SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: June 30, 1998
Commission File No. 1-11530
Taubman Centers, Inc.
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(Exact name of registrant as specified in its charter)
Michigan 38-2033632
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 East Long Lake Road, Suite 300, P.O. Box 200, Bloomfield Hills, Michigan
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(Address of principal executive offices) 48303-0200
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(Zip Code)
(248) 258-6800
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(Registrant's telephone number, 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 November 12, 1998, there were outstanding 52,922,823 shares of the
Company's common stock, par value $0.01 per share.
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
The following financial statements of Taubman Centers, Inc. (the Company) are
provided pursuant to the requirements of this item. The financial statements of
The Taubman Realty Group Limited Partnership (TRG) are also provided.
INDEX TO FINANCIAL STATEMENTS
TAUBMAN CENTERS, INC.
- ---------------------
Balance Sheet as of September 30, 1998 and December 31, 1997................. 2
Statement of Operations for the three months ended
September 30, 1998 and 1997................................................. 3
Statement of Operations for the nine months ended
September 30, 1998 and 1997................................................. 4
Statement of Cash Flows for the nine months ended
September 30, 1998 and 1997................................................. 5
Notes to Financial Statements................................................ 6
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
- --------------------------------------------
Consolidated Balance Sheet as of September 30, 1998 and December 31, 1997.... 12
Consolidated Statement of Operations for the three months ended
September 30, 1998 and 1997................................................. 13
Consolidated Statement of Operations for the nine months ended
September 30, 1998 and 1997................................................. 14
Consolidated Statement of Cash Flows for the nine months ended
September 30, 1998 and 1997................................................. 15
Notes to Consolidated Financial Statements................................... 16
- 1 -
<PAGE>
TAUBMAN CENTERS, INC.
BALANCE SHEET
(in thousands, except share data)
September 30 December 31
------------ -----------
1998 1997
---- ----
Assets:
Investment in TRG (Notes 1 and 2):
Partnership interest $ 347,859
Series A Preferred Equity interest 200,000
---------
$ 547,859
Properties, net of accumulated
depreciation and amortization of $167,259 $1,204,531
Investment in Unconsolidated Joint Ventures 96,067
Cash and cash equivalents 33,804 8,965
Accounts and notes receivable, less
allowance for doubtful accounts of $386 14,249
Accounts receivable from related parties 8,428
Deferred charges and other assets 21,302
---------- ---------
$1,378,381 $ 556,824
========== =========
Liabilities:
Unsecured notes payable $ 441,496
Mortgage notes payable 241,969
Accounts payable and accrued liabilities 155,144 $ 277
Dividends payable 12,435 11,929
---------- ---------
$ 851,044 $ 12,206
Commitments and Contingencies (Note 3)
Minority Interests (Note 1)
Shareowners' Equity (Notes 3 and 4):
Series A Cumulative Redeemable Preferred
Stock, $0.01 par value, 50,000,000 shares
authorized, $200 million liquidation
preference, 8,000,000 shares issued and
outstanding at September 30, 1998
and December 31, 1997 $ 80 $ 80
Series B Non-Participating Convertible
Preferred Stock, $0.001 par and liquidation
value, 40,000,000 shares authorized at
September 30, 1998, none issued
Common Stock, $0.01 par value, 250,000,000
shares authorized, 52,916,896 and 50,759,657
issued and outstanding at September 30, 1998
and December 31, 1997 529 508
Additional paid-in capital 697,088 668,951
Dividends in excess of net income (170,360) (124,921)
---------- ---------
$ 527,337 $ 544,618
---------- ---------
$1,378,381 $ 556,824
========== =========
See notes to financial statements.
- 2 -
<PAGE>
TAUBMAN CENTERS, INC.
STATEMENT OF OPERATIONS
(in thousands, except share data)
Three Months Ended September 30
-------------------------------
1998 1997
---- ----
Income:
Income before extraordinary item from
investment in TRG (Note 2):
Equity in TRG's income before extraordinary
item allocable to partnership unitholders $ 1,567 $ 6,408
Series A Preferred Equity interest in TRG 4,150
Interest and other 100 78
-------- -------
$ 5,817 $ 6,486
-------- -------
Operating Expenses:
General and administrative $ 182 $ 210
Management fee 62 62
-------- -------
$ 244 $ 272
-------- -------
Income before extraordinary item $ 5,573 $ 6,214
Equity in TRG's extraordinary item (Note 2) (19,699)
-------- -------
Net income (loss) $(14,126) $ 6,214
Preferred dividends (4,150)
-------- -------
Net income (loss) available to common
shareowners $(18,276) $ 6,214
======== =======
Basic earnings per common share:
Income before extraordinary item $ .03 $ .12
======== =======
Net income (loss) $ (.35) $ .12
======== =======
Diluted earnings per common share:
Income before extraordinary item $ .03 $ .12
======== =======
Net income (loss) $ (.34) $ .12
======== =======
Cash dividends declared per common share $ .235 $ .23
======== =======
Weighted average number of common
shares outstanding 52,899,013 50,745,241
========== ==========
See notes to financial statements.
- 3 -
<PAGE>
TAUBMAN CENTERS, INC.
STATEMENT OF OPERATIONS
(in thousands, except share data)
Nine Months Ended September 30
------------------------------
1998 1997
---- ----
Income:
Income before extraordinary items
from investment in TRG (Note 2):
Equity in TRG's income before extraordinary
items allocable to partnership unitholders $ 11,910 $ 19,102
Series A Preferred Equity interest in TRG 12,450
Interest and other 295 229
-------- --------
$ 24,655 $ 19,331
Operating Expenses:
General and administrative $ 582 $ 591
Management fee 187 187
-------- --------
$ 769 $ 778
-------- --------
Income before extraordinary items $ 23,886 $ 18,553
Equity in TRG's extraordinary items (Note 2) (20,066)
-------- --------
Net income $ 3,820 $ 18,553
Preferred dividends (12,450)
-------- --------
Net income (loss) available to common shareowners $ (8,630) $ 18,553
======== ========
Basic earnings per common share:
Income before extraordinary items $ .22 $ .37
======== ========
Net income (loss) $ (.17) $ .37
======== ========
Diluted earnings per common share:
Income before extraordinary items $ .22 $ .36
======== ========
Net income (loss) $ (.17) $ .36
======== ========
Cash dividends declared per common share $ .705 $ .69
======== ========
Weighted average number of common
shares outstanding 51,949,256 50,730,179
========== ==========
See notes to financial statements.
- 4 -
<PAGE>
TAUBMAN CENTERS, INC.
STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended September 30
------------------------------
1998 1997
---- ----
Cash Flows From Operating Activities:
Income before extraordinary items $ 23,886 $ 18,553
Adjustments to reconcile income before
extraordinary items to net cash provided
by operating activities:
Increase in accounts payable
and other liabilities 136 26
Increase in other assets (49) (37)
-------- --------
Net Cash From Operating Activities $ 23,973 $ 18,542
-------- --------
Cash Flows Provided by Investing Activities:
Purchase of additional interest in TRG $(26,660)
Distributions from TRG in excess of income
before extraordinary items 25,360 $ 16,147
-------- --------
Net Cash Provided By (Used In)
Investing Activities $ (1,300) $ 16,147
-------- --------
Cash Flows From Financing Activities:
Cash dividends to common shareowners $(36,303) $(35,001)
Cash dividends to preferred shareowners (12,450)
Proceeds from stock issuance 26,660
-------- --------
Net Cash Used in Financing Activities $(22,093) $(35,001)
-------- --------
Net Increase (Decrease) In Cash $ 580 $ (312)
Cash and Cash Equivalents at Beginning of Period 8,965 9,388
Effect of consolidating TRG in connection
with the GMPT Exchange (see below) 24,259
-------- --------
Cash and Cash Equivalents at End of Period $ 33,804 $ 9,076
======== ========
On September 30, 1998, the Company obtained a majority and controlling
interest in TRG as a result of the GMPT Exchange (Note 1). Upon obtaining this
controlling interest, the Company consolidated the financial position of TRG,
its investment in which the Company had previously presented under the equity
method. In replacing the Company's investment in TRG with its underlying assets
and liabilities, the Company's consolidated cash position increased by TRG's
September 30, 1998 cash balance of $24.3 million. This amount is presented above
in the reconciliation between beginning and ending cash balances.
See notes to financial statements.
- 5 -
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
Nine months ended September 30, 1998
Note 1 -Organization and Basis of Presentation
Taubman Centers, Inc. (the Company) is the managing general partner of The
Taubman Realty Group Limited Partnership (TRG), which engages in the ownership,
management, leasing, acquisition, development, and expansion of regional retail
shopping centers and interests therein. On September 30, 1998, the Company
obtained a majority and controlling interest in TRG as a result of a transaction
in which TRG exchanged interests in 10 shopping centers, together with $990
million of its debt, for all of the partnership units owned by General Motors
Pension Trusts (GMPT), representing approximately 37% of TRG's equity (the GMPT
Exchange) (Note 2). As a result of the GMPT Exchange, the Company's general
partnership interest in TRG increased to 62.8%.
The consolidated balance sheet of the Company as of September 30, 1998
includes all accounts of TRG and its consolidated subsidiaries; all intercompany
balances have been eliminated. Investments in entities not unilaterally
controlled by ownership or contractual obligation (Unconsolidated Joint
Ventures) are accounted for under the equity method. As the net equity of TRG as
of September 30, 1998 is less than zero, the ownership interest of the
noncontrolling TRG partners (the Minority Interest) is presented as a zero
balance. As the Company's obtaining of a controlling ownership interest did not
occur until September 30, 1998, the balance sheet as of December 31, 1997 and
the statements of operations and cash flows of the Company reflect the financial
position and results of operations of TRG under the equity method.
The unaudited interim financial statements should be read in conjunction with
the audited financial statements and related notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997. In the opinion
of management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial statements for the interim
periods have been made. The results of interim periods are not necessarily
indicative of the results for a full year.
Note 2 - Investment in TRG
The Company's ownership in TRG at September 30, 1998 and December 31, 1997
consisted of a 62.8% and 36.70% managing general partnership interest, as well
as a preferred equity interest. Net income and distributions are allocable first
to the preferred equity interest, and the remaining amounts to the general and
limited TRG partners generally in accordance with their percentage ownership.
The Company's average ownership percentage in TRG for the three months ended
September 30, 1998 and 1997 was 39.54% and 36.69%, respectively. The Company's
average ownership percentage in TRG for the nine months ended September 30, 1998
and 1997 was 38.96% and 36.69%, respectively.
At September 30, 1998, the excess of the Company's cost of its investment in
TRG over the Company's share of TRG's accumulated partners' deficit was $390.4
million, of which $176.6 million and $213.8 million has been allocated to the
Company's bases in TRG's properties and investment in Unconsolidated Joint
Ventures, respectively. The excess of the Company's cost of its investment in
TRG partnership units over its proportionate share of TRG's accumulated
partners' deficit at December 31, 1997 was $468.4 million.
- 6 -
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS-- (Continued)
On September 30, 1998, TRG exchanged interests in 10 shopping centers (nine
wholly owned and one Unconsolidated Joint Venture), together with $990 million
of debt, for all of GMPT's partnership units (approximately 50 million units
with a fair value of $675 million, based on the average stock price of the
Company's shares of $13.50 for the two week period prior to the closing). TRG
will continue to manage the centers exchanged under a management agreement with
GMPT that expires December 31, 1999. The management agreement is cancelable with
90 days notice. The amount of debt allocated to GMPT is subject to a working
capital adjustment, which is expected to be settled in the fourth quarter. A
gain of $1.1 billion on the exchange was recognized by TRG, representing the
difference between the fair value of the GMPT units and the sum of the net book
values of the 10 shopping centers, the debt assumed by GMPT, the estimated
working capital adjustment, and transaction costs. The Company did not recognize
a share of this gain because the transaction was an exchange between the owners
of TRG.
In anticipation of the GMPT Exchange, TRG used the $1.2 billion proceeds from
two bridge loans bearing interest at one-month LIBOR plus 1.30% to extinguish
approximately $1.1 billion of debt, including substantially all of TRG's public
unsecured debt, its outstanding commercial paper, and borrowings on its existing
lines of credit. The remaining proceeds were used primarily to pay prepayment
premiums and transaction costs. An extraordinary charge of approximately $49.8
million, consisting primarily of prepayment premiums, was incurred in connection
with the extinguishment of the debt.
The balance on the first bridge loan of $902 million was assumed by GMPT in
connection with the GMPT Exchange. The second loan had a balance of $310 million
as of September 30, 1998. This loan has a maximum borrowing capacity of $430
million and expires in June 1999. TRG expects to refinance the balance on the
bridge loan during the first half of 1999. Additionally, TRG has obtained a $200
million line of credit, replacing TRG's previous revolving credit and commercial
paper facilities. The line of credit expires in September 2001.
During the nine months ended September 30, 1998, the Company's ownership of
TRG also increased due to the following transactions. In January 1998, TRG
redeemed 6.1 million units of partnership interest from a partner. In April
1998, the Company sold approximately 2.0 million shares of its common stock at
$13.1875 per share, before deducting the underwriting commission and expenses of
the offering, under the Company's shelf registration statement. The Company used
the proceeds to acquire an additional equity interest in TRG. TRG paid all costs
of the offering. Net proceeds of approximately $25 million were used by TRG for
general partnership purposes. Also, the Company exchanged 0.1 million shares of
common stock for an equal number of TRG partnership units issued in connection
with the exercise of incentive options, pursuant to the Company's Continuing
Offer (Note 3).
The Company's income from its investment in TRG included $4.2 million and
$12.5 million for the three and nine months ended September 30, 1998,
respectively, from its Series A Preferred Equity interest in TRG. The Company's
share of TRG's income before extraordinary item available to partnership
unitholders for the three months ended September 30, 1998 and 1997 was $3.9
million and $8.5 million, respectively, reduced by $2.3 million and $2.0
million, respectively, representing adjustments arising from the Company's
additional basis in TRG's net assets. The Company's share of TRG's income before
extraordinary items available to partnership unitholders for the nine months
ended September 30, 1998 and 1997 was $18.6 million and $25.2 million,
respectively, reduced by $6.7 million and $6.1 million, respectively,
representing adjustments arising form the Company's additional basis in TRG's
net assets. For the 1998 periods, the Company's share of TRG's income before
extraordinary items includes $4.2 million related to the loss on TRG's
restructuring which occurred concurrently with the GMPT Exchange.
- 7 -
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS-- (Continued)
During the first quarter of 1998, TRG recognized an extraordinary charge of
$1.0 million relating to the extinguishment of debt by one of its joint
ventures. The Company's share of TRG's extraordinary item was $0.4 million.
During the third quarter of 1998, TRG recognized an extraordinary charge of
$49.8 million relating to debt extinguished in anticipation of the GMPT
Exchange, of which the Company's share was $19.7 million.
TRG's summarized balance sheet and results of operations information (in
thousands) are presented below, followed by information about TRG's beneficial
interest in the operations of its Unconsolidated Joint Ventures. Beneficial
interest is calculated based on TRG's ownership interest in each of the
Unconsolidated Joint Ventures. The Company's balances of Properties and
Investment in Unconsolidated Joint Ventures differ from the corresponding
amounts presented in TRG's summarized balance sheet due to the Company's
additional basis in these assets.
September 30 December 31
------------ -----------
1998 1997
---- ----
Assets:
Properties $1,173,232 $1,593,350
Accumulated depreciation
and amortization 145,256 268,658
---------- ----------
$1,027,976 $1,324,692
Other assets 68,189 72,134
---------- ----------
$1,096,165 $1,396,826
========== ==========
Liabilities:
Unsecured notes payable $ 441,496 $1,008,459
Mortgage notes payable 241,969 275,868
Accounts payable and other liabilities 154,731 106,404
Distributions in excess of net income of
Unconsolidated Joint Ventures 117,736 141,815
---------- ----------
$ 955,932 $1,532,546
Partnership Equity:
Series A Preferred Equity 192,840 192,840
Partners' Accumulated Deficit (52,607) (328,560)
---------- ----------
$1,096,165 $1,396,826
========== ==========
- 8 -
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS-- (Continued)
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues excluding GMPT
Exchange gain $ 90,932 $ 78,037 $ 270,166 $223,961
Gain on GMPT Exchange 1,090,159 1,090,159
---------- -------- ---------- --------
$1,181,091 $ 78,037 $1,360,325 $223,961
---------- -------- ---------- --------
Operating costs other than
interest and depreciation
and amortization $ 53,942 $ 36,763 $ 138,759 $108,651
Interest expense 22,076 19,388 66,662 54,002
Depreciation and amortization 14,788 11,050 42,868 31,386
---------- -------- ---------- --------
$ 90,806 $ 67,201 $ 248,289 $194,039
---------- -------- ---------- --------
Equity in income before
extraordinary item of
Unconsolidated Joint Ventures 13,818 12,205 38,349 38,873
---------- -------- ---------- --------
Income before extraordinary items $1,104,103 $ 23,041 $1,150,385 $ 68,795
Extraordinary items (49,817) (50,774)
---------- -------- ---------- --------
Net income $1,054,286 $ 23,041 $1,099,611 $ 68,795
Preferred distributions (4,150) (12,450)
---------- -------- ---------- --------
Net income available to
unitholders $1,050,136 $ 23,041 $1,087,161 $ 68,795
========== ======== ========== ========
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1998 1997 1998 1997
---- ---- ---- ----
TRG's beneficial interest
in Unconsolidated Joint
Ventures' operations:
Revenues less recoverable
and other operating expenses $ 28,036 $ 23,187 $ 79,902 $ 68,503
Interest expense (9,820) (7,491) (28,731) (20,720)
Depreciation and amortization (4,398) (3,491) (12,822) (8,910)
-------- -------- --------- --------
Income before extraordinary item $ 13,818 $ 12,205 $ 38,349 $ 38,873
======== ======== ======== ========
Note 3 - Commitments and Contingencies
At the time of the Company's initial public offering (IPO) and acquisition of
its partnership interest in TRG, the Company entered into an agreement with A.
Alfred Taubman, who owns an interest in TRG, whereby he has the annual right to
tender to the Company units of partnership interest in TRG (provided that the
aggregate value is at least $50 million) and cause the Company to purchase the
tendered interests at a purchase price based on a market valuation of the
Company on the trading date immediately preceding the date of the tender (the
Cash Tender Agreement). The Company will have the option to pay for these
interests from available cash, borrowed funds or from the proceeds of an
offering of the Company's common stock. Generally, the Company expects to
finance these purchases through the sale of new shares of its stock. The
tendering partner will bear all market risk if the market price at closing is
less than the purchase price and will bear the costs of sale. Any proceeds of
the offering in excess of the purchase price will be for the sole benefit of the
Company. At A. Alfred Taubman's election, his family and Robert C. Larson and
his family may participate in tenders.
- 9 -
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS-- (Continued)
Based on a market value at September 30, 1998 of $14.00 per common share, the
aggregate value of interests in TRG which may be tendered under the Cash Tender
Agreement was approximately $333 million. The purchase of these interests at
September 30, 1998 would have resulted in the Company owning an additional 28%
interest in TRG.
The Company has made a continuing, irrevocable offer to all present holders
(other than certain excluded holders, including A. Alfred Taubman), assignees of
all present holders, those future holders of partnership interests in TRG as the
Company may, in its sole discretion, agree to include in the continuing offer,
and all existing and future optionees under TRG's incentive option plan
(described below) to exchange shares of common stock for partnership interests
in TRG (the Continuing Offer). Under the Continuing Offer agreement, one unit of
TRG partnership interest is exchangeable for one share of the Company's common
stock.
Shares of common stock that were acquired by GMPT and the AT&T Master Pension
Trust in connection with the IPO may be sold through a registered offering.
Pursuant to a registration rights agreement with the Company, the owners of each
of these shares have the annual right to cause the Company to register and
publicly sell their shares of common stock (provided that the shares have an
aggregate value of at least $50 million and subject to certain other
restrictions). All expenses of such a registration are to be borne by the
Company, other than the underwriting discounts or selling commissions, which
will be borne by the exercising party.
Currently, options for 8.1 million units of partnership interest may be issued
under TRG's incentive option plan for employees of The Taubman Company Limited
Partnership (the Manager), of which options for 6.9 million units are
outstanding. The Manager, which is approximately 99% beneficially owned by TRG,
provides various administrative, management, accounting, shareowner relations,
and other services to the Company and TRG. The exercise price of all options
outstanding was equal to market value on the date of the grant. Incentive
options generally vest to the extent of one-third of the units on each of the
third, fourth and fifth anniversaries of the date of grant. Options expire ten
years from the date of grant. During the nine months ended September 30, 1998,
options for 0.1 million units were exercised at a weighted average price of
$11.04 per unit. There were no grants during the nine months ended September 30,
1998. As of September 30, 1998, there were options outstanding for 6.9 million
units with a weighted average exercise price of $11.22 per unit, of which
options for 6.1 million units were vested with a weighted average exercise price
of $11.29 per unit.
Note 4 - Series B Preferred Stock
In connection with the GMPT Exchange, the Company became obligated to issue to
the partners in TRG other than the Company (Minority Partners), upon
subscription, one share of Series B Non-Participating Convertible Preferred
Stock (Series B Preferred Stock) for each TRG unit held by the Minority
Partners. The Company expects to have completed the initial issuance of Series B
Preferred Stock to the Minority Partners before the end of 1998. Each share of
Series B Preferred Stock entitles the holder to one vote on all matters
submitted to the Company's shareholders. The holders of Series B Preferred
Stock, voting as a class, have the right to designate up to four nominees for
election as directors of the Company. On all other matters, including the
election of directors, the holders of Series B Preferred Stock will vote with
the holders of common stock. The holders of Series B Preferred Stock are not
entitled to dividends or earnings. Under certain circumstances, the Series B
Preferred Stock is convertible into common stock at a ratio of 14,000 shares of
Series B Preferred Stock for one share of common stock.
- 10 -
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS-- (Continued)
Note 5 - Earnings Per Share
Basic earnings per common share are calculated by dividing earnings available
to common shareowners by the average number of common shares outstanding during
each period. For diluted earnings per common share, the Company's ownership
interest in TRG (and therefore earnings) is adjusted assuming the exercise of
all options for units of partnership interest under TRG's incentive option plan
having exercise prices less than the average market value of the units using the
treasury stock method. For the three months ended September 30, 1998 and 1997,
options for 0.2 million and 0.4 million units of partnership interest with
average exercise prices of $13.89 and $13.58, respectively, were excluded from
the computation of diluted earnings per share because the exercise prices were
greater than the average market price for the period calculated. For the nine
months ended September 30, 1998 and 1997, options for 0.3 million and 0.4
million units of partnership interest with average exercise prices of $13.79 and
13.68, respectively, were excluded from the computation of diluted earnings per
share because the exercise prices were greater than the average market price for
the period calculated.
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1998 1997 1998 1997
---- ---- ---- ----
(in thousands, except share data)
Income before extraordinary
items allocable to common
shareowners (Numerator):
Basic income before
extraordinary items $ 1,423 $ 6,214 $ 11,436 $ 18,553
Effect of dilutive options (35) (58) (157) (194)
-------- -------- -------- --------
Diluted income before
extraordinary items $ 1,388 $ 6,156 $ 11,279 $ 18,359
======== ======== ======== ========
Shares (Denominator) -
basic and diluted 52,899,013 50,745,241 51,949,256 50,730,179
Income before extraordinary
items per common share:
Basic $ .03 $ .12 $ .22 $ .37
===== ===== ===== =====
Diluted $ .03 $ .12 $ .22 $ .36
===== ===== ===== =====
- 11 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(in thousands)
September 30 December 31
------------ -----------
1998 1997
---- ----
Assets:
Properties $1,173,232 $1,593,350
Accumulated depreciation
and amortization 145,256 268,658
---------- ----------
$1,027,976 $1,324,692
Cash and cash equivalents 24,259 3,250
Accounts and notes receivable, less
allowance for doubtful accounts of
$386 and $414 in 1998 and 1997 14,249 17,803
Accounts receivable from related parties 8,428 7,400
Deferred charges and other assets 21,253 43,681
---------- ----------
$1,096,165 $1,396,826
========== ==========
Liabilities:
Unsecured notes payable $ 441,496 $1,008,459
Mortgage notes payable 241,969 275,868
Accounts payable and other liabilities 154,731 106,404
Distributions in excess of net income of
Unconsolidated Joint Ventures (Note 4) 117,736 141,815
---------- ----------
$ 955,932 $1,532,546
Commitments and Contingencies (Note 6)
Partnership Equity:
Series A Preferred Equity 192,840 192,840
Partners' Accumulated Deficit (52,607) (328,560)
---------- ----------
140,233 (135,720)
---------- ----------
$1,096,165 $1,396,826
========== ==========
Allocation of Partners' Accumulated Deficit:
General Partners $ (36,965) $ (254,474)
Limited Partners (15,642) (74,086)
---------- ----------
$ (52,607) $ (328,560)
========== ==========
See notes to financial statements.
- 12 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except units data)
Three Months Ended September 30
-------------------------------
1998 1997
---- ----
Revenues:
Minimum rents $ 52,021 $ 45,140
Percentage rents 2,008 1,867
Expense recoveries 28,339 24,476
Other 6,676 4,379
Revenues from management, leasing
and development services 1,888 2,175
Gain on GMPT Exchange (Note 2) 1,090,159
---------- ---------
$1,181,091 $ 78,037
---------- ---------
Operating Costs:
Recoverable expenses $ 25,994 $ 20,932
Other operating 11,027 7,980
Management, leasing and
development services 1,111 1,264
General and administrative 5,112 6,587
Restructuring (Note 2) 10,698
Interest expense 22,076 19,388
Depreciation and amortization 14,788 11,050
---------- ---------
$ 90,806 $ 67,201
---------- ---------
Income before equity in net income
of Unconsolidated Joint Ventures
and extraordinary item $1,090,285 $ 10,836
Equity in net income of Unconsolidated
Joint Ventures (Note 4) 13,818 12,205
---------- ---------
Income before extraordinary item $1,104,103 $ 23,041
Extraordinary item (Note 2) (49,817)
---------- ---------
Net income $1,054,286 $ 23,041
Preferred distributions to TCO (4,150)
---------- ---------
Net income available to unitholders $1,050,136 $ 23,041
========== =========
Allocation of net income to unitholders:
General Partners $ 985,981 $ 17,845
Limited Partners 64,155 5,196
---------- ---------
$1,050,136 $ 23,041
========== =========
Basic earnings per Unit of Partnership
Interest (Note 7):
Income before extraordinary item $ 8.22 $ .17
========== =========
Net income $ 7.85 $ .17
========== =========
Diluted earnings per Unit of Partnership
Interest (Note 7):
Income before extraordinary item $ 8.15 $ .17
========== =========
Net income $ 7.78 $ .17
========== =========
Weighted Average Number of Units of
Partnership Interest Outstanding 133,775,064 138,277,110
=========== ===========
See notes to financial statements.
- 13 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except units data)
Nine Months Ended September 30
------------------------------
1998 1997
---- ----
Revenues:
Minimum rents $ 155,860 $ 130,406
Percentage rents 5,219 5,030
Expense recoveries 84,787 70,661
Other 18,510 11,384
Revenues from management, leasing
and development services 5,790 6,480
Gain on GMPT Exchange (Note 2) 1,090,159
---------- ---------
$1,360,325 $ 223,961
---------- ---------
Operating Costs:
Recoverable expenses $ 74,416 $ 60,223
Other operating 31,392 26,218
Management, leasing and
development services 3,536 3,553
General and administrative 18,717 18,657
Restructuring (Note 2) 10,698
Interest expense 66,662 54,002
Depreciation and amortization 42,868 31,386
---------- ---------
$ 248,289 $ 194,039
---------- ---------
Income before equity in income before
extraordinary item of Unconsolidated
Joint Ventures and extraordinary items $1,112,036 $ 29,922
Equity in income before extraordinary item
of Unconsolidated Joint Ventures (Note 4) 38,349 38,873
---------- ---------
Income before extraordinary items $1,150,385 $ 68,795
Extraordinary items (Note 2) (50,774)
---------- ---------
Net Income $1,099,611 $ 68,795
Preferred distributions to TCO (12,450)
---------- ---------
Net income available to unitholders $1,087,161 $ 68,795
========== =========
Allocation of net income available
to unitholders:
General Partners $1,016,042 $ 53,278
Limited Partners 71,119 15,517
---------- ---------
$1,087,161 $ 68,795
========== =========
Basic earnings per Unit of Partnership
Interest (Note 7):
Income before extraordinary items $ 8.53 $ .50
========== =========
Net income $ 8.15 $ .50
========== =========
Diluted earnings per Unit of Partnership
Interest (Note 7):
Income before extraordinary items $ 8.46 $ .49
========== =========
Net income $ 8.08 $ .49
========== =========
Weighted Average Number of Units of
Partnership Interest Outstanding 133,354,554 138,261,847
=========== ===========
See notes to financial statements.
- 14 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended September 30
------------------------------
1998 1997
---- ----
Cash Flows From Operating Activities:
Income before extraordinary items $ 1,150,385 $ 68,795
Adjustments to reconcile income before
extraordinary items to net cash
provided by operating activities:
Depreciation and amortization 42,868 31,386
Provision for losses on accounts receivable 1,077 828
Amortization of deferred financing costs 2,129 1,740
Other 621 468
Gains on sales of land (2,905) (880)
Gain on GMPT Exchange (1,090,159)
Increase (decrease) in cash attributable
to changes in assets and liabilities:
Receivables, deferred charges and
other assets (8,602) (6,129)
Accounts payable and other liabilities 43,447 30,375
----------- ---------
Net Cash Provided By Operating Activities $ 138,861 $ 126,583
----------- ---------
Cash Flows From Investing Activities:
Purchase of interests in Centers $(124,783)
Additions to properties $ (228,015) (105,947)
Proceeds from sales of land 4,302 1,795
Contributions to Unconsolidated Joint Ventures (29,140) (12,573)
Distributions from Unconsolidated Joint Ventures
in excess of income before extraordinary item 52,076 14,777
----------- ---------
Net Cash Used In Investing Activities $ (200,777) $(226,731)
=========== =========
Cash Flows From Financing Activities:
Debt proceeds $ 1,558,716 $ 243,991
Debt payments (130,913) (54,544)
Early extinguishment of debt (1,167,746)
Debt issuance costs (2,790) (382)
Redemption of partnership units (77,698)
GMPT Exchange costs (15,177)
Equity offering 25,160
Issuance of units of partnership interest 1,498 414
Cash distributions to partnership unitholders (95,675) (96,065)
Cash distributions to TCO for Series A
Preferred Equity interest (12,450)
----------- ---------
Net Cash Provided By Financing Activities $ 82,925 $ 93,414
----------- ---------
Net Increase (Decrease) In Cash $ 21,009 $ (6,734)
Cash and Cash Equivalents at Beginning of Period 3,250 7,912
----------- ---------
Cash and Cash Equivalents at End of Period $ 24,259 $ 1,178
=========== =========
Interest on mortgage notes and other loans paid during the nine months ended
September 30, 1998 and 1997, net of amounts capitalized of $12,830 and $6,798,
was $69,077 and $39,149, respectively.
See notes to financial statements.
- 15 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended September 30, 1998
Note 1 - Interim Financial Statements
The Taubman Realty Group Limited Partnership (TRG) engages in the ownership,
management, leasing, acquisition, development, and expansion of regional retail
shopping centers (Taubman Shopping Centers) and interests therein. Taubman
Centers, Inc. (TCO) is the managing general partner of TRG. Other general
partners include TG Partners Limited Partnership, Taub-Co Management, Inc., and,
prior to September 30, 1998, General Motors Pension Trusts (GMPT).
The unaudited interim financial statements should be read in conjunction with
the audited financial statements and related notes included in TRG's Annual
Report on Form 10-K for the year ended December 31, 1997. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial statements for the interim
periods have been made. The results for interim periods are not necessarily
indicative of the results for a full year.
Certain prior year amounts have been reclassified to conform to 1998
classifications.
Note 2 - The GMPT Exchange and Related Transactions
On September 30, 1998, TRG exchanged interests in 10 shopping centers (nine
wholly owned (Briarwood, Columbus City Center, The Falls, Hilltop, Lakeforest,
Marley Station, Meadowood Mall, Stoneridge, and The Mall at Tuttle Crossing) and
one Unconsolidated Joint Venture (Woodfield)), together with $990 million of
debt, for all of the partnership units of GMPT (approximately 50 million units
with a fair value of $675 million, based on the average stock price of TCO
shares of $13.50 for the two week period prior to the closing) (the GMPT
Exchange). TRG will continue to manage the centers exchanged under a management
agreement with GMPT that expires December 31, 1999. The management agreement is
cancelable with 90 days notice. The amount of debt allocated to GMPT is subject
to a working capital adjustment, which is expected to be settled in the fourth
quarter. A gain of $1.1 billion on the exchange was recognized, representing the
difference between the fair value of the GMPT units and the sum of the net book
values of the 10 shopping centers, the debt assumed by GMPT, the estimated
working capital adjustment, and transaction costs.
During the three and nine months ended September 30, 1998, the exchanged
centers contributed $25.8 million and $75.1 million to TRG's net income,
respectively. During the three and nine months ended September 30, 1997, the
exchanged centers contributed $20.6 million and $57.8 million to TRG's net
income, respectively.
In anticipation of the GMPT Exchange, TRG used the $1.2 billion proceeds from
two bridge loans bearing interest at one-month LIBOR plus 1.30% to extinguish
approximately $1.1 billion of debt, including substantially all of TRG's public
unsecured debt, its outstanding commercial paper, and borrowings on its existing
lines of credit. The remaining proceeds were used primarily to pay prepayment
premiums and transaction costs. An extraordinary charge of approximately $49.8
million, consisting primarily of prepayment premiums, was incurred in connection
with the extinguishment of the debt.
- 16 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The balance on the first bridge loan of $902 million was assumed by GMPT in
connection with the GMPT Exchange. The second loan had a balance of $310 million
as of September 30, 1998. This loan has a maximum capacity of $430 million and
expires in June 1999. TRG expects to refinance the balance on the bridge loan
during the first half of 1999. Additionally, TRG has obtained a $200 million
line of credit, replacing TRG's previous revolving credit and commercial paper
facilities. The line of credit expires in September 2001. TRG entered into
treasury lock agreements with a notional amount of $200 million at approximately
5%, plus credit spread. In October 1998, TRG effectively closed out its position
in the treasury locks at a cost of approximately $4 million, which will be
deferred and amortized over the term of the anticipated new debt.
