previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto.
The items to be so allocated shall be determined in accordance
with Regulations Section 1.704-2(f)(6). This SECTION 5.A is
intended to comply with the minimum gain chargeback requirements
in Regulations Section 1.704-2(f).
B. MEMBER MINIMUM GAIN CHARGEBACK. Notwithstanding the provisions of
ARTICLE 6 of this Agreement or any other provisions of this
EXHIBIT B (except SECTION 5.A hereof), if there is a net decrease
in Member Minimum Gain attributable to a Member Nonrecourse Debt
during any Company Year, each Member who has a share of the
Member Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5),
shall be specially allocated items of Company income and gain for
such year (and, if necessary, subsequent years) in an amount
equal to such Member's share of the net decrease in Member
Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5).
Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to
each Member pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section
1.704-2(i)(4). This SECTION 5.B is intended to comply with the
minimum gain chargeback requirement in Regulations Section 1.704
- 2(i)(4) and shall be interpreted consistently therewith.
C. QUALIFIED INCOME OFFSET. In the event any Member unexpectedly
receives any adjustments, allocations or distributions described
in Regulations Sections 1.704-l(b)(2)(ii)(d)(4),
l.704-1(b)(2)(ii)(d)(5), or 1.704-l(b)(2)(ii)(d)(6), and after
giving effect to the allocations required under SECTIONS 5.A and
5.B hereof, such Member has an Adjusted Capital Account Deficit,
items of Company income and gain (consisting of a pro rata
portion of each item of Company income, including gross income
and gain for the Company Year) shall be specifically allocated to
such Member in an amount and manner sufficient to eliminate, to
the extent required by the Regulations, its Adjusted Capital
Account Deficit created by such adjustments, allocations or
distributions as quickly as possible.
D. NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any Company
Year shall be allocated to the Members in accordance with their
respective Percentage Interests. If the Operating Member
determines in its good faith discretion that the Company's
Nonrecourse Deductions must be allocated in a different ratio to
satisfy the safe harbor requirements of the Regulations
promulgated under Section 704(b) of the Code, the Operating
Member is authorized, upon notice to the other Members, to revise
the prescribed ratio to the numerically closest ratio for such
Company Year which would satisfy such requirements.
E. MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse Deductions
for any Company Year shall be specially allocated to the Member
who bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable, in accordance with Regulations Section 1.704-2(i).
F. CODE SECTION 754 ADJUSTMENTS. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Section
734(b) or 743(b) of the Code is required, pursuant to Regulations
Section 1.704-l(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such adjustment to
the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis), and such item of gain or loss
shall be specially allocated to the Members in a manner
consistent with the manner in which their Capital Accounts are
required to be adjusted pursuant to such Section of the
Regulations.
6. ALLOCATIONS FOR TAX PURPOSES
A. Except as otherwise provided in this SECTION 6, for federal
income tax purposes, each item of income, gain, loss and
deduction shall be allocated among the Members in the same manner
as its correlative item of "book" income, gain, loss or deduction
is allocated pursuant to SECTION 6.1 or 6.2 of the Agreement
and/or SECTION 5 of this EXHIBIT B.
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain,
loss, and deduction attributable to a Contributed Property or an
Adjusted Property shall be allocated for federal income tax
purposes among the Members as follows:
(1) (a) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the
Members consistent with the principles of Section
704(c) of the Code to take into account the variation
between the 704(c) Value of such property and its
adjusted basis at the time of contribution; and
(b) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be
allocated among the Members in the same manner as its
correlative item of "book" gain or loss is allocated
pursuant to SECTION 6.1 or 6.2 of the Agreement and/or
SECTION 5 of this EXHIBIT B.
(2) (a) In the case of an Adjusted Property, such items
shall
(i) first, be allocated among the Members in a
manner consistent with the principles of
Section 704(c) of the Code to take into
account the Unrealized Gain or Unrealized
Loss attributable to such property and the
allocations thereof pursuant to SECTION 2 of
this EXHIBIT B, and
(ii) second, in the event such property was
originally a Contributed Property, be
allocated among the Members in a manner
consistent with SECTION 6.B.(1)(A) of this
EXHIBIT B; and
(b) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated
among the Members in the same manner its correlative
item of "book" gain or loss is allocated pursuant to
SECTION 6.1or 6.2of the Agreement and/or SECTION 5 of
this EXHIBIT B.
(3) all other items of income, gain, loss and deduction
shall be allocated among the Members in the same manner
as their correlative item of "book" gain or loss is
allocated pursuant to SECTION 6.1 or 6.2 of the
Agreement and/or SECTION 5 of the EXHIBIT B.
C. To the extent Treasury Regulations promulgated pursuant to
Section 704(c) of the Code permit the utilization of alternative
methods to eliminate the disparity between the agreed value of
property and its adjusted basis, the Operating Member shall have
the authority to elect the method to be used by the Company and
such election shall be binding on all Members.
<PAGE>
EXHIBIT C
ADJUSTED PERCENTAGE INTEREST CALCULATION
Assume that on the Percentage Interest Adjustment Date Member A has
contributed $10 million to the Company and Member B has contributed $6 million
to the Company. Member A's percentage of the total contribution is
$10 MILLION = .625 (62.5%)
-----------
$16 million
and the percentage of the total contributions of Member B is
$6 MILLION= .375 (37.5%)
----------
$16 million
As a result, 37.5% shall be Member B's Adjusted Percentage Interest. Member A's
Adjusted Percentage Interest shall be 62.5%.
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
OF
S/C ORLANDO DEVELOPMENT LLC
TABLE OF CONTENTS
PAGE NUMBER
ARTICLE 1.........................................................1
DEFINITIONS; EXHIBITS..........................................1
Section 1.1 CERTAIN DEFINITIONS ............................1
Section 1.2 OTHER DEFINITIONS...............................1
Section 1.3 EXHIBITS........................................1
ARTICLE 2.........................................................2
FORMATION; NAME; PLACE OF BUSINESS.............................2
Section 2.1 FORMATION OF COMPANY; CERTIFICATE OF FORMATION..2
Section 2.2 NAME OF COMPANY.................................2
Section 2.3 PLACE OF BUSINESS...............................2
Section 2.4 REGISTERED OFFICE AND REGISTERED AGENT..........3
ARTICLE 3.........................................................3
PURPOSES AND POWERS OF COMPANY.................................3
Section 3.1 PURPOSES........................................3
Section 3.2 POWERS..........................................3
Section 3.3 LIMITS OF COMPANY...............................3
Section 3.4 NO INDIVIDUAL AUTHORITY.........................4
Section 3.5 RESPONSIBILITY OF MEMBERS.......................4
ARTICLE 4.........................................................5
TERM OF COMPANY................................................5
ARTICLE 5.........................................................5
CAPITAL........................................................5
Section 5.1 MEMBERS'INITIAL PERCENTAGE INTERESTS............5
Section 5.2 CAPITAL CONTRIBUTIONS...........................5
(a) INITIAL CAPITAL CONTRIBUTIONS.........................5
(b) PRE-CONSTRUCTION EXPENDITURES.........................6
(c) CONSTRUCTION PERIOD...................................6
(d) COMPLETION OF CONSTRUCTION............................7
Section 5.3 ADDITIONAL FUNDS................................8
Section 5.4 CAPITAL CALLS...................................8
(a) GENERAL...............................................8
(b) NOTICE BY OPERATING MEMBER............................8
(c) CONSTRUCTION OVERRUNS.................................8
(d) DILUTION.............................................10
(e) CONTRIBUTION LOANS...................................11
(f) REPAYMENT THROUGH DISTRIBUTIONS......................12
(g) TRANSFEREES AND ASSIGNEES............................12
(h) NO THIRD PARTY RIGHTS................................13
(i) ROLE IN MANAGEMENT...................................13
(j) FAILURE TO FUND UNDER PARTNERSHIP AGREEMENT..........13
Section 5.5 NO INTEREST ON CAPITAL.........................14
Section 5.6 REDUCTION OF CAPITAL ACCOUNTS..................14
Section 5.7 NEGATIVE CAPITAL ACCOUNTS......................14
Section 5.8.LIMIT ON CONTRIBUTIONS AND OBLIGATIONS
OF MEMBERS.....................................14
ARTICLE 6........................................................15
PROFITS, LOSSES, DISTRIBUTIONS, AND ALLOCATIONS...............15
Section 6.1 NET PROFIT.....................................15
Section 6.2 NET LOSS.......................................15
Section 6.3 LIMITATION ON NET LOSS ALLOCATION..............15
Section 6.4 OTHER ALLOCATION RULES.........................16
Section 6.5 DISTRIBUTION OF CASH FLOW......................16
Section 6.6 DISTRIBUTION OF CAPITAL PROCEEDS...............16
ARTICLE 7........................................................17
COMPANY BOOKS; ACCOUNTING/FINANCIAL STATEMENTS................17
Section 7.1 BOOKS AND RECORDS..............................17
Section 7.2 TAX RETURNS....................................17
Section 7.3 REPORTS........................................17
Section 7.4 AUDITS.........................................18
Section 7.5 BANK ACCOUNTS..................................19
Section 7.6 TAX ELECTIONS..................................19
Section 7.7 TAX MATTERS MEMBER.............................19
ARTICLE 8........................................................19
MANAGEMENT OF THE COMPANY.....................................19
Section 8.1 MANAGEMENT OF THE COMPANY......................19
(a) GENERAL..............................................19
(b) MEMBER REPRESENTATIVES...............................20
(c) ACTIONS BY THE MEMBERS...............................20
(d) MEETINGS.............................................21
Section 8.2 THE OPERATING MEMBER...........................21
Section 8.3 DUTIES OF OPERATING MEMBER; CHELSEA AS
INITIAL OPERATING MEMBER.......................24
Section 8.4 AUTHORIZATION FOR EXPENDITURES.................24
Section 8.5 RIGHTS NOT ASSIGNABLE..........................25
Section 8.6 MAJOR DECISIONS AND PROHIBITED ACTS............25
Section 8.7 EMERGENCY AUTHORITY............................27
Section 8.8 AUTHORIZED ACTS................................28
Section 8.9 BUDGETS........................................28
Section 8.10 REMOVAL OF OPERATING MEMBER...................30
Section 8.11 DEVELOPMENT AGREEMENT.........................30
Section 8.12 MANAGEMENT AGREEMENT..........................31
Section 8.13 CONSTRUCTION CONTRACT AND ARCHITECT'S
CONTRACT AND ENGINEER'S CONTRACT..............32
Section 8.14 FEES AND EXPENSE REIMBURSEMENTS FOR MEMBERS...32
ARTICLE 9........................................................32
COMPENSATION; REIMBURSEMENTS; CONTRACTS WITH AFFILIATES.......32
Section 9.1 COMPENSATION, REIMBURSEMENTS...................32
(a) COMPENSATION.........................................32
(b) REIMBURSEMENTS.......................................32
Section 9.2 NO CONTRACTS WITH AFFILIATES...................33
ARTICLE 10.......................................................32
SALE, TRANSFER OR MORTGAGE....................................33
Section 10.1 GENERAL.......................................33
Section 10.2 PERMITTED TRANSFERS BY THE MEMBERS............33
(a) TRANSFERS BY CHELSEA.................................33
(b) TRANSFERS BY SIMON...................................33
(c) AGREEMENTS WITH TRANSFEREES..........................34
Section 10.3 FIRST RIGHT OF REFUSAL PROCEDURE..............34
Section 10.4 RESTRAINING ORDER.............................39
Section 10.5 NO TERMINATION................................39
Section 10.6 BUY-SELL......................................40
Section 10.7 CLOSING OF PURCHASE OF A MEMBER'S INTEREST....42
Section 10.8 ASSUMPTION OF LIABILITIES.....................42
ARTICLE 11.......................................................44
DISSOLUTION...................................................44
Section 11.1 DISSOLUTION AND TERMINATION;
CONTINUATION OF BUSINESS......................44
(a) CAUSES OF DISSOLUTION AND TERMINATION................44
(b) RIGHT TO CONTINUE BUSINESS OF THE COMPANY............45
Section 11.2 PROCEDURE IN DISSOLUTION AND LIQUIDATION......45
(a) WINDING UP...........................................45
(b) MANAGEMENT RIGHTS DURING WINDING UP..................45
(c) WORK IN PROGRESS.....................................46
(d) DISTRIBUTIONS IN LIQUIDATION.........................46
(e) NON-CASH ASSETS......................................47
Section 11.3 DISPOSITION OF DOCUMENTS AND RECORDS..........47
Section 11.4 DATE OF TERMINATION...........................47
ARTICLE 12.......................................................48
GENERAL PROVISIONS............................................48
Section 12.1 VOLUNTARY DISPUTE RESOLUTION.................48
Section 12.2 NOTICES......................................48
Section 12.3 ENTIRE AGREEMENT.............................50
Section 12.4 SEVERABILITY.................................50
Section 12.5 SUCCESSORS AND ASSIGNS.......................50
Section 12.6 COUNTERPARTS.................................50
Section 12.7 ADDITIONAL DOCUMENTS AND ACTS................50
Section 12.8 INTERPRETATION...............................50
Section 12.9 TERMS........................................51
Section 12.10 AMENDMENT....................................51
Section 12.11 REFERENCES TO THIS AGREEMENT.................51
Section 12.12 HEADINGS.....................................51
Section 12.13 NO THIRD PARTY BENEFICIARY...................51
Section 12.14 NO WAIVER....................................51
Section 12.15 TIME OF ESSENCE..............................52
Section 12.16 ATTORNEY'S FEES..............................52
EXHIBIT LIST:
Exhibit A
Definitions, 54
Exhibit B
Capital Accounts; Special Allocation Rules, 62
Exhibit C
Adjusted Percentage Interest Calculation 71
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
OF
S/C ORLANDO DEVELOPMENT LLC
DECEMBER 23, 1998
Exhibit 10.10
SIMON/CHELSEA ORLANDO DEVELOPMENT LIMITED PARTNERSHIP
LIMITED PARTNERSHIP AGREEMENT
THIS LIMITED PARTNERSHIP AGREEMENT, executed as of January 22, 1999,
(the "Partnership Agreement" or this "Agreement"), is made between and among S/C
ORLANDO DEVELOPMENT LLC, a Delaware limited liability company ("S/C Orlando"),
as a General Partner, CHELSEA GCA REALTY PARTNERSHIP, L.P. , a Delaware limited
partnership ("Chelsea"), as a Limited Partner, and SIMON PROPERTY GROUP
(FLORIDA), L.P., a Delaware limited partnership ("Simon"), as a Limited Partner.
RECITALS:
R-1. The parties hereto hereby form Simon/Chelsea Orlando Development
Limited Partnership (the "Partnership") as a Florida limited partnership to
acquire, own, develop, finance, manage and lease certain real property located
in Orange County, Florida, consisting of approximately 70 acres (the "Land") as
more fully described in EXHIBIT B hereto.
R-2. The Partnership intends to develop on the Land a manufacturers
outlet shopping center, consisting of approximately 432,000 gross leasable
square feet of retail space.
R-3. The parties hereto desire to execute this Agreement to govern the
affairs of the Partnership and set forth their rights, obligations and
understandings with respect to the Partnership.
ARTICLE 1 - DEFINED TERMS
Capitalized terms used herein without further definition, and
variations thereof, have the meaning set forth below unless the context
otherwise clearly requires:
1.1 ACT. The Florida Revised Uniform Limited Partnership Act, as the
same may be amended from time to time.
1.2 ADJUSTED PERCENTAGE INTEREST. The aggregate percentage interest(s)
in the Partnership owned by each Partner after the calculation made pursuant to
SECTION 6.4.
1.3 AFFILIATE. A Chelsea or Simon Affiliate, or a Person or Persons
directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with the Person(s) in question. The term
"control"(including, with correlative meaning, the terms "controlled by" and
"under common control with"), as used in the immediately preceding sentence,
means, (i) with respect to a Person that is a corporation, the right to
exercise, directly or indirectly, more than 50% of the rights attributable to
the shares of the controlled corporation and, with respect to a Person that is
not a corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of the controlled
Person, or (ii) owning a majority of the equity interest in such Person. For all
purposes of this Agreement, Chelsea GCA Operating Corp., or any similarly
structured services corporation, shall be deemed to be an Affiliate of Chelsea,
and M.S. Management and SPG Realty Consultants, L.P., or any similarly
structured services corporation, shall be deemed to be an Affiliate of Simon.
1.4 AGREEMENT. This Limited Partnership Agreement, and EXHIBIT A
hereto and all amendments hereto. Words such as "herein," "hereinafter,"
"hereof," "hereto," "hereby" and "hereunder" when used with reference to this
Agreement, refer to this Agreement as a whole, including those terms which are
included by reference, unless the context otherwise requires.
1.5 APPROVED OR APPROVED BY THE GENERAL PARTNER or APPROVAL OF THE
GENERAL PARTNER shall mean Approval as defined in the General Partnership
Agreement.
1.6 BANKRUPTCY. As to a referenced Person:
A. Its filing a petition commencing a case as a debtor under the
Federal Bankruptcy Code or a similar provision of State law
(collectively, as now or in the future amended, the "Bankruptcy
Code");
B. The commencement of an involuntary case against it under the
Bankruptcy Code and the earlier of (A) the entry of an order for
relief, or (B) the appointment of an interim trustee to take
possession of its estate and/or to operate any of its business;
C. Its making a general assignment for the benefit of its
creditors;
D. Its consenting to the appointment of a receiver for all or a
substantial part of its property;
E. The entry of a court order appointing a receiver or trustee
for all or a substantial part of its property; or
F. The assumption of custody or sequestration by a court of
competent jurisdiction of all or substantially all of its property.
