<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
SIMON PROPERTY GROUP, INC. SPG REALTY CONSULTANTS, INC.
-------------------------- ----------------------------
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
Delaware Delaware
-------- --------
(State of incorporation (State of incorporation
or organization) or organization)
001-14469 001-14469-01
--------- ------------
(Commission File No.) (Commission File No.)
046268599 13-2838638
--------- ----------
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
National City Center National City Center
115 West Washington Street, 115 West Washington Street,
Suite 15 East Suite 15 East
Indianapolis, Indiana 46204 Indianapolis, Indiana 46204
--------------------------- ---------------------------
(Address of principal (Address of principal
executive offices) executive offices)
(317) 636-1600 (317) 636-1600
-------------- --------------
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
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 [ ]
As of August 7, 1999, 170,276,561 shares of common stock, par value $0.0001 per
share, 3,200,000 shares of Class B common stock, par value $0.0001 per share,
and 4,000 shares of Class C common stock, par value $0.0001 per share of Simon
Property Group, Inc. were outstanding, and were paired with 1,734,805.61 shares
of common stock, par value $0.0001 per share, of SPG Realty Consultants, Inc.
================================================================================
<PAGE>
SIMON PROPERTY GROUP, INC. AND
SPG REALTY CONSULTANTS, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1: Financial Statements - Introduction 3
Simon Property Group, Inc. and SPG Realty Consultants, Inc.:
Combined Condensed Balance Sheets as of June 30, 1999
and December 31, 1998 4
Combined Condensed Statements of Operations for the
three-month and six-month periods ended June 30, 1999
and 1998 5
Combined Condensed Statements of Cash Flows for the
six-month periods ended June 30, 1999 and 1998 6
Simon Property Group, Inc.:
Consolidated Condensed Balance Sheets as of June 30,
1999 and December 31, 1998 7
Consolidated Condensed Statements of Operations for
the three-month and six-month periods ended June 30,
1999 and 1998 8
Consolidated Condensed Statements of Cash Flows for
the six-month periods ended June 30, 1999 and 1998 9
SPG Realty Consultants, Inc.:
Consolidated Condensed Balance Sheets as of June 30,
1999 and December 31, 1998 10
Consolidated Condensed Statements of Operations for
the three-month and six-month periods ended June 30,
1999 and 1998 11
Consolidated Condensed Statements of Cash Flows for
the six-month periods ended June 30, 1999 and 1998 12
Notes to Unaudited Condensed Financial Statements 13
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 22
Item 3: Qualitative and Quantitative Disclosure About Market Risk 29
PART II - OTHER INFORMATION
Items 1 through 6 30
SIGNATURE 31
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS - INTRODUCTION
The following unaudited financial statements of Simon Property Group,
Inc. and its paired-share affiliate, SPG Realty Consultants, Inc., are provided
pursuant to the requirements of this Item. In the opinion of management, all
adjustments necessary for fair presentation, consisting of only normal recurring
adjustments, have been included. The financial statements presented herein have
been prepared in accordance with the accounting policies described in Simon
Property Group, Inc. and SPG Realty Consultants, Inc.'s combined annual report
on Form 10-K for the year ended December 31, 1998 and should be read in
conjunction therewith.
As described in Note 2 to the financial statements, Corporate Property
Investors, Inc. was acquired by Simon DeBartolo Group, Inc. as of the close of
business on September 24, 1998. Although Simon DeBartolo Group, Inc. became a
subsidiary of Corporate Property Investors, Inc., the shareholders of Simon
DeBartolo Group, Inc. became majority holders of the outstanding common stock of
Corporate Property Investors, Inc. Accordingly, Simon DeBartolo Group, Inc. is
the predecessor to Simon Property Group, Inc. for accounting and reporting
purposes. In connection with the acquisition, Corporate Property Investors, Inc.
and Corporate Realty Consultants, Inc. were renamed "Simon Property Group, Inc."
and "SPG Realty Consultants, Inc.", respectively. See Note 1 to the financial
statements for a description of the basis of presentation of the following
unaudited financial statements.
3
<PAGE>
SIMON PROPERTY GROUP, INC. AND
SPG REALTY CONSULTANTS, INC.
COMBINED CONDENSED BALANCE SHEETS
(UNAUDITED AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS:
Investment properties, at cost $ 12,398,346 $ 11,850,014
Less-- accumulated depreciation 908,950 722,371
------------ ------------
11,489,396 11,127,643
Goodwill, net 41,356 58,134
Cash and cash equivalents 145,020 129,195
Tenant receivables and accrued revenue, net 235,432 218,581
Notes and advances receivable from Management Company and affiliate 128,441 115,378
Investment in partnerships and joint ventures, at equity 1,077,868 1,306,753
Investment in Management Company and affiliates 14,452 10,037
Other investment 52,289 50,176
Deferred costs and other assets 236,140 228,965
Minority interest 34,365 32,138
------------ ------------
$ 13,454,759 $ 13,277,000
============ ============
LIABILITIES:
Mortgages and other indebtedness $ 8,274,608 $ 7,973,372
Accounts payable and accrued expenses 421,219 415,186
Cash distributions and losses in partnerships and joint ventures, at equity 30,901 29,139
Other liabilities 87,222 95,131
------------ ------------
Total liabilities 8,813,950 8,512,828
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 10)
LIMITED PARTNERS' INTEREST IN THE OPERATING PARTNERSHIPS 1,010,032 1,015,634
PREFERRED STOCK OF SUBSIDIARY 339,463 339,329
SHAREHOLDERS' EQUITY:
CAPITAL STOCK OF SIMON PROPERTY GROUP, INC.:
Series A convertible preferred stock, 209,249 shares authorized,
53,271 and 209,249 issued and outstanding, respectively 68,073 267,393
Series B convertible preferred stock, 5,000,000 shares authorized,
4,844,331 issued and outstanding 450,523 450,523
Common stock, $.0001 par value, 400,000,000 shares authorized,
and 170,252,399 and 163,571,031 issued and outstanding, respectively 17 16
Class B common stock, $.0001 par value, 12,000,000 shares authorized, 3,200,000
issued and outstanding 1 1
Class C common stock, $.0001 par value, 4,000 shares authorized, issued and
outstanding -- --
CAPITAL STOCK OF SPG REALTY CONSULTANTS, INC.:
Common stock, $.0001 par value, 7,500,000 shares authorized,
1,734,563.99 and 1,667,750.31 issued and outstanding, respectively -- --
Capital in excess of par value 3,268,615 3,083,213
Accumulated deficit (469,916) (372,313)
Unrealized gain on long-term investment 1,657 126
Unamortized restricted stock award (27,656) (19,750)
------------ ------------
Total shareholders' equity 3,291,314 3,409,209
------------ ------------
$ 13,454,759 $ 13,277,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
SIMON PROPERTY GROUP, INC. AND
SPG REALTY CONSULTANTS, INC.
COMBINED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUE:
Minimum rent $ 276,394 $ 186,474 $ 550,243 $ 370,934
Overage rent 14,586 10,701 28,026 20,483
Tenant reimbursements 139,555 91,811 276,838 181,971
Other income 23,471 21,389 44,992 37,244
--------- --------- --------- ---------
Total revenue 454,006 310,375 900,099 610,632
--------- --------- --------- ---------
EXPENSES:
Property operating 72,003 50,479 140,507 100,258
Depreciation and amortization 89,765 58,313 179,525 116,618
Real estate taxes 44,123 28,764 91,043 58,959
Repairs and maintenance 16,976 11,655 36,888 23,550
Advertising and promotion 14,854 8,621 29,552 16,722
Provision for credit losses 2,951 733 4,794 3,455
Other 6,691 6,584 14,249 12,177
--------- --------- --------- ---------
Total operating expenses 247,363 165,149 496,558 331,739
--------- --------- --------- ---------
OPERATING INCOME 206,643 145,226 403,541 278,893
INTEREST EXPENSE 142,734 92,510 283,856 184,420
--------- --------- --------- ---------
INCOME BEFORE MINORITY INTEREST 63,909 52,716 119,685 94,473
MINORITY INTEREST (3,688) (2,154) (5,503) (3,596)
LOSSES ON SALES OF ASSETS, NET (9,308) (7,219) (9,308) (7,219)
INCOME TAX BENEFIT OF SRC 3,374 -- 3,374 --
--------- --------- --------- ---------
INCOME BEFORE UNCONSOLIDATED ENTITIES 54,287 43,343 108,248 83,658
INCOME FROM UNCONSOLIDATED ENTITIES 13,051 171 26,478 4,980
--------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEMS 67,338 43,514 134,726 88,638
EXTRAORDINARY ITEMS (43) 7,024 (1,817) 7,024
--------- --------- --------- ---------
INCOME BEFORE ALLOCATION TO LIMITED PARTNERS 67,295 50,538 132,909 95,662
LESS:
LIMITED PARTNERS' INTEREST IN THE OPERATING PARTNERSHIPS 12,710 15,737 25,665 29,579
PREFERRED DIVIDENDS OF SUBSIDIARY 7,334 -- 14,668 --
--------- --------- --------- ---------
NET INCOME 47,251 34,801 92,576 66,083
PREFERRED DIVIDENDS (8,789) (7,334) (19,160) (14,668)
--------- --------- --------- ---------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 38,462 $ 27,467 $ 73,416 $ 51,415
========= ========= ========= =========
BASIC EARNINGS PER COMMON PAIRED SHARE:
Income before extraordinary items $ 0.22 $ 0.21 $ 0.44 $ 0.42
Extraordinary items -- 0.04 (0.01) 0.04
--------- --------- --------- ---------
Net income $ 0.22 $ 0.25 $ 0.43 $ 0.46
========= ========= ========= =========
DILUTED EARNINGS PER COMMON PAIRED SHARE:
Income before extraordinary items $ 0.22 $ 0.21 $ 0.44 $ 0.42
Extraordinary items -- 0.04 (0.01) 0.04
--------- --------- --------- ---------
Net income $ 0.22 $ 0.25 $ 0.43 $ 0.46
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
SIMON PROPERTY GROUP, INC. AND
SPG REALTY CONSULTANTS, INC.
COMBINED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED AND DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 92,576 $ 66,083
Adjustments to reconcile net income to net cash provided
by operating activities--
Depreciation and amortization 185,013 120,915
Extraordinary items 1,817 (7,024)
Losses on sales of assets, net 9,308 7,219
Limited partners' interest in the Operating Partnerships 25,665 29,579
Preferred dividends of Subsidiary 14,668 --
Straight-line rent (9,063) (4,091)
Minority interest 5,503 3,596
Equity in income of unconsolidated entities (26,478) (4,980)
Income tax benefit of SRC (3,374) --
Changes in assets and liabilities--
Tenant receivables and accrued revenue (1,475) 4,507
Deferred costs and other assets (5,292) (1,866)
Accounts payable, accrued expenses and other liabilities (3,926) (817)
----------- -----------
Net cash provided by operating activities 284,942 213,121
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (99,254) (243,355)
Capital expenditures (201,238) (126,776)
Cash from acquisitions and consolidation of joint ventures, net 10,812 4,387
Change in restricted cash -- 2,591
Net proceeds from sales of assets 53,953 46,087
Investments in unconsolidated entities (32,173) (6,554)
Distributions from unconsolidated entities 163,542 113,426
Investments in and advances to Management Company and affiliate (13,063) (17,045)
----------- -----------
Net cash used in investing activities (117,421) (227,239)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock, net 1,853 92,350
Minority interest distributions, net (8,142) (6,326)
Preferred dividends of Subsidiary (14,668) --
Preferred dividends and distributions to shareholders (192,734) (126,698)
Distributions to limited partners (64,821) (63,727)
Mortgage and other note proceeds, net of transaction costs 1,091,808 1,485,545
Mortgage and other note principal payments (964,992) (1,373,360)
----------- -----------
Net cash provided by (used in) financing activities (151,696) 7,784
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 15,825 (6,334)
CASH AND CASH EQUIVALENTS, beginning of period 129,195 109,699
=========== ===========
CASH AND CASH EQUIVALENTS, end of period $ 145,020 $ 103,365
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
SIMON PROPERTY GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS:
Investment properties, at cost $ 12,390,785 $ 11,816,325
Less-- accumulated depreciation 907,741 710,012
------------ ------------
11,483,044 11,106,313
Goodwill, net 41,356 58,134
Cash and cash equivalents 142,236 127,626
Tenant receivables and accrued revenue, net 234,710 217,798
Notes and advances receivable from Management Company and affiliate 128,441 115,378
Note receivable from SRC Operating Partnership -- 20,565
Investment in partnerships and joint ventures, at equity 1,073,057 1,303,251
Investment in Management Company and affiliates 14,452 10,037
Other investment 52,289 50,176
Deferred costs and other assets 236,058 227,713
Minority interest 34,365 32,138
------------ ------------
$ 13,440,008 $ 13,269,129
============ ============
LIABILITIES:
Mortgages and other indebtedness $ 8,273,822 $ 7,972,381
Notes payable to SRC Operating Partnership (Interest at 8%, due 2008) 6,008 17,907
Accounts payable and accrued expenses 420,757 411,259
Cash distributions and losses in partnerships and joint ventures, at equity 30,901 29,139
Other liabilities 86,021 95,326
------------ ------------
Total liabilities 8,817,509 8,526,012
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 10)
LIMITED PARTNERS' INTEREST IN THE SPG OPERATING PARTNERSHIP 1,004,975 1,009,646
PREFERRED STOCK OF SUBSIDIARY 339,463 339,329
SHAREHOLDERS' EQUITY:
Series A convertible preferred stock, 209,249 shares authorized,
53,271 and 209,249 issued and outstanding, respectively 68,073 267,393
Series B convertible preferred stock, 5,000,000 shares authorized,
4,844,331 issued and outstanding 450,523 450,523
Common stock, $.0001 par value, 400,000,000 shares authorized,
and 170,252,399 and 163,571,031 issued and outstanding, respectively 17 16
Class B common stock, $.0001 par value, 12,000,000 shares authorized, 3,200,000
issued and outstanding 1 1
Class C common stock, $.0001 par value, 4,000 shares authorized, issued and
outstanding -- --
Capital in excess of par value 3,254,203 3,068,458
Accumulated deficit (468,757) (372,625)
Unrealized gain on long-term investment 1,657 126
Unamortized restricted stock award (27,656) (19,750)
------------ ------------
Total shareholders' equity 3,278,061 3,394,142
------------ ------------
$ 13,440,008 $ 13,269,129
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
SIMON PROPERTY GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUE:
Minimum rent $ 276,260 $ 186,474 $ 549,659 $ 370,934
Overage rent 14,586 10,701 28,026 20,483
Tenant reimbursements 139,583 91,811 276,840 181,971
Other income 27,038 21,389 48,294 37,244
--------- --------- --------- ---------
Total revenue 457,467 310,375 902,819 610,632
--------- --------- --------- ---------
EXPENSES:
Property operating 71,846 50,479 140,180 100,258
Depreciation and amortization 89,738 58,313 179,217 116,618
Real estate taxes 44,102 28,764 90,887 58,959
Repairs and maintenance 16,953 11,655 36,879 23,550
Advertising and promotion 14,854 8,621 29,552 16,722
Provision for credit losses 2,949 733 4,779 3,455
Other 6,747 6,584 14,429 12,177
--------- --------- --------- ---------
Total operating expenses 247,189 165,149 495,923 331,739
--------- --------- --------- ---------
OPERATING INCOME 210,278 145,226 406,896 278,893
INTEREST EXPENSE 145,488 92,510 284,058 184,420
--------- --------- --------- ---------
INCOME BEFORE MINORITY INTEREST 64,790 52,716 122,838 94,473
MINORITY INTEREST (3,688) (2,154) (5,503) (3,596)
LOSSES ON SALES OF ASSETS (4,188) (7,219) (4,188) (7,219)
--------- --------- --------- ---------
INCOME BEFORE UNCONSOLIDATED ENTITIES 56,914 43,343 113,147 83,658
INCOME FROM UNCONSOLIDATED ENTITIES 12,608 171 24,925 4,980
--------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEMS 69,522 43,514 138,072 88,638
EXTRAORDINARY ITEMS (43) 7,024 (1,817) 7,024
--------- --------- --------- ---------
INCOME BEFORE ALLOCATION TO LIMITED PARTNERS 69,479 50,538 136,255 95,662
LESS:
LIMITED PARTNERS' INTEREST IN THE SPG OPERATING PARTNERSHIP 14,258 15,737 27,540 29,579
PREFERRED DIVIDENDS OF SUBSIDIARY 7,334 -- 14,668 --
--------- --------- --------- ---------
NET INCOME 47,887 34,801 94,047 66,083
PREFERRED DIVIDENDS (8,789) (7,334) (19,160) (14,668)
--------- --------- --------- ---------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 39,098 $ 27,467 $ 74,887 $ 51,415
========= ========= ========= =========
BASIC EARNINGS PER COMMON SHARE:
Income before extraordinary items $ 0.23 $ 0.21 $ 0.45 $ 0.42
Extraordinary items 0.00 0.04 (0.01) 0.04
--------- --------- --------- ---------
Net income $ 0.23 $ 0.25 $ 0.44 $ 0.46
========= ========= ========= =========
DILUTED EARNINGS PER COMMON SHARE:
Income before extraordinary items $ 0.23 $ 0.21 $ 0.44 $ 0.42
Extraordinary items 0.00 0.04 -- 0.04
--------- --------- --------- ---------
Net income $ 0.23 $ 0.25 $ 0.44 $ 0.46
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE>
SIMON PROPERTY GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED AND DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 94,047 $ 66,083
Adjustments to reconcile net income to net cash provided
by operating activities--
Depreciation and amortization 184,705 120,915
Extraordinary item 1,817 (7,024)
Losses on sales of assets 4,188 7,219
Limited partners' interest in the SPG Operating Partnership 27,540 29,579
Preferred dividends of Subsidiary 14,668 --
Straight-line rent (9,065) (4,091)
Minority interest 5,503 3,596
Equity in income of unconsolidated entities (24,925) (4,980)
Changes in assets and liabilities--
Tenant receivables and accrued revenue (1,435) 4,507
Deferred costs and other assets (6,439) (1,866)
Accounts payable, accrued expenses and other liabilities (5,231) (817)
----------- -----------
Net cash provided by operating activities 285,373 213,121
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (99,254) (243,355)
Capital expenditures (198,958) (126,776)
Cash from acquisitions and consolidation of joint ventures, net 10,812 4,387
Change in restricted cash -- 2,591
Net proceeds from sales of assets 42,000 46,087
Investments in unconsolidated entities (32,338) (6,554)
Note payment from the SRC Operating Partnership 20,565 --
Distributions from unconsolidated entities 163,463 113,426
Investments in and advances to Management Company and affiliate (13,063) (17,045)
----------- -----------
Net cash used in investing activities (106,773) (227,239)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common, net 1,253 92,350
Minority interest distributions, net (8,142) (6,326)
Preferred dividends of Subsidiary (14,668) --
Preferred dividends and distributions to shareholders (192,734) (126,698)
Distributions to limited partners (64,821) (63,727)
Note payable to the SRC Operating Partnership (11,899) --
Mortgage and other note proceeds, net of transaction costs 1,091,808 1,485,545
Mortgage and other note principal payments (964,787) (1,373,360)
----------- -----------
Net cash provided by (used in) financing activities (163,990) 7,784
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 14,610 (6,334)
CASH AND CASH EQUIVALENTS, beginning of period 127,626 109,699
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 142,236 $ 103,365
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
9
<PAGE>
SPG REALTY CONSULTANTS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- ------------
<S> <C> <C>
ASSETS:
Investment properties, at cost $ 7,561 $ 33,689
Less-- accumulated depreciation 1,209 12,359
-------- --------
6,352 21,330
Cash and cash equivalents 2,784 1,569
Note receivable from SPG Operating Partnership (Interest at 8%, due 2008) 6,008 17,907
Tenant receivables 721 783
Investments in joint ventures, at equity 4,811 3,502
Other 83 1,510
-------- --------
$ 20,759 $ 46,601
======== ========
LIABILITIES:
Mortgages and other indebtedness $ 786 $ 991
Mortgage payable to the SPG Operating Partnership -- 20,565
Other liabilities 1,663 3,990
-------- --------
Total liabilities 2,449 25,546
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 10)
LIMITED PARTNERS' INTEREST IN THE SRC OPERATING PARTNERSHIP 5,057 5,988
SHAREHOLDERS' EQUITY:
Common stock, $.0001 par value, 7,500,000 shares authorized,
1,734,563.99 and 1,667,750.31 issued and outstanding, respectively -- --
Capital in excess of par value 29,519 29,861
Accumulated deficit (16,266) (14,794)
-------- --------
Total shareholders' equity 13,253 15,067
-------- --------
$ 20,759 $ 46,601
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
10
<PAGE>
SPG REALTY CONSULTANTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------------------------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUE:
Minimum rent $ 306 $ 1,165 $ 1,444 $ 1,947
Tenant reimbursements 39 258 210 470
Other income 436 251 866 322
------------- ------------- ------------- -------------
Total revenue 781 1,674 2,520 2,739
------------- ------------- ------------- -------------
EXPENSES:
Property operating 267 553 706 1,094
Depreciation and amortization 27 235 308 464
Administrative and other 262 1,000 836 1,216
------------- ------------- ------------- -------------
Total operating expenses 556 1,788 1,850 2,774
------------- ------------- ------------- -------------
OPERATING INCOME (LOSS) 225 (114) 670 (35)
INTEREST EXPENSE (1,107) (338) (3,824) (676)
LOSS ON SALES OF ASSETS, NET (5,120) -- (5,120) --
INCOME TAX BENEFIT 3,374 123 3,374 190
------------- ------------- ------------- -------------
LOSS BEFORE UNCONSOLIDATED ENTITIES (2,628) (329) (4,900) (521)
INCOME FROM UNCONSOLIDATED ENTITIES 443 127 1,553 274
------------- ------------- ------------- -------------
LOSS BEFORE ALLOCATION TO LIMITED PARTNERS (2,185) (202) (3,347) (247)
LESS -- LIMITED PARTNERS' INTEREST IN
THE SRC OPERATING PARTNERSHIP 1,548 -- 1,875 --
------------- ------------- ------------- -------------
NET LOSS $ (637) $ (202) $ (1,472) $ (247)
============= ============= ============= =============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.37) $ (0.36) $ (0.86) $ (0.44)
============= ============= ============= =============
BASIC AND DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 1,733,423.99 558,678.00 1,711,765.34 558,692.00
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
11
<PAGE>
SPG REALTY CONSULTANTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED AND DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
--------------------
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,472) $ (247)
Adjustments to reconcile net loss to net cash
provided by operating activities--
Depreciation and amortization 308 464
Loss on sales of assets, net 5,120 --
Limited partners' interest in SRC Operating Partnership (1,875) --
Straight-line rent 2 --
Equity in income of unconsolidated entities (1,553) (274)
Income tax benefit (3,374) (190)
Changes in assets and liabilities--
Tenant receivables and other assets 631 152
Other liabilities 176 (30)
-------- --------
Net cash provided by (used in) operating activities (2,037) (125)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (509) (584)
Investments in unconsolidated entities -- (2,833)
Net proceeds from sales of assets 11,953 --
Note payment from the SPG Operating Partnership 11,899 --
Distributions from unconsolidated entities 79 18,507
-------- --------
Net cash provided by investing activities 23,422 15,090
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock, net 600 3
Distributions to shareholders -- (537)
Mortgage and other note proceeds, net of transaction costs -- 2,408
Mortgage and other note principal payments (20,770) (18,570)
-------- --------
Net cash used in financing activities (20,170) (16,696)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,215 (1,731)
CASH AND CASH EQUIVALENTS, beginning of period 1,569 4,147
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 2,784 $ 2,416
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
12
<PAGE>
SIMON PROPERTY GROUP, INC. AND
SPG REALTY CONSULTANTS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts
and where indicated as in billions)
NOTE 1 - BASIS OF PRESENTATION
The accompanying combined consolidated financial statements include
Simon Property Group, Inc. ("SPG") and subsidiaries and its paired-share
affiliate SPG Realty Consultants, Inc. ("SRC" and together with SPG, the
"Companies") and its subsidiary. All significant intercompany amounts have been
eliminated. The combined balance sheets and statements of operations and cash
flows reflect the purchase of Corporate Property Investors, Inc. ("CPI") and
related transactions (the "CPI Merger") as of the close of business on September
24, 1998. Operating results prior to the completion of the CPI Merger represent
the operating results of Simon DeBartolo Group, Inc. and subsidiaries ("SDG"),
the predecessor to SPG for financial reporting purposes.
The accompanying consolidated financial statements for SPG include the
accounts of SPG and its subsidiaries. All significant intercompany amounts have
been eliminated. SPG's primary subsidiary is Simon Property Group, L.P. (the
"SPG Operating Partnership"), formerly known as Simon DeBartolo Group, L.P.
("SDG, LP"). The balance sheets and statements of operations and cash flows
reflect the purchase of CPI as of the close of business on September 24, 1998.
Operating results prior to the CPI Merger represent the operating results of
SDG.
The accompanying consolidated financial statements of the paired share
affiliate, SRC, include the accounts of SPG Realty Consultants, L.P. (the "SRC
Operating Partnership"). Because the cash contributed to SRC and the SRC
Operating Partnership in exchange for shares of common stock and units of
partnership interests ("Units"), in connection with the CPI Merger represented
equity transactions, SRC, unlike CPI, is not subject to purchase accounting
treatment. The separate statements of SRC represent the historical results of
Corporate Realty Consultants, Inc. ("CRC"), the predecessor to SRC, for all
periods presented.
The SRC Operating Partnership and the SPG Operating Partnership are
hereafter referred to as the "Operating Partnerships" and, together with the
Companies, as "Simon Group".
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles, which require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reported periods.
Actual results could differ from these estimates.
Outstanding common shares of SPG are paired with 1/100th of a common
share of SRC (together "Paired Shares"). SPG is a self-administrated and
self-managed, paired-share real estate investment trust ("REIT"), and is engaged
primarily in the ownership, operation, management, leasing, acquisition,
expansion and development of real estate properties, primarily regional malls
and community shopping centers. As of June 30, 1999, Simon Group owned or held
an interest in 241 income-producing properties in the United States, which
consisted of 153 regional malls, 76 community shopping centers, four specialty
retail centers, five office and mixed-use properties and three value-oriented
super-regional malls in 35 states (the "Properties"), and one asset in Europe.
Simon Group also owned interests in one regional mall, one value-oriented
super-regional mall, three community centers and one outlet center currently
under construction and thirteen parcels of land held for future development. In
addition, Simon Group holds substantially all of the economic interest in M.S.
Management Associates, Inc. (the "Management Company" -See Note 7). Simon Group
holds substantially all of the economic interest in, and the Management Company
holds substantially all of the voting stock of, DeBartolo Properties Management,
Inc. ("DPMI"), which provides architectural, design, construction and other
services to substantially all of the Properties, as well as certain other
regional malls and community shopping centers owned by third parties. The
Companies owned 72.4% and 71.6% of the Operating Partnerships at June 30, 1999
and December 31, 1998, respectively.
Properties which are wholly-owned or owned less than 100% and are
controlled by the Operating Partnerships are accounted for using the
consolidated method of accounting. Control is demonstrated by the ability of the
general partner to manage day-to-day operations, refinance debt and sell the
assets of the partnership without the consent of the limited partner and the
inability of the limited partner to replace the general partner. Investments in
partnerships and joint ventures which represent noncontrolling ownership
interests and the investment in the Management Company are accounted for using
the equity method of accounting. These investments are recorded initially at
cost and subsequently adjusted for net equity in income (loss) and cash
contributions and distributions.
13
<PAGE>
Net operating results of the Operating Partnerships are allocated to
the Companies based first on the Companies' preferred unit preference, if
applicable, and then on their remaining ownership interests in the Operating
Partnerships during the period. The Companies' remaining weighted average
ownership interests in the Operating Partnerships for the three-month and
six-month periods ended June 30, 1999 were 72.4% and 72.1%, respectively. SPG's
remaining weighted average ownership interest in the SPG Operating Partnership
for the three-month and six-month periods ended June 30, 1998 were 63.6% and
63.5%, respectively. Prior to the CPI Merger, SRC owned its assets directly.
SRC is taxed as a C Corporation, and thus is subject to income taxes on
its earnings. SRC follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". The valuation allowance related to SRC's tax accounts is
adjusted as necessary based on management's expectations of SRC's ability to
utilize its tax benefit carryforwards.
NOTE 2 - CPI MERGER
For financial reporting purposes, as of the close of business on
September 24, 1998, the CPI Merger was consummated pursuant to the Agreement and
Plan of Merger dated February 18, 1998, among SDG, CPI and CRC.
Pursuant to the terms of the CPI Merger, a subsidiary of CPI merged
with and into SDG with SDG continuing as the surviving company. SDG became a
majority-owned subsidiary of CPI. The outstanding shares of common stock of SDG
were exchanged for a like number of shares of CPI. Beneficial interests in CRC
were acquired for $14,000 in order to pair the common stock of CPI with 1/100th
of a share of common stock of CRC, the paired share affiliate.
Immediately prior to the consummation of the CPI Merger, the holders of
CPI common stock were paid a merger dividend consisting of (i) $90 in cash, (ii)
1.0818 additional shares of CPI common stock and (iii) 0.19 shares of 6.50%
Series B convertible preferred stock of CPI per share of CPI common stock.
Immediately prior to the CPI Merger, there were 25,496,476 shares of CPI common
stock outstanding. The aggregate value associated with the completion of the CPI
Merger was approximately $5.9 billion including transaction costs and
liabilities assumed.
To finance the cash portion of the CPI Merger consideration, $1.4
billion was borrowed under a new senior unsecured medium term bridge loan (the
"Merger Facility"), which bears interest at a base rate of LIBOR plus 65 basis
points and matures in three mandatory amortization payments (on June 22, 1999,
March 24, 2000 and September 24, 2000) (See Note 8). An additional $237,000 was
also borrowed under the SPG Operating Partnership's existing $1.25 billion
unsecured revolving credit facility (the "Credit Facility"). In connection with
the CPI Merger, CPI was renamed "Simon Property Group, Inc." and CPI's paired
share affiliate, CRC was renamed "SPG Realty Consultants, Inc." In addition SDG
and SDG, LP were renamed "SPG Properties, Inc.", and "Simon Property Group,
L.P.", respectively.
Upon completion of the CPI Merger, SPG transferred substantially all of
the CPI assets acquired, which consisted primarily of 23 regional malls, one
community center, two office buildings and one regional mall under construction
(other than one regional mall, Ocean County Mall, and certain net leased
properties valued at approximately $153,100) and liabilities assumed (except
that SPG remains a co-obligor with respect to the Merger Facility) of
approximately $2.3 billion to the SPG Operating Partnership or one or more
subsidiaries of the SPG Operating Partnership in exchange for 47,790,550 limited
partnership interests and 5,053,580 preferred partnership interests in the SPG
Operating Partnership. The preferred partnership interests carry the same rights
and equal the number of preferred shares issued and outstanding as a direct
result of the CPI Merger. Likewise, the net assets of SRC, with a carrying value
of approximately $14,755, were transferred to the SRC Operating Partnership in
exchange for partnership interests.
The Companies accounted for the merger between SDG and the CPI merger
subsidiary as a reverse purchase in accordance with Accounting Principles Board
Opinion No. 16. Although paired shares of the former CPI and CRC were issued to
SDG common stock holders and SDG became a substantially wholly owned subsidiary
of CPI following the CPI Merger, CPI is considered the business acquired for
accounting purposes. SDG is considered the acquiring company because the SDG
common stockholders became majority holders of the common stock of SPG. The
value of the consideration paid by SDG has been allocated to the estimated fair
value of the CPI assets acquired and liabilities assumed which resulted in
goodwill of $42,518, as adjusted. Goodwill is being amortized over the estimated
life of the Properties acquired, which is 35 years. Accumulated amortization of
goodwill as of June 30, 1999 and December 31, 1998 was $1,162 and $414,
respectively. Purchase accounting will be finalized when SPG completes and
implements its combined operating plan, which is expected to occur by the third
quarter of 1999.
SDG, LP contributed $14,000 cash to CRC and $8,000 cash to the SRC
Operating Partnership on behalf of the SDG common stockholders and the limited
partners of SDG, LP to obtain the beneficial interests in common stock of CRC,
which were paired with the shares of common stock issued by SPG, and to obtain
Units in the SRC Operating Partnership so that the limited partners of SDG, LP
would hold the same proportionate interest in the SRC Operating Partnership that
they hold in SDG, LP. The cash contributed to CRC and the SRC Operating
Partnership in exchange for an ownership interest therein have been
appropriately
14
<PAGE>
accounted for as capital infusion or equity transactions. The assets and
liabilities of CRC have been reflected at historical cost. Adjusting said assets
and liabilities to fair value would only have been appropriate if the SDG
stockholders' beneficial interests in CRC exceeded 80%.
PRO FORMA
The following unaudited pro forma summary financial information
excludes any extraordinary items and combines the consolidated results of
operations of SPG and SRC as if the CPI Merger had occurred as of January 1,
1998, and was carried forward through June 30, 1998. Preparation of the pro
forma summary information was based upon assumptions deemed appropriate by
management. The pro forma summary information is not necessarily indicative of
the results which actually would have occurred if the CPI Merger had been
consummated at January 1, 1998, nor does it purport to represent the results of
operations for future periods.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998
----------------
<S> <C>
Revenue $820,931
================
Net income before allocation to limited partners (1) 125,211
================
Net income available to common shareholders 63,828
================
Net income per Paired Share (1) $ 0.39
================
Net income per Paired Share - assuming dilution $ 0.39
================
Weighted average number of Paired Shares of common stock outstanding 163,904,309
================
Weighted average number of Paired Shares of common stock outstanding -
assuming dilution 164,293,510
================
</TABLE>
(1) Includes a net gain on the sales of assets of $38,075, or $0.17 on a
basic earnings per Paired Share basis.
NOTE 3 - RECLASSIFICATIONS
Certain reclassifications of prior period amounts have been made in the
financial statements to conform to the 1999 presentation. These
reclassifications have no impact on the net operating results previously
reported.
NOTE 4 - PER SHARE DATA
Basic earnings per share is based on the weighted average number of
shares of common stock outstanding during the period and diluted earnings per
share is based on the weighted average number of shares of common stock
outstanding combined with the incremental weighted average shares that would
have been outstanding if all dilutive potential common shares would have been
converted into shares at the earliest date possible. The weighted average number
of shares used in the computation for the three-month periods ended June 30,
1999 and 1998 was 173,342,399 and 111,954,695, respectively. The weighted
average number of shares used in the computation for the six-month periods ended
June 30, 1999 and 1998 was 171,176,534 and 110,825,745, respectively. The
diluted weighted average number of shares used in the computation for the
three-month periods ended June 30, 1999 and 1998 was 173,609,740 and
112,381,667, respectively. The diluted weighted average number of shares used in
the computation for the six-month periods ended June 30, 1999 and 1998 was
171,394,895 and 111,214,946, respectively.
Combined basic and diluted earnings per share is presented in the
financial statements based upon the weighted average number of Paired Shares
outstanding, giving effect to the CPI Merger as of the close of business on
September 24, 1998. Management believes this presentation provides the
shareholders with the most meaningful presentation of earnings for a single
interest in the combined entities.
Both series of convertible preferred stock issued and outstanding
during the comparative periods did not have a dilutive effect on earnings per
share. Paired Units held by limited partners in the Operating Partnerships may
be exchanged for Paired Shares, on a one-for-one basis in certain circumstances.
If exchanged, the paired Units would not have a dilutive effect. The increase in
weighted average shares outstanding under the diluted method over the basic
method in every period presented for the Companies is due entirely to the effect
of outstanding stock options. Basic earnings and diluted earnings were the same
for all periods presented.
NOTE 5 - CASH FLOW INFORMATION
Cash paid for interest, net of amounts capitalized, during the six
months ended June 30, 1999 was $270,937 as compared to $186,614 for the same
period in 1998. Accrued and unpaid distributions were $873 and $3,428 at June
30, 1999 and December 31,
15
<PAGE>
1998, respectively, and represented distributions payable on SPG's 6.5% Series A
Convertible Preferred Stock. See Notes 6 and 9 for information about non-cash
transactions during the six months ended June 30, 1999.
NOTE 6 - OTHER ACQUISITIONS, DISPOSALS AND DEVELOPMENT
During the first six months of 1999 Simon Group acquired the remaining
ownership interests in four Properties for a total of approximately $147,500,
including the assumption of approximately $48,500 of mortgage indebtedness.
These purchases were funded primarily with borrowings from the Credit Facility.
Each of the Properties purchased were previously accounted for using the equity
method of accounting and are now accounted for using the consolidated method of
accounting.
On April 15, 1999, Simon Group sold the Three Dag Hammarskjold office
building and land (the former headquarters of CPI) in New York, New York for
$21,253, resulting in a loss of $5,155. The SRC Operating Partnership, which
owned the building, used its $11,753 portion of the net proceeds primarily to
repay the remaining $10,565 mortgage payable to the SPG Operating Partnership.
The SPG Operating Partnership used its portion of the net proceeds along with
the note repayment from the SRC Operating Partnership to pay down the
outstanding balance on the Credit Facility. Also in the second quarter of 1999,
one community shopping center was sold for $4,200, resulting in a loss of
$4,188. In addition, on June 18, 1999, Simon Group sold its partnership
interests in the management company of the Charles Hotel in Cambridge,
Massachusetts and related land, resulting in a gain of $35. The net proceeds of
approximately $28,500 were used to reduce the outstanding borrowings on the
Credit Facility.