Concurrent with the GMPT Exchange, TRG committed to a restructuring of its
operations. TRG recognized a restructuring charge of $10.7 million, primarily
representing the cost of certain involuntary terminations of personnel.
Note 3 - Other Equity Transactions
In January 1998, TRG redeemed a partner's 6.1 million units of partnership
interest for approximately $77.7 million (including costs). The redemption was
funded through the use of an existing revolving credit facility.
In April 1998, TCO sold approximately 2.0 million shares of its common stock
at $13.1875 per share, before deducting the underwriting commission and expenses
of the offering, under TCO's shelf registration statement. TCO used the proceeds
to acquire an additional equity interest in TRG. TRG paid all costs of the
offering. Net proceeds of approximately $25 million were used by TRG for general
partnership purposes.
Note 4 - Investments in Unconsolidated Joint Ventures
Following are TRG's investments in various real estate Unconsolidated Joint
Ventures which own regional retail shopping centers. TRG is generally the
managing general partner of these Unconsolidated Joint Ventures. TRG's interest
in each Unconsolidated Joint Venture is as follows:
TRG's %
Ownership
as of
Unconsolidated Joint Venture Taubman Shopping Center September 30, 1998
---------------------------- ----------------------- ------------------
Arizona Mills, L.L.C. Arizona Mills 37%
Fairfax Company of Virginia L.L.C. Fair Oaks 50
Lakeside Mall Limited Partnership Lakeside 50
Rich-Taubman Associates Stamford Town Center 50
Taubman-Cherry Creek
Limited Partnership Cherry Creek 50
Twelve Oaks Mall Limited Partnership Twelve Oaks Mall 50
West Farms Associates Westfarms 79
Woodland Woodland 50
- 17 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
In March 1998, Fairfax Company of Virginia L.L.C. completed a $140 million,
6.60%, secured financing maturing in 2008. The net proceeds were used to
extinguish an existing mortgage on Fair Oaks of approximately $39 million and
pay a prepayment penalty of approximately $1.8 million. In addition, proceeds of
$5.6 million were used to close out a treasury lock agreement entered into in
1997, which resulted in an effective rate on the financing of approximately 7%.
The remaining proceeds were distributed to the owners. TRG used its 50% share of
the distributions to pay down its revolving credit facilities. TRG recognized an
extraordinary charge of approximately $1.0 million on the extinguishment of the
Fair Oaks mortgage.
TRG reduces its investment in Unconsolidated Joint Ventures to eliminate
intercompany profits on sales of services that are capitalized by the
Unconsolidated Joint Ventures. As a result, the carrying value of TRG's
investment in Unconsolidated Joint Ventures is less than TRG's share of the
deficiency in assets reported in the combined balance sheet of the
Unconsolidated Joint Ventures by approximately $5.7 million and $8.1 million at
September 30, 1998 and December 31, 1997, respectively. These differences are
amortized over the useful lives of the related assets.
Combined balance sheet and results of operations information are presented
below (in thousands) for all Unconsolidated Joint Ventures, followed by TRG's
beneficial interest in the combined information. Beneficial interest is
calculated based on TRG's ownership interest in each of the Unconsolidated Joint
Ventures.
September 30 December 31
------------ -----------
1998 1997
---- ----
Assets:
Properties, net $ 564,064 $ 623,981
Other assets 62,209 84,397
--------- ---------
$ 626,273 $ 708,378
========= =========
Liabilities and partners'
accumulated deficiency in assets:
Debt $ 825,311 $ 875,356
Capital lease obligations 5,574 6,509
Other liabilities 43,156 94,801
TRG accumulated deficiency in assets (112,018) (133,680)
Unconsolidated Joint Venture Partners'
accumulated deficiency in assets (135,750) (134,608)
--------- ---------
$ 626,273 $ 708,378
========= =========
TRG accumulated deficiency in assets (above) $(112,018) $(133,680)
Elimination of intercompany profit (5,718) (8,135)
--------- ---------
Distributions in excess of net income
of Unconsolidated Joint Ventures $(117,736) $(141,815)
========= =========
- 18 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues $ 76,193 $ 62,541 $220,651 $187,574
-------- -------- -------- --------
Recoverable and other
operating expenses $ 26,831 $ 22,827 $ 78,078 $ 68,417
Interest expense 18,431 13,588 53,788 38,459
Depreciation and amortization 8,508 6,112 25,168 16,728
-------- -------- -------- --------
Total operating costs $ 53,770 $ 42,527 $157,034 $123,604
-------- -------- -------- --------
Income before extraordinary item $ 22,423 $ 20,014 $ 63,617 $ 63,970
Extraordinary item (1,913)
-------- -------- -------- --------
Net Income $ 22,423 $ 20,014 $ 61,704 $ 63,970
======== ======== ======== ========
Net income attributable to TRG $ 11,917 $ 11,234 $ 32,398 $ 35,035
Extraordinary item attributable
to TRG 957
Realized intercompany profit 1,901 971 4,994 3,838
-------- -------- -------- --------
Equity in income before
extraordinary item of
Unconsolidated Joint Ventures $ 13,818 $ 12,205 $ 38,349 $ 38,873
======== ======== ======== ========
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1998 1997 1998 1997
---- ---- ---- ----
TRG's beneficial interest
in Unconsolidated Joint
Ventures' operations:
Revenues less recoverable and
other operating expenses $ 28,036 $ 23,187 $ 79,902 $ 68,503
Interest expense (9,820) (7,491) (28,731) (20,720)
Depreciation and amortization (4,398) (3,491) (12,822) (8,910)
-------- -------- -------- --------
Income before extraordinary item $ 13,818 $ 12,205 $ 38,349 $ 38,873
======== ======== ======== ========
Note 5 - Beneficial Interest in Debt and Interest Expense
TRG's beneficial interest in the debt (excluding capital lease obligations),
capitalized interest, and interest expense (net of capitalized interest) of TRG,
its consolidated subsidiaries and its Unconsolidated Joint Ventures is
summarized in the following table. TRG's beneficial interest for 1998 and 1997
excludes the 30% minority interest in the debt outstanding on the MacArthur
Center construction facility.
- 19 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
Unconsolidated TRG's Share of TRG's TRG's
Joint Unconsolidated Consolidated Beneficial
Ventures Joint Ventures Subsidiaries Interest
-------- -------------- ------------ --------
<S> <C> <C> <C> <C>
Debt as of:
September 30, 1998 $ 825,311 $ 439,086 $ 683,465 $1,094,655
December 31, 1997 875,356 465,556 1,284,327 1,737,211
Capitalized interest:
Nine months ended September 30, 1998 $ 1,748 $ 869 $ 12,830 $ 12,575
Nine months ended September 30, 1997 6,683 3,851 6,798 10,649
Interest expense
(Net of capitalized interest):
Nine months ended September 30, 1998 $ 53,788 $ 28,731 $ 66,662 $ 95,393
Nine months ended September 30, 1997 38,459 20,720 54,002 74,722
</TABLE>
Note 6 - Incentive Option Plan
TRG has an incentive option plan for employees of the Manager. Currently,
options for 8.1 million units of partnership interest may be issued under the
plan, of which options for 6.9 million units are outstanding. The exercise price
of all options outstanding was equal to market value on the date of grant.
Incentive options generally vest to the extent of one-third of the units on each
of the third, fourth and fifth anniversaries of the date of grant. Options
expire ten years from the date of grant. During the nine months ended September
30, 1998, options for 0.1 million units were exercised at a weighted average
price of $11.04 per unit. There were no grants during the nine months ended
September 30, 1998. As of September 30, 1998, there were options outstanding for
6.9 million units with a weighted average exercise price of $11.22 per unit, of
which options for 6.1 million units were vested with a weighted average exercise
price of $11.29 per unit.
Note 7 - Earnings Per Unit of Partnership Interest
Basic earnings per unit of partnership interest are based on the average
number of units of partnership interest outstanding during each period. Diluted
earnings per unit of partnership interest are based on the average number of
units of partnership interest outstanding during each period, assuming exercise
of all options for units of partnership interest having exercise prices less
than the average market value of the units using the treasury stock method. For
the three months ended September 30, 1998 and 1997, options for 0.2 million and
0.4 million units of partnership interest with average exercise prices of $13.89
and $13.58 per unit, respectively, were excluded from the computation of diluted
earnings per unit because the exercise prices were greater than the average
market price for the period calculated. For the nine months ended September 30,
1998 and 1997, options for 0.3 million and 0.4 million units of partnership
interest with average exercise prices of $13.79 and $13.68, respectively, were
excluded from the computation of diluted earnings per unit because the exercise
prices were greater than the average market price for the period calculated.
- 20 -
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1998 1997 1998 1997
---- ---- ---- ----
(in thousands, except unit data)
<S> <C> <C> <C> <C>
Income before extraordinary items
allocable to unitholders (Numerator) $ 1,099,953 $ 23,041 $ 1,137,935 $ 68,795
=========== =========== =========== ===========
Partnership units (Denominator):
Basic 133,775,064 138,277,110 133,354,554 138,261,847
Effect of dilutive options 1,221,332 980,773 1,136,390 1,068,494
----------- ----------- ----------- -----------
Diluted 134,996,396 139,257,883 134,490,944 139,330,341
=========== =========== =========== ===========
Per unit:
Basic $ 8.22 $ .17 $ 8.53 $ .50
====== ===== ====== =====
Diluted $ 8.15 $ .17 $ 8.46 $ .49
====== ===== ====== =====
</TABLE>
- 21 -
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
The following discussion should be read in conjunction with the accompanying
Financial Statements of Taubman Centers, Inc. and the Notes thereto and the
Consolidated Financial Statements of The Taubman Realty Group Limited
Partnership and the Notes thereto.
General Background and Performance Measurement
The Company, through its interest in and as managing general partner of TRG,
participates in TRG's Owned Businesses. TRG's Owned Businesses consist of: (i)
Taubman Shopping Centers that TRG controls by ownership or contractual
agreement, development projects for future regional shopping centers
(Development Projects) and The Taubman Company Limited Partnership (the
Manager), (collectively, the Consolidated Businesses); and (ii) Taubman Shopping
Centers partially owned through joint ventures with third parties that are not
controlled (Unconsolidated Joint Ventures). The Unconsolidated Joint Ventures
are accounted for under the equity method in TRG's Consolidated Financial
Statements.
Certain aspects of the performance of the Owned Businesses are best understood
by measuring their performance as a whole, without regard to TRG's ownership
interest. For example, mall tenant sales and shopping center occupancy trends
fit this category and are so analyzed below. In addition, trends in certain
items of revenue and expense are often best understood in the same fashion, and
consequently, in addition to the discussion of the operations of the
Consolidated Businesses, the operations of the Unconsolidated Joint Ventures are
presented and discussed as a whole.
On September 30, 1998, TRG exchanged interests in 10 shopping centers (nine
Consolidated Businesses (Briarwood, Columbus City Center, The Falls, Hilltop,
Lakeforest, Marley Station, Meadowood Mall, Stoneridge, and The Mall at Tuttle
Crossing) and one Unconsolidated Joint Venture (Woodfield)) and a share of TRG's
debt for all of the partnership units owned by General Motors Pension Trusts
(GMPT) (the GMPT Exchange - see TRG - 1998 Transactions -- GMPT Exchange and
Related Transactions). Performance statistics for periods presented below
include these ten centers (the GMPT Centers) through the completion of the GMPT
Exchange, while information presented as of September 30, 1998, such as ending
occupancy, excludes the GMPT Centers. In future periods, the GMPT Exchange will
impact the presentation of the Company's results of operations and changes in
its financial condition, as the Company obtained a controlling interest in TRG
as a result of the transaction and will consolidate TRG's results. However, as
the exchange did not occur until September 30, 1998, the Company's results of
operations and changes in its financial condition for periods presented continue
to be best understood through separate analysis of the Company and TRG, and are
so discussed below.
Seasonality
The regional shopping center industry is seasonal in nature, with mall tenant
sales highest in the fourth quarter due to the Christmas season, and with
lesser, though still significant, sales fluctuations associated with the Easter
holiday and back-to-school events. While minimum rents and recoveries are
generally not subject to seasonal factors, most leases are scheduled to expire
in the first quarter, and the majority of new stores open in the second half of
the year in anticipation of the Christmas selling season. Accordingly, revenues
and occupancy levels are generally highest in the fourth quarter.
- 22 -
<PAGE>
The following table summarizes certain quarterly operating data for TRG's
Owned Businesses for 1997 and the first three quarters of 1998:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th 1st 2nd 3rd
Quarter Quarter Quarter Quarter Total Quarter Quarter Quarter
1997 1997 1997 1997 1997 1998 1998 1998
---------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mall tenant sales $600,709 $629,906 $692,487 $1,163,157 $3,086,259 $740,104 $796,862 $809,802 (1)
Revenues 130,677 134,756 137,728 157,192 560,353 156,415 161,598 164,044
Occupancy:
Average Occupancy 86.5% 86.8% 87.0% 89.5% 87.6% 88.5% 88.3% 89.2% (2)
Ending Occupancy 86.4% 87.1% 87.2% 90.3% 90.3% 88.2% 88.4% 89.8% (3)
Leased Space 88.7% 89.5% 90.8% 92.3% 92.3% 91.3% 91.6% 92.4% (3)
(1) Mall tenant sales excluding the GMPT Centers were $507.1 million and $1.5
billion for the three and nine months ended September 30, 1998,
respectively.
(2) Average occupancy excluding the GMPT Centers was 89.5% and 89.1% for the
three and nine months ended September 30, 1998, respectively.
(3) Excludes GMPT Centers as of September 30, 1998.
</TABLE>
Because the seasonality of sales contrasts with the generally fixed nature of
minimum rents and recoveries, mall tenant occupancy costs (the sum of minimum
rents, percentage rents and expense recoveries) relative to sales are
considerably higher in the first three quarters than they are in the fourth
quarter. The following table summarizes occupancy costs, excluding utilities,
for mall tenants as a percentage of sales for 1997 and the first three quarters
of 1998:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th 1st 2nd 3rd
Quarter Quarter Quarter Quarter Total Quarter Quarter Quarter
1997 1997 1997 1997 1997 1998 1998 1998 (1)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Minimum rents 12.6% 11.8% 11.3% 7.3% 10.1% 12.0% 11.2% 11.2%
Percentage rents 0.2 0.3 0.3 0.2 0.3 0.2 0.3 0.3
Expense recoveries 5.2 5.1 4.7 3.5 4.4 4.8 4.9 4.7
---- ---- ---- ---- ---- ---- ---- ----
Mall tenant
occupancy costs 18.0% 17.2% 16.3% 11.0% 14.8% 17.0% 16.4% 16.2%
==== ==== ==== ==== ==== ==== ==== ====
(1) Mall tenant occupancy costs as a percentage of sales excluding the GMPT
Centers were 15.9% for both the three and nine months ended September 30,
1998.
</TABLE>
Rental Rates
Average base rent per square foot for all mall tenants at the 18 Centers owned
and open for at least five years was $39.44 for the twelve months ended
September 30, 1998, compared to $38.62 for the twelve months ended September 30,
1997. Excluding the GMPT Centers, the average base rent per square foot for all
mall tenants at the remaining centers owned and open for at least five years (10
of the 15 remaining centers) was $41.98 for the twelve months ended September
30, 1998.
As leases have expired in the Taubman Shopping Centers, TRG has generally been
able to rent the available space, either to the existing tenant or a new tenant,
at rental rates that are higher than those of the expired leases. In a period of
increasing sales, rents on new leases will tend to rise as tenants' expectations
of future growth become more optimistic. In periods of slower growth or
declining sales, rents on new leases will grow more slowly or will decline for
the opposite reason. However, Center revenues nevertheless increase as older
leases roll over or are terminated early and replaced with new leases negotiated
at current rental rates that are usually higher than the average rates for
existing leases.
- 23 -
<PAGE>
The annual spread between average annualized base rent of stores opening and
closing, excluding renewals, has ranged between four and eleven dollars per
square foot during the past five years. TRG anticipates that the spread between
opening and closing rents for the 1998 fiscal year will be at or below the low
end of TRG's historical range. This statistic is difficult to predict in part
because TRG's leasing policies and practices may result in early lease
terminations with actual average closing rents which may vary from the average
rent per square foot of scheduled lease expirations. In addition, the opening or
closing of large tenant spaces, which generally pay a lower rent per square
foot, can significantly change the spread in a given year.
Results of Operations
Comparison of the Three and Nine Months Ended September 30, 1998 to the Three
and Nine Months Ended September 30, 1997
Taubman Centers, Inc.
The Company's average ownership of TRG was 39.54% and 38.96% for the three and
nine months ended September 30, 1998, respectively, and 36.69% for both the
three and nine months ended September 30, 1997. Since the first quarter of 1997,
the Company's ownership in TRG has changed as a result of the following
transactions.
The GMPT Exchange and Related Transactions
On September 30, 1998, the Company obtained a majority and controlling
interest in TRG as a result of the GMPT Exchange (TRG - 1998 Transactions --
GMPT Exchange and Related Transactions), which increased the Company's ownership
of TRG to 62.8%. Concurrent with the GMPT Exchange, TRG committed to a
restructuring of its operations, consisting primarily of involuntary termination
of personnel. Also, in anticipation of the GMPT Exchange, TRG used the proceeds
from bridge loans to extinguish substantially all of TRG's public unsecured
debt, its outstanding commercial paper, and borrowings on its existing lines of
credit.
Upon obtaining the controlling interest in TRG, the Company consolidated the
financial position of TRG. In future periods, the Company's results will include
the results of TRG on a consolidated basis and will reflect the effects of TRG's
revised portfolio, its restructured operations, and its new debt structure.
Other Transactions
In October 1997, the Company used the proceeds from its $200 million public
offering of eight million shares of 8.3% Series A Cumulative Redeemable
Preferred Stock to acquire a Series A Preferred Equity interest in TRG that
entitles the Company to income and distributions (in the form of guaranteed
payments) in amounts equal to the dividends payable on the Company's Series A
Preferred Stock. In January 1998, TRG redeemed 6.1 million units of partnership
interest from a partner, increasing the Company's ownership of TRG. In April
1998, the Company sold approximately 2.0 million shares of its common stock at
$13.1875 per share, before deducting the underwriting commission and expenses of
the offering. The Company used the proceeds to acquire an additional equity
interest in TRG. TRG paid all costs of the offering. Also, during 1997 and 1998
the Company exchanged common stock for TRG units of partnership interest newly
issued in connection with the exercise of incentive options.
- 24 -
<PAGE>
Comparison of Operating Results
The Company's income from TRG for the three months ended September 30, 1998
consisted of $4.2 million from its preferred equity interest in TRG and the
Company's $3.9 million share of TRG's net income before extraordinary item,
which includes the Company's $4.2 million share of TRG's restructuring loss. For
the three months ended September 30, 1997, the Company's income from TRG
consisted of its $8.5 million share of TRG's net income. The Company's share of
1998 and 1997 income was reduced by $2.3 million and $2.0 million, respectively,
representing adjustments arising from the Company's additional basis in TRG's
net assets. During the third quarter of 1998, the Company recognized an
extraordinary item of $19.7 million, consisting of its share of TRG's
extraordinary charge relating to debt extinguished in anticipation of the GMPT
Exchange. Net income (loss) available to common shareowners for the three months
ended September 30, 1998 was $(18.3) million, compared to $6.2 million for the
third quarter of 1997.
The Company's income from TRG for the nine months ended September 30, 1998
consisted of $12.5 million from its preferred equity interest in TRG and the
Company's $18.6 million share of TRG's income before extraordinary items, which
includes the Company's $4.2 share of TRG's restructuring loss. For the nine
months ended September 30, 1997, the Company's income from TRG consisted of its
$25.2 million share of TRG's net income. The Company's share of 1998 and 1997
income was reduced by $6.7 million and $6.1 million, respectively, representing
adjustments arising from the Company's additional basis in TRG's net assets.
During the first nine months of 1998, Company recognized extraordinary items of
$20.1 million, consisting of its share of TRG's extraordinary charges relating
primarily to debt extinguished in anticipation of the GMPT Exchange. Net income
(loss) available to common shareowners for the nine months ended September 30,
1998 was $(8.6) million, compared to $18.6 million for the same period in 1997.
In the third quarter of 1998, TRG recognized a gain on the GMPT Exchange,
representing the difference between the fair value and book value of the
interests exchanged. The Company did not recognize a share of the gain because
the transaction was an exchange between the owners of TRG.
TRG
1998 Transactions - GMPT Exchange and Related Transactions
On September 30, 1998, TRG exchanged interests in 10 shopping centers (nine
wholly owned and one Unconsolidated Joint Venture), together with $990 million
of debt, for all of GMPT's partnership units (approximately 50 million units
with a fair value of $675 million, based on the average stock price of the
Company's shares of $13.50 for the two week period prior to the closing). TRG
will continue to manage the centers exchanged under a management agreement with
GMPT that expires December 31, 1999. The management agreement is cancelable with
90 days notice. The amount of debt allocated to GMPT is subject to a working
capital adjustment, which is expected to be settled in the fourth quarter. A
gain of $1.1 billion on the exchange was recognized, representing the difference
between the fair value of the GMPT units and the sum of the net book values of
the 10 shopping centers, the debt assumed by GMPT, the estimated working capital
adjustment, and transaction costs. During the three and nine months ended
September 30, 1998, the exchanged centers contributed $32.3 million and $100.8
million to TRG's EBITDA, respectively (EBITDA is defined and described in
Liquidity and Capital Resources -- Distributions).
- 25 -
<PAGE>
In anticipation of the GMPT Exchange, TRG used the $1.2 billion proceeds from
two bridge loans bearing interest at one-month LIBOR plus 1.30% to extinguish
$1.1 billion of debt, including substantially all of TRG's public unsecured
debt, its outstanding commercial paper, and borrowings on its existing line of
credit. The remaining proceeds were used primarily to pay prepayment premiums
and transaction costs. An extraordinary charge of approximately $49.8 million,
consisting primarily of prepayment premiums, was recognized in connection with
the extinguishment of the debt. GMPT's share of debt received in the exchange
included the $902 million balance on the first bridge loan, $86 million
representing 50% of the debt on the Joint Venture owned shopping center, and
$1.6 million of assessment bond obligations. After the GMPT Exchange, TRG's debt
and its beneficial interest in its joint ventures totaled $1.1 billion
(Liquidity and Capital Resources - TRG).
Concurrent with the GMPT Exchange, TRG committed to a restructuring of its
operations. A restructuring charge of approximately $10.7 million was incurred,
consisting primarily of costs related to involuntary termination of personnel.
TRG expects to reduce its annual general and administrative expense by
approximately $10 million by 1999. This is a forward looking statement, and
certain significant factors could cause the actual reductions in TRG's general
and administrative expense to differ materially, including but not limited to:
1) actual payroll reductions achieved; 2) actual results of negotiations; 3) use
of outside consultants; and 4) changes in TRG's owned or managed portfolio.
1998 Transactions - Other
In January 1998, TRG redeemed a partner's 6.1 million units of partnership
interest for approximately $77.7 million (including costs). The redemption was
funded through the use of an existing revolving credit facility.
In March 1998, a 50% owned Unconsolidated Joint Venture completed a $140
million, 6.60%, secured financing maturing in 2008. The net proceeds were used
to extinguish an existing mortgage of approximately $39 million and pay a
prepayment penalty of approximately $1.8 million. In addition, proceeds of $5.6
million were used to close out a treasury lock agreement entered into in 1997,
which resulted in an effective rate on the financing of approximately 7%. The
remaining proceeds were distributed to the owners. TRG used its share of the
distribution to pay down its revolving credit facilities.
1997 Transactions
During 1997, TRG completed the following acquisitions: Regency Square in
September, The Falls in December, and the leasehold interest in The Mall at
Tuttle Crossing (Tuttle Crossing), also in December. In addition, TRG opened the
following new centers and expansions: Tuttle Crossing in July, Arizona Mills in
November, Westfarms' expansion in August, and Biltmore's expansion throughout
the last half of the year.
Occupancy and Mall Tenant Sales
The average occupancy rate in the Taubman Shopping Centers was 89.2% for the
three months ended September 30, 1998 compared to 87.0% for the comparable
period in 1997. For the nine months ended September 30, 1998 average occupancy
was 88.7% compared to 86.8% in the same period in 1997. The increase in average
occupancy was primarily due to increases in occupancy at Centers owned and open
prior to 1997. The ending occupancy rate for the Taubman Shopping Centers at
September 30, 1998 was 89.8% versus 87.2% at the same date in 1997. Leased space
at September 30, 1998 was 92.4% compared to 90.8% at the same date in 1997.
Statistics as of September 30, 1998 exclude the GMPT Centers.
- 26 -
<PAGE>
Total sales for Taubman Shopping Center mall tenants in the three months ended
September 30, 1998 were $809.8 million, a 16.9% increase from $692.5 million in
the same period in 1997. Tenant sales increased 22.0% to $2.3 billion for the
nine months ended September 30, 1998 from $1.9 billion in the comparable period
in 1997. Mall tenant sales per square foot, excluding Arizona Mills, increased
3.0% and 3.9% for the three and nine months ended September 30, 1998 over the
same periods in 1997. Mall tenant sales for Centers owned and open for all of
the first nine months of 1998 and 1997 were $698.1 million and $2.0 billion in
the third quarter and first nine months of 1998, a 5.7% increase and a 6.7%
increase, respectively, from the same periods in 1997.
- 27 -
<PAGE>
Comparison of the Three Months Ended September 30, 1998 to the Three Months
Ended September 30, 1997
The following table sets forth operating results for TRG's Owned Businesses
for the three months ended September 30, 1998 and September 30, 1997, showing
the results of the Consolidated Businesses and Unconsolidated Joint Ventures:
<TABLE>
<CAPTION>
Three Months Ended September 30, 1998 Three Months Ended September 30, 1997
------------------------------------------- -------------------------------------------
TRG UNCONSOLIDATED TOTAL TRG UNCONSOLIDATED TOTAL
CONSOLIDATED JOINT OWNED CONSOLIDATED JOINT OWNED
BUSINESSES(1) VENTURES(2) BUSINESSES BUSINESSES(1) VENTURES(2) BUSINESSES
------------------------------------------- -------------------------------------------
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Minimum rents 50.1 46.3 96.4 43.2 38.2 81.4
Percentage rents 1.7 1.0 2.8 1.8 0.9 2.6
Expense recoveries 27.7 26.0 53.8 23.8 21.8 45.6
Management, leasing and
development 1.9 1.9 2.2 2.2
Other 6.6 2.5 9.2 4.3 1.7 6.0
----- ----- ----- ----- ----- -----
Total revenues 88.1 75.9 164.0 75.2 62.5 137.7
OPERATING COSTS:
Recoverable expenses 25.0 22.4 47.4 20.1 18.8 38.9
Other operating 9.0 2.7 11.7 6.0 2.4 8.5
Management, leasing and
development 1.1 1.1 1.3 1.3
General and administrative 5.1 5.1 6.6 6.6
Interest expense 22.1 18.5 40.6 19.4 13.7 33.1
Depreciation and amortization 14.7 8.4 23.1 11.0 6.0 17.0
----- ----- ----- ----- ----- -----
Total operating costs 77.0 52.0 129.0 64.3 41.0 105.3
Net results of Memorial City (1) (0.3) (0.3) (0.1) (0.1)
----- ----- ----- ----- ----- -----
10.8 23.9 34.7 10.8 21.5 32.4
===== ===== ===== =====
Equity in net income of
Unconsolidated Joint Ventures 13.8 12.2
----- -----
Income before extraordinary
and unusual items 24.6 23.0
Gain on GMPT Exchange 1,090.2
Restructuring loss (10.7)
------- -----
Income before extraordinary item 1,104.1 23.0
Extraordinary item (49.8)
------- -----
Net income 1,054.3 23.0
Preferred distributions to TCO (4.2)
------- -----
Net income available to unitholders 1,050.1 23.0
======= =====
SUPPLEMENTAL INFORMATION (3):
EBITDA contribution 47.7 28.0 75.7 41.3 23.2 64.5
TRG's Beneficial Interest Expense (22.1) (9.8) (31.9) (19.4) (7.5) (26.9)
Non-real estate depreciation (0.5) (0.5) (0.5) (0.5)
Preferred distributions to TCO (4.2) (4.2)
----- ----- ----- ----- ----- -----
Distributable Cash Flow contribution 20.9 18.2 39.1 21.4 15.7 37.1
===== ===== ===== ===== ===== =====
(1) The results of operations of Memorial City are presented net in this table.
TRG expects that Memorial City's net operating income will approximate the
ground rent payable under the lease for the immediate future.
(2) With the exception of the Supplemental Information, amounts represent 100%
of the Unconsolidated Joint Ventures. Amounts are net of intercompany
profits. The Unconsolidated Joint Ventures are accounted for under the
equity method in TRG's Consolidated Financial Statements.
(3) EBITDA, TRG's Beneficial Interest Expense and Distributable Cash Flow are
defined and discussed in Liquidity and Capital Resources - Distributions.
(4) Amounts in the table may not add due to rounding.
(5) Certain 1997 amounts have been reclassified to conform to 1998
classifications.
</TABLE>
- 28 -
<PAGE>
TRG --Consolidated Businesses
- -----------------------------
Total revenues for the three months ended September 30, 1998 were $88.1
million, a $12.9 million, or 17.2%, increase over the comparable period in 1997.
Minimum rents increased $6.9 million, of which $5.1 million was caused by Tuttle
Crossing and the 1997 acquisitions. Minimum rents also increased due to the
expansion at Biltmore and tenant rollovers. Expense recoveries increased
primarily due to Tuttle Crossing and the acquired Centers. Other revenue
increased primarily due to gains on sales of peripheral land.
Total operating costs increased $12.7 million, or 19.8%, to $77.0 million.
Recoverable and depreciation and amortization expenses increased primarily due
to Tuttle Crossing and the acquisitions. Other operating expense increased due
to the acquisitions, management expenses, and professional fees. General and
administrative expense decreased primarily due to decreases in compensation,
employee relocation, and recruiter costs. Interest expense increased due to an
increase in debt used to finance Tuttle Crossing, the acquisition of The Falls
and the redemption of a partner's interest in TRG, partially offset by a
decrease in debt paid down with the proceeds of the October 1997 and April 1998
equity offerings. In addition, interest expense increased due to an increase in
debt used to fund capital expenditures, offset by the related capitalized
interest.
Revenues and expenses as presented in the preceding table differ from the
amounts shown in TRG's consolidated statement of operations by the amounts
representing Memorial City's revenues and expenses, which are presented in the
preceding table as a net amount.
Unconsolidated Joint Ventures
- -----------------------------
Total revenues for the three months ended September 30, 1998 were $75.9
million, a $13.4 million, or 21.4%, increase from the comparable period of 1997.
The increase in minimum rents and expense recoveries was primarily due to
Arizona Mills and the expansion at Westfarms. Minimum rents also increased due
to tenant rollovers. Other revenue increased by $0.8 million primarily due to
increases in lease cancellation revenue.
Total operating costs increased by $11.0 million, or 26.8%, to $52.0 million
for the three months ended September 30, 1998. Recoverable and depreciation and
amortization expenses increased primarily due to Arizona Mills and Westfarms.
Other operating expense increased primarily due to Arizona Mills. Interest
expense increased primarily due to an increase in debt used to finance Arizona
Mills and the Westfarms expansion, and a decrease in capitalized interest
related to these two projects. Operating costs as presented in the preceding
table differ from the amounts shown in the combined, summarized financial
statements of the Unconsolidated Joint Ventures (Note 4 to TRG's financial
statements) by the amount of intercompany profit.
As a result of the foregoing, net income of the Unconsolidated Joint Ventures
increased by $2.4 million, or 11.2%, to $23.9 million. TRG's equity in net
income of the Unconsolidated Joint Ventures was $13.8 million, a 13.1% increase
from the comparable period in 1997.
Net Income
- ----------
As a result of the foregoing, TRG's income before extraordinary and unusual
items increased $1.6 million, or 7.0%, to $24.6 million for the three months
ended September 30, 1998. During the third quarter of 1998, TRG recognized a
$1.1 billion gain on the GMPT Exchange and a $10.7 million loss on the related
restructuring, which primarily represented the cost of certain involuntary
terminations of personnel. Also, TRG recognized an extraordinary charge of $49.8
million, related to debt extinguished in anticipation of the GMPT Exchange,
consisting primarily of prepayment premiums. After payment of $4.2 million in
preferred distributions to the Company, net income available to partnership
unitholders for the third quarter of 1998 was $1.1 billion compared to $23.0
million in 1997.
- 29 -
<PAGE>
Comparison of the Nine Months Ended September 30, 1998 to the Nine Months Ended
September 30, 1997
The following table sets forth operating results for TRG's Owned Businesses
for the nine months ended September 30, 1998 and September 30, 1997, showing the
results of the Consolidated Businesses and Unconsolidated Joint Ventures:
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998 Nine Months Ended September 30, 1997
------------------------------------------- -------------------------------------------
TRG UNCONSOLIDATED TOTAL TRG UNCONSOLIDATED TOTAL
CONSOLIDATED JOINT OWNED CONSOLIDATED JOINT OWNED
BUSINESSES(1) VENTURES(2) BUSINESSES BUSINESSES(1) VENTURES(2) BUSINESSES
------------------------------------------- -------------------------------------------
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Minimum rents 150.1 135.2 285.3 124.5 112.9 237.3
Percentage rents 4.8 2.7 7.4 4.7 2.0 6.7
Expense recoveries 82.8 75.1 157.9 68.5 64.6 133.0
Management, leasing and
development 5.8 5.8 6.5 6.5
Other 18.2 7.4 25.6 11.2 8.3 19.6
----- ----- ----- ----- ----- -----
Total revenues 261.7 220.4 482.1 215.3 187.8 403.2
OPERATING COSTS:
Recoverable expenses 71.5 63.7 135.2 57.4 55.3 112.7
Other operating 25.3 9.9 35.2 20.3 8.5 28.8
Management, leasing and
development 3.5 3.5 3.6 3.6
General and administrative 18.7 18.7 18.7 18.7
Interest expense 66.7 54.0 120.7 54.0 38.9 92.9
Depreciation and amortization 42.6 24.3 66.9 31.2 16.3 47.5
----- ----- ----- ----- ----- -----
Total operating costs 228.3 151.9 380.2 185.1 118.9 304.1
Net results of Memorial City (1) (0.8) (0.8) (0.3) (0.3)
----- ----- ----- ----- ----- -----
32.6 68.5 101.1 29.9 68.9 98.8
===== ===== ===== =====
Equity in income before
extraordinary item of
Unconsolidated Joint Ventures 38.3 38.9
----- -----
Income before extraordinary
and unusual items 70.9 68.8
Gain on GMPT Exchange 1,090.2
Restructuring loss (10.7)
------- -----
Income before extraordinary items 1,150.4 68.8
Extraordinary items (50.8)
------- -----
Net income 1,099.6 68.8
Preferred distributions to TCO (12.5)
------- -----
Net income available to unitholders 1,087.2 68.8
======= =====
SUPPLEMENTAL INFORMATION (3):
EBITDA contribution 142.1 79.9 222.0 115.3 68.5 183.8
TRG's Beneficial Interest Expense (66.7) (28.7) (95.4) (54.0) (20.7) (74.7)
Non-real estate depreciation (1.6) (1.6) (1.6) (1.6)
Preferred distributions to TCO (12.5) (12.5)
----- ----- ----- ----- ----- -----
Distributable Cash Flow contribution 61.4 51.2 112.6 59.7 47.8 107.5
===== ===== ===== ===== ===== =====
(1) The results of operations of Memorial City are presented net in this table.