1.7. BONA FIDE OFFER. As defined in Section 11.3 hereof.
1.8 BUDGETS shall mean the following budgets of the Partnership from
time to time:
A. Development Budget. The budget of Total Project Costs
estimated to be incurred with respect to the Project including,
without limitation, that portion of Total Project Costs included in
the Pre-Construction Budget which shall be Approved by the General
Partner by written resolution, subject to revision from time to time
by Approval of the General Partner ; and
B. Operating Budget. The annual budgets of the Partnership for
the Project which shall be Approved by the General Partner by written
resolution, and which shall be comprised of: (A) an estimate of all
receipts from and expenditures for the ownership, management,
maintenance and operation of the Project and the Partnership for such
Fiscal Year and (B) an estimate of all capital replacements,
substitutions and/or additions to the Project, or any component
thereof, which are to be accomplished during such Fiscal Year; and
C. Pre-Construction Budget. The budget of costs and expenses
estimated to be incurred with respect to the Project during the
Pre-Construction Period which shall be Approved by the General Partner
by written resolution, subject to revision from time to time by
Approval of the General Partner .
1.9 BUSINESS DAY. Any day on which commercial banks located in New
York City are not authorized to close and which is not a Saturday or a Sunday.
In the event any act is required by this Agreement to be taken or to occur on a
specified date and the specified date is not a Business Day, performance of such
act shall be deemed timely if it is taken or occurs on the first Business Day
following the specified date.
1.10 CAPITAL ACCOUNT. With respect to each Partner, the separate
"book" account maintained by the Partnership for such Partner established and
adjusted in accordance with Section 6.9 hereof.
1.11 CAPITAL CONTRIBUTION. The total amount of cash and the Carrying
Value of any other assets contributed (or deemed contributed under Regulation
Section 1.704-1(b)(2)(iv)(d)) to the capital of the Partnership by a Partner,
net of liabilities assumed by the Partnership or to which such assets are
subject.
1.12 CAPITAL CONTRIBUTION BALANCE. As to each Partner, the amount of
the aggregate capital contributions made by such Partner from time to time,
reduced by all cash distributions to such Partners other than (i) distributions
of Cash Flow pursuant to SECTION 6.5 hereof and (ii) the repayment of, or any
payment of interest on, any Contribution Loans or any loans to the Partnership
made by such Partners.
1.13 CARRYING VALUE. With respect to any Partnership asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
A. The initial Carrying Value of any asset contributed (or deemed
contributed) to the capital of the Partnership shall be such asset's
gross fair market value at the time of such contribution, as
determined by the General Partner or otherwise specifically agreed to
between the Partnership and the Partner making (or deemed to make)
such contribution;
B. The Carrying Value of each Partnership asset shall be adjusted
to equal its respective gross fair market value as of the following
times: (A) the acquisition of an additional Partnership Interest by
any new or existing Partner in exchange for more than a DE MINIMIS
Capital Contribution; (B) the distribution by the Partnership to a
Partner of more than a DE MINIMIS amount of Partnership Property other
than money, unless all Partners receive simultaneous distributions of
undivided interests in the distributed Partnership Property in
proportion to their Partnership Interests; and (C) such other times as
required under applicable Regulations;
C. The Carrying Value of each Partnership asset shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such asset pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Treasury
Regulations Section l.704-l(b)(2)(iv)(m) and Section 1.44 and Section
6.9 below hereof; provided, however, that the Carrying Value shall not
be adjusted pursuant to this clause (iii) to the extent an adjustment
is made pursuant to clause (ii) above in connection with a transaction
that would otherwise result in an adjustment pursuant to this clause
(iii); and
D. If the Carrying Value of an asset has been determined pursuant
to clause (i), (ii) or (iii) above, such Carrying Value shall
thereafter be adjusted in the same manner as the asset's adjusted
basis for federal income tax purposes except that Depreciation
deductions shall be computed based upon the Carrying Values of the
Partnership's assets rather than upon the assets' adjusted bases for
federal income tax purposes.
1.14 CERTIFICATE. The Certificate of Limited Partnership of the
Partnership filed with the Office of the Secretary of State of the State of
Florida on January 22, 1999, as such Certificate may be amended and in effect
from time to time.
1.15 CHANGE IN CONTROL shall mean any event or occurrence, the result
of which is that: (i) as to Chelsea only, (A) during the Pre-Construction Period
and the Construction Period, none of David Bloom, William Bloom, Leslie Chao or
Tom Davis is an executive officer of Chelsea or its general partner with the
power and authority to conduct the day-to-day activities of, and make binding
decisions for, Chelsea, (B) at any time during the term of this Agreement, there
occurs a Transfer of the Percentage Interest of Chelsea or the Percentage
Interest of any Chelsea Affiliate, other than a Transfer permitted pursuant to
SECTION 11.2 of this Agreement, or (C) at any time during the term of this
Agreement, there occurs a merger, consolidation or other business reorganization
of Chelsea GCA Realty Partnership, L.P. ("Chelsea") or Chelsea GCA Realty, Inc.
("Chelsea Inc.") in which (x) Chelsea or Chelsea Inc. or a Chelsea Affiliate is
not the surviving entity and/or (y) a majority of the directors, and officers of
the surviving entity have not been nominated and appointed by Chelsea or
Chelsea, Inc.; and (ii) as to Simon only, (A) during the Pre-Construction Period
and the Construction Period, none of Melvin Simon, Herbert Simon, David Simon or
Richard Sokolov is an executive officer of Simon or its general partner with the
power and authority to conduct the day-to-day activities of, and make binding
decisions for, Simon, (B) at any time during the term of this Agreement, there
occurs a Transfer of the Percentage Interest of Simon or any Simon Affiliate,
other than a Transfer permitted pursuant to SECTION 11.2 of this Agreement, or
(C) at any time during the term of this Agreement, there occurs a merger,
consolidation or other business reorganization of Simon Property Group, L.P.
("Simon") or its general partner, Simon Property Group, Inc. ("Simon Inc.")
and/or SD Property Group, Inc. ("SD Inc.") and/or SPG Properties Inc. ("SPG") in
which (x) Simon or Simon Inc., or SD Inc. or SPG or a Simon Affiliate is not the
surviving and/or controlling entity and/or (y) a majority of the directors and
officer of the surviving entity have not been nominated and appointed by Simon,
Simon, Inc., SD Inc. or SPG.
1.16 CHELSEA. Chelsea GCA Realty Partnership, L.P., a Delaware limited
partnership, which is a Limited Partner hereunder.
1.17 INTENTIONALLY DELETED.
1.18 CODE. The Internal Revenue Code of 1986, as amended from time to
time.
1.19 CONSENT. The prior written consent or approval of a Partner to do
the act or thing for which the consent or approval is solicited, or the act of
granting such consent or approval, as the context may require. Except as
expressly provided otherwise herein, reference to a requirement for the Consent
of a Partner shall require the commercially reasonable judgment of such Partner
in light of the facts and circumstances rather than the unfettered discretionary
decision of such Partner.
1.20 CONSTRUCTION LENDER. Collectively, the lender which provides the
Construction Loan and any co-agents, co-lenders and/or participants in such
loan.
1.21 CONSTRUCTION LOAN. The construction loan to be obtained by the
Partnership for the purpose of financing a portion of the construction of the
Project.
1.22 INTENTIONALLY DELETED.
1.23 CONSTRUCTION PERIOD shall mean the period commencing upon the
earliest to occur of (i) the date of closing of a third-party Construction Loan
or (ii) the actual start of construction of the site work or any portion of the
Project's buildings and improvements, or (iii) entry into commitments with third
parties for the construction of any portion of the Project's buildings and
improvements, and ending on the later to occur of (x) the opening for business
with the public of any portion of the Project or (y) the Project Completion
Date.
1.24 DEBT SERVICE. Principal, interest and other payments of every
kind on or in connection with any outstanding indebtedness of the Partnership.
1.25 DEPRECIATION. For each fiscal year of the Partnership or other
period, an amount equal to the depreciation, amortization or other cost recovery
deduction allowable with respect to an asset for such year or other period,
except that if the Carrying Value of an asset differs from its adjusted basis
for federal income tax purposes at the beginning of such year or other period,
Depreciation shall be an amount which bears the same ratio to such beginning
Carrying Value as the federal income tax depreciation, amortization or other
cost recovery deduction for such year or other period bears to such beginning
adjusted tax basis.
1.26 DEVELOPMENT AGREEMENT. The Development Agreement to be entered
into by and between the Partnership and an Affiliate(s) of the General Partner
covering the development and construction of the Project.
1.27 DOLLARS OR $. Lawful money of the United States of America.
1.28 EXCESS NEGATIVE BALANCE. As to any Partner, the excess, if any,
of (i) the negative balance in a Partner's Capital Account (determined before
taking into account any Capital Account adjustments for the Partnership taxable
year during which the determination is made) after reducing such balance by the
net adjustments, allocations and distributions described in Regulation Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) which, as of the end the Partnership's
taxable year are reasonably expected to be made to such Partner, over (ii) the
sum of (A) the amount, if any, which the Partner is required to restore to the
Partnership upon liquidation of such Partner's Partnership Interest (or which is
so treated pursuant to Regulation Section 1.704-1(b)(2)(ii)(c)), (B) the
Partner's share (as determined under Regulation Section 1.704-2(g)(1)) of the
Minimum Gain computed solely with respect to Nonrecourse Debt other than Partner
Nonrecourse Debt, and (C) the Partner's share (as determined under Regulation
Section 1.704-2(i)(5)) of the Partner Minimum Gain computed solely with respect
to any Partner Nonrecourse Debt.
1.29 FISCAL YEAR. The twelve month period ending December 31 of each
year; provided that the first Fiscal Year shall be the period beginning on the
date the Partnership is formed and ending on December 31, 1999, and the last
Fiscal Year shall be the period beginning on January 1 of the calendar year in
which the final liquidation and termination of the Partnership is completed and
ending on the date such final liquidation and termination is completed (to the
extent any computation or other provision hereof provides for an action to be
taken on a Fiscal Year basis, an appropriate proration or other adjustment shall
be made in respect of the first or final Fiscal Year to reflect that such period
is less than a full calendar year period).
1.30 FUNDING MEMBER. Shall have the meaning set forth in Section 6.4
hereof.
1.31 GENERAL PARTNER. S/C Orlando and any other Person who becomes a
successor or additional General Partner of the Partnership pursuant to the terms
of this Agreement, and who is a General Partner at the time of reference
thereto.
1.32 GENERAL PARTNER AGREEMENT. The Limited Liability Company
Agreement as of December 23, 1998 between Simon Property Group, L.P. and Chelsea
GCA Realty Partnership, L.P. as members.
1.33 INDEPENDENT ACCOUNTANTS shall mean Ernst & Young or other
nationally recognized accounting firm designated pursuant to this Agreement.
1.34 INITIAL PERCENTAGE INTEREST. The aggregate initial percentage
interest(s) in the Partnership owned by each Partner as set forth in SECTION 5.
1.35 LAND. As defined in Recital R-1 hereof.
1.36 LAND PARCELS. Those parcels of Land owned by the Partnership and
(i) designated for sale or ground lease as described in the Development Budget
or (ii) which are hereafter designated as Land Parcels by the General Partner.
1.37 LIMITED PARTNER. Any Partner who is designated as a Limited
Partner on EXHIBIT A to this Agreement at the time of reference thereto, in such
Partner's capacity as a Limited Partner of the Partnership, including
substituted Limited Partners admitted in accordance with the terms of this
Agreement.
1.38 MAJOR CAPITAL EVENT. Any of the following: (1) the sale of any of
the real property (other than Land Parcels during the term of the Construction
Loan) or any material item of the personal property of the Partnership,
including without limitation, all or any part of the Land (other than Land
Parcels during the term of the Construction Loan) and/or the Project; (2) the
condemnation of all or any part of (i) the Project or the use thereof, or (ii)
the Land or the use thereof, or (iii) purchases or processes in lieu thereof,
except for temporary easements and the like; (3) receipt of net recoveries of
damage awards and insurance proceeds (other than rental interruption insurance
proceeds); or (4) receipt of the net proceeds (net of reserves reasonably
determined by the General Partner) from any mortgages on Partnership Property or
any other loans or borrowings of the Partnership, including without limitation,
loans from any Partner. The sale of Land Parcels during the term of the
Construction Loan and the distribution of Proceeds from such sale is
specifically addressed in Section 7.6 hereof.
1.39 MAJOR DECISION. As defined in Section 9.1(c) hereof.
1.40 MANAGEMENT AGREEMENT. The Management Agreement to be entered into
by and between the Partnership and an Affiliate or Affiliates of the General
Partner, in the form to be Approved by the General Partner.
1.41 MINIMUM GAIN. The meaning set forth in Regulation Section
1.704-2(d). Minimum Gain shall be computed separately for each Partner in a
manner consistent with the Regulations under Code Section 704(b).
1.42 NEGATIVE CAPITAL ACCOUNT. A Capital Account with a balance of
less than zero.
1.43 NET ORDINARY CASH FLOW. With respect to a particular Fiscal Year,
all net income less expenses of the Partnership determined in accordance with
generally accepted accounting principles for such fiscal year (except net income
arising from a Major Capital Event) and shall be determined by adjusting such
net income and expenses as follows:
A. Depreciation of buildings, improvements and personal property
shall not be considered an expense.
B. Amortization of any financing or refinancing fee, organization
cost, leasing fee, capitalized interest, start-up expense or other
capital-type item shall not be considered an expense.
C. Amortization or other payment of the principal of any mortgage
or other loan or indebtedness of the Partnership shall be considered
an expense. To the extent that proceeds from a Major Capital Event or
from the sale of any Land Parcel are used to pay any such loan, the
amount of such payments shall not be treated as an expense for
purposes hereof.
D. After the Completion of the Project, annual contributions, in
accordance with the Approved Budget, shall be made to fund reasonable
reserves as determined by the General Partner, to provide for working
capital needs, funds for releasing costs, capital improvements or
replacements and for any other contingencies of the Partnership. Said
annual contributions to reserves shall be held in a separate interest
bearing reserve account, established in the name of the Partnership
and under the control of the General Partner. The contributions to
such reserves shall be considered as expenses. Any expense paid for by
funds in such reserves shall not be considered an expense. Interest on
such reserves shall be credited to reserves, but shall not be
considered income for purposes of this definition of Net Ordinary Cash
Flow.
E. Accruals for free or stepped rent shall not be considered as
income and the related amortized amounts shall not be considered as
expenses.
F. Any amounts paid by the Partnership for the acquisition of
Partnership Property, re-leasing costs, expansion costs and/or for
capital improvements and/or replacements shall be considered as
expenses, except to the extent the same are financed through proceeds
from a Major Capital Event, the sale of any Land Parcel, Capital
Contributions, or funds in reserves expensed in the current or
previous fiscal years. Any item that would otherwise be an expense
shall not be considered an expense if it is paid from proceeds from a
Major Capital Event or Capital Contributions.
G. Net Ordinary Cash Flow shall also be deemed to include any
other funds available at any time and from any source (other than
Major Capital Events) including without limitation, amounts previously
set aside as reserves and expensed in the current or previous fiscal
years, determined by the General Partner to be no longer reasonably
necessary for the efficient conduct of the business of the
Partnership.
1.44 NET PROFITS AND NET LOSSES. The taxable income or loss, as the
case may be, for a period (or from a transaction) as determined in accordance
with Code Section 703(a) (for this purpose, all items of income, gain, loss, or
deduction required to be separately stated pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss) computed with the following
adjustments (without duplication):
A. Items of gain, loss and deduction (including Depreciation)
shall be computed based upon the Carrying Values of the Partnership
assets rather than upon the assets' adjusted bases for federal income
tax purposes;
B. Any tax-exempt income received by the Partnership shall be
included as an item of gross income;
C. The amount of any adjustments to the Carrying Values of any
Partnership assets pursuant to Code Section 734 as provided in Section
1.13(B) or 1.13(C) shall be taken into account but any adjustment
pursuant Code Section 743 shall not be taken into account; and
D. Any expenditure of the Partnership described in Code Section
705(a)(2)(B) (including any expenditures treated as being described in
Code Section 705(a)(2)(B) pursuant to the Regulations) shall be
treated as deductible expense.
E. Nothwithstanding any other provision of this definition, any
items which are specifically allocated pursuant to Section 7.2 shall
not be taken into account in computing Net Profits or Net Losses.
1.45 NONRECOURSE DEBT. has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
1.46 NONRECOURSE DEDUCTIONS has the meaning set forth in Section
1.704(b)(1) of the Regulations.
1.47 NON-CONTRIBUTING MEMBER shall have the meaning specified in
SECTION 6.4(B)(I).
1.48 NON-FUNDING MEMBER shall have the meaning specified in SECTION
6.4(A).
1.49 NOTICE. A writing containing the information required by this
Agreement to be communicated to any Person, sent by registered or certified
mall, postage prepaid, or given by personal delivery, or sent by confirmed air
courier to such Person at the last known address of such Person, or by
facsimile, the date of registry thereof or the date of the certification of
receipt therefor as evidenced by postal, facsimile or air courier records or the
date of personal delivery (or refusal thereof during normal business hours)
being deemed the date of receipt of Notice; provided, however, that any
communication sent to such Person and actually received by such a Person shall
constitute Notice for all purposes of this Agreement; and provided, further,
that any Notice required to be given by the General Partner pursuant to the
first (1st) sentence of Section 6.3 herein may be given either in writing or
orally.