In January of 1999, The Shops at Sunset Place opened in South Miami,
Florida. Simon Group owns a noncontrolling 37.5% interest in this 510,000
square-foot destination-oriented retail and entertainment project.
NOTE 7 - INVESTMENT IN UNCONSOLIDATED ENTITIES
PARTNERSHIPS AND JOINT VENTURES
Summary financial information of Simon Group's investment in
partnerships and joint ventures accounted for using the equity method of
accounting and a summary of Simon Group's investment in and share of income from
such partnerships and joint ventures follow:
<TABLE>
<CAPTION>
June 30, December 31,
BALANCE SHEETS 1999 1998
---------- ------------
<S> <C> <C>
Assets:
Investment properties at cost, net $4,191,102 $4,290,795
Cash and cash equivalents 150,062 173,778
Tenant receivables 135,109 140,579
Other assets 122,128 103,481
---------- ----------
Total assets $4,598,401 $4,708,633
========== ==========
Liabilities and Partners' Equity:
Mortgages and other indebtedness $3,000,058 $2,861,589
Accounts payable, accrued expenses and other liabilities 200,390 227,677
---------- ----------
Total liabilities 3,200,448 3,089,266
Partners' equity 1,397,953 1,619,367
---------- ----------
Total liabilities and partners' equity $4,598,401 $4,708,633
========== ==========
Simon Group's Share of:
Total assets $1,759,605 $1,910,021
========== ==========
Partners' equity $ 455,768 $ 568,998
Add: Excess Investment (See below) 591,199 708,616
---------- ----------
Simon Group's Net Investment in Joint Ventures $1,046,967 $1,277,614
========== ==========
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
---------------------- ----------------------
June 30, June 30,
---------------------- ----------------------
STATEMENTS OF OPERATIONS 1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUE:
Minimum rent $ 125,359 $ 106,881 $ 252,492 $ 197,562
Overage rent 4,679 4,988 8,521 7,810
Tenant reimbursements 60,080 44,782 119,686 86,658
Other income 9,036 5,534 17,757 11,220
--------- --------- --------- ---------
Total revenue 199,154 162,185 398,456 303,250
Operating Expenses:
Operating expenses and other 71,329 56,866 142,613 107,503
Depreciation and amortization 36,335 31,835 71,065 61,625
--------- --------- --------- ---------
Total operating expenses 107,664 88,701 213,678 169,128
--------- --------- --------- ---------
Operating Income 91,490 73,484 184,778 134,122
Interest Expense 49,928 46,501 97,216 85,178
Extraordinary Losses -- 42 -- 42
--------- --------- --------- ---------
Net Income 41,562 26,941 87,562 48,902
Third Party Investors' Share of Net Income 25,813 17,207 53,515 34,030
--------- --------- --------- ---------
Simon Group's Share of Net Income $ 15,749 $ 9,734 $ 34,047 $ 14,872
Amortization of Excess Investment (See below) (5,606) (3,417) (11,663) (5,402)
========= ========= ========= =========
Income from Unconsolidated Entities $ 10,143 $ 6,317 $ 22,384 $ 9,470
========= ========= ========= =========
</TABLE>
As of June 30, 1999 and December 31, 1998, the unamortized excess of
Simon Group's investment over its share of the equity in the underlying net
assets of the partnerships and joint ventures ("Excess Investment") was $591,199
and $708,616, respectively. This Excess Investment is being amortized generally
over the life of the related Properties. Amortization included in income from
unconsolidated entities for the three-month periods ended June 30, 1999 and 1998
was $5,606 and $3,417, respectively. Amortization included in income from
unconsolidated entities for the six-month periods ended June 30, 1999 and 1998
was $11,663 and $5,402, respectively.
The net income or net loss for each partnership and joint venture is
allocated in accordance with the provisions of the applicable partnership or
joint venture agreement. The allocation provisions in these agreements are not
always consistent with the ownership interest held by each general or limited
partner or joint venturer, primarily due to partner preferences.
THE MANAGEMENT COMPANY
The Management Company, including its consolidated subsidiaries,
provides management, leasing, development, accounting, legal, marketing and
management information systems services to five wholly-owned Property, 25 non
wholly-owned Properties, Melvin Simon & Associates, Inc., and certain other
nonowned properties. Certain subsidiaries of the Management Company provide
architectural, design, construction, insurance and other services primarily to
certain of the Properties. The Management Company also invests in other
businesses to provide other synergistic services to the Properties. Simon
Group's share of consolidated net income (loss) of the Management Company, after
intercompany profit eliminations, was $2,908 and ($6,146) for the three-month
periods ended June 30, 1999 and 1998, and was $4,094 and ($4,490) for the
six-month periods ended June 30, 1999 and 1998, respectively.
NOTE 8 - DEBT
At June 30, 1999, Simon Group had consolidated debt of $8,274,608, of
which $6,369,823 was fixed-rate debt and $1,904,785 was variable-rate debt.
Simon Group's pro rata share of indebtedness of the unconsolidated joint venture
Properties as of June 30, 1999 was $1,250,367. As of June 30, 1999, Simon Group
had interest-rate protection agreements related to $687,999 of its consolidated
indebtedness. The agreements are generally in effect until the related
variable-rate debt matures. Simon Group's hedging activity did not materially
impact interest expense in the comparative periods.
In January of 1999, Simon Group retired the $21,910 mortgage on North
East Mall, which bore interest at 10% and had a stated maturity of September,
2000, using cash from working capital. The paydown included a $1,774 prepayment
charge, which
17
<PAGE>
was recorded as an extraordinary loss. In June of 1999, a new $17,709 mortgage
was placed on North East Mall bearing interest at 6.74%, with a stated maturity
of May 2002. The net proceeds were added to working capital.
On February 4, 1999, the SPG Operating Partnership completed the sale
of $600,000 of senior unsecured notes. These notes included two $300,000
tranches. The first tranche bears interest at 6.75% and matures on February 4,
2004 and the second tranche bears interest at 7.125% and matures on February 4,
2009. The SPG Operating Partnership used the net proceeds of approximately
$594,000 primarily to retire the $450,000 initial tranche of the Merger Facility
and to pay $142,000 on the outstanding balance of the Credit Facility.
18
<PAGE>
NOTE 9 - SHAREHOLDERS' EQUITY
The following table summarizes the changes in the Companies'
shareholders' equity since December 31, 1998.
<TABLE>
<CAPTION>
SPG SPG Common SRC Common Unrealized Capital in Unamortized Total
Preferred Stock Stock Gain on Excess of Accumulated Restricted Shareholders'
Stock Investment (1) Par Value Deficit Stock Award Equity
--------- ---------- ---------- -------------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $ 717,916 $ 17 $ 0 $ 126 $3,083,213 $ (372,313) $ (19,750) $3,409,209
Conversion of 155,978 shares of
Series A Preferred Stock into
5,926,440 Paired Shares (2) (199,320) 1 199,319 --
Common stock issued as dividend
(153,890 Paired Shares) (2) 4,030 4,030
Stock incentive program (523,050
Paired Shares, net of 13,273 (13,273) --
forfeitures)
Amortization of stock incentive 5,367 5,367
Stock options exercised (77,988
Paired Shares) 1,906 1,906
Adjustment to the limited
partners' interests in the
Operating Partnerships (33,126) (33,126)
Distributions (190,179) (190,179)
--------- ------- ------ --------- ---------- ----------- ---------- ----------
Subtotal 518,596 18 -- 126 3,268,615 (562,492) (27,656) 3,197,207
Comprehensive Income:
Unrealized gain on investment (1) 1,531 1,531
Net income 92,576 92,576
--------- ------- ------ --------- ---------- ----------- ---------- ----------
Total Comprehensive Income -- -- -- 1,531 -- 92,576 -- 94,107
========= ======= ====== ========= ========== =========== ========== ==========
Balance at June 30, 1999 $ 518,596 $ 18 $ 0 $ 1,657 $3,268,615 $ (469,916) $ (27,656) $3,291,314
========= ======= ====== ========= ========== =========== ========== ==========
</TABLE>
(1) Amounts consist of the Companies' pro rata share of the unrealized gain
resulting from the change in market value of 1,408,450 shares of common
stock of Chelsea GCA Realty, Inc. ("Chelsea"), a publicly traded REIT,
which Simon Group purchased on June 16, 1997. The investment in Chelsea is
being reflected in the accompanying consolidated condensed balance sheets
as other investment.
(2) On February 26, 1999, 150,000 shares of SPG's Series A Convertible
Preferred stock were converted into 5,699,304 Paired Shares. On March 1,
1999 another 152,346 Paired Shares were issued to the holders of the
converted shares in lieu of the cash dividends allocable to these preferred
shares. Additionally, on May 10, 1999 another 5,978 shares of SPG's Series
A Convertible Preferred stock were converted into 227,136 Paired Shares,
with another 1,544 Paired Shares issued in lieu of the cash dividends
allocable to those preferred shares. At June 30, 1999, 53,271 shares of
Series A Convertible Preferred stock remained outstanding.
19
<PAGE>
THE SIMON PROPERTY GROUP 1998 STOCK INCENTIVE PLAN
At the time of the CPI Merger, Simon Group adopted The Simon Property
Group 1998 Stock Incentive Plan (the "1998 Plan"). The 1998 Plan provides for
the grant of equity-based awards during the ten-year period following its
adoption, in the form of options to purchase Paired Shares ("Options"), stock
appreciation rights ("SARs"), restricted stock grants and performance unit
awards (collectively, "Awards"). Options may be granted which are qualified as
"incentive stock options" within the meaning of Section 422 of the Code and
Options which are not so qualified. In March of 1999, 533,696 Paired Shares of
restricted stock were awarded to executives related to 1998 performance. As of
June 30, 1999, 1,810,275 Paired Shares of restricted stock, net of forfeitures,
were deemed earned and awarded under the 1998 Plan. Approximately $2,654 and
$3,100 relating to these programs were amortized in the three-month periods
ended June 30, 1999 and 1998, respectively and approximately $5,367 and $4,447
relating to these programs were amortized in the six-month periods ended June
30, 1999 and 1998, respectively. The cost of restricted stock grants, which is
based upon the stock's fair market value at the time such stock is earned,
awarded and issued, is charged to shareholders' equity and subsequently
amortized against earnings of Simon Group over the vesting period.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
LITIGATION
Richard E. Jacobs, et al. v. Simon DeBartolo Group, L.P. On September
3, 1998, a complaint was filed in the Court of Common Pleas in Cuyahoga County,
Ohio, captioned Richard E. Jacobs, et al. v. Simon DeBartolo Group, L.P. The
plaintiffs are all principals or affiliates of The Richard E. Jacobs Group, Inc.
("Jacobs"). The plaintiffs alleged in their complaint that the SPG Operating
Partnership engaged in malicious prosecution, abuse of process, defamation,
libel, injurious falsehood/unlawful disparagement, deceptive trade practices
under Ohio law, tortious interference and unfair competition in connection with
the SPG Operating Partnership's acquisition by tender offer of shares in RPT, a
Massachusetts business trust, and certain litigation instituted in September,
1997, by the SPG Operating Partnership against Jacobs in federal district court
in New York, wherein the SPG Operating Partnership alleged that Jacobs and other
parties had engaged, or were engaging in activity which violated Section 10(b)
of the Securities Exchange Act of 1934, as well as certain rules promulgated
thereunder. Plaintiffs in the Ohio action are seeking compensatory damages in
excess of $200,000, punitive damages and reimbursement for fees and expenses.
Simon Group moved to dismiss certain of plaintiffs' claims. On March 31, 1999,
the Ohio trial court dismissed the claims for malicious prosecution and abuse of
process as to all plaintiffs other than Jacobs Group, Inc. On May 7, 1999, the
trial court dismissed the claim of Jacobs Group, Inc. for abuse of process. On
May 21, 1999, SPG Operating Partnership filed its answer to the complaint and
asserted counterclaims against Jacobs Group, Inc. for tortious interference with
prospective business relations and contracts, unfair competition, breach of
fiduciary duty and breach of contract seeking damages in excess of $425,000. On
July 28, 1999, United States Court of Appeals, Second Circuit, reversed the
trial court's previously-imposed sanction against the SPG Operating Partnership.
It is difficult to predict the ultimate outcome of this action and there can be
no assurance that the SPG Operating Partnership will receive a favorable
verdict. Based upon the information known at this time, in the opinion of
management, it is not expected that this action will have a material adverse
effect on Simon Group.
Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. On October
16, 1996, a complaint was filed in the Court of Common Pleas of Mahoning County,
Ohio, captioned Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. The
named defendants are SD Property Group, Inc., an indirect 99%-owned subsidiary
of SPG, and DeBartolo Properties Management, Inc., a subsidiary of the
Management Company, and the plaintiffs are 27 former employees of the
defendants. In the complaint, the plaintiffs alleged that they were recipients
of deferred stock grants under the DRC Plan and that these grants immediately
vested under the DRC Plan's "change in control" provision as a result of the DRC
Merger. Plaintiffs asserted that the defendants' refusal to issue them
approximately 661,000 shares of DRC common stock, which is equivalent to
approximately 450,000 Paired Shares computed at the 0.68 exchange ratio used in
the DRC Merger, constituted a breach of contract and a breach of the implied
covenant of good faith and fair dealing under Ohio law. Plaintiffs sought
damages equal to such number of shares of DRC common stock, or cash in lieu
thereof, equal to all deferred stock ever granted to them under the DRC Plan,
dividends on such stock from the time of the grants, compensatory damages for
breach of the implied covenant of good faith and fair dealing, and punitive
damages. The complaint was served on the defendants on October 28, 1996. The
plaintiffs and the defendants each filed motions for summary judgment. On
October 31, 1997, the Court entered a judgment in favor of the defendants
granting their motion for summary judgment. The plaintiffs have appealed this
judgment and the matter is pending. While it is difficult to predict the
ultimate outcome of this action, based on the information known to date, it is
not expected that this action will have a material adverse effect on Simon
Group.
Roel Vento et al v. Tom Taylor et al. An affiliate of Simon Group is a
defendant in litigation entitled Roel Vento et al v. Tom Taylor et al., in the
District Court of Cameron County, Texas, in which a judgment in the amount of
$7,800 has been
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entered against all defendants. This judgment includes approximately $6,500 of
punitive damages and is based upon a jury's findings on four separate theories
of liability including fraud, intentional infliction of emotional distress,
tortious interference with contract and civil conspiracy arising out of the sale
of a business operating under a temporary license agreement at Valle Vista Mall
in Harlingen, Texas. Simon Group appealed the verdict and on May 6, 1999, the
Thirteenth Judicial District (Corpus Christi) of the Texas Court of Appeals
issued an opinion reducing the trial court verdict to $3,384 plus interest.
Simon Group intends to file a petition for a writ of certiorari to the Texas
Supreme Court requesting that they review and revise the determination of the
Appellate Court. Management, based upon the advice of counsel, believes that the
ultimate outcome of this action will not have a material adverse effect on Simon
Group.
Simon Group currently is not subject to any other material litigation
other than routine litigation and administrative proceedings arising in the
ordinary course of business. On the basis of consultation with counsel,
management believes that these items will not have a material adverse impact on
Simon Group's financial position or results of operations.
NOTE 11 - RELATED PARTY TRANSACTIONS
Until April 15, 1999, when the Three Dag Hammarskjold building was
sold, the SRC Operating Partnership received a substantial amount of its rental
income from the SPG Operating Partnership for office space under lease. During
the period prior to the CPI Merger, such rent was received from CPI.
NOTE 12 - NEW ACCOUNTING PRONOUNCEMENTS
On June 15, 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities("SFAS 133"). SFAS 133 establishes accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS 133 requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
formally document, designate, and assess the effectiveness of transactions that
receive hedge accounting.
SFAS 133 will be effective for Simon Group beginning with the 2001
fiscal year and may not be applied retroactively. Management does not expect the
impact of SFAS 133 to be material to the financial statements. However, SFAS 133
could increase volatility in earnings and other comprehensive income.
On April 3, 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5 ("SOP 98-5"), Reporting on the Costs of Start-Up
Activities, which is effective for fiscal years beginning after December 15,
1998. The Companies have assessed the impact of this pronouncement and
determined the impact to be immaterial to the financial statements.
NOTE 13 - PENDING ACQUISITION
On February 25, 1999 Simon Group entered into a definitive agreement
with New England Development Company ("NED") to acquire and assume management
responsibilities for NED's portfolio of up to 14 regional malls aggregating
approximately 10.6 million square feet of GLA. The purchase price for the
portfolio is approximately $1.7 billion. On April 15, 1999, Simon Group executed
a letter of intent to form a joint venture to acquire the portfolio, with Simon
Group's initial ownership to be approximately 50%. The joint venture intends to
complete the purchase of ten of such regional malls in August of 1999 and up to
four more by the end of 1999.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SIMON PROPERTY GROUP, INC. AND SPG REALTY CONSULTANTS, INC. COMBINED
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of Simon Group to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions, which will, among other things, affect
demand for retail space or retail goods, availability and creditworthiness of
prospective tenants, lease rents and the terms and availability of financing;
adverse changes in the real estate markets including, among other things,
competition with other companies and technology; risks of real estate
development and acquisition; governmental actions and initiatives; substantial
indebtedness; conflicts of interests; maintenance of REIT status; risks related
to the "year 2000 issue"; and environmental/safety requirements.
OVERVIEW
For financial reporting purposes, as of the close of business on
September 24, 1998, the operating results include the CPI Merger described in
Note 2 to the financial statements. As a result, the 1999 consolidated results
of operations include an additional 17 regional malls, two office buildings (one
of which was sold on April 15, 1999, as described below) and one community
center, with an additional six regional malls being accounted for using the
equity method of accounting.
The following Property acquisitions, sales and opening (the "Property
Transactions"), also impacted Simon Group's consolidated results of operations
in the comparative periods. On January 26, 1998, Simon Group acquired 100% of
Cordova Mall in Pensacola, Florida for approximately $87.3 million. In March of
1998, Simon Group opened the approximately $13.3 million Muncie Plaza in Muncie,
Indiana. On May 5, 1998, Simon Group acquired the remaining 50.1% interest in
Rolling Oaks Mall for 519,889 shares of SPG's common stock, valued at
approximately $17.2 million. Effective June 1, 1998, Simon Group sold The
Promenade for $33.5 million. Effective June 30, 1998, Simon Group sold Southtown
Mall for $3.3 million. On December 7, 1998, Simon Group obtained a controlling
90% interest in The Arboretum, a community center in Austin, Texas for
approximately $40.5 million. On January 29, 1999, Simon Group acquired the
remaining 15% ownership interests in Lakeline Mall and Lakeline Plaza for
approximately $21.8 million. On February 26, 1999 Simon Group acquired the
remaining 50% ownership interests in Century III Mall for approximately $57.0
million. On April 15, 1999, Simon Group sold the Three Dag Hammarskjold office
building and land (the former headquarters of CPI) in New York, New York for
$21.3 million. On May 20, 1999, Simon Group sold Cohoes Commons for $4.2
million. (See Liquidity and Capital Resources for additional information on 1999
acquisitions and dispositions.)
RESULTS OF OPERATIONS
For the Three Months ended June 30, 1999 vs. the Three Months Ended June 30,
1998
Total revenue increased $143.6 million or 46.3% for the three months
ended June 30, 1999, as compared to the same period in 1998. This increase is
primarily the result of the CPI Merger ($120.6 million) and the Property
Transactions ($10.2 million). Excluding these items, total revenues increased
$12.9 million or 4.1%, primarily due to a $10.5 million increase in minimum rent
and a $6.0 million increase in tenant reimbursements. The 5.6% comparable
increase in minimum rent results from increased occupancy levels and the
replacement of expiring tenant leases with renewal leases at higher minimum base
rents, while the $6.0 million increase in tenant reimbursements is offset by a
similar increase in recoverable expenses.
Total operating expenses increased $82.2 million or 49.8% for the three
months ended June 30, 1999, as compared to the same period in 1998. This
increase is primarily the result of the CPI Merger ($68.3 million) and the
Property Transactions ($7.1 million). Excluding these transactions, total
operating expenses increased $6.8 million or 4.1%, primarily due to a $6.0
million increase in recoverable expenses, which is offset by an increase in
tenant reimbursements, as described above.
Interest expense increased $50.2 million, or 54.3% for the three months
ended June 30, 1999, as compared to the same period in 1998. This increase is
primarily a result of the CPI Merger ($42.9 million), the Property Transactions
($4.1 million), and additional interest ($1.0 million) on indebtedness incurred
by the SPG Operating Partnership, the net proceeds of which were used to retire
mortgage indebtedness on one of the joint venture Properties and to pay down the
Credit Facility. Excluding these transactions, interest expense increased $2.2
million.
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The $3.4 million income tax benefit in 1999 represents SRC's pro rata
share of the SRC Operating Partnership's current year losses and the realization
of tax carryforward benefits for which a valuation allowance was previously
provided.
Income from unconsolidated entities increased from $0.2 million in 1998
to $13.1 million in 1999, resulting from a $3.8 million increase in income from
unconsolidated partnerships and joint ventures and a $9.1 million increase in
income from the Management Company. The increase in income from unconsolidated
partnerships and joint ventures is primarily due to the CPI Merger ($3.1
million).
The $7.0 million extraordinary gain in 1998 is the result of a gain on
forgiveness of debt ($5.2 million) and the write-off of the premium on such
indebtedness ($1.8 million).
Income before allocation to limited partners was $67.3 million for the
three months ended June 30, 1999, as compared to $50.5 million for the same
period in 1998, reflecting an increase of $16.8 million, primarily for the
reasons discussed above. Income before allocation to limited partners was
allocated to the Companies based on the Companies' direct ownership of Ocean
County Mall and certain net lease assets, and the Companies' preferred Unit
preference and weighted average ownership interest in the Operating Partnerships
during the period. In addition, SRC recognizes an income tax provision (benefit)
on its pro rata share of the earnings (losses) of the SRC Operating Partnership.
Preferred distributions of subsidiary represent distributions on
preferred stock of SPG Properties, Inc. (formerly "Simon DeBartolo Group, Inc."
prior to the CPI Merger), a 99.999% owned subsidiary of SPG.
For the Six Months ended June 30, 1999 vs. the Six Months Ended June 30, 1998
Total revenue increased $289.5 million or 47.4% for the six months
ended June 30, 1999, as compared to the same period in 1998. This increase is
primarily the result of the CPI Merger ($237.2 million) and the Property
Transactions ($17.3 million). Excluding these items, total revenues increased
$35.0 million or 5.7%, primarily due to a $21.6 million increase in minimum rent
and a $13.0 million increase in tenant reimbursements. The 5.8% comparable
increase in minimum rent results from increased occupancy levels and the
replacement of expiring tenant leases with renewal leases at higher minimum base
rents, while the $13.0 million increase in tenant reimbursements was offset by
an increase in recoverable expenses.
Total operating expenses increased $164.8 million or 49.7% for the six
months ended June 30, 1999, as compared to the same period in 1998. This
increase is primarily the result of the CPI Merger ($138.1 million) and the
Property Transactions ($11.3 million). Excluding these transactions, total
operating expenses increased $15.4 million or 4.6%, primarily due to a $14.9
million increase in recoverable expenses, which was offset by an increase in
tenant reimbursements, as described above.
Interest expense increased $99.4 million, or 53.9% for the six months
ended June 30, 1999, as compared to the same period in 1998. This increase is
primarily a result of the CPI Merger ($84.4 million), the Property Transactions
($6.6 million), and additional interest ($2.0 million) on indebtedness incurred
by the SPG Operating Partnership, the net proceeds of which were used to retire
mortgage indebtedness on one of the joint venture Properties and to pay down the
Credit Facility and incremental interest on borrowings under the Credit Facility
to acquire a noncontrolling joint venture interest in twelve regional malls and
two community centers (the "IBM Properties") in February 1998 ($2.2 million).
Excluding these transactions, interest expense increased $4.2 million.
The $3.4 million income tax benefit in 1999 represents SRC's pro rata
share of the SRC Operating Partnership's current year losses and the realization
of tax carryforward benefits for which a valuation allowance was previously
provided.
Income from unconsolidated entities increased from $5.0 million in 1998
to $26.5 million in 1999, resulting from a $12.9 million increase in income from
unconsolidated partnerships and joint ventures and a $8.6 million increase in
income from the Management Company. The increase in income from unconsolidated
partnerships and joint ventures is primarily due to the CPI Merger ($8.8
million) and the IBM Properties ($3.3 million).
The $1.8 million extraordinary loss in 1999 is the result of
refinancing mortgage indebtedness. The $7.0 million extraordinary gain in 1998
is the result of a gain on forgiveness of debt ($5.2 million) and the write-off
of the premium on such indebtedness ($1.8 million).
Income before allocation to limited partners was $132.9 million for the
six months ended June 30, 1999, as compared to $95.7 million for the same period
in 1998, reflecting an increase of $37.2 million, primarily for the reasons
discussed above. Income before allocation to limited partners was allocated to
the Companies based on the Companies' direct ownership of Ocean County Mall and
certain net lease assets, and the Companies' preferred Unit preference and
weighted average
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ownership interest in the Operating Partnerships during the period. In addition,
SRC recognizes an income tax provision (benefit) on its pro rata share of the
earnings (losses) of the SRC Operating Partnership.
Preferred distributions of subsidiary represent distributions on
preferred stock of SPG Properties, Inc. (formerly "Simon DeBartolo Group, Inc."
prior to the CPI Merger), a 99.999% owned subsidiary of SPG.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, Simon Group's balance of cash and cash equivalents
was approximately $145.0 million. In addition to its cash balance, Simon Group
had a borrowing capacity on the Credit Facility of $926.0 million available
after outstanding borrowings at June 30, 1999. Simon Group also has access to
public equity and debt markets. The SPG Operating Partnership has a debt shelf
registration statement under which $250 million in debt securities may be
issued.
Management anticipates that cash generated from operating performance
will provide the necessary funds on a short- and long-term basis for its
operating expenses, interest expense on outstanding indebtedness, recurring
capital expenditures, and distributions to shareholders in accordance with REIT
requirements. Sources of capital for nonrecurring capital expenditures, such as
major building renovations and expansions, as well as for scheduled principal
payments, including balloon payments, on outstanding indebtedness are expected
to be obtained from: (i) excess cash generated from operating performance; (ii)
working capital reserves; (iii) additional debt financing; and (iv) additional
equity raised in the public markets.
On February 26, 1999, 150,000 shares of SPG's Series A Convertible
Preferred stock were converted into 5,699,304 Paired Shares. On March 1, 1999,
another 152,346 Paired Shares were issued to the holders of the converted shares
in lieu of the cash dividends allocable to these preferred shares. Additionally,
on May 10, 1999 another 5,978 shares of SPG's Series A Convertible Preferred
stock were converted into 227,136 Paired Shares, with another 1,544 Paired
Shares issued in lieu of the cash dividends allocable to those preferred shares.
At June 30, 1999, 53,271 shares of Series A Convertible Preferred stock remained
outstanding.
Sensitivity Analysis
Simon Group's future earnings, cash flows and fair values relating to
financial instruments are dependent upon prevalent market rates of interest,
such as LIBOR. Based upon consolidated indebtedness and interest rates at June
30, 1999, a 1% increase in the market rates of interest would decrease future
earnings and cash flows by approximately $13.4 million per year, and would
decrease the fair value of debt by approximately $670 million. A 1% decrease in
the market rates of interest would increase future earnings and cash flows by
approximately $14.0 million per year, and would increase the fair value of debt
by approximately $870 million.
Financing and Debt
At June 30, 1999, Simon Group had consolidated debt of $8,275 million,
of which $6,370 million is fixed-rate debt bearing interest at a weighted
average rate of 7.3% and $1,905 million is variable-rate debt bearing interest
at a weighted average rate of 5.9%. As of June 30, 1999, Simon Group had
interest rate protection agreements related to $688 million of consolidated
variable-rate debt. Simon Group's interest rate protection agreements did not
materially impact interest expense or weighted average borrowing rates for the
six months ended June 30, 1999 or 1998.
Scheduled principal payments of the Companies' share of consolidated
indebtedness over the next five years is $3,918 million, with $4,216 million
thereafter. Simon Group's combined ratio of consolidated debt-to-market
capitalization was 54.8% and 51.2% at June 30, 1999 and December 31, 1998,
respectively.
In January of 1999 Simon Group retired the $22 million mortgage on
North East Mall, which bore interest at 10% and had a stated maturity of
September, 2000, using cash from working capital. The paydown included a $1.8
million prepayment charge, which was recorded as an extraordinary loss. In June
of 1999, a new $17.7 million mortgage was placed on North East Mall bearing
interest at 6.74%, with a stated maturity of May 2002. The net proceeds were
added to working capital.
On February 4, 1999, the SPG Operating Partnership completed the sale
of $600 million of senior unsecured notes. These notes included two $300 million
tranches. The first tranche bears interest at 6.75% and matures on February 4,
2004 and the second tranche bears interest at 7.125% and matures on February 4,
2009. The SPG Operating Partnership used the net proceeds of approximately $594
million primarily to retire the $450 million initial tranche of the Merger
Facility and to pay $142 million on the outstanding balance of the Credit
Facility.
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Acquisitions
Management continues to actively review and evaluate a number of
individual property and portfolio acquisition opportunities. Management believes
that funds on hand, and amounts available under the Credit Facility, together
with the net proceeds of public and private offerings of debt and equity
securities are sufficient to finance likely acquisitions. No assurance can be
given that Simon Group will not be required to, or will not elect to, even if
not required to, obtain funds from outside sources, including through the sale
of debt or equity securities, to finance significant acquisitions, if any.
During the first six months of 1999 Simon Group acquired the remaining
ownership interests in four Properties for a total of approximately $147.5
million, including the assumption of approximately $48.5 million of mortgage
indebtedness. These purchases were funded primarily with borrowing from the
Credit Facility. Each of the Properties purchased were previously accounted for
using the equity method of accounting and are now accounted for using the
consolidated method of accounting.
Dispositions
On April 15, 1999, Simon Group sold the Three Dag Hammarskjold office
building and land (the former headquarters of CPI) in New York, New York for
$21.3 million, resulting in a loss of $5.2 million. The SRC Operating
Partnership, which owned the building, used its $11.8 million portion of the net
proceeds primarily to repay the remaining $10.6 million mortgage payable to the
SPG Operating Partnership. The SPG Operating Partnership used its portion of the
net proceeds along with the note repayment from the SRC Operating Partnership to
pay down the outstanding balance on the Credit Facility.
Also in the second quarter of 1999, one community shopping center was
sold for $4.2 million, resulting in a loss of $4.2 million. In addition, Simon
Group sold its partnership interests in the management company of the Charles
Hotel in Cambridge, Massachusetts and related land, resulting in a minimal gain.
The net proceeds of approximately $28.5 million, were used to reduce the
outstanding borrowings on the Credit Facility.
Portfolio Restructuring. In addition to the Property sales described
above, Simon Group is continuing to evaluate the potential sale of its remaining
non-retail holdings, along with a number of retail assets that are no longer
aligned with Simon Group's strategic criteria. If these assets are sold,
management expects the sale prices will not differ materially from the carrying
value of the related assets.
Development, Expansions and Renovations. Simon Group is involved in
several development, expansion and renovation efforts.
In January of 1999, The Shops at Sunset Place, a 510,000 square-foot
destination-oriented retail and entertainment project, opened in South Miami,
Florida. Simon Group owns 37.5% of this approximately $150 million specialty
center.
Construction also continues on the following projects, which have an
aggregate construction cost of approximately $720 million, of which Simon
Group's share is approximately $395 million:
o Concord Mills, a 37.5%-owned value-oriented super regional mall
project, containing approximately 1.4 million square feet of GLA,
is scheduled to open in September of 1999 in Concord (Charlotte),
North Carolina.
o The Mall of Georgia, an approximately 1.6 million square foot
regional mall project, is scheduled to open in August of 1999.
Adjacent to the regional mall, The Mall of Georgia Crossing is an
approximately 441,000 square-foot community shopping center
project, which is also scheduled to open in August of 1999. Simon
Group is funding 85% of the capital requirements of the project.
Simon Group has a noncontrolling 50% ownership interest in each of
these development projects after the return of its equity and a 9%
return thereon.
o In addition to Mall of Georgia Crossing, two other new community
center projects are under construction: The Shops at North East
Mall and Waterford Lakes Town Center at a combined 1,261,000
square feet of GLA, which are each scheduled to open in November
of 1999.
o Orlando Premium Outlets marks Simon Group's first project to be
constructed in the partnership with Chelsea GCA Realty. This
433,000 square-foot upscale outlet center is scheduled for
completion in the summer of 2000 in Orlando, Florida.
A key objective of Simon Group is to increase the profitability and
market share of its Properties through strategic renovations and expansions.
Simon Group's share of projected costs to fund all renovation and expansion
projects in 1999 is
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approximately $400 million, which includes approximately $150 million incurred
in the first six months of 1999. It is anticipated that the cost of these
projects will be financed principally with the Credit Facility, project-specific
indebtedness, access to debt and equity markets, and cash flows from operations.
Simon Group currently has nine major expansion and/or redevelopment projects
under construction and in the preconstruction development stage with targeted
1999 completion dates. Included in combined investment properties at June 30,
1999 is approximately $330 million of construction in progress, with another
$300 million in the unconsolidated joint venture investment properties.
Distributions. The Companies declared a distribution of $0.505 per
Paired Share in each of the first two quarters of 1999. The current annual
distribution rate is $2.02 per Paired Share. Future common stock distributions
will be determined based on actual results of operations and cash available for
distribution. In addition, preferred distributions of $65.54 per share of SPG's
Series A preferred stock and $3.25 per share of SPG's Series B preferred stock
were declared during the first six months of 1999.
INVESTING AND FINANCING ACTIVITIES
Cash used in investing activities for the six months ended June 30,
1999 of $117.4 million is primarily the result of $201.2 million of capital
expenditures; acquisitions of $99.3 million; $32.2 million of investments in
unconsolidated joint ventures; and $13.1 million of investments in and advances
to the Management Company, partially offset by distributions from unconsolidated
entities of $163.5 million; net proceeds from the sales of assets of $54.0
million; and cash of $10.8 million from the consolidations of Haywood Mall,
Century III Mall, Lakeline Mall and Lakeline Plaza. Capital expenditures
includes development costs of $14.8 million, renovation and expansion costs of
approximately $158.5 million and tenant costs and other operational capital
expenditures of approximately $27.9 million. Acquisitions includes $69.0
million, $24.0 million and $6.3 million for the remaining interests in Haywood
Mall, Century III Mall and Lakeline Mall and Plaza, respectively. Investments in
unconsolidated joint ventures is primarily $11.5 million in Florida Mall and
$11.2 million in Orlando Premium Outlots. Distributions from unconsolidated
entities includes $44.9 million, $33.1 million, $27.4 million and $14.4 million
derived primarily from incremental borrowings on Gwinnett Place, Town Center at
Cobb, Westchester Mall and Concord Mills, respectively. Net proceeds from the
sales of assets is made up of $28.5 million, $21.3 million and $4.2 million from
the sales of the partnership interests in the management company of the Charles
Hotel and related land, the Three Dag Hammarskjold office building and Cohoes
Center, respectively. The $13.1 million investment in the Management Company is
primarily to fund an additional investment in Groupe BEG, which represents Simon
Group's interests in retail real estate in Europe.
Cash used in financing activities for the six months ended June 30,
1999 was $151.7 million and primarily includes net distributions of $278.5
million, partially offset by net borrowings of $126.8 million.
EBITDA--EARNINGS FROM OPERATING RESULTS BEFORE INTEREST, TAXES,
DEPRECIATION AND AMORTIZATION
Management believes that there are several important factors that
contribute to the ability of Simon Group to increase rent and improve
profitability of its shopping centers, including aggregate tenant sales volume,
sales per square foot, occupancy levels and tenant costs. Each of these factors
has a significant effect on EBITDA. Management believes that EBITDA is an
effective measure of shopping center operating performance because: (i) it is
industry practice to evaluate real estate properties based on operating income
before interest, taxes, depreciation and amortization, which is generally
equivalent to EBITDA; and (ii) EBITDA is unaffected by the debt and equity
structure of the property owner. EBITDA: (i) does not represent cash flow from
operations as defined by generally accepted accounting principles; (ii) should
not be considered as an alternative to net income as a measure of operating
performance; (iii) is not indicative of cash flows from operating, investing and
financing activities; and (iv) is not an alternative to cash flows as a measure
of liquidity.
Total EBITDA for the Properties increased from $591.3 million for the
six months ended June 30, 1998 to $838.9 million for the same period in 1999,
representing a 41.9% increase. This increase is primarily attributable to the
CPI Merger ($197.5 million), the IBM Properties ($14.4 million) and the other
Properties opened or acquired during 1998 and 1999 ($7.9 million), partially
offset by a decrease from Properties sold in the comparative periods ($2.3
million). Excluding these items, EBITDA increased $30.2 million, or 5.1%,
resulting from aggressive leasing of new and existing space and increased
operating efficiencies. During this period operating profit margin decreased
slightly from 64.7% to 64.6%.
FFO-FUNDS FROM OPERATIONS
FFO, as defined by the National Association of Real Estate Investment
Trusts, means the consolidated net income of Simon Group and its subsidiaries
without giving effect to depreciation and amortization, gains or losses from
extraordinary items, gains or losses on sales of real estate, gains or losses on
investments in marketable securities and any provision/benefit for income taxes
for such period, plus the allocable portion, based on Simon Group's ownership
interest, of funds from operations of unconsolidated joint ventures, all
determined on a consistent basis in accordance with generally accepted
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accounting principles. Management believes that FFO is an important and widely
used measure of the operating performance of REITs which provides a relevant
basis for comparison among REITs. FFO is presented to assist investors in
analyzing performance. Simon Group's method of calculating FFO may be different
from the methods used by other REITs. FFO: (i) does not represent cash flow from
operations as defined by generally accepted accounting principles; (ii) should
not be considered as an alternative to net income as a measure of operating
performance or to cash flows from operating, investing and financing activities;
and (iii) is not an alternative to cash flows as a measure of liquidity.