TRG expects that Memorial City's net operating income will approximate the
ground rent payable under the lease for the immediate future.
(2) With the exception of the Supplemental Information, amounts represent 100%
of the Unconsolidated Joint Ventures. Amounts are net of intercompany
profits. The Unconsolidated Joint Ventures are accounted for under the
equity method in TRG's Consolidated Financial Statements.
(3) EBITDA, TRG's Beneficial Interest Expense and Distributable Cash Flow are
defined and discussed in Liquidity and Capital Resources - Distributions.
(4) Amounts in the table may not add due to rounding.
(5) Certain 1997 amounts have been reclassified to conform to 1998
classifications.
</TABLE>
- 30 -
<PAGE>
TRG --Consolidated Businesses
- -----------------------------
Total revenues for the nine months ended September 30, 1998 were $261.7
million, a $46.4 million, or 21.6%, increase over the comparable period in 1997.
Minimum rents increased $25.6 million, of which $21.5 million was caused by
Tuttle Crossing and the 1997 acquisitions. Minimum rents also increased due to
the expansion at Biltmore and tenant rollovers. Expense recoveries increased
primarily due to Tuttle Crossing and the acquired Centers. Other revenue
increased primarily due to an increase in lease cancellation revenue and gains
on sales of peripheral land.
Total operating costs increased $43.2 million, or 23.3%, to $228.3 million.
Recoverable, other operating, and depreciation and amortization expenses
increased primarily due to Tuttle Crossing and the acquisitions. Other operating
expense also increased due to professional fees and management expense. General
and administrative expense remained consistent between periods, with increases
in compensation attributable to the phase-in of the long-term compensation plan
being offset by decreases in employee relocation and recruiter costs. Interest
expense increased due to an increase in debt used to finance Tuttle Crossing,
the acquisition of The Falls and the redemption of a partner's interest in TRG,
partially offset by a decrease in debt paid down with the proceeds of the
October 1997 and April 1998 equity offerings. In addition, interest expense
increased due to an increase in debt used to fund capital expenditures, offset
by the related capitalized interest.
Revenues and expenses as presented in the preceding table differ from the
amounts shown in TRG's consolidated statement of operations by the amounts
representing Memorial City's revenues and expenses, which are presented in the
preceding table as a net amount.
Unconsolidated Joint Ventures
- -----------------------------
Total revenues for the nine months ended September 30, 1998 were $220.4
million, a $32.6 million, or 17.4%, increase from the comparable period of 1997.
The increase in minimum rents and expense recoveries was primarily due to
Arizona Mills and the expansion at Westfarms. Minimum rents also increased due
to tenant rollovers. Other revenue decreased by $0.9 million primarily due to a
decrease in gains on peripheral land sales, partially offset by an increase in
lease cancellation revenue.
Total operating costs increased by $33.0 million, or 27.8%, to $151.9 million
for the nine months ended September 30, 1998. Recoverable and depreciation and
amortization expenses increased primarily due to Arizona Mills and Westfarms.
Other operating expense increased primarily due to Arizona Mills. Interest
expense increased primarily due to an increase in debt used to finance Arizona
Mills and the Westfarms expansion, and a decrease in capitalized interest
related to these two projects. Operating costs as presented in the preceding
table differ from the amounts shown in the combined, summarized financial
statements of the Unconsolidated Joint Ventures (Note 4 to TRG's financial
statements) by the amount of intercompany profit.
As a result of the foregoing, income before extraordinary item of the
Unconsolidated Joint Ventures decreased by $0.4 million, or 0.6%, to $68.5
million. TRG's equity in income before extraordinary item of the Unconsolidated
Joint Ventures was $38.3 million, a 1.5% decrease from the comparable period in
1997.
- 31 -
<PAGE>
Net Income
- ----------
As a result of the foregoing, TRG's income before extraordinary and unusual
items increased $2.1 million, or 3.1%, to $70.9 million for the nine months
ended September 30, 1998. During the first nine months of 1998, TRG recognized a
$1.1 billion gain on the GMPT Exchange and a $10.7 million loss on the related
restructuring, which primarily represented the cost of certain involuntary
terminations of personnel. Also, TRG recognized $50.8 million in extraordinary
charges related to the extinguishment of debt, including debt extinguished in
anticipation of the GMPT Exchange, primarily consisting of prepayment premiums.
After payment of $12.5 million in preferred distributions to the Company, net
income available to partnership unitholders for the nine months ended September
30, 1998 was $1.1 billion compared to $68.8 million for the comparable period in
1997.
- 32 -
<PAGE>
Liquidity and Capital Resources
Taubman Centers, Inc.
On September 30, 1998, the Company obtained a majority and controlling
interest in TRG as a result of the GMPT Exchange (Results of Operations
- --TRG--1998 Transactions above). As of that date the Company consolidated the
accounts of TRG in the Company's financial statements. Prior to that date the
Company accounted for its investment in TRG under the equity method.
Consequently, the Company's and TRG's cash flows for the three and nine months
ended September 30, 1998 are discussed separately.
In April 1998, the Company sold approximately 2.0 million shares of its common
stock at $13.1875 per share, before deducting the underwriting commission and
expenses of the offering, under the Company's shelf registration statement. The
Company used the proceeds to acquire an additional equity interest in TRG. TRG
paid all costs of the offering. TRG used the net proceeds of approximately $25
million for general partnership purposes.
In October 1997, the Company issued eight million shares of 8.3% Series A
Preferred Stock under its equity shelf registration statement. Dividends are
payable in arrears on or before the last day of each calendar quarter. The
Company used the proceeds to acquire a Series A Preferred Equity interest in TRG
that entitles the Company to distributions (in the form of guaranteed payments)
in amounts equal to the dividends payable on the Company's Series A Preferred
Stock.
As of September 30, 1998, the Company had a consolidated cash balance of $33.8
million. As of September 30, 1998, the Company had 52.9 million outstanding
shares of common stock compared to 50.8 million at September 30, 1997.
During the first nine months of 1998 and 1997, the Company received
distributions from its partnership interest in TRG of $37.3 million and $35.2
million, respectively. Additionally, the Company received preferred
distributions from TRG of $12.5 million in 1998.
The Company pays regular quarterly dividends to its common and preferred
shareowners. The principal factor affecting the Company's ability to pay
dividends is the receipt of distributions from TRG. The Company's dividends to
its common shareowners are at the discretion of the Board of Directors and
depend on the cash available to the Company, its financial condition, capital
and other requirements, and such other factors as the Board of Directors deems
relevant. Preferred dividends accrue regardless of whether earnings, cash
availability, or contractual obligations were to prohibit the current payment of
dividends. Because of the Company's controlling interest in TRG, the Company now
has control over TRG's distribution policies; however the Company does not
currently anticipate a material change in TRG's distribution policies or the
Company's corresponding dividend policy (TRG -- Distributions).
On September 8, 1998, the Company declared a quarterly dividend of $0.235 per
common share payable October 20, 1998 to shareowners of record on September 30,
1998. The Board of Directors also declared a quarterly dividend of $0.51875 per
share on the Company's 8.3% Series A Preferred Stock for the quarterly dividend
period ended September 30, 1998, which was paid on September 30, 1998 to
shareowners of record on September 18, 1998.
The Company is presently determining the effect of the GMPT Exchange and the
related refinancing and restructuring on the tax status of its common and
preferred dividends.
- 33 -
<PAGE>
TRG
In anticipation of the GMPT Exchange, TRG used the $1.2 billion proceeds from
two bridge loans bearing interest at one-month LIBOR plus 1.30% to extinguish
approximately $1.1 billion of debt, including substantially all of TRG's public
unsecured debt, its outstanding commercial paper, and borrowings on its existing
lines of credit. The remaining proceeds were used primarily to pay prepayment
premiums and transaction costs.
The balance of the first bridge loan of $902 million was assumed by GMPT at
the time of the GMPT Exchange. The second loan had a balance of $310 million at
September 30, 1998. This loan has a maximum borrowing capacity of $430 million
and expires in June 1999. TRG expects to refinance the balance on the bridge
loan during the first half of 1999. Additionally, TRG has obtained a $200
million line of credit, replacing TRG's previous revolving credit and commercial
paper facilities. The line of credit expires in September 2001.
TRG also has available an unsecured bank line of credit of up to $40 million.
The line had no outstanding borrowings as of September 30, 1998 and expires in
August 1999.
Proceeds from other borrowings and equity issuances of $373.4 million provided
funding for the first nine months of 1998 (including $77.7 million for the
redemption of 6.1 million units of partnership interest in January 1998)
compared to $244.4 million in the comparable period of 1997 (including $123.9
million for the acquisition of Regency Square in September 1997). Additionally,
the proceeds were used to fund capital expenditures for the Consolidated
Businesses and contributions to Unconsolidated Joint Ventures for construction
costs.
In March 1998, a 50% owned Unconsolidated Joint Venture completed a $140
million, 6.60% secured financing maturing in 2008. The net proceeds were used to
extinguish an existing mortgage of approximately $39 million and pay a
prepayment penalty of approximately $1.8 million. In addition, proceeds of $5.6
million were used to close out a treasury lock agreement entered into in 1997,
which resulted in an effective rate on the financing of approximately 7%. The
remaining proceeds were distributed to the owners. TRG used its 50% share of the
distribution to pay down its revolving credit facilities.
At September 30, 1998, TRG's debt and its beneficial interest in the debt of
its Consolidated and Unconsolidated Joint Ventures totaled $1,094.7 million. As
shown in the following table, $299.0 million of this debt was floating rate debt
that remained unhedged at September 30, 1998. Interest rates shown do not
include amortization of debt issuance costs and interest rate hedging costs.
These items are reported as interest expense in TRG's results of operations. In
the aggregate, these costs added 0.49% to the effective rate of interest on
TRG's beneficial interest in debt at September 30, 1998. Included in TRG's
beneficial interest in debt is debt used to fund development and expansion
costs. TRG's beneficial interest in assets on which interest is being
capitalized totaled $334.5 million as of September 30, 1998. TRG's beneficial
interest in capitalized interest was $5.2 million and $12.6 million for the
three and nine months ended September 30, 1998, respectively.
- 34 -
<PAGE>
<TABLE>
<CAPTION>
Beneficial Interest in Debt
-------------------------------------------------------
Amount Interest LIBOR Frequency LIBOR
(In millions Rate at Cap of Rate at
of dollars) 9/30/98 Rate Resets 9/30/98
---------- ------- ---- ------ -------
<S> <C> <C> <C> <C> <C>
Total beneficial interest
in fixed rate debt 408.9 8.01%(1)
Floating rate debt hedged
via interest rate caps:
Through July 1999 65.0 6.41 7.00 Monthly 5.38
Through December 1999 200.0 6.79(1) 9.50(2) Monthly 5.38
Through October 2001 25.0 6.04 8.55 Monthly 5.38
Through January 2002 53.4 6.88(1) 9.50 Monthly 5.38
Through July 2002 43.4 7.07 6.50 Monthly 5.38
Other floating rate debt 299.0 6.79(1)
-------
Total beneficial interest in debt 1,094.7 7.22(1)
=======
(1) Denotes weighted average interest rate.
(2) Rate reduces to 7.0% in December 1998.
</TABLE>
In September 1998, TRG entered into treasury lock agreements with a notional
amount of $200 million at approximately 5%, plus credit spread. In October 1998,
TRG effectively closed out its position in the treasury locks at a cost of
approximately $4 million.
TRG's loan and facility agreements contain various restrictive covenants,
including minimum debt service and fixed charges coverage ratios, a maximum
payout ratio on distributions, and a minimum debt yield ratio, the latter being
the most restrictive. TRG is in compliance with all of such covenants.
Distributions
A principal factor that TRG considers in determining distributions to partners
is TRG's Distributable Cash Flow, which is defined as EBITDA less TRG's
Beneficial Interest Expense, non-real estate depreciation and amortization, and
preferred distributions. Capital structure, in addition to operations,
influences this measure of performance. TRG defines EBITDA as TRG's beneficial
interest in (or pro rata share of ) the revenues, less operating costs before
interest, depreciation and amortization, and unusual items of the Owned
Businesses. The Company calculates its Funds from Operations by adding the
Company's beneficial interest in TRG's Distributable Cash Flow to the Company's
other income, less the Company's operating expenses. EBITDA, Distributable Cash
Flow and Funds from Operations do not represent cash flows from operations, as
defined by generally accepted accounting principles, and should not be
considered to be an alternative to net income as an indicator of operating
performance or to cash flows from operations as a measure of liquidity. However,
the National Association of Real Estate Investment Trusts (NAREIT) suggests that
Funds from Operations is a useful supplemental measure of operating performance
for REITs.
- 35 -
<PAGE>
The following table summarizes TRG's Distributable Cash Flow and the Company's
Funds from Operations for the three months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three months ended Three months ended
September 30, 1998 September 30, 1997
----------------------------------------- ----------------------------------------
TRG Unconsolidated TRG Unconsolidated
Consolidated Joint Consolidated Joint
Businesses Ventures(1) Total Businesses Ventures(1) Total
----------------------------------------- ----------------------------------------
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
TRG's Net Income(2) 1,054.3 23.0
Extraordinary item (3) 49.8
Net gain on GMPT Exchange and
restructuring charge (1,079.5)
Depreciation and Amortization(4) 19.2 14.5
TRG's Beneficial Interest Expense 31.9 26.9
----- -----
EBITDA 47.7 28.0 75.7 41.3 23.2 64.5
TRG's Beneficial Interest Expense (22.1) (9.8) (31.9) (19.4) (7.5) (26.9)
Non-real estate depreciation (0.5) (0.5) (0.5) (0.5)
Preferred distributions to TCO (4.2) (4.2)
----- ----- ----- ----- ----- -----
Distributable Cash Flow 20.9 18.2 39.1 21.4 15.7 37.1
===== ===== ===== ===== ===== =====
The Company's share of
Distributable Cash Flow 15.5 13.6
Other income/ expenses, net (0.1) (0.2)
----- -----
Funds from Operations 15.3 13.4
===== =====
(1) Amounts represent TRG's beneficial interest in the operations of its
Unconsolidated Joint Ventures.
(2) Includes TRG's share of gains on peripheral land sales of $2.9 and $0.6
million for the three months ended September 30, 1998 and 1997.
(3) Extraordinary charge related to the extinguishment of debt, primarily
consisting of prepayment premiums.
(4) Includes $1.1 million and $1.0 million of mall tenant allowance
amortization in the third quarter of 1998 and 1997, respectively.
(5) Amounts may not add due to rounding.
</TABLE>
The following table summarizes TRG's Distributable Cash Flow and the Company's
Funds from Operations for the nine months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 30, 1998 September 30, 1997
----------------------------------------- ----------------------------------------
TRG Unconsolidated TRG Unconsolidated
Consolidated Joint Consolidated Joint
Businesses Ventures(1) Total Businesses Ventures(1) Total
----------------------------------------- ----------------------------------------
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
TRG's Net Income(2) 1,099.6 68.8
Extraordinary items(3) 50.8
Net gain on GMPT Exchange and
restructuring charge (1,079.5)
Depreciation and Amortization(4) 55.7 40.3
TRG's Beneficial Interest Expense 95.4 74.7
----- -----
EBITDA 142.1 79.9 222.0 115.3 68.5 183.8
TRG's Beneficial Interest Expense (66.7) (28.7) (95.4) (54.0) (20.7) (74.7)
Non-real estate depreciation (1.6) (1.6) (1.6) (1.6)
Preferred distributions to TCO (12.5) (12.5)
----- ----- ----- ----- ----- -----
Distributable Cash Flow 61.4 51.2 112.6 59.7 47.8 107.5
===== ===== ===== ===== ===== =====
The Company's share of
Distributable Cash Flow 43.9 39.4
Other income/ expenses, net (0.5) (0.6)
----- -----
Funds from Operations 43.4 38.9
===== =====
(1) Amounts represent TRG's beneficial interest in the operations of its
Unconsolidated Joint Ventures.
(2) Includes TRG's share of gains on peripheral land sales of $3.3 million and
$2.5 million for the nine months ended September 30, 1998 and 1997,
respectively.
(3) Extraordinary charges related to the extinguishment of debt, primarily
consisting of prepayment premiums.
(4) Includes $3.3 million and $2.8 million of mall tenant allowance
amortization for the nine months ended September 30, 1998 and 1997,
respectively.
(5) Amounts may not add due to rounding.
</TABLE>
- 36 -
<PAGE>
For the third quarter of 1998, EBITDA and Distributable Cash Flow were $75.7
million and $39.1 million, compared to $64.5 million and $37.1 million for the
same period in 1997. In addition to $4.2 million representing preferred
distributions to the Company on TRG's Series A Preferred Equity, TRG distributed
$32.1 million to its partners in both the third quarter of 1998 and 1997. The
Company's Funds from Operations for the third quarter of 1998 was $15.3 million,
compared to $13.4 million for the same period in 1997.
During the first nine months of 1998, EBITDA and Distributable Cash Flow were
$222.0 million and $112.6 million, compared to $183.8 million and $107.5 million
for the same period in 1997. In addition to $12.5 million in preferred
distributions to the Company, TRG distributed $95.7 million and $96.1 million to
its partners in the nine month periods ended September 30, 1998 and 1997,
respectively. The Company's Funds from Operations for 1998 was $43.4 million,
compared to $38.9 million for the same period in 1997.
The annual determination of TRG's distributions is based on anticipated
Distributable Cash Flow available after preferred distributions to the Company
on TRG's Series A Preferred Equity, as well as financing considerations and
other appropriate factors. Further, the Company has decided that the growth in
distributions will be less than the growth in Distributable Cash Flow for the
immediate future.
Except under unusual circumstances, TRG's practice is to distribute equal
monthly installments of the determined amount of distributions throughout the
year. Due to seasonality and the fact that cash available to TRG for
distributions may be more or less than net cash provided from operating
activities plus distributions from Joint Ventures during the year, TRG may
borrow from unused credit facilities (described in Liquidity and Capital
Resources -- TRG above).
Each Joint Venture may make distributions only in accordance with the terms of
its partnership agreement. TRG, in general, acts as the managing partner and has
the right to determine the amount of cash available for distribution from the
Joint Venture. In general, the provisions of these agreements require the
distribution of all available cash (as defined in each partnership agreement),
but most do not allow borrowing to finance distributions without approval of the
Joint Venture Partner.
As a result, distribution policies of many Joint Ventures will not parallel
those of TRG. While TRG may not, therefore, receive as much in distributions
from each Joint Venture as it intends to distribute with respect to that Joint
Venture, the Company does not believe this will impede TRG's intended
distribution policy because of TRG's overall access to liquid resources,
including borrowing capacity.
Any inability of TRG or its Joint Ventures to secure financing as required to
fund maturing debts, capital expenditures and changes in working capital,
including development activities and expansions, may require the utilization of
cash to satisfy such obligations, thereby possibly reducing distributions to
partners of TRG and funds available to the Company for the payment of dividends.
- 37 -
<PAGE>
Capital Spending
Capital spending for routine maintenance of the Taubman Shopping Centers is
generally recovered from tenants. The following table summarizes planned capital
spending, which is not recovered from tenants and assuming no acquisitions
during 1998:
<TABLE>
<CAPTION>
1998
--------------------------------------------------------------
TRG's Share of
Unconsolidated Consolidated Businesses
Consolidated Joint and Unconsolidated
Businesses Ventures(1) Joint Ventures(1)(2)
--------------------------------------------------------------
(in millions of dollars)
<S> <C> <C> <C>
Development, renovation,
and expansion 285.7(3) 98.9(4) 259.2
Mall tenant allowances 7.9 7.3 11.7
Pre-construction development
and other 54.5 2.6 55.7
----- ----- -----
Total 348.1 108.8 326.6
===== ===== =====
(1) Costs are net of intercompany profits.
(2) Includes TRG's share of construction costs for Great Lakes Crossing (an 80%
owned consolidated joint venture), MacArthur Center (a 70% owned
consolidated joint venture), and Tampa International (a 50.1% owned
consolidated joint venture).
(3) Includes costs related to MacArthur Center, Great Lakes Crossing and Tampa
International.
(4) Includes costs related to the expansion project at Cherry Creek.
</TABLE>
At Cherry Creek, an ongoing expansion includes a newly constructed Lord &
Taylor store, which opened in November 1997, and the addition of 132 thousand
square feet of mall GLA, which began opening in stages in August and continuing
throughout the fall of 1998. The expansion is expected to cost approximately $50
million. TRG has a 50% ownership interest in Cherry Creek.
Great Lakes Crossing, an enclosed value super-regional mall being developed by
TRG in Auburn Hills, Michigan, will open in November 1998. The Center will be
1.4 million square feet and its 11 anchors will include Bass Pro Shops Outdoor
World, Neiman Marcus Last Call Clearance Center, JCPenney Outlet Store, Oshman's
SuperSports USA, and a 25-screen 100,000 square foot Star Theatre megaplex. This
Center is presently owned by a joint venture in which TRG has a controlling 80%
interest and is projected to cost approximately $215 million.
MacArthur Center, a new Center under construction in Norfolk, Virginia, is
expected to open in March 1999. The 930 thousand square foot Center will
initially be anchored by Nordstrom and Dillard's. This Center will be owned by a
joint venture in which TRG has a 70% controlling interest and is projected to
cost approximately $150 million.
Tampa International, a new Center located in Tampa, Florida, is expected to
begin construction in the fourth quarter of 1998 and open in the fall of 2001.
The Center is expected to open with 1.2 million square feet and will be anchored
by Nordstrom, Lord & Taylor and Neiman Marcus. This Center will be owned by a
joint venture in which TRG will have a controlling 50.1% interest and is
projected to cost approximately $265 million.
In 1996, TRG entered into an agreement to lease Memorial City Mall, a 1.4
million square foot shopping center located in Houston, Texas. Memorial City is
anchored by Sears, Foley's, Montgomery Ward and Mervyn's. TRG has the option to
terminate the lease after the third full year by paying $2 million to the
lessor. TRG is using this option period to evaluate the redevelopment
opportunities of the Center. Under the terms of the lease, TRG has agreed to
invest a minimum of $3 million during the three year option period. If the
redevelopment proceeds, TRG is required to invest an additional $22 million in
property expenditures not recoverable from tenants during the first 10 years of
the lease term.
- 38 -
<PAGE>
TRG and The Mills Corporation have formed an alliance to develop value
super-regional projects in major metropolitan markets. The ten-year agreement
calls for the two companies to jointly develop and own at least seven of these
centers, each representing approximately $200 million of capital investment. The
initial scope of the arrangement will include joint ventures in projects
currently under development by TRG in Detroit (Great Lakes Crossing) and Mills
in Houston as well as proposed projects in Philadelphia and Boston. A number of
other locations across the nation are targeted for future initiatives.
TRG anticipates that its share of costs for development projects scheduled to
be completed in 1999 will be as much as $71 million in 1999. TRG's estimates of
1998 and 1999 capital spending include only projects approved by the Company's
board of directors and, consequently, TRG's estimates will change as new
projects are approved. Currently, TRG expects to open on average one $175
million to $200 million shopping center each year. TRG's estimates regarding
capital expenditures presented above are forward-looking statements and certain
significant factors could cause the actual results to differ materially,
including but not limited to: 1) actual results of negotiations with anchors,
tenants and contractors; 2) changes in the scope and number of projects; 3) cost
overruns; 4) timing of expenditures; 5) financing considerations; and 6) actual
time to complete projects.
Year 2000 Matters
The approach of the calendar year 2000 (Year 2000) presents issues for many
financial, information, and operational systems that may not properly recognize
the Year 2000. The Company has developed a high-level plan to address the risks
posed by the Year 2000 issue, covering affected application and infrastructure
systems. Affected systems include both informational (such as accounting and
payroll) and operational (such as elevators, security and lighting). The
Company's plan also addresses the effect of third parties with which it conducts
business, including tenants, vendors, contractors, creditors, and others. The
Company has completed the assessment, inventory and planning phases of its plan
and has determined that the majority of the Company's internal systems and all
of its mission critical systems are already Year 2000 compliant. The Company has
requested information and is obtaining commitments from tenants, vendors,
suppliers and business partners and is developing alternative solutions to
minimize the impact on the Company in the event they do not meet their Year 2000
commitments.
The Company expects to remediate any remaining issues encountered with
application and infrastructure systems through repair and/or replacement by
early 1999; the estimated costs of addressing this issue are not expected to be
material to 1998 or 1999 operations. The Company will also continue monitoring
the progress of material third parties' responses to the Year 2000 issue. The
Company believes that its most likely exposure will be the failure of third
parties in comprehensively addressing the issue. For example, failure of
tenants' information systems could delay the payment of rents. The Company is
developing contingency plans in response to such exposure, as appropriate.
Failure by the Company or those with which it conducts business to successfully
respond to the Year 2000 issue may have a material adverse effect on the
Company.
Cash Tender Agreement
A. Alfred Taubman has the annual right to tender to the Company units of
partnership interest in TRG (provided that the aggregate value is at least $50
million) and cause the Company to purchase the tendered interests at a purchase
price based on a market valuation of the Company on the trading date immediately
preceding the date of the tender (the Cash Tender Agreement). At A. Alfred
Taubman's election, his family, and Robert C. Larson and his family may
participate in tenders. The Company will have the option to pay for these
interests from available cash, borrowed funds, or from the proceeds of an
offering of the Company's common stock. Generally, the Company expects to
finance these purchases through the sale of new shares of its stock. The
tendering partner will bear all market risk if the market price at closing is
less than the purchase price and will bear the costs of sale. Any proceeds of
the offering in excess of the purchase price will be for the sole benefit of the
Company.
- 39 -
<PAGE>
Based on a market value at September 30, 1998 of $14.00 per common share, the
aggregate value of interests in TRG that may be tendered under the Cash Tender
Agreement was approximately $333 million. The purchase of these interests at
September 30, 1998 would have resulted in the Company owning an additional 28%
interest in TRG.
Capital Resources
The Company believes that its net cash provided by operating activities,
distributions from the Joint Ventures, the unutilized portion of its credit
facilities, and its ability to access the credit markets, assure adequate
liquidity to conduct its operations in accordance with its distribution and
financing policies. TRG's borrowings are not and will not be recourse to the
Company without its consent.
- 40 -
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
3 (a) -- Restated Articles of Incorporation of Taubman Centers, Inc.
3 (b) -- Restated By-Laws of Taubman Centers, Inc.
4 -- Revolving Credit Agreement dated as of September 21, 1998
among The Taubman Realty Group Limited Partnership, as
Borrower, UBS AG, New York Branch, as a Bank and UBS AG,
New York Branch, as Administrative Agent.
10 -- The Second Amendment and Restatement of Agreement of
Limited Partnership of the Taubman Realty Group Limited
Partnership dated September 30, 1998.
12 (a) -- Statement Re: Computation of Taubman Centers, Inc. Ratio of
Earnings to Preferred Stock Dividends.
12 (b) -- Statement Re: Computation of TRG's Ratios of Earnings to
Fixed Charges and Preferred Distributions.
27 -- Financial Data Schedule.
b) Current Reports on Form 8-K.
The Company voluntarily filed a current report on Form 8-K dated
September 30, 1998 to report a press release announcing TRG's
completion of the redemption of the General Motors Pension Trusts'
holding in TRG.
The Company voluntarily filed a current report on Form 8-K dated
August 20, 1998 to make available information regarding certain
current developments in the form of a press release and investor
supplements.
- 41 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
TAUBMAN CENTERS, INC.
Date: November 16, 1998 By: /s/ Lisa A. Payne
----------------------------
Lisa A. Payne
Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number
------
3 (a) -- Restated Articles of Incorporation of Taubman Centers, Inc.
3 (b) -- Restated By-Laws of Taubman Centers, Inc.
4 -- Revolving Credit Agreement dated as of September 21, 1998
among The Taubman Realty Group Limited Partnership, as
Borrower, UBS AG, New York Branch, as a Bank and UBS AG,
New York Branch, as Administrative Agent.
10 -- The Second Amendment and Restatement of Agreement of
Limited Partnership of the Taubman Realty Group Limited
Partnership dated September 30, 1998.
12 (a) -- Statement Re: Computation of Taubman Centers, Inc. Ratio of
Earnings to Preferred Stock Dividends.
12 (b) -- Statement Re: Computation of TRG's Ratios of Earnings to
Fixed Charges and Preferred Distributions.
27 -- Financial Data Schedule.
RESTATED ARTICLES OF INCORPORATION
OF
TAUBMAN CENTERS, INC.
1. These Restated Articles of Incorporation are executed on behalf
of Taubman Centers, Inc. (the "Corporation") pursuant to the
provisions of Section 643 of the Michigan Business Corporation
Act (the "Act").
2. The present name of the Corporation is: Taubman Centers, Inc.
3. The corporation identification number (CID) assigned by the
Bureau is: 011-602.
4. Except for the Corporation=s present name, the Corporation has
not used any name other than Taubman Realty, Inc.
5. The date of filing the original articles of incorporation was
November 21, 1973.
6. These Restated Articles of Incorporation were duly adopted by the
Board of Directors of the Corporation in accordance with the
provisions of Section 641(4) of the Act.
7. The following Restated Articles of Incorporation only restate and
integrate (and do not further amend) the Corporation's Second
Amended and Restated Articles of Incorporation, as previously
amended. There is no material discrepancy between the provisions
of the Corporation's Second Amended and Restated Articles of
Incorporation, as amended, and the following Restated Articles of
Incorporation (referred to below as "these Amended and Restated
Articles of Incorporation").
ARTICLE I
Name
The name of the Corporation is: Taubman Centers, Inc.
ARTICLE II
Purpose
The purpose for which the Corporation is organized is to:
1. own, hold, develop and dispose of and invest in any type of
retail real property or mixed use real property having a retail
component of significant value in relation to the value of the
entire mixed use real property, including any entity whose
material assets include such real properties including, but not
limited to, partnership interests in The Taubman Realty Group
Limited Partnership, a Delaware limited partnership, and any
successor thereto ("TRG");
2. act as managing general partner of TRG;
3. at such time, if ever, as TRG distributes its assets to its
partners, own, hold, manage, develop and dispose of said assets
and in all other respects, carry on the business of TRG;
4. qualify as a REIT (as hereinafter defined); and
5. engage in any other lawful act or activity for which corporations
may be organized under the Michigan Business Corporation Act in
addition to any of the foregoing purposes, that is consistent
with the Corporation's qualification as a REIT.
1
<PAGE>
ARTICLE III
Capital
1. Classes and Number of Shares.
The total number of shares of all classes of stock that the Corporation
shall have authority to issue is 300,000,000 shares. The classes and the
aggregate number of shares of stock of each class are as follows:
250,000,000 shares of Common Stock, par value $0.01 per share (the
"Common Stock"), which shall have the rights and limitations set forth
below.
50,000,000 shares of preferred stock (the "Preferred Stock"), which
may be issued in one or more series having such relative rights,
preferences, priorities, privileges, restrictions, and limitations as the
Board of Directors may determine from time to time.
2. Certain Powers, Rights, and Limitations of Capital Stock.
(a) Common Stock. Subject to the rights, preferences, and limitations that
the Board of Directors designates with respect to any series of Preferred Stock,
a statement of certain powers, rights, and limitations of the shares of the
Common Stock is as follows:
(i) Dividend Rights. The holders of shares of the Common Stock shall
be entitled to receive such dividends as may be declared by the Board of
Directors of the Corporation with respect to the Common Stock, subject to
the preferential rights of any series of Preferred Stock designated by the
Corporation's Board of Directors.
(ii) Rights Upon Liquidation. Subject to the provisions of
Subsection (e) of this Section 2 of this Article III, in the event of any
voluntary or involuntary liquidation, dissolution or winding up of, or any
distribution of the assets of, the Corporation, each holder of shares of
the Common Stock shall be entitled to receive, ratably with each other
holder of shares of the Common Stock, that portion of the assets of the
Corporation available for distribution to its holders of shares of Common
Stock as the number of shares of the Common Stock held by such holder
bears to the total number of shares of Common Stock (including shares of
Common Stock that have become Excess Stock) then outstanding.
(b) Voting Rights. Subject to the provisions of Subsection (e) of this
Section 2 of this Article III, the holders of shares of the Common Stock shall
be entitled to vote on all matters (for which a common shareholder shall be
entitled to vote thereon) at all meetings of the shareholders of the
Corporation, and shall be entitled to one vote for each share of the Common
Stock entitled to vote at such meeting. Any action to be taken by the
shareholders, other than the election of directors or adjourning a meeting,
including, but not limited to, the approval of an amendment to these Amended and
Restated Articles of Incorporation (other than an amendment by the Board of
Directors to establish the relative rights, preferences, priorities, privileges,
restrictions, and limitations of Preferred Stock as provided in Subsection (c)
of this Section 2 of this Article III, which amendment by the Board of Directors
shall require no action to be taken by the shareholders), shall be authorized if
approved by the affirmative vote of two-thirds of the shares of Capital Stock
entitled to vote thereon. Directors shall be elected if approved by a plurality
of the votes cast at an election.
(c) Preferred Stock. The Preferred Stock shall have such relative rights,
preferences, priorities, privileges, restrictions, and limitations as the Board
of Directors may determine from time to time by one or more amendments to these
Amended and Restated Articles of Incorporation.
(i) Series A Preferred Stock. Subject in all cases to the other
provisions of this Section 2 of this Article III, including, without
limitation, those provisions restricting the Beneficial Ownership and
Constructive Ownership of shares of Capital Stock and those provisions
with respect to Excess Stock, the following sets forth the designation,
preferences, limitations as to dividends, voting and other rights, and the
terms and conditions of redemption of the Series A Preferred Stock
(defined below) of the Corporation.