1.50 OPERATING BUDGET shall have the meaning specified in Section 1.8
(B) above.
1.51 OPERATING EXPENSES shall mean all expenditures of any kind made
with respect to the operations of the Partnership in the normal course of
business including, but not limited to, debt service (principal and interest)
payable on indebtedness of the Partnership, ad valorem taxes, insurance
premiums, repair and maintenance expense, management fees or salaries,
advertising expenses, professional fees, wages, and utility costs, plus such
sums as are deemed reasonably necessary as a reserve to be retained for the
conduct of the business of the Partnership, and capital expenditures and
investments in other assets. Such expenses shall be determined on an accrual
basis and shall not include any non-cash items such as depreciation or
amortization
1.52 PARTIALLY ADJUSTED CAPITAL ACCOUNT. With respect to any Partner
for any taxable year or other period, the Capital Account balance of such
Partner at the beginning of such period, adjusted as set forth in the definition
of Capital Account for all contributions and distributions during such period
and all special allocations pursuant to Section 7.2 respect to such period but
before giving effect to any allocation pursuant to Section 7.1 respect to such
period.
1.53 PARTNER. Any General Partner or Limited Partner.
1.54 INTENTIONALLY DELETED.
1.55 PARTNER MINIMUM GAIN. An amount, with respect to each Partner
Nonrecourse Debt, equal to the Minimum Gain that would result if such Partner
Nonrecourse Debt were treated as a Nonrecourse Debt, determined in accordance
with Regulation Section 1.704-(2)(i)(3).
1.56 PARTNER NONRECOURSE DEDUCTIONS has the meaning set forth in
Section 1.704-2(i)(1) and 1.704-2(i)(2)of the Regulations.
1.57 PARTNER NONRECOURSE DEBT. Any indebtedness of the Partnership
that is a "partner nonrecourse debt" with the meaning of Regulation Section
1.704-2(b)(4).
1.58 PARTNERSHIP MINIMUM GAIN has the meaning set forth in Regulations
Sections 1.704-2(b)(2) and 1.704-2(d).
1.59 PARTNERSHIP. The limited partnership herein formed as
Simon/Chelsea Orlando Development L.P., as said Partnership may from time to
time be constituted.
1.60 PARTNERSHIP INTEREST. The entire ownership interest (which may be
expressed as a percentage) of a Partner in the Partnership at any particular
time, including the right of such Partner to any and all benefits to which a
Partner may be entitled pursuant to this Agreement and under the Act, together
with all obligations of such Partner to comply with the terms and provisions of
this Agreement and the Act. The percentage of Partnership Interest of each
Partner is set forth on EXHIBIT A hereto, as the same may be amended from time
to time. Whenever any reference is made herein to "Partnership Interest" in the
context of an allocation or other similar determination being made PRO RATA, in
proportion to or in accordance with the Partners' respective Partnership
Interests, such references shall mean and refer to the then-applicable
percentage of Partnership Interest of each Partner.
1.61 PARTNERSHIP PROPERTY. All real and personal property now owned or
hereafter acquired by the Partnership and any and all improvements thereto, and
shall include the Land, all Land Parcels, the Project and both tangible and
intangible property.
1.62 PERCENTAGE INTEREST shall mean the Initial Percentage Interest or
Adjusted Percentage Interest, as the case may be.
1.63 PERCENTAGE INTEREST ADJUSTMENT DATE shall mean the date of
funding of a Non-Funding Member's share of a capital contribution by a Funding
Member in accordance with SECTION 6.4(A) hereof.
1.64 PERMANENT LOAN. The financing to be obtained by the Partnership
to replace the Construction Loan, which Permanent Loan shall satisfy the
parameters approved by the General Partner.
1.65 PERSON. An individual, partnership, firm, corporation, trust,
estate or other entity.
1.66 PLANS. The plans and specifications for the Project which have
been approved by the General Partner pursuant to the General Partnership
Agreement and all amendments thereto.
1.67 POSITIVE CAPITAL ACCOUNT. A Capital Account with a balance
greater than zero.
1.68 PRIME OR PRIME RATE. The prime rate as the same may be published
and modified from time to time in THE WALL STREET JOURNAL. If at any time there
is more than one such published prime rate, the average of the range of the
prime rates shall be used.
1.69 PROCEEDS. All net proceeds from sales by the Partnership of Land
Parcels (after making any amortization payments required pursuant to the terms
of the Construction Loan) which sales occur prior to the closing of the
Permanent Loan.
1.70 PROJECT. The Land, all infrastructure necessary or appropriate in
connection with the development of such Land and the manufacturers outlet
shopping center constructed thereon and all equipment and personal property
necessary or desirable for the operation of such shopping center. The Partners
contemplate that the manufacturer's outlet shopping mall will be developed in
one phase. At the option of the General Partner, any Land not needed for the
development of the manufacturers outlet center may be designated as Land Parcels
and sold or leased.
1.71 PROJECT COMPLETION DATE. The date upon which the Project has been
substantially completed in accordance with the Plans, as certified by the
Project's architect.
1.72 REGULATIONS. The income tax regulations, including any temporary
regulations, from time to time promulgated under the Code, as such regulations
are amended from time to time.
1.73 S/C ORLANDO. S/C Orlando Development LLC a Delaware limited
liability company, which is the General Partner hereunder. The Chelsea Member
and the Simon Member constitute all of the members of S/C Orlando.
1.74 SIMON. Simon Property Group, L.P., a Delaware limited
partnership, which is a Limited Partner hereunder.
1.75 SIMON, INC. Simon Property Group, Inc., a Delaware corporation.
1.76 TARGET CAPITAL ACCOUNT. With respect to any Partner for any
taxable year or other period an amount (which may be either a positive or
negative balance) equal to the difference between (i) the hypothetical
distribution (if any) such Partner would receive if all Partnership assets,
including cash, were sold for cash equal to their Carrying Value (taking into
account any adjustments to Carrying Value for such period), all Partnership
liabilities were satisfied in cash according to their terms limited, with
respect to each nonrecourse liability of the Partnership, to the Carrying Value
of the assets securing such liability), and the net proceeds of such sale to the
Partnership (after satisfaction of said liabilities) were distributed in full
pursuant to Section 7.8 on the last day of such period minus (ii) the sum of (A)
such Partner's share of Minimum Gain and Partner Minimum Gain, determined as
provided in Section 7.2 immediately prior to such deemed sale, plus (B) the
amount, if any, which such Partner is obligated to contribute to the capital of
the Partnership pursuant to Article 6 as of the last day of such period (but
only to the extent such Capital Contribution obligation has not been taken into
account in determining such Partner's share of Partner Minimum Gain).
1.77 TAX MATTERS PARTNER OR TMP. The General Partner.
1.78 TOTAL PROJECT COSTS. All costs which have been or are estimated
to be incurred by the Partnership with respect to the acquisition, design,
development, construction, debt financing, leasing, and completion of the
Project, which Total Project Costs (including without limitation tenant
allowances) are initially estimated in the Development Budget. Total Project
Costs shall include the Development and Leasing Fees referenced in the
Development Agreement.
1.79 UNRETURNED CAPITAL CONTRIBUTIONS ACCOUNT. As to any Partner, an
account maintained for internal bookkeeping purposes by the Partnership for each
Partner, which account, as of any date, except as expressly provided herein,
shall equal the sum of all Capital Contributions by such Partner pursuant to
Sections 6.1, 6.2 and, as indicated therein, 6.4 and 6.5 hereof reduced (but not
below zero) by all Partnership distributions to such Partner pursuant to Section
7.8 hereof.
ARTICLE 2 - FORMATION AND NAME; FILINGS; ASSUMED NAMES
2.1 FORMATION AND NAME. The Partners hereby form the Partnership,
under the name Simon/Chelsea Orlando Development Limited Partnership, as a
limited partnership pursuant to the provisions of the Act and this Agreement.
The General Partner shall have the right to change the name of the Partnership,
provided that it shall thereafter promptly send Notice to each Limited Partner
of the name adopted by the Partnership.
2.2 FILINGS. The General Partner shall do all other acts and things
requisite to perfect and maintain the Partnership as a limited partnership under
the Act and under the laws of all other jurisdictions in which the Partnership
may elect to do business, including filing the Certificate (or an amendment
thereto) with the Secretary of State of the State of Florida and qualifying the
Partnership as a foreign limited partnership in any jurisdiction in which such
filing may be required, as determined by the General Partner.
2.3 ASSUMED NAMES. The business of the Partnership shall be conducted
under its name designated above or under such variations of this name as the
General Partner deems appropriate to comply with the laws of any state in which
the Partnership does business, or under any assumed or fictitious name the
General Partner deems appropriate for that purpose. The General Partner shall
execute and file in the proper offices such certificates as may be required by
any assumed or fictitious name act or similar law in effect in the states,
counties and other governmental jurisdictions in which the Partnership may elect
to conduct its business. The General Partner shall be required promptly to send
Notice to each Partner of any assumed or fictitious name which the Partnership
elects to use.
ARTICLE 3 - PRINCIPAL OFFICE; ADDITIONAL OFFICES; RESIDENT AGENT
3.1 PRINCIPAL OFFICE; PLACE OF BUSINESS. The principal office of the
Partnership (at which all Partnership records required by the Act shall be kept)
shall be located at 103 Eisenhower Parkway, Roseland, New Jersey 07068. All
correspondence shall be sent to the General Partner at such office. The General
Partner, in its sole discretion, is authorized to change or relocate the
principal office of the Partnership provided the General Partner gives prompt
Notice to all partners of such change or relocation. The Partnership shall have
such other or additional offices as the General Partner, in its sole discretion,
shall deem advisable.
3.2 RESIDENT AGENT. The name and address of the Partnership's resident
agent in the State of Florida is CT Corporation System, 1200 South Pine Island
Road, Plantation, FL 33324. The General Partner shall have the right to change
the resident agent of the Partnership at any time in compliance with the Act and
the laws of all other jurisdictions in which the Partnership may elect to
conduct business.
ARTICLE 4 - BUSINESS OF PARTNERSHIP
BUSINESS AND PURPOSE OF PARTNERSHIP. The business and purposes of the
Partnership shall consist of (i) acquiring and owning the Land; (ii) owning,
developing, constructing and operating the Project on the Land as an investment
and for income producing purposes and developing, mortgaging, managing,
operating, leasing, refinancing and, if necessary or appropriate, selling the
Land and/or the Project or any part thereof; (iii) selling Land Parcels and/or
developing such other projects on the Land as the General Partner deems
appropriate and prudent; (iv) investing excess funds of the Partnership as the
General Partner deems appropriate and prudent; and (v) carrying on any and all
activities related thereto (all of which enterprises and activities may be
carried on either by the Partnership in its own name or a trading name or by or
through such agents, employees and/or independent contractors and in such
name(s) as the General Partner may determine to be in the best interests of the
Partnership).
ARTICLE 5 - PARTNERS AND PERCENTAGES OF PARTNERSHIP INTEREST
PARTNERS; PERCENTAGE INTERESTS. The name, address and Percentage Interest of
each Partner is shown on the attached EXHIBIT A (subject to adjustment in
accordance with Section 6.4 hereof). To the extent substitute Partners are
admitted to the Partnership, or Percentage Interests change, all in accordance
with the terms hereof, this Agreement and EXHIBIT A hereto shall be deemed to be
automatically amended to reflect the admission or substitution or change of
Percentage Interest of such Partners whether or not the actual physical change
has been made. Unless the context clearly indicates otherwise, (i) the terms
"Partner" and "Partners" shall include the General Partner and the Limited
Partners, and (ii) the terms "Partnership Interest" and "Partnership Interests"
shall include both the General Partner Partnership Interests and Limited Partner
Partnership Interests.
ARTICLE 6 - CAPITALIZATION AND LOANS
6.1 INITIAL CAPITAL CONTRIBUTIONS AND INTERESTS.
A. S/C Orlando Interest. On the date of this Agreement, S/C
Orlando shall own, in the aggregate, a one-half of one percent (.5%)
Partnership Interest (subject to adjustment pursuant to Section 6.4
hereof). S/C Orlando shall initially contribute One Hundred Twelve
Thousand Five Hundred Dollars ($112,500.00) to the capital of the
Partnership; such capital contribution has been fully funded.
B. Chelsea's Capital Contributions and Interest. On the date of
this Agreement, Chelsea shall own, in the aggregate, a forty-nine and
three-quarters percent (49.75%) Partnership Interest (subject to
adjustment pursuant to Section 6.4 hereof). Chelsea shall initially
contribute up to Eleven Million One Hundred Ninety Three Thousand
Seven Hundred Fifty Dollars ($11,193,750.00) to the capital of the
Partnership. Chelsea's Capital Contribution shall be made in the
manner set forth in Section 6.3 below.
C. Simon's Capital Contributions and Interest. On the date of
this Agreement, Simon shall own, in the aggregate, a forty-nine and
three quarters percent (49.75%) Partnership Interest (subject to
adjustment pursuant to Section 6.4 hereof). Simon shall initially
contribute up to Eleven Million One Hundred Ninety Three Thousand
Seven Hundred Fifty Dollars ($11,193,750.00) to the capital of the
Partnership. Simon's Capital Contribution shall be made in the manner
set forth in Section 6.3 below.
6.2 ADDITIONAL CAPITAL CONTRIBUTIONS.
A. During the Construction Period, S/C Orlando, Chelsea and Simon
shall be obligated to contribute, from time to time and as reasonably
determined by the General Partner, any and all amounts (in addition to
the initial capital contribution reflected in Section 6.1) required by
the Partnership to pay all costs of the work to be undertaken and/or
completed in connection with the development of the Project
(including, without limitation, the purchase of the Land, and the
payment by the Partnership of costs of the Project to the extent
reflected in the Development Budget) in excess of all funds then
available to the Partnership in the form of a loan, which
contributions shall be divided among them pro rata in accordance with
their respective Percentage Interests.
B. During the Operating Period of the Project, in the event
additional funds are required to operate the Project in accordance
with expenditures delineated in one or more Budgets or for other
purposes identified by the General Partner, S/C Orlando, Chelsea and
Simon shall be obligated to contribute, from time to time, and as
reasonably determined by the General Partner, the amount necessary to
satisfy such obligations, which contribution shall be divided among
them pro rata in accordance with their respective Percentage
Interests.
6.3 PAYMENT OF CAPITAL CONTRIBUTIONS. From and after the effective
date of this Agreement if Capital Contributions are required pursuant to this
Article, the General Partner shall provide Notice to Chelsea and Simon of the
amount required by the Partnership to pay all costs described in this Article
falling due within the next month. Each of the Partners shall, within ten (10)
calendar days (time being of the essence) after the receipt of such notice,
deposit by wire transfer of immediately available federal funds into the
Partnership's bank account, the capital contribution specified in the Notice to
be credited to the contributing Partner's Capital Account.
6.4 DEFAULT CAPITAL CONTRIBUTIONS.
A. If a Partner (a "Non-Funding Partner") fails to fund any
Capital Contributions required of it within the time period specified
and such failure continues for a period in excess of (10) days (an
"Initial Uncured Default"), then the General Partner shall promptly
send Notice to the other Partners of such failure and the remaining
Partners ("Funding Partners ") shall be entitled to fund all or any
portion of such Capital Contribution required of the Non-Funding
Partner. If the Funding Partners make such Capital Contributions
("Default Capital Contributions"), the Partnership Interest of each
Partner shall thereupon be recalculated as set forth below. The
Funding Partner is hereby constituted and appointed as
attorney-in-fact, such appointment being coupled with an interest, to
execute, acknowledge and deliver all instruments and documents
necessary to effect such recalculation of Percentage Interests as
herein provided.
1. The recalculation of the Percentage Interests on the
Percentage Interest Adjustment Date shall be done as follows:
First, the total amount of Capital Contributions made by each
Partner as of the Percentage Interest Adjustment Date shall be
calculated. Second, the Non-Funding Partner's Percentage Interest
shall be reduced, and the Funding Partner's Percentage Interest
shall be increased, to reflect each Partner's percentage of the
total contributions made by both Partners as of the Percentage
Interest Adjustment Date.
2. The Adjusted Percentage Interests of the Partners shall
be expressed in terms of a decimal rounded to the nearest fourth
digit. An example illustrating the operation of this provision is
attached hereto as EXHIBIT C.
a. If due to the operation of this SECTION 6.4(A) a
Non-Funding Partner's Initial Percentage Interest is
diluted, the other Partner shall have the right and option
for a period of 60 days after such dilution occurs to
purchase the Non-Funding Partner's interest in the
Partnership at a price equal to the total amount of cash
capital contributions which had been contributed to the
Partnership by the Non-Funding Partner at that point in
time, less the amount of any distributions of Net Ordinary
Cash Flow or proceeds from a Major Capital Event previously
made to the Non-Funding Partner.
b. In order to elect to purchase the interest in the
Partnership of a Non-Funding Partner pursuant to this
SECTION 6.4(A), the Funding Partner shall send written
notice of election to the Non-Funding Partner prior to
expiration of such 60-day period. In the event a Funding
Partner elects to purchase a Non-Funding Partner's interest,
such election pursuant to this SECTION 6.4(A) shall create a
binding contract for the purchase and sale of the
Non-Funding Partner's interest in the Partnership. The
closing of such purchase and sale shall take place at the
office where the principal place of business of the
Partnership is located on the date specified by the Funding
Partner in its election notice which date shall not be less
than 20 days nor more than 60 days following the date of
such notice, unless the Partners agree to a different
mutually acceptable date. The form and substance of the
closing documents shall be reasonably satisfactory to the
Funding Partner and shall consist of an assignment and bill
of sale (both with covenants against grantor's acts) from
the Non-Funding Partner to the Funding Partner (or its
nominee or designee), together with such other instruments
and documents as may be reasonably necessary or desirable to
effectuate the sale. The purchase price shall be payable by
federal wire transfer of immediately available funds to an
account designated by the Non-Funding Partner, against
delivery of all the closing documents. At either Partner's
request, the Partnership's bank or the title company which
issued the owner's title policy to the Partnership may be
appointed as escrow agent to receive all closing documents
and the purchase price in escrow in order to make
simultaneous delivery of closing documents and disbursement
of funds at the closing or the next business day thereafter.