The following summarizes FFO of Simon Group and reconciles combined
income before extraordinary items to FFO for the periods presented:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(In thousands)
FFO of Simon Group $ 170,573 $ 115,957 $ 328,528 $ 224,864
========= ========= ========= =========
Reconciliation:
Income Before Extraordinary Items $ 67,338 $ 43,514 $ 134,726 $ 88,638
Plus:
Depreciation and amortization from combined
consolidated Properties 89,544 58,082 179,081 116,161
Simon Group's share of depreciation and
amortization and extraordinary items from
unconsolidated affiliates 20,761 16,304 41,291 31,108
Loss on the sale of real estate 9,308 7,219 9,308 7,219
Less:
Minority interest portion of depreciation,
amortization and extraordinary items (255) (1,828) (2,050) (3,594)
Preferred dividends (including preferred
dividends of a subsidiary) (16,123) (7,334) (33,828) (14,668)
--------- --------- --------- ---------
FFO of Simon Group $ 170,573 $ 115,957 $ 328,528 $ 224,864
========= ========= ========= =========
FFO Allocable to the Companies $ 125,099 $ 73,719 $ 239,359 $ 142,734
========= ========= ========= =========
</TABLE>
PORTFOLIO DATA
The following operating statistics give effect to the CPI Merger for
1999 only. Statistics include all Properties except Charles Towne Square,
Richmond Town Square, The Shops at Mission Viejo, and the redevelopment area at
Irving Mall, which are all undergoing extensive redevelopments.
Aggregate Tenant Sales Volume. For the six months ended June 30, 1999
compared to the same period in 1998, total reported retail sales at mall and
freestanding GLA owned by Simon Group ("Owned GLA") in the regional malls
increased $1,753 million or 41.7% from $4,200 million to $5,953 million,
primarily as a result of the CPI Merger ($1,408 million), increased productivity
of our existing tenant base and an overall increase in occupancy. Retail sales
at Owned GLA affect revenue and profitability levels because they determine the
amount of minimum rent that can be charged, the percentage rent realized, and
the recoverable expenses (common area maintenance, real estate taxes, etc.) the
tenants can afford to pay.
Occupancy Levels. Occupancy levels for Owned GLA at mall and
freestanding stores in the regional malls increased from 87.0% at June 30, 1998,
to 88.4% at June 30, 1999. Owned GLA has increased 13.5 million square feet from
June 30, 1998, to June 30, 1999, primarily as a result of the CPI Merger (12.4
million).
Average Base Rents. Average base rents per square foot of mall and
freestanding Owned GLA at regional malls increased 13.2%, from $23.10 at June
30, 1998 to $26.15 at June 30, 1999.
27
<PAGE>
INFLATION
Inflation has remained relatively low during the past four years and
has had a minimal impact on the operating performance of the Properties.
Nonetheless, substantially all of the tenants' leases contain provisions
designed to lessen the impact of inflation. Such provisions include clauses
enabling Simon Group to receive percentage rentals based on tenants' gross
sales, which generally increase as prices rise, and/or escalation clauses, which
generally increase rental rates during the terms of the leases. In addition,
many of the leases are for terms of less than ten years, which may enable Simon
Group to replace existing leases with new leases at higher base and/or
percentage rentals if rents of the existing leases are below the then-existing
market rate. Substantially all of the leases, other than those for anchors,
require the tenants to pay a proportionate share of operating expenses,
including common area maintenance, real estate taxes and insurance, thereby
reducing Simon Group's exposure to increases in costs and operating expenses
resulting from inflation.
However, inflation may have a negative impact on some of Simon Group's
other operating items. Interest and general and administrative expenses may be
adversely affected by inflation as these specified costs could increase at a
rate higher than rents. Also, for tenant leases with stated rent increases,
inflation may have a negative effect as the stated rent increases in these
leases could be lower than the increase in inflation at any given time.
YEAR 2000 COSTS
Simon Group has undertaken a project to identify and correct problems
arising from the inability of information technology hardware and software
systems to process dates after December 31, 1999. This Year 2000 project
consists of two primary components. The first component focuses on Simon Group's
key information technology systems (the "IT Component") and the second component
focuses on the information systems of key tenants and key third party service
providers as well as imbedded systems within common areas of substantially all
of the Properties (the "Non-IT Component"). Key tenants include the 20 largest
base rent contributors and anchor tenants with over 25,000 square feet of GLA.
Key third party service providers are those providers whose Year 2000 problems,
if not addressed, would be likely to have a material adverse effect on Simon
Group's operations.
The IT Component of the Year 2000 project is being managed by the
information services department of Simon Group who have actively involved other
disciplines within Simon Group which are directly impacted by an IT Component of
the project. The Non-IT Component is being managed by a steering committee of 25
employees, including senior executives of a number of Simon Group's departments.
In addition, outside consultants have been engaged to assist in the Non-IT
Component.
STATUS OF PROJECT THROUGH JULY 31, 1999
IT Component. Simon Group's primary operating, financial
accounting and billing systems and Simon Group's standard primary
desktop software have been determined to be Year 2000 ready. Simon
Group's information services department has also completed its
assessment of other "mission critical" applications within Simon Group
and is currently implementing solutions to those applications in order
for them to be Year 2000 ready. It is expected that the implementation
of these mission critical solutions will be complete by September 30,
1999.
Non-IT Component. The Non-IT Component includes the following
phases: (1) an inventory of Year 2000 items which are determined to be
material to Simon Group's operations; (2) assigning priority to
identified items; (3) assessing Year 2000 compliance status as to all
critical items; (4) developing replacement or contingency plans based
on the information collected in the preceding phases; (5) implementing
replacement and contingency plans; and (6) testing and monitoring of
plans, as applicable.
Phase (1) and Phase (2) are complete and Phase (3) is in
process. The assessment of compliance status of key tenants is
approximately 90% complete, the assessment of compliance status of key
third party service providers is approximately 91% complete, the
assessment of compliance status of critical inventoried components at
the Properties is approximately 90% complete and the assessment of
compliance status of non-critical inventoried components at the
Properties is approximately 90% complete. Simon Group expects to
complete Phase (3) by August 31, 1999. The development of contingency
or replacement plans (Phase (4)) is scheduled to be completed by August
31, 1999. Development of such plans is ongoing. Implementation of
contingency and replacement plans (Phase (5)) is ongoing and will
continue throughout 1999 to the extent Year 2000 issues are identified.
Testing is in process. Testing of critical inventoried components is
scheduled to be completed by September 30, 1999.
28
<PAGE>
Costs. Simon Group estimates that it will spend approximately $1.5
million in incremental costs for its Year 2000 project. This amount is being
incurred over a period that commenced in January 1997 and is expected to end in
September 1999. Costs incurred through June 30, 1999 are estimated at
approximately $600 thousand, including approximately $100 thousand in the
six-month period ended June 30, 1999. Such amounts are expensed as incurred.
These estimates do not include the costs expended by Simon Group following the
1996 merger with DeBartolo Realty Corporation for software, hardware and related
costs necessary to upgrade its primary operating, financial accounting and
billing systems, which allowed those systems to, among other things, become Year
2000 compliant.
Risks. The most reasonably likely worst case scenario for Simon Group
with respect to the Year 2000 problems would be disruptions in operations at the
Properties. This could lead to reduced sales at the Properties and claims by
tenants which would in turn adversely affect Simon Group's results of
operations.
Simon Group has not yet completed all phases of its Year 2000 project
and Simon Group is dependent upon key tenants and key third party suppliers to
make their information systems Year 2000 compliant. In addition, disruptions in
the economy generally resulting from Year 2000 problems could have an adverse
effect on Simon Group's operations.
PENDING ACQUISITION
As described in Note 13 to the financial statements, on February 25,
1999 Simon Group entered into a definitive agreement with NED to acquire and
assume management responsibilities for NED's portfolio of up to 14 regional
malls aggregating approximately 10.6 million square feet of GLA. The purchase
price for the portfolio is approximately $1.7 billion. On April 15, 1999, Simon
Group executed a letter of intent to form a joint venture to acquire the
portfolio, with Simon Group's initial ownership to be approximately 50%. The
joint venture intends to complete the purchase of ten of such regional malls in
August of 1999 and up to four more by the end of 1999.
SEASONALITY
The shopping center industry is seasonal in nature, particularly in the
fourth quarter during the holiday season, when tenant occupancy and retail sales
are typically at their highest levels. In addition, shopping malls achieve most
of their temporary tenant rents during the holiday season. As a result of the
above, earnings are generally highest in the fourth quarter of each year.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
Reference is made to Item 2 of this Form 10-Q under the caption
"Liquidity and Capital Resources".
29
<PAGE>
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
None.
Item 4: Submission of Matters to a Vote of Security Holders
The Annual Meeting of the stockholders of Simon Property
Group, Inc. and SPG Realty Consultants, Inc. was held on May 12, 1999.
The matters submitted to the stockholders for a vote included (a) the
election of 7 directors to the Board of Directors; and (b) the
ratification of the appointment of Arthur Andersen LLP as independent
accountants for the fiscal year ending December 31, 1999.
The following table sets forth the results of voting on these matters.
<TABLE>
<CAPTION>
Number of Number of
Number of Votes Abstentions/
Votes AGAINST/ Broker
Matter FOR WITHHELD Non-Votes
------ --------- --------- ------------
<S> <C> <C> <C>
Election of Directors:
Robert E. Angelica.................................. 124,659,940 5,231,826 --
Birch Bayh.......................................... 124,517,323 5,374,443 --
Hans C. Mautner..................................... 124,655,844 5,235,922 --
G. William Miller................................... 124,622,023 5,269,743 --
J. Albert Smith, Jr. ............................... 124,653,679 5,238,087 --
Pieter S. van den Berg.............................. 124,660,340 5,231,426 --
Phillip J. Ward .................................... 124,663,231 5,228,535 --
Ratification of Appointment of Arthur Andersen LLP.. 128,508,839 87,582 1,295,345
</TABLE>
Members of the Board of Directors whose term of office as a director
continued after the Annual Meeting other than those elected are Melvin Simon,
Herbert Simon, David Simon, Richard S. Sokolov, Frederick W. Petri and M. Denise
DeBartolo York.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Management And Portfolio Agreement Among Simon
Property Group, Inc., Simon Property Group, L.P., Ned
Management Limited Partnership, and Wellspark
Management LLC Dated as of February 22, 1999.
(b) Reports on Form 8-K
One Form 8-K were filed during the current period.
On May 20, 1999 under Item 5 - Other Events,
SPG reported that it made available additional
ownership and operational information concerning the
Companies, the Operating Partnerships, and the
properties owned or managed as of March 31, 1999, in
the form of a Supplemental Information Package. A
copy of the package was included as an exhibit to the
8-K filing.
30
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
SIMON PROPERTY GROUP, INC. AND
SPG REALTY CONSULTANTS, INC.
/s/ John Dahl
-------------------------------
John Dahl,
Senior Vice President and Chief
Accounting Officer
(Principal Accounting Officer)
Date: August 12, 1999
31
<PAGE>
EXHIBIT 2.1
=============================================================================
MANAGEMENT AND PORTFOLIO AGREEMENT
Among
SIMON PROPERTY GROUP, INC.
SIMON PROPERTY GROUP, L.P.
NED MANAGEMENT LIMITED PARTNERSHIP
and
WELLSPARK MANAGEMENT LLC
Dated as of February 22, 1999
=============================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I Definitions.....................................................2
SECTION 1.01. Definitions.............................................2
SECTION 1.02. References..............................................8
ARTICLE II The Transaction................................................8
SECTION 2.00. The Transaction.........................................8
SECTION 2.01. Management and Leasing Assets Owned by WellsPark Group.11
SECTION 2.02. Sale or Contribution of the NED Portfolio Properties...12
SECTION 2.03. Withdrawn Shopping Centers; Withdrawn Management
Agreements; Withdrawn Assumed Loans....................12
SECTION 2.04. Consideration..........................................13
SECTION 2.05. Liabilities to be Assumed by Buyer.....................19
SECTION 2.06. Closing................................................20
SECTION 2.07. Severance Payments and Stay Bonuses....................21
SECTION 2.08. Intentionally Deleted..................................22
SECTION 2.09. Expenses...............................................22
SECTION 2.10. Board of Directors.....................................22
SECTION 2.11. Investigation..........................................22
ARTICLE III Representations and Warranties of the Buyer..................23
SECTION 3.00. Organization, Good Standing and Authority..............23
SECTION 3.01. Buyer's Authorization and Binding Effect...............23
SECTION 3.02. Capitalization.........................................24
SECTION 3.03. Conflicting Agreements and Other Matters...............25
SECTION 3.04. Litigation; Proceeding, Etc............................25
SECTION 3.05. No Default or Violation................................26
SECTION 3.06. Governmental Consents, Etc.............................26
SECTION 3.07. Private Offering.......................................26
SECTION 3.08. No Other Liabilities...................................27
SECTION 3.09. Status of Partnership Agreement; Taxes and REIT Status.27
SECTION 3.10. Compliance with Laws...................................27
SECTION 3.11. SEC Documents..........................................27
SECTION 3.12. No Material Adverse Change.............................28
SECTION 3.13. No Undisclosed Liabilities.............................28
SECTION 3.14. No Undisclosed Events or Circumstances.................28
SECTION 3.15. Material Contracts.....................................28
SECTION 3.16. No Merger Agreements...................................29
SECTION 3.17. Certain Actions by Buyer...............................29
SECTION 3.18. Buyer's Knowledge......................................29
ARTICLE IV Representations and Warranties of Seller......................29
SECTION 4.00. Organization and Authority.............................29
SECTION 4.01. Title to Assets; Title to Interests....................30
SECTION 4.02. Adverse Claims, Litigation and Proceedings.............31
SECTION 4.03. Compliance with Laws...................................31
-i-
<PAGE>
SECTION 4.04. Intellectual Property of Seller........................32
SECTION 4.05. Contracts..............................................32
SECTION 4.06. Taxes..................................................32
SECTION 4.07. Permits................................................33
SECTION 4.08. Insolvency.............................................33
SECTION 4.09. Financial Condition....................................33
SECTION 4.10. Liabilities............................................33
SECTION 4.11. Debt...................................................33
SECTION 4.12. Employees..............................................33
SECTION 4.13. Insurance..............................................34
SECTION 4.14. Seller's Knowledge.....................................34
SECTION 4.15..............................................................34
ARTICLE V Covenants......................................................34
SECTION 5.00. Existence; Preservation of Tax Status..................34
SECTION 5.01. Amendment to Partnership Agreement of OP...............34
SECTION 5.02. Good Faith Efforts.....................................35
SECTION 5.03. Good Faith Cooperation.................................35
SECTION 5.04. Seller Conduct of Business.............................35
SECTION 5.06. Amendment to Partnership Agreement and Registration
Rights Agreement.......................................36
SECTION 5.06. WellsPark Assets.......................................36
SECTION 5.06. ERISA..................................................36
SECTION 5.09. No Solicitation........................................37
ARTICLE VI Continuation and Survival of Representations, Warranties,
Indemnifications and Covenants................................38
SECTION 6.00. 38
SECTION 6.01. 39
SECTION 6.02. 39
SECTION 6.03. 40
ARTICLE VII HSR Act Filings..............................................41
SECTION 7.00. Filings................................................41
SECTION 7.01. Compliance.............................................41
SECTION 7.02. Filing Costs...........................................41
ARTICLE VIII The Closing.................................................41
SECTION 8.00. Conditions to the Buyer's Obligations..................41
SECTION 8.01. Conditions to the Seller's Obligations.................43
SECTION 8.02. Closing Deliveries.....................................44
SECTION 8.03. Prorations with Respect to Seller......................46
SECTION 8.04. Collections............................................47
ARTICLE IX Default.......................................................48
SECTION 9.00. Default................................................48
ARTICLE X General Provisions.............................................51
-ii-
<PAGE>
SECTION 10.00. Notices...............................................51
SECTION 10.01. Governing Law.........................................52
SECTION 10.02. Successors and Assigns................................52
SECTION 10.03. No Third-Party Beneficiaries..........................53
SECTION 10.04. Counterparts..........................................53
SECTION 10.05. Severability..........................................53
SECTION 10.06. Entire Agreement......................................54
SECTION 10.07. No Waiver.............................................54
SECTION 10.08. Further Assurances....................................54
SECTION 10.09. Confidentiality.......................................54
SECTION 10.10. Competitive Activities................................54
SECTION 10.11. Press Release.........................................54
SECTION 10.12. Broker................................................55
SECTION 10.13. Trading...............................................55
ARTICLE XI Additional Properties; Withdrawn Shopping Centers.............55
SECTION 11.00. Additional Properties.................................55
SECTION 11.01. Withdrawn Shopping Centers............................55
-iii-
<PAGE>
LIST OF EXHIBITS
Exhibit A Phase I Shopping Centers/Phase I Property Owners
Exhibit B Phase II Shopping Centers/Phase II Property Owners
Exhibit C Form of Contribution Agreement
Exhibit D 7.00% Cumulative Convertible Preferred OP Units
Exhibit E 8.00% Cumulative Redeemable Preferred OP Units (Perpetual)
Exhibit F Form of Registration Rights Agreement
Exhibit G New One Wells Avenue Lease Term Sheet
Exhibit H Form of Assignment of Interests
Exhibit I [Intentionally Deleted]
Exhibit J-1 Stephen R. Karp Non-Competition Agreement
Exhibit J-2 Steven S. Fischman Non-Competition Agreement
Exhibit K Form of Tax Protection Agreement
Exhibit L Confidentiality Agreement
Exhibit M Form of Stock Purchase Agreement
Exhibit N Form of Assignment Pending Management Agreement
-iv-
<PAGE>
LIST OF SCHEDULES
Schedule 2.00(d) Provisions Relating to Certain Shopping Centers
Schedule 2.00(h) Excluded Outparcels
Schedule 2.01(a) Assets
Part I Management Agreements
Part II Contracts
Part III Equipment
Part IV Intellectual Property
Part V Other Assets
Schedule 2.03(b) Phase I and Phase II Total Consideration
Schedule 2.04(b) Assumed Loans
Schedule 2.04(f) Leases Out for Signature as of 12/31/98
Schedule 2.04(g) Cape Cod Mall Expansion Budget
Schedule 2.04(g)-A Cape Cod Mall Development Service Agreement
Schedule 2.04(h) Provisions to be incorporated in Acquisition
Agreements for Certain Malls
Schedule 2.05 Wellspark Group liabilities and obligations
Schedule 2.07 - Part I WellsPark Corporate Employees
Schedule 2.07 - Part II Mall Employees to be offered employment
Schedule 3.02(a) Outstanding Subscriptions, Options, Warrants,
Preemptive or Other Rights
Schedule 3.02(b) Capital Stock of the Company
Schedule 3.03 Consents, Approvals
Schedule 3.06 Governmental Consents
Schedule 3.08 Other Liabilities
Schedule 3.16 Merger Agreements
-v-
<PAGE>
Schedule 4.00(c) Third Party Consents
Schedule 4.01(a) Options for the Purchase of Assets
Schedule 401(c) Documents Comprising the WellsPark Partnership
Agreement
Schedule 4.04 Infringements of intellectual property rights
Schedule 4.05(b) Contract Defaults
Schedule 4.12(a) Employee Benefit Plan
Schedule 4.12(b) Employment Severance or Consulting Agreements
Schedule 4.13 Insurance
Schedule 6.02 Litigation Pending Against Wellspark Group
Disclosure Schedule Section 4.01(a)
Disclosure Schedule Section 4.02
Disclosure Schedule Section 4.03(b)
Disclosure Schedule Section 4.06(b)
-vi-
<PAGE>
This MANAGEMENT AND PORTFOLIO AGREEMENT is made and entered into as of
the 22nd day of February, 1999 (the "Effective Date") by and between NED
MANAGEMENT LIMITED PARTNERSHIP, a Massachusetts limited partnership having an
address at One Wells Avenue, Newton, Massachusetts 02459 ("NED"), WELLSPARK
MANAGEMENT LLC, a Delaware limited liability company having an address at One
Wells Avenue, Newton, Massachusetts 02459, ATTN: Steven S. Fischman ("WellsPark
Management," and, together with NED, hereinafter collectively referred to as the
"Seller"), SIMON PROPERTY GROUP, INC., a Delaware corporation having an address
at 115 West Washington Street, Indianapolis, Indiana 76204 (the "Company"), and
SIMON PROPERTY GROUP, L.P., a Delaware limited partnership having an address at
115 West Washington Street, Indianapolis, Indiana 76204 (the "OP"). The Company
and the OP are hereinafter referred to collectively as the "Buyer".
RECITALS
A. WellsPark Management owns 100% of the general partnership interests
(the "General Partnership Interests") and, NED, together with O'CONNOR
MANAGEMENT, L.P., a Delaware limited partnership ("O'Connor"), owns 100% of the
limited partnership interests (the "Limited Partnership Interests", and,
together with the General Partnership Interests, hereinafter referred to as the
"Interests") in WellsPark Group Limited Partnership, a Delaware limited
partnership ("WellsPark Group").
B. O'Connor and NED have entered into an agreement (the "O'Connor
Agreement") pursuant to which NED will acquire all of O'Connor's Limited
Partnership Interests and all of O'Connor's interests in WellsPark Management.
C. WellsPark Group owns and operates a regional shopping center
management and leasing business principally in the New England region of the
United States (the "Management Business"), which Management Business is devoted
primarily, although not exclusively, to the management and leasing of NED
Portfolio Properties (hereinafter defined).
D. Principals of Seller, together with others, each own, directly or
indirectly, interests in certain regional shopping centers more specifically
identified on Exhibit A and Exhibit B attached hereto and, together with the
related property described in the Contribution Agreements, collectively referred
to herein as the "NED Portfolio Properties".
E. Buyer desires to acquire the Interests and, in addition, to acquire
all or a substantial portion of the NED Portfolio Properties and Seller desires
to sell the Interests and, subject to the terms hereof, to endeavor to cause the
owners of the NED Portfolio Properties, in conjunction therewith, to sell or
contribute their respective NED Portfolio Properties to Buyer, or to cause the
owners of interests in the Property Owners to sell or contribute such interests
to Buyer.
-1-
<PAGE>
F. Unless otherwise specifically defined herein, capitalized terms
shall have the meanings assigned to them in Article I below.
NOW, THEREFORE, subject to the terms and conditions set forth in this
Agreement and in consideration of the mutual promises and covenants set forth
below, Seller and Buyer hereby agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Definitions. Unless the context otherwise requires, the
following terms shall have the respective meanings set forth below for purposes
of this Agreement:
"Additional Management Agreements" shall mean the management agreements
currently in effect and identified on Part I of Schedule 2.01(a) with respect to
CambridgeSide Galleria, Meadow Glen Mall and Pheasant Lane Mall, as the same may
be amended in accordance with the provisions of this Agreement.
"Acquisition Agreement" means this Agreement or a Contribution
Agreement (or stock purchase agreement), as the context requires.
"Adjustment Amount" shall have the meaning set forth in Section
2.03(b).
"Affiliate(s)" shall mean, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under common control with
Seller or Buyer, as applicable; (ii) any Person owning or controlling ten
percent (10%) or more of the outstanding voting interests of such Person; (iii)
any Person as to which such Person owns or controls ten percent (10%) or more of
the voting interests; or (iv) any officer, director, manager, general partner or
trustee of such Person or of any Person referred to in clauses (i), (ii) and
(iii) above.
"Agreement" shall mean this Management and Portfolio Agreement.
"Assets" shall have the meaning set forth in Section 2.01(a).
"Assumed Liabilities" shall have the meaning set forth in Section
2.05(a).
"Assumed Loans" shall have the meaning set forth in Section 2.04(b).
"Buyer Material Adverse Effect" means any material adverse effect on
all of the following collectively taken as a whole: the assets, liabilities,
financial condition, earnings, operations and prospects of the Company, the OP
and their respective subsidiaries, or the OP Units and the Company Stock. As the
context may require, a Buyer Material Adverse Effect shall be determined either
(a) without giving effect in whole or in part to the transactions contemplated
herein, or (b) after giving such effect.
-2-
<PAGE>
"Buyer's Representatives" shall have the meaning set forth in Article
VI.
"Closing" shall mean the Initial Closing and any Subsequent Closing, as
the case may be.
"Closing Date" shall mean the Initial Closing Date and any Subsequent
Closing Date and any extensions of each such date.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder.
"Commission" shall have the meaning set forth in Section 3.12.
"Common OP Units" shall mean units of limited partnership interest in
the OP which are paired with limited partnership interests in SRC, other than
(i) the Convertible Preferred OP Units, (ii) the Perpetual Preferred OP units
and (iii) other preferred units of limited partnership interest in the OP which
are currently outstanding.
"Company" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Company Common Stock" means the common stock of the Company which are
paired with beneficial interests in the common stock of SPG Realty Consultants,
Inc.
"Company Stock" means the Company's capital stock.
"Confidentiality Agreement" shall have the meaning set forth in Section
10.09.
"Contracts" shall have the meaning set forth in Section 2.01(a).
"Contributing Property Owner(s)" shall mean those partnerships, limited
liability companies, trusts and individuals or other entities, and/or entities
or individuals holding partnership interests or limited liability company
interests, as the case may be, who are issued OP Units in connection with the
Transaction.
"Contribution Agreement(s)" shall mean the contribution agreement(s),
each of which is to be executed by a Property Owner or by the holders of equity
interests in a Property Owner, as the case may be, as contemplated by Section
2.02 below, which contribution agreements, in all material respects, shall be in
the form attached hereto as Exhibit C.
"Convertible Preferred OP Units" shall mean the Convertible Preferred
OP Units described in Exhibit D attached hereto and made a part hereof.
"Cut-Off Date" shall mean July 23, 1999 as the same may be extended by
written agreement of the Buyer and the Seller.
-3-
<PAGE>
"Effective Date" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Excluded Assets" shall have the meaning set forth in Section 2.01(b).
"Excluded Outparcels" shall have the meaning set forth in Section
2.00(h).
"General Partnership Interests" shall have the meaning set forth in the
Recitals to this Agreement.
"Governmental Authority" shall mean any agency, bureau, commission,
court, department, official, political subdivision, tribunal or other
instrumentality of any government, whether federal, state or local, domestic or
foreign.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Initial Closing Date" shall have the meaning set forth in Section
2.06(a).
"Initial Closing Date Notice" shall have the meaning set forth in
Section 2.06(c).
"Intellectual Property" shall have the meaning set forth in Section
2.01(a).
"Interests" shall have the meaning set forth in the Recitals to this
Agreement.
"Leasing Costs" shall mean leasing commissions and all costs and
expenses paid by a Property Owner with respect to a Shopping Center to a tenant
or a third-party for tenant improvements or replacements, tenant allowances or
inducements, takeover obligations and other leasing costs.
"Lender" shall have the meaning set forth in the Contribution
Agreement.
"Limited Partnership Interests" shall have the meaning set forth in the
Recitals to this Agreement.
"Management Agreements" shall have the meaning set forth in Section
2.01(a).
"Management Business" shall have the meaning set forth in the Recitals
to this Agreement.
"NED" shall have the meaning set forth in the introductory paragraph to
this Agreement.
-4-
<PAGE>
"NED Portfolio Properties" shall have the meaning set forth in the
Recitals to this Agreement.
"New Mall Loan" shall have the meaning set forth in the Contribution
Agreement.
"OP" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"OP Units" shall mean units of limited partnership interests in the OP,
including, without limitation, Common, Perpetual Preferred and Convertible
Preferred OP Units.
"Outside Final Closing Date" shall mean December 31, 1999, subject to
the provisions of Section 2.06(c).
"Outside Initial Closing Date" shall mean August 23, 1999.
"Outside Initial Closing Notice Date" shall mean August 9, 1999, as the
same may be extended as set forth in Section 2.06(a).
"Partnership Agreement" shall mean the Sixth Amended and Restated
Agreement of Limited Partnership Agreement of the OP, dated as of September 24,
1998, as hereafter amended, as permitted or required hereunder.
"Pending Contribution Agreement" shall mean a Contribution Agreement
with respect to a Pending Shopping Center.
"Pending Management Agreement" shall have the meaning set forth in
Section 2.01(b).
"Pending Shopping Center" shall have the meaning set forth in Section
2.03(a).
"Permitted Encumbrances" shall have the meanings specified in each
Contribution Agreement for and with respect to the applicable Shopping Center.
"Permitted Liens" shall have the meaning set forth in Section 4.01(a).
"Perpetual Preferred OP Units" shall have the meaning set forth in
Exhibit E, attached hereto and made a part hereof.
"Person" means an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"Phase I Net Consideration" shall have the meaning set forth in Section
2.04(b)(i)(B).
"Phase II Net Consideration" shall have the meaning set forth in
Section 2.04(c)(i)(B).
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"Phase I Property Owner(s)" shall mean those partnerships, limited
liability companies , trusts and individuals or other entities listed on Exhibit
A or one or more of the entities or individuals holding partnership interests or
limited liability company interests, as the case may be, in an entity identified
on Exhibit A; provided that where, with respect to a given Shopping Center, the
holder of legal title is a so-called "nominee trust" then the "Phase I Property
Owner" with respect to such Shopping Center shall mean the collective reference
to the holder of beneficial title and such holder of legal title.
"Phase I Shopping Centers" shall mean those Shopping Centers so listed
on Exhibit A attached hereto and made a part hereof.
"Phase I Total Consideration" shall have the meaning set forth in
Section 2.04.
"Phase II Property Owner(s)" shall mean those partnerships, limited
liability companies, trusts or individuals or other entities listed on Exhibit B
or one or more of the entities or individuals holding partnership interests or
limited liability company interests or stock, as the case may be, in an entity
identified on Exhibit B; provided that where, with respect to a given Shopping
Center, the holder of legal title is a so-called "nominee trust" then the Phase
I Property Owner" with respect to such Shopping Center shall mean the collective
reference to the holder of beneficial title and such holder of legal title.
"Phase II Shopping Centers" shall mean those Shopping Centers so listed
on Exhibit B attached hereto and made a part hereof.
"Phase II Total Consideration" shall have the meaning set forth in
Section 2.04.
"Pro-Forma Statement of Revenue" shall mean the pro-forma statement of
revenues relating to the Assets for the year ended December 31, 1998 prepared by
WellsPark, delivered by Seller to Buyer.
"Property Adjustment Amount" shall have the meaning set forth in
Section 2.03.
"Property Owner(s)" shall mean Phase I Property Owner(s) and/or Phase
II Property Owner(s), as the context requires.
"Records" shall have the meaning set forth in Section 2.01(a).
"Registration Rights Agreement" shall have the meaning set forth in
Section 5.06.
"Retained Liabilities" shall have the meaning set forth in Section
2.05(b).
"SEC Documents" shall have the meaning specified in Section 3.11 of
this Agreement.
"SEC Financial Statements" shall have the meaning specified in Section
3.12 of this Agreement.
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"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Seller" shall have the meaning set forth in the introductory paragraph
to this Agreement.
"Seller Material Adverse Effect" shall mean any material adverse effect
on all of the following taken collectively as a whole: the business, results of
operations or financial operation of the Management Business, the Interests, the
WellsPark Group and the NED Portfolio Properties.
"SRC" means SPG Realty Consultants, L.P., a Delaware limited
partnership.
"Shopping Center(s)" shall mean one or more of the regional shopping
center(s) comprising the NED Portfolio Properties, owned and/or leased by a
Property Owner and listed on either Exhibit A or Exhibit B and described in the
applicable Contribution Agreement (together with all property related thereto
and described in the applicable Contribution Agreement(s)) (a) which are to be
contributed to the Buyer by a Property Owner pursuant to a Contribution
Agreement or (b) as to which the ownership interests in the applicable Property
Owner are to be contributed to Buyer pursuant to a Contribution Agreement. The
names of such Shopping Centers as set forth on said exhibits are hereby
incorporated as defined terms hereunder.
"Subsequent Closing Date" shall have the meaning set forth in Section
2.06.
"Subsequent Closing" shall have the meaning set forth in Section
2.06(b).
"Subsequent Closing Date Notice" shall have the meaning set forth in
Section 2.06(b).
"Tax Protection Agreement" shall mean the agreement in the form
attached as Exhibit K to this Agreement.
"Tax Returns" means a report, return or other information required to
be filed by a Person with or submitted to a Governmental Authority with respect
to Taxes, including, where permitted or required, combined or consolidated
returns for any group of entity that includes the Person.
"Taxes" shall mean all taxes, charges, fees, levies, duties, imposts,
withholdings, fines, interest, penalties, additions to tax or other assessments
or charges, including, but not limited to, income, excise, property,
withholding, sales, use, gross receipts, value added and franchise taxes,
license recording, documentation and registration fees and custom duties imposed
by any Government Authority.
"Total Consideration" shall have the meaning set forth in Section
2.04(a).
"Transaction" shall have the meaning set forth in Section 2.00(e).
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"WellsPark Group" shall have the meaning set forth in the Recitals to
this Agreement.
"WellsPark Management" shall have the meaning set forth in the
introductory paragraph to this Agreement.
"Withdrawn Shopping Center(s)" shall have the meaning set forth in
Section 2.03(a).
"Withdrawn Management Agreement(s)" shall have the meaning set forth in
Section 2.03(a).
SECTION 1.02. References. Definitions in this Agreement apply equally
to the singular and plural forms of the defined terms. The words "include" and
"including" shall be deemed to be followed by the phrase "without limitation"
regardless of whether such phrase otherwise appears. The words "herein",
"hereof", "hereinafter" and words of similar import refer to this Agreement as a
whole and not to any particular Articles or Sections of this Agreement. Except
as otherwise specifically indicated, all references in this Agreement to
Articles and Sections refer to Articles and Sections of this Agreement, and all
references to Exhibits or Schedules refer to Exhibits or Schedules attached
hereto, and all such Exhibits and Schedules are incorporated herein by
reference.
ARTICLE II
The Transaction
---------------
SECTION 2.00. The Transaction. Subject to the terms and conditions
set forth herein:
(a) Seller agrees to use all commercially reasonable efforts to
consummate the O'Connor Agreement. Seller further agrees at the Initial Closing
to sell or to cause to be sold to Buyer or Buyer's designee, and Buyer agrees at
the Initial Closing to acquire or to cause such designee to acquire from Seller,
all of the Interests, for the consideration set forth herein (including the
assumption of the Assumed Liabilities) and otherwise upon and subject to the
terms hereof.
(b) Subject to the provisions of Section 2.00(d), Seller agrees to use
all commercially reasonable efforts to cause each Phase I Property Owner to
execute and deliver, on or before the Cut-Off Date, a Contribution Agreement
pursuant to which (i) the applicable Property Owner agrees to sell or contribute
its Phase I Shopping Center to OP or (ii) the owners of 100% of the stock,
partnership interests or limited liability company member interests in the
applicable Property Owner agree to sell or contribute such stock or interests to
OP or the Company, as the case may be, and in the case of either (i) or (ii), to
use all commercially reasonable efforts to cause such Phase I Property Owners or
the owners of such interests to perform their obligations thereunder, and Buyer
agrees to cause OP or the Company, as applicable, to execute and deliver each
Contribution Agreement so executed and delivered by a Property Owner or the
owners thereof, on or before ten (10) days following the delivery thereof, and
thereafter to perform its
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obligations thereunder and to acquire the applicable Phase I Shopping Center or
such interest therein in accordance therewith.
(c) Subject to the provisions of Section 2.00(d), Seller agrees to use
all commercially reasonable efforts to cause each Phase II Property Owner to
execute and deliver, on or before November 30, 1999 (or such later date as may
be provided in Section 2.00(d)), a Contribution Agreement pursuant to which (i)
the applicable Property Owner agrees to sell or contribute its Phase II Shopping
Center to OP or (ii) the owners of stock, partnership interests or limited
liability company member interests in the applicable Property Owner agree to
sell or contribute such interest to OP or the Company, and in the case of either
(i) and (ii), to use all commercially reasonable efforts to cause such Phase II
Property Owners or the owners of such interests to perform their obligations
thereunder, and Buyer agrees to cause OP to execute and deliver each such
Contribution Agreement so executed and delivered by a Phase II Property Owner or
the owners thereof, on or within ten (10) days of the delivery thereof, and
thereafter to perform its obligations thereunder and to acquire the applicable
Phase II Shopping Center or such interest therein in accordance therewith.
Seller agrees to use its best efforts, but in no event shall
Seller be required to spend more than a commercially reasonable amount of money
in so doing, to obtain the necessary consents in order to transfer and to
transfer the Additional Management Agreements in accordance with the terms of
this Agreement on or before the Initial Closing Date. Notwithstanding the
foregoing, in no event shall the failure to so transfer the Additional
Management Agreements be a default of Seller under this Agreement.
(d) The provisions set forth in Schedule 2.00(d) attached hereto shall
govern Seller's and Buyer's obligations with respect to the following Shopping
Centers:
Emerald Square Mall
The Mall @ Rockingham Park
Northshore Mall
Apple Blossom Mall
Square One Mall
Any additional Shopping Centers listed on Schedule
2.00(d)
(e) The sale of the Interests to Buyer or its designee, together with
the sale or contribution to OP, or its designee, of the Shopping Centers or of
interests in Property Owners, as the case may be, all upon and subject to the
terms of the applicable Acquisition Agreements, are herein referred to
collectively as the "Transaction".