2
<PAGE>
(a) There is hereby established a series of Preferred Stock
designated "8.30% Series A Cumulative Redeemable Preferred Stock,
par value $0.01 per share" (the "Series A Preferred Stock"), which
shall consist of 8,000,000 authorized shares.
(b) All shares of Series A Preferred Stock redeemed,
purchased, exchanged, or otherwise acquired by the Corporation shall
be restored to the status of authorized but unissued shares of
Preferred Stock.
(c) The Series A Preferred Stock shall, with respect to
dividend rights, rights upon liquidation, winding up or dissolution,
and redemption rights, rank (i) junior to any other series of
Preferred Stock hereafter duly established by the Board of Directors
of the Corporation, the terms of which specifically provide that
such series shall rank prior to the Series A Preferred Stock as to
the payment of dividends and distribution of assets upon liquidation
(the "Senior Preferred Stock"), (ii) pari passu with any other
series of Preferred Stock hereafter duly established by the Board of
Directors of the Corporation, the terms of which specifically
provide that such series shall rank pari passu with the Series A
Preferred Stock as to the payment of dividends and distribution of
assets upon liquidation (the "Parity Preferred Stock"), and (iii)
prior to any other class or series of Capital Stock, including,
without limitation, the Common Stock of the Corporation, whether now
existing or hereafter created (collectively, the "Junior Stock").
(d) (1) Subject to the rights of any Senior Preferred Stock,
the holders of the then outstanding shares of Series A Preferred
Stock shall be entitled to receive, as and when declared by the
Board of Directors, out of funds legally available for the payment
of dividends, cumulative preferential cash dividends at the annual
rate of 8.30% of the $25.00 per share liquidation preference (i.e.,
$2.075 per annum per share). Such dividends shall accrue and be
cumulative from the date of original issue and shall be payable in
equal quarterly amounts in arrears on or before the last day of each
March, June, September, and December or, if such day is not a
business day, the next succeeding business day (each, a "Dividend
Payment Date") (for the purposes of this Subparagraph (1) of this
Paragraph (d), a "business day" is any day, other than a Saturday,
Sunday, or legal holiday, on which banks in Detroit, Michigan, are
open for business). The first dividend, which shall be paid on
December 31, 1997, will be for less than a full quarter. All
dividends on the Series A Preferred Stock, including any dividend
for any partial dividend period, shall be computed on the basis of a
360-day year consisting of twelve 30-day months. Dividends will be
payable to holders of record as they appear in the stock records of
the Corporation at the close of business on the applicable record
date, which shall be the 15th day of the calendar month in which the
applicable Dividend Payment Date falls or on such other date
designed by the Board of Directors of the Corporation for the
payment of dividends that is not more than 30 nor less than ten days
prior to such Dividend Payment Date (each, a "Dividend Record
Date").
(2) No dividends on the Series A Preferred Stock shall
be declared by the Board of Directors or paid or set apart for
payment by the Corporation at such time as any agreement of the
Corporation, including any agreement relating to its indebtedness,
prohibits such declaration, payment, or setting apart for payment or
provides that such declaration, payment, or setting apart for
payment would constitute a breach of, or a default under, such
agreement or if such declaration, payment, or setting aside shall be
restricted or prohibited by law.
(3) Dividends on the Series A Preferred Stock shall
accrue and be cumulative regardless of whether the Corporation has
earnings, regardless of whether there are funds legally available
for the payment of such dividends, and regardless of whether such
dividends are declared. Accrued but unpaid dividends on the Series A
Preferred Stock will accumulate as of the Dividend Payment Date on
which they first become payable. Except as set forth below in this
Subparagraph (3), no dividends shall be declared or paid or set
apart for payment on any Common Stock or any other series of
Preferred Stock ranking, as to dividends, on a parity with or junior
to the Series A Preferred Stock (other than a dividend in shares of
Junior Stock) for any period unless full cumulative dividends have
been or contemporaneously are declared and paid or declared and a
sum sufficient for
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the payment thereof is set apart for such payment on the Series A
Preferred Stock for all past dividend periods and the then current
dividend period. When dividends are not paid in full (and a sum
sufficient for such full payment is not so set apart) upon the
Series A Preferred Stock and the shares of any other series of
Preferred Stock ranking on a parity as to dividends with the Series
A Preferred Stock, all dividends declared upon the Series A
Preferred Stock and any other series of Preferred Stock ranking on a
parity as to dividends with the Series A Preferred Stock shall be
declared pro rata, so that the amount of dividends declared per
share of Series A Preferred Stock and such other series of Preferred
Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Series A Preferred Stock and such
other series of Preferred Stock (which shall not include any accrual
in respect of unpaid dividends for prior dividend periods if such
Preferred Stock does not have a cumulative dividend) bear to each
other. No interest shall be payable in respect of any dividend
payment on the Series A Preferred Stock that may be in arrears.
Holders of shares of the Series A Preferred Stock shall not be
entitled to any dividend, whether payable in cash, property, or
stock, in excess of full cumulative dividends on the Series A
Preferred Stock as provided above. Any dividend payment made on
shares of the Series A Preferred Stock shall first be credited
against the earliest accumulated but unpaid dividend due with
respect to such shares that remains payable.
(4) Except as provided in Subparagraph (3) of this
Paragraph (d) of this Item (i) of this Subsection (c) of this
Section 2 of this Article III, unless full cumulative dividends on
the Series A Preferred Stock have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment
thereof is set apart for payment for all past dividend periods and
the then current dividend period: (i) no dividends (other than in
shares of Junior Stock) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon
the Common Stock (or any other Preferred Stock ranking junior to or
on a parity with the Series A Preferred Stock as to dividends or
upon liquidation); and (ii) no shares of Common Stock (or any other
Preferred Stock of the Corporation ranking junior to or on a parity
with the Series A Preferred Stock as to dividends or upon
liquidation) shall be redeemed, purchased, or otherwise acquired for
any consideration (nor shall any moneys be paid to or made available
for a sinking fund for the redemption of any such shares) by the
Corporation (except by conversion into or exchange for Junior
Stock).
(5) If for any taxable year the Corporation elects to
designate as "capital gains dividends" (as defined in Section 857 of
the Code) any portion (the "Capital Gains Amount") of the dividends
paid or made available for the year to holders of all classes of
Capital Stock (the "Total Dividends"), then the portion of the
Capital Gains Amount that shall be allocable to the holders of
Series A Preferred Stock shall be the amount that the total
dividends paid or made available to the holders of the Series A
Preferred Stock for the year bears to the Total Dividends.
(e) Subject to the rights of any Senior Stock, upon any
voluntary or involuntary liquidation, dissolution, or winding up of
the affairs of the Corporation, and before any distribution of
assets shall be made in respect of any Junior Stock, the holders of
the Series A Preferred Stock shall be entitled to be paid out of the
assets of the Corporation legally available for distribution to its
shareholders a liquidation preference of $25.00 per share in cash
(or property having a fair market value as determined by the Board
of Directors valued at $25.00 per share), plus an amount equal to
any accrued but unpaid dividends to the date of payment. After
payment of the full amount of the liquidating distributions to which
they are entitled, the holders of Series A Preferred Stock shall
have no right or claims to any of the remaining assets of the
Corporation. Neither the consolidation or merger of the Corporation
with or into any other corporation, trust, or entity (or of any
other corporation with or into the Corporation) nor the sale, lease,
or conveyance of all or substantially all of the property or
business of the Corporation shall be deemed to constitute a
liquidation, dissolution or winding up of the Corporation for the
purpose of this Paragraph (e) of this Item (i).
(f) (1) The Series A Preferred Stock is not redeemable prior
to October 3, 2002. On and after October 3, 2002, the Corporation,
at its option upon not less than 30 nor more than 60 days'
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<PAGE>
written notice, may redeem shares of the Series A Preferred Stock,
in whole or in part, at any time and from time to time, for a cash
redemption price of $25.00 per share, plus all accrued and unpaid
dividends to the date fixed for redemption (except as provided
below).
(2) The redemption price of the Series A Preferred Stock
(other than the portion thereof consisting of accrued but unpaid
dividends) shall be payable solely out of the sale proceeds of other
"capital stock" of the Corporation. For purposes of the preceding
sentence, the term "capital stock" means any equity securities of
the Corporation (including Common Stock and Preferred Stock),
shares, interest, participation, or other ownership interests
(however designated) and any rights (other than debt securities
convertible into or exchangeable for equity securities) or options
to purchase any of the foregoing. Holders of Series A Preferred
Stock to be redeemed shall surrender such shares at the place
designated in the notice of redemption and shall be entitled to the
redemption price and any accrued and unpaid dividends payable upon
such redemption following such surrender. If notice of redemption
has been given and if the Corporation has set aside in trust the
funds necessary for the redemption, then from and after the
redemption date: (i) dividends shall cease to accrue on such shares
of Series A Preferred Stock; (ii) such shares of Series A Preferred
Stock shall no longer be deemed outstanding; and (iii) all rights of
the holders of such shares shall terminate, except the right to
receive the redemption price. If less than all of the outstanding
Series A Preferred Stock is to be redeemed, the Series A Preferred
Stock to be redeemed shall be selected pro rata (as nearly as may be
practicable without creating fractional shares) or by any other
equitable method determined by the Corporation.
(3) Unless full cumulative dividends on all shares of
Series A Preferred Stock shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment
thereof set apart for payment, no shares of Series A Preferred Stock
shall be redeemed unless all outstanding shares of Series A
Preferred Stock are simultaneously redeemed, and the Corporation
shall not purchase or otherwise acquire directly or indirectly any
shares of Series A Preferred Stock (except by exchange for Junior
Stock); however, the foregoing shall not prevent the purchase or
acquisition of shares of Series A Preferred Stock pursuant to a
purchase or exchange offer made on the same terms to holders of all
outstanding shares of Series A Preferred Stock.
(4) Notice of redemption shall be given by publication
in a newspaper of general circulation in The City of New York, such
publication to be made once a week for two successive weeks
commencing not less than 30 nor more than 60 days prior to the
redemption date. A similar notice shall be mailed by the
Corporation, postage prepaid, not less than 30 nor more than 60 days
prior to the redemption date, addressed to the respective holders of
record of the Series A Preferred Stock to be redeemed at their
respective addresses as they appear on the stock transfer records of
the Corporation. No failure to give or defect in such notice shall
affect the validity of the proceedings for the redemption of any
shares of Series A Preferred Stock except as to the holder to whom
notice was defective or not given. Each notice shall state: (i) the
redemption date; (ii) the redemption price; (iii) the number of
shares of Series A Preferred Stock to be redeemed; (iv) the place or
places where the Series A Preferred Stock is to be surrendered for
payment of the redemption price; and (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date.
If fewer than all shares of the Series A Preferred Stock held by any
holder are to be redeemed, the notice mailed to such holder shall
also specify the number of shares of Series A Preferred Stock to be
redeemed from such holder.
(5) The holders of Series A Preferred Stock at the close
of business on a Dividend Record Date shall be entitled to receive
the dividend payable with respect to such Series A Preferred Stock
on the corresponding Dividend Payment Date notwithstanding the
redemption thereof between such Dividend Record Date and the
corresponding Dividend Payment Date or the Corporation's default in
the payment of the dividend due. Except as provided above, the
Corporation will make no payment or allowance for unpaid dividends,
regardless of whether in arrears, on called Series A Preferred
Stock.
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<PAGE>
(6) The Series A Preferred Stock has no stated maturity
and shall not be subject to any sinking fund or mandatory
redemption. The Series A Preferred Stock is not convertible into any
other securities of the Corporation, but is subject to the Excess
Stock (and all other) provisions of this Article III.
(g) (1) Except as may be required by law or as otherwise
expressly provided in this Item (i) of this Subsection (c) of this
Section 2 of this Article III, the holders of Series A Preferred
Stock shall not be entitled to vote. On all matters with respect to
which the Series A Preferred Stock is entitled to vote, each share
of Series A Preferred Stock shall be entitled to one vote.
(2) Whenever dividends on the Series A Preferred Stock
are in arrears for six or more quarterly periods, the number of
directors then constituting the Board of Directors shall be
increased by two, and the holders of Series A Preferred Stock
(voting separately as a class with all other series of Preferred
Stock upon which like voting rights have been conferred and are
exercisable) ("Voting Parity Preferred") shall have the right to
elect two directors of the Corporation at a special meeting called
by the holders of record of at least 10% of the Series A Preferred
Stock or at least 10% of any other Voting Parity Preferred so in
arrears (unless such request is received less than 90 days before
the date fixed for the next annual or special meeting of the
shareholders) or at the next annual meeting of shareholders, and at
each subsequent annual meeting, until all dividends accumulated on
the Series A Preferred Stock for the past dividend periods and the
then current dividend period have been fully paid or declared and a
sum sufficient for the payment of such dividends has been set aside
for payment. If and when all accumulated dividends and the dividend
for the then current dividend period on the Series A Preferred Stock
shall have been paid in full or set aside for payment in full, the
holders of the Series A Preferred Stock shall be divested of the
foregoing voting rights, and if all accumulated dividends and the
dividend for the then current period have been paid in full or set
aside for payment in full on all series of Voting Parity Preferred,
the term of office of each director so elected by the holders of the
Series A Preferred Stock and the Voting Parity Preferred shall
terminate.
(3) As long as any shares of Series A Preferred Stock
remain outstanding, the Corporation shall not, without the
affirmative vote or consent of the holders of at least two-thirds of
the outstanding shares of Series A Preferred Stock (voting as a
separate class): (i) authorize or create, or increase the authorized
or issued amount of, any Capital Stock ranking senior to the Series
A Preferred Stock with respect to the payment of dividends or the
distribution of assets upon liquidation, dissolution, or winding up
or reclassify any authorized Capital Stock of the Corporation into
such shares, or create, authorize, or issue any obligation or
security convertible into or evidencing the right to purchase any
such shares; or (ii) amend, alter, or repeal the provisions of these
Amended and Restated Articles of Incorporation, whether by merger,
consolidation, or otherwise (an "Event"), so as to materially and
adversely affect any right, preference, privilege, or voting power
of the Series A Preferred Stock or the holders thereof; however, as
long as the Series A Preferred Stock remains outstanding with its
terms materially unchanged, taking into account that upon the
occurrence of an Event, the Corporation may not be the surviving
entity, the occurrence of an Event described in clause (ii) above of
this Subparagraph (3) shall not be deemed to materially and
adversely affect such rights, preferences, privileges, or voting
power of the holders of Series A Preferred Stock, and (x) any
increase in the amount of the authorized Preferred Stock or the
creation or issuance of any other series of Preferred Stock, or (y)
any increase in the amount of authorized shares of the Series A
Preferred Stock or any other series of Preferred Stock, in each case
ranking on a parity with or junior to the Series A Preferred Stock
with respect to payment of dividends or the distribution of assets
upon liquidation, dissolution, or winding up, shall not be deemed to
materially and adversely affect such rights, preferences,
privileges, or voting powers.
(4) Notwithstanding the foregoing, the Series A
Preferred Stock shall not be entitled to vote, and the foregoing
voting provisions shall not apply, if at or prior to the time when
the act with respect to which such vote would otherwise be required
is effected, all outstanding shares of the Series A Preferred Stock
have been redeemed or called for redemption, and sufficient funds
have
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<PAGE>
been deposited in trust for the benefit of the holders of the Series
A Preferred Stock to effect such redemption.
(ii) Series B Preferred Stock. Subject in all cases to the other
provisions of this Section 2 of this Article III, including, without
limitation, those provisions restricting the Beneficial Ownership and
Constructive Ownership of shares of Capital Stock and those provisions
with respect to Excess Stock, the following sets forth the designation,
preference, limitation as to dividends, voting, and other rights of the
Series B Preferred Stock (defined below) of the Corporation. Terms that
are used and not otherwise defined in this Item (ii) have the meanings
ascribed to them elsewhere in these Amended and Restated Articles of
Incorporation or, if not so defined, their conventional meanings.
(a) There is hereby established a series of Preferred Stock
designated "Series B NonParticipating Convertible Preferred Stock,"
(the "Series B Preferred Stock"), which shall initially consist of
40,000,000 authorized shares, subject to one or more increases in
the authorized shares of the series by a further amendment(s) to
these Amended and Restated Articles of Incorporation to permit the
issuance of additional shares upon the issuance of additional Units
(defined below) to Registered Unitholders (defined below) and to
accommodate stock dividends or stock splits as provided below.
(b) All shares of Series B Preferred Stock purchased,
exchanged, or otherwise acquired by the Corporation or that are
converted into Common Stock shall be restored to the status of
authorized but unissued shares of Preferred Stock.
(c) Except upon the dissolution, liquidation, or winding up of
the Corporation, the Series B Preferred Stock shall have no right to
any assets of the Corporation, and (except as expressly set forth in
this Item (ii)) shall have no right to cash dividends or
distributions (from whatever source), but shall have the preference
rights upon dissolution, liquidation, and winding up that are set
forth in this Item (ii) of this Section 2. The Series B Preferred
Stock ranks (i) junior to the Series A Preferred Stock and junior to
any Parity Preferred Stock or Senior Preferred Stock (the Series A
Preferred Stock, the Parity Preferred Stock, and the Senior
Preferred Stock are collectively referred to as the "Series B Senior
Preferred Stock"), (ii) pari passu with any other series of
Preferred Stock hereafter duly established by the Board of Directors
of the Corporation, the terms of which specifically provide that
such series shall rank pari passu with the Series B Preferred Stock
as to the distribution of assets upon liquidation (the "Series B
Parity Preferred Stock"), and (iii) prior to any other class or
series of Capital Stock, including, without limitation, the Common
Stock of the Corporation, whether now existing or hereafter created
(collectively, the "Series B Junior Stock"). If shares of Common
Stock or other securities are distributed on the Common Stock or
other voting Capital Stock (as a stock dividend or otherwise) (a
"Voting Stock Dividend"), then each share of Series B Preferred
Stock shall receive a distribution of the number of shares (or
warrants or rights to acquire shares, as the case may be) of Series
B Preferred Stock that would then be necessary to preserve the
relative voting power of the Series B Preferred Stock (i.e., in
relation to the voting power of all outstanding shares of voting
Capital Stock) that existed prior to the Voting Stock Dividend.
(d) Subject to the rights of the Series B Senior Preferred
Stock, upon any voluntary or involuntary dissolution, liquidation,
or winding up of the affairs of the Corporation, and before any
distribution of assets shall be made in respect of any Series B
Junior Stock, the holders of the Series B Preferred Stock shall be
entitled to be paid out of the assets of the Corporation legally
available for distribution to its shareholders a liquidation
preference of $0.001 per share in cash (or property having a fair
market value as determined by the Board of Directors valued at
$0.001 per share). After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of
Series B Preferred Stock shall have no right or claims to any of the
remaining assets of the Corporation.
(e) The Series B Preferred Stock has no stated maturity and
shall not be subject to redemption; however, the foregoing shall not
be a restriction on the Corporation's otherwise lawful
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<PAGE>
redemption of shares of Series B Preferred Stock on a consensual
basis with each holder of the shares to be redeemed.
(f) (1) The Series B Preferred Stock is convertible, and will
be automatically converted under the circumstances described below,
into Common Stock at a conversion ratio of 14,000:1; i.e., each
14,000 shares of Series B Preferred Stock may be converted into one
share of Common Stock. In lieu of issuing less than a full share (a
"fractional share") of Common Stock upon the conversion of fewer
than 14,000 shares (or an integral multiple of 14,000 shares) of
Series B Preferred Stock, the Corporation shall redeem the shares of
Series B Preferred Stock that would otherwise be convertible into a
fractional share of Common Stock (the "Scrip Shares"), and from and
after the date of the conversion, the Scrip Shares shall cease to be
outstanding shares of Series B Preferred Stock, shall not constitute
any other class of Capital Stock, and shall entitle the holder only
to receive the cash redemption price, as provided below.
(2) The Corporation will initially issue the Series B
Preferred Stock to each Person who, on the initial date of issuance,
is a Registered Unitholder at the rate of one share for each Unit
held by such Registered Unitholder, if such Registered Unitholder
subscribes for the shares and pays to the Corporation an amount
equal to the product of $0.001 multiplied by the number of shares of
Series B Preferred Stock to be issued to him. Shares of Series B
Preferred Stock may be issued only in certificated, fully registered
form and may be issued only to Registered Unitholders. The
Corporation may issue fractional shares of Series B Preferred Stock.
Following the initial issuance of the Series B Preferred Stock, each
Registered Unitholder acquiring one or more newly issued Units shall
be entitled to receive from the Corporation shares of Series B
Preferred Stock equal in number to the number of newly issued Units
acquired by such Registered Unitholder, provided that the Registered
Unitholder subscribes for the shares and pays to the Corporation an
amount equal to the product of $0.001 multiplied by the number of
shares of Series B Preferred Stock to be issued to him. Except as
provided below, a holder of shares of Series B Preferred Stock may
freely effect a transfer of the shares to any Person (subject to the
Transfer being in compliance with, or (to the satisfaction of the
Corporation) exempt from, applicable securities laws and
regulations). Upon a Registered Unitholder's Transfer of one or more
Units to another Registered Unitholder, then (to the extent of the
transferring Registered Unitholder's then ownership of Series B
Preferred Stock) the transferring Registered Unitholder shall be
deemed to have transferred to the transferee of the Units (i) shares
of Series B Preferred Stock equal in number to the number of
transferred Units or if, after giving effect to the Unit Transfer,
the transferring Registered Unitholder will cease to own any Units,
(ii) all of the transferring Registered Unitholder's shares of
Series B Preferred Stock. Notwithstanding the foregoing, a
Registered Unitholder shall have the right (which shall be exercised
by delivering written notice at the time of the Unit Transfer to the
Corporation and the transferee of the Units) to negate the deemed
simultaneous Transfer of Series B Preferred Stock. A Registered
Unitholder desiring to sell (by exchange or otherwise) Units to the
Corporation shall be required to surrender to the Corporation for
conversion shares of Series B Preferred Stock equal in number to the
number of Units being sold (by exchange or otherwise), but only if
and to the extent that, after giving effect to the Corporation's
proposed purchase of Units, the number of outstanding shares of
Series B Preferred Stock will exceed the aggregate number of Units
held by all Registered Unitholders. Shares of Series B Preferred
Stock surrendered for conversion as provided in the immediately
preceding sentence shall be converted into Common Stock, as provided
in subparagraph (1) of this Paragraph (f), upon the Corporation's
purchase of the Units of the surrendering Registered Unitholder, and
the Corporation shall promptly redeem any resulting Scrip Shares for
cash, as provided below. Except as provided above in this
subparagraph (f)(2), a holder of Series B Preferred Stock shall have
no voluntary conversion rights with respect to the Series B
Preferred Stock, but shares of Series B Preferred Stock shall
automatically convert into Common Stock as provided in subparagraph
(3) of this Paragraph (f).
(3) After giving effect to a Transfer of shares of
Series B Preferred Stock to a Registered Unitholder, the transferee
Registered Unitholder is permitted to own shares of Series B
Preferred Stock up to (i) the number of Units then owned by such
transferee Registered Unitholder or (ii) 5% of the outstanding
shares of Series B Preferred Stock, whichever is greater (any shares
in excess of a transferee Registered Unitholder's permitted
ownership of Series B Preferred
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Stock are referred to as the "Disproportionate Shares"). After
giving effect to a Transfer of shares of Series B Preferred Stock to
any Person who is not a Registered Unitholder, the transferee is
permitted to own up to 5% of the outstanding shares of Series B
Preferred Stock (any shares held by a transferee of Series B
Preferred Stock who is not a Registered Unitholder in excess of such
5% limit are referred to as the "Greater than 5% Shares"). Upon a
Transfer of Series B Preferred Stock resulting in the transferee
holding Disproportionate Shares or Greater than 5% Shares, as
applicable, the Disproportionate Shares or Greater than 5% Shares,
as applicable, shall automatically convert into Common Stock as
provided in subparagraph (1) of this Paragraph (f) without action on
the part of anyone, and the Corporation shall promptly redeem any
resulting Scrip Shares for cash, as provided below. Upon any such
automatic conversion, each certificate evidencing converted shares
of Series B Preferred Stock shall instead represent the whole number
of shares of Common Stock into which such shares of Series B
Preferred Stock were converted and the right to receive the cash
redemption payment for any Scrip Shares evidenced by such
certificate until such certificate is surrendered to the Corporation
for cancellation in exchange for a Common Stock certificate and the
redemption price of the Scrip Shares (if any).
(4) Upon conversion of any shares of Series B Preferred
Stock, no payment or adjustment shall be made on account of
dividends declared and payable to holders of Common Stock of record
on a date prior to the date of conversion.
(5) As soon as practicable on or after the date of
conversion of shares of Series B Preferred Stock and the surrender
to the Corporation of the certificate(s) evidencing the converted
shares, the Corporation will issue and deliver to or at the
direction of the converting shareholder a certificate(s) for the
whole number of shares of Common Stock issuable upon such
conversion. The Corporation shall redeem Scrip Shares resulting from
a voluntary or automatic conversion of Series B Preferred Stock for
a cash payment equal to the fair value of the fractional share of
Common Stock into which the Scrip Shares would otherwise be
convertible (the fair value shall be the product of the relevant
fraction multiplied by the closing price of the Common Stock on the
trading date next preceding the date of conversion on the principal
national securities exchange on which the Common Stock is listed (or
the average of the high and low prices of the Common Stock on such
date on the principal national market system on which the Common
Stock is traded) or (if the Common Stock is not so listed or traded)
the fair value of the Common Stock on such date as determined by the
Corporation's Board of Directors). The Corporation shall be
responsible for any stamp or other issuance taxes payable upon the
issuance of Common Stock in exchange for surrendered or
automatically converted shares of Series B Preferred Stock.
(g) (1) On all matters with respect to which shareholders of
the Corporation vote, each share of Series B Preferred Stock shall
be entitled to one vote. On all matters with respect to which the
Series B Preferred Stock is entitled to vote as a separate class,
including the nomination of directors pursuant to subparagraph (2)
of this Paragraph (g), the action shall be determined by the vote
(which may be by non-unanimous written consent) of a majority of the
outstanding shares of Series B Preferred Stock entitled to vote. On
all other matters, including the election of directors, the Series B
Preferred Stock will vote as a single class with all other Capital
Stock entitled to vote.
(2) With respect to each annual meeting of the
Corporation's shareholders, commencing with the annual meeting of
the Corporation's shareholders to be held in 1999 (the "1999 Annual
Meeting"), the holders of shares of Series B Preferred Stock shall
have the right, voting as a separate class, to designate nominees
for election as directors of the Corporation and to have such
nominees included as such in the Corporation's proxy statement and
ballots (or, if none, in a specially prepared proxy statement and
ballots) submitted to the shareholders of the Corporation entitled
to vote in a timely manner prior to the annual meeting. The
Corporation shall use all reasonable efforts, consistent with the
Board of Directors' exercise of its fiduciary duties, to cause the
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election of the nominees designated by the holders of Series B
Preferred Stock. With respect to the 1999 Annual Meeting, the
holders of Series B Preferred Stock shall have the right to
designate four nominees. With respect to each succeeding annual
meeting of shareholders, the number of nominees to be designated by
the holders of Series B Preferred Stock (the "Base Number of Series
B Nominees") shall be equal to the difference between (i) four and
(ii) the number of directors whose terms commenced prior to and will
continue after such meeting and who were nominated to serve such
terms by the holders of Series B Preferred Stock, voting as a
separate class. The Base Number of Series B Nominees calculated as
set forth in the immediately preceding sentence shall be reduced (i)
by one, if as of the record date for determining the shareholders
entitled to vote for the election of directors at the relevant
annual meeting (the "Record Date"), the Registered Unitholders
collectively own less than 25% (but at least 15%) of the Fully
Diluted Common Stock of the Corporation, (ii) by two, if as of the
Record Date, the Registered Unitholders collectively own less than
15% (but at least 10%) of the Fully Diluted Common Stock of the
Corporation, (iii) by three, if as of the Record Date, the
Registered Unitholders collectively own less than 10% (but at least
5%) of the Fully Diluted Common Stock of the Corporation, and (iv)
to zero, if as of the Record Date, the Registered Unitholders
collectively own less than 5% of the Fully Diluted Common Stock of
the Corporation. For purposes of the immediately preceding sentence,
(i) "Fully Diluted Common Stock of the Corporation" means all shares
of Common Stock issued and outstanding on the relevant Record Date,
plus all shares of Common Stock issuable upon the exercise of vested
employee stock options to acquire Common Stock and issuable upon the
exchange of Units owned by the Registered Unitholders (assuming a
1:1 exchange ratio and calculated without regard to limitations
imposed on the ability or rights of certain Registered Unitholders
to exchange Units for Common Stock), and (ii) the Registered
Unitholders shall be deemed to "collectively own" all shares of
Common Stock that they own in fact, that they have the right to
acquire upon the exercise of vested employee stock options, and that
would be issued upon the exchange (without regard to limitations
imposed on the ability or rights of certain Registered Unitholders
to exchange Units for Common Stock) of all outstanding Units (and
Units issuable upon the exercise of options to acquire Units) held
by the Registered Unitholders.
(h) At all times when the holders of Series B Preferred Stock,
voting as a separate class, are entitled to designate nominees for
election as directors of the Corporation, (i) the Board of Directors
shall consist of nine directors (other than during any vacancy
caused by the death, resignation, or removal of a director), plus
the number of directors that any series of Preferred Stock, voting
separately as a class, has the right to elect because of the
Corporation's default in the payment of preferential dividends due
on such series, and (ii) a majority of the directors shall be
"independent" (for these purposes, an individual shall be deemed
"independent" if such individual is neither an officer nor an
employee of the Corporation or any of its direct or indirect
subsidiaries). At such time as the holders of Series B Preferred
Stock no longer have the right to designate any nominees for
election as directors of the Corporation, the size of the Board of
Directors shall be as determined in accordance with the provisions
of the By-Laws of the Corporation.
(i) For purposes of this Item (ii) of this Subsection (c) of
this Section 2 of this Article III, the following terms have the
indicated meanings:
(1) "Registered Unitholder" means a Person, other than
the Corporation, (i) who at the relevant time is reflected in the
records of The Taubman Realty Group Limited Partnership as a partner
in such partnership (or who as the result of a Transfer of Units is
being admitted as a partner in such partnership) or (ii) who is (or
upon completion of the relevant Transfer (including, for these
purposes, the exercise of an option to acquire a Unit) will become)
a beneficial owner of Units.
(2) "Units" means Units of Partnership Interest in The
Taubman Realty Group Limited Partnership (and its successors), and
any securities into which such Units of Partnership Interest (as a
class) are converted or for which such Units (as a class) are
exchanged, whether by merger, reclassification, or otherwise. All
references in this Item (ii) of this Subsection (c) of this Section
2
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of this Article III to numbers of Units shall be adjusted to reflect
any splits, reverse splits, or reclassifications of Units of
Partnership Interest.
(j) As long as shares of Series B Preferred Stock remain
outstanding, the Corporation shall not, without the affirmative vote
or consent of the holders of a majority of the outstanding shares of
Series B Preferred Stock (voting as a separate class):
(1) create, authorize, or issue any securities or any
obligation or security convertible into or evidencing the right to
purchase any such securities, the issuance of which could adversely
and (relative to the other outstanding Capital Stock) disparately
affect the voting power or voting rights of the Series B Preferred
Stock or the holders of Series B Preferred Stock (including the
rights under Paragraph (g) of this Item (ii) of this Subsection (c)
of this Section 2 of this Article III, and disregarding, for these
purposes, the right of any series of Preferred Stock, voting as a
separate class, to elect directors of the Corporation as the result
of the Corporation's default in the payment of a preferential
dividend to which the holders of such series of Preferred Stock are
entitled);
(2) amend, alter, or repeal the provisions of these
Amended and Restated Articles of Incorporation, whether by merger,
consolidation, or otherwise, in a manner that could adversely affect
the voting power or voting rights of the Series B Preferred Stock or
the holders of Series B Preferred Stock (including the rights under
Paragraph (g) of this Item (ii) of this Subsection (c) of this
Section 2 of this Article III, and disregarding, for these purposes,
the right of any series of Preferred Stock, voting as a separate
class, to elect directors of the Corporation as the result of the
Corporation's default in the payment of a preferential dividend to
which the holders of such series of Preferred Stock are entitled);
(3) be a party to a material transaction (including,
without limitation, a merger, consolidation, or share exchange) (a
"Series B Transaction") if the Series B Transaction could adversely
and (relative to the other outstanding Capital Stock) disparately
affect the voting power or voting rights of the Series B Preferred
Stock or the holders of Series B Preferred Stock (including the
rights under Paragraph (g) of this Item (ii) of this Subsection (c)
of this Section 2 of this Article III, and disregarding, for these
purposes, the right of any series of Preferred Stock, voting as a
separate class, to elect directors of the Corporation as the result
of the Corporation's default in the payment of a preferential
dividend to which the holders of such series of Preferred Stock are
entitled). The provisions of this subparagraph (3) shall apply to
successive Series B Transactions; or
(4) issue any shares of Series B Preferred Stock to
anyone other than a Registered Unitholder as provided in Paragraph
(c) or subparagraph (f)(2) of this Item (ii).
(d) Restrictions on Transfer.
(i) Definitions. The following terms shall have the following
meanings for purposes of these Amended and Restated Articles of
Incorporation:
"Affiliate" and "Affiliates" mean, (i) with respect to any
individual, any member of such individual's Immediate Family, a Family
Trust with respect to such individual, and any Person (other than an
individual) in which such individual and/or his Affiliate(s) owns,
directly or indirectly, more than 50% of any class of Equity Security or
of the aggregate Beneficial Interest of all beneficial owners, or in which
such individual or his Affiliate is the sole general partner, or is the
sole managing general partner, or which is controlled by such individual
and/or his Affiliates; and (ii) with respect to any Person (other than an
individual), any Person (other than an individual) which controls, is
controlled by, or is under common control with, such Person, and any
individual who is the sole general partner or the sole managing general
partner in, or who controls, such Person. The terms "Affiliated" and
"Affiliated with" shall have the correlative meanings.
"Beneficial Interest" means an interest, whether as partner,
joint venturer, cestui que trust, or otherwise, a contract right, or a
legal or equitable position under or by which the possessor participates
in
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the economic or other results of the Person (other than an individual) to
which such interest, contract right, or position relates.