The instruments and documents shall be legally sufficient to
convey all of the Non-Funding Partner's interest in the
Partnership (and the Project) to the Funding Partner (or its
nominee or designee), free and clear of all deeds of trust,
security interests, liens, charges and encumbrances. The
provisions of this SECTION 6.4(A) shall be enforceable by a
decree of specific performance and neither Partner shall
assert in defense thereto that there exists an adequate
remedy at law.
B.Contribution Loans.
1. If either Partner (a "Non-Contributing Partner") fails to
make any additional capital contribution within the time
specified in SECTION 6.4(A) and such failure continues for a
period of thirty (30) days after an Initial Uncured Default, the
other Partner who makes the requested contribution of additional
capital (the "Contributing Partner") shall have the right but not
the obligation to advance directly to the Partnership the funds
required from the Non-Contributing Partner as a loan
("Contribution Loan") to the Non-Contributing Partner. If and
when a Contribution Loan is made, the Non-Contributing Partner
shall be deemed to have waived the right to make the requested
capital contribution as of the date of such loan. Such
Contribution Loan shall bear interest, compounded annually, at a
rate equal to the Prime Rate plus four (4) percentage points per
annum. Contribution Loans may be prepaid by the Non-Contributing
Partner at any time after the date the Contribution Loan is made.
If not repaid by the Non-Contributing Partner, the Contribution
Loan shall be repaid pursuant to SECTION 6.4(C) or other
applicable provisions of this Agreement, but otherwise shall be
and remain a recourse obligation of the Non-Contributing Partner.
2. If the Contributing Partner does not elect to advance the
full amount of the additional funds required from the
Non-Contributing Partner, the Contributing Partner may withdraw
its additional capital contribution.
3. Notwithstanding any other provision of this Agreement to
the contrary, if as of the date which is one hundred eighty (180)
days after the making of a Contribution Loan, such Contribution
Loan shall not have been paid in full, the Contributing Partner
shall have the right for a period of sixty (60) days to have such
Contribution Loan (or the portion thereof remaining unpaid)
converted on the books of the Partnership to a capital
contribution by the Contributing Partner, in which event the
Percentage Interest of the Non-Contributing Partner shall be
adjusted and recalculated in accordance with SECTION 6.4(A) of
this Agreement, and the Contributing Partner shall be entitled to
exercise all rights and remedies thereunder, including without
limitation the purchase option described in SECTION 6.4(A). In
order to elect to convert a Contribution Loan to a capital
contribution pursuant to this SECTION 6.4(B), the Contributing
Partner shall send written notice of election to the
Non-Contributing Partner prior to the expiration of such 60-day
period.
4. The rights set forth in this SECTION 6.4(B) are in lieu
of the exercise of rights set forth in SECTION 6.4(A) and may not
be exercised in addition to such rights.
C. Repayment through Distributions. A Contribution Loan shall be
repaid on a first priority basis out of any subsequent distributions
to which the Non-Contributing Partner for whose account the
Contribution Loan was made would otherwise be entitled in accordance
with this Agreement, which amounts shall be applied first to accrued
interest and then to principal, until the Contribution Loan is paid in
full. Each Non-Contributing Partner irrevocably assigns its rights to
distributions from the Partnership to the Contributing Member for the
purpose of effectuating this repayment. Repayment of either Partner's
Contribution Loan shall also be secured by the Non-Contributing
Partner's Percentage Interest in the Partnership, and the
Non-Contributing Partner hereby grants a security interest in such
Percentage Interest and all distributions related thereto to the
Contributing Partner who has advanced such Contribution Loan and
hereby irrevocably appoints the Contributing Partner, and any of its
agents, officers or employees, as its attorney-in-fact, such
appointment being coupled with an interest, to execute, acknowledge
and deliver any documents, instruments and agreements including, but
not limited to, any note evidencing the Contribution Loan, and such
Uniform Commercial Code financing statements, continuation statements,
and other security instruments or documents as may be appropriate to
perfect and continue such security interest in favor of the
Contributing Partner.
D. Transferees and Assignees. If there shall be a Transfer of
part of the Percentage Interest of either Partner pursuant to ARTICLE
11 below to an Affiliate of such Partner, all of the calculations
necessary at any time or from time to time under this SECTION 6.4
shall be made without regard to any such partial Transfer. Any
dilution of the Percentage Interest of either Partner pursuant to this
SECTION 6.4 shall be made effective against the aggregate Percentage
Interest of the Transferor and any Affiliate Transferee of which the
Partnership has been notified or, failing any such agreement, or
notice thereof, as the Funding Partner, acting on behalf of the
Partnership, may elect. It is the intent and agreement of the Partners
that all of the rights and obligations hereunder, including without
limitation participation in management, rights to give or receive
notices and contribution obligations, and the various consequences
arising from the failure of a Partner to make a required capital
contribution to the Partnership hereunder are to be interpreted and
applied as if Chelsea and any Chelsea Affiliate that owns a part of
its Percentage Interest, on the one hand, and Simon and any Simon
Affiliate that owns a part of its Percentage Interest, on the other,
is a single entity having a Percentage Interest in an amount equal to
the aggregate Percentage Interests owned by such Partner and its
respective Transferees.
E. Role in Management. Notwithstanding any other provision of
this Agreement to the contrary, including without limitation ARTICLE 9
hereof, a Non-Funding Partner or Non-Contributing Partner and any
Affiliate thereof which is a member of the General Partner
(hereinafter, a "Defaulting Partner") shall thereafter have no further
approval rights, right to make decisions or role in management of the
Partnership until such funding or contribution default has been cured.
Without limiting the foregoing, the Funding or Contributing Partner
shall have the right to terminate any Management Agreement and/or
Development Agreement with any Affiliate of the Defaulting Partner as
set forth in the Management Agreement and the Development Agreement,
respectively, (ii) the Non-Defaulting Partner shall have the right to
apply any fees payable to the Defaulting Partner or its Affiliate in
accordance with this Agreement to any amounts owed by the Defaulting
Partner, (iii) the Non-Defaulting Partner shall have the right to make
all decisions of the Partnership and the Partner, and (iv) no
Defaulting Partner shall have the right to initiate the buy-sell
procedure pursuant to SECTION 10.6 hereof.
F. Notwithstanding anything to the contrary in this Section 6.4,
in the event that either of Chelsea's or Simon's Affiliates, in its
capacity as a member of S/C Orlando, shall fail to meet any monetary
obligation pursuant to the General Partner Agreement, such failure
shall constitute Chelsea or Simon (or its Affiliate) a "Defaulting
Partner" pursuant to Section 6.4 (A) hereof to the same extent as if
such Partner had failed to fund a Capital Contribution required of it
hereunder. Similarly, a failure to meet a monetary obligation
hereunder by Chelsea or Simon shall also constitute such party or its
Affiliate a "Non-Funding Member" pursuant to Section 5.4 of the
General Partner Agreement.
6.5 AMOUNTS INCURRED TO FUND CONSTRUCTION OVERAGES.
A. Notwithstanding anything to the contrary set forth herein if
during the Construction Period amounts have been, or will be, incurred
in excess of an Approved Budget, and any Partner refuses to fund its
pro rata share of the excess, the other Partner may fund such excess
as necessary to permit the Partnership to pay its debts, meet its
obligations when due and complete construction of the Project. If a
modification to Budget is subsequently Approved or an arbitrator or
court having jurisdiction over the Partnership and/or the Project
determines that the excess (and the proposed modification to the
Budget) is reasonable and must be funded, then that portion of the
excess which the Non-Funding Partner and its Affiliate(s) are
obligated to contribute (and which the Funding Partner previously
funded) shall be treated as a Contribution Loan by the Partner to the
Non-Funding Partner pursuant to Section 6.4(b) and interest shall
accrue from the date funds were advanced by the remaining Partner on
behalf of the Partnership In addition, the Funding Partner shall be
entitled to all other rights set forth in or elsewhere in this
Agreement with respect to the making of a Contribution Loan. If it is
subsequently determined that the excess and the proposed modification
to Budget is not reasonable, then the excess funded by the Funding
Partner shall not be credited to the Capital Account of such Partner
and the Funding Partner shall not be entitled to any allocation of Net
Profit or distribution of Cash Flow by virtue of same.
B. If, during the Operating Period, either Partner disputes the
need for any additional capital contributions required pursuant to
SECTION 6.2, pending the resolution of such dispute, the Partner
disputing the need for additional capital shall nevertheless
contribute additional capital within the time period specified in
SECTION 6 and the General Partner shall hold the contributions of both
Partners in an interest-bearing account, or shall otherwise invest
such contributions as Approved by the Partners separate from other
cash deposits of the Partnership until such dispute is resolved;
provided, however, that during such Operating Period, the Partnership
shall have the right to use the Partners' contributions to the extent
necessary, to permit the Partnership to pay its debts and to meet its
obligations when due. If and to the extent that it is ultimately
determined that such additional capital contributions were not
required, the previously identified contribution less each Partner's
proportionate share (based on such Partner's Initial Percentage
Interest) of any portion of the Partner's contributed capital which
was expended in accordance with the foregoing, shall be promptly
refunded to each Partner, together with a proportionate share of
interest, if any, earned thereon while on deposit with the
Partnership.
6.6 LIABILITY OF LIMITED PARTNERS. Except as otherwise provided for
herein, no Limited Partner (in its capacity as a Limited Partner) shall be
required under any circumstances to contribute to the capital of the Partnership
any amount beyond that sum required of the Limited Partner pursuant to this
Article 6, nor shall any Partner be obligated to lend any funds to the
Partnership.
6.7 NO INTEREST ON CAPITAL CONTRIBUTION. Except as otherwise provided
for herein, no interest shall accrue or be payable to any Partner by reason of
its Capital Contribution or its Capital Account.
6.8 WITHDRAWAL OF CAPITAL CONTRIBUTIONS. A Partner shall not be
entitled to withdraw any part of its Capital Account or to receive any
distributions (property or cash) except as specifically provided in this
Agreement, and in no event will any Partner have the right to receive property
other than cash in return for any contributions to the capital of the
Partnership. The General Partner shall not have any personal liability
whatsoever with respect to the return to any Partner of its Capital Account.
6.9 MAINTENANCE OF CAPITAL ACCOUNTS. The Capital Accounts of the
Partners shall be maintained in a manner consistent with applicable Regulations
and shall be adjusted as follows:
A. There shall be credited to each Partner's Capital Account (i)
the amount of any cash (which shall not include imputed or actual
interest on any deferred contributions) actually contributed by such
Partner to the capital of the Partnership, (ii) the fair market value
of any property contributed by such Partner to the capital of the
Partnership (net of any liabilities secured by such property that the
Partnership is considered to assume or take subject to under Code
Section 752), and (iii) such Partner's share of the Net Profits of the
Partnership and of any items in the nature of income or gain
separately allocated to the Partners; and there shall be charged
against each Partner's Capital Account (x) the amount of all cash
distributions to such Partner by the Partnership, (y) the fair market
value of any property distributed to such Partner by the Partnership
(net of any liability secured by such property that the Partner is
considered to assume or take subject to under Code Section 752), and
(z) such Partner's share of the Net Losses of the Partnership and of
any items in the nature of losses or deductions separately allocated
to the Partners.
B. If the Partnership at any time distributes any of its assets
in kind to any Partner, the Capital Account of each Partner shall be
adjusted to account for such Partner's allocable share of the Net
Profits or Net Losses that would have been realized by the Partnership
had it sold the assets that were distributed at their respective fair
market values immediately prior to the distribution.
C. In the event that the Partnership makes an election under Code
Section 754, the amounts of any adjustments to the bases (or Carrying
Values) of the assets of the Partnership made pursuant to Code Section
743 shall not be reflected in the Capital Accounts of the Partners,
but the amounts of any adjustments to the bases (or Carrying Values)
of the assets of the Partnership made pursuant to Code Section 734 as
a result of the distribution of property by the Partnership to a
Partner (to the extent that such adjustments have not previously been
reflected in the Partners' Capital Accounts) shall be reflected in the
Capital Accounts of the Partners in the manner prescribed in the
Regulations.
D. The Partners shall elect, upon the occurrence of any of the
following events, that the Capital Account balance of each Partner
shall be adjusted to reflect the Partner's allocable share of the Net
Profits or Net Losses that would be realized by the Partnership if it
sold all of its property at its fair market value on the day of the
adjustment:
1. Any increase in any new or existing Partner's Partnership
Interest resulting from a more than DE MINIMIS contribution of
cash or property by such Partner to the Partnership; and
2. Any reduction in a Partner's Partnership Interest
resulting from a more than DE MINIMIS distribution to such
Partner in redemption of all or a portion of such Partner's
Partnership Interest.
E. In the event any Partnership Interest is transferred in
accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it
relates to the transferred Partnership Interest.
F. In the event the Regulations fall to provide guidance for the
maintenance of the Capital Accounts of Partners in particular
instances, then the Capital Accounts shall be adjusted by the
Partners, with the review and concurrence of the Partnership's tax
advisors, in a manner that (i) maintains equality between the
aggregate Capital Accounts of the Partners and the amount of
Partnership capital reflected on the Partnership's financial books and
records, (ii) is consistent with the underlying economic arrangement
among the Partners and (iii) is based, whenever practicable, upon
federal tax accounting principles.
6.10 NO THIRD PARTY BENEFIT. No provision set forth in this Article 6
shall be construed to be for the benefit of any third party, including without
limitation, any creditor of the Partnership, and no such third party or creditor
shall be entitled to enforce any such provision.
ARTICLE 7 - ALLOCATIONS AND DISTRIBUTIONS
7.1 GENERAL ALLOCATION OF NET PROFITS AND NET LOSSES. After giving
effect to the special allocations set forth in Section 7.2, all Net Profits and
Net Losses (and to the extent necessary, as set forth in clauses (A) and (B) of
this Section 7.1, items of gross income, gain, expense and loss) of the
Partnership shall be allocated to the Partners as follows:
A. If the Partnership has Net Profits for any taxable year
(determined prior to giving effect to this clause (A), each Partner
whose Partially Adjusted Capital Account is greater than its Target
Capital Account shall be allocated items of Partnership expense or
loss for such taxable year equal to the difference between its
Partially Adjusted Capital Account and Target Capital Account. If the
Partnership has insufficient items of expense or loss for such taxable
year to satisfy the previous sentence with respect to all such
Partners, the available items of expense or loss shall be divided
among such Partners in proportion to such difference.
B. If the Partnership has Net Losses for any taxable year
(determined prior to giving effect to this clause (B), each Partner
whose Partially Adjusted Capital Account is less than its Target
Capital Account shall be allocated items of Partnership gain or income
for such taxable year equal to the difference between its Partially
Adjusted Capital Account and Target Capital Account. If the
Partnership has insufficient items of income or gain for such taxable
year to satisfy the previous sentence with respect to all such
Partners, the available items of income or gain shall be divided among
such Partners in proportion to such difference.
C. Any remaining Net Profits or Net Losses (as computed after
giving effect to clauses (A) and (B) of this Section 7.1) shall be
allocated among the Partners so as to reduce, proportionately, the
differences between their respective Partially Adjusted Capital
Accounts and Target Capital Accounts for the period under
consideration. To the extent possible, each Partner shall be allocated
a pro rata share of all Partnership items allocated pursuant to this
clause (C).
7.2 OVERRIDING ALLOCATIONS OF NET PROFITS AND NET LOSSES. The
following allocations of Net Profits and Net Losses and items
thereof shall be made before applying Section 7.1 hereof:
A. If in any year there is a net decrease in the amount of the
Minimum Gain computed solely with respect to Nonrecourse Debt other
than Partner Nonrecourse Debt, then each Partner shall be allocated
items of income and gain (consisting first of gains recognized from
the disposition of Partnership Property subject to one or more
Nonrecourse Debts other than Partner Nonrecourse Debts and then, if
necessary, a pro rara portion of the Partnership's other items of
income and gain for that year) for that year (and, if necessary,
subsequent years) in an amount equal to that Partner's share of the
net decease in Partnership Minimum Gain within the meaning of
Regulation Section 1.7042)(2). It is the intent of the parties that
any allocations pursuant to this Section 0 shall constitute a "Minimum
Gain Chargeback" under Regulation Section 1.704-2(f) and shall be
interpreted consistently thereunder.
B. If in any year there is a net decrease in the amount of the
Partner Minimum Gain computed solely with respect to Partner
Nonrecourse Debt, then each Partner shall be allocated items of income
and gain (consisting first of gain from the disposition of Partnership
Property subject to Partner Nonrecourse Debt and then, if necessary, a
pro rata portion of the Partnership's other items of income and gain
for that year) for that year (and, if necessary, subsequent years) in
an amount and in a manner consistent with the provisions of Regulation
Section 1.704-2(i)(4). It is the intent of the parties that any
allocations pursuant to this Section 0 shall constitute a "Chargeback
of Partner Nonrecourse Debt Minimum Gain" under Regulation Section
1.704-2(i)(4) and shall be interpreted consistently thereunder.