IT IS EXPRESSLY ACKNOWLEDGED THAT NONE OF THE PROPERTY OWNERS SHALL
HAVE ANY OBLIGATIONS UNDER THIS AGREEMENT WHATSOEVER OR UNDER THE TERMS OF ANY
OTHER ACQUISITION AGREEMENT TO WHICH THEY ARE NOT A PARTY, AND EACH PROPERTY
OWNER SHALL ONLY BE BOUND BY THE TERMS AND PROVISIONS OF THE APPLICABLE
ACQUISITION
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AGREEMENT RELATING TO ITS SHOPPING CENTER IF, AS AND WHEN FULLY EXECUTED AND
DELIVERED AND NOT OTHERWISE.
(f) For purposes of this Agreement and without intending to expand the
definition of "all commercially reasonable efforts," the parties hereto
acknowledge that, commercially reasonable efforts shall not require the
initiation or settlement of litigation, disproportionate payouts to any partners
or the settlement of litigation, the payment of money (other than customary
costs associated with negotiating and closing transactions of the nature set
forth herein) or reallocations of the Adjustment Amounts.
(g) Joinder Parties. Stephen R. Karp and Steven S. Fischman (the
"Joinder Parties") hereby join in the execution of this Agreement for the
purpose of agreeing that they will vote all of their personally owned and
controlled interests in the Property Owners or in entities directly or
indirectly owning interests in the Property Owners in favor of the Transaction.
(h) Excluded Outparcels. It is understood and agreed that the property
to be conveyed by the Property Owners pursuant to their respective Contribution
Agreements will exclude those parcels designated by "hatch marks" as "Excluded
Outparcels" on Schedule 2.00(h) attached hereto. Such exclusion may be
accomplished either by omission of such parcel from the deed or by the Property
Owner's conveyance of an Excluded Outparcel to a separate entity prior to the
applicable Closing.
(i) Purchase of Member or Partnership Interests. If Buyer purchases an
interest in an entity (other than with respect to Apple Blossom Mall) pursuant
to any of the provisions of Schedule 2.00(d) (none of which, other than North
Shore Plaza I, Inc. and North Shore Plaza II, Inc., will involve a corporation),
Buyer agrees to cooperate and enter into Contribution Agreements for interests,
both direct and indirect, in the relevant Property Owner provided that the Buyer
is indemnified by Stephen R. Karp and Steven S. Fischman, jointly and severally,
against all loss, cost, damage or expense (including, without limitation,
reasonable attorneys' fees and disbursements) incurred by the OP (or its
affiliate which owns such interests) arising from entity liabilities accrued as
of the applicable Closing which loss, cost, damage or expense would not have
been incurred by the OP (or its affiliate which owns such interests), or with
respect to which the OP would have been indemnified, had the OP purchased the
applicable Shopping Center and assumed the Assumed Loans, Leases, Operating
Contracts and Department Store Documents and other rights relating to such
Shopping Center, rather than purchasing such interest except for the tax
attributes of acquiring such stock or partnership interest or limited liability
company interest as opposed to the Shopping Center asset. The foregoing
indemnity is in addition to the indemnity set forth in Section 6.02(a)
hereinbelow and shall not be subject to the limitations set forth in Section
6.02(b). In lieu of such limitations, however, it is agreed that the indemnitors
granting this indemnity shall in no event be liable for any amounts in excess of
$3,000,000 in the aggregate with respect to any one Property Owner. Furthermore,
the indemnities pursuant to this Section 2.00(i) shall survive the Closing of
the acquisition of such interests for a period of 60 months and with respect to
any written claim within such period, until final unappealable adjudication or
settlement thereof, provided litigation is, or formal adjudication proceedings
are, instituted within six (6) months following indemnitors' receipt of
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Buyer's written notice of such claim. All of the provisions of Section 6.03 of
this Agreement shall be applicable to any such indemnity.
SECTION 2.01. Management and Leasing Assets Owned by WellsPark Group.
(a) At the Initial Closing, WellsPark Group will own, free and clear of
all liens, claims, rights or encumbrances of any kind (except Permitted Liens),
those of the leasehold property interests, personal property, fixtures, rights,
interests, and other assets owned, used or held by WellsPark Group in or in
connection with the Management Business as are listed on Schedule 2.01(a), Parts
I through V as hereinafter described, or as otherwise described below in this
Section 2.01(a) (collectively, the "Assets"):
(i) all rights under the management contracts, leasing
contracts and other agreements listed on Part I of Schedule 2.01(a)
hereto (the "Management Agreements"); and all other contracts and
leases listed on Part II of Schedule 2.01(a); (collectively, including
the Management Agreements, the "Contracts");
(ii) all computers, equipment, office furniture and other
tangible assets used in connection with the Management Business and
that are identified on Part III of Schedule 2.01(a);
(iii) all software and computer programs and other
intellectual property rights (including any application of any of the
foregoing) used in connection with the Management Agreements that are
identified on Part IV of Schedule 2.01(a) (collectively, the
"Intellectual Property");
(iv) copies of all books of account, records, files, invoices,
customer lists, supplier lists, consultants' reports, budgets and
projections and other similar data relating to the Assets
(collectively, the "Records");
(v) all licenses, approvals, orders, permits, franchises and
authorizations of any governmental authority held by Seller or
WellsPark Group with respect to the Assets and any goodwill of the
Seller;
(vi) all items of income that are to be apportioned for the
benefit of Buyer pursuant to Section 8.03; and
(vii) the "other assets", if any, identified as such on Part V
of Schedule 2.01(a).
(b) Notwithstanding the provisions of Section 2.01(a), prior to the
Initial Closing WellsPark Group shall have either divided the partnership to, in
effect, remove the Excluded Assets (hereafter defined) or distributed to Seller
or its designees all ownership and other rights with respect to, the following
items (collectively, the "Excluded Assets"): (i) to the extent accrued to the
Initial Closing Date, all accounts receivable and other items of income and any
and all refunds or amounts attributable to prepayments or advances for insurance
policies, service
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contracts, and any other agreements that are to be apportioned for the benefit
of the Seller pursuant to Section 5.02; (ii) WellsPark Group's rights to fees or
refunds from any federal or state agency or third-party payor with respect to
services rendered prior to the Initial Closing Date; (iii) cash or cash
equivalents other than deposits or prepaid amounts directly related to the
Assets; (iv) WellsPark Group's rights under any contract or lease to which
WellsPark Group is a party except for the Contracts; (v) any Management
Agreement listed on Part I of Schedule 2.01(a) between WellsPark Group and a
Property Owner of a Withdrawn Shopping Center; (vi) any Management Agreement
listed in Part I of Schedule 2.01(a) with shopping centers other than NED
Portfolio Properties or for which any required Third Party Consent (as described
in Section 4.00(c)) has not been obtained; (vii) any Management Agreement listed
in Part I of Schedule 2.01(a) with a Property Owner with respect to a Pending
Shopping Center (each a "Pending Management Agreement"); (viii) to the extent
the same relate to any Withdrawn Shopping Center or Pending Shopping Center, any
Contracts or other Assets (the "Withdrawn Assets"); and (ix) all other assets
(other than the Assets) of WellsPark Group, tangible and intangible, whether or
not used in connection with the Management Business.
SECTION 2.02. Sale or Contribution of the NED Portfolio Properties. At
Closing, Seller and Buyer also contemplate that:
(a) At the Initial Closing, subject to the provisions of Section
2.00(b), Section 2.00(d) and Section 2.03, and otherwise pursuant to the terms
and subject to the conditions set forth in the applicable Contribution
Agreement, each Phase I Property Owner or each owner of interests in such
Property Owner, as the case may be, will sell, assign, transfer and convey to OP
or the Company (or its designee), free and clear of all liens, claims, rights or
encumbrances of any kind (except Permitted Encumbrances), the applicable Phase I
Shopping Centers or the interests in such Property Owner, as the case may be.
(b) At the Initial Closing and/or at one or more Subsequent Closings,
subject to the provisions of Sections 2.00(c), Section 2.00(d) and Section 2.03,
and otherwise pursuant to the terms and subject to the conditions set forth in
the applicable Contribution Agreement, each Phase II Property Owner or each
owner of interests in such Property Owner, as the case may be, will contribute,
assign, transfer and convey to OP (or its designee), free and clear of all
liens, claims, rights or encumbrances of any kind (except Permitted
Encumbrances), the applicable Phase II Shopping Centers, or the interests in
such Property Owner, as the case may be.
SECTION 2.03. Withdrawn Shopping Centers; Pending Shopping Centers;
Withdrawn Management Agreements; Withdrawn Assumed Loans.
(a) A "Withdrawn Shopping Center" shall be any Phase II Shopping Center
as to which an Acquisition Agreement has been terminated. A "Pending Shopping
Center" shall be any Phase II Shopping Center for which no Acquisition Agreement
has been executed and delivered as of the Initial Closing or for which a
condition to closing has neither been satisfied nor waived pursuant to the
applicable Acquisition Agreement, and such agreement has not theretofore been
terminated. Notwithstanding the foregoing, in the event an Acquisition Agreement
has been executed and delivered with respect to the transfer of joint venture
interests,
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partnership interests, limited liability company interests or stock or other
equity interests, as the case may be, in the Shopping Centers described in
Section 2.00(d), such Shopping Centers shall not be considered "Withdrawn
Shopping Centers". A "Withdrawn Management Agreement" shall be any Management
Agreement that is an Excluded Asset pursuant to Section 2.01(b)(v) and (vi). A
Withdrawn Assumed Loan shall mean any Assumed Loan relating to a Withdrawn
Shopping Center or a Pending Shopping Center.
(b) Solely for purposes of the determination of Phase II Total
Consideration under Section 2.04, the "Property Adjustment Amount" for any
Withdrawn Shopping Center shall be the amount specified on Schedule 2.03(b)
hereto.
THE PARTIES ACKNOWLEDGE AND AGREE THAT THE ADJUSTMENT AMOUNTS SET FORTH
ON SCHEDULE 2.03(b) ARE SOLELY FOR THE PURPOSE OF MAKING THE ADJUSTMENTS
DESCRIBED IN SECTION 2.04 AND SECTION 2.00(d) AND THAT THE ACTUAL PRICE TO BE
PAID TO A PROPERTY OWNER PURSUANT TO AN ACQUISITION AGREEMENT FOR THE
CONTRIBUTION OF A PHASE II SHOPPING CENTER MAY VARY FROM ITS RESPECTIVE
ADJUSTMENT AMOUNT SET FORTH ON SUCH SCHEDULE 2.03(b).
(c) In the event that Acquisition Agreements have not been executed for
all of the Phase I Shopping Centers by the Cut-Off Date, or in the event the
Initial Closing in respect of at least the Phase I Shopping Centers and the
Interests shall not have occurred by the Outside Initial Closing Date, then this
Agreement may be terminated in its entirety at the election of Seller or Buyer
by written notice given within five (5) days after the Cut-Off Date or on the
Outside Initial Closing Date, as the case may be. All of the other Acquisition
Agreements shall provide, by their terms, for their termination automatically
upon the termination of this Agreement pursuant to this Section 2.03(c) or
otherwise.
SECTION 2.04. Consideration.
(a) Subject to the apportionments provided for in Section 8.03 and the
property-level prorations set forth in the Acquisition Agreements, the
consideration to be paid or provided by Buyer for the Interests, the Phase I
Shopping Centers and the Phase II Shopping Centers shall be an amount equal to
One Billion Seven Hundred Twenty Five Million Dollars ($1,725,000,000) in the
aggregate, less the Property Adjustment Amounts of all Withdrawn Shopping
Centers and plus or minus the adjustments described in Section 2.00(d) (such
amount, as it may be adjusted from time to time, is hereinafter referred to as
the "Total Consideration" and is comprised of Phase I Total Consideration and
Phase II Total Consideration).
(b) Phase I Total Consideration.
(i) The Phase I Total Consideration, in the amount of One
Billion One Hundred Sixty-Eight Million Dollars ($1,168,000,000), plus
or minus adjustments, shall be paid or provided at the Initial Closing
in accordance with the following:
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(A) Buyer shall assume and agree to pay and perform,
promptly when due, all of the then outstanding principal
balances plus unpaid interest thereon accrued through the
Closing Date (the "Assumed Loan Balance") with respect to each
of the Phase I Shopping Center loans listed on Schedule
2.04(b) as the same may be modified, amended, increased or
replaced in accordance with the terms of the applicable
Acquisition Agreements (each a "Phase I Assumed Loan"); or, in
the event Buyer shall be acquiring the interests in a Phase I
Property Owner, the Phase I Shopping Center owned by such
Phase I Property Owner shall remain subject to the Phase I
Assumed Loan. With respect to any Phase I Shopping Center
which is being acquired in a fully taxable transaction, rather
than assuming the corresponding Phase I Assumed Loan, at
Buyer's option, Buyer may provide Seller with sufficient cash
at the Initial Closing to pay any such loan in full, including
any prepayment penalty; and
(B) With respect to each Phase I Shopping Center and
with respect to the Interests conveyed at the Initial Closing,
Buyer shall pay or provide the balance of the Phase I Total
Consideration allocable to such Phase I Shopping Centers as
set forth in the applicable Acquisition Agreements and
allocable to the Interests as set forth herein - i.e., the
amount by which such portion of the Phase I Total
Consideration exceeds the sum of the Assumed Loan Balances
assumed or paid by Buyer pursuant to Section 2.04(b)(i)(A)
corresponding to such Phase I Shopping Centers (the "Phase I
Net Consideration") - as provided in Section 2.04(b)(ii) and
Section 2.04(b)(iii) hereof. To the extent the Total Phase I
Net Consideration exceeds the aggregate Phase I Net
Consideration set forth in the Phase I Shopping Center
Acquisition Agreements, such excess shall be paid to Seller.
(ii) Subject to adjustment for amortization of the Phase I
Shopping Center Assumed Loans with respect to Phase I Assumed Loans
from December 31, 1998 until the Initial Closing Date, the aggregate
Phase I Net Consideration shall be paid as set forth in Schedule
2.03(b). For purposes of this Section 2.04(b)(ii):
(A) each of the Common OP Units shall be deemed to have a
value equal to $28.50;
(B) each of the Perpetual Preferred OP Units shall have a
value equal to $25.00;
(C) each of the Convertible Preferred OP Units shall have a
value equal to $25.00; and
(D) the OP Units comprised of the Common OP Units, Perpetual
Preferred OP Units and the Convertible Preferred OP Units
shall be provided at a ratio of 1:2.143:2.
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The adjustment for amortization of Phase I Assumed Loans from
December 31, 1998 shall be reflected by a corresponding increase in the
aggregate Phase I Net Consideration payable but for such amortization.
The increase in cash, Common OP Units, Convertible Preferred OP Units
and Perpetual Preferred OP Units shall be determined with reference to
the form and amount of each type of consideration being paid for the
Shopping Center with respect to which such amortization has occurred so
that the relationship of the amount of each type of consideration being
paid with respect to such Shopping Center to each other type of
consideration being paid with respect to such Shopping Center(s) does
not vary.
(iii) The aggregate Phase I Net Consideration and the form
thereof (i.e. cash, Common OP Units, Convertible Preferred OP Units or
Perpetual Preferred OP Units) shall be allocated among the Interests
and the various Phase I Shopping Centers solely by agreement between
Seller and the applicable Property Owners, subject to the aggregate
limitations set forth in Schedule 2.03(b). It is understood and agreed
that in making such allocations, Seller may reallocate Common OP Units,
Convertible Preferred OP Units and Perpetual Preferred OP Units
initially allocated to Phase II Net Consideration in Schedule 2.03(b)
in replacement of cash initially allocated to Phase I Net Consideration
in Schedule 2.03(b) upon giving written notice thereof to Buyer not
less than fifteen (15) days prior to the Initial Closing, and such cash
shall be reallocated to Phase II Net Consideration.
(iv) With respect to each Pending Management Agreement, if
any, at the Initial Closing, and any Additional Management Agreements
which shall not have been transferred at the Initial Closing, provided
Seller shall have obtained any necessary consents from the applicable
Property Owner (which consents Seller agrees to use commercially
reasonable efforts to obtain), NED Management Limited Partnership (or
the manager listed on Schedule 2.01(a) - Part I hereof, as applicable),
and Buyer shall enter into a services agreement ("Services Agreement"),
in a form reasonably acceptable to NED Management Limited Partnership
and Buyer, pursuant to which Buyer shall manage the Pending Shopping
Center (or the Non-Owned Shopping Center, as applicable) relating
thereto on behalf of NED Management Limited Partnership (or the manager
listed on Schedule 2.01(a) - Part I hereof, as applicable) until the
earlier of (i) Buyer's acquisition of such Pending Shopping Center (or
the transfer of the Additional Management Agreement, as applicable),
(ii) the termination of the Acquisition Agreement with respect to such
Pending Shopping Center, or (iii) the Outside Final Closing Date
(including any extensions pursuant to Section 2.06(c) and Schedule
2.00(d). Such Services Agreements shall provide that seventy-five (75%)
percent of the management and leasing fees payable pursuant to the
applicable Pending Management Agreement (or, in the case of the
Additional Management Agreements, 100%) shall be payable to Buyer.
(v) If the closing under the corresponding Acquisition
Agreement does not occur due to a default by Buyer thereunder, then
Seller shall be entitled immediately to a liquidated damages payment
under Section 9.00(d) hereof.
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(c) Phase II Total Consideration.
(i) The Phase II Total Consideration, in the aggregate amount
of Five Hundred Fifty-Seven Million Dollars ($557,000,000), plus or
minus adjustments (including, without limitation, those pursuant to
Schedule 2.00(d)), shall be paid or provided at the Initial Closing
and/or Subsequent Closings, in accordance with the following:
(A) With respect to each Phase II Shopping Center
subject to such Closing, Buyer shall assume and agree to pay
and perform, promptly when due, the applicable Assumed Loan
Balance with respect to each of the Phase II Shopping Center
loans listed on Schedule 2.04(b) as the same may be modified,
amended, increased or replaced in accordance with the terms of
the applicable Acquisition Agreements (each, a "Phase II
Assumed Loan"); or, in the event Buyer shall be acquiring the
Interests in a Phase II Property Owner, the Phase II Shopping
Center owned by such Phase II Property Owner shall remain
subject to the Phase II Assumed Loan. It is understood that
because none of the Phase II transfers are fully taxable,
Buyer may not provide Seller with cash at the Initial Closing
or any Subsequent Closing to pay any such loan (except in
connection with a New Mall Loan); and
(B) With respect to each Phase II Shopping Center
subject to such Closing, and with respect to each Pending
Management Agreement then being transferred, Buyer shall pay
or provide the Property Adjustment Amount for such Phase II
Shopping Center, less the sum of the Assumed Loan Balances
corresponding to such Phase II Shopping Center (the "Phase II
Net Consideration") - as provided in Section 2.04(c)(ii) and
Section 2.04(c)(iii) hereof. The Phase II Net Consideration
may be reallocated between any such Phase II Shopping Center
and the Interests relating to the corresponding Pending
Management Agreement as Seller directs, and the consideration
allocated by Seller to any such Shopping Center shall be equal
to the consideration therefor set forth in the applicable
Acquisition Agreement and the balance shall be paid to Seller.
(ii) Subject to adjustment for amortization of the Phase II
Assumed Loans and other debt adjustments from December 31, 1998 until
the applicable Closing Date, the aggregate Phase II Net Consideration
shall be paid as set forth in Schedule 2.03(b). For purposes of this
Section 2.04(c)(ii):
(A) each of the Common OP Units shall be deemed to have a
value equal to $28.50;
(B) each of the Perpetual Preferred OP Units shall have a
value equal to $25.00;
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(C) each of the Convertible Preferred OP Units shall have a
value equal to $25.00; and
(D) the OP Units comprised of the Common OP Units, Perpetual
Preferred OP Units and the Convertible Preferred OP Units
shall be provided at a ratio of 1:2.143:2.
The adjustment for amortization of Assumed Loans and other
debt adjustments from December 31, 1998 shall be reflected by a
corresponding increase in the aggregate Phase II Net Consideration
payable but for such amortization. The increase in cash, Common OP
Units, Convertible Preferred OP Units, Perpetual Preferred OP Units
shall be determined with reference to the form and amount of each type
of consideration being paid for the Phase II Shopping Center with
respect to which such amortization has occurred so that the
relationship of the amount of each type of consideration being paid
with respect to such Shopping Center to each other type of
consideration being paid with respect to such Shopping Center(s) does
not vary.
(iii) The aggregate Phase II Net Consideration and the form
thereof (i.e. cash, Common OP Units, Convertible Preferred OP Units or
Perpetual Preferred OP Units) shall be allocated among the Interests
corresponding to the Pending Management Agreements and the various
Phase II Shopping Centers solely by agreement between Seller and the
applicable Property Owners, subject to the aggregate limitations per
Shopping Center set forth in Schedule 2.03(b); provided, however that
the Phase II Net Consideration allocable to any Phase II Shopping
Center which is transferred at the Initial Closing shall be aggregated
with the aggregate Phase I Net Consideration and allocated by Seller in
accordance with the provisions of Section 2.04(b)(iii), provided,
however, the amount so aggregated shall in no event exceed the sum of
(A) the Phase II Net Consideration with respect to such Phase II
Shopping Center, and (B) the Total Phase I Net Consideration.
(d) [Intentionally Deleted]
(e) Neither the Joinder Parties nor Seller nor any Person controlled by
any of them shall buy or sell (including, without limitation, short sell) any
shares of Company Stock during the twenty (20) trading days prior to any Closing
hereunder whether in the open market or a negotiated transaction.
(f) There shall be a proration of Leasing Costs at each Closing (other
than with respect to Cape Cod Mall) to reflect a credit to each Property Owner
in the amount of Leasing Costs paid with respect to such Property Owner's
Shopping Center on or prior to the applicable Closing Date for such Shopping
Center under leases and construction contracts that are executed and delivered
after December 31, 1998, and renewals and extensions of leases executed on or
prior to December 31, 1998, which renewals and extensions are exercised or
executed after December 31, 1998 (each such new lease and renewal or extensions
being referred to herein as a
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"New Lease"); provided that such execution and delivery is approved or deemed
approved by Buyer in accordance with and to the extent required under the
provisions of Section 16 of the Contribution Agreement. Leases which are set
forth on the schedule of "Leases Out For Signature as of December 31, 1998"
attached hereto as Schedule 2.04(f) or any replacement tenant for such space
shall be treated for this purpose as having been executed and delivered prior to
such date and all Leasing Costs related to such leases shall be borne by Seller.
If negotiations with the tenant with respect to any such Lease which is set
forth on Schedule 2.04(f) are terminated, the Buyer shall receive a credit at
the applicable property level Closing in the amount of the Leasing Costs
attributed to such Lease. Notwithstanding the foregoing, each Property Owner
shall only be entitled to receive a credit in the amount of Leasing Costs, as
set forth above, for tenant allowances of Ten Dollars ($10.00) per square foot
or less unless approved by Buyer, which approval Buyer agrees not to
unreasonably withhold. In addition, Leasing Costs for and with respect to
leasing commissions shall not exceed Eight Thousand Dollars ($8,000) per lease
and shall not be credited for lease renewals. In addition, and once again
notwithstanding the foregoing, it is understood and agreed that the Arsenal
Property Owner shall receive no credit for and shall be solely responsible for
the tenant allowances payable to the tenant identified as "Rags".
(g) Reference is made to the fact that Cape Cod Mall is currently
undergoing a major renovation and expansion as reflected in the budget (the
"Cape Cod Expansion Budget") attached hereto as Schedule 2.04(g). Such
renovation and expansion pertains to the existing mall and roadways as more
fully described in the financing package heretofore provided to Buyer. The
amount of Total Consideration (and the Adjustment Amount with respect to Cape
Cod Mall) shall be increased from time to time, by the amount of costs incurred
and paid by the Property Owner of the Cape Cod Mall from and after December 31,
1998 in accordance with the Cape Cod Expansion Budget with respect to such
renovation and expansion activities, as documented to Buyer's reasonable
satisfaction. Expansion costs shall include all reasonable costs and expenses
incurred in connection with the proposed renovations and expansion including,
without limitation, Leasing Costs, cost of construction, grading, obtaining
permits and approvals, environmental analysis and development fees. So long as
Cape Cod Mall is not a Withdrawn Shopping Center, Seller shall provide Buyer
with copies of each construction loan draw request, architect's certificates and
such other documents and materials as Buyer may reasonably request and shall
invite a representative of Buyer to attend each monthly requisition meeting with
the construction lender, any weekly meetings with contractors and such other
construction meetings as Buyer may desire. Seller or the Cape Cod Property Owner
shall have the discretion without the prior approval of Buyer to expend up to
fifty percent (50%) of the contingency line item of the Cape Cod Expansion
Budget. Expenditures of the second half of the contingency line item in the Cape
Cod Expansion Budget shall be made with Buyer's approval, which approval Buyer
agrees not to unreasonably withhold. If the cost to complete the renovation and
expansion exceeds the Cape Cod Expansion Budget (the "Excess Costs") , Buyer
shall have the right to review and approve such Excess Costs (which approval
shall not be unreasonably withheld, conditioned or delayed). If Buyer approves
any such Excess Costs, such Excess Costs shall be shared on a 50/50 basis by
Buyer and the Cape Cod Property Owner or Seller. The Contribution Agreement for
Cape Cod Mall shall provide that Seller or an affiliate of Seller shall remain
responsible for the completion of the renovation and expansion of the Cape Cod
Mall and the
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payment of Seller's portion of the Excess Costs as contemplated herein and set
forth in the "Development Services Agreement" to be executed at the Closing for
Cape Cod Mall in substantially the form attached hereto as Schedule 2.04(g)-A.
(h) Special provisions shall be incorporated into the applicable
Acquisition Agreements for the Shopping Centers listed on, and as more
particularly set forth on, Schedule 2.04(h).
SECTION 2.05. Liabilities to be Assumed by Buyer.
(a) Subject to the terms and conditions set forth herein and to Section
2.05(b), Buyer shall or shall cause its designee (subject to the provisions of
Section 10.02) to expressly assume as of the Closing Date, and from and after
the Closing to perform or satisfy, promptly when due and otherwise fully in
accordance with their respective terms, the following liabilities and
obligations of WellsPark Group arising from or associated with the Assets other
than with respect to Withdrawn Shopping Centers or Pending Shopping Centers or
Pending Management Agreements (collectively, the "Assumed Liabilities"):
(i) all of WellsPark Group's liabilities and obligations
arising in respect of any period or periods beginning on or after the
Initial Closing Date under the Contracts;
(ii) the liabilities and obligations of WellsPark Group to the
extent set forth on Schedule 2.05, if any;
(iii) all accounts payable and other items of expense to the
extent Buyer receives credit therefor pursuant to Section 8.03; and
(iv) all liabilities and obligations otherwise relating to the
Assets to the extent arising from acts or events occurring on or after
the Initial Closing Date.
(b) Buyer shall not assume, and Seller shall be fully responsible for,
all liabilities and obligations of WellsPark Group relating to the Management
Business or any other activity, except for the Assumed Liabilities. In
furtherance and not in limitation of the foregoing, it is understood and agreed
that Buyer shall not assume any debts, liabilities or obligations of any kind:
(i) relating to (A) any Excluded Assets, (B) debts,
obligations or liabilities (including, without limitation, arising
under the Contracts) arising in respect of any period or periods ending
on or prior to the Initial Closing, (C) any actions, claims or other
proceedings now or hereafter pending or threatened against WellsPark
Group, the Management Business or any of the Assets to the extent
relating to acts or events occurring prior to the Initial Closing, (D)
any services rendered by WellsPark Group or any of its Affiliates prior
to the Initial Closing or (E) accounts payable or liabilities of
WellsPark Group to any of its Affiliates unless apportioned to Buyer
pursuant to Section 8.03; or
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(ii) relating to Taxes imposed on WellsPark Group or any
consolidated, combined or unitary group of which WellsPark Group is or
was a member, for any period ending on or before the Initial Closing
Date.
(All liabilities and obligations of WellsPark Group not assumed by Buyer
hereunder are collectively referred to herein as the "Retained Liabilities")
SECTION 2.06. (a) Initial Closing. Subject to the terms and conditions
of this Agreement, the initial closing of the Transaction (the "Initial
Closing") shall take place at the offices of Goulston & Storrs, P.C., 400
Atlantic Avenue, Boston, Massachusetts at 10:00 A.M., for and with respect to
the Interests and each Shopping Center as to which an Acquisition Agreement
shall have been executed and delivered prior to the Cut-Off Date on a date
specified in the Initial Closing Date Notice, which Initial Closing Date shall
be not less than 15 days nor more than 30 days following delivery of the Initial
Closing Date Notice to the Buyer, but in no event shall the Initial Closing take
place later than August 23, 1999 subject to extension as provided in this
Section below (the day on which the Initial Closing takes place shall be
referred to herein as the "Initial Closing Date") and the closing for and with
respect to the sale of the Interests shall occur concurrently therewith. The
Initial Closing Date may be extended for a period of up to sixty (60) days in
order to satisfy any closing conditions under an applicable Acquisition
Agreement or this Agreement so that a simultaneous closing of the Interests and
at least all of the Phase I Shopping Centers occurs ("Outside Initial Closing
Date") or so that, by the Outside Initial Closing Date, the conditions provided
in Section 8.01(i) may be met and satisfied. The Outside Initial Closing Date
may be extended by Seller for a period of up to thirty (30) additional days if
required in order to obtain a Lender Consent (as defined in the form
Contribution Agreement attached hereto.)
(b) Subsequent Closings. Provided that at least all of the Phase I
Shopping Centers and the Interests are acquired on the Initial Closing Date, as
the same may be extended, the parties shall use commercially reasonable efforts
to cause the transactions contemplated by this Agreement that do not occur on
the Initial Closing to take place at one or more closings (each a "Subsequent
Closing") to be held at the offices of Goulston & Storrs, P.C., 400 Atlantic
Avenue, Boston, Massachusetts at 10:00 A.M., on a closing date (each a
"Subsequent Closing Date") specified in a Subsequent Closing Date Notice from
the applicable Property Owner, which Closing Date shall be not less than 15 days
nor more than 30 days following the delivery of such Subsequent Closing Date
Notice to the Buyer, but in any event, except as described in the next following
sentence, no such Subsequent Closing Date shall be later than December 31, 1999.
Notwithstanding the foregoing, if the provisions of Schedule 2.00(d) are
exercised with respect to any Phase II Shopping Center as described in Schedule
2.00(d), the respective Subsequent Closings for the applicable Phase II Shopping
Center shall be on the dates designated for the applicable closings pursuant to
Schedule 2.00(d) (even if such date is subsequent to December 31, 1999). The
Phase II Shopping Centers set forth in the Subsequent Closing Date Notice for
such Subsequent Closing (together with the related Pending Management
Agreements) shall be sold to the Buyer for the consideration set forth in the
Acquisition Agreement relating to such Phase II Shopping Center with the balance
of the Adjustment
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Amount, if any, being credited to additional consideration for the Interests
upon assignment of the corresponding Pending Management Agreement.
(c) Closing Notices. The Seller shall deliver a notice (the "Initial
Closing Date Notice") to Buyer at such time as Seller determines, in good faith,
the date on which it expects the conditions to the obligations of the parties to
consummate the Initial Closing (i.e. the closing in respect of at least the
Phase I Shopping Centers and the Interests) to be satisfied, which Initial
Closing Date Notice shall be delivered no later than August 9, 1999 (the
"Outside Initial Closing Notice Date"). Seller shall have the right to defer
sending the Initial Closing Date Notice in order to maximize the number of
Shopping Centers to be included in the Initial Closing, provided such deferral
shall not extend beyond the Outside Initial Closing Notice Date. The Subsequent
Closing Date(s) shall be designated by each Property Owner under each applicable
Acquisition Agreement by a notice (a "Subsequent Closing Date Notice") delivered
to the Buyer at any time any such Property Owner determines, in good faith, the
date on which it expects the conditions to the obligations of the parties with
respect to a Subsequent Closing with respect to one or more Phase II Shopping
Centers to be satisfied.
Following the Initial Closing, the parties shall cooperate to schedule
and hold a final Closing not later than December 31, 1999 (the "Outside Final
Closing Date") with respect to all NED Portfolio Properties (and the related
Pending Management Agreements) for which the conditions to the obligations of
the parties to consummate a Closing have been satisfied or waived by the
applicable parties, it being understood that, except as set forth in Section
2.00(d), Seller shall have no further obligation to cause any Property Owner to
sell, and Buyer shall have no further obligation to purchase, any NED Portfolio
Properties for which such conditions have not been satisfied or waived on or
prior to such date. The Initial Closing Date Notice and each Subsequent Closing
Date Notice shall specify the applicable NED Portfolio Properties to be included
in such Closing.
Each Closing hereunder shall occur through a title insurance company,
and through a closing escrow arrangement, both mutually agreeable to the
parties. Any Closing Date selected by Seller hereunder shall be subject to the
approval of Buyer, which approval shall not be unreasonably withheld or delayed.
In no event shall Buyer be entitled to postpone a Closing Date designated by
Seller by more than thirty (30) days or beyond the Outside Final Closing Date,
except for closings occurring after the Outside Final Closing Date pursuant to
Section 2.00(d).
SECTION 2.07. Severance Payments. In addition to the Total
Consideration payable pursuant to Section 2.04 at Closing, Buyer shall pay or
reimburse Seller for all severance or other payment obligations incurred by
Seller prior to the Closing for retaining, terminating and/or relocating the
employees listed on Schedule 2.07- Part I (the "Corporate Employees") up to
$3,000,000.00 in the aggregate. Said sum shall not be used to reimburse Seller
for any payments made to any Corporate Employee who remains employed by any
Affiliate of Seller or who is rehired by any Affiliate of Seller within one
(1)year following the Initial Closing. Buyer shall offer employment to
substantially all of the acceptable employees set forth on Schedule 2.07 - Part
II (the "Mall Employees") on terms with respect to base salary comparable to
those which
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such Mall Employees currently receive. Buyer shall be responsible for any and
all severance payments and accrued vacation payments due any of the Mall
Employees.
SECTION 2.08. Intentionally Deleted.
SECTION 2.09. Expenses. Each party shall pay all of its respective
costs, expenses and fees incurred by it in connection with the negotiation and
preparation of this Agreement and the consummation of the transactions provided
for herein, except as otherwise expressly provided herein. Buyer shall bear and
timely pay all sales, use, transfer, recording and other taxes arising in
respect of the transfer of the Assets hereunder (the "Transfer Taxes"), the
assumption of the Assumed Liabilities hereunder and all other transactions
contemplated hereby, but Seller, at the Initial Closing, shall reimburse Buyer
for fifty percent (50%) of the Transfer Taxes for the sale of the Assets. Except
with respect to Apple Blossom Mall, Buyer shall be responsible for all
prepayment penalties for the loans set forth on Schedule 2.04(b) which are not
assumed by Operating Partnership which it is entitled to cause the Property
Owner to prepay under the terms of Article 2 hereof.
SECTION 2.10. Board of Directors. Effective with completion of the
Initial Closing, Stephen R. Karp shall thereupon (as promptly as feasible
thereafter) be appointed to the Company's Board of Directors to serve until the
next annual meeting of stockholders and shall be nominated (and recommended to
the Stockholders of the Company) for re-election to the Company's Board of
Directors at each of the two (2) next succeeding annual meetings of
stockholders.
SECTION 2.11. Investigation. (a) Buyer acknowledges and agrees that it
(i) has made its own inquiry and investigation into, and based thereon and on
the representations and warranties contained in this Agreement and the
Acquisition Agreements, has formed an independent judgment concerning, the NED
Portfolio Properties, the Management Business and the Interests and (ii) will
not assert any claims against Seller or any of its respective directors,
officers, employees, agents, stockholders, Affiliates, consultants, investment
bankers or representatives, or hold Seller or any such persons liable, for any
inaccuracies, misstatements or omissions with respect to such information
furnished by Seller or such persons concerning the NED Portfolio Properties, the
Management Business or the Interests, other than any inaccuracies or
misstatements in the representations and warranties contained in this Agreement
and then only to the extent provided in this Agreement or in any applicable
Acquisition Agreement.
(b) Buyer acknowledges and agrees that, except as expressly set forth
in this Agreement or in any Acquisition Agreement, the Buyer is acquiring each
NED Portfolio Property, Management Business and the Interests in their "AS IS"
condition "SUBJECT TO ALL FAULTS" and specifically and expressly without any
warranties, representations or guarantees, either express or implied, of any
kind, nature, or type whatsoever from or on behalf of Seller, except as
otherwise expressly set forth herein or in an applicable Acquisition Agreement.
The Buyer acknowledges that, except as to representations and warranties
expressly set forth in this Agreement or in any Acquisition Agreement, the Buyer
has not relied and is not relying on any information, document, reports, sales
projections, estimates, forecasts, plans,
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budgets, pro formas or statements that may have been given by or made by or on
behalf of Seller or any Property Owner. The Buyer further acknowledges that,
except as otherwise expressly set forth herein or in any Acquisition Agreement,
all materials relating to the NED Portfolio Properties, the Management Business
and the Interests that have been provided by Seller have been provided without
any warranty or representation, expressed or implied, as to their content,
suitability for any purpose, accuracy, truthfulness or completeness, and Buyer
shall not have any recourse against Seller or any of its respective directors,
officers, employees, agents, stockholders, Affiliates, consultants, investment
bankers or representatives for any such information in the event of any errors
therein or omissions therefrom.