"Beneficial Ownership" means ownership of shares of Capital
Stock (including Capital Stock that may be acquired upon conversion of
Debentures) (i) by a Person who owns such shares of Capital Stock in his
own name or is treated as an owner of such shares of Capital Stock
constructively through the application of Section 544 of the Code, as
modified by Sections 856(h)(1)(B) and 856(h)(3)(A) of the Code; or (ii) by
a person who falls within the definition of "Beneficial Owner" under
Section 776(4) of the Act. The terms "Beneficial Owner", "Beneficially
Owns" and "Beneficially Owned" shall have the correlative meanings.
"Capital Stock" means the Common Stock and the Preferred
Stock, including shares of Common Stock and Preferred Stock that have
become Excess Stock.
"Charitable Proceeds" means the amounts due from time to time
to the Designated Charity, consisting of (i) dividends or other
distributions, including capital gain distributions (but not including
liquidating distributions not otherwise within the definition of Excess
Liquidation Proceeds), paid with respect to Excess Stock, (ii) in the case
of a sale of Excess Stock, the excess, if any, of the Net Sales Proceeds
over the amount due to the Purported Transferee as determined under Item
(iii)(b) of Subsection (e) of this Section 2 of this Article III, and
(iii) in the case of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the Excess Liquidation Proceeds.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Constructive Ownership" means ownership of shares of Capital
Stock (including Capital Stock that may be acquired upon conversion of
Debentures) by a Person who owns such shares of Capital Stock in his own
name or would be treated as an owner of such shares of Capital Stock
constructively through the application of Section 318 of the Code, as
modified by Section 856 (d)(5) of the Code. The terms "Constructive
Owner", "Constructively Owns" and "Constructively Owned" shall have the
correlative meanings.
"Control(s)" (and its correlative terms "Controlled By" and
"Under Common Control With") means, with respect to any Person (other than
an individual), possession by the applicable Person or Persons of the
power, acting alone (or solely among such applicable Person or Persons,
acting together), to designate and direct or cause the designation and
direction of the management and policies thereof, whether through the
ownership of voting securities, by contract, or otherwise.
"Debentures" means any convertible debentures or other
convertible debt securities issued by the Corporation from time to time.
"Demand" means the written notice to the Purported Transferee
demanding delivery to the Designated Agent of (i) all certificates or
other evidence of ownership of shares of Excess Stock and (ii) Excess
Share Distributions. Any reference to "the date of the Demand" means the
date upon which the Demand is mailed or otherwise transmitted by the
Corporation.
"Designated Agent" means the agent designated by the Board of
Directors, from time to time, to act as attorney-in-fact for the
Designated Charity and to take delivery of certificates or other evidence
of ownership of shares of Excess Stock and Excess Share Distributions from
a Purported Transferee.
"Designated Charity" means any one or more organizations
described in Sections 501(c)(3) and 170(c) of the Code, as may be
designated by the Board of Directors from time to time to receive any
Charitable Proceeds.
"Equity Security" has the meaning ascribed to it in the
Securities Exchange Act of 1934, as amended from time to time, and the
rules and regulations thereunder (and any successor laws, rules and
regulations of similar import).
"Excess Liquidation Proceeds" means, with respect to shares of
Excess Stock, the excess, if any, of (i) the amount which would have been
due to the Purported Transferee pursuant to
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Subsection (a)(ii) of this Section 2 of this Article III with respect to
such stock in the case of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation if the Transfer had been
valid under Item (ii) of this Subsection (d) of this Section 2 of this
Article III, over (ii) the amount due to the Purported Transferee as
determined under Item (iii)(b)(2) of Subsection (e) of this Section 2 of
this Article III.
"Excess Share Distributions" means dividends or other
distributions, including, without limitation, capital gain distributions
and liquidating distributions, paid with respect to shares of Excess
Stock.
"Excess Stock" means shares of Common Stock and shares of
Preferred Stock that have been automatically converted to Excess Stock
pursuant to the provisions of Item (iii) of this Subsection (d) of this
Section 2 of this Article III, and which are subject to the provisions of
Subsection (e) of this Section 2 of this Article III.
"Existing Holder" means (i) the General Motors Hourly-Rate
Employes Pension Trust, (ii) the General Motors Salaried Employes Pension
Trust (such trusts referred to in (i) or (ii) are hereinafter referred to
as "GMPTS"), (iii) the AT&T Master Pension Trust, (iv) any nominee of the
foregoing, and (v) any Person to whom an Existing Holder transfers
Beneficial Interest of Regular Capital Stock if (x) the result of such
transfer would be to cause the transferee to Beneficially Own shares of
Regular Capital Stock in excess of the greater of the Ownership Limit or
any pre-existing Existing Holder Limit with respect to such transferee
(such excess being herein referred to as the "Excess Amount") and (y) the
transferor Existing Holder, by notice to the Corporation in connection
with such transfer, designates such transferee as a successor Existing
Holder (it being understood that, upon any such transfer, the Existing
Holder Limit for the transferor Existing Holder shall be reduced by the
Excess Amount and the then applicable Ownership Limit or Existing Holder
Limit for the transferee Existing Holder shall be increased by such Excess
Amount).
"Existing Holder Limit" (i) for any Existing Holder who is an
Existing Holder by virtue of Clauses (i) and (ii) of the definition
thereof means the greater of (x) 9.9% of the outstanding Capital Stock,
reduced (but not below the Ownership Limit) by any Excess Amount
transferred in accordance with clause (v) of the definition of Existing
Holder and (y) 4,365,713 shares of Regular Capital Stock (as adjusted to
reflect any increase in the number of outstanding shares as the result of
a stock dividend or any increase or decrease in the number of outstanding
shares resulting from a stock split or reverse stock split), reduced (but
not below the Ownership Limit) by any Excess Amount transferred in
accordance with clause (v) of the definition of Existing Holder, (ii) for
any Existing Holder who is an Existing Holder by virtue of Clause (iii) of
the definition thereof means the greater of (x) 13.74% of the outstanding
Capital Stock, reduced (but not below the Ownership Limit) by any Excess
Amount transferred in accordance with clause (v) of the definition of
Existing Holder and (y) 6,059,080 shares of Regular Capital Stock (as
adjusted to reflect any increase in the number of outstanding shares as
the result of a stock dividend or any increase or decrease in the number
of outstanding shares resulting from a stock split or reverse stock
split), reduced (but not below the Ownership Limit) by any Excess Amount
transferred in accordance with Clause (v) of the definition of Existing
Holder, (iii) for any Existing Holder who is an Existing Holder by virtue
of Clause (iv) of the definition thereof means the percentage of the
outstanding Capital Stock or the number of shares of the outstanding
Regular Capital Stock that the Beneficial Owner for whom the Existing
Holder is acting as nominee is permitted to own under this definition, and
(iv) for any Existing Holder who is an Existing Holder by virtue of Clause
(v) of the definition thereof means the greater of (x) a percentage of the
outstanding Capital Stock equal to the Ownership Limit or pre-existing
Existing Holder Limit applicable to such Person plus the Excess Amount
transferred to such Person pursuant to clause (v) of the definition of
Existing Holder and (y) the number of shares of outstanding Regular
Capital Stock equal to the Ownership Limit or pre-existing Existing Holder
Limit applicable to such Person plus the Excess Amount transferred to such
Person pursuant to clause (v) of the definition of Existing Holder.
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<PAGE>
"Family Trust" means, with respect to an individual, a trust
for the benefit of such individual or for the benefit of any member or
members of such individual's Immediate Family or for the benefit of such
individual and any member or members of such individual's Immediate Family
(for the purpose of determining whether or not a trust is a Family Trust,
the fact that one or more of the beneficiaries (but not the sole
beneficiary) of the trust includes a Person or Persons, other than a
member of such individual's Immediate Family, entitled to a distribution
after the death of the settlor if he, she, it, or they shall have survived
the settlor of such trust and/or includes an organization or organizations
exempt from federal income taxes pursuant to the provisions of Section
501(a) of the Code and described in Section 501(c)(3) of the Code, shall
be disregarded); provided, however, that in respect of transfers by way of
testamentary or inter vivos trust, the trustee or trustees shall be solely
such individual, a member or members of such individual's Immediate
Family, a responsible financial institution and/or an attorney that is a
member of the bar of any state in the United States.
"Immediate Family" means, with respect to a Person, (i) such
Person's spouse (former or then current), (ii) such Person's parents and
grandparents, and (iii) ascendants and descendants (natural or adoptive,
of the whole or half blood) of such Person's parents or of the parents of
such Person's spouse (former or then current).
"Look Through Entity" means any Person that (i) is not an
individual or an organization described in Sections 401(a), 501(c)(17), or
509(a) of the Code or a portion of a trust permanently set aside or to be
used exclusively for the purposes described in Section 642(c) of the Code
or a corresponding provision of a prior income tax law, and (ii) provides
the Corporation with (a) a written affirmation and undertaking, subject
only to such exceptions as are acceptable to the Corporation in its sole
discretion, that (x) it is not an organization described in Sections
401(a), 501(c)(17) or 509(a) of the Code or a portion of a trust
permanently set aside or to be used exclusively for the purposes described
in Section 642(c) of the Code or a corresponding provision of a prior
income tax law, (y) after the application of the rules for determining
stock ownership, as set forth in Section 544(a) of the Code, as modified
by Sections 856(h)(1)(B) and 856(h)(3)(A) of the Code, no "individual"
would own, Beneficially or Constructively, more than the then-applicable
Ownership Limit, taking into account solely for the purpose of determining
such "individual's" ownership for the purposes of this clause (y) (but not
for determining whether such "individual" is in compliance with the
Ownership Limit for any other purpose) only such "individual's" Beneficial
and Constructive Ownership derived solely from such Person and (z) it does
not Constructively Own 10% or more of the equity of any tenant with
respect to real property from which the Corporation or TRG receives or
accrues any rent from real property, and (b) such other information
regarding the Person that is relevant to the Corporation's qualifications
to be taxed as a REIT as the Corporation may reasonably request.
"Market Price" means, with respect to any class or series of
shares of Regular Capital Stock, the last reported sales price of such
class or series of shares reported on the New York Stock Exchange on the
trading day immediately preceding the relevant date, or if such class or
series of shares of Regular Capital Stock is not then traded on the New
York Stock Exchange, the last reported sales price of such class or series
of shares on the trading day immediately preceding the relevant date as
reported on any exchange or quotation system over which such class or
series of shares may be traded, or if such class or series of shares of
Regular Capital Stock is not then traded over any exchange or quotation
system, then the market price of such class or series of shares on the
relevant date as determined in good faith by the Board of Directors of the
Corporation.
"Net Sales Proceeds" means the gross proceeds received by the
Designated Agent upon a sale of Regular Capital Stock that has become
Excess Stock, reduced by (i) all expenses (including, without limitation,
any legal expenses or fees) incurred by the Designated Agent in obtaining
possession of (x) the certificates or other evidence of ownership of the
Regular Capital Stock that had become Excess Stock and (y) any Excess
Share Distributions, and (ii) any expenses incurred in selling or
transferring such shares (including, without limitation, any brokerage
fees, commissions, stock transfer taxes or other transfer fees or
expenses).
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"Ownership Limit" means 8.23% of the value of the outstanding
Capital Stock of the Corporation.
"Person" means (a) an individual, corporation, partnership,
estate, trust (including a trust qualified under Section 401(a) or
501(c)(17) of the Code), a portion of a trust permanently set aside for or
to be used exclusively for the purposes described in Section 642(c) of the
Code, association, private foundation within the meaning of Section 509(a)
of the Code, joint stock company or other entity and (b) also includes a
group as that term is used for purposes of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended from time to time, and the
rules and regulations thereunder (and any successor laws, rules and
regulations of similar import).
"Purported Transferee" means, with respect to any purported
Transfer which results in Excess Stock, the purported beneficial
transferee for whom the shares of Regular Capital Stock would have been
acquired if such Transfer had been valid under Item (ii) of this
Subsection (d) of this Section 2 of this Article III.
"Regular Capital Stock" means shares of Common Stock and
Preferred Stock that are not Excess Stock.
"REIT" means a Real Estate Investment Trust defined in Section
856 of the Code.
"Transfer" means any sale, transfer, gift, assignment, devise
or other disposition of Capital Stock, (including (i) the granting of any
option or entering into any agreement for the sale, transfer or other
disposition of Capital Stock or (ii) the sale, transfer, assignment or
other disposition of any securities or rights convertible into or for
Capital Stock), whether voluntary or involuntary, whether of record or
beneficial ownership, and whether by operation of law or otherwise.
(ii) Restriction on Transfers.
(a) Except as provided in Item (viii) of this Subsection (d)
of this Section 2 of this Article III, no Person (other than an
Existing Holder) shall Beneficially Own or Constructively Own shares
of Capital Stock having an aggregate value in excess of the
Ownership Limit, and No Existing Holder shall Beneficially Own or
Constructively Own shares of Capital Stock in excess of the Existing
Holder Limit for such Existing Holder.
(b) Except as provided in Item (viii) of this Subsection (d)
of this Section 2 of this Article III, any Transfer that, if
effective, would result in any Person (other than an Existing
Holder) Beneficially Owning or Constructively Owning shares of
Regular Capital Stock having an aggregate value in excess of the
Ownership Limit shall be void ab initio as to the Transfer of such
shares which would be otherwise Beneficially Owned or Constructively
Owned by such Person in excess of the Ownership Limit, and the
intended transferee shall acquire no rights in such shares.
(c) Except as provided in Item (viii) of this Subsection (d)
of this Section 2 of this Article III, any Transfer that, if
effective, would result in any Existing Holder Beneficially Owning
or Constructively Owning shares of Regular Capital Stock in excess
of the applicable Existing Holder Limit shall be void ab initio as
to the Transfer of such shares which would be otherwise Beneficially
Owned or Constructively Owned by such Existing Holder in excess of
the applicable Existing Holder Limit, and such Existing Holder shall
acquire no rights in such shares.
(d) Except as provided in Item (viii) of this Subsection (d)
of this Section 2 of this Article III, any Transfer that, if
effective, would result in the Capital Stock being beneficially
owned by fewer than 100 Persons (determined without reference to any
rules of attribution) shall be void ab initio as to the Transfer of
such shares which would be otherwise beneficially owned by the
transferee, and the intended transferee shall acquire no rights in
such shares.
(e) Any Transfer that, if effective, would result in the
Corporation being "closely held" within the meaning of Section
856(h) of the Code shall be void ab initio as to the Transfer of the
shares of
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Regular Capital Stock which would cause the Corporation to be
"closely held" within the meaning of Section 856(h) of the Code, and
the intended transferee shall acquire no rights in such shares.
(f) In determining the shares which any Person Beneficially
Owns (or would Beneficially Own following a purported Transfer) or
Constructively Owns (or would Constructively Own following a
purported Transfer) for purposes of applying the limitations
contained in Paragraphs (a), (b), (c), (d) and (e) of this Item (ii)
of this Subsection (d) of this Article III:
(1) shares of Capital Stock that may be acquired upon
conversion of Debentures Beneficially Owned or Constructively Owned
by such Person, but not shares of Capital Stock issuable upon
conversion of Debentures held by others, are deemed to be
outstanding.
(2) a pension trust shall be treated as owning all
shares of Capital Stock (including Capital Stock that may be
acquired upon conversion of Debentures) as are (x) owned in its own
name or with respect to which it is treated as an owner
constructively through the application of Section 544 of the Code as
modified by Section 856(h)(1)(B) of the Code but not by Section
856(h)(3)(A) of the Code and (y) owned by, or treated as owned by,
constructively through the application of Section 544 of the Code as
modified by Section 856(h)(1)(B) of the Code but not by Section
856(h)(3)(A) of the Code, all pension trusts sponsored by the same
employer as such pension trust or sponsored by any of such
employer's Affiliates. Notwithstanding the foregoing, (y) above
shall not apply in the case of either Motors Insurance Corporation
and its subsidiaries (collectively, "MIC") or any pension trusts
sponsored by the General Motors Corporation, a Delaware corporation
("GMC"), or the American Telephone and Telegraph Company, a New York
corporation ("AT&T"), or by any of their respective Affiliates,
provided that with respect to MIC and each such pension trust
sponsored by GMC, AT&T or any of their respective Affiliates, other
than the Existing Holders described in (i) through (iii) in the
definition thereof, all of the following conditions are met: (i)
each such pension trust is administered, and will continue to be
administered, by persons who do not serve in an administrative or
other capacity to any other such pension trust sponsored by GMC or
any Affiliate of GMC or AT&T or any Affiliate of AT&T, as
applicable, including the Existing Holders described in (i) through
(iv) in the definition thereof, (it being understood that the fact
that any two such pension trusts may have in common one or more, but
less than a majority, of the persons having ultimate investment
authority for such pension trusts shall not cause such trusts to be
treated as one Person, provided that they are otherwise separately
administered as hereinbefore described), (ii) day to day investment
decisions with respect to MIC are made by a person or persons
different than the person or persons who make such decisions for the
pension trusts sponsored by GMC or its affiliates, including the
Existing Holders described in (i), (ii) and, in respect of (i) and
(ii), item (iv) in the definition thereof, (although MIC and the
pension trusts sponsored by GMC may have in common the person or
persons with ultimate investment authority for such entities), and
the investment of MIC in the Corporation does not exceed 2% of the
value of the outstanding Capital Stock of the Corporation, (iii)
neither MIC nor any such pension trust acts or will act, in concert
with MIC, any other pension trust sponsored by GMC or any Affiliate
of GMC or AT&T or any Affiliate of AT&T, as applicable, including
the Existing Holders described in (i) through (iv) in the definition
thereof, with respect to its investment in the Corporation, and (iv)
as from time to time requested by the Corporation, MIC and each
pension trust shall provide the Corporation with a representation
and undertaking in writing to the foregoing effect.
(3) If there are two or more classes of stock then
outstanding, the total value of the outstanding Capital Stock shall
be allocated among the different classes and series according to the
relative value of each class or series, as determined by reference
to the Market Price per share of each such class or series, using
the date on which the Transfer occurs as the relevant date, or the
effective date of the change in capital structure as the relevant
date, as appropriate.
(g) If any shares are transferred resulting in a violation of
the Ownership Limit or Paragraphs (b), (c), (d) or (e) of this Item
(ii) of this Subsection (d) of this Section 2 of this
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Article III, such Transfer shall be valid only with respect to such
amount of shares transferred as does not result in a violation of
such limitations, and such Transfer otherwise shall be null and void
ab initio.
(iii) Conversion to Excess Stock.
(a) If, notwithstanding the other provisions contained in this
Article III, at any time there is a purported Transfer or other
change in the capital structure of the Corporation such that any
Person (other than an Existing Holder) would Beneficially Own or any
Person (other than an Existing Holder) would Constructively Own
shares of Regular Capital Stock in excess of the Ownership Limit, or
that any Person who is an Existing Holder would Beneficially Own or
any Person who is an Existing Holder would Constructively Own shares
of Regular Capital Stock in excess of the Existing Holder Limit,
then, except as otherwise provided in Item (viii) of this Subsection
(d) of this Section 2 of this Article III, such shares of Common
Stock or Preferred Stock, or both, in excess of the Ownership Limit
or Existing Holder Limit, as the case may be, (rounded up to the
nearest whole share) shall automatically become Excess Stock. Such
conversion shall be effective as of the close of business on the
business day prior to the date of the Transfer or change in capital
structure.
(b) If, notwithstanding the other provisions contained in this
Article III, at any time, there is a purported Transfer or other
change in the capital structure of the Corporation which, if
effective, would cause the Corporation to become "closely held"
within the meaning of Section 856(h) of the Code then the shares of
Common Stock or Preferred Stock, or both, being Transferred which
would cause the Corporation to be "closely held" within the meaning
of Section 856(h) of the Code or held by a Person in excess of that
Person's Ownership Limit or Existing Holder Limit, as applicable
(rounded up to the nearest whole share) shall automatically become
Excess Stock. Such conversion shall be effective as of the close of
business on the business day prior to the date of the Transfer or
change in capital structure.
(c) Shares of Excess Stock shall be issued and outstanding
stock of the Corporation. The Purported Transferee shall have no
rights in such shares of Excess Stock except as provided in
Subsection (e) of this Section 2 of this Article III.
(iv) Notice of Restricted Transfer. Any Person who acquires or
attempts to acquire shares in violation of Item (ii) of this Subsection
(d) of this Section 2 of this Article III, or any Person who is a
transferee such that Excess Stock results under Item (iii) of this
Subsection (d) of this Section 2 of this Article III, shall immediately
give written notice to the Corporation of such event and shall provide to
the Corporation such other information as the Corporation may request
regarding such Person's ownership of Capital Stock.
(v) Owners Required to Provide Information.
(a) Every Beneficial Owner of more than 5% (or such other
percentage, as provided in the applicable regulations adopted under
Sections 856 through 859 of the Code) of the outstanding shares of
the Capital Stock of the Corporation shall, within 30 days after
January 1 of each year, give written notice to the Corporation
stating the name and address of such Beneficial Owner, the number of
shares Beneficially Owned and Constructively Owned, and a full
description of how such shares are held. Every Beneficial Owner
shall, upon demand by the Corporation, disclose to the Corporation
in writing such additional information with respect to the
Beneficial Ownership and Constructive Ownership of the Capital Stock
as the Board of Directors deems appropriate or necessary (i) to
comply with the provisions of the Code, regarding the qualification
of the Corporation as a REIT under the Code, and (ii) to ensure
compliance with the Ownership Limit or the Existing Holder Limit.
(b) Any Person who is a Beneficial Owner or Constructive Owner
of shares of Capital Stock and any Person (including the shareholder
of record) who is holding Capital Stock for a Beneficial Owner or
Constructive Owner, and any proposed transferee of shares, upon the
determination by the Board of Directors to be reasonably necessary
to protect the status of the Corporation as a REIT under the Code,
shall provide a statement or affidavit to the Corporation, setting
forth the number of
17
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shares of Capital Stock already Beneficially Owned or Constructively
Owned by such shareholder or proposed transferee and any related
person specified, which statement or affidavit shall be in the form
prescribed by the Corporation for that purpose.
(vi) Remedies Not Limited. Subject to Subsection (h) of this Section
2 of this Article III, nothing contained in this Article III shall limit
the authority of the Board of Directors to take such other action as it
deems necessary or advisable (i) to protect the Corporation and the
interests of its shareholders in the preservation of the Corporation's
status as a REIT, and (ii) to insure compliance with the Ownership Limit
and the Existing Holder Limit.
(vii) Determination. Any question regarding the application of any
of the provisions of this Subsection (d) of this Section 2 of this Article
III, including any definition contained in Item (i) of this Subsection (d)
of this Section 2 of this Article III, shall be determined or resolved by
the Board of Directors and any such determination or resolution shall be
final and binding on the Corporation, its shareholders, and all parties in
interest.
(viii) Exceptions. The Board of Directors, upon advice from, or an
opinion from, Counsel, may exempt a Person from the Ownership Limit if
such Person is a Look Through Entity, provided, however, in no event may
any such exception cause such Person's ownership, direct or indirect
(without taking into account such Person's ownership of interests in TRG),
to exceed 9.9% of the value of the outstanding Capital Stock.
For a period of 90 days following the purchase of Regular
Capital Stock by an underwriter that (i) is a Look Through Entity and (ii)
participates in a public offering of the Regular Capital Stock, such
underwriter shall not be subject to the Ownership Limit with respect to
the Regular Capital Stock purchased by it as a part of such public
offering.
(e) Excess Stock.
(i) Surrender of Excess Stock to Designated Agent. Within thirty
business days of the date upon which the Corporation determines that
shares have become Excess Stock, the Corporation, by written notice to the
Purported Transferee, shall demand that any certificate or other evidence
of ownership of the shares of Excess Stock be immediately surrendered to
the Designated Agent (the "Demand").
(ii) Excess Share Distributions. The Designated Agent shall be
entitled to receive all Excess Share Distributions. The Purported
Transferee of Regular Capital Stock that has become Excess Stock shall not
be entitled to any dividends or other distributions, including, without
limitation, capital gain distributions, with respect to the Excess Stock.
Any Excess Share Distributions paid to a Purported Transferee shall be
remitted to the Designated Agent within thirty business days after the
date of the Demand.
(iii) Restrictions on Transfer; Sale of Excess Stock.
(a) Excess Stock shall be transferable by the Designated Agent
as attorney-in-fact for the Designated Charity. Excess Stock shall
not be transferable by the Purported Transferee.
(b) Upon delivery of the certificates or other evidence of
ownership of the shares of Excess Stock to the Designated Agent, the
Designated Agent shall immediately sell such shares in an
arms-length transaction (over the New York Stock Exchange or such
other exchange over which the shares of the applicable class or
series of Regular Capital Stock may then be traded, if practicable),
and the Purported Transferee shall receive from the Net Sales
Proceeds, the lesser of:
(1) the Net Sales Proceeds; or
(2) the price per share that such Purported Transferee
paid for the Regular Capital Stock in the purported Transfer that
resulted in the Excess Stock, or if the Purported Transferee did not
give value for such shares (because the Transfer was, for example,
through a gift, devise or other transaction), a price per share
equal to the Market Price determined using the date of the purported
Transfer that resulted in the Excess Stock as the relevant date.
18
<PAGE>
(c) If some or all of the shares of Excess Stock have been
sold prior to receiving the Demand, such sale shall be deemed to
been made for the benefit of and as the agent for the Designated
Charity. The Purported Transferee shall pay to the Designated Agent,
within thirty business days of the date of the Demand, the entire
gross proceeds realized upon such sale. Notwithstanding the
preceding sentence, the Designated Agent may grant written
permission to the Purported Transferee to retain an amount from the
gross proceeds equal to the amount the Purported Transferee would
have been entitled to receive had the Designated Agent sold the
shares as provided in Item (iii)(b) of this Subsection (e) of this
Section 2 of this Article III.
(d) The Designated Agent shall promptly pay to the Designated
Charity any Excess Share Distributions recovered by the Designated
Agent and the excess, if any, of the Net Sales Proceeds over the
amount due to the Purported Transferee as provided in Item (iii)(b)
of this Subsection (e) of this Section 2 of this Article III.
(iv) Voting Rights. The Designated Agent shall have the exclusive
right to vote all shares of Excess Stock as the attorney-in-fact for the
Designated Charity. The Purported Transferee shall not be entitled to vote
such shares (except as required by applicable law). Notwithstanding the
foregoing, votes erroneously cast by a Prohibited Transferee shall not be
invalidated in the event that the Corporation has already taken
irreversible corporate action to effect a reorganization, merger, sale or
dissolution of the Corporation.
(v) Rights Upon Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of, or any distribution
of the assets of the Corporation, a Purported Transferee shall be entitled
to receive the lesser of (i) that amount which would have been due to such
Purported Transferee had the Designated Agent sold the shares of Excess
Stock as provided in Item (iii)(b) of this Subsection (e) of this Section
2 of this Article III and (ii) that amount which would have been due to
the Purported Transferee if the Transfer had been valid under Item (ii) of
Subsection (d) of this Section 2 of this Article III, determined (A) in
the case of Common Stock, pursuant to Subsection (a)(ii) of this Section 2
of this Article III, and (B) in the case of Preferred Stock, pursuant to
the provisions of these Amended and Restated Articles of Incorporation,
amended as authorized by Section 1 of this Article III, which sets forth
the liquidation rights of such class or series of Preferred Stock. With
respect to shares of Excess Stock, a Purported Transferee shall not have
any rights to share in the assets of the Corporation upon the liquidation,
dissolution or winding up of the Corporation other than the right to
receive the amount determined in the preceding sentence and shall not be
entitled to any preference or priority (as a creditor of the Corporation)
over the holders of the shares of Regular Capital Stock. Any Excess
Liquidation Proceeds shall be paid to the Designated Charity.
(vi) Action by Corporation to Enforce Transfer Restrictions. If the
Purported Transferee fails to deliver the certificates or other evidence
of ownership and all Excess Share Distributions to the Designated Agent
within thirty business days of the date of Demand, the Corporation shall
take such legal action to enforce the provisions of this Article III as
may be permitted under applicable law.
(f) Legend. Each certificate for Capital Stock shall bear the following
legend:
"The Amended and Restated Articles of Incorporation, as the same may
be amended (the "Articles"), impose certain restrictions on the
transfer and ownership of the shares represented by this Certificate
based upon the percentage of the outstanding shares owned by the
shareholder. At no charge, any shareholder may receive a written
statement of the restrictions on transfer and ownership that are
imposed by the Articles."
(g) Severability. If any provision of this Article III or any application
of any such provision is determined to be invalid by any Federal or state court
having jurisdiction over the issues, the validity of the remaining provisions
shall not be affected and other applications of such provision shall be affected
only to the extent necessary to comply with the determination of such court.
(h) New York Stock Exchange Settlement. Nothing contained in these Amended
and Restated Articles of Incorporation shall preclude the settlement of any
transaction entered into through the facilities of the New
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York Stock Exchange or of any other stock exchange on which shares of the Common
Stock or class or series of Preferred Stock may be listed, or of the Nasdaq
National Market (if the shares are quoted on such Market) and which has
conditioned such listing or quotation on the inclusion in the Corporation's
Amended and Restated Articles of Incorporation of a provision such as this
Subsection (h). The fact that the settlement of any transaction is permitted
shall not negate the effect of any other provision of this Article III and any
transferee in such a transaction shall be subject to all of the provisions and
limitations set forth in this Article III.
ARTICLE IV
Registered Office and Registered Agent
1. Registered Office.
The address and mailing address of the registered office of the
Corporation is 500 North Woodward Avenue, Suite 100, Bloomfield Hills, Michigan
48304.
2. Resident Agent.
The resident agent for service of process on the Corporation at the
registered office is Jeffrey H. Miro.
ARTICLE V
Plan of Compromise or Reorganization
When a compromise or arrangement or a plan of reorganization of the
Corporation is proposed between the Corporation and its creditors or any class
of them or between the Corporation and its shareholders or any class of them, a
court of equity jurisdiction within the State of Michigan, on application of the
Corporation or of a creditor or shareholder thereof, or on application of a
receiver appointed for the Corporation, may order a meeting of the creditors or
class of creditors or of the shareholders or class of shareholders to be
affected by the proposed compromise or arrangement or reorganization, to be
summoned in such manner as the court directs. If a majority in number
representing 75% in value of the creditors or class of creditors, or of the
shareholders or class of shareholders to be affected by the proposed compromise
or arrangement or a reorganization, agree to a compromise or arrangement or a
reorganization of the Corporation as a consequence of the compromise or
arrangement, the compromise or arrangement and the reorganization, if sanctioned
by the court to which the application has been made, shall be binding on all the
creditors or class of creditors, or on all the shareholders or class of
shareholders and also on the Corporation.
ARTICLE VI
Directors
For so long as the Corporation has the right to designate, pursuant to The
Amended and Restated Agreement of Limited Partnership of TRG (as the same may be
amended, the Partnership Agreement"), members of the committee of TRG that have
the power to approve or propose all actions, decisions, determinations,
designations, delegations, directions, appointments, consents, approvals,
selections, and the like to be taken, made or given, with respect to TRG, its
business and its properties as well as the management of all affairs of TRG (the
"Partnership Committee"), the Board of Directors shall consist of, except during
the period of any vacancy between annual meetings of the shareholders, that
number of members as are set forth in the By-Laws of the Corporation of which,
except during the period of any vacancy between annual meetings of the
shareholders, not less than 40% (rounded up to the next whole number) of the
members shall be Independent Directors (as hereinafter defined), and,
thereafter, the Board of Directors shall consist of, except during the period of
any vacancy between annual meetings of the shareholders, that number of members
as are set forth in the By-Laws of the Corporation. For purposes of this Article
VI, "Independent Director" shall mean an individual who is neither one of the
following named persons nor an employee, beneficiary, principal, director,
officer or agent of, or a general partner in, or limited partner (owning in
excess
20
<PAGE>
of 5% of the Beneficial Interest) or shareholder (owning in excess of 5% of the
Beneficial Interest) in, any such named Person: (i) for so long as TG Partners
Limited Partnership, a Delaware limited partnership, has the right to appoint
one or more Partnership Committee members, A. Alfred Taubman and any Affiliate
of A. Alfred Taubman or any member of his Immediate Family, (ii) for so long as
Taub-Co Management, Inc., a Michigan corporation (formerly The Taubman Company,
Inc. ("T-Co")) has the right to appoint one or more Partnership Committee
members, T-Co or an Affiliate of T-Co, (iii) for so long as a Taubman Transferee
(as hereinafter defined) has the right to appoint one or more Partnership
Committee members, a Taubman Transferee, or an Affiliate of such Taubman
Transferee, (iv) for so long as GMPTS has the right to appoint one or more
Partnership Committee members, GMPTS, General Motors Corporation, or an
Affiliate of GMPTS or of General Motors Corporation, and (v) for so long as a
GMPTS Transferee (as hereinafter defined) has the right to appoint one or more
Partnership Committee members, a GMPTS Transferee or an Affiliate of such GMPTS
Transferee. "Taubman Transferee" means a single Person that acquires, pursuant
to Section 8.1(b) or Section 8.3(a) of The Partnership Agreement, or upon the
foreclosure or like action in respect of a pledge of a partnership interest in
TRG, the then (i.e., at the time of such acquisition) entire partnership
interest in TRG (excluding, in the case of an acquisition pursuant to Section
8.3(a) of the Partnership Agreement or pursuant to a foreclosure or like action
in respect of a pledge of a partnership interest in TRG, the ability of such
Person to act as a substitute partner) of A. Alfred Taubman, and any Affiliate
of A. Alfred Taubman or any member of his Immediate Family, from one or more
such persons or from any Taubman Transferee; provided that the percentage
interest in TRG being transferred exceeds 7.7%. "GMPTS Transferee" means a
single Person that acquires, pursuant to Section 8.1(b) or Section 8.3(a) of the
Partnership Agreement, or upon the foreclosure or like action in respect of a
pledge of a partnership interest in TRG, the then (i.e., at the time of such
acquisition) entire such partnership interest in TRG (excluding, in the case of
an acquisition pursuant to Section 8.3(a) of the Partnership Agreement or
pursuant to a foreclosure or like action in respect of a pledge of partnership
interests in TRG, the ability of such Person to act as a substitute partner) of
GMPTS or of any GMPTS Transferee; provided that the percentage interest in TRG
being transferred exceeds 7.7%.