C. If, during any year, a Partner unexpectedly receives any
adjustment, allocation or distribution described in Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), and as a result of such
adjustment, allocation or distribution, such Partner's Capital Account
has an Excess Negative Balance, then items of gross income (computed
with the adjustments set forth in clauses (a), (b) and (c) of the
definition of Net Profits and Net Losses) for such year (and, if
necessary, subsequent years) shall first be allocated to such Partner
in an amount equal to such Partner's Excess Negative Balance. It is
the intent of the parties that any allocations pursuant to this
Section 0 shall constitute a "qualified income offset" provision under
Regulation Section l.704-1(b)(2)(ii)(d) and shall be interpreted
consistently thereunder.
D. Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal
Year shall be specially allocated among the Partners in proportion to
their Percentage Interests.
E. In no event shall Net Losses of the Partnership be allocated to
a Partner if such allocation would cause or increase an Excess
Negative Balance in such Partner's Capital Account. Any such Net
Losses shall be allocated to the Partners who bear the economic risk
of such Net Losses.
F. Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Fiscal Year shall be specially allocated to the
Partner who bears the economic risk of loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions
are attributable in accordance with Regulations Section 1.704-2(i)(1).
G. In the event that Net Profits, Net Losses or items thereof are
allocated to one or more Partners pursuant to Sections 7.2(A) through
7.2(F) above, subsequent Net Profits and Net Losses shall first be
allocated (subject to the provisions of Sections 7.2(A), 7.2(B),
7.2(C), 7.2(D) and 7.2(E) to the Partners in a manner designed to
result in each Partner having a Capital Account balance equal to what
it would have been had the original allocation of Net Profits, Net
Losses or items thereof pursuant to Sections 7.2(A) through 7.2 (E)
hereof not occurred.
H. Except as otherwise provided herein, for tax purposes, all
items of income, gain, loss, deduction or credit shall be allocated to
the Partners in the same manner as are Net Profits and Net Losses;
provided, however, that if the Carrying Value of any property of the
Partnership differs from its adjusted basis for tax purposes, then
items of income, gain, loss, deduction or credit related to such
property for tax purposes shall be allocated among the Partners so as
to take account of the variation between the adjusted basis of the
property for tax purposes and its Carrying Value in the manner
provided for under Code Section 704(c).
I. Solely for purposes of determining a Partner's proportionate
share of the "excess nonrecourse liabilities" of the Partnership
within the meaning of regulation Section 1 .752-3(a)(3), the Partners'
interests in the Partnership profits are in proportion to their
respective Partnership Interests.
7.3 SECTION 754 AND OTHER ELECTIONS. In the event of a transfer of all
or part of a Partnership Interest pursuant to this Agreement, the Partnership
shall elect at the request of any existing Partner or any person being admitted
as a Partner, or the executor, administrator or other legal representative of a
deceased Partner, to adjust the basis of the Partnership's assets pursuant to
Code Section 754 or the corresponding provision of subsequent law. In the case
of a new Partner, the election shall be filed by the Partnership as constituted
prior to such admission. The General Partner reserves the right to cause the
Partnership to file such further election(s) if it determines in its reasonable
discretion that there are good and substantial reasons to do so.
7.4 PARTIAL TAXABLE YEAR. In the event of the transfer of all or any
part of a Partnership Interest in accordance with the provisions of this
Agreement at any time other than the end of a Partnership fiscal year, the
distributive share of the various Partnership items in respect of the
Partnership Interest so transferred shall (unless otherwise determined in
writing by the transferor and transferee) be allocated between the transferor
and transferee (i) in the same ratio as the number of days in such Partnership
fiscal year before and after such transfer or adjustment, except that the
provisions of this sentence shall not be applicable to a gain or loss on the
sale or other disposition of all or substantially all of the Partnership
Property or to other extraordinary nonrecurring items, or (ii) as otherwise
required under the Code.
7.5 INTENT. The provisions of this Article 7 governing the allocation
of income and losses shall be construed and implemented in a manner which is
consistent with Code Sections 704)(2) and 704(c) and the Regulations promulgated
thereunder.
7.6 USE OF PROCEEDS. During the term of the Construction Loan, all
Proceeds shall be used by the Partnership to (i) pay development and operating
costs of the Project, (ii) pay the costs set forth in the Development Budget,
and (iii) reduce the principal amount of, or reduce the need to draw upon, the
Construction Loan.
7.7 DISTRIBUTION OF NET ORDINARY CASH FLOW.
A. Net Ordinary Cash Flow shall be allocated and distributed
among the Partners as follows:
1. First, to pay any accrued but unpaid principal balance,
if any, of any and all loans made by any Partner to the
Partnership in accordance with this Agreement, provided, however,
that any Contribution Loans shall not be regarded as loans to the
Partnership and shall be repaid on a first priority basis out of
any Cash Flow to which the Non-Contributing Partner for whose
account the Contribution Loan was made would otherwise be
entitled to in accordance with Section 7.7(A)(2) of this
Agreement, which amounts shall be applied first to accrued
interest and then to principal, until the Contribution Loan is
paid in full, and
2. Second, the balance in proportion to the Partners'
respective Partnership Interests.
B. Amounts distributed pursuant to the preceding sub-paragraphs
shall be paid on a quarterly basis, within fifteen (15) days of the
end of each calendar quarter, if Net Ordinary Cash Flow is available
and the balance, if any, shall be paid within ninety (90) days
subsequent to the end of each calendar year. The final allocation and
distribution of Net Ordinary Cash Flow for each calendar year shall be
made based upon the audited financial statements of the Partnership
provided for in Section 10.2 hereof for such year.
7.8 DISTRIBUTIONS UPON MAJOR CAPITAL EVENT
A. Net proceeds derived from or in connection with a Major
Capital Event shall be allocated and distributed among the Partners,
on a cumulative basis, as follows:
1. First, to pay any accrued but unpaid interest on, and
then to pay the unpaid principal balance, if any, of any and all
loans made by any Partner to the Partnership in accordance with
this Agreement, provided, however, that any Contribution Loans
shall not be regarded as loans to the Partnership and shall be
repaid on a first priority basis out of any capital proceeds to
which the Non-Contributing Member for whose account the
Contribution Loan was made would otherwise be entitled to in
accordance with SECTIONS 7.8(A)2 through 7.8(A)3 of this
Agreement, which amounts shall be applied first to accrued
interest and then to principal, until the Contribution Loan is
paid in full;
2. Second, to the Partners to the extent of and in
proportion to their Capital Contribution Balances, and
3. Third, the balance in proportion to the Partners'
respective Partnership Interests.
B. Notwithstanding the provisions of Section 7.8(A) hereof, to
the extent the total net proceeds distributable to a Partner on a
cumulative basis under Section 7.8, hereof are less than the amount
such Partner would be entitled to receive if all such distributions
had been made following the redetermination and adjustment of
Partnership Interests pursuant to Section 6.4 hereof, the net proceeds
which would otherwise be distributed to the Defaulting Partner(s)
shall be distributed first to the Non-Defaulting Partner(s), until
such Non-Defaulting Partners have received all net proceeds to which
they are entitled in accordance with such readjusted Partnership
Interests, and any remaining net proceeds shall be distributed to the
Partner(s) in proportion to their respective Partnership Interests.
7.9 DISTRIBUTION OF COST SAVINGS. If the net proceeds of the Permanent
Loan (after payment of all closing costs, brokerage fees and similar items)
exceed the then outstanding principal amount of the Construction Loan plus all
accrued but unpaid interest thereon, then within ten (10) days of closing of the
Permanent Loan, the Partnership shall distribute such net proceeds to the
Partners, in proportion to their respective Partnership Interests. Any amounts
otherwise distributable pursuant to this Section 7.9 shall be reduced by a
reserve equal to one hundred percent (100%) of the budgeted costs of the initial
lease-up of any unleased space in the Project, including tenant improvements and
leasing commissions and fees. Any distribution pursuant to this Section 7.9
shall be in accordance with Partnership Interests and shall not reduce the
Capital Contributions or Unreturned Capital Contributions Account of any
Partner.
ARTICLE 8 - LEGAL TITLE TO PARTNERSHIP PROPERTY
8.1 LEGAL TITLE. Legal title to the Project, the Land and other
Partnership Property shall be taken and at all times held in the name of the
Partnership, except as otherwise approved by the General Partner.
8.2 MATTERS AFFECTING LEGAL TITLE. Except as otherwise provided for
herein the General Partner, in its capacity as General Partner, shall have the
right, power and authority, acting for and on behalf on the Partnership, to
enter into and execute any lease, contract, agreement, deed, covenants,
proffers, applications for zoning, grading, building, occupancy and other
permits and licenses, mortgage or other instrument or document required or
otherwise appropriate to develop, construct, lease, sell, mortgage, convey or
refinance the Partnership Property (or any part thereof), to borrow money and
execute promissory notes, to secure the same by mortgage or deed of trust, to
renew or extend any and all such loans or notes, and to convey the Partnership
Property by deed, lease, sublease, mortgage or otherwise. In no event shall any
Person dealing with the General Partner with respect to any of the Partnership
Property or to whom the Partnership Property (or any part thereof) shall be
conveyed, contracted to be sold, leased, mortgaged or refinanced by the General
Partner be obligated to see to the application of any purchase money, rent or
money borrowed or advanced thereon, or be obligated to see that the terms of
this Agreement have been complied with, or be obligated to inquire into the
necessity or expediency of any act or action of the General Partner, and every
contract, agreement, deed, mortgage, lease, promissory note or other instrument
or document executed by the General Partner with respect to any of the
Partnership Property shall be conclusive evidence in favor of any and every
Person relying thereon or claiming thereunder that (a) at the time or times of
the execution and/or delivery thereof, the Partnership was in full force and
effect, (b) such instrument or document was duly executed and authorized and is
binding upon the Partnership and all of the Partners thereof, and (c) the
General Partner was duly authorized and empowered to execute and deliver any and
every such instrument or document for and on behalf of the Partnership.
ARTICLE 9 - MANAGEMENT OF BUSINESS
9.1 DUTIES, RIGHTS AND POWERS OF THE GENERAL PARTNER; FEES AND COSTS;
INDEMNIFICATION.
A. Except as otherwise expressly provided herein, management
decisions of the Partnership shall be made by the General Partner,
which shall be responsible for the conduct of Partnership business
subject to the provisions of this Agreement and applicable law. The
General Partner, as General Partner, shall devote to the management of
the Partnership business so much of its time as it, in its sole
discretion, deems reasonably necessary for the efficient operation of
the Partnership business.
B. Except as otherwise provided for in Section 9.3 and 9.4, if any
activities of the Partnership require, in the reasonable judgment of
the General Partner, that Affiliates be engaged to provide services or
to sell products to the Partnership, such services and products shall
be provided in accordance with the arrangements specified in Sections
9.6 hereof.
C. Notwithstanding the foregoing or any contrary provision of
this Agreement, and in addition to Consents to Partnership action
required elsewhere in this Agreement, the Consent of all Partners
shall be required prior to the implementation by the General Partner
of any of the following major decisions (each such decision, a "Major
Decision"):
1. Sale of the entire Property or the entire Project, except
as contemplated pursuant to Sections 11.3 and/or 11.4 hereof.
2. Mortgaging of the entire Property, except in connection
with the Construction Loan or the Permanent Loan.
D. No Limited Partner (in its capacity as a Limited Partner)
shall have or exercise any rights in connection with the management of
the Partnership business.
9.2 BUDGETS.
A. The General Partner has prepared and Approved a Development
Budget for the Project and has provided the Limited Partners with
copies of such Development Budget. The General Partner shall prepare a
pre-construction budget and a development budget for any subsequent
project, and shall submit same to the Limited Partners for their
information before undertaking any subsequent project. Subject to the
provisions of Section 6.5 hereof, the General Partner will cause the
Project to be constructed in accordance with the provisions in the
Development Budget.
B. The General Partner shall also prepare and Approve a proposed
annual Operating Budget for the Project for the period after the
Project Completion Date, setting forth estimated revenues and
expenses, capital expenditures, reserves, contingencies, sources and
applications of funds, and loans contemplated, if any. Any Operating
Budget shall be submitted to the Limited Partners for their
information not less than sixty (60) calendar days prior to the first
day of the fiscal year covered by such Operating Budget. In addition,
projections of current Fiscal Year expenditures shall be prepared by
the General Partner and submitted to the Limited Partners on June 1
and November 1 of each Fiscal Year. Subject to certain parameters and
exceptions set forth in the General Partner's Agreement, the General
Partner will cause the Property to be operated in any Fiscal Year in
accordance with the Operating Budget for such year.
9.3 MANAGEMENT AGREEMENT; MANAGEMENT FEES. An Affiliate of Chelsea and
an Affiliate of Simon will render services to the Partnership in connection with
the management and ongoing leasing, including future releasing of the Project.
The General Partner shall negotiate and Approve a Management Agreement with such
Affiliates. The Partnership will pay management fees for managing the Project
pursuant to the Management Agreement in an amount equal to six percent (6%) of
the gross rental income accrued by the Partnership, excluding, however proceeds
received from the sale of any Land Parcels.
9.4 DEVELOPMENT AGREEMENT; DEVELOPMENT AND LEASING FEES. An Affiliate
of Chelsea and an Affiliate of Simon will also render services to the
Partnership in connection with the initial development of the Project and the
initial lease-up of the Project. The General Partner has negotiated and Approved
a Development Agreement with such Affiliates. The Partnership shall pay
development and leasing fees to such Affiliates in the amount more particularly
set forth in the Development Agreement. Should subsequent projects be developed
on a portion of the Land, an agreement covering the initial development and
leasing of any such project in substantially the form of the Development
Agreement shall be negotiated and approved by the General Partner.
9.5 POST-INITIAL LEASE-UP FEES. Fees to be paid by the Partnership for
leasing of space in the Project other than the first lease of any such space and
for renewals or extensions of any lease shall be set forth in the Management
Agreement.
9.6 THIRD PARTY SERVICES. The General Partner may employ any third
parties to perform services on behalf of the Partnership, including, without
limitation, Affiliates of any Partner, provided that the costs to be paid by the
Partnership for such services are competitive with the costs of independent
contractors performing the same services. The parties recognize that an
Affiliate of Simon provides bundled services contracts for maintenance and
operational obligations, utilities, vending services and otherwise and such
contractual arrangements shall be reviewed in accordance with the provisions of
this Section and the Management Agreement.
9.7 COSTS. The General Partner shall be reimbursed by the Partnership
for all reasonable out-of-pocket costs and expenses incurred on behalf of the
Partnership in accordance with the previously specified Budgets so long as such
costs and expenses are not intended to be paid from fees otherwise payable to
such Partner or its Affiliates as set forth in the Development Agreement and the
Management Agreement, respectively.
9.8 LIABILITY OF LIMITED PARTNERS. Except as otherwise specifically
set forth herein, to the extent a Limited Partner is not a General Partner and
does not take part in the control of the Partnership's business within the
meaning of the Act, the liability of a Limited Partner for the obligations or
losses of the Partnership shall in no event exceed such Limited Partner's
Unreturned Capital Contributions Account.
9.9 INDEMNIFICATION OF GENERAL PARTNER.
A. The General Partner shall be indemnified and held harmless,
absolutely, unconditionally and irrevocably, by the Partnership from
and against any and all claims, demands, liabilities, costs, damages
and causes of action, of any nature whatsoever, arising out of or
incidental to such General Partner's management of the Project and/or
the Partnership affairs, except where the claim at issue is based upon
the fraud, gross negligence or willful misconduct of such General
Partner.
B. The indemnification authorized by this Section 9.10 shall
include, but not be limited to, payment of (i) reasonable attorneys'
fees or other expenses incurred in connection with settlement or in
any finally-adjudicated legal proceeding, and (ii) the removal of any
liens affecting any property of the indemnitee.
C. The indemnification rights contained in this Section 9.10
shall be cumulative of, and in addition to, any and all rights,
remedies and recourses to which the General Partner shall be entitled,
whether pursuant to the provisions of this Agreement, at law or in
equity.
D. The rights and obligations hereunder with respect to
indemnification shall survive an event of withdrawal of a General
Partner.
ARTICLE 10 - BANK ACCOUNTS; BOOKS AND RECORDS; TAX ELECTION
10.1 BANK ACCOUNT. The funds of the Partnership shall be deposited in
such separate Partnership bank account or accounts as are approved by the
General Partner, who shall arrange for the appropriate management of such
account or accounts.
10.2 BOOKS AND RECORDS.
A. There shall be kept at the principal business office of the
Partnership, as set forth in Section 10.3 hereof (or at such other
office in the United States as the General Partner may designate),
full and accurate books and records respecting the Project, showing
all receipts and expenditures, assets and liabilities, profits, losses
and distributions and all other information necessary for recording
the business and affairs of the Partnership.
B. The books shall be kept on an accrual method and shall show at
all times all items of income and expense. In all events, the books of
account of the Partnership shall be maintained in accordance with
federal tax accounting principles as determined by the Code, and the
applicable regulations promulgated thereunder and in effect from time
to time.
C. Audited financial statements shall be prepared annually by the
Independent Accountants, and shall be paid for by the Partnership.
Each Partner shall be entitled to a copy of such audited financial
statements.
D. In addition, the General Partner shall provide the Partners
with such monthly and quarterly financial statements as may be
prepared by the Partnership on an unaudited basis. On or before March
31 following each Partnership fiscal year, each Partner will be
furnished with a copy of such report or financial statements together
with such information as is relevant to such Partner for its
individual federal, state and local income tax purposes with respect
to the calendar year most recently ended.