ARTICLE III
Representations and Warranties of the Buyer
-------------------------------------------
The Company and the OP hereby represent and warrant, jointly and
severally, to Seller as follows:
SECTION 3.00. Organization, Good Standing and Authority. OP is a
limited partnership and the Company is a corporation, each of which is duly
organized, validly existing and in good standing under the laws of its
respective state of organization, is duly qualified to do business in all
jurisdictions where such qualification is necessary to carry on its business as
now conducted, except where failure to do so would not have a Buyer Material
Adverse Effect, and/or each of OP's designees, as applicable, is or will be
prior to Closing duly qualified to conduct business in the respective states in
which such designee is acquiring a NED Portfolio Property except where failure
to do so would not have a Buyer Material Adverse Effect, and each of OP and the
Company is authorized to consummate the transactions contemplated hereby and to
fulfill all of its respective obligations hereunder and under all documents
contemplated hereunder to be executed by OP and/or the Company, and has all
necessary power to execute and deliver this Agreement and all documents
contemplated hereunder to be executed by OP and/or the Company including,
without limitation, the Contribution Agreements, and to perform all of their
respective obligations hereunder and thereunder. Buyer has delivered to Seller
true, correct and complete copies of the Partnership Agreement as currently in
effect, the certificate of limited partnership of OP, the certificate of
incorporation of the Company and the bylaws of the Company.
SECTION 3.01. Buyer's Authorization and Binding Effect. This Agreement
has, and all documents contemplated hereunder to be executed by OP and/or the
Company including, without limitation, the Contribution Agreements, when
executed and delivered will have been duly authorized by all requisite
partnership or corporate action on the part of OP and the Company and each is,
or will be, upon execution and delivery, as applicable, the valid and legally
binding obligation of OP and the Company, as the case may be, enforceable in
accordance with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity (including concepts of materiality, reasonableness,
good faith and fair dealing), regardless of whether considered in a proceeding
in equity or at law.
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Neither the execution and delivery of this Agreement and all documents
contemplated hereunder to be executed by OP or the Company, nor the performance
of the obligations of OP or the Company hereunder or thereunder will result in
the violation of any provision of the Partnership Agreement or the certificate
of incorporation or bylaws of the Company, or will conflict with any order or
decree of any court or governmental instrumentality of any nature by which OP or
the Company is bound or to which it is subject.
SECTION 3.02. Capitalization.
(a) OP Units. The capitalization of OP is as set forth in Exhibit "A"
of the Partnership Agreement. As of February 22, 1999, 252,872,374 OP Units in
the aggregate were issued and outstanding (including 27,195,109 OP Units issued
to The Retail Property Trust, an affiliate of the OP, which are not convertible
into cash or common stock of the Company), of which 209,249 are Series A
Convertible OP Units, 4,844,331 are Series B Convertible OP Units, and the
balance are common OP Units. There are no restrictions on the transfer of the OP
Units to be issued hereunder other than those contained in the Partnership
Agreement or the Partnership Amendment, and those arising from federal and
applicable state securities Laws. All currently issued and outstanding OP Units
were, and all of the OP Units to be issued in connection with the Transaction
will be, duly authorized and validly issued in accordance with the terms of the
Partnership Agreement and in compliance with applicable Laws, and, are, or will
be in connection with the Transaction, as the case may be, fully paid and
non-assessable with no pre-emptive rights and the Common, Perpetual Preferred
and Convertible Preferred OP Units to be issued in connection with the
Transaction will be issued upon the terms and with the rights, privileges and
preferences provided in the Partnership Agreement, as the same is to be amended
as permitted or required hereunder. Except as set forth on Schedule 3.02(a) and
in the SEC Documents and except as created by this Agreement, as of the date
hereof, there are no outstanding subscriptions, options, warrants, preemptive or
other rights or other arrangements or commitments obligating Buyer to issue any
OP Units. At the Closing, upon receipt of the Assets and the Shopping Centers or
the interests in Property Owners being contributed in exchange for OP Units, the
OP will issue the OP Units to be issued hereunder free and clear of all liens
other than those suffered or permitted or granted by Seller or a Contributing
Property Owner, as the case may be, and as of the Closing, each Contributing
Property Owner, or its respective partners and shareholders, as the case may be,
will be admitted as a limited partner of the Partnership and SRC. The issuance
of the OP Units to the Contributing Property Owners at the Closing will not
require any approval or consent of any Person except any such approval as shall
have been obtained on or prior to the date of Closing. Assuming each of the
Contributing Property Owners, or its respective partners and shareholders, as
the case may be, is either a "qualified institutional buyer" as defined in Rule
144A under the Securities Act or an "accredited investor" as defined in Rule 501
under the Securities Act, the issuance of the OP Units hereunder is exempt from
registration under the Securities Act and applicable state securities Laws.
(b) Stock. Schedule 3.02(b) and the SEC Documents set forth as of the
date hereof (i) the authorized capital stock of the Company, (ii) the total
number of shares of Company Stock outstanding and (iii) all options and warrants
with respect to Company Stock and any commitments to issue or grant any of the
foregoing. All of the outstanding shares of Company
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Stock are duly and validly issued, fully paid and non-assessable and not subject
to any preemptive rights of other shareholders. If and when issued, the Company
Stock issuable upon redemption of the OP Units delivered under this Agreement or
under the Contribution Agreement(s) pursuant to the Partnership Agreement or the
Redemption Agreement will be duly authorized, validly issued, fully paid and
non-assessable and not subject to any preemptive rights of other shareholders.
The issuance of Company Stock upon redemption of OP Units delivered under the
Agreement or under the Contribution Agreements (a) will be free and clear of all
liens other than those suffered or permitted or granted by a Contributing
Property Owner, as the case may be, (b) will not require any approval or consent
of any Person except any such approval or consent that shall have been obtained
on or prior to the Closing Date, and (c) assuming each of the Contributing
Property Owners, or its respective partners and shareholders, as the case may
be, is an "accredited investor" as defined in Rule 501 under its Securities Act,
will be exempt from registration under the Securities Act and applicable state
securities laws.
SECTION 3.03. Conflicting Agreements and Other Matters. Neither Buyer
nor any Affiliate of Buyer is a party to any contract or agreement or subject to
any articles of incorporation or other corporate restriction compliance which
could reasonably be expected to have a Buyer Material Adverse Effect. Neither
the execution and delivery of the documents relating to the Transaction nor
fulfillment of nor compliance with the terms and provisions thereof, nor the
issuance of the OP Units to be issued to Contributing Property Owners pursuant
to this Agreement and the Contribution Agreements will (i) violate any provision
of any law presently in effect having applicability to the OP or the Company or
any of their properties, except such violations as could not reasonably be
expected to have a Buyer Material Adverse Effect, (ii) except for the
Partnership Amendment contemplated in this Agreement, conflict with or result in
a breach of or constitute a default under the Partnership Agreement, charter or
bylaws or any other organizational document of either OP or the Company, (iii)
except as set forth in Schedule 3.03, require any consent, approval or notice
under, or conflict with or result in a breach of, constitute a default or
accelerate any right under, any note, bond, mortgage, license, indenture or loan
or credit agreement, or any other agreement or instrument, to which OP or the
Company is a party or by which any of its respective properties is bound, except
such consents, approvals, notices, conflicts, breaches or defaults as could not
reasonably be expected to have a Buyer Material Adverse Effect or impair or
interfere with consummation of the Transaction, (iv) result in, or require the
creation or imposition of, any lien upon or with respect to any of the
properties now owned or hereafter acquired by OP or the Company. In addition,
Buyer has no knowledge of any facts or circumstances that, individually or in
the aggregate, could reasonably be expected to have a Buyer Material Adverse
Effect or to impair or interfere with consummation of the Transaction.
SECTION 3.04. Litigation; Proceeding, Etc. Except as set forth in the
SEC Documents (as defined herein), there is no action, suit, notice of
violation, proceeding or investigation pending or, to the best knowledge of
Buyer, threatened against or affecting OP or the Company or any of their
respective properties before or by any Governmental Authority which (i)
challenges the legality, validity or enforceability of the Transaction or of any
of the documents relating to the Transaction or (ii) could (individually or in
the
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aggregate) reasonably be expected to have a Buyer Material Adverse Effect or
(iii) would (individually or in the aggregate) impair the ability of Buyer to
perform fully on a timely basis any obligations which it has under any of the
documents relating to the Transaction.
SECTION 3.05. No Default or Violation. Except as set forth in the SEC
Documents (as defined herein), neither OP nor the Company has received written
notice that it is (i) in default under or in violation of any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound, except such defaults or
violations as could not reasonably be expected to have a Buyer Material Adverse
Effect, (ii) in violation of any order of any Governmental Authority, which
could reasonably be expected to have a Buyer Material Adverse Effect or (iii) in
violation of any law which could reasonably be expected to (A) adversely affect
the legality, validity or enforceability of the documents relating to the
Transaction, (B) have a Buyer Material Adverse Effect, or (C) adversely impair
Buyer's ability or obligation to perform fully on a timely basis any obligation
which it has under the documents relating to the Transaction.
SECTION 3.06. Governmental Consents, Etc. Except as may be required
under any applicable securities law in connection with the performance by the
Company of its obligations under the Partnership Agreement with respect to
certain registration rights granted thereunder and assuming the accuracy of the
representations and warranties of, and the performance of the agreements of,
Seller set forth herein and each Contributing Property Owner under the
applicable Acquisition Agreement, no authorization, consent, approval, waiver,
license, qualification or formal exemption from, nor any filing, declaration,
qualification or registration with, any Governmental Authority or any securities
exchange is required in connection with (a) the execution, delivery or
performance by Buyer of this Agreement (b) the issuance of the OP Units pursuant
to this Agreement and the Contribution Agreement or (c) the issuance of Company
Stock upon the redemption of any such OP Units, except for those that (i) have
been made or obtained by Buyer as of the date hereof or (ii) are set forth in
Schedule 3.06 and by the Closing shall be made or received by Buyer. At the
Closing Date, Buyer will have made all filings and given all notices to
Governmental Authorities and obtained all necessary registrations, declarations,
approvals, orders, consents, qualifications, franchises, certificates, permits
and authorizations from any Governmental Authorities, to own or lease its
properties and to conduct its businesses as currently owned, leased or
conducted, except where failure to do so could not reasonably be expected to
have a Buyer Material Adverse Effect. At the Closing Date, all such
registrations, declarations, approvals, orders, consents, qualifications,
franchises, certificates, permits and authorizations, the failure of which to
file, give notice of or obtain could reasonably be expected to have a Buyer
Material Adverse Effect or to impair or interfere with the consummation of the
Transaction, will have been filed, notified or obtained and to the extent
applicable, will be in full force and effect.
SECTION 3.07. Private Offering. Neither the OP or the Company nor any
person acting on their behalf has taken or will take any action (including,
without limitation, any offering of any securities of OP or the Company under
circumstances which would require the integration of such offering with the
issuance of the OP Units under the Securities Act) which might subject the OP
Units or the issuance of Company Stock, in exchange for or upon the redemption
of any such OP Units to the registration requirements of Section 5 of the
Securities Act.
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SECTION 3.08. No Other Liabilities. Except as set forth in Schedule
3.08 neither the Company nor its subsidiaries or Affiliates (including OP) has
any material liability, whether absolute, accrued, contingent or otherwise,
except liabilities (i) reflected on the consolidated balance sheet of the
Company as of September 30, 1998 or in the SEC Documents, or (ii) that (1) were
incurred by the Company or its subsidiaries or Affiliates after September 30,
1998 in the ordinary course of business or (2) were incurred before September
30, 1998, but are not required by generally accepted accounting principles
consistently applied to be reflected on such balance sheet and (3) in either
event, could not reasonably be expected to have a Buyer Material Adverse Effect.
SECTION 3.09. Status of Partnership Agreement; Taxes and REIT Status.
The Partnership Agreement is in full force and effect; a true, complete and
correct copy thereof has been delivered to the Seller; and there are no
dissolution, termination or liquidation proceedings pending or contemplated with
respect to the Company or OP. The OP is, and has been since the date of its
formation, taxable as a "partnership" as defined in Section 7701(a) of the Code
and is, and has been since the date of its formation, not taxable as a
corporation by reason of not being a publicly traded partnership within the
meaning of Section 7704 of the Code. Each of the OP and the Company has filed
all Tax Returns that are required to be filed with any Governmental Authority
and has paid all taxes due pursuant to the Tax Returns or any assessment
received by it or otherwise required to be paid, except taxes being contested in
good faith by appropriate proceedings and for which adequate reserves or other
provisions are maintained, and except for the filing of Tax Returns as to which
the failure to file could not, individually or in the aggregate, have a Buyer
Material Adverse Effect. The Company (i) has elected to be taxed as a REIT which
election is effective for the taxable year ending December 31, 1999 and such
election has not been terminated or revoked, (ii) qualified for taxation as a
REIT for the year ended December 31, 1998 and will so to qualify for its current
taxable year, (iii) operates, and intends to continue to operate, in a manner so
as to qualify as a REIT, and (iv) has not sold or otherwise disposed of any
assets which could give rise to a material amount of tax pursuant to any
election made by the Company under Notice 88-19, 1988-1 CB 486 and does not
expect to effect any such sale or other disposition.
SECTION 3.10. Compliance with Laws. To the knowledge of the Buyer,
neither the OP nor the Company has been in or is in, and none of them has
received written notice of, violation of or default with respect to, any law or
any decision, ruling, order or award of any arbitrator applicable to it or its
business, properties or operations, except for violations or defaults that,
individually or in the aggregate, could not reasonably be expected to have a
Buyer Material Adverse Effect or impair or interfere with the consummation of
the Transaction.
SECTION 3.11. SEC Documents. The Company has filed with the Securities
and Exchange Commission (the "Commission") all reports, schedules, forms,
statements and other documents required by the Securities Act or the Exchange
Act or the rules or regulations promulgated thereunder to be filed by the
Company in each case in the form and with the substance prescribed by either
such Act or such rules or regulations (collectively, and in each case including
all exhibits and schedules thereto and documents incorporated by reference
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therein, the "SEC Documents") including without limitation proxy information and
solicitation materials, in each case in the form and with the substance
prescribed by either such Act or such rules or regulations. Buyer has delivered
or made available to Seller all SEC Documents. As of their respective filing
dates (or if amended, revised or superseded by a subsequent filing with the
Commission then on the date of such subsequent filing), the SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the
Commission promulgated thereunder and other federal, state and local laws, rules
and regulations applicable to the SEC Documents and none of the SEC Documents
(including any and all financial statements included therein) as of such dates
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The consolidated financial statements of Buyer, the Company and, if
any, all Affiliates of Buyer included in all SEC Documents, including any
amendments thereto (the "SEC Financial Statements"), comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto and, as at the
dates as of which the same were prepared and for the periods then ended, fairly
presented the financial condition and results of operations of the Company and
in its Affiliates on a consolidated basis in accordance with generally accepted
accounting principles consistently applied throughout all such periods.
SECTION 3.12. No Material Adverse Change. Since December 31, 1997, the
date through which the most recent annual report of the Company on Form 10-K has
been prepared and filed with the Commission, a copy of which is included in the
SEC Documents, no Buyer Material Adverse Effect has occurred or exists except as
may be disclosed in any SEC Documents filed subsequent to such date.
SECTION 3.13. No Undisclosed Liabilities. The Company, OP and their
subsidiaries and Affiliates have no liabilities or obligations which are
material, individually or in the aggregate, and are not disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Companies,
OPs or their respective businesses since December 31, 1997, and which,
individually or in the aggregate, do not or would not have a Buyer Material
Adverse Effect.
SECTION 3.14. No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to the Company, OP or their
subsidiaries or Affiliates or their respective businesses, properties,
prospects, operations or financial condition, which, under applicable law, rule
or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed.
SECTION 3.15. Material Contracts. The SEC Documents include a correct
and complete list of the following with respect to the OP and the Company which
are required to be disclosed in the SEC Documents: (1) agreements with any unit
holder or shareholder having beneficial ownership of 5 % or more of the OP Units
of Buyer or of the shares of Company Stock issued and outstanding prior to the
Transactions or with any director or officer of the OP or the Company or of any
material subsidiary or Affiliate thereof and all shareholders' agreements
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and voting trusts; and (2) agreements not made in the ordinary course of
business which would reasonably be expected to result in a Buyer Material
Adverse Effect.
SECTION 3.16. No Merger Agreements. As of the date hereof, except as
set forth in Schedule 3.16, neither the Company nor the OP has entered into any
agreement with any person or Governmental Authority, which has not been
terminated as of the date of this Agreement and under which there remains any
material liability or obligation thereof with respect to a merger or
consolidation with either the Company or the OP, or any other acquisition of a
substantial amount of the assets of the Company or the OP, which would
reasonably be expected to result in a Buyer Material Adverse Effect.
SECTION 3.17. Certain Actions by Buyer. None of the OP, the Company or
any material subsidiary or Affiliate thereof has (i) made a general assignment
for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy or
suffered the filing of any involuntary petition by Buyer's creditors; (iii)
suffered the appointment of a receiver to take possession of all or
substantially all of Buyer's assets, (iv) suffered the attachment or other
judicial seizure of all, or substantially all, of Buyer's assets, (v) admitted
in writing Buyer's inability to pay its debts as they come due; or (vi) made an
offer of settlement, extension, or composition to its creditors generally.
SECTION 3.18. Buyer's Knowledge. As used in this Agreement, the words
"to the knowledge of Buyer" or words of similar tenor shall mean only the
"current, actual, conscious (and not constructive, imputed or implied)
knowledge" of the following designees of Buyer, without having made a review of
files or other inquiry: David Simon, Richard Sokolov and Stephen E. Sterrett.
Anything herein to the contrary notwithstanding, no such designee shall have any
personal liability or obligation whatsoever with respect to any of the matters
set forth in this Agreement or any of the representations made by Buyer being or
becoming untrue, inaccurate or incomplete in any respect.
ARTICLE IV
Representations and Warranties of Seller
----------------------------------------
NED and WellsPark Management, jointly and severally, each hereby
represents and warrants to and agrees with the Buyer, except as set forth on any
of the disclosure schedules or otherwise furnished or disclosed to Buyer by
Seller in writing, as follows:
SECTION 4.00. Organization and Authority.
(a) WellsPark Group is a limited partnership duly formed, validly
existing and in good standing under the laws of Delaware. WellsPark Group has
all requisite power to own, operate, lease or otherwise hold the Assets and to
carry on the Management Business as now being conducted. WellsPark Group is
qualified to do business and, to the extent applicable, is in good standing in
each jurisdiction where the character of its property owned or leased or the
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nature of its activities makes such qualification necessary, except where the
failure to be so qualified and in good standing would not have a Seller Material
Adverse Effect.
(b) NED is a limited partnership duly organized, validly existing and
in good standing under the laws of the Commonwealth of Massachusetts, WellsPark
Management is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Delaware and each entity
comprising Seller is in good standing in each jurisdiction where the character
of its property owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified and in good
standing would not have a Seller Material Adverse Effect. Seller has full power
and authority to enter into this Agreement and to perform its obligations
hereunder. This Agreement has been duly authorized and approved by all necessary
action of Seller, has been duly executed and delivered by Seller and constitutes
a legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws relating
to or affecting creditor's rights generally from time to time in effect and to
general principles of equity (including concepts of materiality, reasonableness,
good faith and fair dealing), regardless whether considered in a proceeding in
equity or at law.
(c) The execution, delivery, and performance by Seller of this
Agreement and the consummation of the transactions contemplated hereby
(including the transfer of the Interests to the Buyer) will not (i) violate any
provision of the governing documents of Seller; (ii) require Seller or WellsPark
Group to obtain any consent, approval, or action of, or make any filing with or
give any notice to, any governmental authority or any other Person except those
set forth on Schedule 4.00(c) attached hereto (the "Third Party Consents") and
filings under the HSR Act; (iii) subject to clause (ii), conflict with, result
in the breach of or constitute a default under any agreement, lease, commitment,
or other binding arrangement to which Seller or WellsPark Group is a party or by
or to which Seller or WellsPark Group or any Assets may be bound; (iv) violate
any order or decree of any court, arbitrator or other governmental authority
against or binding upon Seller or WellsPark Group, the Management Business or
any of the Assets; or (v) violate any law or regulation of any governmental
authority to which Seller or WellsPark Group, the Management Business or any of
the Assets is subject; except, in the case of the preceding clauses (ii), (iii),
(iv) and (v), where the failure so to obtain a consent, approval or action or
where the occurrence of such a conflict, breach, default or violation,
individually or in the aggregate, would not have a Seller Material Adverse
Effect.
(d) The principal place of business and chief executive office of NED
and WellsPark Management is One Wells Avenue, Newton, Massachusetts.
SECTION 4.01. Title to Assets; Title to Interests.
(a) WellsPark Group owns or will, as of the Initial Closing, own the
Assets free and clear of all liens, except as set forth on any disclosure
schedules heretofore delivered to the Buyer and except for liens that are not so
material in character, amount or extent as to materially detract from the value
or materially interfere with the Buyers use of the Assets as heretofore utilized
by
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WellsPark Group ("Permitted Liens"). Except as set forth as Schedule 4.01(a), as
of the Closing Date, no Person will have any option or any right capable of
becoming an option for the purchase of any of the Assets.
(b) The Interests have been duly authorized and validly issued and are
fully paid and non-assessable. NED and WellsPark Management will own 100% of the
Limited Partnership Interests and General Partnership Interests, respectively,
of WellsPark Group as of the Initial Closing Date, free and clear of all rights,
liens, claims and encumbrances other than pursuant to this Agreement and subject
to restrictions on transfer under federal and state securities laws.
(c) All documents comprising the WellsPark Group Partnership Agreement
(including, without limitation, all amendments, supplements and modifications
thereof and all assignments with respect thereto) are described on Schedule
4.01(c) attached hereto, true, correct and complete copies of which have been
delivered to Buyer. The WellsPark Group Partnership Agreement is in full force
and effect.
(d) The Management Agreements comprise all management, leasing or other
comparable agreements relating to the Shopping Centers and the Non-Owner
Shopping Centers.
SECTION 4.02. Adverse Claims, Litigation and Proceedings. Except as set
forth on any disclosure schedules heretofore delivered to the Buyer, there are,
to Seller's knowledge, no actions, claims, suits, investigations, arbitrations
or other proceedings pending or threatened against or affecting WellsPark Group,
the Management Business, Seller or any of the Assets other than those which,
individually or in the aggregate with other such actions, claims, suits,
investigations and proceedings not disclosed, would not have a Seller Material
Adverse Effect. Seller has received no written notice that it is (i) in default
under or in violation of any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any other
property is bound, (ii) in violation of any order of any Governmental Authority,
or (iii) in violation of any law which could reasonably be expected to (A)
adversely affect the legality, validity or enforceability of the documents
relating to the Transaction, or (B) adversely impair Seller's ability or
obligation to perform fully on a timely basis any obligation which it has under
the documents relating to the Transaction.
SECTION 4.03. Compliance with Laws.
(a) To the knowledge of Seller, WellsPark Group is not in violation of
any material law, regulation, order or decree of any governmental authority,
court order, decision, ruling, order or award of any arbitration other than a
violation which, individually or in the aggregate with other such violations,
would not have a Seller Material Adverse Effect. Seller has not received any
notice of violation or claimed violation of any such law, regulation or decree,
or pending regulatory proceeding, action or investigation with respect thereto,
or any threat by any governmental authority to take regulatory action against
WellsPark Group, the Management Business or any of the Assets by reason of any
such violation or claimed violation other than such of the foregoing as,
individually or in the aggregate, would not have a Seller Material Adverse
Effect.
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(b) Except as set forth on any disclosure schedules heretofore
delivered to the Buyer, the Seller has not received any written or other actual
notice within the past twelve (12) months from any governmental authority having
jurisdiction over WellsPark Group of any violation of any employment or other
regulatory law, order, regulation or requirement relating to the Management
Business that remains uncured and which, individually or in the aggregate with
other such violations which remain uncured, would have a Seller Material Adverse
Effect.
SECTION 4.04. Intellectual Property of Seller. Except as set forth in
Schedule 4.04, to the knowledge of Seller, WellsPark Group is not infringing
upon any intellectual property rights of any other Person nor, to the knowledge
of Seller, is any other Person infringing on any of WellsPark Group's rights in
respect of the Intellectual Property.
SECTION 4.05. Contracts.
(a) To the knowledge of Seller, the Contracts set forth on Schedule
2.01(a) include all of the contracts or other understandings, written or oral,
to which WellsPark Group is a party or by which WellsPark Group is bound that
relate to the Shopping Centers and the shopping centers commonly known as
Cambridgeside Galleria, located in Cambridge, Massachusetts, Meadow Glen Mall,
located in Medford, Massachusetts, and Pheasant Lane Mall located in Nashua, New
Hampshire (collectively, the "Non-Owned Shopping Centers"), except for contracts
or understandings that are terminable without penalty by WellsPark Group on sale
or upon 90 days' notice or less. Seller has delivered or made available to the
Buyer a true and complete copy of each Contract listed on Schedule 2.01(a)
(including in each case all exhibits and schedules thereto).
(b) The Contracts are valid agreements in full force and effect, and
neither WellsPark Group nor, to Seller's knowledge, any other party thereunder
is in material breach thereof, nor has WellsPark or Seller sent or received
written notice of any such default which remains uncured except as set forth on
Schedule 4.05(b).
SECTION 4.06. Taxes.
(a) To the knowledge of Seller, except for such matters as,
individually or in the aggregate with other such matters, would not have a
Seller Material Adverse Effect (i) all Tax Returns required to be filed on or
before the date hereof (including any valid extensions of time to file such Tax
Returns) by or on behalf of WellsPark Group have been filed through the date
hereof or will be filed on or before the Closing Date in accordance with all
applicable laws; (ii) there is no action, suit or proceeding pending against, or
with respect to, WellsPark Group or the Management Business for any Taxes, nor
has any claim for additional Taxes been asserted by any such authority; and
(iii) all Taxes reflected upon or required to be reflected upon a Tax Return so
filed or so to be filed on or before the Closing Date have been paid or will be
paid on or before the Closing Date, unless such Taxes are being contested in
good faith and adequate reserves for the payment of such Taxes have been
established by WellsPark Group.
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(b) As of the Effective Date, and except as set forth on any disclosure
schedules heretofore delivered to the Buyer, there is no pending or, to Seller's
knowledge, threatened tax audit of any Tax Return filed by or on behalf of
WellsPark Group or with respect to any of WellsPark Group's income, operations,
properties or assets (including the Management Business and the Assets) or any
Tax Return by or on behalf of any other Person as to which WellsPark Group may
have liability for any such Person's Taxes (whether by operation of law or by
contract).
(c) WellsPark Group has qualified as a partnership for federal income
tax purposes at all times during its existence and no taxing authority has
asserted any position to the contrary.
SECTION 4.07. Permits. To the knowledge of Seller, WellsPark Group has
all permits as are necessary for the ownership, use, operation and licensing of
the Management Business and is not in violation of any such permit, except to
the extent the failure to possess or the violation of such permit would not,
individually or in the aggregate, have a Seller Material Adverse Effect.
SECTION 4.08. Insolvency. There are no attachments, executions or
assignments for the benefit of creditors, or voluntary or involuntary
proceedings in bankruptcy, or under any other debtor relief laws, contemplated
by or pending or, to the knowledge of Seller, threatened against the Seller or
WellsPark Group.
SECTION 4.09. Financial Condition. The Pro-Forma Statement of Revenue
for the twelve-month period ended December 31, 1998 heretofore delivered to
Operating Partnership accurately reflects, in all material respects, all sources
of Management Business revenue with respect to the NED Portfolio Properties for
such period. The exception set forth in the preamble to this Article IV shall
not apply to this representation and warranty.
SECTION 4.10. Liabilities. Other than the Contracts and the litigation
set forth on any disclosure schedules heretofore delivered to the Buyer,
WellsPark Group has no liabilities (actual or contingent) other than (i) the
Assumed Liabilities; and (ii) the Retained Liabilities.
SECTION 4.11. Debt. There exists no uncured default or event that with
the passage of time or notice or both would constitute a default, with respect
to any debt of WellsPark Group that, individually or in the aggregate, would
have a Seller Material Adverse Effect.
SECTION 4.12. Employees.
(a) Except as disclosed on Schedule 4.12(a), employees of WellsPark
Group are not participants in a pension, profit sharing or similar plan. Except
as disclosed on Schedule 4.12(a), WellsPark Group does not have and has not
maintained any "employee benefit plans" as such term is defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974. All employees of
WellsPark Group have been or will be terminated as of the Initial Closing Date.
(b) Except as disclosed on Schedule 4.12(b), WellsPark Group is not a
party to any outstanding written employment, severance or consulting agreements
or contracts with any
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employee or any agreement or contract that provides for the payment of any bonus
or commission by WellsPark Group or any of its Affiliates to any employee.
Subject to Section 2.07, WellsPark Group has no agreement, policy or practice
that requires it to pay termination or severance pay which would be binding on
the Buyer.
SECTION 4.13. Insurance. Insurance policies or binders of insurance or
programs of self-insurance in the types and amounts listed in Schedule 4.13 are
valid and currently in effect. Seller has paid, or caused to be paid, all
premiums due under such policies and is not in default with respect to its
obligations under any such policies.
SECTION 4.14. Seller's Knowledge. As used in this Agreement, the words
"to the knowledge of Seller" or words of similar tenor shall mean only the
"current, actual, conscious (and not constructive, imputed or implied)
knowledge" of the following designees of Seller, without having made a review of
files or other inquiry: Stephen R. Karp, Steven S. Fischman, Dawn K. Neher,
Kenneth A. Leibowitz and Bruce M. Herman. Anything herein to the contrary
notwithstanding, no such designee shall have any personal liability or
obligation whatsoever with respect to any of the matters set forth in this
Agreement or any of the representations made by Seller being or becoming untrue,
inaccurate or incomplete in any respect.
SECTION 4.15. Indemnity. Subject to the provisions of Article VI
hereof, Seller shall jointly and severally indemnify and defend Buyer against
and hold Buyer harmless from any and all losses, costs, damages, liabilities and
expenses (including, without limitation, reasonable counsel fees and expenses)
arising out of any breach by Seller of its representations and warranties
hereunder.
ARTICLE V
Covenants
---------
SECTION 5.00. Existence; Preservation of Tax Status. The Company will
take all steps necessary to preserve and continue the corporate existence of the
Company and the partnership existence of the OP. No party hereto shall take any
action or omit to take any action reasonably within its power to take that (i)
would cause the Company to be disqualified as a REIT or (ii) would cause the OP
to be taxed other than as a partnership for federal income tax purpose or cause
the OP to be classified as a publicly traded partnership pursuant to Section
7704 of the Code. Seller shall take all steps necessary to preserve and continue
the corporate, partnership or limited liability company existence of each Seller
and of WellsPark Group.
SECTION 5.01. Amendment to Partnership Agreement of OP. At the Initial
Closing and at each Subsequent Closing in which OP Units are issued, the Company
shall cause the OP to amend its Partnership Agreement to admit as limited
partners the persons or entities to which Common OP Units, Perpetual Preferred
OP Units or Convertible Preferred OP Units are to be initially allocated by the
Seller pursuant to Section 2.04(c) hereof and any other persons or entities to
which such OP Units may be transferred in accordance with the Partnership
Agreement.
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SECTION 5.02. Good Faith Efforts. Each of the Buyer, on the one hand,
and the Seller, on the other hand, shall act in good faith and shall not take
any action that would result in (i) any of the representations and warranties of
such party set forth in this Agreement that are qualified as to materiality
becoming untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect or (iii) any of the conditions
precedent to closing set forth in Article VIII not being satisfied.
SECTION 5.03. Good Faith Cooperation. Subject to the terms and
conditions herein provided, the parties to this Agreement shall use commercially
reasonable efforts to take, or cause to be taken, all other actions and do, or
cause to be done, all other things necessary, proper or appropriate to
consummate and make effective the transactions contemplated by this Agreement.
If, at any time after any Closing hereunder, any further action is necessary or
desirable to carry out the purpose of this Agreement, the proper officers and
directors and other duly authorized representatives of the parties shall take
all such necessary action. The provisions of the immediately preceding sentence
shall survive the Closing.
SECTION 5.04. Conduct of Business. (a) Prior to the Initial Closing,
Seller covenants and agrees that, between the date hereof and the Initial
Closing Date, Seller shall (i) operate the Management Business in the ordinary
course and consistent with Sellers prior practice, except as otherwise
contemplated by this Agreement and the other Acquisition Agreements; (ii) use
all commercially reasonable efforts to maintain, for the benefit of Buyer or its
designee following the Initial Closing, the good will of owners of the Non Owned
Shopping Centers and other Persons having business relations with WellsPark
Group in respect of the Shopping Centers and the Non Owned Shopping Centers
(iii) cause WellsPark Groups debts to be paid when due (or in good faith contest
the same) and perform WellsPark Groups obligations under the Management
Agreements and otherwise in respect of the Shopping Centers and the Non Owned
Shopping Centers; (iv) not (and not permit WellsPark Group to) (A) modify, amend
or supplement any Management Agreement or the WellsPark Group Partnership
Agreement (except, in the case of the WellsPark Group Partnership Agreement, as
may be necessary in order to implement the O'Connor Agreement), (B) cancel or
terminate any Management Agreement or the WellsPark Group Partnership Agreement
or take any action which would have the effect of canceling or terminating the
same, or (C) sell, transfer assign, lease, encumber or otherwise dispose of, or
grant any right or interest in, all or any of the Assets or the Interests; and
(v) provide on a timely basis monthly lease status update reports for all NED
Portfolio Properties in the form heretofore delivered to Buyer. Seller shall not
incur any additional debt or grant any additional liens on the Assets which
shall become Assumed Liabilities or which shall encumber any of the Assets
following the Closing. Seller shall not enter into any equipment lease which
would become an Asset or an Assumed Liabilities or which shall encumber any of
the Assets following the Closing. Seller shall not enter into any equipment
lease which would become an Asset or an Assumed Liability if such equipment
lease has an annual rental payment in excess of $15,000 without Buyer's prior
written consent, which consent shall not be unreasonably withheld, delayed or
conditioned and which shall be deemed to have been given if Buyer fails to
respond within seven (7) days following Seller's written request (which request
shall be accompanied by a copy of the proposed equipment lease).
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(b) Between the Initial Closing Date and the Applicable Subsequent
Closing Date, NED covenants and agrees that it will cause any Pending Shopping
Centers to be managed in accordance with first-class shopping center standards
to the extent the related Pending Management Agreement is not assigned pursuant
to a Service Agreement.
SECTION 5.05. Agreement of Joinder Parties. The Joinder Parties and
Seller hereby agree, subject to fiduciary duties if any, based upon the opinion
of counsel and as reported to Buyer, that prior to the execution of an
Acquisition Agreement by a Property Owner or the withdrawal of the relating
Shopping Center, neither the Joinder Parties nor Seller shall take any action
which would cause a Property Owner to breach any of the covenants or result in a
breach of a representation or warranty set forth in the form Contribution
Agreement attached as Exhibit C hereto and if a Joinder Party becomes aware that
any such action has been taken, such Joinder Party shall immediately notify
Buyer thereof.
SECTION 5.06. Amendment to Partnership Agreement and Registration
Rights Agreement. OP shall execute and cause to become effective on the Initial
Closing Date an amendment to the Partnership Agreement containing the terms and
provisions or particularly set forth on Exhibits D and E and such other terms
and provisions as are customary or reasonably required for the creation of the
Convertible Preferred and Perpetual Preferred OP Units described in said
Exhibits.
At the Initial Closing, the Company shall enter into and deliver a
Registration Rights Agreement with all persons and entities receiving or
entitled to receive at least $10,000,000 worth of OP Units incident to and as a
consequence of the transactions consummated at Initial Closing. At each
Subsequent Closing, such Registration Rights Agreement shall be amended to add
as parties thereto those additional persons and entities receiving or entitled
to receive at least $10,000,000 worth of OP Units or OP Units which together
with OP Units previously received total or will total $10,000,000 worth of such
units incident to and as a consequence of the Transactions consummated at each
such Subsequent Closing. Such Registration Rights Agreement shall be in
substantially the form and substance of the Registration Rights Agreement dated
as of September 24, 1998 and to which the Company is also a party, a copy of
which is annexed hereto as Exhibit F and hereby made a part hereof.
SECTION 5.07. WellsPark Assets. To the extent that any Assets whose
revenues are reflected in the Pro Forma Statement of Revenue are not currently
owned by WellsPark Group, Seller covenants to cause such Assets to be conveyed
to WellsPark Group on or before the Initial Closing and that all Assets related
to any Pending Management Agreements will be owned directly or indirectly by NED
at the time of the applicable Subsequent Closing.
SECTION 5.08. ERISA. Prior to the Initial Closing Date and without any
liability to WellsPark Group or Buyer, Seller shall take, or cause to be taken,
all actions which are necessary so that on and after the Initial Closing Date,
WellsPark Group is no longer the sponsor of or a participating employer under
any employee benefit plan as such term is defined in Section 3(3) of ERISA or
any other arrangement, contract or plan which provides deferred compensation,
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retirement, bonus, stock option, or other employee benefit, except as otherwise
directed by Buyer. All liabilities or obligations with respect to any such plan
are Retained Liabilities, including but not limited to, any obligations to
provide continuation coverage with respect to any such plan pursuant to Section
4980B of the Code, Part 6 of Title I of ERISA, any applicable state continuation
coverage law.