For so long as the Corporation has the right to designate, pursuant to the
Partnership Agreement, any members of the Partnership Committee, the affirmative
vote of both a majority of the Independent Directors who do not have a
beneficial financial interest in the action before the Board of Directors and a
majority of all members of the Board of Directors who do not have a beneficial
financial interest in the action before the Board of Directors is required for
the approval of all actions to be taken by the Board of Directors; provided,
however, the Corporation may not appoint to the Partnership Committee as a
Corporation appointee an individual who does not satisfy the definition of
Independent Director in one or more respects without the affirmative vote of all
of the Independent Directors then in office. Thereafter, the affirmative vote of
a majority of all members of the Board of Directors who do not have a beneficial
financial interest in the action before the Board of Directors is required for
the approval of all actions to be taken by the Board of Directors. The
establishment of reasonable compensation of Directors for services to the
Corporation as Directors or officers shall not constitute action in which any
Director has a beneficial financial interest.
Subject to the foregoing, a Director shall be deemed and considered in all
respects and for all purposes to be a Director of the Corporation, including,
without limitation, having the authority to vote or act on all matters,
including, without limitation, matters submitted to a vote at any meeting of the
Board of Directors or at any meeting of a committee of the Board of Directors,
and the application to such Director of Articles VII and VIII of these Amended
and Restated Articles of Incorporation, notwithstanding a Purported Transferee's
unauthorized exercise of voting rights with respect to such Director's election.
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ARTICLE VII
Limited Liability of Directors
No director of the Corporation shall be liable to the Corporation or its
shareholders for monetary damages for a breach of the director's fiduciary duty;
provided, however, the foregoing provision shall not be deemed to limit a
director's liability to the Corporation or its shareholders resulting from:
(i) a breach of the director's duty of loyalty to the
Corporation or its shareholders;
(ii) acts or omissions of the director not in good faith or which
involve intentional misconduct or knowing violation of law;
(iii) a violation of Section 551(1) of the Act or;
(iv) a transaction from which the director derived an improper
personal benefit.
ARTICLE VIII
Indemnification of Officers, Directors, Etc.
1. Indemnification of Directors.
The Corporation shall and does hereby indemnify a person (including the
heirs, executors, and administrators of such person) who is or was a party to,
or who is threatened to be made a party to, a threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal, including, without limitation, an
action by or in the right of the Corporation, by reason of the fact that he or
she is or was a director of the Corporation, or is or was serving at the request
of the Corporation as a director (or in a similar capacity, including serving as
a member of the Partnership Committee and of any other committee of TRG) or in
any other representative capacity of another foreign or domestic corporation or
of or with respect to any other entity (including TRG), whether for profit or
not, against expenses, attorneys' fees, judgments, penalties, fines, and amounts
paid in settlement actually and reasonably incurred by him or her in connection
with the action, suit, or proceeding. This Section 1 of this Article VIII is
intended to grant the persons herein described with the fullest protection not
prohibited by existing law in effect as of the date of filing this Amended and
Restated Articles of Incorporation or such greater protection as may be
permitted or not prohibited under succeeding provisions of law.
2. Indemnification of Officers, Etc.
The Corporation has the power to indemnify a person (including the heirs,
executors, and administrators of such person) who is or was a party to, or who
is threatened to be made a party to, a threatened, pending, or contemplated
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal, including an action by or in the
right of the Corporation, by reason of the fact that he or she is or was an
officer, employee, or agent of the Corporation or is or was serving at the
request of the Corporation as an officer, partner, trustee, employee, or agent
of another foreign or domestic corporation, partnership (including TRG), joint
venture, trust or other enterprise, whether for profit or not, against expenses,
including attorneys' fees, judgments, penalties, fines, and amounts paid in
settlement actually and reasonably incurred by him or her in connection with the
action, suit, or proceeding, if the person acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Corporation or its shareholders, and with respect to a criminal action or
proceeding, if the person had no reasonable cause to believe his or her conduct
was unlawful. Unless ordered by a court, an indemnification under this Section 2
of this Article VIII shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the officer,
employee, or agent is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in this Section 2 of this Article VIII.
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3. Advancement of Expenses.
The Corporation shall pay the expenses incurred by a person described in
Section 1 of this Article VIII in defending a civil or criminal action, suit, or
proceeding described in such Section 1 in advance of the final disposition of
the action, suit, or proceeding. The Corporation shall pay the expenses incurred
by a person described in Section 2 of this Article VIII in defending a civil or
criminal action, suit, or proceeding described in such Section 2 in advance of
the final disposition of the action, suit, or proceeding upon receipt of an
undertaking by or on behalf of such person to repay the expenses if it is
ultimately determined that the person is not entitled to be indemnified by the
Corporation. Such undertaking shall be by unlimited general obligation of the
person on whose behalf advances are made but need not be secured.
Signed and certified as of the 12th day of October, 1998.
/s/ ROBERT S. TAUBMAN
--------------------------------------
Robert S. Taubman
President and Chief Executive Officer
23
TABLE OF CONTENTS TO
RESTATED BY-LAWS OF
TAUBMAN CENTERS, INC.
(Reflecting amendments through September 30, 1998)
Page
----
Article I -- MEETINGS OF SHAREHOLDERS
Section 1.01 Place of Meetings............................ 1
Section 1.02 Annual Meeting............................... 1
Section 1.03 Special Meetings............................. 1
Section 1.04 Notice of Meetings........................... 1
Section 1.05 Waiver of Notice............................. 1
Section 1.06 Inspectors of Election....................... 2
Section 1.07 Quorum and Adjournment....................... 2
Section 1.08 Vote of Shareholders......................... 2
Section 1.09 Proxies...................................... 2
Section 1.10 Consents..................................... 2
Section 1.11 Organization of Shareholders' Meetings....... 3
Article II -- DETERMINATION OF VOTING, DIVIDEND, AND
OTHER RIGHTS...................................... 3
Article III -- DIRECTORS
Section 3.01 General Powers............................... 3
Section 3.02 Number, Qualifications, and Term of Office... 3
Section 3.03 Place of Meetings............................ 4
Section 3.04 Annual Meeting............................... 4
Section 3.05 Regular and Special Meetings................. 4
Section 3.06 Quorum and Manner of Action.................. 4
Section 3.07 Compensation................................. 4
Section 3.08 Removal of Directors......................... 5
Section 3.09 Resignations................................. 5
Section 3.10 Vacancies.................................... 5
Section 3.11 Organization of Board Meeting................ 5
Article IV -- COMMITTEES
Section 4.01 Committees................................... 5
Section 4.02 Regular Meetings............................. 5
Section 4.03 Special Meetings............................. 5
Section 4.04 Quorum and Manner of Action.................. 6
Section 4.05 Records...................................... 6
Section 4.06 Vacancies.................................... 6
Article V -- OFFICERS
Section 5.01 Officers..................................... 6
Section 5.02 Term of Office and Resignation............... 6
Section 5.03 Removal of Elected Officers.................. 6
Section 5.04 Vacancies.................................... 7
Section 5.05 Compensation................................. 7
Section 5.06 The Chairman of the Board.................... 7
Section 5.07 The Vice Chairman of the Board............... 7
Section 5.08 The President................................ 7
Section 5.09 The Chief Financial Officer.................. 7
Section 5.10 The Vice President........................... 7
Section 5.11 The Secretary................................ 7
Section 5.12 The Treasurer................................ 8
<PAGE>
Article VI -- INDEMNIFICATION
Section 6.01 Indemnification.............................. 8
Section 6.02 Advancement of Expenses...................... 8
Section 6.03 Indemnification: Insurance................... 8
Section 6.04 Indemnification: Constituent Corporations.... 8
Article VII -- SHARE CERTIFICATES
Section 7.01 Form; Signature.............................. 9
Section 7.02 Transfer Agents and Registrars............... 9
Section 7.03 Transfers of Shares.......................... 9
Section 7.04 Registered Shareholders...................... 9
Section 7.05 Lost Certificates............................ 9
Article VIII -- MISCELLANEOUS
Section 8.01 Fiscal Year.................................. 10
Section 8.02 Signatures on Negotiable Instrumental........ 10
Section 8.03 Dividends.................................... 10
Section 8.04 Reserves..................................... 10
Section 8.05 Seal......................................... 10
Section 8.06 Corporation Offices.......................... 10
Article IX -- AMENDMENTS
Section 9.01 Power to Amend............................... 10
<PAGE>
RESTATED BY-LAWS
OF
TAUBMAN CENTERS, INC.
(Reflecting amendments through September 30, 1998)
ARTICLE I
Meetings of Shareholders
Section 1.01. Place of Meetings.
Annual and special meetings of the shareholders shall be held at such place
within or outside the State of Michigan as may be fixed from time to time by the
board of directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 1.02. Annual Meeting.
The annual meeting of the shareholders for the election of directors and for
the transaction of such other business as may properly come before the meeting
shall be held on such date as the Chairman of the Board, or the Vice Chairman of
the Board or the President or the board of directors shall designate, and at
such hour as may be named, in the notice of said meeting. If the election of
directors shall not be held on the date so designated for any annual meeting or
at any adjournment of such meeting, the board of directors shall cause the
election to be held at a special meeting as soon thereafter as it conveniently
may be held.
Section 1.03. Special Meetings.
A special meeting of the shareholders may be called at any time and for any
purpose or purposes by the Chairman of the Board, the Vice Chairman of the
Board, the President, a Vice President or any two directors, or by a shareholder
or shareholders holding of record shares entitled to at least twenty-five
percent (25%) of all the votes entitled to be cast by the holders of all
outstanding capital stock of the corporation entitled to vote at such meeting.
Section 1.04. Notice of Meetings.
A written notice of the place, date, hour, and purposes of each meeting,
whether annual or special, and any adjournment thereof, shall be given
personally or by mail to each shareholder entitled to vote thereat at least ten
(10) but not more than sixty (60) days prior to the meeting unless a shorter
time is provided by the Michigan Business Corporation Act and is fixed by the
board of directors. The notice of any special meeting shall also state by or at
whose direction it is being issued. If, at any meeting, whether annual or
special, action is proposed to be taken which would, if taken, entitle
shareholders fulfilling requirements of law to receive payment for their shares,
the notice of such meeting shall include a statement of that purpose and to that
effect. If any notice, as provided in this Section 1.04 is mailed, it shall be
directed to the shareholder in a postage prepaid envelope at his address as it
appears on the record of shareholders, or, if he shall have filed with the
Secretary a written request that notices to him be mailed to some other address,
then directed to him at such other address.
Section 1.05. Waiver of Notice.
Notice of meeting need not be given to any shareholder who submits a waiver
of notice, signed in person or by proxy, whether before, at or after the
meeting. The attendance of any shareholder at a meeting, in person or by proxy,
shall constitute a waiver of notice by him except when the shareholder attends
such meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
<PAGE>
Section 1.06. Inspectors of Election.
The board of directors, or any officer or officers duly authorized by the
board of directors, in advance of any meeting of shareholders, may appoint one
or more inspectors to act at the meeting or any adjournment thereof. If
inspectors are not so appointed, the person presiding at the meeting may, and on
the request of any shareholder entitled to vote thereat shall, appoint one or
more inspectors. In case any person appointed fails to appear or act, the
vacancy may be filled by appointment made by the board of directors in advance
of the meeting or at the meeting by the chairman of the meeting. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors shall
determine the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the validity and
effect of proxies, and shall receive votes, ballots, or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots, or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all shareholders. On request of the person presiding at the meeting or any
shareholder entitled to vote thereat, the inspectors shall make a report in
writing of any facts or matters found or determined by them and execute a
certificate with respect thereto.
Section 1.07. Quorum and Adjournment.
Unless a greater or lesser quorum is provided by statute or in the articles
of incorporation, shares entitled to cast a majority of the votes at a meeting
constitute a quorum at the meeting. The shareholders present in person or by
proxy at the meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum. By a vote of the shares present, even if less than a quorum, the meeting
may be adjourned to another place and time for a period not exceeding thirty
(30) days in any one case. At an adjourned meeting at which a quorum shall be
present, any business may be transacted that might have been transacted at the
meeting as originally called.
Section 1.08. Vote of Shareholders.
Each share of outstanding capital stock shall entitle its holder to the
voting rights set forth in the articles of incorporation. All elections of
directors shall be by a plurality vote of the shareholders entitled to vote at
such meeting of shareholders. Whenever any corporate action is to be taken by
vote, other than the election of directors, it shall, except as otherwise
required by statute, by the articles of incorporation, or by these by-laws, be
authorized by two-thirds (2/3(rds)) of all the votes entitled to be cast by the
holders of all outstanding capital stock entitled to vote on the action.
Directors shall be elected if approved by a plurality of the votes cast at an
election.
Section 1.09. Proxies.
Every shareholder entitled to vote at a meeting of shareholders or to express
consent or dissent without a meeting may authorize another person or persons to
act for him by proxy. Every proxy must be in writing and signed by the
shareholder or his attorney-in-fact. No proxy shall be valid after the
expiration of three (3) years from the date thereof unless otherwise provided in
the proxy.
Section 1.10. Consents.
Any action required or permitted to be taken by the holders of any class or
series of capital stock authorized under the articles of incorporation to vote
by non-unanimous written consent may be taken without a meeting, without prior
notice, and without a vote, if consents in writing, setting forth the action so
taken, are signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take the action
at a meeting at which all shares entitled to vote on the action were present and
voted. The written consents shall bear the date of signature of each shareholder
who signs the consent. No written consents shall be effective to take the action
referred to unless, within 60 days after the record date for determining
shareholders entitled to express consent to or to dissent from a proposal
without a
2
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meeting, written consents signed by shareholders holding a sufficient number of
shares to take the action are delivered to the corporation. Delivery shall be to
the corporation's registered office, its principal place of business, or an
officer or agent of the corporation having custody of the minutes of the
proceedings of its shareholders. Delivery made to the corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. Prompt notice of the taking of the action without a meeting by less
than unanimous written consent shall be given to the holders of the relevant
class or series of capital stock who would have been entitled to notice of the
shareholder meeting if the action had been taken at a meeting and who have not
consented in writing.
Section 1.11. Organization of Shareholders' Meetings.
At every meeting of the shareholders, the Chairman of the Board, or in his
absence, the Vice Chairman of the Board, or in his absence, the President, or in
his absence, a Vice President, or in the absence of the Chairman of the Board,
the President and Vice President, a chairman chosen by a majority in interest of
the shareholders of the corporation present in person or by proxy and entitled
to vote, shall act as chairman; and the Secretary, or in his absence any person
appointed by the chairman, shall act as secretary.
ARTICLE II
Determination of Voting,
Dividend, and Other Rights
For the purpose of determining the shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or to express
consent to or dissent from any proposal without a meeting, or for the purpose of
determining shareholders entitled to receive payment of any dividend or the
allotment of any rights, or the date when any change or conversion or exchange
of capital stock shall go into effect, or for the purpose of any other action,
the board of directors may fix, in advance, a date as the record date for any
such determination of shareholders. Such date shall not be more than sixty (60)
nor less than ten (10) days before the date of any such meeting, nor more than
thirty (30) days prior to any other action. If a record date is so fixed, such
shareholders and only such shareholders as shall be shareholders of record on
that date so fixed shall be entitled to notice of, and to vote at, such meeting
and any adjournment thereof, or to express such consent or dissent, or to
receive payment of such dividend or such allotment of rights, or otherwise to be
recognized as shareholders for the purpose of any other action, notwithstanding
any transfer of any shares on the books of the corporation after any such record
date so fixed.
ARTICLE III
Directors
Section 3.01. General Powers.
The business and all the powers of the corporation, and the stock, property,
and affairs of the corporation, except as otherwise provided by the articles of
incorporation, the by-laws, or by statute, shall be managed by the board of
directors.
Section 3.02. Number, Qualifications, and Term of Office.
Except when the Corporation's articles of incorporation require the board to
consist of a fixed number of directors, the board of directors shall consist of
that number of directors established from time to time by the board of
directors, provided that the board cannot reduce the number of directors below
its then current size except upon the expiration of the term of one or more
directors or the death, resignation, or removal of a director. Except as
otherwise required by the articles of incorporation, the directors, who need not
be shareholders, shall be divided into three classes that shall be as nearly
equal in number as is possible. At each annual meeting of shareholders, one
class of directors shall be chosen for a full three year term and until their
successors shall be duly elected and qualified or, if earlier, until death,
resignation or removal.
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If satisfied immediately following the most recent election or appointment of
directors, any requirement under the articles of incorporation or these by-laws
regarding the number of directors who must be "independent" shall be deemed to
be satisfied until the next annual meeting of shareholders, notwithstanding the
occurrence of one or more vacancies on the board of directors occurring between
meetings of shareholders.
Section 3.03. Place of Meetings.
Meetings of the board of directors, annual or special, shall be held at any
place within or outside the State of Michigan as may from time to time be
determined by the board of directors.
Section 3.04. Annual Meeting.
The board of directors shall meet as soon as practicable after each annual
election of directors for the purpose of organization, election of officers, and
the transaction of other business, on the same day and at the same place at
which the shareholders' meeting is held. Notice of such meeting need not be
given. Such meeting may be held at such other time and place as shall be
specified in a notice to be given as hereinafter provided for special meetings
of the board of directors, or according to consent and waiver of notice thereof
signed by all directors.
Section 3.05. Regular and Special Meetings.
Regular (i.e., previously scheduled by action of the board of directors)
meetings of the board of directors may be held with or without notice. Special
meetings of the board of directors shall be held whenever called by any
director. Notice of any special meeting, and any adjournment thereof, stating
the place, date, hour and purpose of the meeting, shall be mailed to each
director, addressed to him at his residence or usual place of business, or shall
be sent to him at such place by mail, telegraph, cable, fax or radio, or be
delivered personally or by telephone, not later than forty-eight (48) hours
prior to the day on which the meeting is to be held. Notice of any meeting of
the board of directors need not be given to any director who submits a signed
waiver of notice before or after the meeting, or who attends the meeting without
protesting, either prior to or at the commencement of such meeting, the lack of
notice to him. Unless limited by statute, the articles of incorporation, these
by-laws, or the terms of the notice thereof, any and all business may be
transacted at any special meeting.
Section 3.06. Quorum and Manner of Action.
A majority of the directors in office at the time of any meeting of the board
of directors, present in person, shall be necessary and sufficient to constitute
a quorum for the transaction of business. The affirmative vote of a majority of
the directors in office shall be required for the approval of all actions to be
taken by the board of directors, except as otherwise required by statute or the
articles of incorporation and except for adjournment. A majority of the
directors present, regardless of whether a quorum is present, may adjourn any
meeting to another place and time for a period not exceeding thirty (30) days in
any one case. If all of the directors severally or collectively consent in
writing to any act taken or to be taken by the corporation, such action shall be
valid corporate action as though it had been authorized at a meeting of the
board of directors.
Section 3.07. Compensation.
Each independent director shall be paid such directors' fees and fixed sums
and expenses for attendance at each annual, regular or special meeting of the
board of directors or committees of the board of directors as the board of
directors by resolution so determines; provided, however, that nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
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Section 3.08. Removal of Directors.
By a vote of two-thirds (2/3(rds)) of all the votes entitled to be cast by
the holders of all outstanding capital stock entitled to vote, the shareholders
may remove one or more or all of the directors from office for or without cause.
Section 3.09. Resignations.
Any director may resign at any time by giving written notice to the board of
directors, the Chairman of the Board, the Vice Chairman, the President, or the
Secretary of the corporation. Such resignation shall take effect at the time
specified therein; and unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 3.10. Vacancies.
Any vacancies occurring on the board of directors by reason of death,
resignation, retirement, disqualification, removal, or an increase in the size
of the board of directors shall be temporarily filled by the board of directors
then in office. Except as provided in the next sentence, unless a successor
director is elected by a vote of the shareholders, any director elected by the
board of directors to fill a vacancy temporarily shall hold office for the
unexpired portion of the term of his predecessor. If a director is elected by
the directors in order to fill a vacancy created as a result of an increase in
the size of the board of directors, then such director shall have an initial
term equal to the remaining term of the class of directors that such director is
placed in pursuant to the resolution of the board of directors adopted pursuant
to Section 3.02 of these by-laws.
Section 3.11. Organization of Board Meeting.
At each meeting of the board of directors, the Chairman, or in his absence,
the Vice Chairman, or in his absence, the President, if he is a director, or in
his absence, a director chosen by a majority of the directors present, shall act
as chairman of the meeting. The Secretary, or in his absence, any person
appointed by the chairman, shall act as secretary of the meeting.
ARTICLE IV
Committees
Section 4.01. Committees.
The corporation may have such committees as the board of directors shall by
resolution from time to time determine, which shall have such powers and
authority as are designated by the board of directors.
Section 4.02. Regular Meetings.
Regular meetings of a committee shall be held without notice at such time and
at such place as shall from time to time be determined by resolution of the
committee. In case the day so determined shall be a legal holiday, such meeting
shall be held on the next succeeding day, not a legal holiday, at the same hour.
Section 4.03. Special Meetings.
Special meetings of a committee shall be held wherever called by the chairman
of the committee. Notice of any special meeting and any adjournment thereof
shall be delivered personally, by telephone or fax or mailed to each member,
addressed to him at his residence or usual place of business, or be sent to him
at such place by telegraph, or be delivered personally, by telephone, or by fax,
not later than the second (2nd) day before the day on which the meeting is to be
held. Notice of any meeting of a committee need not be given to any member who
submits a signed waiver of notice before or after the meeting, or who attends
the meeting without protesting prior thereto or at its commencement the lack of
notice to him. Unless limited by statute,
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the articles of incorporation, these by-laws, or the terms of the notice
thereof, any and all business may be transacted at any special meeting of the
committee.
Section 4.04. Quorum and Manner of Action.
A majority of the members of a committee in office at the time of any regular
or special meeting of the committee present in person shall constitute a quorum
for the transaction of business. The vote of a majority of the members shall be
the act of the committee. Any member of a committee may require that action
proposed to be taken by the committee instead be submitted to the board of
directors for its consideration and action. A majority of the members present,
whether or not a quorum is present, may adjourn any meeting to another time and
place. No notice of an adjourned meeting need be given.
Section 4.05. Records.
A committee shall keep minutes of its proceedings and shall submit the same
from time to time to the board of directors. The Secretary of the corporation,
or in his absence an assistant secretary, shall act as secretary to the
committee; or the committee may in its discretion appoint its own secretary.
Section 4.06. Vacancies.
Any newly created memberships and vacancies occurring in a committee shall be
filled by resolution adopted by a majority of the entire board of directors.
ARTICLE V
Officers
Section 5.01. Officers.
The elected officers of the corporation shall be a Chairman of the Board, a
Vice Chairman of the Board, a President, a Chief Financial Officer, a Secretary,
a Treasurer, and, if the board of directors so determines, one or more Vice
Presidents. The board of directors may also appoint one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers and
agents as may from time to time appear to be necessary or advisable in the
conduct of the affairs of the corporation. Any two or more offices, whether
elective or appointive, may be held by the same person, except that an officer
shall not execute, acknowledge or verify any instrument in more than one
capacity if the instrument is required by law or the articles of incorporation
or the by-laws to be executed, acknowledged or verified by two or more officers.
Section 5.02. Term of Office and Resignation.
So far as practicable, all elected officers shall be elected at the first
meeting of the board of directors following the annual meeting of shareholders
in each year and, except as otherwise hereinafter provided, shall hold office
until the first meeting of the board of directors following the next annual
meeting of shareholders and until their respective successors shall have been
elected or appointed and qualified. All other officers shall hold office during
the pleasure of the board of directors. Any elected or appointed officer may
resign at any time by giving written notice to the board of directors, the
Chairman, the Vice Chairman, the President, the Chief Financial Officer, or the
Secretary of the corporation. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5.03. Removal of Elected Officers.
Any officer may be removed at any time, with or without cause, by vote at any
meeting of the board of directors.
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Section 5.04. Vacancies.
If any vacancy shall occur in any office for any reason, the board of
directors may elect or appoint a successor to fill such vacancy for the
remainder of the term.
Section 5.05. Compensation.
The compensation, if any, of all elected or appointed officers and agents of
the corporation shall be fixed by the board of directors.
Section 5.06. The Chairman of the Board.
The Chairman of the Board (sometimes herein the "Chairman") shall preside at
all meetings of the shareholders and board of directors and shall appoint all
standing and special committees as are deemed necessary in the conduct of the
business. The Chairman shall exercise any and all powers and perform any and all
duties which are required by the by-laws and which the board of directors may
additionally confer upon him.
Section 5.07. The Vice Chairman of the Board.
The Vice Chairman of the Board (sometimes herein the "Vice Chairman"), in the
absence of the Chairman, shall preside at all meetings of the shareholders and
board of directors. The Vice Chairman shall exercise any and all powers and
perform any and all duties which are required by the by-laws and which the board
of directors may additionally confer upon him.
Section 5.08. The President.
The President shall be the Chief Executive Officer and, if he is a director,
in the absence of the Chairman and the Vice Chairman, preside at all meetings of
the board of directors; and shall perform such other duties as are usually
ascribed to that office. The President shall exercise any and all powers and
perform any and all duties which are required by the by-laws and which the board
of directors may additionally confer upon him.
Section 5.09. The Chief Financial Officer.
The Chief Financial Officer shall perform all necessary acts and duties in
connection with the administration of the financial affairs of the corporation;
and shall perform such other duties as are usually ascribed to that office. The
Chief Financial Officer shall exercise any and all powers and perform any and
all duties which are required by the by-laws and which the board of directors
may additionally confer upon him.
Section 5.10. The Vice President.
The Vice President, if any, or if there is more than one Vice President, each
Vice President, shall have such powers and discharge such duties as may be
assigned to him from time to time by the board of directors.
Section 5.11. The Secretary.
The Secretary shall attend all meetings of the board of directors and the
shareholders and shall record all votes and the minutes of all proceedings in a
book to be kept for that purpose and shall, when requested, perform like duties
for all committees of the board of directors. He shall attend to the giving of
notice of all meetings of the shareholders, and special meetings of the board of
directors and committees thereof; he shall have custody of the corporate seal,
if same is provided, and, when authorized by the board of directors, shall have
authority to affix the same to any instrument and, when so affixed, it shall be
attested by his signature or by the signatures of the Treasurer or an Assistant
Secretary or an Assistant Treasurer. He shall keep an account for all books,
documents, papers, and records of the corporation, except those for which some
other officer or agent is properly accountable. He shall have authority to sign
stock certificates, and shall generally perform all the duties appertaining to
the office of secretary of a corporation. In the absence of the Secretary, such
person as shall be designated by the President shall perform his duties.
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Section 5.12. The Treasurer.
The Treasurer shall have the care and custody of all the funds of the
corporation and shall deposit the same in such banks or other depositories as
the board of directors, or any officer and agent jointly, duly authorized by the
board of directors, shall, from time to time, direct or approve. He shall keep a
full and accurate account of all monies received and paid on account of the
corporation, and shall render a statement of his accounts whenever the board of
directors shall require. In addition, he shall generally perform all duties
usually appertaining to the office of Treasurer of a corporation. When required
by the board of directors, he shall give bonds for the faithful discharge of his
duties in such sums and with such sureties as the board of directors shall
approve. In the absence of the Treasurer, such person as shall be designated by
the Chief Financial Officer shall perform his duties.
ARTICLE VI
Indemnification
Section 6.01. Indemnification.
Subject to and in accordance with the provisions of the corporation's
articles of incorporation, the corporation has the power to (and, if so provided
in the corporation's articles of incorporation, shall) indemnify any person (and
the heirs, executors, and administrators of any such person) against any loss,
cost, damage, fine, penalty, or expense (including attorneys' fees) suffered,
incurred, assessed, or imposed by reason of the fact that such person is or was
a director, officer, employee, or agent of the corporation or is or was serving,
at the request of the corporation, as a director, officer, employee, agent,
partner, or trustee of another corporation, partnership, joint venture, trust,
or other enterprise, or a member of the Partnership Committee.
Section 6.02. Advancement of Expenses.
Subject to and in accordance with the corporation's articles of
incorporation, expenses incurred in defending or settling a civil or criminal
action, suit, or proceeding to which any person described in Section 6.01 is or
was a party, or is or was threatened to be made a party, may (and, if so
provided in the corporation's articles of incorporation, shall) be paid by the
corporation in advance.
Section 6.03. Indemnification: Insurance.
The corporation shall have power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee, or agent of the
corporation or is liable as a director of the corporation, or is or was serving,
at the request of the corporation, as a director, officer, partner, trustee,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise, or a member of the Partnership Committee against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, regardless of whether the corporation would have power to
indemnify him against such liability under the provisions of this Article VI.
Section 6.04. Indemnification: Constituent Corporations.
For the purposes of this Article VI, references to the corporation include
all constituent corporations absorbed in a merger and the resulting or surviving
corporation, so that a person who is or was a director or officer of such
constituent corporation or is or was serving at the request of such constituent
corporation as a director or officer of another corporation, partnership, joint
venture, trust, or other enterprise shall (as shall his heirs, executors, and
administrators) stand in the same position, under the provisions of this
Article, with respect to the resulting or surviving corporation as he would if
he had served the resulting or surviving corporation in the same capacity.
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ARTICLE VII
Share Certificates
Section 7.01. Form; Signature.
The shares of the corporation shall be represented by certificates in such
form as shall be determined by the board of directors and shall be signed by the
Chairman, Vice Chairman, President or a Vice President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer of the
corporation, and if a seal has been provided for the corporation, may be sealed
with the seal of the corporation or a facsimile thereof. The signatures of the
officers upon a certificate may be facsimiles if the certificate is
countersigned by a Transfer Agent or registered by a Registrar other than the
corporation or its employee. In case any officer who has signed or whose
facsimile has been placed upon a certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer at the date of issue.
Section 7.02. Transfer Agents and Registrars.
The board of directors may, in its discretion, appoint one or more banks or
trust companies in the State of Michigan and in such other state or states as
the board of directors may deem advisable, from time to time, to act as Transfer
Agents and Registrars of the shares of the corporation; and upon such
appointments being made, no certificate representing shares shall be valid until
countersigned by one of such Transfer Agents and registered by one of such
Registrars.
Section 7.03. Transfers of Shares.
Transfers of shares shall be made on the books of the corporation only upon
written request by the person named in the certificate, or by his attorney
lawfully constituted in writing, and upon surrender and cancellation of a
certificate or certificates for a like number of shares of the same class, with
duly executed assignment and a power of transfer endorsed thereon or attached
thereto, and with such proof of the authenticity of the signatures as the
corporation or its agents may reasonably require.
Section 7.04. Registered Shareholders.
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
other distributions, and to vote as such owner, and to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by law or contemplated by the
articles of incorporation.
Section 7.05. Lost Certificates.
In case any certificate representing shares shall be lost, stolen, or
destroyed, the board of directors, or any officer or officers duly authorized by
the board of directors, may authorize the issuance of a substitute certificate
in place of the certificate so lost, stolen, or destroyed, and may cause or
authorize such substitute certificate to be countersigned by the appropriate
Transfer Agent and registered by the appropriate Registrar. In each such case
the applicant for a substitute certificate shall furnish to the corporation and
to such of its Transfer Agents and Registrars as may require the same, evidence
to their satisfaction, in their discretion, of the loss, theft, or destruction
of such certificate and of the ownership thereof, and also such security or
indemnity as may by them be required.
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ARTICLE VIII
Miscellaneous
Section 8.01. Fiscal Year.
The board of directors from time to time shall determine the fiscal year of
the corporation.
Section 8.02. Signatures on Negotiable Instruments.
All bills, notes, checks, or other instruments for the payment of money shall
be signed or countersigned by such officers or agents and in such manner as from
time to time may be prescribed by resolution of the board of directors, or may
be prescribed by any officer or officers, or any officer and agent jointly, duly
authorized by the board of directors.
Section 8.03. Dividends.
Except as otherwise provided in the articles of incorporation, dividends upon
the shares of the corporation may be declared and paid as permitted by law in
such amounts as the board of directors may determine at any annual or special
meeting. Dividends may be paid in cash, in property, or in shares of the capital
stock of the corporation, subject to the articles of incorporation.
Section 8.04. Reserves.
Before payment of any dividend, there may be set aside out of any funds of
the corporation available for dividends such sum or sums as the board of
directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the board of directors deems conducive to the interest of the
corporation; and in its discretion, the board of directors may decrease or
abolish any such reserve.
Section 8.05. Seal.
The board of directors may, but need not, provide a corporate seal which
shall consist of two concentric circles between which is the name of the
corporation and in the center of which shall be inscribed "SEAL".
Section 8.06. Corporation Offices.
The registered office of the corporation shall be as set forth in the
articles of incorporation. The corporation may also have offices in such places
as the board of directors may from time to time appoint or the business of the
corporation require. Such offices may be outside the State of Michigan.
ARTICLE IX
Amendments
Section 9.01. Power to Amend.
These by-laws may be amended, repealed, or adopted by the shareholders or the
board of directors. Any by-law adopted by the board of directors may be amended
or repealed by the board of directors or by shareholders entitled to vote
thereon as herein provided; and any by-law adopted by the Incorporators or the
shareholders may be amended or repealed by the board of directors, except as
limited by statute and except when the shareholders have expressly provided
otherwise with respect to any particular by-law or by-laws.