E. Any Partner shall have the right to a private examination and
audit of the books and records of the Partnership, provided such
examination is made at the expense of the Partner desiring it, made
during normal business hours at reasonable times after due Notice, and
at the offices at which the books and records of the Partnership are
then kept.
10.3 RECORDS REQUIRED UNDER THE ACT. In addition to the foregoing
books of account, the Partnership shall keep at its business office, c/o Chelsea
GCA Realty, Inc., 103 Eisenhower Parkway, Roseland, New Jersey 07068, the
records required under the Act. Such records, and all records described in
Section 10.2hereof, shall be made available for inspection and copying upon the
reasonable request, and at the expense, of any Partner during normal business
hours.
10.4 TAX MATTERS PARTNER.
A. Pursuant to Section 6231 of the Code, the General Partner
shall be the Tax Matters Partner (the "TMP") and shall prepare or
cause to be prepared, by March 31 of each year, all tax returns
required of the Partnership at the Partnership's expense. The TMP may
be changed by the General Partner. The TMP shall not have the
authority, without the Consent of the Partners to do any of the
following which purports to bind, directly or indirectly, the
Partners: (i) to enter into a settlement agreement respecting any tax
returns and/or taxes payable by the Partnership; or (ii) to file any
request contemplated in Section 6227(b) of the Code. The TMP shall not
file a petition as contemplated in Sections 6226(a) or 6228(a) of the
Code without consulting with the Partners and reflecting the substance
of any comments received from the Partners in such petition. In
addition, without the prior written approval of the Partners, the TMP
shall not enter into an agreement extending the period of limitations
as contemplated in Section 6229(b)(1)(B) of the Code for a period or
periods exceeding one (1) year in the aggregate. The TMP shall give to
the Partners prompt Notice upon receipt of advice that the IRS or any
other taxing authority intends to examine any Partnership tax return
or the books and records of the Partnership.
B. If the Partnership incurs any costs in retaining accountants,
attorneys, experts and/or other professionals related to any tax
audit, declaration of any tax deficiency or any administrative
proceeding or litigation involving any Partnership tax matter, the
Partnership shall use all available funds for such purpose, but no
Partner shall be required to advance or contribute funds to the
Partnership for such purpose, except if and to the extent provided in
Article 6 hereof.
ARTICLE 11 - TRANSFERS
11.1 LIMITATION ON ASSIGNMENT BY GENERAL PARTNER. Except as expressly
permitted under this Agreement, the General Partner may not sell, assign,
transfer or mortgage, hypothecate or otherwise encumber or permit or suffer any
encumbrance of all or any part of its Partnership Interest. Any attempt by the
General Partner to sell, assign, transfer or mortgage, hypothecate or otherwise
encumber or permit or suffer any encumbrance of its Partnership Interest, in
violation of this Section 11.1 shall be null and void.
11.2 LIMITATION ON ASSIGNMENT BY LIMITED PARTNERS.
A. Except as expressly permitted under this Agreement, no Limited
Partner may sell, assign, transfer or mortgage, hypothecate or
otherwise encumber or permit or suffer any encumbrance of all or any
part of its Partnership Interest.
B. Notwithstanding the provisions of Section 11.2(a) hereof, (i)
Chelsea may, at any time (and without any requirement to offer its
Partnership Interest to any other Partner), assign its Partnership
Interest as a Limited Partner to any Chelsea Affiliate so long as such
transfer does not result or occur in connection with a Change in
Control as defined in Subparagraph (i)(c) of Section 1.15, and (ii)
Simon may, at any time (and without any requirement to offer its
Partnership Interest to any other Partner), assign its Partnership
Interest as a Limited Partner to any Simon Affiliate so long as such
transfer does not result from or occur in connection with a Change in
Control as defined in Subparagraph (ii)(C) of Section 1.15.
C. Each Limited Partner agrees that no part of its Partnership
Interest may be sold, assigned, pledged, encumbered or transferred,
whether voluntarily or by operation of law, except as permitted by
this Agreement. Any sale, assignment, pledge, encumbrance or transfer
which is not permitted or does not comply with the terms hereof shall
be invalid, void and without force or effect.
D. Except as expressly permitted under this Agreement, the
Partnership Interest of each Limited Partner (including such Partner's
right to receive a share of the profits and a return of its Unreturned
Capital Contributions Account) may be assigned, encumbered, pledged,
conveyed or otherwise transferred, in whole or in part, only after the
General Partner's Consent, which may be withheld in its sole
discretion; provided further, in the event the General Partner does
Consent, any assignee shall not become a substituted Limited Partner
of the Partnership (unless all of the following conditions are
satisfied or waived by the General Partner):
1. The assigning Limited Partner provides that the assignee
shall become a substituted Limited Partner in the instrument of
assignment;
2. The assignee agrees in writing to be bound by the terms
of this Agreement;
3. The assignee pays to the Partnership a fee equal to the
reasonable costs and expenses of the preparation and execution of
an amendment to this Agreement;
4. The assignee provides an opinion of counsel, in form and
substance satisfactory to the General Partner, that neither the
offering nor the assignment of such Partnership Interest requires
registration under applicable federal and state securities laws
nor violates federal or state securities, "blue sky" or similar
law;
5. Such transfer, together with all other sales or transfers
of Partnership Interests within the preceding twelve (12) months
will not result in a termination of the Partnership pursuant to
Section 708 of the Code; and
6. Any such transfer shall not cause the Partnership to be
classified as other than a partnership for federal income tax
purposes.
If all of the foregoing conditions are satisfied, the General Partner
shall prepare (or cause to be prepared) an amendment to EXHIBIT A to this
Agreement to be signed by the General Partner and new Limited Partner.
11.3 THIRD PARTY OFFERS TO CHELSEA, SIMON OR S/C ORLANDO.
A. FIRST REFUSAL NOTICE. Except as provided in SECTION 11.2, if,
subsequent to the date which is 6 (six) full calendar years after the
Project Completion Date, either Simon or Chelsea desires to sell all
of its and its Affiliates' Percentage Interest in the Partnership it
shall give written notice (the "First Refusal Notice") of such
intention to the other Partner (the Partner issuing the First Refusal
Notice is hereinafter called the "Offeror" and the Partner receiving
the First Refusal Notice is hereinafter called the "Offeree"). The
First Refusal Notice shall set forth (i) the price (the "Refusal
Price") and terms upon which the Offeror has received a bona-fide,
third party, arms-length offer (the "Bona Fide Offer") to purchase
such Percentage Interest (the Percentage Interest in the Partnership
subject to the First Refusal Notice is hereinafter called the "Subject
Interest") subject to all liabilities of the Partnership as of that
date, (ii) a copy of such third-party offer, and (iii) the name and
address of the proposed purchaser, provided, that the Offeror shall
deal with only one such Purchaser at a time. The Refusal Price set
forth therein must be payable with cash consideration only, although,
at the Offeror's election, payment of portions of such cash
consideration may be deferred and paid, with interest, in one or more
installments after closing. Moreover, in furtherance of SECTION
11.3(E) below, so as to avoid a termination of the Company for federal
income tax purposes pursuant to Section 708(b)(1)(B) of the Code the
First Refusal Notice must propose a structure for the sale of the
Subject Interest so that the sale when combined with previous sales
will not cause there to be a sale or exchange of more than a
forty-nine percent (49%) interest in the Net Profits or capital of the
Partnership in any 12-month period, or, alternatively to fairly
compensate the Offeree for the cost (including loss of benefits and/or
increased taxes) of any such tax termination. Any First Refusal Notice
providing for non-cash consideration, in whole or in part, (except as
permitted in this SECTION 11.3(A)) or a sale that would cause a
combined sale or exchange of more than a forty-nine percent (49%)
interest in any 12-month period (except as permitted in this SECTION
11.3(A)) shall not be effective to institute the First Refusal
procedures. If the First Refusal Notice provides that payment of a
portion of the Refusal Price is to be deferred, then the required
collateral for such deferred payment shall be described in the First
Refusal Notice and shall be the Subject Interest to be purchased
and/or a certificate of deposit, irrevocable stand-by letter of
credit, or other type of collateral which is generally available,
liquid, and not unique. Such First Refusal Notice shall constitute an
offer by the Offeror to sell to the Offeree the Subject Interest
specified in the First Refusal Notice for such price and terms,
exclusive of any brokerage or similar commission provided for therein.
Except as otherwise provided herein, neither Simon nor Chelsea may
give the First Refusal Notice during the Construction Period, or for
six (6) years after the Project Completion Date.
B. ELECTION BY OFFEREE. For a period of thirty (30) days
following the date of receipt by the Offeree of the First Refusal
Notice (the "First Refusal Period"), the Offeree shall have the option
to purchase all, but not less than all, of the Subject Interest
specified in the First Refusal Notice for the price and on the terms
stated in the First Refusal Notice. In the alternative the Offeree
shall have the option to sell its entire Percentage Interest in the
Partnership to the Purchaser as set forth in subparagraph (D) hereof.
If the Offeree elects to purchase the Subject Interest it must notify
the Offeror in writing (the "First Refusal Exercise Notice") within
said 30-day period, and such notice must be accompanied by a First
Refusal Deposit (defined below). If the Offeree fails to send a First
Refusal Exercise Notice or to deliver a First Refusal Deposit within
said 30-day period it shall be deemed to have elected not to purchase.
"First Refusal Deposit" shall mean an amount equal to 5% of the price
set forth in the First Refusal Notice.
C. CLOSING.
1. If the Offeree elects to so purchase the Subject
Interest, the transfer of the Subject Interest specified in the
First Refusal Notice from the Offeror to the Offeree shall be
closed and consummated in the principal office of the Company at
11:00 a.m., local time, on the sixtieth (60th) day following the
date of the First Refusal Exercise Notice (or if such date is not
a business day, the business day next following such day), or on
such earlier day as may be selected by the Offeree. At the
closing, the Offeree shall deliver to the Offeror (i) such
portion of the Refusal Price which is payable at closing in
accordance with the terms of the First Refusal Notice in cash
(U.S. dollars) by wire transfer representing immediately
available Federal Reserve System funds and (ii) the promissory
note and the applicable security instruments, if any, required by
the First Refusal Notice. Simultaneously with the receipt of such
payment, the Offeror shall deliver the Subject Interest to the
Offeree free and clear of all liens, security interests and
competing claims (other than security interests granted in favor
of the Offeree to secure any Contribution Loans made by the
Offeree on behalf of the Offeror and not fully credited as
hereinafter provided) and shall deliver to the Offeree such
instruments of transfer and such evidence of due authorization,
execution and delivery and of the absence of any such liens,
security interests or competing claims as the Offeree shall
reasonably request. The Refusal Price paid at closing shall be
reduced by the amount of any outstanding Contribution Loans made
by the Offeree to the Offeror, together with all accrued interest
thereon and the costs (including loss of benefits and/or
increased taxes), if any, associated with any termination under
Section 708(b) (1) (B) of the Code caused by the transfer.
2. If, by virtue of the election of the Offeree to purchase
any Subject Interest in accordance with the provisions of this
SECTION 11.3, the holder of any loan to the Partnership under
which the Offeror or any of its Affiliates has personal liability
has the right to, and notifies the Partnership of its intent to
accelerate the loan, it shall be a condition to the closing that
the Offeree repay such loan (plus any deferred and accrued and
unpaid interest thereon and any required prepayment premium
and/or yield maintenance fees), or have the Offeror and its
Affiliates as applicable, released from personal liability for
payment of the loan and any guaranty thereof by a written
instrument reasonably satisfactory to the Offeror, at the closing
of the sale of such Subject Interest.
D. SALE OF PROJECT TO THIRD PARTY.
1. During the First Refusal Period, the Offeree shall also
have the option to sell its entire Percentage Interest in the
Partnership and (y) the interest of any Affiliate in the General
Partner (collectively the "Entire Interest") to the Purchaser. If
the Offeree elects to sell its Entire Interest to the Purchaser,
it must notify the Offeror in writing (the "Sale Notice") within
the First Refusal Period. If Offeree fails to send a Sale Notice
within said time 30-day period, it shall be deemed to have
elected not to sell its Entire Interest.
2. If the Offeree elects to sell its Entire Interest, the
Offeror shall proceed to consummate a sale of both the Subject
Interest, any interest held by an Affiliate of the Offeror in the
General Partner and the Offeree's Entire Interest (the entire
Project) to the Purchaser at a purchase price equal to the
product of (i) the Refusal Price and (ii) the quotient resulting
from the division of (x) one (1) by (y) the percentage interest
in the Partnership represented by the Subject Interest, subject
to all liabilities of the Partnership as of the date of the First
Refusal Notice. For example, if the Refusal Price for the
Offeror's Percentage Interest is $1,000,000 and the Subject
Interest equals 50%, then the entire Project may be sold at a
purchase price equal to $2,000,000 ($1,000,000 times 1.00/.50).
The purchase price shall be payable as set forth in Section
11.3(a); provided however, that if a portion of the purchase
price is to be deferred, then the required collateral for such
deferred payment shall be a first mortgage on the Project and/or
a certificate of deposit, irrevocable stand-by letter of credit
or other type of collateral which is generally available, liquid
and not unique and no more than 50% of the purchase price may be
deferred. The form of the contract of sale shall be subject to
the reasonable approval of the Offeree, and the contract shall be
executed, and close, within the time frames, identified in
Subparagraph (e)(i) of this section. If the holder of any loan to
the Partnership under which a Partner or Partners or Affiliates
have personal liability has the right to and notifies the
Partnership of its intent to accelerate the loan, it shall be a
condition to the closing that the Purchaser repay such loan and
obtain releases from the lender of any guaranties given in
connection therewith. Costs incurred in connection with the
drafting and negotiation of the contract of sale (excluding,
however, costs incurred by the Offeree in commenting on same) and
any conveyance, transfer or similar taxes payable in connection
with the closing shall be expenses of the Partnership.
E. SALE OF SUBJECT INTEREST TO THIRD PARTY.
1. If the Offeree fails to exercise its right to purchase
the Subject Interest, or if the Offeree exercises its right to
purchase but through no fault of the Offeror subsequently fails
to purchase the Subject Interest within the time specified, or
the Offeree fails to offer to sell its entire Percentage Interest
to the Purchaser, then the Offeror shall have the right, for four
(4) months after the expiration of the First Refusal Period, to
obtain a bona fide, binding contract for the sale of such Subject
Interest to the third party which is identified as the
prospective purchaser in the First Refusal Notice, so long as
such third party is not an Affiliate of the Offeror (a
"Purchaser") for a price and on terms and conditions consistent
with SECTION 11.3(A) which are no less favorable to the Offeror
than those stated in the First Refusal Notice, except that any
such contract must provide for a closing of the purchase and sale
of such Subject Interest within sixty (60) days after the date of
such contract; PROVIDED, that if the Offeree fails to purchase
the Offeror's Subject Interest in breach of a commitment by the
Offeree to do so the Offeror shall have, as its sole remedy, the
right to retain the First Refusal Deposit as liquidated damages
and not as a penalty, and in addition thereto the above
four-month limitation on the Offeror's rights to obtain a binding
contract with a third party shall be extended to six (6) months.
2. In the event the Offeror proposes to consummate a sale of
the Subject Interest to the Purchaser identified pursuant to
SECTION 11.3(A) hereof within the time specified and in a manner
otherwise consistent with the requirements of SECTIONS 11.3(D)(1)
above, the Purchaser shall not be entitled to any benefits or
rights under this Agreement unless and until:
a. The Offeree shall reasonably approve the form and
content of the instruments of transfer;
b. The Purchaser in writing accepts and adopts all of
the terms and conditions of this Agreement, as the same may
have been amended, including, without limitation, the
restrictions on transfer set forth in SECTION 11.2, and
acknowledges that the Offeror's rights under this SECTION
11.3 are transferable, but shall not be available for a
period of two (2) years, to such Purchaser;
c. The Offeror or the Purchaser, as the case may be,
pays all debts of the Offeror then due and payable to the
Partnership or to the Offeree (including interest accrued
thereon) and all capital contributions then due and payable
by the Offeror to the Partnership;
d. The Offeror or the Purchaser pays all reasonable
expenses incurred by the Offeree from the date the Offeree
last declines to purchase the Subject Interest through the
date on which the Subject Interest is transferred to the
Purchaser, including, without limitation, legal and
accounting fees, and pays all costs incurred by the
Partnership as the result of such transfer, including,
without limitation, real or personal property transfer
taxes, if any, imposed on the Partnership by virtue of the
transfer and the cost of preparing and filing any and all
tax returns which are required to be filed as a result of
such sale; and
e. If required by the Offeree, the Purchaser delivers
an opinion of counsel to the Partnership, which counsel and
opinion are satisfactory to the Offeree, that an exemption
from registration or qualification under the Securities Act
of 1933, as amended, and under all applicable statutes,
rules or laws of any state which may be applicable thereto
is available.
3. In the event the Offeror is an Affiliate of the operating
member of the General Partner and/or an Affiliate of the manager
under the Management Agreement, the non-operating member shall
have the right to become the operating member and the manager
under the Management Agreement (or to have an Affiliate become
the manager) upon sale of the Subject Interest by giving notice
of exercise to the Offeror.
F. REINSTATEMENT OF FIRST REFUSAL PROCEDURE. In the event the
Offeror fails within the time specified in SECTION 11.3(D) OR SECTION
11.3(E), AS APPLICABLE, to consummate such proposed sale, through no
fault of the Offeree, the Offeror shall reimburse the Offeree for its
above-described costs and shall, prior to any subsequent proposed sale
of the Subject Interest be required to extend to the Offeree, and the
Offeree shall have, the rights of First Refusal set forth in this
SECTION 11.3. Except as otherwise permitted by this Agreement, any
sale, assignment or other transfer by a Partner of its Percentage
Interest or any portion thereof in violation of the restrictions and
procedures set forth in this SECTION 11.3 shall be void.