SECTION 5.09. No Solicitation (a) Between the Effective Date and the
Initial Closing or the termination of this Agreement, whichever is earlier (the
"No Shop Period"), Seller shall not, nor shall it permit any of its Affiliates
to, nor shall it authorize any officer or director of, or any investment,
banker, attorney or other advisor or representative of, Seller or any of its
Affiliates to and the Joinder Parties agree that they shall not directly or
indirectly, solicit or initiate the submission of any Acquisition Proposal. For
purposes of this Agreement, "Acquisition Proposal" means any proposal for a
merger, asset sale or other business combination involving the Seller and/or all
or substantially all of the Seller's and/or its Affiliates interest in the NED
Portfolio Properties and/or the Interests or any proposal or offer to acquire in
any manner, directly or indirectly, an equity interest in, all or substantially
all of the Seller's and/or its Affiliates interest in the NED Portfolio
Properties and/or the Interests (any of the foregoing, an Acquisition
Transaction").
(b) The Seller shall promptly advise Buyer orally and in writing of any
written request for information or of any Acquisition Proposal, or any written
inquiry with respect to any Acquisition Proposal, the material terms and
conditions of such request, acquisition proposal or inquiry, and the identity of
the Person making any such Acquisition Proposal or inquiry.
(c) If (i) this Agreement is terminated (x) by either party pursuant to
Section 2.03(c) or (y) by Buyer pursuant to Section 9.00(b) or Section 9.00(z)
by Seller when Buyer could have, but had not then, terminated pursuant to (A)
Section 2.03(c) by reason of Seller not performing under Section 2.03(c) or (B)
Section 9.00(b) (unless under either clause (A) or clause (B) such
nonperformance results from a Buyer breach or failure of covenant of Buyer or a
condition to Seller's obligation not having been satisfied without fault of
Seller; and, (ii) within 15 months after the Effective Date, Seller and/or its
Affiliates enter into an agreement with respect to an Acquisition Transaction,
or an Acquisition Transaction occurs, Seller shall pay, or cause to be paid, in
same day funds, to Buyer upon demand a fee of $20,000,000. The provisions of
this Section 5.09(c) are the sole and exclusive remedy of Buyer for any breach
by Seller and/or the Joinder Parties of this Section 5.09, at law and in equity.
Notwithstanding anything to the contrary contained in this Agreement, the
provisions of this Section 5.09 shall survive any termination by Buyer of this
Agreement pursuant to Section 2.03(c) or Section 9.00(b) or any termination by
Seller of this Agreement.
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ARTICLE VI
Continuation and Survival of Representations, Warranties,
---------------------------------------------------------
Indemnifications and Covenants
------------------------------
SECTION 6.00 . Except as specifically otherwise provided herein or with
respect to covenants of Buyer which in the context of this Agreement are to be
performed subsequent to the Initial Closing and/or a Subsequent Closing, the
representations, warranties, indemnifications and covenants of Buyer contained
herein or made in writing pursuant to this Agreement are intended to be and
shall remain true and correct as of the time of the Initial Closing and each
applicable Subsequent Closing, shall be deemed to be material, and shall survive
the Closing and the transfer of title for a period of nine (9) months, and with
respect to any written claim made within such period, until final unappealable
adjudication or settlement thereof provided litigation is, or formal
adjudication proceedings are, instituted within six (6) months following Buyer's
receipt of Seller's written notice of claim. Any claim must be delivered to the
Buyer on or before that date which is nine (9) months after the applicable
Closing Date, sent by certified mail, return receipt requested, at the Buyers
address set forth in Article X hereof. No such notice of claim shall be
effective unless such notice identifies such claim with specificity and refers
to this Article VI.
Except as specifically otherwise provided herein or with respect to
covenants of Seller which in the context of this Agreement are to be performed
subsequent to the Initial Closing and/or a Subsequent Closing, the
representations, warranties, indemnifications and covenants of Seller contained
herein or made in writing pursuant to this Agreement are intended to be and
shall remain true and correct as of the time of the Initial Closing and/or each
applicable Subsequent Closing for and with respect to any Pending Management
Agreement which is to be transferred at such Subsequent Closing, and shall
survive the Initial Closing (or such Subsequent Closing, as applicable) for a
period of nine (9) months and with respect to any written claim made within such
period, until final unappealable adjudication or settlement thereof, provided
litigation is, or formal adjudication proceedings are, instituted within six (6)
months following Seller's receipt of Buyer's written notice of claim (the
"Survival Period"). Any claim must be delivered to the Seller on or before that
date which is nine (9) months after the Initial Closing Date (or such Subsequent
Closing, as applicable), sent by certified mail, return receipt requested, at
the Seller's address set forth in Article X hereof. No such notice of claim
shall be effective unless such notice identifies such claim as specificity and
refers to this Article VI.
To the extent that Buyer knows or is deemed to know, prior to the
Initial Closing Date (or such Subsequent Closing, as applicable), that the
Seller's representations or warranties in Article IV or elsewhere in this
Agreement are inaccurate, untrue or incorrect in any way, such representations
and warranties shall be deemed modified to reflect Buyers knowledge or deemed
knowledge, as the case may be, and if Buyer is entitled to elect not to close
pursuant to Section 8.00(a) hereof, but Buyer shall elect to close
notwithstanding such inaccuracy, then Seller shall not be deemed to be in
default hereunder and any claim arising as a result thereof shall be considered
to have been waived for all purposes. For purposes of this Agreement, Buyer
shall be "deemed to know" that a representation or warranty was untrue,
inaccurate or incorrect
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only to the extent that this Agreement, any studies, tests, reports, or analyses
prepared by or for Buyer or any of its employees, agents, representatives or
attorneys (all of the foregoing being herein collectively called the "Buyer's
Representatives") or further written information furnished to Buyer by Seller or
its representatives or by any Property Owner at any time on or before the
applicable Closing Date or otherwise obtained by Buyer or Buyer's
Representatives contains information which is inconsistent with such
representation or warranty.
SECTION 6.01. Without derogating from the representations and
warranties of Seller contained in this Agreement or Seller's obligations, or
Buyer's rights expressly set forth in this Agreement, by accepting the
Interests, Buyer, for itself and its Affiliates, successors and assigns hereby
releases and forever discharges Seller and all Affiliates of Seller (other than
the Property Owners with respect to matters governed by an executed Acquisition
Agreement) from any and all claims, acts, debts, demands, actions, causes of
action, suits, sums of money, guaranties, bonds, covenants, contracts, accounts,
agreements, promises, representations, restitutions, omissions, variances,
damages, obligations, costs, response actions, fees and liabilities of every
name and nature whatsoever, both at law and in equity, which Buyer and its
Affiliates, successors and assigns may now or hereafter have with respect to
matters existing as of the Closing Date against Seller, and any Affiliates of
Seller (other than the Property Owners with respect to matters governed by an
executed Acquisition Agreement) arising in connection with this Agreement, the
Interests, the Assets, or the Transaction contemplated hereby.
SECTION 6.02. (a) NED and WellsPark Management (for purposes of this
Section 6.02, Section 6.03 and Section 6.04, the "Indemnitors"), jointly and
severally, covenant and agree to indemnify, defend and hold Buyer and its
Affiliates (for purposes of this Section 6.02, Section 6.03 and Section 6.04,
collectively, the "Indemnitees") harmless from, against and in respect of any
and all damages, losses, claims, penalties, liabilities, costs and expenses
(including, without limitation, reasonable attorneys' fees, disbursements and
other charges) that arise from or relate or are attributable to (i) the Retained
Liabilities, (ii) any breach or default by Seller of, or in respect of Seller's
representations, warranties, indemnifications or covenants contained herein and
(iii) all reasonable costs and expenses (including reasonable attorneys' fees
and expenses) incurred by Buyer in connection with any action, suit, proceeding,
demand, assessment or judgment incident to any of the matters indemnified
against in this Section 6.02 subject to the provisions of this Section 6.02
hereinafter set forth.
(b) In no event shall the Indemnitees be entitled to indemnification
under this Section 6.02 from the Indemnitors (i) unless and until the aggregate
amount of all such claims for indemnification exceeds $200,000 and then only to
the extent such aggregate amounts exceed $200,000, or (ii) for any amounts in
excess of $3,000,000 in the aggregate. The foregoing sentence does not apply to
prorations pursuant to Section 8.03 of this Agreement or the litigation listed
on Schedule 6.02(b).
(c) Stephen R. Karp guarantees to Buyer that the Seller will have
available, in cash or by Letter of Credit or by OP Units (valued at the values
established in Section 2.04(b)(ii), $3,000,000.00 during the Survival Period.
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SECTION 6.03. In the case of any claim asserted by a third party
against an Indemnitee, including without limitation, claims by a Governmental
Authority and any request by an such Governmental Authority to audit or
otherwise inquire or examine into (an "Inquiry") any matters as to which a claim
might arise hereunder, notice shall be given by the Indemnitee to a
representative appointed by the Indemnitors (the "Indemnitors' Representative")
for the purpose of representing their collective interests in the event of a
claim against the Indemnitees promptly after such Indemnitee has actual
knowledge of any claim as to which indemnity may be sought or as to any such
Inquiry, and the Indemnitee shall permit the Indemnitors' Representative (acting
on behalf of, and at the expense of the Indemnitors) to assume the defense of
any claim or any litigation resulting therefrom or administer such Inquiry,
provided that (i) counsel to the Indemnitors, who shall conduct the defense of
such claim or litigation or the administration of such Inquiry, shall be
reasonably satisfactory to the Indemnitee, and the Indemnitee may participate in
such defense at such Indemnitee's expense, and (ii) the omission by any
Indemnitee to give notice as provided herein shall not relieve the Indemnitors
of their indemnification obligation under this Agreement except to the extent
that such omission results in a failure of actual notice to the Indemnitors and
the Indemnitors are materially damaged as a result of such failure to give
notice. The Indemnitors' Representative, in the defense of any such claim or
litigation, shall not, except with the consent of the Indemnitee (x) consent to
entry of any judgment or enter into any settlement that provides for injunctive
or other nonmonetary relief affecting the Indemnitee or that does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnitee of a release from all liability with respect to such claim or
litigation or (y) pursue any course of defense of any claim subject to
indemnification hereunder, if the Indemnitee shall reasonably and in good faith
determine that the conduct of such defense might be expected to affect adversely
the Indemnitee's tax liability or ability to conduct its business. In the event
that the Indemnitee shall reasonably and in good faith determine that any
proposed settlement of any claim subject to indemnification hereunder by the
Indemnitors' Representative might be expected to affect adversely the
Indemnitee's tax liability or ability to conduct its business or that the
Indemnitee may have available to it one or more defenses or counterclaims that
are inconsistent with one or more of those that may be available to the
Indemnitors in respect of such claims or litigation relating thereto, the
Indemnitee shall have the right at all times to take over and assume control
over the settlement, negotiations and litigation relating to any such claim at
the sole cost of the Indemnitors, provided that if the Indemnitee does so take
over and assume control, the Indemnitee shall not settle such claim or
litigation without the written consent of the Indemnitors' Representative, such
consent not be unreasonably withheld, and the liability of the Indemnitors with
respect to such claim or litigation shall in no event exceed the amount the
Indemnitors would have paid in settlement thereof and provided, further, that
the provisions of clause (x) shall control with respect to the defense of any
claim arising out of any tax audit or assessment. In the event that the
Indemnitors' Representative does not accept the defense of any matter as above
provided, the Indemnitee shall have the full right to defend against any such
claim or demand, and shall be entitled to settle or agree to pay in full such
claim or demand, in its sole discretion. In any event, the Indemnitors and the
Indemnitees shall cooperate in the defense of any action or claim subject to
this Agreement and the records of each shall be available to the other with
respect to such defense. Acceptance of the defense of any claim or litigation or
of the administration of any Inquiry by the Indemnitors' Representative shall be
without prejudice to the Indemnitors' right to
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assert at any time before or after accepting such defense or administration that
they are not obligated to provide indemnity, either in whole or in part, with
respect to such claim or litigation for which such defense is accepted or which
might subsequently arise from such Inquiry.
ARTICLE VII
HSR Act Filings
---------------
SECTION 7.00. Filings. Within thirty (30) days after the date hereof,
the Buyer and the Seller shall make such filings, if any, as may be required by
the HSR Act with respect to the consummation of the transactions contemplated by
this Agreement, and shall thereafter file or cause to be filed as promptly as
practicable with the United States Federal Trade Commission and the United
States Department of Justice any supplemental information which may be requested
pursuant to the HSR Act and/or to secure the expiration or early termination of
applicable waiting periods under the HSR Act. Seller and Buyer will make such
filings and use all reasonable efforts to obtain the requisite approvals from
all applicable Governmental Authorities. All filings referred to in this Section
7.00 will comply in all material respects with the requirements of the
respective laws pursuant to which they are made.
SECTION 7.01. Compliance. Without limiting the generality or effect of
Section 7.00, if such an HSR filing is required, each of the parties will (a)
use their respective reasonable efforts to comply as expeditiously as possible
with all lawful requests of Governmental Authorities for additional information
and documents pursuant to the HSR Act, and (b) not extend any waiting period
under the HSR Act or enter into any agreement with any Governmental Authority
not to consummate the transactions contemplated by this Agreement, except with
the prior consent of the other party (or parties) hereto, and (c) cooperate with
each other and use reasonable efforts to cause the lifting or removal of any
temporary restraining order, preliminary injunction or other judicial or
administrative order which may be entered into in connection with the
transactions contemplated by this Agreement, including without limitation the
execution, delivery and performance by the appropriate entity of such
divestiture agreements or other actions, as the case may be, as may be necessary
to secure the expiration or termination of the applicable waiting periods under
the HSR Act or the removal, dissolution, stay or dismissal of any temporary
restraining order, preliminary injunction or other judicial or administrative
order which prevents the consummation of the transactions contemplated hereby or
requires as a condition thereto that all or any part of the Management Business
be held separately and, prior to or after the Closing, pursue the underlying
litigation or administrative proceeding diligently and in good faith.
SECTION 7.02. Filing Costs. Each of Seller and Buyer shall pay
one-half of the total filing costs incurred by Seller and Buyer.
ARTICLE VIII
The Closing
-----------
SECTION 8.00. Conditions to the Buyer's Obligations. The obligations of
the Buyer under this Agreement to consummate the transactions contemplated
hereby for the Initial Closing
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will be subject to the satisfaction, at or prior to the Initial Closing, of all
of the following conditions, any one or more of which may be waived at the
option of the Buyer:
(a) No Material Misrepresentation or Breach. Subject to Section 9.00(e)
hereof, there shall be no breach or default by Seller of any of its (i)
representations or warranties of the Seller under this Agreement (as of the
Initial Closing Date as if made anew on the Initial Closing Date or, if made as
of a specified date as of such date) or (ii) covenants under this Agreement
which breach or default individually or with other such breaches or defaults
would materially adversely affect, individually or with other such breaches or
defaults, collectively taken as a whole, the businesses and assets contemplated
by this Agreement to be acquired by the Buyer or its designee and such
representations and warranties shall be true and correct as of the Initial
Closing Date as if made anew on the Initial Closing Date (except for
representations or warranties made as of a specified date, which shall be true
and correct as of the specified date) unless the failure of such representation
or warranty to be true and correct, individually or in the aggregate with other
such failures would not materially and adversely affect, collectively taken as a
whole, such businesses and assets, and Seller shall have delivered to the Buyer
a certificate certifying each of the foregoing, dated the Initial Closing Date
and signed by an executive officer of the general partner of each Seller to the
foregoing effect.
(b) No Prohibition or Violation. No law or court, regulatory or other
governmental order shall be in effect that prohibits the Buyer and/or the Seller
from consummating the transactions contemplated by this Agreement or any
material portion thereof. Neither the execution and delivery of the documents
relating to the Transaction nor fulfillment of nor compliance with the terms and
provisions thereof, nor the issuance of the OP Units to be issued to
Contributing Property Owners pursuant to this Agreement and the Contribution
Agreements nor the issuance of Company Common Stock to be issued to Property
Owners and/or Seller pursuant to this Agreement and the other Acquisition
Agreements will violate any provision of any law in effect at the Closing Date
having applicability to the OP or the Company or any of their properties, except
such violations as do not have and could not reasonably be expected to have a
Buyer Material Adverse Effect.
(c) HSR Waiting Period. If an HSR filing is required under the HSR Act,
the waiting period applicable to the transactions contemplated by this Agreement
under the HSR Act and the regulations promulgated thereunder shall have expired
or been terminated.
(d) Closings under other Acquisition Agreements. The conditions
precedent to closing under Acquisition Agreements for at least all of the Phase
I Shopping Centers shall have been satisfied or waived, and each of the Property
Owners thereunder shall have delivered such executed instruments of conveyance,
assignments, bills of sale, deeds, consents and/or waivers (if any),
certificates of title and all other documents as required under the applicable
Acquisition Agreement in order that closings under the Acquisition Agreements
for all of the Phase I Shopping Centers are occurring simultaneously with the
Initial Closing hereunder.
(e) Third Party Consents. The Third Party Consents relating to the
Assets shall have been obtained in form reasonably acceptable to Buyer.
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(f) Closing Documents. Seller shall have delivered or caused to be
delivered to the Buyer all documents required to be delivered or cause to be
delivered by the Seller pursuant to Section 8.02.
(g) Ownership of Interests. NED and WellsPark Management and/or
entities wholly owned by NED or one or more of the Joinder Parties shall own
100% of the Limited Partnership Interests and the General Partnership Interests,
respectively, as of the Initial Closing Date, free and clear of all rights,
liens, claims and encumbrances other than pursuant to this Agreement and subject
to restriction on transfer under federal and state securities laws.
(h) New One Wells Avenue Lease. Provided Buyer shall have notified
Seller within sixty (60) days of the Effective Date that Buyer or an Affiliate
of Buyer desires to lease space for office purposes within the premises known as
and numbered One Wells Avenue, Newton, Massachusetts for a term of at least one
(1) year, terminable on six (6) months prior written notice and otherwise on the
terms described on Exhibit G attached hereto and made a part hereof (which Buyer
shall be entitled to do or not do in Buyer's sole discretion), Buyer and the
owner of One Wells Avenue, Newton, Massachusetts, which is an Affiliate of
Seller, shall, concurrently with the Initial Closing, have entered into a lease
for such premises at One Wells Avenue (the "New One Wells Avenue Lease") on a
form to be negotiated in good faith. The New One Wells Avenue Lease shall
provide for a sharing of the use and the cost of certain computer servers,
telephone systems and the like. Buyer's failure to notify Seller of its desire
to enter into the New One Wells Avenue Lease within said sixty (60) day period
shall constitute Buyer's election not to enter into the New One Wells Avenue
Lease.
(i) Intentionally Omitted.
SECTION 8.01. Conditions to the Seller's Obligations. The obligations
of the Seller under this Agreement to consummate the transactions contemplated
hereby for the Initial Closing will be subject to the satisfaction, at or prior
to the Initial Closing, of all of the following conditions, any one or more of
which may be waived at the option of the Seller:
(a) No Material Misrepresentation or Breach. There shall have been no
breach or default by the Buyer in the performance of any of the covenants herein
to be performed by it in whole or in part at or prior to the Initial Closing
which breach or default individually or which such other breaches or defaults
would constitute a Buyer Material Adverse Effect, and the representations and
warranties of the Buyer contained in this Agreement shall be true and correct in
all material respects on the date hereof and as of the Initial Closing Date as
if made anew on the Initial Closing Date, except for representations or
warranties made as of a specified date unless the failure of such representation
or warranty to be true and correct individually or in the aggregate with such
other failures would constitute a Buyer Material Adverse Effect, which shall be
true and correct in all material respects as of the specified date, and the
Buyer shall have delivered to the Seller a certificate certifying each of the
foregoing, dated the Initial Closing Date and signed by one of the executive
officers of the Company and the general partner of the OP to the foregoing
effect.
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(b) No Prohibition. No law or court, regulatory or other governmental
order shall be in effect that prohibits the Seller and/or the Buyer from
consummating the transactions contemplated by this Agreement or any material
portion thereof.
(c) HSR Waiting Period. If an HSR filing is required under the HSR Act,
the waiting period applicable to the transactions contemplated by this Agreement
under the HSR Act and the regulations promulgated thereunder shall have expired
or been terminated.
(d) Closings under other Acquisition Agreements. The conditions
precedent to closing under the respective Acquisition Agreements for at least
all of the Phase I Shopping Centers shall have been satisfied (or the same shall
have been waived) and the Property Owners thereunder shall have delivered such
executed instruments of conveyance, assignments, bills of sale, deeds, consents
and/or waivers (if any), certificates of title and all other documents as
required under the applicable Acquisition Agreement in order that closings under
the Acquisition Agreements for all of the Phase I Shopping Centers are occurring
simultaneously with the Initial Closing hereunder.
(e) Third Party Consents. The Third Party Consents relating to the
Assets shall have been obtained in form reasonably acceptable to Seller and
Buyer.
(f) Closing Documents. Buyer shall have delivered to the Seller all
documents required to be delivered by the Buyer pursuant to Section 8.02.
(g) Consideration. The Buyer shall have delivered the Consideration in
accordance with Section 2.04.
(h) Ownership of Interests. NED and/or WellsPark Management and/or
entities wholly owned by NED or one or more of the Joinder Parties shall own
100% of the Limited Partnership Interests of O'Connor, free and clear of all
rights, liens, claims and encumbrances other than pursuant to this Agreement and
subject to restrictions on transfer under federal and state securities laws.
(i) REIT Qualification. At the time of the Closing, Buyer shall be
qualified for taxation as a REIT.
(i) One Wells Avenue Lease. The New One Wells Avenue Lease, if any,
shall, concurrently with the Initial Closing, have been fully executed and
delivered.
SECTION 8.02. Closing Deliveries. (a) At the Initial Closing and at
each Subsequent Closing, Seller and the Buyer shall execute and deliver or cause
to be executed and delivered the following:
(i) at each Subsequent Closing, an Assignment of the Pending
Management Agreement required to be transferred at such Subsequent
Closing in substantially the
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form of Exhibit N hereto pursuant to which NED Management Limited
Partnership shall assign such Pending Management Agreement to Buyer,
free and clear of all rights, liens, claims and encumbrances other than
pursuant to this Agreement;
(ii) such instruments as are required to be delivered at the
Closing under each of the Acquisition Agreements which are closing on
the applicable Closing Date;
(iii) such certificates of each of the parties signed by its
respective authorized officers to evidence compliance with the
conditions set forth in Article VIII as may be reasonably requested by
the other parties;
(iv) agreements and such other instruments as are required by
lenders in connection with the assumption of the Assumed Loans;
(v) At each Subsequent Closing, an assignment, transfer and
conveyance of the Withdrawn Assets relating to the Phase II Shopping
Center(s) being transferred to Buyer at such Subsequent Closing, in
form reasonably satisfactory to Buyer and Seller, and consist with the
other assignment forms attached to this Agreement, pursuant to which
NED Management Limited Partnership shall assign such Withdrawn Assets
to Buyer, free and clear of all rights, liens, claims and encumbrances
other than as permitted pursuant to the terms of this Agreement; and
(vi) the Net Consideration payable at the applicable Closing
in accordance with Section 2.04.
(b) In addition, at the Initial Closing, Seller and Buyer shall execute
and deliver or cause to be executed and delivered:
(i) an assignment of the Interests in substantially the form
of Exhibit H hereto pursuant to which Seller shall convey the Interests
to Buyer, free and clear of all rights, liens, claims and encumbrances
other than pursuant to this Agreement and subject to restrictions on
transfer under federal or state securities laws;
(ii) a Non Competition Agreements in the form of Exhibit J-1
attached hereto and made a part hereof executed by Stephen R. Karp and
in the form of Exhibit J-2 attached hereto and made a part hereof
executed by Steven S. Fischman;
(iii) a Registration Rights Agreement referred to in Exhibit F
attached hereto, executed by the Company [and the Operating
Partnership];
(iv) If Buyer, in its sole discretion, elected to enter into
the New One Wells Avenue Lease, the New One Wells Avenue Lease,
executed by Buyer and the owner of One Wells Avenue;
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(v) an opinion of counsel of Seller regarding the due
organization of Seller and the due execution and delivery of this
Agreement by Seller, in form and substance reasonably acceptable to
Buyer;
(vi) an opinion of counsel of Buyer regarding the due
organization of Buyer and the due execution and delivery of this
Agreement by Buyer, in form and substance reasonably acceptable to
Seller;
(vii) the Consideration payable at the Initial Closing in
accordance with Section 2.04;
(viii) The WellsPark Group Partnership Agreement and
Certificate of Limited Partnership relating thereto), certified as
true, correct and complete by Seller;
(ix) Originals of the Management Agreements and all other
tangible Assets;
(x) Intentionally Omitted;
(xi) a Tax Protection Agreement substantially in the form
attached as Exhibit K to this Agreement, which shall benefit each party
receiving OP Units;
(xii) Such other documents, instruments, certifications and
confirmations as may be reasonably required and designated by either
party to fully effect and consummate the transactions contemplated
hereby, including, without limitation, transfer tax forms, if required;
(xiii) Such documents, instruments, certifications and
confirmations as may be required by Legal Requirements to be filed,
recorded or entered into in connection with the transactions
contemplated by this Agreement, including, without limitation, tax
forms, certificates of amendment to the WellsPark Group Partnership
Agreement and any documents evidencing the transfer of the Interests;
and
(xiv) A Closing statement setting forth the prorations and
adjustments pursuant to this Agreement.
SECTION 8.03. Prorations with Respect to Seller.
(a) In connection with the Initial Closing and thereafter in connection
with each Subsequent Closing, all items of income and expense properly
attributable to the Assets corresponding to the Interests then being sold and
the Assumed Liabilities relating thereto shall be apportioned between Seller and
the Buyer as of 11:59 p.m. on the day immediately preceding the applicable
Closing Date, pursuant to a closing statement prepared by Seller and agreed to
by Buyer. All such items attributable to periods prior to such Closing Date
shall be apportioned to Seller and all such items attributable to periods from
and after such Closing Date shall be apportioned to the Buyer.
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(b) All prorations under this Agreement shall be made on the basis of
the accrual method of accounting and shall be settled in cash. Seller and the
Buyer shall diligently work to determine and agree upon any such prorations not
determined or not agreed upon as of the Closing, and the net amount of such
prorations shall be paid to Seller or the Buyer, as the case may be, within
thirty (30) days after such agreement. Any errors or omissions in computing
prorations under this Agreement shall be corrected promptly after their
discovery. The provisions of this Section 8.03 shall survive the applicable
Closing for a period of twelve (12) months. There shall be no proration with
respect to the Excluded Assets or the Retained Liabilities, it being the intent
that Seller shall retain all rights and liabilities associated therewith.
SECTION 8.04. Collections.
(a) All amounts collected by Seller in respect of any Asset subsequent
to the Closing which were apportioned to the Buyer pursuant to Section 8.03
shall be paid by Seller to the Buyer promptly after receipt by Seller. Seller
shall give prompt written notice to the Buyer of such collections, which notice
shall set forth in reasonable detail all relevant information used by Seller in
making its determination as to the allocation described in this paragraph.
(b) All amounts collected by the Buyer in respect of any Asset
subsequent to the Closing which were apportioned to Seller pursuant to Section
8.04 shall be paid by the Buyer to Seller within thirty (30) days after receipt
by the Buyer. Buyer shall give prompt written notice to Seller of such
collections, which notice shall set forth in reasonable detail all relevant
information used by the Buyer in making its determination as to the allocation
described in this paragraph.
(c) It is agreed that, unless a payment is clearly identified as being
made on account of a specific delinquent invoice, Buyer shall not be deemed to
have collected any arrearages due to Seller until such time as the payee is
current in the payment of all amounts accruing from and after the Closing Date.
Buyer agrees for a period of twelve (12) months following the applicable Closing
to bill payees for unbilled charges for periods prior to the Initial Closing and
to take any additional reasonable actions requested by Seller to collect such
charges and all delinquent invoices provided that Buyer shall not be obligated
to incur any out-of-pocket third party expenses in connection with such actions
and Buyer shall not be required to terminate any agreement or commence
litigation. Seller reserves the right to bring suit against any payee to collect
for delinquent amounts owed to Seller, but shall not bring an involuntary
bankruptcy action against such payee.
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ARTICLE IX
Default
-------
SECTION 9.00.
(a) In the event this Agreement is terminated pursuant to the
provisions of Section 2.03(c), Seller shall pay, or cause to be paid, in same
day U.S. funds, to Buyer, on demand therefor by Buyer, a fee in the amount of
Two Million Dollars ($2,000,000.00) and shall also reimburse Buyer for all of
its third party out-of-pocket costs incurred in connection with the Transaction
including, without limitation, reasonable attorneys fees, promptly upon
submission therefor by Buyer of the certificate executed by Buyer's chief
financial officer certifying in reasonable detail the costs as to which Buyer
seeks reimbursement and including with such certificate copies of invoices,
statements and other similar back-up. In the event this Agreement is terminated
pursuant to the provisions of Section 2.03(c) due to Seller's inability to
obtain a Lender's consent, Seller shall only be obligated to reimburse Buyer for
all its third party out-of-pocket costs incurred in connection with Transaction
and shall not be obligated to pay the aforementioned fee. This provision shall
survive the termination of this Agreement.
(b) In the event of a breach or default by Seller of any its
representations, warranties, covenants or obligations hereunder prior to Closing
which breach or default would reasonably be expected to have a Seller Material
Adverse Effect on the transactions contemplated herein, or if a condition to
Buyer's obligation to close as set forth in Section 8.00 has not been satisfied
(other than by reason of a material default or breach by Buyer or a material
failure of Buyer to perform its covenants under this Agreement), Buyer shall
have the right to exercise any one, but not both of the following remedies and,
except as provided in Section 9.00(c), this shall be Buyer's sole remedy against
Seller for the failure of Seller to satisfy such condition or to fulfill its
obligations:
(i) Buyer shall have the right to terminate this Agreement by
notice to Seller, provided all of the Acquisition Agreements are
simultaneously terminated by Buyer, in which event all obligations of
the parties under this Agreement shall terminate; or
(ii) Buyer shall have the right to waive the breach, or
default or other closing condition and proceed to consummate the
transaction contemplated hereby to be completed at the Initial Closing
or any Subsequent Closing without any adjustment of the consideration
in accordance with the provisions of this Agreement and without the
right to seek indemnity with respect to any such breach, default or
failure to satisfy any such closing condition.
(c) In the event that Seller or a Joinder Party acts in bad faith (i.e.
willfully or intentionally (i) breaches or defaults under the representations
and warranties of Article IV or elsewhere in this Agreement or (ii) in addition
to the provisions of Section 9.00(f) herein, breaches a covenant set forth
herein or (iii) fails to use commercially reasonable efforts to cure a breach or
default by Seller or a Joinder Party of any of Sellers or such Joinder Party,
its
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representations, warranties, covenants or obligations hereunder), then and only
in such event, Buyer may seek specific performance of Seller's obligations
hereunder provided Buyer shall have performed all of its material obligations
under the Acquisition Agreements.
If, however, Seller shall have breached a warranty or
representation but Buyer shall not have had the right to exercise the remedy set
forth in 9.00(b)(i) above, Buyer shall proceed with the Closing but Buyer shall
not be considered to have waived such breach and shall be entitled to the
remedies set forth in Section 6.02 of this Agreement in accordance with the
terms, provisions and limitations in Article VI of this Agreement on account of
such breach.
(d) In the event of a breach or default by Buyer of any of its
representations, warranties, covenants or obligations hereunder prior to
Closing, which breach or default would reasonably be expected to have a Buyer
Material Adverse Effect or if a condition to Seller's obligation to close has
not been satisfied, Seller shall have the right to terminate this Agreement by
notice to Buyer or to waive the breach, or default or other closing condition
and proceed to consummate the transaction contemplated hereby.
(e) If Buyer shall, in breach of this Agreement, fail to close the
Phase I transactions contemplated hereby or by each Acquisition Agreement for a
Phase I Shopping Center on the Initial Closing Date, Buyer shall pay to Seller
an amount (the "Liquidated Damages Amount") equal to Twenty-Five Million Dollars
($25,000,000). Buyer and Seller agree that actual damages accruing from such
breach of this Agreement and/or any Acquisition Agreement are incapable of
precise estimation and would be difficult to prove, that the payments stipulated
in this Section 9.00(e) bear a reasonable relationship to the potential injury
likely to be sustained in the event of such a breach and that the payments
stipulated in this Section 9.00(e) are intended by the parties to provide just
compensation in the event of such a breach and are not intended to compel
performance or to constitute a penalty for non-performance. If Buyer fails
promptly to pay to Seller any amounts due under this Section 9.00(e), then Buyer
shall be obligated to pay the costs and expenses (including reasonable legal
fees and expenses) in connection with any action, including the filing of any
lawsuit or other legal action, taken to collect such payment, together with
interest on the amount of any unpaid fee from the date such amount was required
to be paid at an annual interest rate equal to four percent (4%) per annum over
the Prime Rate as published from time to time in the Wall Street Journal.
Seller's rights pursuant to this Section 9.00(e) shall be Seller's sole and
exclusive remedy for any such breach or failure by Buyer hereunder with respect
to the Phase I Shopping Centers and the Interests to be conveyed at the Initial
Closing except as otherwise set forth herein as to surviving indemnification
obligations and other than as set forth in Section 9.00(d). The parties hereby
acknowledge that the agreements contained in this Section 9.00(e) are an
integral part of the transactions contemplated by this Agreement.
Notwithstanding the foregoing, Buyer's payment and indemnity obligations with
respect to Schedule 2.00(d) shall not be limited in any way by the provisions of
this Section 9.00(e).
If Buyer shall, in breach of this Agreement or any other
Acquisition Agreement, fail to close any Phase II transactions contemplated
hereby or by any other Acquisition Agreement relating to a Phase II Shopping
Center on the Closing Date therefor specified
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pursuant to the terms hereof or thereof, Seller shall be entitled to avail
itself of any and all remedies available at law and in equity including, without
limitation, specific performance.
(f) Notwithstanding the provisions of Section 9.00(b) above, if between
the Effective Date and the applicable Closing date hereunder either Joinder
Party shall intentionally and in bad faith commit any of the acts specified
below (the "Specified Acts") in breach of the covenants set forth in Article V
hereof or elsewhere in this Agreement or any Acquisition Agreement, which breach
has (i) a material adverse effect on the Assets, taken as a whole, or (ii) a
material adverse affect on the applicable Shopping Center, then Buyer shall have
the right to notify the Joinder Parties of such breach in writing on or before
the Initial Closing Date (with respect to the Assets) and on or before the
applicable Closing Date for the respective Shopping Center. If the Joinder
Parties do not cure such default or breach within thirty (30) days following
such notice )or such additional period of time as is reasonably necessary to
cure the same), then Buyer shall nonetheless be obligated to close (unless Buyer
would have a right to terminate this Agreement pursuant to Section 9.00(b) but
Buyer shall be entitled to seek monetary damages from the Joinder Parties to the
extent of Buyer's actual damages directly arising from the commission of such
Specified Act(s) (provided arbitration proceedings are commenced, or litigation
is filed, within six (6) months following the date of Buyer's written notice of
the breach).
Capitalized terms used in this clause (f) and not defined in this
Agreement shall have the meanings ascribed to them in the form of Contribution
Agreement attached hereto. The term "Specified Acts" shall mean the intentional
and bad faith breach of the following covenants:
(i) The Joinder Parties shall not cause a Property Owner to
(A) enter into any lease covering in excess of 7,500 square feet of
gross leasable area at the Property (a "Major Lease") or any new
Department Store Document, (B) amend, modify, or cancel any Major
Lease, Anchor Lease or Department Store Document, (C) institute
litigation or eviction proceedings against any Anchor Tenant, or (D)
enter into any Lease providing the tenant thereunder with an exclusive
use clause unless the tenant thereunder is a "national" tenant and such
exclusive use clause is consistent with past business practices for
leases with such tenant in NED Portfolio Properties, or (E) enter into
any easement which burdens an NED Portfolio Property or (F) grant any
person an option to purchase any of the NED Portfolio Properties save
and except the Excluded Outparcels, in each case without the prior
written consent of Operating Partnership, which consent (other than
with respect to clause (F)) shall not be unreasonably withheld,
conditioned or delayed and shall be deemed to have been given if Buyer
fails to approve or disapprove any proposed Specified Act within seven
(7) days following Owner's written request for approval, which request
shall include copies of the proposed document, instrument or term sheet
as applicable.
(ii) The Joinder Parties shall not cause a Property Owner to
enter into any new Operating Contract or renew, extend or modify any of
the Operating Contracts except in the ordinary course of its business
and unless any such Operating Contract so renewed, extended or modified
grants to the Owner a right to terminate on sale or upon not more than
thirty (30) days notice with no material cost to exercise such right.
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(iii) Without the prior written consent of Buyer (which
consent shall not to be unreasonably withheld, conditioned or delayed
and which consent shall be deemed to have been given if Buyer fails to
approve or disapprove any such action within seven (7) days following
Owner's written request therefore), the Joinder Parties shall not cause
a Property Owner to prepay or refinance all or any portion of any
Assumed Loan unless(A) the terms and conditions of any such refinancing
shall be generally as favorable as such terms and conditions as are
generally available in the market at the time of refinancing for
similar loans and are not less favorable than the terms of the Assumed
Loan being refinanced, (B) the principal amount of the new loan shall
not exceed the outstanding principal balance under the Assumed Loan on
the date hereof. The term "Assumed Loan" as used herein shall include
any such modification or replacement loan.