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REVOLVING CREDIT AGREEMENT
dated as of September 21, 1998
among
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP,
as Borrower,
UBS AG, NEW YORK BRANCH,
as a Bank
and
UBS AG, NEW YORK BRANCH,
as Administrative Agent
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS; ETC..................................1
SECTION 1.01. Definitions.......................................1
SECTION 1.02. Accounting Terms.................................16
SECTION 1.03. Computation of Time Periods......................16
SECTION 1.04. Rules of Construction............................16
ARTICLE II THE LOANS........................................17
SECTION 2.01. The Loans........................................17
SECTION 2.02. Purpose..........................................17
SECTION 2.03. Advances, Generally..............................17
SECTION 2.04. Procedures for Advances..........................17
SECTION 2.05. Additional Conditions to Advances................18
SECTION 2.06. Interest Periods; Renewals.......................18
SECTION 2.07. Interest.........................................19
SECTION 2.08. Fees.............................................19
SECTION 2.09. Notes............................................19
SECTION 2.10. Prepayments......................................20
SECTION 2.11. Termination of Commitments.......................20
SECTION 2.12. Method of Payment................................20
SECTION 2.13. Elections, Conversions or Continuation of Loans..20
SECTION 2.14. Minimum Amounts..................................21
SECTION 2.15. Certain Notices Regarding Elections, Conversions
and Continuations of Loans.......................21
SECTION 2.16. Late Payment Premium.............................21
SECTION 2.17. Collateral for Loans.............................21
SECTION 2.18. Letters of Credit................................24
ARTICLE III YIELD PROTECTION; ILLEGALITY; ETC................25
SECTION 3.01. Additional Costs.................................25
SECTION 3.02. Limitation on Types of Loans.....................27
SECTION 3.03. Illegality.......................................27
SECTION 3.04. Treatment of Affected Loans......................27
SECTION 3.05. Certain Compensation.............................28
SECTION 3.06. Capital Adequacy.................................29
SECTION 3.07. Substitution of Banks............................29
ARTICLE IV CONDITIONS PRECEDENT.............................30
SECTION 4.01. Conditions Precedent to the Initial Advance......30
SECTION 4.02. Conditions Precedent to Advances After the Initial
Advance..........................................32
SECTION 4.03. Deemed Representations...........................32
<PAGE>
Page
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ARTICLE V REPRESENTATIONS AND WARRANTIES...................33
SECTION 5.01. Due Organization.................................33
SECTION 5.02. Power and Authority; No Conflicts; Compliance With
Laws.............................................33
SECTION 5.03. Legally Enforceable Agreements...................33
SECTION 5.04. Litigation.......................................33
SECTION 5.05. Good Title to Properties.........................34
SECTION 5.06. Taxes............................................34
SECTION 5.07. ERISA............................................34
SECTION 5.08. No Default on Outstanding Judgments or Orders....34
SECTION 5.09. No Defaults on Other Agreements..................34
SECTION 5.10. Government Regulation............................35
SECTION 5.11. Environmental Protection.........................35
SECTION 5.12. Solvency.........................................35
SECTION 5.13. Financial Statements.............................35
SECTION 5.14. Valid Existence of Affiliates....................35
SECTION 5.15. Insurance........................................35
SECTION 5.16. Schedule A and B Assets..........................35
SECTION 5.17. Accuracy of Information; Full Disclosure.........36
ARTICLE VI AFFIRMATIVE COVENANTS............................36
SECTION 6.01. Maintenance of Existence.........................36
SECTION 6.02. Maintenance of Records...........................36
SECTION 6.03. Maintenance of Insurance.........................36
SECTION 6.04. Compliance with Laws; Payment of Taxes...........36
SECTION 6.05. Right of Inspection..............................37
SECTION 6.06. Compliance With Environmental Laws...............37
SECTION 6.07. Payment of Costs.................................37
SECTION 6.08. Maintenance of Properties........................37
SECTION 6.09. Reporting and Miscellaneous Document
Requirements.....................................37
ARTICLE VII NEGATIVE COVENANTS...............................39
SECTION 7.01. Mergers Etc......................................39
SECTION 7.02. Investments......................................39
SECTION 7.03. Sale of Assets...................................40
SECTION 7.04. Interest Rate Hedging............................40
SECTION 7.05. Partnership Committee of Borrower................40
SECTION 7.06. Disposition or Encumbrance of Certain Assets.....40
SECTION 7.07. Amendments to Separation Agreement...............41
SECTION 7.08. Certain Restrictions on Activities of TCI........41
ARTICLE VIII FINANCIAL COVENANTS AND ADJUSTMENTS..............41
SECTION 8.01. Covenants Prior to Certain Events................41
SECTION 8.02. Covenants Subsequent to Certain Events...........42
SECTION 8.03. Certain Pro-Forma Adjustments....................43
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Page
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ARTICLE IX EVENTS OF DEFAULT................................44
SECTION 9.01. Events of Default................................44
SECTION 9.02. Remedies.........................................46
ARTICLE X ADMINISTRATIVE AGENT; RELATIONS AMONG
BANKS............................................46
SECTION 10.01. Appointment, Powers and Immunities of
Administrative Agent.............................46
SECTION 10.02. Reliance by Administrative Agent.................47
SECTION 10.03. Defaults.........................................47
SECTION 10.04. Rights of Administrative Agent as a Bank.........48
SECTION 10.05. Indemnification of Administrative Agent..........48
SECTION 10.06. Non-Reliance on Administrative Agent and Other
Banks............................................48
SECTION 10.07. Failure of Administrative Agent to Act...........49
SECTION 10.08. Resignation or Removal of Administrative Agent...49
SECTION 10.09. Amendments Concerning Agency Function............49
SECTION 10.10. Liability of Administrative Agent................49
SECTION 10.11. Transfer of Agency Function......................50
SECTION 10.12. Non-Receipt of Funds by Administrative Agent.....50
SECTION 10.13. Withholding Taxes................................50
SECTION 10.14. Minimum Commitment by UBS........................50
SECTION 10.15. Pro Rata Treatment...............................51
SECTION 10.16. Sharing of Payments Among Banks..................51
SECTION 10.17. Possession of Documents..........................51
ARTICLE XI NATURE OF OBLIGATIONS............................51
SECTION 11.01. Absolute and Unconditional Obligations...........51
SECTION 11.02. Non-Recourse to TRG Partners.....................52
ARTICLE XII MISCELLANEOUS....................................52
SECTION 12.01. Binding Effect of Request for Advance............52
SECTION 12.02. Amendments and Waivers...........................53
SECTION 12.03. Usury............................................53
SECTION 12.04. Expenses; Indemnification........................53
SECTION 12.05. Assignment; Participation........................55
SECTION 12.06. Documentation Satisfactory.......................57
SECTION 12.07. Notices..........................................57
SECTION 12.08. Setoff...........................................57
SECTION 12.09. Year 2000........................................57
SECTION 12.10. Table of Contents; Headings......................58
SECTION 12.11. Severability.....................................58
SECTION 12.12. Counterparts.....................................58
SECTION 12.13. Integration......................................58
SECTION 12.14. GOVERNING LAW....................................58
SECTION 12.15. Waivers..........................................58
SECTION 12.16. JURISDICTION; IMMUNITIES.........................58
iii
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EXHIBIT A - Assignment and Assumption Agreement
EXHIBIT B - Authorization Letter
EXHIBIT C - Note
EXHIBIT D - List of Affiliates
EXHIBIT E - Solvency Certificate
SCHEDULE A - Schedule A Assets
SCHEDULE B - Schedule B Assets
i
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REVOLVING CREDIT AGREEMENT ("this Agreement") dated as of September 21,
1998 among THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP, a limited partnership
organized and existing under the laws of the State of Delaware ("Borrower"), UBS
AG, NEW YORK BRANCH, as agent for the Banks (in such capacity, together with its
successors in such capacity, "Administrative Agent"), and UBS AG, NEW YORK
BRANCH (in its individual capacity and not as Administrative Agent, "UBS") (UBS
and the lenders who from time to time become Banks pursuant to Section 3.07 or
12.05, each a "Bank" and collectively, the "Banks").
Borrower desires that the Banks extend credit as provided herein, and
the Banks are prepared to extend such credit. Accordingly, Borrower, each Bank
and Administrative Agent agree as follows:
ARTICLE I
DEFINITIONS; ETC.
SECTION 1.01. Definitions. As used in this Agreement the following
terms have the following meanings (except as otherwise provided, terms defined
in the singular to have a correlative meaning when used in the plural and vice
versa):
"Administrative Agent" has the meaning specified in the preamble.
"Administrative Agent's Office" means Administrative Agent's address
located at 299 Park Avenue, New York, NY 10171, or such other address in the
United States as Administrative Agent may designate by written notice to
Borrower and the Banks.
"Affiliate" means, with respect to any Person (the "first Person"),
any other Person (1) which directly or indirectly controls, or is controlled by,
or is under common control with the first Person or (2) 10% or more of the
beneficial interest in which is directly or indirectly owned or held by the
first Person. The term "control" means the possession, directly or indirectly,
of the power, alone, to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.
"Agreement" means this Revolving Credit Agreement, as amended,
supplemented or modified from time to time.
<PAGE>
"Applicable Commitment Fee Rate" means (1) prior to such time as the
Loans become secured in accordance with Section 2.17, the respective rates per
annum determined, at any time, based on the Leverage Ratio at the time, in
accordance with Table I below (any change in the Leverage Ratio, including any
change pursuant to Section 2.05, causing it to move to a different range on said
Table I shall effect an immediate change in the Applicable Commitment Fee Rate)
and (2) subsequent to such time as the Loans become secured in accordance with
Section 2.17, the respective rates per annum determined, at any time, based on
the Collateral Property Debt Yield at the time, in accordance with Table II
below (any change in the Collateral Property Debt Yield, including any change
pursuant to Section 2.05, causing it to move to a different range on said Table
II shall effect an immediate change in the Applicable Commitment Fee Rate).
TABLE I
-------
Applicable Commitment
Leverage Ratio Fee Rate - unsecured (% per annum)
-------------- ----------------------------------
Less than or equal to 50% 0.20%
Greater than 50% 0.25%
TABLE II
--------
Applicable Commitment
Collateral Property Debt Yield Fee Rate - secured (% per annum)
------------------------------ --------------------------------
Greater than 15% 0.20%
Less than or equal to 15% 0.25%
"Applicable Lending Office" means, for each Bank and for its LIBOR Loan
or Base Rate Loan, as applicable, the lending office of such Bank (or of an
Affiliate of such Bank) designated as such on its signature page hereof or in
the applicable Assignment and Assumption Agreement, or such other office of such
Bank (or of an Affiliate of such Bank) as such Bank may from time to time
specify to Administrative Agent and Borrower as the office by which its LIBOR
Loan or Base Rate Loan, as applicable, is to be made and maintained.
2
<PAGE>
"Applicable Margin" means (1) with respect to Base Rate Loans and LIBOR
Loans prior to such time as the Loans become secured in accordance with Section
2.17, the respective rates per annum determined, at any time, based on the
Leverage Ratio at the time, in accordance with Table I below (any change in the
Leverage Ratio, including any change pursuant to Section 2.05, causing it to
move to a different range on said Table I shall effect an immediate change in
the Applicable Margin) and (2) with respect to Base Rate Loans and LIBOR Loans
subsequent to such time as the Loans become secured in accordance with Section
2.17, the respective rates per annum determined, at any time, based on the
Collateral Property Debt Yield at the time, in accordance with Table II below
(any change in the Collateral Property Debt Yield, including any change pursuant
to Section 2.05, causing it to move to a different range on said Table II shall
effect an immediate change in the Applicable Margin ).
TABLE I
-------
Applicable Margin Applicable Margin
for Base Rate Loans - for LIBOR Loans
Leverage Ratio unsecured (% per annum) unsecured (% per annum)
-------------- ----------------------- -----------------------
Less than or equal to 50% -0- 1.15
Greater than 50% -0- 1.30
TABLE II
--------
Applicable Margin for Applicable Margin
Base Rate Loans - for LIBOR Loans -
Collateral Property Debt Yield secured (% per annum) secured (% per annum)
- ------------------------------ --------------------- ---------------------
Greater than 15% -0- 0.90
Less than or equal to 15% -0- 1.05
"Assignee" has the meaning specified in Section 12.05.
"Assignment and Assumption Agreement" means an Assignment and
Assumption Agreement, substantially in the form of EXHIBIT A, pursuant to which
a Bank assigns and an Assignee assumes rights and obligations in accordance with
Section 12.05.
"Authorization Letter" means a letter agreement executed by Borrower in
the form of EXHIBIT B.
"Bank" and "Banks" have the respective meanings specified in the
preamble.
3
<PAGE>
"Bank Parties" means Administrative Agent and the Banks.
"Banking Day" means (1) any day on which commercial banks are not
authorized or required to close in New York City and (2) whenever such day
relates to a LIBOR Loan, an Interest Period with respect to a LIBOR Loan, or
notice with respect to a LIBOR Loan, a day on which dealings in Dollar deposits
are also carried out in the London interbank market and banks are open for
business in London.
"Base Rate" means, for any day, the higher of (1) the Federal Funds
Rate for such day plus 0.50% or (2) the Prime Rate for such day.
"Base Rate Loan" means all or any portion (as the context requires) of
a Bank's Loan which shall accrue interest at a rate determined in relation to
the Base Rate.
"Bonds" means the senior unsecured notes of Borrower in the principal
amount of $708,000,000 issued pursuant to the Amended and Restated Indenture
dated March 4, 1994 between Borrower and The Chase Manhattan Bank, as successor
to Chemical Bank, as trustee.
"Borrower's Accountants" means Deloitte & Touche, or such other
accounting firm(s) selected by Borrower and reasonably acceptable to the
Required Banks.
"Borrower" has the meaning specified in the preamble.
"Capital Lease" means any lease which has been or should be capitalized
on the books of the lessee in accordance with GAAP.
"Capitalization Value" means, at any time, the sum of (1) Combined
EBITDA for the twelve (12)-month period ending with the most recently ended
calendar quarter, capitalized at an annual rate equal to 8.00%, (2) Borrower's
beneficial share of unrestricted Cash and Cash Equivalents (i. e., Cash and Cash
Equivalents that are not pledged or the use of which is not restricted by the
terms of any document or agreement) of Borrower and its Consolidated Businesses
and UJVs and (3) without duplication, the cost basis of properties of Borrower
under development. For the purposes of this definition, in no event shall (x)
properties under development constitute in excess of 15% of Capitalization Value
or (y) leasing commissions payable by third parties and/or management and
development fees contribute to greater than 5% of Capitalization Value.
"Cash and Cash Equivalents" means (1) cash, (2) marketable direct
obligations issued or unconditionally guaranteed by the United States government
and backed by the full faith and credit of the United States government, (3)
domestic and Eurodollar certificates of deposit and time deposits, bankers'
acceptances and floating rate certificates of deposit issued by any commercial
bank organized under the Laws of the United States, any state thereof or the
District of Columbia, any foreign bank, or its branches or agencies (fully
protected against currency fluctuations), which, at the time of acquisition, are
rated A-1 or better by S&P or P-1 or better by Moody's, provided that the
maturities thereof shall not exceed one (1) year from the
4
<PAGE>
date of acquisition and (4) shares of Fidelity Institutional Money Market Fund
or comparable money market funds.
"Closing Date" means the date this Agreement has been executed by all
parties.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral Properties" means those Schedule A Assets which are given
as security for the Loans pursuant to Section 2.17.
"Collateral Property Debt Yield" means, for any calendar quarter, the
ratio (expressed as a percentage) of (1) Collateral Property EBITDA for the
twelve (12)-month period ending with such calendar quarter to (2) the
outstanding principal balance under the Notes, plus the total outstanding amount
of Letters of Credit as of the end of such calendar quarter.
"Collateral Property EBITDA" means that portion of the Combined EBITDA
attributable to the Collateral Properties.
"Collateral Property Owners" means the Affiliates of Borrower that own
the respective Collateral Properties.
"Columbus UDAG Loan" means the UDAG mortgage loan in the current
principal amount of $7,858,786 to TL - Columbus Associates regarding Columbus
City Center.
"Combined EBITDA" means, for any period of time, (1) revenues less
operating costs (including general and administrative expenses) before interest,
depreciation and amortization and unusual items for Borrower and its
Consolidated Businesses (including, without limitation, non-recurring items such
as gains or losses from asset sales) and adjusted to eliminate the effects of
straight lining of rents plus (2) Borrower's beneficial interest in revenues
less operating costs (including general and administrative expenses) before
interest, depreciation and amortization and unusual items (after eliminating
appropriate intercompany amounts) (including, without limitation, non-recurring
items such as gains or losses from asset sales) and adjusted to eliminate the
effects of straight lining of rents applicable to each of the UJVs. For purposes
of this definition, gains or losses from peripheral land sales, to the extent
such gains or losses total less than $5,000,000 in any twelve (12)-month period,
shall be treated in accordance with the accounting principles reflected in
Borrower's form 10-K for 1997.
"Consolidated Businesses" means, collectively (1) each Affiliate of
Borrower, all of the equity interests of which are, or, under GAAP, are deemed
to be, owned by Borrower and (2) Taub-Co Management Inc., The Taubman Company
Limited Partnership and their respective Affiliates so long as more than 90% of
the equity interests in the entities referred to in this clause (2) are owned
directly or indirectly by Borrower.
"Consolidated Outstanding Indebtedness" means, as of any time, all
indebtedness and liability for borrowed money (which shall be deemed to include
obligations as lessee under Capital Leases), secured or unsecured, of Borrower
and all indebtedness and liability for
5
<PAGE>
borrowed money (which shall be deemed to include obligations as lessee under
Capital Leases), secured or unsecured, attributable to Borrower's beneficial
interest in its Consolidated Businesses, including mortgage and other notes
payable but excluding any indebtedness which is margin indebtedness secured by
cash and cash equivalent securities, as reflected in the TRG Consolidated
Financial Statements.
"Contingent Liabilities" means the sum of (1) those liabilities, as
determined in accordance with GAAP, set forth and quantified as contingent
liabilities in the notes to the TRG Consolidated Financial Statements and (2)
contingent liabilities, other than those described in the foregoing clause (1),
which represent direct payment guaranties of Borrower; provided, however, that
Contingent Liabilities shall exclude contingent liabilities which represent the
"Other Party's Share" of "Duplicated Obligations" (as such quoted terms are
hereinafter defined). "Duplicated Obligations" means, collectively, all those
payment guaranties in respect of Debt of UJVs for which Borrower and another
party are jointly and severally liable, where the other party is, in the sole
judgment of the Required Banks, capable of satisfying the Other Party's Share of
such obligation; and "Other Party's Share" means such other party's fractional
beneficial interest in the UJV in question.
"Continue", "Continuation" and "Continued" refer to the continuation
pursuant to Section 2.13 of a LIBOR Loan as a LIBOR Loan from one Interest
Period to the next Interest Period.
"Convert", "Conversion" and "Converted" refer to a conversion pursuant
to Section 2.13 of a Base Rate Loan into a LIBOR Loan or a LIBOR Loan into a
Base Rate Loan, each of which may be accompanied by the transfer by a Bank (at
its sole discretion) of all or a portion of its Loan from one Applicable Lending
Office to another.
"Debt" means (1) indebtedness or liability for borrowed money, or for
the deferred purchase price of property or services (including trade
obligations), (2) obligations as lessee under Capital Leases, (3) current
liabilities in respect of unfunded vested benefits under any Plan, (4)
obligations under letters of credit issued for the account of any Person, (5)
all obligations arising under bankers' or trade acceptance facilities, (6) all
guarantees, endorsements (other than for collection or deposit in the ordinary
course of business), and other contingent obligations to purchase any of the
items included in this definition, to provide funds for payment, to supply funds
to invest in any Person, or otherwise to assure a creditor against loss, (7) all
obligations secured by any Lien on property owned by the Person whose Debt is
being measured, whether or not the obligations have been assumed and (8) all
obligations under any agreement providing for contingent participation or other
hedging mechanisms with respect to interest payable on any of the items
described above in this definition.
"Default" means any event which with the giving of notice or lapse of
time, or both, would become an Event of Default.
"Default Rate" means a rate per annum equal to (1) with respect to Base
Rate Loans, a variable rate 3% above the rate of interest then in effect thereon
(including the Applicable Margin) and (2) with respect to LIBOR Loans, a fixed
rate 3% above the rate(s) of
6
<PAGE>
interest in effect thereon (including the Applicable Margin) at the time of
Default until the end of the then current Interest Period therefor and,
thereafter, a variable rate 3% above the rate of interest for a Base Rate Loan
(including the Applicable Margin).
"Disposition" means a sale (whether by assignment, transfer or Capital
Lease) of an asset.
"Distributable Cash Flow" means Funds From Operations.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Elect", "Election" and "Elected" refer to election, if any, by
Borrower pursuant to Section 2.13 to have all or a portion of an advance of the
Loans be outstanding as LIBOR Loans.
"Environmental Discharge" means any discharge or release of any
Hazardous Materials in violation of any applicable Environmental Law.
"Environmental Law" means any Law relating to pollution or the
environment, including Laws relating to noise or to emissions, discharges,
releases or threatened releases of Hazardous Materials into the work place, the
community or the environment, or otherwise relating to the generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
"Environmental Notice" means any written complaint, order, citation,
letter, inquiry, notice or other written communication from any Person (1)
affecting or relating to Borrower's compliance with any Environmental Law in
connection with any activity or operations at any time conducted by Borrower,
(2) relating to the occurrence or presence of or exposure to or possible or
threatened or alleged occurrence or presence of or exposure to Environmental
Discharges or Hazardous Materials at any of Borrower's locations or facilities,
including, without limitation, (a) the existence of any contamination or
possible or threatened contamination at any such location or facility and (b)
remediation of any Environmental Discharge or Hazardous Materials at any such
location or facility or any part thereof; and (3) any violation or alleged
violation of any relevant Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including any rules and regulation promulgated
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of the same controlled group of organizations (within the meaning of
Section 414(b) of the Code) as Borrower or is under common control (within the
meaning of Section 414(c) of the Code) with Borrower.
"Event of Default" has the meaning specified in Section 9.01.
"Federal Funds Rate" means, for any day, the rate per annum (expressed
on a 360- day basis of calculation) equal to the weighted average of the rates
on overnight federal funds
7
<PAGE>
transactions as published by the Federal Reserve Bank of New York for such day
provided that (1) if such day is not a Banking Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the immediately preceding
Banking Day as so published on the next succeeding Banking Day and (2) if no
such rate is so published on such next succeeding Banking Day, the Federal Funds
Rate for such day shall be the average of the rates quoted by three (3) Federal
Funds brokers to Administrative Agent on such day on such transactions.
"Fiscal Year" means each period from January 1 to December 31.
"Fixed Charges" means, for any period of time, the sum of (1) Interest
Expense, (2) dividends payable on preferred equity interests and (3) all
scheduled principal payments made or required to be made during such period on
Debt of Borrower and that attributable to Borrower's beneficial interest in its
Consolidated Business and UJVs, excluding, however, balloon payments of
principal due upon the stated maturity of any such Debt.
"Funds From Operations" means, for any period of time, net income of
Borrower and its Consolidated Businesses, as determined in accordance with GAAP,
excluding gains (or losses) from debt restructuring and sales of property and
without taking into account straight- lining of rents, plus depreciation related
to real estate and amortization, less amounts distributed by Borrower as
preferred distributions, and after adjustments to reflect Borrower's pro rata
share of UJVs (which will be calculated to reflect Funds From Operations on the
same basis). For purposes of this definition, gains or losses from peripheral
land sales, to the extent such gains or losses total less than $5,000,000 in any
twelve (12)-month period, shall be treated in accordance with the accounting
principles reflected in Borrower's form 10-K for 1997.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, applied on a basis consistent
with those used in the preparation of the financial statements referred to in
Section 5.13 (except for changes concurred in by Borrower's Accountants).
"GMPT Borrower" means a single purpose entity or entities, at least
99.9% owned and controlled (directly or indirectly) by GMPTS and otherwise
satisfactory to Administrative Agent, which will be the indirect owner of a 100%
interest in the Schedule B Assets following the consummation of the Unit
Redemption Transaction.
"GMPTS" means GMPTS Limited Partnership, a Delaware limited
partnership, presently a general partner of Borrower owning 50,025,713
partnership units representing an approximately 37.3% interest therein.
"Good Faith Contest" means the contest of an item if (1) the item is
diligently contested in good faith, and, if appropriate, by proceedings timely
instituted, (2) adequate reserves are established with respect to the contested
item, (3) during the period of such contest, the enforcement of any contested
item is effectively stayed and (4) the failure to pay or comply with the
contested item during the period of the contest is not likely to result in a
Material Adverse Change.
8
<PAGE>
"Governmental Approvals" means any authorization, consent, approval,
license, permit, certification, or exemption of, registration or filing with or
report or notice to, any Governmental Authority.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Materials" means any pollutant, effluents, emissions,
contaminants, toxic or hazardous wastes or substances, as any of those terms are
defined from time to time in or for the purposes of any relevant Environmental
Law, including asbestos fibers and friable asbestos, polychlorinated biphenyls,
and any petroleum or hydrocarbon-based products or derivatives.
"Indemnity" and "Indemnities" have the respective meanings specified in
Section 2.17.
"Initial Advance" means the first advance of proceeds of the Loans.
"Interest Expense" means, for any period of time, the consolidated
interest expense (without deduction of consolidated interest income) of Borrower
and its Consolidated Businesses, including, without limitation or duplication
(or, to the extent not so included, with the addition of), (1) the portion of
any rental obligation in respect of any Capital Lease obligation allocable to
interest expense in accordance with GAAP, (2) the amortization of Debt
discounts, (3) any payments or receipts (other than up-front fees) with respect
to interest rate swap or similar agreements, (4) any dividends attributable to
any equity security which may be converted into a debt security of Borrower at
any time or is mandatorily redeemable for cash within twenty (20) years from its
initial issuance and (5) the interest expense and items listed in clauses (1)
through (4) above applicable to each of the UJVs multiplied by Borrower's
respective beneficial interests in the UJVs (it being understood that the items
listed in clauses (1), (2) and (3) above shall be considered part of Interest
Expense even if, due to a change in GAAP, such items would no longer be
considered interest expense under GAAP).
"Interest Period" means, with respect to any LIBOR Loan, the period
commencing on the date the same is advanced, converted from a Base Rate Loan or
Continued, as the case may be, and ending, as Borrower may select pursuant to
Section 2.06, on the numerically corresponding day in the first, second or third
calendar month thereafter, provided that, in any case, each such Interest Period
which commences on the last Banking Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Banking Day of the appropriate calendar
month.
"Law" means any federal, state or local statute, law, rule, regulation,
ordinance, order, code, or rule of common law, now or hereafter in effect, and
any judicial or administrative interpretation thereof by a Governmental
Authority or otherwise, including any judicial or administrative order, consent
decree or judgment.
9
<PAGE>
"Leverage Ratio" means the ratio, expressed as a percentage, of Total
Outstanding Indebtedness to Capitalization Value.
"LIBOR Base Rate" means, with respect to any Interest Period therefor,
the rate per annum (rounded upwards if necessary to the nearest 1/16 of 1%)
quoted at approximately 11:00 a.m., New York time, by UBS two (2) Banking Days
prior to the first day of such Interest Period for the offering to leading banks
in the London interbank market of Dollar deposits in immediately available
funds, for a period, and in an amount, comparable to such Interest Period and
principal amount of the LIBOR Loan in question outstanding during such Interest
Period.
"LIBOR Interest Rate" means, for any LIBOR Loan, a rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by
Administrative Agent to be equal to the quotient of (1) the LIBOR Base Rate for
such LIBOR Loan for the Interest Period therefor divided by (2) one minus the
LIBOR Reserve Requirement for such LIBOR Loan for such Interest Period.
"LIBOR Loan" means all or any portion (as the context requires) of any
Bank's Loan which shall accrue interest at rate(s) determined in relation to
LIBOR Interest Rate(s).
"LIBOR Reserve Requirement" means, for any LIBOR Loan, the rate at
which reserves (including any marginal, supplemental or emergency reserves) are
actually required to be maintained during the Interest Period for such LIBOR
Loan under Regulation D by the applicable Bank against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the LIBOR Reserve Requirement shall also reflect any other
reserves actually required to be maintained by any Bank by reason of any
Regulatory Change against (1) any category of liabilities which includes
deposits by reference to which the LIBOR Base Rate is to be determined as
provided in the definition of "LIBOR Base Rate" in this Section 1.01 or (2) any
category of extensions of credit or other assets which include loans the
interest rate on which is determined on the basis of rates referred to in said
definition of "LIBOR Base Rate".
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment for collateral purposes, deposit arrangement, lien
(statutory or other), or other security agreement or charge of any kind or
nature whatsoever of any third party (excluding any right of setoff but
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable Law of any jurisdiction to evidence any of
the foregoing).
"Loan" and "Loans" have the respective meanings specified in Section
2.01.
10
<PAGE>
"Loan Commitment" means, with respect to each Bank, the obligation to
make a Loan in the principal amount set forth below or in the applicable
Assignment and Assumption Agreement, as such amount may be modified from time to
time in accordance with the provisions of Section 2.11, 3.07 or 12.05:
Bank Loan Commitment
---- ---------------
UBS $200,000,000
Total $200,000,000
============
"Loan Documents" means this Agreement, the Notes and the Solvency
Certificate and, following such time as the Loans become secured pursuant to
Section 2.17, the Mortgages and the Indemnities.
"Material Adverse Change" means either (1) a material adverse change in
the status of the business, results of operations, financial condition, property
or prospects of Borrower or (2) any event or occurrence of whatever nature which
is likely to have a material adverse effect on the ability of Borrower to
perform its obligations under the Loan Documents.
"Maturity Date" means September 21, 2001.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" and "Mortgages" have the respective meanings specified in
Section 2.17.
"Multiemployer Plan" means a Plan defined as such in Section 3(37) of
ERISA to which contributions have been made by Borrower or any ERISA Affiliate
and which is covered by Title IV of ERISA.
"Net Worth" means the excess of Capitalization Value over Total
Outstanding Indebtedness.
"Note" and "Notes" have the respective meanings specified in Section
2.09.
"Obligations" means each and every obligation, covenant and agreement
of Borrower, now or hereafter existing, contained in this Agreement, and any of
the other Loan Documents, whether for principal, reimbursement obligations,
interest, fees, expenses, indemnities or otherwise, and any amendments or
supplements thereto, extensions or renewals thereof or replacements therefor,
including but not limited to all indebtedness, obligations and liabilities of
Borrower to Administrative Agent and any Bank now existing or hereafter incurred
under or arising out of or in connection with the Notes, this Agreement, the
other Loan Documents, and any documents or instruments executed in connection
therewith; in each case whether direct or indirect, joint or several, absolute
or contingent, liquidated or unliquidated, now or hereafter existing, renewed or
restructured, whether or not from time to time decreased or
11
<PAGE>
extinguished and later increased, created or incurred, and including all
indebtedness of Borrower, under any instrument now or hereafter evidencing or
securing any of the foregoing.
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by Borrower or any ERISA
Affiliate of Borrower and which is covered by Title IV of ERISA or to which
Section 412 of the Code applies.
"presence", when used in connection with any Environmental Discharge or
Hazardous Materials, means and includes presence, generation, manufacture,
installation, treatment, use, storage, handling, repair, encapsulation,
disposal, transportation, spill, discharge and release.
"Prime Rate" means that rate of interest from time to time announced by
UBS at its Principal Office as its prime commercial lending rate.
"Principal Office" means the principal office of UBS, presently located
at 299 Park Avenue, New York, New York 10171.
"Pro Rata Share" means, for purposes of this Agreement and with respect
to each Bank, a fraction, the numerator of which is the amount of such Bank's
Loan Commitment and the denominator of which is the Total Loan Commitment.
"Prohibited Transaction" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Code.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System, as the same may be amended or supplemented from time to
time, or any similar Law from time to time in effect.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as the same may be amended or supplemented from time to
time.
"Regulatory Change" means, with respect to any Bank, any change after
the date of this Agreement in United States federal, state, municipal or foreign
laws or regulations (including Regulation D) or the adoption or making after
such date of any interpretations, directives or requests applying to a class of
banks including such Bank of or under any United States, federal, state,
municipal or foreign laws or regulations (whether or not having the force of
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law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Related Bridge Loan" means the loan in the amount of up to
$430,000,000 to Borrower pursuant to a Credit Agreement, dated as of the date
hereof, among Borrower, UBS and the other lenders, if any, identified therein,
and UBS, as administrative agent for said lenders.
"Related Bridge Term Loan" means the loan in the amount of $902,000,000
to Borrower pursuant to a Term Loan Agreement, dated as of the date hereof,
among Borrower, UBS and the other lenders, if any, identified therein, and UBS,
as administrative agent for said lenders.
"Related Loan Banks" means the "Banks" under the credit agreement(s)
governing the Related Loans.
"Related Loan Commitments" means the commitments of the Related Loan
Banks to make the Related Loans.
"Related Loans" means the Related Bridge Loan and, until the
consummation of the Unit Redemption Transaction, the Related Bridge Term Loan.
"Reportable Event" means any of the events set forth in Section 4043(b)
of ERISA.
"Required Banks" means at any time the Banks and Related Loan Banks
having Loan Commitments and/or Related Loan Commitments the aggregate
outstanding plus unfunded amounts of which are equal to at least 66-2/3% of the
aggregate outstanding plus unfunded amounts of all the Loan Commitments and
Related Loan Commitments; provided, however, that during the existence of an
Event of Default, the "Required Banks" shall be the Banks and/or Related Loan
Banks holding at least 66-2/3% of the then aggregate unpaid principal amount of
the Loans and the Related Loans.
"Restricted Payment" has the meaning specified in Section 8.01(6).
"Schedule A Assets" means those assets of Borrower identified in
SCHEDULE A.
"Schedule B Assets" means those assets of Borrower identified in
SCHEDULE B. Following the consummation of the Unit Redemption Transaction,
references in this Agreement to the "Schedule B Assets" shall be disregarded.
"Secured Indebtedness" means that portion of Total Outstanding
Indebtedness that is secured.
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"Separation Agreement" means, collectively, the Separation and Relative
Value Adjustment Agreement dated August 17, 1998 between Borrower and GMPTS,
together with the two (2) related side letters of even date therewith from
Borrower and agreed to and accepted by GMPTS, as the same may be modified to the
extent permitted by Section 7.07.
"Solvency Certificate" means a certificate in substantially the form of
EXHIBIT E, to be delivered by Borrower pursuant to the terms of this Agreement.
"Solvent" means, when used with respect to any Person, that (1) the
fair value of the property of such Person, on a going concern basis, is greater
than the total amount of liabilities (including, without limitation, contingent
liabilities) of such Person, (2) the present fair saleable value of the assets
of such Person, on a going concern basis, is not less than the amount that will
be required to pay the probable liabilities of such Person on its debts as they
become absolute and matured, (3) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities mature, (4) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute unreasonably
small capital after giving due consideration to the prevailing practice in the
industry in which such Person is engaged and (5) such Person has sufficient
resources, provided that such resources are prudently utilized, to satisfy all
of such Person's obligations. Contingent liabilities will be computed at the
amount that, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies.
"Specified Credit Facilities" means, collectively, (1) the unsecured
revolving credit facility of up to $300,000,000 from UBS and other lenders to
Borrower made pursuant to an Amended and Restated Revolving Loan Agreement dated
as of March 5, 1997, as amended, (2) the unsecured credit facility of up to
$100,000,000 from UBS to Borrower made pursuant to an Unsecured Loan Agreement
dated as of July 27, 1998, (3) the Stoneridge Mortgage Loan and the Columbus
UDAG Loan.
"Stoneridge Mortgage Loan" means the mortgage loan in the original
principal amount of $75,000,000 from The First National Bank of Chicago and J.G.
Finley, as Trustee, to Stoneridge Properties.
"Supplemental Fee Letter" means that certain letter agreement, dated
the date hereof, between UBS and Borrower.