G. RELATIONSHIP TO BUY-SELL. Neither Chelsea nor Simon may invoke
the provisions of this Section 11.3 during any period when the
buy/sell option described in Section 11.4 hereof has been invoked but
closing thereunder has not yet occurred.
H. OFFER BY MEMBER TO MEMBER. Notwithstanding anything to the
contrary in this Section 11.3, from and after the Project Completion
Date, Chelsea and Simon shall have the right to make offers to the
other for the purchase and sale of all or any portion of their
respective Partnership Interests. Such offers shall not be subject to
the First Right of Refusal Procedure and the party receiving same
shall not be obligated to take any action with respect thereto.
11.4 BUY-SELL
A. Except as hereinafter set forth, at any time following the
date which is six full calendar (6) years after the Project Completion
Date, either Partner (the "Offeror"), provided such Partner is not
then a Defaulting Partner, may by giving the other Partner (the
"Offeree") written notice (the "Sale Notice") implement the sale
procedures which are set forth in this SECTION 11.4. The Offeror must
offer the Entire Interest as previously defined in SECTION 11.3(D).
Prior to implementing the sale procedures, the Partner wishing to
trigger the buy-sell shall first be obligated to notify the other
Partner of its desire to sell its Entire Interest and the Partners
shall thereafter commence good faith discussions to determine whether
or not they mutually agree upon the terms and conditions for the sale
of one Partner's Entire Interest in the Partnership to the other
Partner. If the Partners are unable to agree, then upon the earlier to
occur of thirty (30) days after commencement of discussions or the
date either party notifies the other that it does not want to continue
discussions, the Offeror may deliver the Sale Notice which shall state
the cash price (determined or to be determined as set forth in
subparagraph (E) below) at which the Offeror would be willing to sell
its Entire Interest in the Partnership to the Offeree or to purchase
the Offeree's Entire Interest in the Partnership.
B. Except as hereinafter set forth, no Partner may give the Sale
Notice described in SECTION 11.4(A) during the Construction Period or
for six(6) years after the Project Completion Date.
C. If there is a merger, consolidation, or other business
reorganization of Chelsea or Chelsea, Inc. or Simon, Simon, Inc., SD
Inc., or SPG as a result of which a Change in Control occurs (as
defined in Section 1.15), then the non-merging, non-consolidating or
non-reorganizing Partner may, at its option implement the Buy-Sell
procedures set forth in this Section 11.4 regardless of the period of
time that has elapsed subsequent to the Project Completion Date.
D. If any Partner shall choose to deliver a Sale Notice, upon
receipt of the Sale Notice given and delivered pursuant to SECTION
11.4(A), the Offeree shall be obligated to elect, in accordance with
the provisions of this SECTION 11.4, either to purchase the Offeror's
Entire Interest in the Partnership or to sell its Entire Interest in
the Partnership to the Offeror for cash at the closing described in
SECTION 11.5.
E. The purchase price (the "PURCHASE PRICE") for any purchase and
sale of the Entire Interest in the Partnership of a Partner under this
SECTION 11.4 shall be equal to the cash amount set forth in the Sale
Notice (less the outstanding principal balance of the mortgage,
transfer taxes and prepayment premiums or other amounts payable to the
lender, which amount shall be adjusted for the respective Percentage
Interests of the Partners).
F. The Offeree shall give written notice of its election to the
Offeror within 30 days after receipt of the Offer. Failure of the
Offeree to give notice that such Offeree has elected to purchase the
Offeror's Entire Interest in the Partnership shall be conclusively
deemed to be an election of the Offeree to sell to the Offeror its
Entire Interest in the Partnership.
G. If the holder of any loan to the Partnership under which the
selling Partner or any Affiliate thereof has personal liability, has
the right to, and notifies the Partnership of its intent to accelerate
such loan, it shall be a condition to the closing that the purchasing
Partner repay such loan (plus any deferred and accrued and unpaid
interest thereon and any prepayment premium and/or yield maintenance
fees) at the closing, or have the selling Partner or any Affiliate
thereof released from liability for payment of the loan and any
guarantees made in connection therewith by a written instrument
reasonably satisfactory to the selling Partner, and the failure to do
so will cause such Partner to be a Defaulting Partner. The purchasing
Partner agrees to indemnify the selling Partner and its Affiliates and
hold each of them harmless from and against any damage, loss or
liability to any of them as a result of the indemnifying party's
failure to repay such loan at the closing in accordance with the
provisions hereof. In addition, the selling Partner may, in its sole
and absolute discretion, and without prejudice to any other legal or
equitable remedies it may have, refuse to proceed with the closing
unless simultaneously therewith any such loan is so repaid.
H. The Offeree's election for which notice is given pursuant to
subparagraph (F) shall create a binding contract for the purchase by
Offeree of Offeror's Entire Interest or sale, as the case may be, of
the Offeree's Entire Interest in the Partnership on the terms set
forth in this SECTION 11.4. If the Offeree shall thereafter be in
breach of its obligation to close the purchase or sale in accordance
with such election, such Partner shall be a Defaulting Partner and in
addition to all other rights and remedies herein provided, the Offeror
shall have all remedies at law or in equity. In the event the Offeror
shall be in breach of its obligation to close the purchase or sale
herein provided, then such Partner shall be a Defaulting Partner, and
in addition to all other rights and remedies herein provided, the
Offeree shall have all remedies available in law or at equity.
11.5 CLOSING OF PURCHASE OF A PARTNER'S INTEREST.
A. The closing of any sale of a Partner's interest pursuant to
SECTION 11.4 shall be held at the office where the principal place of
business of the Partnership is located on the 120th day after the
election by the Offeree (unless the Partners agree to a different
mutually acceptable date), unless such 120th day is not a business
day, in which event the closing shall take place on the first business
day following such 120th day. Within 30 days prior to such closing,
there shall be a preliminary closing at which the Partners shall act
diligently and in good faith to agree upon the form and substance of
all documents necessary to effectuate the closing.
B. At the closing, an assignment and, if requested by the
purchasing Partner, a bill of sale (both with covenants against
grantor's acts) from the selling Partner to the purchasing Partner of
the selling Partner's Percentage Interest in the Partnership and any
Affiliate's interest in the General Partner, therein, together with
such other instruments and documents as may be reasonably necessary or
desirable to effectuate the sale and transfer to the purchasing
Partner, shall be deposited in escrow under an escrow agreement and
with an escrow agent approved by the Partners, which approval shall
not be unreasonably withheld. If there is any dispute between the
Partners, any title company which issued a fee title policy to the
Partnership or acted as co-insurer or reinsurer may be designated by
any Partner as the escrow agent. The instruments and documents to be
deposited in escrow at the closing shall be legally sufficient to
convey the selling Partner's interest in the Partnership to the
purchasing Partner, free and clear of all mortgages, deeds of trust,
liens and encumbrances. The purchase price shall be paid to the
selling Partner by federal wire transfer of immediately available
funds to an account designated by the selling Partner.
C. In the event there are any conveyance, transfer or similar
taxes payable as an incident to the conveyances at the preliminary
closing or the closing, such taxes shall be expenses of the
Partnership. In the event that any title insurance company insuring
the title of the Partnership to the Project shall refuse to endorse
its policy of title insurance to reinsure the Partnership's title to
the Project effective immediately after the transfer to the purchasing
Partner without exception other than as set forth in the original
policy of title insurance (other than exceptions for real estate
taxes, rights of tenants in possession, as tenants only, any surviving
deeds of trust, mortgages, liens or charges against the Project, any
easements created by the Partnership and Approved by the Partners, and
any other matter Approved by the Partners at any time or from time to
time), then the assignment from the Offeror to the purchasing Partner
shall contain general warranties of its title to its interest in the
Partnership and the Project.
11.6 ASSUMPTION OF LIABILITIES.
A. At any closing held pursuant to SECTION 11.5, the purchasing
Partner shall, by a legally enforceable agreement, assume the payment
of all obligations of the Partnership accruing after closing,
including, without limitation, any indebtedness under any lien on the
Project identified in the Offer to the extent that the Partners have
personal liability therefor, and shall further secure the release of
the selling Partner's or any Affiliate's guarantees, if any.
B. If, at the time of the purchase of the selling Partner's
interest, the Project is subject to any mortgage, deed of trust, lien
or charge, other than those which were in existence at the time of the
Sale Notice and used to calculate the Purchase Price, the purchasing
Partner shall discharge, assume, or take subject to such mortgage,
deed of trust, lien or charge and reduce the amount of the Purchase
Price otherwise payable pursuant to SECTION 11.4(D) by the selling
Partner's pro rata share of the amount of money as would be required
to discharge such mortgage, deed of trust, lien or charge (including,
without limitation, any and all prepayment premiums or penalties). In
addition, if such an encumbrance shall have been placed by the selling
Partner in contravention of the terms and provisions of this
Agreement, then the purchasing Partner shall also have all of the
rights provided in SECTION 11.4 with respect to a default by the
selling Partner, and the purchasing Partner shall not be required to
close the purchase and sale of the interest of the selling Partner in
the Partnership.
C. Unless the Sale Notice provides otherwise, if the Project is
damaged by fire or other casualty, or if any party possessing the
right of eminent domain or such similar right shall give notice of an
intention to take or acquire a part of the Project, and such damage
occurs, or such notice is given between the date of the Sale Notice
and the closing, the following shall apply:
1. If the Project is damaged by an insured casualty (or an
uninsured casualty not resulting in significant damage, which for
the purposes of this subsection only shall mean damage the cost
to repair of which would not exceed $1,000,000), or if the taking
or acquisition shall not involve a substantial portion of the
Project resulting in an other than substantial reduction in
income, then the Offeree shall be required to complete the
transaction and accept an assignment of the insurance or
condemnation proceeds, in which case the Purchase Price shall be
reduced by a portion of the uninsured casualty, if any, equal to
the amount of the uninsured casualty multiplied by the selling
Member's Entire Interest, and shall be further reduced by the sum
of all deductible amounts specified under the policies of
insurance multiplied by the selling Member's Entire Percentage
Interest.
2. If the Project is damaged by an uninsured casualty
resulting in significant damage, or if the taking or acquisition
shall or may result in a substantial reduction in the income
producing capacity of the Project, then the purchasing Partner
shall have the option to either (1) accept the Entire Interest in
the Project in an "as is" condition together with any insurance
proceeds, settlements and awards (in which case the Purchase
Price shall be reduced by the sum of all deductible amounts
specified under policies of insurance multiplied by the selling
Partner's Entire Interest), or (2) cancel the purchase.
In the event that the purchase is canceled by the purchasing Partner
in accordance with this SECTION 11.6(C), the terms of this Agreement shall
remain in effect and continue to be binding on the parties.
11.7 CONTINUATION OF PARTNERSHIP UPON GENERAL PARTNER WITHDRAWAL. The
retirement, withdrawal, Bankruptcy, dissolution, death or adjudication of
incompetence of the General Partner shall cause the dissolution of the
Partnership, unless the Partners elect, by unanimous consent (other than the
affected partner or its successor in interest), within ninety (90) days of such
event, to continue the Partnership and the Partnership business. If such
election to continue is made, then (i) the Partnership shall not be dissolved;
(ii) the Partnership and the Partnership business shall be continued; (iii) a
Successor General Partner shall be appointed by the Consent of the Partners in
accordance with Section 11.8 hereof and the Partnership Interest of the
Bankrupt, retired, deceased, dissolved or incompetent General Partner shall be
converted to a Partnership Interest as a Limited Partner; and (iv) this
Agreement and the Certificate shall be amended to reflect (a) such continuation
of the Partnership, (b) if applicable, the conversion of such General Partner's
Partnership Interest to a Limited Partner's Partnership Interest, and (c) the
admission of the Successor General Partner(s) designated pursuant to clause
(iii) of this Section 11.7.
11.8 ELECTION OF SUCCESSOR GENERAL PARTNER.
A. A Person shall be admitted as a Successor General Partner only
if the following terms and conditions are satisfied:
1. Except as otherwise provided herein, the admission of
such Person as a General Partner shall have been agreed to by the
Consent of the Partners (other than the affected partner or its
successor in interest);
2. The person shall have accepted and agreed to be bound by
all the terms and provisions of this Agreement and the
Certificate, by executing a counterpart thereof and such other
documents or instruments as may be required or appropriate in
order to effect the admission of such Person as a Successor
General Partner; and
3. An amended Certificate evidencing the admission of such
Person as a General Partner shall have been filed for recordation
under the Act.
B. Notwithstanding Section 11.8(a) hereof, in the event
Chelsea or Simon acquires the Entire Interest of the other
pursuant to Section 11.3 or 11.4 then Chelsea or Simon or an
Affiliate thereof, as the case may he, shall be admitted as a
Successor General Partner without the Consent of all Partners
pursuant to Section 11.8(a) hereof.
<PAGE>
11.9 ADMISSION OF SUBSTITUTE LIMITED PARTNER. Notwithstanding any
other provision under this Agreement, no transferee of a Limited Partner's
Partnership Interest shall become a substituted Limited Partner unless (i) such
transferee shall have executed an instrument satisfactory in form and substance
to the General Partner accepting and agreeing to be bound by all the terms of
this Agreement, (ii) the General Partner has given its Consent thereto, which
may be withheld in its sole discretion; and (iii) all applicable requirements
imposed by this Article 11 have been fulfilled. Absent such substitution, an
assignor of a Limited Partner's Partnership Interest shall continue to be a
Limited Partner with all of the rights and obligations thereof, except for
entitlement to any Partnership distributions or allocations attributable to such
Partnership Interest.
11.10 DEATH, INCOMPETENCE OR DISSOLUTION OF A LIMITED PARTNER. The
adjudication of Bankruptcy or insolvency, dissolution or termination of any
partnership or corporate Limited Partner, or the death or adjudication of
insanity, incompetence, Bankruptcy or insolvency of any individual Limited
Partners (other than a Limited Partner who is also a General Partner) shall not
dissolve the Partnership. In such event, the executors or administrators of the
estate of the deceased Limited Partner, or the committee or other legal
representatives of the estate of the insane, incompetent, bankrupt or insolvent
Limited Partner, shall, for the purposes of settling the estate, have all of the
rights of a Limited Partner and be subject to the provisions of this Agreement,
including this Article 11.
ARTICLE 12 - TERM; DISSOLUTION OF PARTNERSHIP
12.1 TERM.
The Partnership shall continue in effect until December 31, 2050, unless sooner
dissolved and liquidated in accordance with the provisions hereof. All
provisions of this Agreement relative to dissolution and liquidation shall be
cumulative and the exercise or use of one of the provisions hereof shall not
preclude the exercise or use of any other provisions.
12.2 EVENTS OF DISSOLUTION. The Partnership shall be dissolved upon
the occurrence of any of the following events:
A. Subject to the provisions of Section 11.7 hereof, the
adjudication of Bankruptcy or insolvency, dissolution or termination
of the General Partner
B. The expiration of the term of the Partnership;
C. The sale or other disposition (through condemnation or
otherwise) of all or substantially all of the Land and the Project and
completion of the purposes of the Partnership; or
D. When Partners owning more than seventy-five percent (75%) of
the aggregate Partnership Interests shall so determine in writing.
12.3 WINDING-UP OF PARTNERSHIP. Upon dissolution of the Partnership,
the General Partner then remaining (or if there is no remaining General Partner,
Limited Partners owning a majority of the total Limited Partners' Partnership
Interests), shall proceed with dispatch and without any unnecessary delay to
wind up the business affairs of the Partnership, to sell or otherwise liquidate
the Partnership assets and Partnership Property, and, after paying or duly
providing for all liabilities to creditors of the Partnership, to distribute the
net proceeds and any other liquid assets of the Partnership among the Partners
in the manner set forth in Section 7.8 hereof.
12.4 TERMINATION OF PARTNERSHIP. The Partnership shall terminate when
(i) all property and assets owned by the Partnership shall have been disposed
of, (ii) the net proceeds therefrom and any other liquid assets of the
Partnership, after payment of or due provision for all liabilities to creditors
of the Partnership, shall have been distributed to the Partners as provided in
Section 7.8 hereof, and (iii) the Certificate has been amended (terminated) of
record to reflect such termination. With respect to any and all distributions
made to Partners (general or limited) pursuant to Section 7.8 hereof, and with
respect to the aforesaid termination of the Partnership, no Partner shall have
any liability or obligation to the Partnership or to any other Partner to
contribute any cash or other property to the Partnership or to any other
Partner, or to defer or forego the receipt of any cash or other property from
the Partnership, by reason of any deficit in such Partner's Capital Account at
such time.
ARTICLE 13 - MISCELLANEOUS PROVISIONS
13.1 NO AGENCY; NO LIMITATION OF BUSINESS ACTIVITIES BY PARTNERS.
Except as provided in this Agreement, nothing herein contained shall be
construed to constitute any Partner hereof the agent of any other Partner hereof
or to limit the Partners in any manner in the carrying on of their own
respective businesses or activities. Any Partner may engage in and/or possess
any interest in other businesses and real estate ventures of every nature and
description, independently or with others, including but not limited to, the
ownership, financing, leasing, operation, management, syndication, brokerage and
development of real property, and neither the Partnership nor any Partner hereof
shall have any rights in or to any such independent venture or the income or
profits derived therefrom.