(iv) With respect to Emerald Square Mall and The Mall @
Rockingham Park, the Joinder Parties shall not cause a Property Owner
to enter into any material amendment of the organizational documents
pursuant to which a Property Owner is operating (it being agreed that
any amendment to the "buy/sell" or "right of first refusal" provisions
contained therein would be material) without the prior written consent
of Operating Partnership, which consent shall not be unreasonably
withheld, conditioned or delayed provided such amendment is entered
into in order to implement or is consistent with implementing the
provisions of Schedule 2.00(d), Paragraph (i), and shall be deemed to
have been given if Buyer fails to approve or disapprove any proposed
amendment within seven (7) days following Owners' written request
(which request shall be accompanied by a copy of the proposed
amendment)
(v) To the extent that any Assets reflected in the Pro-Forma
Statement of Revenue are not currently owned by WellsPark Group, if the
Joinder Parties shall fail to cause such Assets to be conveyed to
WellsPark Group on or before the Initial Closing.
(vi) If the Joinder Parties shall cause Seller to, (A) incur
any additional debt or grant any additional liens on the Assets which
shall become Assumed Liabilities or which shall encumber any of the
Assets following the Closing, or (B) enter into any equipment lease
which would become an Asset or an Assumed Liability if such equipment
lease has an annual rental payment in excess of $15,000 without Buyer's
prior written consent, which consent, in the case of clause (B) shall
not be unreasonably withheld, delayed or conditioned and which shall be
deemed to have been given if Buyer fails to respond within seven (7)
days following Seller's written request (which request shall be
accompanied by a copy of the proposed equipment lease).
ARTICLE X
General Provisions
------------------
SECTION 10.00. Notices. Any notice or communication which may be or is
required to be given pursuant to the terms of this Agreement shall be in writing
and shall be sent to the
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respective party at the address set forth in the first paragraph of this
Agreement, postage prepaid, by Certified Mail, Return Receipt Requested, or by a
nationally recognized overnight courier service that provides tracing and proof
or receipt of items mailed, or to such other address as either party may
designate by notice similarly sent. Notices shall be effective upon receipt or
attempted delivery if delivery is refused or the party no longer receives
deliveries at said address and no new address has been given to the other party
pursuant to this paragraph. A copy of any notice to Seller shall also be
simultaneously sent to Goulston & Storrs, 400 Atlantic Avenue, Boston, MA
02110-3333, Attention: Thomas P. Bloch, Esq. A copy of any notice to Buyer shall
also be simultaneously sent to Willkie Farr & Gallagher, 787 Seventh Avenue, New
York, New York 10019-6099, Attention: Richard L. Posen, Esq.
SECTION 10.01. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Massachusetts.
SECTION 10.02. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns as permitted hereunder. Neither party shall have the
right to assign this Agreement, in whole or in part, whether by operation of law
or otherwise, without the prior written consent of the other party hereto. Any
purported assignment contrary to the terms hereof shall be null, void and of no
force and effect. Notwithstanding the foregoing, Buyer shall have the right to
designate any Affiliate as its nominee, provided that OP shall expressly assume
in writing and shall be and remain jointly and severally liable with such
nominee for all obligations of Buyer hereunder.
In addition, after the Final Closing hereunder (including any closing
under Section 2.00(d)(i) or 2.00(d)(ii)) Buyer may assign this Agreement and the
rights or benefits hereof including, without limitation, the benefit of the
representations and warranties of Seller contained herein, to any joint venture
in which Operating Partnership owns at least a 25% equity interest in such joint
venture and, provided that such joint venture (i) will have a minimum of
$200,000,000 of net worth, defined as set forth below (and will covenant to
maintain such net worth for the duration of its liability under the first
paragraph of Section 6.00 hereof) and (ii) will directly or indirectly own all
applicable NED Portfolio Properties (the "Buyer Joint Venture"), and such
assignment shall relieve Buyer of its obligations hereunder.
If the NED Portfolio Properties are contributed by Buyer to the Buyer
Joint Venture then:
(i) the form of Tax Protection Agreement attached as Exhibit K to
this Agreement shall be modified to limit to $150,000,000
Operating Partnership's liability under Section 3 thereof as a
result of Taxable Sales, as such term is defined in the Tax
Protection Agreement (without such limitation affecting
Operating Partnership's liability for any other payments
required to be made under said Section 3);
(ii) As a condition to the modification of Operating Partnership's
obligations pursuant to the immediately preceding
sub-paragraph:
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(a) the Buyer Joint Venture shall enter into an indemnity
agreement with the Contributors (as defined in the
Tax Protection Agreement) for any liability for
payments under Section 3 of the Tax Protection
Agreement as the result of the occurrence of a
Taxable Sale, with the Contributor's rights under
such indemnity subordinate to Buyer's right of
reimbursement from Buyer Joint Venture for any
payments made by Buyer under Section 3 of the Tax
Protection Agreement as a result of Taxable Sales;
and
(b) Buyer Joint Venture shall covenant with the
Contributors that at all times during the Tax
Protection Period (as defined in the Tax Protection
Agreement) it will maintain a net worth of not less
than $200,000,000. Net worth shall be defined the
same as the term Net Worth, or the appropriate
comparable definition, is defined from time to time
in Buyer's largest line of credit (the appropriate
defined term for net worth as of the Effective Date
in Buyer's largest line of credit being "Combined
Equity Value") provided, however, that for purposes
of determining Buyer Joint Venture's net worth, the
Buyer Joint Venture's EBITDA shall be capitalized at
an annual interest rate of 7.75%. Buyer Joint
Venture shall provide the Contributor Representative
(as defined in the Tax Protection Agreement) with an
annual certification of the net worth determined in
accordance with the applicable definition.
SECTION 10.03. No Third-Party Beneficiaries. There are no third party
beneficiaries of this Agreement or of the transactions contemplated hereby, and
the covenants and agreements set forth in this Agreement shall be solely for the
benefit of, and shall be enforceable only by, the parties hereto, and the Seller
Affiliates referred to in Section 2.00(d), or their respective successors and
assigns as permitted hereunder. Nothing contained herein shall be deemed to
confer upon any Person other than the parties hereto, the Affiliates and their
permitted successors and assigns any right to insist upon or to enforce the
performance of any of the covenants or agreements contained herein.
SECTION 10.04. Counterparts. This Agreement may be executed in multiple
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
SECTION 10.05. Severability. If one or more of the provisions of this
Agreement shall for any reason whatsoever be held invalid or unenforceable, such
provisions shall be deemed severable from the remaining covenants, agreements
and provisions of this Agreement, and such invalidity or unenforceability shall
in no way affect the validity or enforceability of such remaining provisions or
the rights of any parties hereto. To the extent permitted by law, the parties
hereto hereby waive any provision of law that renders any provision of this
Agreement invalid or unenforceable in any respect.
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SECTION 10.06. Entire Agreement. Except as set forth in Section 10.09
hereof, this Agreement (together with the other Acquisition Agreements,
certificates, agreements, Exhibits, Schedules, instruments and other documents
referred to herein) constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, with respect to such subject matter. In
the event of a discrepancy or conflict between this Agreement and the other
Acquisition Agreements, this Agreement shall govern. The Exhibits and Schedules
to this Agreement are incorporated by reference herein and are made a part
hereof as if they were fully set forth herein.
SECTION 10.07. No Waiver. Any provision of this Agreement may be waived
at any time by the party entitled to the benefits thereof, and this Agreement
may be amended or supplemented at any time. No such waiver, amendment or
supplement shall be effective unless in writing and signed by the parties hereto
or, in the case of a waiver, by the party granting the waiver.
SECTION 10.08. Further Assurances. Each of the parties agrees that it
will from time to time after the date of this Agreement (whether prior to or
following the Closing) at its expense execute and deliver such other
certificates, documents and instruments and take such other action as may be
reasonably requested by the other parties to carry out the actions and
transactions contemplated by this Agreement.
SECTION 10.09. Confidentiality. Reference is made to that certain
letter agreement dated April 24, 1998, regarding the confidentiality agreements
of the parties for and with respect to the Transaction (the "Confidentiality
Agreement"), a copy of which is attached hereto as Exhibit L. It is understood
and agreed that the terms and provisions of the Confidentiality Agreement are
and shall remain in full force and effect and that the Confidentiality Agreement
is hereby incorporated herein by reference as though fully set forth herein and
that the provisions of the Confidentiality Agreement shall survive the Closing
or termination of this Agreement with respect to any Shopping Center or Asset
not acquired pursuant hereto.
SECTION 10.10. Competitive Activities. Except as specifically set forth
in the Non-Competition Agreements attached hereto as Exhibits J-1 and J-2 and
made a part hereof (the "Non-Competition Agreements"), nothing herein shall be
construed as restricting or limiting in any way the Seller, its principals or
Affiliates or any partner, member or shareholder of any of them, from engaging
in activities that may be deemed to be competitive with the Management Business,
the NED Portfolio Properties, or any other business activities currently
conducted or to be conducted by the Buyer or any of its Affiliates on or after
the date hereof.
SECTION 10.11. Press Release. To the extent required by applicable
securities laws, rules and regulations, Buyer may be required to issue a press
release following the execution and delivery of this Agreement and of any
Closing under an Acquisition Agreement. Buyer agrees that the press release
shall style the transaction as a merger of the management businesses of Seller
and Buyer and an acquisition of the Shopping Centers and further agrees to
coordinate the timing of any such press release with Seller; and Seller shall
have the right to review the form and content thereof.
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SECTION 10.12. Broker. Each party represents hereby to the other that
it dealt with no broker in the consummation of this Agreement except for Merrill
Lynch Pierce Fenner and Smith, Inc. and its affiliates (the "Broker") and each
party shall indemnify and save the other harmless from and against any claim
arising from breach of such representation by the indemnifying party. Any
commission due Broker shall be paid by Seller, and Seller shall obtain and
provide to Buyer a receipt therefor dated the Initial Closing Date. The
provisions of this Section 10.12 shall survive the Closing hereunder.
SECTION 10.13. Trading. The Joinder Parties for themselves and for any
Persons controlled by either of them, and Seller each hereby agree not to trade
in Company Stock of Buyer from the date of execution of this Agreement until
there has been a public announcement contemplating this transaction and each
Joinder Party hereby agrees that if he contacts any Property Owner or Affiliate
and discloses this transaction prior to such public disclosure such Joinder
Party shall inform such Property Owner or Affiliate that transactions in Company
Stock prior to such public disclosure will subject the Property Owner or
Affiliate to liability and/or the securities laws for insider trading.
ARTICLE XI
Additional Properties; Withdrawn Shopping Centers
-------------------------------------------------
SECTION 11.00. Additional Properties. Seller and Buyer shall use all
commercially reasonable efforts to cause the owners of Pheasant Lane Mall of
Nashua, New Hampshire (the "Pheasant Lane Mall") and the owners of CambridgeSide
Galleria of Cambridge, Massachusetts (the "CambridgeSide Mall" and together with
the Pheasant Lane Mall, the "Additional Properties") to execute and deliver on
or before December 1, 1999 agreements pursuant to which such owners agree to
sell or contribute such Additional Properties, or their interest in such
Additional Properties, to OP for such consideration and on terms and conditions
as shall be mutually agreed to by the applicable owners in each case and the
Buyer. Buyer recognizes that such agreements will need to address issues of tax
exposures and of compensation for various cash flow preferences in establishing
consideration which will be acceptable to certain of such owners.
Notwithstanding the foregoing, in no event shall such Additional Properties be
considered NED Portfolio Properties and the failure to obtain an executed
Contribution Agreement or other agreement, as the case may be, with respect
thereto, or a default thereunder by the applicable Property Owner, shall not
constitute a breach, default or nonperformance of this Agreement by the Seller
or by Buyer.
SECTION 11.01. Pending Shopping Centers. Provided this Agreement shall
not have been terminated pursuant to Section 2.03(c) above, Seller agrees to
continue to use all commercially reasonable efforts between the Cut-Off Date and
the Outside Final Closing Date to cause the Property Owners of Pending Shopping
Centers (or the holders of interests in such Property Owners, as the case may
be) which have not executed a Contribution Agreement to execute and deliver a
Contribution Agreement 30 days prior to the Outside Final Closing Date and Buyer
agrees to cause OP to execute and deliver each such Contribution Agreement
within
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ten (10) days of receipt thereof as so executed and delivered and to perform its
obligation thereunder and to acquire each of the Pending Shopping Centers or
such interests in such Property Owners, as the case may be, for the Adjustment
Amount relating thereto (with the amount set forth in the Acquisition Agreement
being paid to the Property Owner and the balance being paid as additional
consideration for the sale and assignment of the Interests) and, concurrently
with such acquisition, to acquire the Pending Management Agreement relating
thereto and any related Assets. Notwithstanding the foregoing, the failure to
obtain any such executed Contribution Agreement, as the case may be, shall not
constitute a breach, default or nonperformance of this Agreement by the Seller.
[Signature page on next page.]
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<PAGE>
[SIGNATURE PAGE TO MANAGEMENT AND PORTFOLIO AGREEMENT]
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed and delivered on its behalf as of the date first
above written.
BUYER:
SIMON PROPERTY GROUP, INC.,
a Delaware corporation
By:
-------------------------------
Its:
-------------------------
SIMON PROPERTY GROUP, L.P.,
a Delaware limited partnership,
By: SIMON PROPERTY GROUP, INC., a
Delaware corporation,
its general partner,
By:
--------------------------
Name:
Title:
SELLER:
NED MANAGEMENT LIMITED PARTNERSHIP,
a Massachusetts limited partnership
By: NED Management Co., Inc.,
its general partner
By:
--------------------------
Name:
----------------
Title:
----------------
[SIGNATURES CONTINUED ON NEXT PAGE]
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<PAGE>
[SIGNATURE PAGE TO MANAGEMENT AND PORTFOLIO AGREEMENT]
WELLSPARK MANAGEMENT LLC, a Delaware
limited liability company its
general partner
By: NED Management Limited Partnership,
its manager
By: NED Management Co., Inc.,
its general partner
By:
--------------------------
Name:
----------------
Title:
----------------
[SEE JOINDER ON NEXT PAGE.]
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JOINDER
The undersigned Stephen R. Karp and Steven S. Fischman are principals
of Seller and will benefit from the consummation of the Transactions.
Accordingly, in order to induce Buyer to enter into this Agreement, (a) Stephen
R. Karp hereby joins in the execution of this Agreement solely and exclusively
for the purpose of agreeing to be bound by the provisions of Section 2.00(g),
Section 2.00(i), Section 2.04(e), Section 5.05, Section 5.09(a), Section
6.02(c), Section 9.00(f), Section 10.10 and Section 10.13 hereof and (b) Steven
S. Fischman hereby joins in the execution of this Agreement solely and
exclusively for the purpose of agreeing to be bound by the provisions of Section
2.00(g), Section 2.00(i), Section 2.04(e), Section 5.05, Section 5.09(a),
Section 9.00(f), Section 10.10 and Section 10.13.
-------------------------------------
Stephen R. Karp
-------------------------------------
Steven S. Fischman
Dated: February ____, 1999
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EXHIBIT A
---------
Phase I Shopping Centers/Phase I Property Owners
------------------------------------------------
A-1
<PAGE>
EXHIBIT B
---------
Phase II Shopping Centers/Phase II Property Owners
--------------------------------------------------
B-1
<PAGE>
EXHIBIT C
---------
Form of Contribution Agreement
------------------------------
C-1
<PAGE>
EXHIBIT D
---------
Intentionally Deleted
---------------------
D-1
<PAGE>
EXHIBIT E
---------
Intentionally Deleted
---------------------
E-1
<PAGE>
EXHIBIT F
---------
Form of Partnership Agreement Amendment
---------------------------------------
F-1
<PAGE>
EXHIBIT G
---------
One Wells Lease Term Sheet
--------------------------
G-1
<PAGE>
EXHIBIT H
---------
Form of Assignment of Interests
-------------------------------
H-1
<PAGE>
EXHIBIT I
---------
[Intentionally Deleted]
-----------------------
-1-
<PAGE>
EXHIBIT J-1
-----------
J-2-1-
<PAGE>
EXHIBIT J-1
-----------
Non-Competition Agreement
-------------------------
THIS NON-COMPETITION AGREEMENT ("Agreement") is made and entered into
this ____ day of ______________, 1999, by and between STEPHEN R. KARP ("Karp"),
SIMON PROPERTY GROUP, INC., a Delaware corporation (the "Company") and SIMON
PROPERTY GROUP, L.P., a Delaware limited partnership (the "Operating
Partnership").
W I T N E S S E T H :
WHEREAS, Karp and his Affiliates, along with certain other
parties, have sold or contributed certain real estate or other assets, or
interests in partnerships or other entities owning such assets, to the Operating
Partnership in which the Company is the sole general partner, all pursuant to
that certain Management and Portfolio Agreement dated as of ___________, 1999
and certain related documents (collectively, the "Portfolio Agreements"); and
WHEREAS, Karp (a) will be a member of the Company's Board of
Directors, and (b) will own, directly or indirectly, common shares of the
Company and limited partnership interests in the Operating Partnership; and
WHEREAS, Karp desires to enter into this Agreement in order to
induce the Company to complete the various transactions contemplated by the
Portfolio Agreements, and the Company requires that Karp enter into this
Agreement as a condition to the Operating Partnership entering into the various
transactions contemplated by the Portfolio Agreements.
NOW, THEREFORE, in consideration of the promises and the
mutual covenants and undertakings set forth below and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the
following terms shall have the respective meanings set forth below:
"Affiliate" shall mean: (a) with respect to Karp, any Karp
Family Trust or any entity which, directly or indirectly through one or more
intermediaries, is controlled by Karp and/or one or more Karp Family Trusts; and
(b) with respect to the Company, any entity which, directly or indirectly
through one or more intermediaries, is controlled by, or under common control
with, the Company, or any person or other entity which, directly or indirectly
through one or more intermediaries, controls the Company.
"Excluded Projects" means those certain projects described on
Exhibit A hereto, and the interests of Karp and his Affiliates in such projects,
which projects and interests have not been sold or contributed to the Operating
Partnership.
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<PAGE>
"Karp Family Trust" shall mean any trust for the benefit of
Karp, Karp's spouse and/or Karp's minor children.
"Permitted Investments" shall mean an investment as a
stockholder in a publicly held corporation in which Karp and his Affiliates do
not own more than one percent (1%) of any class of stock.
"Restricted Area" shall mean the area described in Exhibit B
hereto.
"Restricted Period" shall mean the period commencing on the
date of this Agreement and ending on the first to occur of: (i) the fifth
anniversary of the date of the last closing under the Portfolio Agreements, and
(ii) December 31, 2004
"Regional Mall Business Activities" shall mean: the direct or
indirect ownership, development, management or leasing of, or investment or
financial interest in, any Regional Mall located within the Restricted Area.
"Regional Mall" shall mean a retail shopping center that (a)
is an enclosed shopping mall and (b) contains more than 400,000 square feet of
retail area.
2. Restrictive Covenant. Karp agrees, during the Restricted
Period, that Karp and his Affiliates, on his or its own account, or as a
consultant, agent, partner, joint venturer, owner, participant or officer of any
other person, firm, partnership, corporation or other entity, shall not,
directly or indirectly, in any way conduct or engage in the conduct of Regional
Mall Business Activities (except for Permitted Investments and Excluded
Projects) other than on behalf of the Company and its Affiliates.
3. Severability and Survival. The parties hereto acknowledge
and agree that the restrictions contained in this Agreement are reasonable,
including without limitation as to time, scope and geography, and are necessary
for the protection of the Company. The parties further acknowledge and agree
that, in the event of a breach of this Agreement, a remedy at law would be
inadequate and the Company may obtain injunctive relief and/or specific
performance which remedies shall be cumulative and nonexclusive. If a court of
competent jurisdiction determines that any of the restrictions contained herein
are unenforceable by reason of their extent or duration or otherwise, it is the
intention of the parties that the court modify such restrictions only as
necessary to enforce this Agreement in accordance with its terms as so modified.
4. Complete Agreement. This Agreement contains the complete
agreement and understanding of the parties hereto and supersedes all prior
understandings and agreements, written or oral, between the parties with respect
to the subject matter hereof, and, except as provided in Section 3 hereof, this
Agreement may be modified only in a writing signed by both the parties hereto.
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<PAGE>
5. Binding Effect. This Agreement and all of the covenants,
terms, provisions and conditions contained herein shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
successors, representatives and assigns.
6. Governing Law. This Agreement shall be governed by and its
terms construed in accordance with the laws of the Commonwealth of Massachusetts
without giving effect to the conflicts of law principles thereof.
7. Notices. Any notice or communication which may be or is
required to be given pursuant to the terms of this Agreement shall be in writing
and shall be sent to the respective party at the address set forth below,
postage prepaid, by Certified Mail, Return Receipt Requested, or by a nationally
recognized overnight courier service that provides tracing and proof or receipt
of items mailed, or to such other address as either party may designate by
notice similarly sent. Notices shall be effective upon receipt or attempted
delivery if delivery is refused or the party no longer receives deliveries at
said address and no new address has been given to the other party pursuant to
this paragraph. Karp's notice address is One Wells Avenue, Newton, Massachusetts
02459, and a copy of any notice to Karp shall also be simultaneously sent to
Goulston & Storrs, 400 Atlantic Avenue, Boston, MA 02110-3333, Attention: Thomas
P. Bloch, Esq. The Company's and the Operating Partnership's notice address is
_______________________________, and a copy of any notice to the Company and the
Operating Partnership shall also be simultaneously sent to
______________________________.
IN WITNESS WHEREOF, the undersigned have executed or caused to
be executed this Agreement as of the day and year first above written.
----------------------------------
Stephen R. Karp
SIMON PROPERTY GROUP, INC.
a Delaware corporation
By:
-------------------------------
Name:
Title:
SIMON PROPERTY GROUP, L.P.,
a Delaware limited partnership
By:
-------------------------------
Name:
Title:
-3-
<PAGE>
EXHIBIT A
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to Non-Competition Agreement
----------------------------
Excluded Projects
1. Regional Mall development at intersection of Route 95 and Route 91 in
New Haven, Connecticut
2. Westgate Mall, Brockton, Massachusetts
3. Withdrawn Shopping Centers and Withdrawn Management Agreements as
defined in the Portfolio Agreements
4. Pending Shopping Centers and Pending Management Agreements as defined
in the Portfolio Agreements
5. Worcester Common Fashion Outlet - Worcester, MA
6. CambridgeSide Galleria - Cambridge, MA
7. Pheasant Lane Mall - Nashua, NH and Tyngsborough, MA
8. Meadow Glen Mall - Medford, MA
9. Hanover Mall - Hanover, MA
10. Any project in the City of Boston
11. Emerald Square Mall - North Attleboro, MA and Mall @ Rockingham Park -
Salem, NH if purchased pursuant to a Buy-Sell Agreement
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<PAGE>
EXHIBIT B
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to Non-Competition Agreement
----------------------------
Restricted Area
1. Eastern Massachusetts (east of Worcester excluding the City of Boston)
2. New Hampshire
3. Connecticut
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<PAGE>
EXHIBIT J-2
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Non-Competition Agreement
-------------------------
THIS NON-COMPETITION AGREEMENT ("Agreement") is made and entered into
this ____ day of ______________, 1999, by and between STEVEN S. FISCHMAN
("Fischman"), SIMON PROPERTY GROUP, INC., a Delaware corporation (the "Company")
and SIMON PROPERTY GROUP, L.P., a Delaware limited partnership (the "Operating
Partnership").
W I T N E S S E T H :
WHEREAS, Fischman and his Affiliates, along with certain other
parties, have sold or contributed certain real estate or other assets, or
interests in partnerships or other entities owning such assets, to the Operating
Partnership in which the Company is the sole general partner, all pursuant to
that certain Management and Portfolio Agreement dated as of ___________, 1999
and certain related documents (collectively, the "Portfolio Agreements"); and
WHEREAS, Fischman will own, directly or indirectly, common
shares of the Company and limited partnership interests in the Operating
Partnership; and
WHEREAS, Fischman desires to enter into this Agreement in
order to induce the Company to complete the various transactions contemplated by
the Portfolio Agreements, and the Company requires that Fischman enter into this
Agreement as a condition to the Operating Partnership entering into the various
transactions contemplated by the Portfolio Agreements.
NOW, THEREFORE, in consideration of the promises and the
mutual covenants and undertakings set forth below and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the
following terms shall have the respective meanings set forth below:
"Affiliate" shall mean: (a) with respect to Fischman, any
Fischman Family Trust or any entity which, directly or indirectly through one or
more intermediaries, is controlled by Fischman and/or one or more Fischman
Family Trusts; and (b) with respect to the Company, any entity which, directly
or indirectly through one or more intermediaries, is controlled by, or under
common control with, the Company, or any person or other entity which, directly
or indirectly through one or more intermediaries, controls the Company.
"Excluded Projects" means those certain projects described on
Exhibit A hereto, and the interests of Fischman and his Affiliates in such
projects, which projects and interests have not been sold or contributed to the
Operating Partnership.
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<PAGE>
"Fischman Family Trust" shall mean any trust for the benefit
of Fischman, Fischman's spouse and/or Fischman's minor children.
"Permitted Investments" shall mean an investment as a
stockholder in a publicly held corporation in which Fischman and his Affiliates
do not own more than one percent (1%) of any class of stock.
"Restricted Area" shall mean the area described in Exhibit B
hereto.
"Restricted Period" shall mean the period commencing on the
date of this Agreement and ending on the first to occur of: (i) the fifth
anniversary of the date of the last closing under the Portfolio Agreements, and
(ii) December 31, 2004
"Regional Mall Business Activities" shall mean: the direct or
indirect ownership, development, management or leasing of, or investment or
financial interest in, any Regional Mall located within the Restricted Area.
"Regional Mall" shall mean a retail shopping center that (a)
is an enclosed shopping mall and (b) contains more than 400,000 square feet of
retail area.
2. Restrictive Covenant. Fischman agrees, during the
Restricted Period, that Fischman and his Affiliates, on his or its own account,
or as a consultant, agent, partner, joint venturer, owner, participant or
officer of any other person, firm, partnership, corporation or other entity,
shall not, directly or indirectly, in any way conduct or engage in the conduct
of Regional Mall Business Activities (except for Permitted Investments and
Excluded Projects) other than on behalf of the Company and its Affiliates.
3. Severability and Survival. The parties hereto acknowledge
and agree that the restrictions contained in this Agreement are reasonable,
including without limitation as to time, scope and geography, and are necessary
for the protection of the Company. The parties further acknowledge and agree
that, in the event of a breach of this Agreement, a remedy at law would be
inadequate and the Company may obtain injunctive relief and/or specific
performance which remedies shall be cumulative and nonexclusive. If a court of
competent jurisdiction determines that any of the restrictions contained herein
are unenforceable by reason of their extent or duration or otherwise, it is the
intention of the parties that the court modify such restrictions only as
necessary to enforce this Agreement in accordance with its terms as so modified.
4. Complete Agreement. This Agreement contains the complete
agreement and understanding of the parties hereto and supersedes all prior
understandings and agreements, written or oral, between the parties with respect
to the subject matter hereof, and, except as provided in Section 3 hereof, this
Agreement may be modified only in a writing signed by both the parties hereto.
-2-
<PAGE>
5. Binding Effect. This Agreement and all of the covenants,
terms, provisions and conditions contained herein shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
successors, representatives and assigns.
6. Governing Law. This Agreement shall be governed by and its
terms construed in accordance with the laws of the Commonwealth of Massachusetts
without giving effect to the conflicts of law principles thereof.
7. Notices. Any notice or communication which may be or is
required to be given pursuant to the terms of this Agreement shall be in writing
and shall be sent to the respective party at the address set forth below,
postage prepaid, by Certified Mail, Return Receipt Requested, or by a nationally
recognized overnight courier service that provides tracing and proof or receipt
of items mailed, or to such other address as either party may designate by
notice similarly sent. Notices shall be effective upon receipt or attempted
delivery if delivery is refused or the party no longer receives deliveries at
said address and no new address has been given to the other party pursuant to
this paragraph. Fischman's notice address is One Wells Avenue, Newton,
Massachusetts 02459, and a copy of any notice to Fischman shall also be
simultaneously sent to Goulston & Storrs, 400 Atlantic Avenue, Boston, MA
02110-3333, Attention: Thomas P. Bloch, Esq. The Company's and the Operating
Partnership's notice address is _______________________________, and a copy of
any notice to the Company and the Operating Partnership shall also be
simultaneously sent to ______________________________.
IN WITNESS WHEREOF, the undersigned have executed or caused to
be executed this Agreement as of the day and year first above written.
----------------------------------
Steven S. Fischman
SIMON PROPERTY GROUP, INC.
a Delaware corporation
By:
-------------------------------
Name:
Title:
-3-
<PAGE>
SIMON PROPERTY GROUP, L.P.,
a Delaware limited partnership
By:
-------------------------------
Name:
Title:
-4-
<PAGE>
EXHIBIT A
---------
to Non-Competition Agreement
----------------------------
Excluded Projects
1. Regional Mall development at intersection of Route 95 and Route 91 in
New Haven, Connecticut
2. Westgate Mall, Brockton, Massachusetts
3. Withdrawn Shopping Centers and Withdrawn Management Agreements as
defined in the Portfolio Agreements
4. Pending Shopping Centers and Pending Management Agreements as defined
in the Portfolio Agreements
5. Worcester Common Fashion Outlet - Worcester, MA
6. CambridgeSide Galleria - Cambridge, MA
7. Pheasant Lane Mall - Nashua, NH and Tyngsborough, MA
8. Meadow Glen Mall - Medford, MA
9. Hanover Mall - Hanover, MA
10. Any project in the City of Boston
11. Emerald Square Mall - North Attleboro, MA and Mall @ Rockingham Park -
Salem, NH if purchased pursuant to a Buy-Sell Agreement
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<PAGE>
EXHIBIT B
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to Non-Competition Agreement
----------------------------
Restricted Area
1. Eastern Massachusetts (east of Worcester excluding the City of Boston)
2. New Hampshire
3. Connecticut
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<PAGE>
EXHIBIT K
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[Intentionally Deleted]
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K-1
<PAGE>
EXHIBIT L
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Confidentiality Agreement
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L-1
<PAGE>
EXHIBIT M
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Form of Stock Purchase Agreement
--------------------------------
1
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SCHEDULE 2.00(d)
----------------
The following special provisions shall govern Seller's obligations with
respect to the Shopping Centers described in this Section:
(i) Emerald Square Mall.
(A) The beneficial Property Owner of Emerald Square Mall is
Attleborough Associates ("Attleborough Associates"), a joint venture
between N. A. Limited Partnership ("NALP", which is comprised of
current and former principals of Seller and/or its Affiliates and
others) and Newport Galleria Group, a joint venture affiliated with The
Pyramid Companies ("Newport").
(B) Seller agrees to use all commercially reasonable efforts
to obtain the consent of Newport for Attleborough Associates to enter
into a Contribution Agreement with respect to the contribution of the
fee in Emerald Square Mall or all of the partnership interests in
Attleborough Associates (the "Emerald Contribution Agreement") to
Buyer. The parties acknowledge that the Property Adjustment Amount for
Emerald Square Mall listed on Schedule 2.03(b) reflects a transfer of
only NALP's fifty percent (50%) joint venture interest in Attleborough
Associates and that the Assumed Loans corresponding to Emerald Square
Mall and listed on Schedule 2.03(b) and are only in an amount equal to
fifty percent (50%) of the outstanding loans (which would be Assumed
Loans) encumbering Emerald Square Mall. In the event that Attleborough
Associates (or all of its constituent partners) and Buyer execute an
Emerald Contribution Agreement, the amounts of Total Consideration,
Phase II Total Consideration, the Property Adjustment Amount, the Phase
II Net Consideration for Emerald Square Mall and the applicable Assumed
Loans shall be increased appropriately (i.e.- doubling such Property
Adjustment Amount, the amount of such Assumed Loans and the Phase II
Net Consideration relating to Emerald Square Mall and increasing the
Total Consideration by the increase in the Property Adjustment Amount
for Emerald Square Mall so computed), and the resulting increase (as
set forth in the Emerald Contribution Agreement) in the applicable
Phase II Net Consideration shall be paid by Buyer in cash and/or OP
Units, as agreed upon between NALP and Newport, and approved by Buyer,
which approval Buyer agrees not to unreasonably withhold, provided,
however, to the extent the Net Consideration payable to Newport or its
constituent partners is not greater than the amount of OP Units as
listed on Schedule 2.03(b) relating to Emerald Square Mall (as adjusted
for principal amortization with respect to the Assumed Loan for Emerald
Square Mall) and the OP Units to be so issued are in the same form and
in the same proportion as set forth in Section 2.04(b)(ii), then the
Buyer shall be obligated to accept and to pay such consideration,
subject to Buyer's rights pursuant to the next succeeding sentence. If
Buyer shall be unable or unwilling to issue such additional OP Units as
shall have been agreed upon by NALP and Newport is the same then, to
the extent Buyer decides to use cash as some or all of the
consideration in order to acquire Emerald Square Mall, Buyer shall be
obligated to complete the acquisition using such consideration, and
Buyer shall indemnify NALP and Newport for any tax liability (with
appropriate gross-up) incurred by NALP and Newport or its partners as a
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result of Attleboro Associates, NALP, Newport or any of its partners
receiving consideration other than of OP Units. The balance of the
consideration due under the Emerald Contribution Agreement shall be
paid as otherwise provided pursuant to Section 2.04(c). Three quarters
of the positive amount, if any, obtained by subtracting the
Contribution Price (as defined in the form of Contribution Agreement
attached hereto as Exhibit C) under the Emerald Contribution Agreement
from the Property Adjustment Amount for Emerald Square Mall, increased
as set forth above, shall be paid by Buyer to Seller as a portion of
the consideration for the Interests, such consideration to be paid in
cash to the extent set forth on Schedule 2.03(b) with the balance, if
any, to be paid in OP Units.
(C) In the event Newport shall not consent to the execution of
the Emerald Contribution Agreement, then Seller shall use all
commercially reasonable efforts to obtain Newport's consent (the
"Newport Consent") to the assignment and transfer of NALP's joint
venture interest in Attleborough Associates to Buyer without initiating
the right of first refusal provisions contained in the Agreement of
Partnership of Attleborough Associates dated as of March 12, 1987, as
the same has heretofore been amended by that certain (I) undated
Amendment #1 to Agreement of Partnership of Attleborough Associates,
and (II) Amendment No. 2 to Agreement of Partnership of Attleborough
Associates dated as of July 19, 1989 (as so amended, the "Attleborough
Partnership Agreement"); provided, however, it shall be a condition to
any such assignment and transfer that Newport agree to enter into an
amendment of the Attleborough Partnership Agreement on such terms and
conditions as Buyer may reasonably request (including without
limitation revising such agreement to provide that Buyer shall have the
right to control the management and leasing of Emerald Square Mall). In
the event the Newport Consent is obtained for the transfer of NALP's
joint venture interest in Attleborough Associates, then Seller shall
cause NALP to enter into a form of Contribution Agreement with Buyer,
as provided in Section 2.04(c), which form shall be modified as the
context appropriately would require to address the assignment of a
joint venture interest rather than the conveyance of real property.
(D) Prior to the Initial Closing Date, Seller further agrees
to use all commercially reasonable efforts to obtain Newport's consent,
to the extent such consent is required under the existing management
agreement, to the management of Emerald Square Mall by an Affiliate of
Buyer or subsidiary thereof for the period between the Initial Closing
and the Closing pursuant to a Services Agreement.
(E) If the provisions of Paragraph (i)(B), (i)(C) or (i)(F) of
this Schedule 2.00(d) become effective, it is understood and agreed
that, as the case may be, the Property Adjustment Amount or the Buyer's
Offer Price shall be increased by an amount determined to be the value
of the Excluded Outparcels related to Emerald Square Mall as determined
by mutual agreement of Seller and Buyer (1/2 of such amount if the
provisions of Paragraph (i)(C) are applicable) and in any such event
the provisions of Section 2.00(h) shall not be applicable to the
Excluded Outparcels. In the event Seller and Buyer are unable to reach
agreement on the value of said Excluded Outparcels, the value shall be
determined by an appraisal process in which case each of Buyer and
Seller
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shall submit an appraisal submitted by a commercial real estate
appraiser having a minimum of five (5) years experience in the region
with the value to be the average of the two appraisals in the event the
two appraisers do not agree on the value.
(F) (1) In the event that Attleborough Associates
does not enter into the Emerald Contribution Agreement and
Seller does not obtain the Newport Consent, both as provided
in Schedule 2.00(d), part (i), on or before the later to occur
of (i) the Initial Closing or (ii) six (6) months following
the Effective Date, then, provided the Initial Closing shall
have occurred (and provided no event shall have occurred which
would have entitled Buyer to terminate a Contribution
Agreement for Emerald Square Mall had such a Contribution
Agreement been entered into), Buyer shall be unconditionally
obligated to provide NALP with a bona fide offer to purchase
the entire fee interest in Emerald Square Mall in the form of
a Contribution Agreement for cash and assumption of any
assumable non-recourse financing in accordance with the
provisions of Article 21 of the Attleborough Partnership
Agreement (a copy of which provisions are attached hereto as
Schedule 2.00(d)(i)-A). The proposed purchase price with
respect to the acquisition of Emerald Square Mall shall be in
an amount (the "Buyer's Offer Price") equal to two times the
Property Adjustment Amount for the Emerald Square Mall as set
forth on Schedule 2.03(b) except as Buyer and Seller may
otherwise agree and as adjusted by Paragraph (i)(E) above.
Seller shall cause NALP to (a) notify Newport that NALP
desires Attleborough Associates to accept such offer, and (b)
forward such offer to Newport in accordance with the
provisions of such Article 21.
(2) In the event Newport elects to purchase NALP's
interest in Attleborough Associates, then the full proceeds of
such purchase shall be the sole property of NALP, and from and
after the closing of such purchase, the provisions of this
Agreement shall no longer apply to Emerald Square Mall.
(3) In the event Newport elects to permit the sale of
Emerald Square Mall pursuant to Buyer's offer rather than to
purchase NALP's partnership interest in Attleborough
Associates in accordance with such Article 21, Seller may
first undertake to obtain Newport's consent to implementing
the provisions of the aforesaid Article 21 by (x) the
execution of a separate Contribution Agreement between Buyer
and Newport for the transfer of Newport's partnership interest
in Attleborough Associates for cash or OP Units, as Newport
and Buyer may agree, and (y) the execution of a separate
Contribution Agreement between Buyer and NALP for the transfer
of NALP's partnership interest in Attleborough Associates for
OP Units in the amount and as otherwise provided in Section
2.04(c). To the extent the total consideration under the
Contribution Agreement for Newport's partnership interest in
Attleboro Associates is less than the Property Adjustment
Amount for Emerald Square Mall as set forth on Schedule
2.03(b) one half of such difference, if any, shall be paid in
cash as consideration for the Interests relating to the
Management Business related to Emerald Square Mall. If Seller
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shall be unable to obtain Newport's consent to the foregoing,
Seller shall cause Attleborough Associates to enter into a
Contribution Agreement pursuant to which Attleborough
Associates agrees to convey fee title to Emerald Square Mall
to Buyer for cash and the assumption of any assumable
non-recourse financing in accordance with Buyer's Offer Price.
In such event, the full proceeds of such purchase allocable
and distributed to NALP shall be the sole property of NALP
under the Attleboro Partnership Agreement and the components
of the Total Phase II consideration as set forth on Schedule
2.03(b) shall be revised appropriately.
(4) In the event Newport elects to purchase NALP's
interest in Attleborough Associates but then defaults in its
obligation to do so,
(a) Seller shall cause NALP or its designee
to purchase the interest of Newport in Attleborough
Associates in accordance with the provisions of such
Article 21; and
(b) Buyer shall (i) loan NALP or NALP's
designee at the applicable closing (the "Newport
Consideration Loan"), in cash, all funds necessary to
enable NALP or its designee to purchase such interest
of Newport (the "Newport Consideration") at the
default price (80%) set forth in the Attleborough
Partnership Agreement, and (ii) agree to indemnify,
defend and hold harmless NALP and NALP's designee
from and against all loss, cost, damage and expense
incurred by NALP or NALP's designee arising directly
from Buyer's breach of the foregoing covenant.
(5) In such event, Seller shall (a) cause NALP or its
designee to enter into a Contribution Agreement agreeing to
convey to Buyer the interest in Attleborough Associates so
acquired from Newport for One Hundred Twelve and one half
percent (112.5%) of the Newport Consideration in consideration
for the cancellation of the Newport Consideration Loan with
the balance in cash; and (b) cause NALP to enter into a
Contribution Agreement with Buyer in the amount and as
otherwise provided in Section 2.04(c).
(6) Seller and Buyer acknowledge that the inclusion
of the consideration for the Interest relating to the Emerald
Management in the required amount of the Buyer's Offer Price
when the same would otherwise be allocable pursuant to this
Agreement to the consideration payable for and with respect to
the sale of the Interests in the Management Business as part
of the overall Transaction has been required of the Seller by
the Buyer in the event that Seller is unsuccessful in
negotiating an agreement with Newport pursuant to (d)(i)(B) or
(C) in order to maximize the likelihood that Newport will
elect to permit the sale of Emerald Square Mall to Buyer in
accordance with the aforesaid Article 21.
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(7) In the event that, prior to Buyer's presentation
to NALP of the offer contemplated by this Paragraph (i)(F),
Newport shall present NALP with a bona fide offer to purchase
Emerald Square Mall in accordance with the provisions of
Article 21 of the Attleborough Associates Partnership
Agreement (the "Newport Offer"), Seller shall cause NALP to
promptly provide a copy of the Newport Offer to Buyer. In such
event, Buyer must notify Seller within ten (10) days if Buyer
desires NALP to elect to purchase Newport's interest in
accordance with the provisions of the aforesaid Article 21,
provided, however, if the Initial Closing has occurred, and
prior to six months following the Effective Date, if the
Newport Offer is for an amount equal to or less than the
Property Adjustment Amount (as doubled pursuant to the
preceding provisions, and as adjusted, if appropriate,
pursuant to Paragraph (i)(E) of Schedule 2.00(d)(i)) then
Buyer shall be obligated to provide funds and otherwise
perform under and pursuant to subparagraph (b) below. If Buyer
fails to so notify Seller, NALP shall be free to elect to
purchase Newport's interest or to sell its interest in
Attleborough Associates, in which event the full proceeds of
such sale shall be the sole property of NALP and, from and
after the closing of such purchase, the provisions of this
Agreement shall no longer apply to Emerald Square Mall. If
Buyer however shall notify Seller within the aforesaid period
of its desire to purchase Emerald Square Mall at the price set
forth in the bona fide offer contained in the Newport Offer or
if Buyer is obligated to accept such offer pursuant to the
above, then:
(a) Seller shall cause NALP to notify
Newport that it has elected to purchase Newport's
interest in Attleborough Associates in accordance
with the provisions of such Article 21 and shall
cause NALP or its designee to purchase the interest
of Newport in Attleboro Associates; and
(b) Buyer shall (i) loan NALP or its
designee at the applicable closing (the "Newport
Offer Loan"), in cash, all sums necessary to enable
NALP or its designee to purchase such interest of
Newport (the "Newport Offer Consideration"), and (ii)
agree to indemnify, defend and hold harmless NALP and
its designee from and against all loss, cost, damage
and expense incurred by NALP or its designee arising
directly from Buyer's breach of the foregoing
covenants.
(8) In such event, Seller shall (1) cause NALP or its
designee to enter into a Contribution Agreement agreeing to
convey to Buyer the interest in Attleborough Associates to be
acquired from Newport for the Newport Offer Consideration in
consideration for the cancellation of the Newport Offer Loan;
and (2) cause NALP to enter into a Contribution Agreement with
Buyer in the amount and as otherwise provided in Section
2.04(c). To the extent that the Newport Offer Consideration is
less than the Property Adjustment Amount set forth on Schedule
2.03(b) relating to Emerald Square Mall, one half of such
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<PAGE>
difference shall be paid by Buyer to Seller in cash as
consideration for the Interests relating to the Management
Business related to Emerald Square Mall.
(9) Notwithstanding anything to the contrary set
forth in the Agreement or this Paragraph (i)(F) of Schedule
2.00(d)(i), it is understood and agreed that the amount and
form of the Newport Consideration Loan or the Newport Offer
Loan shall not affect the amount or type of consideration set
forth on Schedule 2.03(b).
(ii) The Mall @ Rockingham Park.
(A) The Property Owner of The Mall @
Rockingham Park is Rocksal Mall LLC, a Delaware
limited liability company ("Rocksal") in which the
California Public Employees' Retirement System, an
agency of the State of California ("CalPers") is a
member.
(B) Seller shall use all commercially
reasonably efforts (without any requirement to
initiate any applicable "buy-sell", "right of first
refusal" or "right of first offer" provisions
("Transfer Provisions") set forth in the Limited
Liability Company Agreement of Rocksal Mall L.L.C.
dated as of June 29, 1995 (the "Rocksal Agreement")),
to obtain the consent of CalPers to (a) CalPers'
execution of a Contribution Agreement relating to the
sale of CalPers' interest in Rocksal (the "CalPers'
Interest") to Buyer for cash (the "CalPers
Consideration"), and (b) all of the remaining Rocksal
members' (the "NED Rocksal Members") execution of a
Contribution Agreement relating to the contribution
of the remaining interests in Rocksal (the "NED
Rocksal Interests") to Buyer for OP Units in the
amount set forth as OP Units on Schedule 2.03(b) as
it relates to the Mall @ Rockingham Park (the "NED
Rocksal Consideration"). The total of the CalPers
Consideration, the Assumed Loan relating to The Mall
@ Rockingham Park and the NED Rocksal Consideration
shall not exceed the Property Adjustment Amount for
The Mall @ Rockingham Park as set forth on Schedule
2.03(b). The amount, if any, obtained by subtracting
the sum of (1) the CalPers Consideration plus (2) the
NED Rocksal Consideration plus (3) the amount of the
Assumed Loan relating to The Mall @ Rockingham Park
from (4) the Property Adjustment Amount for The Mall
@ Rockingham Park as set forth on Schedule 2.03(b),
shall be paid by Buyer to Seller as a portion of the
consideration for the Interests, such consideration
to be paid in cash.
(C) In the event Seller fails to obtain the
consent of CalPers to the transfers contemplated in
the immediately preceding paragraph (B), Seller
agrees to use all commercially reasonable efforts in
cooperation with Buyer to renegotiate with CalPers
the terms and conditions of the Rocksal Agreement to
result in a so-called "straight up" Rocksal Agreement
whereby all members will have a constant percentage
of income, gains, losses,
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<PAGE>
distributions and capital in Rocksal in a manner
satisfactory to both Seller and Buyer (the
"Restructuring"). In connection with the
Restructuring, (a) Buyer shall enter into a
Contribution Agreement with CalPers for and with
respect to the sale for the portion of the CalPers
Interests to be transferred to Buyer as part of the
Restructuring for cash (the "CalPers Restructuring
Consideration") and (b) Buyer shall enter into a
separate Contribution Agreement with the NED Rocksal
Members for and with respect to the of the NED
Rocksal Interests for OP Units in the amount set
forth for OP Units on Schedule 2.03(b) as it relates
to the Mall @ Rockingham Park (the "NED Rocksal
Restructuring Consideration"), provided, however,
that the total of the CalPers Restructuring
Consideration and the NED Rocksal Restructuring
Consideration shall not exceed the Property
Adjustment Amount for The Mall @ Rockingham Park
(reduced by the amount of the applicable Assumed
Loan) multiplied by the percentage interest in
Rocksal being acquired by the Buyer under the
Restructuring Option (the "Available Rockingham Net
Consideration"). In the event the Restructuring
Option is consummated, Buyer shall pay to Seller, in
cash, as a portion of the consideration for the
Interests the amount, if any, determined by
subtracting (x) the sum of the CalPers Restructuring
Consideration plus the NED Rocksal Restructuring
Consideration from (y) the Available Rockingham Net
Consideration.
(D) Prior to the Initial Closing Date,
Seller further agrees to use all commercially
reasonable efforts to obtain CalPers' consent, to the
extent such consent is required under the existing
management agreement, to the management and leasing
of The Mall @ Rockingham Park by an Affiliate of
Buyer or a subsidiary thereof for the period between
the Initial Closing and the Closing pursuant to a
Services Agreement, and if obtained, shall enter into
such Services Agreement.
(E) (1) In the event that Seller does not
obtain the consent of CalPers described in such
paragraph (B) in this Paragraph (ii) and is
unsuccessful in obtaining the agreement of CalPers
pursuant to paragraph (C) of this Paragraph (ii), on
or before the later to occur of (i) the Initial
Closing or (ii) six (6) months following the
Effective Date, and provided that the Initial Closing
shall have occurred (and provided no event shall have
occurred which would have entitled Buyer to terminate
a Contribution Agreement for The Mall @ Rockingham
Park had such a Contribution Agreement been entered
into), Seller shall cause the NED Rocksal Members to
initiate the buy-sell provisions set forth in Article
13 of the Rocksal Agreement (a copy of which
provisions are attached hereto as Schedule
2.00(d)(ii)-A). The proposed purchase price (the "NED
Rocksal Members Offer Price") which the NED Rocksal
Members shall state to CalPers in their notice of
such exercise shall be equal to one hundred and two
percent (102%) of the Property Adjustment Amount for
7
<PAGE>
The Mall @ Rockingham Park as set forth on Schedule
2.03(b), except as Buyer and Seller may otherwise
agree.
(2) In the event that CalPers elects to
purchase the NED Rocksal Interests pursuant to such
provisions, then the full proceeds of such purchase
shall be the sole property of the NED Rocksal
Members, and from and after the closing of such
purchase, the provisions of this Agreement shall no
longer apply to The Mall @ Rockingham Park.
(3) In the event that CalPers elects to sell
its interest in Rocksal pursuant to such provisions,
(a) Seller shall cause the NED
Rocksal Members or their nominee (the "NED
Rocksal Nominee") to purchase such interest
in accordance with the provisions of such
Article 13; and
(b) Buyer shall (i) loan the NED
Rocksal Members or the NED Rocksal Nominee
(the "CalPers Consideration Loan"), in cash,
all funds necessary to enable the NED
Rocksal Members or the NED Rocksal Nominee
to purchase such interest of CalPers (the
"CalPers Consideration"), and (ii) agree to
indemnify, defend and hold harmless NED
Rocksal Members and the NED Rocksal Nominee
from and against all loss, cost, damage and
expense incurred by NED Rocksal Members or
the NED Rocksal Nominee arising directly
from Buyer's breach of the foregoing
covenant.
(4) In such event, Seller shall (1) cause
the NED Rocksal Members or the NED Rocksal Nominee to
enter into a Contribution Agreement agreeing to
convey to Buyer the interest in Rocksal to be
acquired from CalPers for the CalPers Consideration
in consideration for the cancellation of the CalPers
Consideration Loan; and (2) cause the NED Rocksal
Members to enter into a Contribution Agreement with
Buyer pursuant to which the NED Rocksal Members will
convey their interest in Rocksal for an amount equal
to the difference between the Property Adjustment
Amount for The Mall @ Rockingham Park (reduced by the
corresponding Assumed Loan) and the CalPers
Consideration, such consideration to be paid in OP
Units up to and not exceeding the amount of OP Units
identified on Schedule 2.03(b) relating to The Mall @
Rockingham Park (the "NED Buy/Sell Consideration").
Concurrently with the closing contemplated in the
preceding sentences, Buyer shall pay the Seller, in
cash, the positive (x) the Property Adjustment Amount
set forth on Schedule 2.03(b) relating to The Mall @
Rockingham Park over (y) the sum of the CalPers
Consideration and the NED Buy/Sell Consideration,
such payment being a portion of the consideration for
the Interests (the "Rockingham Management Interest
Consideration").
8
<PAGE>
(5) Seller and Buyer acknowledge that the
inclusion of the Rockingham Management Interest
Consideration in the required amount of the NED
Rocksal Members Offer Price when the same would
otherwise be allocable pursuant to this Agreement to
the consideration payable for and with respect to the
sale of the Interests relating to the Management
Business as part of the overall Transaction has been
required of the Seller by the Buyer in the event that
Seller is unsuccessful in negotiating an agreement
with CalPers pursuant to Paragraph (ii)(B) or (C) in
order to maximize the likelihood that CalPers will
elect to permit the sale of The Mall @ Rockingham
Park to Buyer in accordance with the aforesaid
Article 13.
(6) In the event that, prior to NED Rocksal
Members' presentation to CalPers of the offer
contemplated by this Paragraph (ii), CalPers shall
initiate the buy-sell provisions set forth in Article
13 of the Rocksal Agreement (the "CalPers Offer"),
Seller shall cause the NED Rocksal Members to
promptly provide a copy of the CalPers Offer to
Buyer. In such event, Buyer must notify Seller within
ten (10) days if Buyer desires the NED Rocksal
Members to elect to purchase CalPers' Interest in
accordance with the provisions of the aforesaid
Article 13 provided, however if the Initial Closing
has occurred and prior to six months following the
Effective Date and if the Total Price is for less
than the Property Adjustment Amount, then Buyer shall
be obligated to provide funds and otherwise under and
pursuant to subparagraph (b) below. If Buyer fails so
to notify Seller, the NED Rocksal Members shall be
free to elect to sell their interest in Rocksal in
which event the full proceeds of such sale shall be
the sole property of the NED Rocksal Members and,
from and after the closing of such purchase, the
provisions of this Agreement shall no longer apply to
The Mall @ Rockingham Park. If Buyer however shall
notify Seller within the aforesaid period of its
desire to purchase The Mall @ Rockingham Park at the
price set forth in the CalPers Offer,
(a) Seller shall cause the NED
Rocksal Members to notify CalPers that they
have elected to purchase CalPers' interest
in Rocksal and shall cause the NED Rocksal
Members or the NED Rocksal Nominee to
purchase such interest of CalPers in
accordance with the provisions of such
Article 13; and
(b) Buyer shall (i) loan the NED
Rocksal Members or the NED Rocksal Nominee
(the "CalPers Offer Loan"), in cash, all
funds necessary to enable NED Rocksal
Members or the NED Rocksal Nominee to
purchase such interest of CalPers (the
"CalPers Offer Consideration"), and (ii)
indemnify, defend and
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<PAGE>
hold harmless NED Rocksal Members and the
NED Rocksal Nominee from and against all
loss, cost, damage and expense incurred by
the NED Rocksal Members or the NED Rocksal
Nominee arising directly from Buyer's breach
of the foregoing covenant.
(7) In such event, Seller shall (1) cause
the NED Rocksal Members or the NED Rocksal Nominee to
enter into a Contribution Agreement agreeing to
convey to Buyer the interest in Rocksal to be
acquired from CalPers for the CalPers Offer
Consideration in consideration of the cancellation of
the CalPers Offer Loan; and (2) cause the NED Rocksal
Members to enter into a Contribution Agreement with
Buyer pursuant to which NED Rocksal Members will
convey their interest in Rocksal for an amount equal
to the difference between the Property Adjustment
Amount for The Mall @ Rockingham Park (reduced by the
corresponding Assumed Loan) and the CalPers
Consideration, such consideration to be paid in OP
Units up to and not exceeding the amount of OP Units
identified on Schedule 2.03(b) relating to The Mall @
Rockingham Park (the "NED Buy/Sell Consideration").
Concurrently with the closing contemplated in the
preceding sentences, Buyer shall pay the Seller, in
cash, the difference between (x) the Property
Adjustment Amount set forth on Schedule 2.03(b)
relating to The Mall @ Rockingham Park and (y) the
sum of the CalPers Consideration and the NED Buy/Sell
Consideration as a portion of the consideration for
the Interests (the "Rockingham Management Interest
Consideration").
(8) In the event that, prior to Buyer's
presentation to the NED Rocksal Members of the offer
contemplated by this Paragraph, CalPers shall present
the NED Rocksal Members with a bona fide offer to
purchase The Mall @ Rockingham Park in accordance
with the provisions of Article 12 of the Rocksal
Agreement (the "CalPers Bona Fide Offer"), Seller
shall cause the NED Rocksal Members to promptly
provide a copy of the CalPers Bona Fide Offer to
Buyer. In such event, Buyer must notify Seller within
ten (10) days if Buyer desires the NED Rocksal
Members to elect to purchase CalPers' Interest in
accordance with the provisions of the aforesaid
Article 12, provided, however, if the Initial Closing
has occurred and prior to six months following the
Effective Date and if the Bona Fide Offer is for less
than or equal to the Property Adjustment Amount, then
Buyer shall be obligated to provide funds and
otherwise under and pursuant to subparagraph (b)
below. If Buyer fails so to notify Seller, the NED
Rocksal Members shall be free to elect to sell their
interest in Rocksal in which event the full proceeds
of such sale shall be the sole property of the NED
Rocksal Members and, from and after the closing of
such purchase, the provisions of this Agreement shall
no longer apply to The Mall @ Rockingham Park. If
Buyer however shall notify Seller
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<PAGE>
within the aforesaid period of its desire to purchase
The Mall @ Rockingham Park at the price set forth in
the CalPers Bona Fide Offer, or if Buyer is obligated
to accept such offer pursuant to the above, then
(a) Seller shall cause the NED
Rocksal Members to notify CalPers that they
have elected to purchase CalPers' interest
in Rocksal and shall cause the NED Rocksal
Members or the NED Rocksal Nominee to
purchase such interest of CalPers in
accordance with the provisions of such
Article 12; and
(b) Buyer shall and does hereby (i)
covenant and agree to loan NED Rocksal
Members or the NED Rocksal Nominee (the
"CalPers Bona Fide Offer Loan"), in cash,
all funds necessary to enable NED Rocksal
Members or the NED Rocksal Nominee to
purchase such interest of CalPers (the
"CalPers Bona Fide Offer Consideration"),
and (ii) indemnify, defend and hold harmless
NED Rocksal Members and the NED Rocksal
Nominee from and against all loss, cost,
damage and expense incurred by the NED
Rocksal Members or the NED Rocksal Nominee
arising directly from Buyer's breach of the
foregoing covenant.
(9) In such event, Seller shall (1) cause
the NED Rocksal Members or the NED Rocksal Nominee to
enter into a Contribution Agreement agreeing to
convey to Buyer the interest in Rocksal to be
acquired from CalPers for the CalPers Bona Fide Offer
Consideration in consideration of the cancellation of
the CalPers Bona Fide Offer Loan; and (2) cause the
NED Rocksal Members to enter into a Contribution
Agreement with Buyer pursuant to which NED Rocksal
Members will convey their interest in Rocksal for an
amount equal to the difference between the Property
Adjustment Amount for The Mall @ Rockingham Park
(reduced by the corresponding Assumed Loan) and the
CalPers Consideration, such consideration to be paid
in OP Units up to and not exceeding the amount of OP
Units identified on Schedule 2.03(b) relating to The
Mall @ Rockingham Park (the "NED Buy/Sell
Consideration"). Concurrently with the closing
contemplated in the preceding sentences, Buyer shall
pay to Seller, in cash, the difference between (x)
the Property Adjustment Amount set forth on Schedule
2.03(b) relating to The Mall @ Rockingham Park and
(y) the sum of the CalPers Consideration and the NED
Buy/Sell Consideration as a portion of the
consideration for the Interests (the "Rockingham
Management Interest Consideration").
(10) Notwithstanding anything to the
contrary set forth in the Agreement or this
Paragraph, it is understood and agreed that the
CalPers Consideration Loan or the CalPers Offer Loan
or the CalPers Bona Fide
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Offer Loan shall not reduce the amount or type of
consideration on Schedule 2.03(b).
(iii) Northshore Mall. The Property Owner of Northshore Mall is
Northshore Mall Limited Partnership ("NMLP"), the general partners of which are
Northshore Plaza I, Inc. ("NSPI") and Northshore Plaza II, Inc. ("NSPII"). Buyer
acknowledges that Seller has advised Buyer that due to certain tax
considerations NMLP will be unwilling to enter into a Contribution Agreement.
However, Seller agrees to use all commercially reasonable efforts to cause (A)
the stockholders in NSP I, Inc. and NSP II, Inc. to enter into a stock purchase
agreement (substantially in the form attached hereto as Exhibit__) with the
Company pursuant to which such stockholders would sell all of their stock in NSP
I, Inc. and NSP II, Inc. to the Company and (B) the limited partners to enter
into an agreement to contribute or sell their limited partnership interests in
NMLP to OP, and (c) the stockholders of NSPI and NSPII shall contribute their
respective loans receivable from NSPI and NSPII to the capital of each company
thereby discharging the obligations of such companies to the stockholders. If
agreement is obtained for the transfer of such stock and such limited
partnership interests, then the form of each Contribution Agreement for
Northshore Mall shall be modified as the context appropriately would admit or
require to address the sale of stock and the contribution of partnership
interests rather than the conveyance of real property and to include in the
stock purchase agreement those representations set forth in Schedule Northshore
Tax Representations attached hereto as Schedule (d)...?
(iv) Apple Blossom Mall. Apple Blossom Mall is encumbered by a loan
from Teacher Retirement System of Texas ("Texas Teachers") which includes a
participation payment due to the lender upon sale of the shopping center.
Accordingly, the Texas Teachers loan will need to be refinanced simultaneously
with the closing under the Apple Blossom Mall Acquisition Agreement. Subject to
other applicable provisions of this Agreement and of the Tax Protection
Agreement, the new loan shall be non-recourse and at the sole cost and expense
of Buyer, and shall be entered into with a lender designated by Buyer and on
such terms as Buyer shall negotiate (the "New ABM Loan"). The Apple Blossom
Property Owner shall be the initial borrower under the new loan, which shall be
assumed by Buyer at the closing. The Apple Blossom Property Owner shall have the
right to approve provisions relating to the scope of its liability under the new
loan documents, which approval shall not be unreasonably withheld, delayed or
conditioned. Buyer also agrees on the request of Seller to assume as an Assumed
Loan any additional loan (the "ABM Additional Loan") obtained by the Apple
Blossom Property Owner to the extent the proceeds of the New ABM Loan are not
sufficient to repay in full the Texas Teachers Loan, so long as the ABM
Additional Loan is prepayable without penalty or premium and is otherwise
approved by Buyer. The New ABM Loan and the ABM Additional Loan shall be treated
as Assumed Loans for all other purposes hereunder. The amount of the New ABM
Loan and, if applicable, the ABM Additional Loan shall be added to the amount of
the Phase I Assumed Loans and the cash portion of the Phase I Net Consideration
shall be reduced by the same amount.
(v) Square One Mall. The Property Owner of Square One Mall is Square
One Mall Limited Partnership, the general partner of which is NED Square One
Limited Partnership
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("NEDSOLP") and the limited partner of which is Square One Holdings LLC
("Holdings"), an entity under common control with NEDSOLP. The conveyance of
Square One Mall shall be by means of the sale (for cash) of the limited partner
interest of Holdings and the contribution (for OP Units) of the general partner
interest of NEDSOLP. The Acquisition Agreements for Square One Mall accordingly
will consist of separate Contribution Agreements with NEDSOLP and Holdings.
(vi) Seller shall continually keep Buyer apprised of its discussions
and negotiations with Newport and CalPers with respect to any of the matters set
forth in Paragraphs (i)(F) and (ii)(E) (including without limitation promptly
providing Buyer with copies of all correspondence relating thereto), and in the
event Buyer wishes to become involved in such negotiations, Buyer shall have the
right to do so.
(viii) The parties acknowledge that in certain instances the structure
for the acquisition of a Shopping Center will be for Operating Partnership to
purchase, for cash, certain interests in Property Owner (or in an entity which
itself owns an interest in Property Owner), all as designated by Property Owner,
and that the Shopping Center would then be contributed to Operating Partnership
for OP Units, with an aggregate price for both the purchase of the interest and
the contribution for OP Units (after reduction for the OP Units paid on account
of the redemption described below) up to a maximum amount equal to the Property
Adjustment Amount as such might be adjusted pursuant to the provisions of
section (i) of Schedule 2.00(d), in proportions of OP Units and cash as provided
on Schedule 2.03(b). At the time of any acquisition of an interest in an entity
by Operating Partnership, such entity and the constituent holders of interests
in such entity shall agree to redeem Operating Partnership if, and upon,
contribution by the Property Owner of the Shopping Center to Operating
Partnership for OP Units, said redemption to be for the value of Operating
Partnership's interest in Property Owner (or in an upper tier entity, as
appropriate), payable to Operating Partnership in OP Units. The above is a
general description of the intent of the parties, and the parties hereto
acknowledge that reasonable variations thereof shall also be appropriate. The
Shopping Centers to which the above will or may apply are as follows:
Arsenal Mall
Atrium Mall
Cape Cod Mall
Emerald Square Mall
Mall @ Rockingham Park
Northshore Mall
Mall of New Hampshire
The provisions of this Schedule 2.00(d) shall survive the Initial
Closing.
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<PAGE>
SCHEDULE 2.00(h)
----------------
Excluded Outparcels
-------------------
All Excluded Outparcels shall be separate legal lots and all actions will be
taken by Seller to insure that each will be a separate tax parcel. All expenses
relating to the Excluded Outparcels will be borne by Seller.
The following agreements, restriction obligations and rights shall apply to the
Excluded Outparcels identified with a double asterisk on the attached schedules
as follows:
Emerald Square Mall Excluded Outparcel.
---------------------------------------
(a) Prohibition on noxious uses.
(b) Obligation to maintain in good order and condition
(c) Any lawful use.
The conveyance of Emerald Square Mall shall include a bill of
sale from the Emerald Square Mall Property Owner conveying the private
sewer line in Route One to Buyer as a right appurtenant to the Mall. At
the applicable Closing, Buyer and the Emerald Square Property Owner
shall enter into a Private Sewer Tie-in Agreement pursuant to which (1)
Buyer shall grant to the Emerald Square Property Owner the right to use
up to fifty thousand (50,000) gallons per day in the aggregate of sewer
capacity for the Excluded Outparcels adjacent to Emerald Square Mall
(the "Emerald Square Excluded Outparcels"), and (2) the right to sell
on behalf of Buyer any excess capacity (as the same may change from
time to time) which remains available in the private sewer line, it
being agreed that Buyer and the Emerald Square Property Owner shall
divide any profits resulting from such sales on a 50/50 basis. To the
extent the Emerald Square Property Owner uses any of the aforementioned
50,000 gallons of sewer capacity for the Emerald Square Excluded
Outparcels, such capacity shall be provided at cost without profit, but
Buyer shall be entitled to one hundred percent (100%) of the profits
resulting from the sales of excess capacity equal to the gallonage per
day provided to the Emerald Square Excluded Outparcels. Any capacity
provided to the Emerald Square Excluded Outparcels shall bear and be
responsible for its pro rata share of the annual costs of operating the
private sewerage treatment facility and the private sewer line based
upon the gallonage provided to the Emerald Square Excluded Outparcels
divided by the total gallonage utilized by all parties served by the
private sewer treatment facility.
Crystal Mall Excluded Outparcel.
--------------------------------
(a) Prohibition on noxious uses.
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(b) Obligation to maintain in good order and condition
(c) Final subdivision approval prior to the applicable Closing.
With respect to the Crystal Mall Excluded Outparcel, Buyer and
the owner of the Crystal Mall Excluded Outparcel shall enter into an
access easement agreement providing such parcel with pedestrian and
vehicular access over the mall roadways.
Liberty Tree Mall.
------------------
(a) Prohibition on noxious uses.
(b) Obligation to maintain in good order and condition
(c) Any lawful use.
(d) Prohibition on violation of any Liberty Tree Mall existing
exclusives to the extent the same remain in full force and
effect.
(e) One time right of first refusal.
(f) Responsibility for equitable pro rata share of exterior common
area maintenance expenses incurred and charged by Liberty Tree
Mall.
Square One Mall.
----------------
(a) Prohibition on noxious uses.
(b) Obligation to maintain in good order and condition
(c) Any lawful use.
Solomon Pond Mall.
------------------
(a) Prohibition on noxious uses.
(b) Obligation to maintain in good order and condition
(c) Any lawful use.
The above restrictions, agreements and conditions shall be set forth in
a deed or other recordable instrument and shall be in form and substance
reasonably satisfactory to Buyer, Seller and the applicable Property Owner.
2
<PAGE>
SCHEDULE 2.01(a)
----------------
Assets
------
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<PAGE>
SCHEDULE 2.01(a)
----------------
Part I - Management Agreements
------------------------------
-1-
<PAGE>
SCHEDULE 2.01(a)
----------------
Part II - Contracts
-------------------
-1-
<PAGE>
SCHEDULE 2.01(a)
----------------
Part III - Equipment
--------------------
-1-
<PAGE>
SCHEDULE 2.01(a)
----------------
Part IV - Intellectual Property
-------------------------------
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<PAGE>
SCHEDULE 2.01(a)
----------------
Part V - Other Assets
---------------------
-1-
<PAGE>
SCHEDULE 2.04
-------------
Assumed Loans
-------------
-1-
<PAGE>
SCHEDULE 2.04(h)
----------------
(A) Auburn Mall -
-----------
(1) After the applicable Closing, Auburn Mall Property Owner
shall remain responsible for the cost of constructing a pedestrian
bridge, as described in the existing lease with Caldor, if the tenant
under such lease requires such construction in accordance with the
provisions of the Caldor Lease.
(2) Buyer shall receive a credit in the amount of any
reimbursement of Sears due from the Auburn Mall Property Owner not yet
paid as more particularly set forth in the existing lease with Sears.
(3) The Auburn Mall Property Owner will assign the
Metropolitan Life Easement and Remediation Agreements applicable to
Auburn Mall and will provide notice to Metropolitan Life within thirty
(30) days after the applicable Closing.
(B) North Shore Mall - Buyer shall receive a credit at closing in an
amount equal to $40,000 on account of the payment for past electrical
charges due to Peabody Electric Company in December, 1999 (to the
extent such payment has not theretofore been made).
(C) Atrium - The Atrium Property Owner shall deliver at closing an
assignment of its rights with respect to the so-called "Limited Deficit
Rents" and an adjustment under the applicable Contribution Agreement
with the Atrium Property Owner for any unexpended construction amounts
(the "Atrium TA/TI Monies") held by the Atrium Property Owner under the
so-called "Limited" agreements (currently in the amount of
approximately $850,000, representing the remaining balance of an
initial amount of $1,750,000). Atrium Property Owner agrees that the
Atrium TA/TI Monies shall only be used for the tenant allowance and
tenant improvement costs and expenses incurred in releasing space at
the Shopping Center which has been vacated by members of the Limited
family of stores.
(D) Emerald Square - Reference is made to the fact that an Affiliate of
the Emerald Square Property Owner is in the process of selling the
former Lechmere building at Emerald Square Mall to a division of The
May Department Store Company (the "Lord & Taylor Parcel") for the sum
of Nine Million Dollars ($9,000,000). It is understood and agreed that
in the event the sale to Lord & Taylor is not consummated on or before
the Emerald Square Mall Closing with Buyer (the "Emerald Square Mall
Closing"), Buyer shall have the right to elect concurrently with the
Emerald Square Mall Closing either of the following:
(i) Buyer may purchase the Lord & Taylor Parcel from the
Affiliate of the Emerald Square Mall Property Owner for Nine
Million Dollars ($9,000,000) (less amounts previously received
by such Affiliate from Lord & Taylor on account
-1-
<PAGE>
thereof) (subject to the terms of the Lord & Taylor
Agreements, if any, still in effect) and Seller or its
Affiliate shall complete Seller's work required in the current
Lord & Taylor agreements; or
(ii) Buyer may elect not to proceed with the purchase of the
Lord & Taylor Parcel in which event the Lord & Taylor Parcel
shall be subject to and have the benefit of the applicable
Construction, Operation and Reciprocal Easement Agreement and
with the rights necessary to complete construction of the
building and other site improvements contemplated by the Lord
and Taylor Agreements.
(E) Greendale Mall - The Greendale Mall Contribution Agreement shall include as
a condition to Buyer's obligation to close a requirement that the REA be amended
to the extent necessary to accommodate the Best Buy lease (if the Best Buy lease
remains in effect).
-2-
<PAGE>
SCHEDULE 2.05
-------------
Liabilities and Obligations
---------------------------
-1-
<PAGE>
SCHEDULE 3.02
-------------
Outstanding Subscriptions, Options, Warrants, Preemptive or Other Rights
------------------------------------------------------------------------
-1-
<PAGE>
SCHEDULE 3.02(b)
----------------
Capital Stock of the Company
----------------------------
-1-
<PAGE>
SCHEDULE 3.03
-------------
Consents; Approvals
-------------------
-1-
<PAGE>
SCHEDULE 3.06
-------------
Governmental Consents
---------------------
-1-
<PAGE>
SCHEDULE 3.11
-------------
Other Liabilities
-----------------
-1-
<PAGE>
SCHEDULE 3.18
-------------
Material Contracts
------------------
-1-
<PAGE>
SCHEDULE 3.19
-------------
Merger Agreements
-----------------
-1-
<PAGE>
SCHEDULE 4.00(c)
----------------
Schedule of Required Consents
-----------------------------
-1-
<PAGE>
SCHEDULE 4.01(a)
----------------
Options for the Purchase of Assets
----------------------------------
-1-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001063761
<NAME> SIMON PROPERTY GROUP INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 142,236
<SECURITIES> 0
<RECEIVABLES> 234,710
<ALLOWANCES> 0<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 12,390,785
<DEPRECIATION> 907,741
<TOTAL-ASSETS> 13,440,008
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 8,273,822
0
518,596
<COMMON> 18
<OTHER-SE> 2,759,447
<TOTAL-LIABILITY-AND-EQUITY> 13,440,008<F3>
<SALES> 0
<TOTAL-REVENUES> 902,819
<CGS> 0
<TOTAL-COSTS> 491,144
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,779
<INTEREST-EXPENSE> 284,058
<INCOME-PRETAX> 138,072
<INCOME-TAX> 138,072
<INCOME-CONTINUING> 138,072
<DISCONTINUED> 0
<EXTRAORDINARY> 1,817
<CHANGES> 0
<NET-INCOME> 94,047
<EPS-BASIC> 0.44
<EPS-DILUTED> 0.44
<FN>
<F1>Receivables are stated net of allowances.
<F2>The Registrant does not report using a classified balance sheet.
<F3>Includes limited partner's interest in the Operating Partnership of
1,004,975, and preferred stock of subsidiary of 339,463.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001067173
<NAME> SPG REALTY CONSULTANTS INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,784
<SECURITIES> 0
<RECEIVABLES> 721<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 7,561
<DEPRECIATION> 1,209
<TOTAL-ASSETS> 20,759
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 786
0
0
<COMMON> 0
<OTHER-SE> 13,253
<TOTAL-LIABILITY-AND-EQUITY> 20,759<F3>
<SALES> 0
<TOTAL-REVENUES> 2,520
<CGS> 0
<TOTAL-COSTS> 1,850
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,824
<INCOME-PRETAX> (8,274)
<INCOME-TAX> (3,374)
<INCOME-CONTINUING> (1,472)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,472)
<EPS-BASIC> (0.86)
<EPS-DILUTED> (0.86)
<FN>
<F1>Receivables are stated net of allowances.
<F2>The Registrant does not report using a classified balance sheet.
<F3>Includes limited partner's interest in the SRC Operating Partnership of
$5,057.
</FN>
</TABLE>