13.2 PARTNERSHIP INTERESTS TREATED AS PERSONALTY. The Partnership
Interests of all Partners, and the interest of all Partners in and to the
Partnership and the assets and property of the Partnership, shall be deemed for
all purposes to be personal property and not real property. All real and other
property owned by the Partnership shall be deemed to be owned legally and
beneficially solely by the Partnership as a separate entity, and no Partner,
individually, shall have any direct ownership interest in any such Partnership
Property.
13.3 EFFECT OF CONSENT OR WAIVER. No consent or waiver, express or
implied, by any Partner to or of any breach or default by any other Partner in
the performance by such other Partner of its obligations hereunder shall be
deemed or construed to be a consent or waiver to or of any other breach or
default by such other Partner in the performance by such other Partner of the
same or any other obligations of such Partner hereunder. Failure on the part of
any Partner to object to or complain of any act or failure to act of any of the
other Partners or to declare any of the other Partners in default, irrespective
of how long such failure continues, shall not constitute a waiver by any such
Partner of its rights hereunder.
13.4 SECTION HEADINGS AND PRONOUNS. All headings contained in this
Agreement are for convenience of reference only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provisions hereof. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural,
as the identification of the Person or Persons may require.
13.5 SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the remainder of this Agreement or any
valid clause of any invalid portion. The Partners shall amend this Agreement to
replace any such invalid or unenforceable provision with a valid and enforceable
provision which comes closest to the intent of the Partners with respect to such
invalid or unenforceable provision.
13.6 PARTITION. Each of the parties hereof irrevocably waives during
the term of the Partnership any right it may have , to maintain an action for
partition with respect to Partnership Property and any other Partnership assets.
13.7 NO BENEFIT TO CREDITORS. No provision of this Agreement is
intended to be for the benefit of any creditor or any other Person (other than a
Partner in its capacity as a Partner) to whom any debts, liabilities or
obligations are owed by the Partnership or any Partner, and no such Person shall
be deemed to be a third party beneficiary of any provision of this Agreement.
13.8 ENTIRE AGREEMENT. This Agreement, including all exhibits and
appendices hereto, which are incorporated herein by this reference, sets forth
all (and is intended by all parties hereto to be an integration of all) of the
promises, agreements, conditions, understandings, warranties and representations
among the parties hereto with respect to the terms of the Partnership, the
conduct of the Partnership business and the property of the Partnership, through
the date hereof, and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, express or
implied, with respect thereto among them, through the date hereof, other than as
set forth herein.
13.9 GOVERNING LAW; LITIGATION. It is the intention of the parties
hereto that all questions with respect to the construction of this Agreement and
the rights and liabilities of the parties hereto shall be determined in
accordance with the laws of the State of Florida. In the event the Partnership
or any Partner (or its Affiliates) institutes litigation or an administrative
action against, Chelsea or any of its Affiliates, and/or Simon or any of its
Affiliates, relating to a claim arising under this Agreement or related to the
Land or Project the parties hereto agree that the prevailing party in such
litigation or administrative action shall be entitled to recover its
out-of-pocket costs and expenses of defending or maintaining such litigation or
administrative action, including without limitation, attorneys' fees. With
respect to any action initiated by a Partner in the nature of a derivative
action, the Partner initiating the derivative action shall be obligated to
reimburse the Partnership for any obligation incurred by the Partnership
pursuant to this Section 13.9 if such Partner is the losing party in such
litigation or administrative action. For purposes of the foregoing, a Partner
who is an Affiliate of a party which is the losing party in such litigation or
administrative action shall be obligated to reimburse the prevailing party for
the costs and expenses of such litigation or administrative action.
13.10 BINDING EFFECT. This Agreement is binding upon, and shall inure
to the benefit of, the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors and permitted
assigns.
13.11 NOTICES. Notices required herein shall be sent to the following
addresses:
If to S/C Orlando: S/C Orlando Development LLC
c/o Chelsea GCA Realty, Inc.
103 Eisenhower Parkway
Roseland, New Jersey 07068
Attention: Chief Executive Officer
Fax: (973) 228-1694
with a copy to: Simon Property Group, L.P.
National City Center
115 West Washington Street
Indianapolis, Indiana 46204
Attention: Chief Executive Officer
Fax: (317) 265-7177
If to Chelsea: Chelsea GCA Realty Partnership, L.P.
103 Eisenhower Parkway
Roseland, New Jersey 07068
Attention: General Counsel
Fax: (973) 228-7913
If to Simon: Simon Property Group, L.P.
National City Center
115 West Washington Street
Indianapolis, Indiana 46204
Attention: General Counsel
Fax: (317) 685-7221
13.12 GENERAL PARTNER AS ATTORNEY-IN-FACT FOR LIMITED PARTNERS.
A. Each of the Limited Partners hereby appoints, and each newly
admitted or substitute Limited Partner, by being admitted to the
Partnership, automatically appoints the General Partner or any
successor general partner for the General Partner, as its true and
lawful attorney-in-fact to execute such amendments to this Agreement
and the Certificate and other instruments and to do such other acts as
may be required in the conduct of the Partnership business, consistent
with the provisions of this Agreement and authorized by the General
Partner to reflect, among other things, any of the following:
1. A change in the name of the Partnership or in the
principal office or the resident agent of the Partnership;
2. The conversion of a General Partner Partnership Interest
into a Limited Partner Partnership Interest, or the admission of
a General Partner pursuant to any of the provisions of Article 11
hereof;
3. The substitution of any successor General Partner or
Limited Partners pursuant to the provisions of Article 11 hereof,
or by unanimous Consent of all Partners;
4. The correction or clarification of any scrivener's error
in this Agreement or the Certificate;
5. The execution and filing by the Partnership of any
statement, amendment or other document required to be filed for
record under any provision of the Act;
6. Any amendment to this Agreement or the Certificate which
amendment is approved by the Partners or is required by the Act
or any other applicable state or federal law to conform the
Agreement and/or the Certificate to any requirements of the Act
or any other applicable state or federal law; or
7. The amendment of EXHIBIT A hereto pursuant to the terms
and conditions of this Agreement.
B. The appointment of the attorneys pursuant to this Section
13.12shall be irrevocable and coupled with an interest, and shall
survive the disability of any Limited Partner.
13.13 COUNTERPARTS AND EFFECTIVENESS.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument and may be executed and delivered by facsimile transmission with
each party executing the agreement (or a counterpart thereto) and delivering
such executed document by facsimile transmission with the original to follow by
actual delivery. The parties hereto intend to be legally bound and obligated by
this Agreement effective immediately upon the delivery of any such facsimile
transmission.
[End of Page 40]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto affixed their
signatures as of the day and year first above written.
GENERAL PARTNER:
S/C ORLANDO DEVELOPMENT LLC,
a Delaware limited liability company
By: Chelsea GCA Realty Partnership, L.P.,
a Delaware limited partnership,
By: Chelsea GCA Realty. Inc.,
General Partner
By:____________________________
Its:___________________________
LIMITED PARTNERS:
Chelsea GCA Realty Partnership, L.P.,
a Delaware limited partnership
By: Chelsea GCA Realty. Inc.,
a Maryland corporation,
General Partner
By:____________________________
Its:___________________________
SIMON PROPERTY GROUP, L.P.,
a Delaware limited partnership
By: SIMON PROPERTY GROUP, INC.,
a Delaware corporation, General Partner
By:____________________________
Its:___________________________
<PAGE>
SIMON/CHELSEA ORLANDO DEVELOPMENT LIMITED PARTNERSHIP
EXHIBIT A TO
LIMITED PARTNERSHIP AGREEMENT
SCHEDULE OF PARTNERS
NAME AND ADDRESS PARTNERSHIP INTERESTS
GENERAL PARTNER:
S/C Orlando Development LLC .5%
c/o Chelsea GCA Realty, Inc.
103 Eisenhower Parkway
Roseland, New Jersey 07068
LIMITED PARTNERS:
Chelsea GCA Realty Partnership, L.P. 49.75%
c/o Chelsea GCA Realty, Inc.
103 Eisenhower Parkway
Roseland, New Jersey 07068
Simon Property Group, L.P. 49.75%
National City Center
115 West Washington Street
Indianapolis, Indiana 46204
<PAGE>
SIMON/CHELSEA ORLANDO DEVELOPMENT LIMITED PARTNERSHIP
EXHIBIT B TO
LIMITED PARTNERSHIP AGREEMENT
THE LAND
<PAGE>
SIMON/CHELSEA ORLANDO DEVELOPMENT LIMITED PARTNERSHIP
EXHIBIT C TO
LIMITED PARTNERSHIP AGREEMENT
ADJUSTED PERCENTAGE INTEREST CALCULATION
Assume that on the Percentage Interest Adjustment Date Member A has
contributed $10 million to the Partnership and Partner B has contributed $6
million to the Partnership. Partner A's percentage of the total contribution is
$10 MILLION = .625 (62.5%)
-----------
$16 million
and the percentage of the total contributions of Partner B is
$6 million = .375 (37.5%)
$16 million
As a result, 37.5% shall be Partner B's Adjusted Percentage Interest. Partner
A's adjusted Percentage Interest shall be 62.5%.
<PAGE>
SIMON/CHELSEA ORLANDO DEVELOPMENT LIMITED PARTNERSHIP
LIMITED PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
SECTION PAGE
ARTICLE 1 - DEFINED TERMS.........................................1
1.1 Act.......................................................1
1.2 Adjusted Percentage Interest..............................1
1.3 Affiliate.................................................1
1.4 Agreement.................................................2
1.5 Approved..................................................2
1.6 Bankruptcy................................................2
1.7 Bona Fide Offer...........................................2
1.8 Budgets ..................................................2
1.9 Business Day..............................................3
1.10 Capital Account ..........................................3
1.11 Capital Contribution......................................3
1.12 Capital Contribution Balance..............................3
1.13 Carrying Value............................................3
1.14 Certificate...............................................4
1.15 Change of Control.........................................4
1.16 Chelsea...................................................4
1.17 Deletion..................................................4
1.18 Code......................................................4
1.19 Consent...................................................4
1.20 Construction Lender.......................................4
1.21 Construction Loan.........................................4
1.22 Deletion..................................................4
1.23 Construction Period.......................................4
1.24 Debt Service..............................................5
1.25 Depreciation..............................................5
1.26 Development Agreement.....................................5
1.27 Dollars or $..............................................5
1.28 Excess Negative Balance...................................5
1.29 Fiscal Year...............................................5
1.30 Funding Member............................................5
1.31 General Partner...........................................5
1.32 General Partnership Agreement.............................6
1.33 Independent Accountants...................................6
1.34 Initial Percentage Interest...............................6
1.35 Land......................................................6
1.36 Land Parcels..............................................6
1.37 Limited Partner...........................................6
1.38 Major Capital Event.......................................6
1.39 Major Decision............................................6
1.40 Management Agreement......................................6
1.41 Minimum Gain..............................................6
1.42 Negative Capital Account..................................6
1.43 Net Ordinary Cash Flow....................................6
1.44 Net Profits and Net Losses................................7
1.45 Nonrecourse Debt..........................................8
1.46 Nonrecourse Deductions....................................8
1.47 Non-Contributing Member...................................8
1.48 Non-Funding Member........................................8
1.49 Notice....................................................8
1.50 Operating Budget..........................................8
1.51 Operating Expenses........................................8
1.52 Partially Adjusted Capital Account........................8
1.53 Partner...................................................8
1.54 Deletion..................................................8
1.55 Partner Minimum Gain......................................9
1.56 Partner Nonrecourse Deductions............................9
1.57 Partner Nonrecourse Debt..................................9
1.58 Partnership Minimum Gain..................................9
1.59 Partnership...............................................9
1.60 Partnership Interest......................................9
1.61 Partnership Property......................................9
1.62 Percentage Interest.......................................9
1.63 Percentage Interest Adjustment Date.......................9
1.64 Permanent Loan............................................9
1.65 Person....................................................9
1.66 Plans.....................................................9
1.67 Positive Capital Account..................................9
1.68 Prime or Prime Rate......................................10
1.69 Proceeds.................................................10
1.70 Project..................................................10
1.71 Project Completion Date..................................10
1.72 Regulations..............................................10
1.73 S/C Orlando..............................................10
1.74 Simon....................................................10
1.75 Simon, Inc...............................................10
1.76 Target Capital Account...................................10
1.77 Tax Matters Partner or TMP...............................10
1.78 Total Project Costs......................................10
1.79 Unreturned Capital Contributions Account.................11
ARTICLE 2 - FORMATION AND NAME; FILINGS; ASSUMED NAMES...........11
2.1 Formation and Name.......................................11
2.2 Filings..................................................11
2.3 Assumed Names............................................11
ARTICLE 3 - PRINCIPAL OFFICE; ADDITIONAL OFFICES; RESIDENT AGENT.11
3.1 Principal Office; Place of Business......................11
3.2 Resident Agent...........................................11
ARTICLE 4 - BUSINESS OF PARTNERSHIP..............................12
Business and Purpose of Partnership...........................12
ARTICLE 5 - PARTNERS AND PERCENTAGES OF PARTNERSHIP INTEREST.....12
Partners; Percentage Interests................................12
ARTICLE 6 - CAPITALIZATION AND LOANS.............................12
6.1 Initial Capital Contributions and Interests..............12
6.2 Additional Capital Contributions.........................13
6.3 Payment of Capital Contributions.........................13
6.4 Default Capital Contributions............................13
6.5 Amounts Incurred to Fund Construction Overages ..........16
6.6 Liability of Limited Partners............................17
6.7 No Interest on Capital Contribution......................17
6.8 Withdrawal of Capital Contributions......................17
6.9 Maintenance of Capital Accounts..........................17
6.10 No Third Party Benefit...................................18
ARTICLE 7 - ALLOCATIONS AND DISTRIBUTIONS........................19
7.1 General Allocation of Net Profits and Net Losses.........19
7.2 Overriding Allocations of Net Profits and Net Losses.....19
7.3 Section 754 and Other Elections..........................20
7.4 Partial Taxable Year.....................................21
7.5 Intent...................................................21
7.6 Use of Proceeds..........................................21
7.7 Distribution of Net Ordinary Cash Flow...................21
7.8 Distributions Upon Major Capital Event...................21
7.9 Distribution of Cost Savings.............................22
ARTICLE 8 - LEGAL TITLE TO PARTNERSHIP PROPERTY..................22
8.1 Legal Title..............................................22
8.2 Matters Affecting Legal Title............................22
ARTICLE 9 - MANAGEMENT OF BUSINESS...............................23
9.1 Duties, Rights and Powers of the Managing General
Partner; Fees and Costs; Indemnification.................23
9.2 Budgets..................................................23
9.3 Management Agreement, Management Fees....................24
9.4 Development Agreement; Development and Leasing Fees......24
9.5 Post-Initial Lease-Up Fees...............................24
9.6 Third Party Services.....................................24
9.7 Costs....................................................24
9.8 Liability of Limited Partners............................24
9.9 Indemnification of General Partner.......................25
ARTICLE 10 - FISCAL YEAR; BANK ACCOUNTS; BOOKS AND RECORDS;
TAX ELECTION........................................25
10.1 Bank Account.............................................25
10.2 Books and Records........................................25
10.3 Records Required Under the Act...........................26
10.4 Tax Matters Partner......................................26
ARTICLE 11 - TRANSFERS...........................................26
11.1 Limitation on Assignment by General Partner..............26
11.2 Limitation on Assignment by Limited Partners ............27
11.3 Third Party Offers to Chelsea, Simon or S/C Orlando......28
11.4 Buy/Sell.................................................32
11.5 Closing of Purchase of a Partner's Interest..............33
11.6 Assumption of Liabilities................................34
11.7 Continuation of Partnership Upon General Partner
Withdrawal...............................................35
11.8 Election of Successor General Partner....................35
11.9 Admission of Substitute Limited Partner..................36
11.10 Death, Incompetence or Dissolution of a Limited Partner.36
ARTICLE 12 - TERM; DISSOLUTION OF PARTNERSHIP....................36
12.1 Term.....................................................36
12.2 Events of Dissolution....................................36
12.3 Winding-Up of Partnership................................36
12.4 Termination of Partnership...............................37
ARTICLE 13 - MISCELLANEOUS PROVISIONS............................37
13.1 No Agency; No Limitation of Business Activities
by Partners..............................................37
13.2 Partnership Interests Treated as Personalty..............37
13.3 Effect of Consent or Waiver..............................37
13.4 Section Headings and Pronouns............................37
13.5 Severability.............................................37
13.6 Partition................................................38
13.7 No Benefit to Creditors..................................38
13.8 Entire Agreement.........................................38
13.9 Governing Law; Litigation................................38
13.10 Binding Effect..........................................38
13.11 Notices.................................................38
13.12 Managing General Partner as Attorney-in-Fact for
Limited Partners........................................39
13.13Counterparts and Effectiveness...........................40
EXHIBITS:
Exhibit A
Schedule of Partners..........................................42
Exhibit B
The Land......................................................43
Exhibit C
Adjusted Percentage Interest Calculation......................44
<PAGE>
SIMON/CHELSEA ORLANDO DEVELOPMENT LIMITED PARTNERSHIP
A FLORIDA LIMITED PARTNERSHIP
LIMITED PARTNERSHIP AGREEMENT
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement Form
S-3 (No. 333-36487) of Chelsea GCA Realty, Inc. and Chelsea GCA Realty
Partnership, L.P. and in the related Prospectus of our report dated February 10,
1999, with respect to the consolidated financial statements and schedule of
Chelsea GCA Realty Partnership, L.P. included in this Annual Report (Form 10-K)
for the year ended December 31, 1998.
Ernst & Young LLP
New York, New York
March 23, 1999
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