"TCI" means Taubman Centers, Inc., a Michigan corporation, Borrower's
managing general partner.
"TCI Financial Statements" means the consolidated balance sheet and
related consolidated statement of operations, accumulated deficiency in assets
and cash flows, and footnotes thereto, of TCI, prepared in accordance with GAAP.
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"Total Loan Commitment" means the sum of the Loan Commitments of all
the Banks.
"Total Outstanding Indebtedness" means the sum, without duplication, of
(1) Consolidated Outstanding Indebtedness, (2) TRG's Share of UJV Combined
Outstanding
Indebtedness and (3) Contingent Liabilities.
"TRG Consolidated Financial Statements" means the consolidated balance
sheet and related consolidated statement of operations, accumulated deficiency
in assets and cash flows, and footnotes thereto, of Borrower, prepared in
accordance with GAAP.
"TRG's Share of UJV Combined Outstanding Indebtedness" means the sum of
the indebtedness of each of the UJVs contributing to UJV Combined Outstanding
Indebtedness multiplied by Borrower's respective beneficial interests in each
such UJV.
"UBS" has the meaning specified in the preamble.
"UJV Combined Outstanding Indebtedness" means, as of any time, all
indebtedness and liability for borrowed money (which shall be deemed to include
obligations as lessee under Capital Leases), secured or unsecured, of the UJVs,
including mortgage and other notes payable but excluding any indebtedness which
is margin indebtedness secured by cash and cash equivalent securities, as
reflected in the balance sheets of each of the UJVs, prepared in accordance with
GAAP.
"UJVs" means the unconsolidated joint ventures in which Borrower owns a
beneficial interest and which are accounted for under the equity method in the
TRG Consolidated Financial Statements.
"Unencumbered Combined EBITDA" means that portion of Combined EBITDA
attributable to Unencumbered Wholly-Owned Assets.
"Unencumbered Wholly-Owned Assets" means assets, reflected on the TRG
Consolidated Financial Statements, wholly owned, directly or indirectly, by
Borrower and not subject to any Lien to secure all or any portion of Secured
Indebtedness; provided, however, that, for purposes of this definition only, the
loans described in the following table, so long as the documents in respect of
the same permit secondary financing, shall not be considered part of Secured
Indebtedness:
Description of
Debt Obligation Obligor Affected Asset Amount ($)
- ---- ---------- ------- -------------- ----------
Assessment Bonds - Richmond Associates Hilltop land 413,727
City of Richmond
Assessment Bonds - Stoneridge Properties Stoneridge land 1,200,400
CIty of Pleasanton
Assessment Bonds - Biltmore Shopping Biltmore land 2,978,584
City of Phoenix Center Partners
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"Unit Redemption Transaction" means the transaction whereby all of
GMPTS's partnership units in Borrower will be redeemed in exchange for the
Schedule B Assets, (2) GMPT Borrower shall assume certain indebtedness relating
to the Schedule B Assets and (3) Borrower shall assign to GMPT Borrower, and
GMPT Borrower shall assume, all of Borrower's rights and obligations under the
Related Bridge Term Loan, all in accordance with the Separation Agreement, which
Unit Redemption Transaction is anticipated by Borrower and GMPTS to be
consummated on or after September 30, 1998 and in connection with which Unit
Redemption Transaction Borrower's agreement of limited partnership shall be
amended and restated.
"Unsecured Debt Yield" means, for any calendar quarter, the ratio
(expressed as a percentage) of (1) Unencumbered Combined EBITDA for the twelve
(12)-month period ending with such calendar quarter to (2) Unsecured
Indebtedness as of the end of such calendar quarter.
"Unsecured Indebtedness" means that portion of Total Outstanding
Indebtedness that is unsecured.
"Woodfield Mortgage Loan" means the mortgage loan, in the original
principal amount of $172,000,000 from Morgan Guaranty Trust Company of New York,
as Trustee, with respect to the Woodfield shopping center, and the related
interest rate hedging agreement.
SECTION 1.02. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data required to be delivered hereunder shall be prepared in accordance with
GAAP.
SECTION 1.03. Computation of Time Periods. Except as otherwise provided
herein, in this Agreement, in the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including" and words "to" and "until" each means "to but excluding".
SECTION 1.04. Rules of Construction. Except as otherwise provided or
indicated, when used in this Agreement (1) "or" is not exclusive, (2) a
reference to a Law includes any amendment or modification to such Law, (3) a
reference to a Person includes its permitted successors and permitted assigns,
(4) all references to the singular shall include the plural and vice versa, (5)
a reference to an agreement, instrument or document shall include such
agreement, instrument or document as the same may be amended, modified or
supplemented from time to time in accordance with its terms and as permitted by
the Loan Documents, (6) all references to Articles, Sections, Exhibits or
Schedules shall be to Articles and Sections of, and Exhibits and Schedules to,
this Agreement, (7) "hereunder", "herein", "hereof" and the like refer to this
Agreement as a whole and (8) all Exhibits and Schedules to this Agreement shall
be incorporated into this Agreement.
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ARTICLE II
THE LOANS
SECTION 2.01. The Loans. Subject to the terms and conditions of this
Agreement, each of the Banks severally agrees to make a loan to Borrower (each
such loan by a Bank, a "Loan"; such loans, collectively, the "Loans") pursuant
to which each Bank shall from time to time advance and re-advance to Borrower an
amount equal to the excess of the amount of such Bank's Loan Commitment over the
amount of all previous advances made by such Bank under its Loan Commitment
which remain unpaid. For purposes of the immediately preceding sentence, a
Bank's Pro Rata Share of the amount of outstanding Letters of Credit shall be
deemed to be advanced. Within the limits set forth herein, Borrower may borrow
from time to time under this Section 2.01 and prepay from time to time pursuant
to Section 2.10 (subject, however, to the restrictions on prepayment set forth
in such Section) and thereafter re-borrow pursuant to this Section 2.01.
The Loans may be outstanding as (1) Base Rate Loans, (2) LIBOR Loans or
(3) a combination of the foregoing, as Borrower shall elect and notify
Administrative Agent in accordance with Section 2.15. The LIBOR Loan and Base
Rate Loan of each Bank shall be maintained at such Bank's Applicable Lending
Office for its LIBOR Loan and Base Rate Loan, respectively.
The obligations of the Banks under this Agreement are several, and no
Bank shall be responsible for the failure of any other Bank to make any advance
of a Loan to be made by such other Bank. However, the failure of any Bank to
make any advance of the Loan to be made by it hereunder on the date specified
therefor shall not relieve any other Bank of its obligation to make any advance
of its Loan specified hereby to be made on such date.
SECTION 2.02. Purpose. Borrower shall use the proceeds of the Loans for
general partnership purposes of Borrower and its Consolidated Businesses and
UJVs, including costs incurred in connection with acquisitions. In no event
shall proceeds of the Loans be used for any illegal purpose or for the purpose,
whether immediate, incidental or ultimate, of buying or carrying "margin stock"
within the meaning of Regulation U.
SECTION 2.03. Advances, Generally. The Initial Advance shall be made
upon satisfaction of the conditions set forth in Section 4.01. Subsequent
advances shall be made no more frequently than weekly upon satisfaction of the
conditions set forth in Section 4.02. The amount of each advance subsequent to
the Initial Advance shall be in the minimum amount of $2,000,000 (unless less
than $2,000,000 is available for disbursement pursuant to the terms hereof at
the time of any subsequent advance, in which case the amount of such subsequent
advance shall be equal to such remaining availability) and in integral multiples
of $100,000 above such amount.
SECTION 2.04. Procedures for Advances. Borrower shall submit to
Administrative Agent a request for each advance hereunder, stating the amount
requested and certifying the purpose for which such advance is to be used, no
later than 10:00 a.m. (New York time) on the date three (3) Banking Days prior
to the date the advance is to be made.
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Administrative Agent, upon its receipt and approval of the requisite documents
for the advance, will so notify the Banks either by telephone or by facsimile.
Not later than 10:00 a.m. (New York time) on the date of each advance, each Bank
shall, through its Applicable Lending Office and subject to the conditions of
this Agreement, make the amount to be advanced by it on such day available to
Administrative Agent, at Administrative Agent's Office and in immediately
available funds for the account of Borrower. The amount so received by
Administrative Agent shall, subject to the conditions of this Agreement, be made
available to Borrower, in immediately available funds, by Administrative Agent's
crediting an account of Borrower designated by Borrower and maintained with
Administrative Agent at Administrative Agent's Office.
SECTION 2.05. Additional Conditions to Advances. Each advance of the
Loans shall be subject, in addition to the other limitations and conditions set
forth herein, to, at Administrative Agent's request, Administrative Agent's
receipt of a certificate, of the sort required by paragraph (3)(b) of Section
6.09, which shall demonstrate Borrower's compliance, as of the end of the most
recently ended calendar quarter for which financial results are required
hereunder to have been reported by Borrower (and taking into account pro-forma
adjustments for all acquisitions and Dispositions subsequent to the end of such
quarter required to be reported pursuant to paragraph (7) of Section 6.09), with
all covenants enumerated in said paragraph (3)(b), assuming that the amount that
will be outstanding under the Loans following the making of the advance that is
being requested was outstanding as of the end of such most recently ended
calendar quarter.
For purposes of the definitions of the "Applicable Commitment Fee Rate"
and "Applicable Margin" in Section 1.01, the Leverage Ratio and Collateral
Property Debt Yield shall be adjusted in accordance with the foregoing covenant
compliance calculations as of the date of each advance of the Loans and upon
each acquisition and Disposition required to be reported pursuant to paragraph
(7) of Section 6.09.
SECTION 2.06. Interest Periods; Renewals. In the case of the LIBOR
Loans, Borrower shall select an Interest Period of any duration in accordance
with the definition of Interest Period in Section 1.01, subject to the following
limitations: (1) no Interest Period may extend beyond the Maturity Date, (2) if
an Interest Period would end on a day which is not a Banking Day, such Interest
Period shall be extended to the next Banking Day, unless such Banking Day would
fall in the next calendar month, in which event such Interest Period shall end
on the immediately preceding Banking Day and (3) only five (5) discrete segments
of a Bank's Loan bearing interest at a LIBOR Interest Rate, for a designated
Interest Period, pursuant to a particular Election, Conversion or Continuation,
may be outstanding at any one time (each such segment of each Bank's Loan
corresponding to a proportionate segment of each of the other Banks' Loans).
Upon notice to Administrative Agent as provided in Section 2.15,
Borrower may Continue any LIBOR Loan on the last day of the Interest Period of
the same or different duration in accordance with the limitations provided
above. If Borrower shall fail to give notice to Administrative Agent of such a
Continuation, such LIBOR Loan shall automatically become a Base Rate Loan on the
last day of the current Interest Period.
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SECTION 2.07. Interest. Borrower shall pay interest to Administrative
Agent for the account of the applicable Bank on the outstanding and unpaid
principal amount of the Loans, at a rate per annum as follows: (1) for Base Rate
Loans at a rate equal to the Base Rate plus the Applicable Margin and (2) for
LIBOR Loans at a rate equal to the applicable LIBOR Interest Rate plus the
Applicable Margin. Any principal amount not paid when due (when scheduled, at
acceleration or otherwise) shall bear interest thereafter, payable on demand, at
the Default Rate.
The interest rate on Base Rate Loans shall change when the Base Rate
changes. Interest on Base Rate Loans and LIBOR Loans shall not exceed the
maximum amount permitted under applicable law. Interest shall be calculated for
the actual number of days elapsed on the basis of, in the case of Base Rate
Loans and LIBOR Loans, three hundred sixty (360) days.
Accrued interest shall be due and payable in arrears upon and with
respect to any prepayment of principal and on the first Banking Day of each
calendar month; provided, however, that interest accruing at the Default Rate
shall be due and payable on demand.
SECTION 2.08. Fees. (a) Borrower shall during the term of the Loans,
pay to Administrative Agent for the account of each Bank a commitment fee
computed on the daily unused Loan Commitment of such Bank (it being understood
that the amount of outstanding Letters of Credit shall be considered "used" for
this purpose), at a rate per annum equal to the daily Applicable Commitment Fee
Rate, calculated on the basis of a year of three hundred sixty (360) days for
the actual number of days elapsed. The accrued commitment fees shall be due and
payable in arrears on the first Banking Day of each month after the Closing
Date, and upon the Maturity Date or earlier termination of the Loan Commitments.
(b) Borrower shall pay to Administrative Agent, for the accounts of the
parties specified therein, the fees provided for, on the dates specified, in the
Supplemental Fee Letter.
SECTION 2.09. Notes. The Loan made by each Bank under this Agreement
shall be evidenced by, and repaid with interest in accordance with, a promissory
note of Borrower in the form of EXHIBIT C duly completed and executed by
Borrower, in a principal amount equal to such Bank's Loan Commitment, payable to
such Bank for the account of its Applicable Lending Office (each such note, as
the same may hereafter be amended, modified, extended, severed, assigned,
substituted, renewed or restated from time to time, including any substitute
note pursuant to Section 3.07 or 12.05, a "Note"; all such notes, collectively,
the "Notes"). The Notes shall mature, and all outstanding principal and accrued
interest and other sums thereunder shall be paid in full, on the Maturity Date,
as the same may be accelerated.
Each Bank is hereby authorized by Borrower to endorse on the schedule
attached to the Notes held by it, the amount of each advance, and each payment
of principal received by such Bank for the account of its Applicable Lending
Office(s) on account of its Loan, which endorsement shall, in the absence of
manifest error, be conclusive as to the outstanding balance of the Loan made by
such Bank. The failure by any Bank to make such notations with respect to its
Loan or each advance or payment shall not limit or otherwise affect the
obligations of Borrower under this Agreement or the Notes.
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SECTION 2.10. Prepayments. Borrower may, upon at least one (1) Banking
Day's notice to Administrative Agent in the case of the Base Rate Loans, and at
least two (2) Banking Days' notice to Administrative Agent in the case of LIBOR
Loans, prepay the Loans, provided that (1) any partial prepayment under this
Section shall be in integral multiples of $1,000,000, (2) a LIBOR Loan may be
prepaid only on the last day of the Applicable Interest Period for such LIBOR
Loan and (3) each prepayment under this Section shall include all interest
accrued on the amount of principal prepaid through the date of prepayment.
SECTION 2.11. Termination of Commitments. (a) At any time, Borrower
shall have the right, without premium or penalty, to terminate the unused Loan
Commitments, in whole or in part, from time to time, provided that (1) Borrower
shall give notice of each such termination to Administrative Agent, specifying
the amount of the termination, no later then 10:00 a.m. (New York time) on the
date which is fifteen (15) days prior to the effectiveness of such termination,
(2) the Loan Commitments of each of the Banks must be terminated ratably and
simultaneously with those of the other Banks and (3) each partial termination of
the Loan Commitments as a whole (and corresponding reduction of the Total Loan
Commitment) shall be in an integral multiple of $1,000,000.
(b) The Loan Commitments, to the extent terminated, may not be
reinstated.
SECTION 2.12. Method of Payment. Borrower shall make each payment under
this Agreement and under the Notes not later than 11:00 a.m. (New York time) on
the date when due in Dollars to Administrative Agent at Administrative Agent's
Office in immediately available funds. Administrative Agent will thereafter, on
the day of its receipt of each such payment, cause to be distributed to each
Bank (1) such Bank's appropriate share (based upon the respective outstanding
principal amounts and rate(s) of interest under the Notes of the Banks) of the
payments of principal and interest in like funds for the account of such Bank's
Applicable Lending Office and (2) fees payable to such Bank in accordance with
the terms of this Agreement. Borrower hereby authorizes Administrative Agent and
the Banks, if and to the extent payment by Borrower is not made when due under
this Agreement or under the Notes, to charge from time to time against any
account Borrower maintains with Administrative Agent or any Bank any amount so
due to Administrative Agent and/or the Banks.
Except to the extent provided in this Agreement, whenever any payment
to be made under this Agreement or under the Notes is due on any day other than
a Banking Day, such payment shall be made on the next succeeding Banking Day,
and such extension of time shall in such case be included in the computation of
the payment of interest and other fees, as the case may be.
SECTION 2.13. Elections, Conversions or Continuation of Loans. Subject
to the provisions of Article III and Sections 2.06 and 2.14, Borrower shall have
the right to Elect to have all or a portion of any advance of the Loans be LIBOR
Loans, to Convert Base Rate Loans into LIBOR Loans, to Convert LIBOR Loans into
Base Rate Loans, or to Continue LIBOR Loans as LIBOR Loans, at any time or from
time to time, provided that (1) Borrower shall give Administrative Agent notice
of each such Election, Conversion or Continuation as provided in
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Section 2.15 and (2) a LIBOR Loan may be Converted or Continued only on the last
day of the applicable Interest Period for such LIBOR Loan. Except as otherwise
provided in this Agreement, each Election, Continuation and Conversion shall be
applicable to each Bank's Loan in accordance with its Pro Rata Share.
SECTION 2.14. Minimum Amounts. With respect to the Loans as a whole,
each Election and each Conversion shall be in an amount at least equal to
$2,000,000 and in integral multiples of $100,000.
SECTION 2.15. Certain Notices Regarding Elections, Conversions and
Continuations of Loans. Notices by Borrower to Administrative Agent of
Elections, Conversions and Continuations of LIBOR Loans shall be irrevocable and
shall be effective only if received by Administrative Agent not later than 10:00
a.m. (New York time) on the number of Banking Days prior to the date of the
relevant Election, Conversion or Continuation specified below:
Number of
Notice Banking Days Prior
- ------ ------------------
Conversions into Base Rate Loans two (2)
Election of, Conversions into or Continuations as, LIBOR Loans three (3)
Promptly following its receipt of any such notice, Administrative Agent shall so
advise the Banks either by telephone or by facsimile. Each such notice of
Election shall specify the portion of the amount of the advance that is to be
LIBOR Loans (subject to Section 2.14) and the duration of the Interest Period
applicable thereto (subject to Section 2.06); each such notice of Conversion
shall specify the LIBOR Loans or Base Rate Loans to be Converted; and each such
notice of Conversion or Continuation shall specify the date of Conversion or
Continuation (which shall be a Banking Day), the amount thereof (subject to
Section 2.14) and the duration of the Interest Period applicable thereto
(subject to Section 2.06). In the event that Borrower fails to Elect to have any
portion of an advance be LIBOR Loans, the entire amount of such advance shall
constitute Base Rate Loans. In the event that Borrower fails to Continue LIBOR
Loans within the time period and as otherwise provided in this Section, such
LIBOR Loans will be automatically Converted into Base Rate Loans on the last day
of the then current applicable Interest Period for such LIBOR Loans.
SECTION 2.16. Late Payment Premium. Borrower shall, at Administrative
Agent's option, pay to Administrative Agent for the account of the Banks a late
payment premium in the amount of 4% of any payments of interest under the Loans
made more than fifteen (15) days after the due date thereof, which shall be due
with any such late payment.
SECTION 2.17. Collateral for Loans. Borrower covenants and agrees that,
within thirty (30) days following the earliest to occur of (x) the maturity date
of the Related Bridge Loan and the Related Bridge Term Loan, as the same may be
accelerated, (y) the
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repayment in full of the Related Bridge Loan and the Related Bridge Term Loan
and the cancellation of the loan commitments of the lenders thereof and (z) the
repayment in full of the Related Bridge Loan and the cancellation of the loan
commitments of the lenders of the Related Bridge Term Loan and the assumption of
the Related Bridge Term Loan by GMPT Borrower as contemplated by the Term Credit
Agreement governing the same, it will deliver to Administrative Agent, for the
benefit of the Banks, (A) an amendment and restatement of this Agreement, duly
executed by Borrower, which will, inter alia, add customary mortgage and
property-related representations, covenants, conditions and defaults, (B)
certified copies of all documents evidencing partnership action taken by
Borrower and the Collateral Property Owners authorizing the execution, delivery
and performance of the Mortgages, the Indemnities and each other document to be
delivered by or on behalf of Borrower pursuant to this Section, (C) a
certificate of Borrower's managing general partner, or a similar certificate
with respect to each of the Collateral Property Owners, certifying the names and
true signatures of each individual authorized to sign the Mortgages, the
Indemnities and all related documents on behalf of Borrowers or the respective
Collateral Property Owner, (D) a Solvency Certificate, duly executed, from
Borrower and each Collateral Property Owner, (E) a certificate, of the sort
required by paragraph 3(b) of Section 6.09, containing calculations
demonstrating Borrower's compliance, as of the end of the most recently ended
calendar quarter with the covenants set forth in Section 8.02 (6) and (7) and
(F) the following with respect to each of the Schedule A Assets then owned by
Borrower (other than those that have been encumbered with the Required Banks'
consent in accordance with Section 7.06), all of said requirements at Borrower's
expense and each in form and substance reasonably satisfactory to Administrative
Agent:
(1) a mortgage (or deed of trust), assignment of leases and rents
and security agreements (each, a "Mortgage" and collectively, the
"Mortgages") and related Uniform Commercial Code Financing Statements, each
duly executed by the appropriate Collateral Property Owner and in proper
form for recording or filing, as the case may be, in the appropriate
records;
(2) an agreement (each, an "Indemnity" and collectively, the
"Indemnities") whereby the Banks and Administrative Agent are indemnified
regarding Hazardous Materials, duly executed by Borrower and the
appropriate Collateral Property Owner;
(3) a paid title insurance policy, in the amount of the Mortgage,
which shall insure the Mortgage to be a valid first lien on the appropriate
Collateral Property Owner's interest in the property covered thereby, free
and clear of all liens, defects, encumbrances and exceptions except those
reasonably approved (in light of the normal and customary Liens,
encumbrances and exceptions found on title to comparable regional shopping
center properties and not prohibited under Section 7.06) by Administrative
Agent, and shall contain (i) a reference to the survey required below but
no material survey exceptions, (ii) a pending disbursements clause and
(iii) such affirmative insurance and endorsements as Administrative Agent
may reasonably require; and shall be accompanied by such reinsurance
agreements as Administrative Agent may require;
(4) a current ALTA survey, certified to Administrative Agent and
the title insurer, showing (i) the location of the perimeter of the
property by courses and distances,
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(ii) all easements, rights-of-way, and utility lines referred to in the
title policy required above or which actually service or cross the property
(with instrument, book and page number indicated), (iii) the lines of the
streets abutting the property and the width thereof, and any established
building lines (and that such roads are public roads), (iv) any
encroachments and the extent thereof upon the property, (v) locations of
all portions (with the acreage thereof also identified) of the property
which are located in an area designated as a "flood prone area" as defined
by U.S. Department of Housing and Urban Development pursuant to the Flood
Disaster Protection Act of 1973 and (vi) all improvements thereon, and the
relationship thereof by distances to the perimeter of the property,
established building lines and street lines;
(5) an independent M.A.I. appraisal, which appraisal shall comply
in all respects with the standards for real estate appraisals established
pursuant to the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989;
(6) copies of the policies and originals of the certificates of
hazard and other insurance required by the Mortgage on such property,
together with evidence of the payment of the premiums therefor;
(7) a detailed report and certification by a properly qualified
engineer with regard to Hazardous Materials affecting the property, which
shall include, inter alia, a certification that such engineer has obtained
and examined a list of prior owners, tenants and other users of the
property, and has made an on-site physical examination of the property and
improvements thereon, and a visual observation of the surrounding areas,
and disclosing the extent of past or present Hazardous Materials activities
or of the presence of Hazardous Materials;
(8) a detailed report from an engineering consultant to the effect
that all improvements on the property are in satisfactory condition and
enumerating any maintenance or governmental compliance items necessary or
expected to be incurred over the remaining term of the Loans and stating
the approximate cost thereof;
(9) copies of any and all certificates of occupancy and similar
authorizations required by Governmental Authorities for the use, occupancy
and operation of the property and/or the improvements thereon;
(10) copies, certified by Borrower to be true and complete, of all
leases of the property, accompanied by, in the case of such leases as are
reasonably requested by Administrative Agent (i) estoppel certificates from
the tenants thereunder (to the extent such estoppel certificates are
obtainable with Borrower's commercially reasonable efforts, it being
understood that if Borrower shall not have obtained any such estoppel
certificates using such efforts prior to the granting of the Mortgage,
Borrower covenants to continue to use such efforts to obtain such estoppel
certificates), (ii) notices of assignment, and (iii) to the extent in
Borrower's possession or otherwise obtainable with reasonable effort,
current financial statements of the tenants (and guarantors of the tenants'
obligations, if applicable) thereunder;
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(11) a copy, certified by Borrower to be true and complete, of any
reciprocal easement and operating agreement (and related agreements)
affecting the property, together with estoppel certificates with respect
thereto from the parties thereto (to the extent such estoppel certificates
are obtainable with Borrower's commercially reasonable efforts, it being
understood that if Borrower shall not have obtained any such estoppel
certificates using such efforts prior to the granting of the Mortgage,
Borrower covenants to continue to use such efforts to obtain such estoppel
certificates), and, if in Borrower's possession or otherwise obtainable
with reasonable effort, current financial statements of such parties;
(12) copies, certified by Borrower to be true and complete, of all
existing contracts providing for the management or leasing of the property
or any improvements thereon, together with, in each case, such collateral
assignments or "will-serve" letters as Administrative Agent may reasonably
require;
(13) favorable opinions of counsel for Borrower and the
appropriate Collateral Property Owner as to (i) the due authorization,
execution and enforceability of the Mortgage and Indemnity and (ii) such
other matters as Administrative Agent may reasonably request;
(14) Uniform Commercial Code searches with respect to Borrower and
the appropriate Collateral Property Owner and advice from the title insurer
to the effect that searches of the proper public records disclose no leases
of personalty (other than leases made in the ordinary course of business)
or financing statements filed or recorded against Borrower or such
Collateral Property Owner or the property covered by the Mortgage, other
than those reasonably approved by Administrative Agent;
(15) good standing, and, if required, foreign qualification,
certificates for Borrower and the appropriate Collateral Property Owner
from the jurisdiction where the property is located;
(16) current financial/operating statements, certified by Borrower
to be true and complete; and
(17) such other documents, instruments, materials, opinions or
assurances as Administrative Agent may reasonably request.
SECTION 2.18. Letters of Credit. (a) Borrower, the Banks and
Administrative Agent acknowledge that Administrative Agent has issued the
following two (2) irrevocable letters of credit for the account of Borrower: No.
SBY502898, dated July 22, 1994, in the original amount of $5,654,571, for the
benefit of Morgan Guaranty Trust Company of New York, as Trustee, and No.
SBY505218, dated August 19, 1997, in the original amount of $3,049,481, for the
benefit of Palm Beach County Board of County Commissioners (each, a "Letter of
Credit"; said letters of credit, collectively, the "Letters of Credit").
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(b) In connection with each Letter of Credit, Borrower hereby covenants
to pay to Administrative Agent the following fees, each payable quarterly in
arrears (on the first Banking Day of each calendar quarter): (i) a fee, payable
to Administrative Agent for the account of the Banks, computed daily on the
amount of the Letter of Credit issued and outstanding at a rate per annum equal
to the "Banks' L/C Fee Rate" (as hereinafter defined) and (ii) a fee, payable to
Administrative Agent for its own account, computed daily on the amount of the
Letter of Credit issued and outstanding at a rate per annum of 0.125%. For
purposes of this Agreement, the "Banks' L/C Fee Rate" shall mean, at any time, a
rate per annum equal to the Applicable Margin for LIBOR Loans less 0.125% per
annum. It is understood and agreed that the last installment of the fees
provided for in this paragraph (b) with respect to any particular Letter of
Credit shall be due and payable on the first day of the calendar quarter
following the return, undrawn, or cancellation of such Letter of Credit.
(c) The parties hereto acknowledge and agree that, immediately upon
notice from Administrative Agent of any drawing under a Letter of Credit, each
Bank shall, notwithstanding the existence of a Default or Event of Default or
the non-satisfaction of any conditions precedent to the making of an advance of
the Loans, advance proceeds of its Loan, in an amount equal to its Pro Rata
Share of such drawing, which advance shall be made to Administrative Agent to
reimburse Administrative Agent, for its own account, for such drawing. Each of
the Banks further acknowledges that its obligation to fund its Pro Rata Share of
drawings under Letters of Credit as aforesaid shall survive the Banks'
termination of this Agreement or enforcement of remedies hereunder or under the
other Loan Documents.
(d) Borrower agrees, upon the occurrence of an Event of Default and at
the request of Administrative Agent, (i) to deposit with Administrative Agent
cash collateral in the amount of all the outstanding Letters of Credit, which
cash collateral shall be held by Administrative Agent as security for Borrower's
obligations in connection with the Letters of Credit and (ii) to execute and
deliver to Administrative Agent such documents as Administrative Agent requests
to confirm and perfect the assignment of such cash collateral to Administrative
Agent.
ARTICLE III
YIELD PROTECTION; ILLEGALITY; ETC.
SECTION 3.01. Additional Costs. Borrower shall pay directly to each
Bank from time to time on demand such amounts as such Bank may determine to be
necessary to compensate it for any increased costs which such Bank determines
are attributable to its making or maintaining a LIBOR Loan, or its obligation to
make or maintain a LIBOR Loan, or its obligation to Convert a Base Rate Loan to
a LIBOR Loan hereunder, or any reduction in any amount receivable by such Bank
hereunder in respect of its LIBOR Loan or such obligations (such increases in
costs and reductions in amounts receivable being herein called "Additional
Costs"), in each case resulting from any Regulatory Change which:
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(1) changes the basis of taxation of any amounts payable to such
Bank under this Agreement or the Notes in respect of any such LIBOR Loan
(other than changes in the rate of general corporate, franchise, branch
profit, net income or other income tax imposed on such Bank or its
Applicable Lending Office by the jurisdiction in which such Bank has its
principal office or such Applicable Lending Office); or
(2) (other than to the extent the LIBOR Reserve Requirement is
taken into account in determining the LIBOR Rate at the commencement of the
applicable Interest Period) imposes or modifies any reserve, special
deposit, deposit insurance or assessment, minimum capital, capital ratio or
similar requirements relating to any extensions of credit or other assets
of, or any deposits with or other liabilities of, such Bank (including any
LIBOR Loan or any deposits referred to in the definition of "LIBOR Interest
Rate" in Section 1.01), or any commitment of such Bank (including such
Bank's Loan Commitment hereunder); or
(3) imposes any other condition affecting this Agreement or the
Notes (or any of such extensions of credit or liabilities).
Notwithstanding the foregoing, in the event that any Bank determines that it
shall incur Additional Costs in maintaining a LIBOR Loan, such Bank shall
provide written notice thereof to Borrower (with a copy to Administrative
Agent), which notice shall include the dollar amount of the Additional Costs,
and Borrower shall have the option, which option must be exercised within five
(5) Banking Days of Borrower's receipt of such notice, to prepay such LIBOR Loan
or to Convert such LIBOR Loan into a Base Rate Loan, subject, however, to the
provisions of Section 3.05.
Without limiting the effect of the provisions of the first paragraph of
this Section, in the event that, by reason of any Regulatory Change, any Bank
either (1) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits of other liabilities of
such Bank which includes deposits by reference to which the LIBOR Interest Rate
is determined as provided in this Agreement or a category of extensions of
credit or other assets of such Bank which includes loans based on the LIBOR
Interest Rate or (2) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if such Bank so
elects by notice to Borrower (with a copy to Administrative Agent), the
obligation of such Bank to permit Elections of, to Continue, or to Convert Base
Rate Loans into, LIBOR Loans shall be suspended (in which case the provisions of
Section 3.04 shall be applicable) until such Regulatory Change ceases to be in
effect.
Determinations and allocations by a Bank for purposes of this Section
of the effect of any Regulatory Change pursuant to the first or second paragraph
of this Section, on its costs or rate of return of making or maintaining its
Loan or portions thereof or on amounts receivable by it in respect of its Loan
or portions thereof, and the amounts required to compensate such Bank under this
Section, shall be conclusive absent manifest error.
To the extent that changing the jurisdiction of a Bank's Applicable
Lending Office would have the effect of minimizing Additional Costs, each such
Bank shall use reasonable
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efforts to make such a change, provided that same would not otherwise be
disadvantageous to each such Bank.
No Bank shall be entitled to any compensation pursuant to this Section
relating to any period more than ninety (90) days prior to the date notice
thereof is given to Borrower by such Bank.
SECTION 3.02. Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of the LIBOR
Interest Rate for any Interest Period:
(1) Administrative Agent determines (which determination shall be
conclusive) that quotations of interest rates for the relevant deposits
referred to in the definition of "LIBOR Interest Rate" in Section 1.01 are
not being provided in the relevant amounts or for the relevant maturities
for purposes of determining rates of interest for the LIBOR Loans as
provided in this Agreement; or
(2) a Bank determines (which determination shall be conclusive)
and promptly notifies Administrative Agent that the relevant rates of
interest referred to in the definition of "LIBOR Interest Rate" in Section
1.01 upon the basis of which the rate of interest for LIBOR Loans for such
Interest Period is to be determined do not adequately cover the cost to
such Bank of making or maintaining such LIBOR Loan for such Interest
Period;
then Administrative Agent shall give Borrower prompt notice thereof, and so long
as such condition remains in effect, the Banks (or, in the case of the
circumstances described in clause (2) above, the affected Bank) shall be under
no obligation to permit Elections of LIBOR Loans, to Convert Base Rate Loans
into LIBOR Loans or to Continue LIBOR Loans and Borrower shall, on the last
day(s) of the then current Interest Period(s) for the affected outstanding LIBOR
Loans, either (x) prepay the affected LIBOR Loans or (y) Convert the affected
LIBOR Loans into Base Rate Loans in accordance with Section 2.13.
SECTION 3.03. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to honor its obligation to make or maintain a LIBOR Loan
hereunder, to allow Elections of a LIBOR Loan or to Convert a Base Rate Loan
into a LIBOR Loan, then such Bank shall promptly notify Administrative Agent and
Borrower thereof and such Bank's obligation to make or maintain a LIBOR Loan, or
to permit Elections of, to Continue, or to Convert its Base Rate Loan into, a
LIBOR Loan shall be suspended (in which case the provisions of Section 3.04
shall be applicable) until such time as such Bank may again make and maintain a
LIBOR Loan.
SECTION 3.04. Treatment of Affected Loans. If the obligations of any
Bank to permit an Election of a LIBOR Loan, to Continue its LIBOR Loan, or to
Convert its Base Rate Loan into a LIBOR Loan, are suspended pursuant to Sections
3.01 or 3.03 (each LIBOR Loan so affected being herein called an "Affected
Loan"), such Bank's Affected Loan shall be automatically Converted into a Base
Rate Loan on the last day of the then current Interest Period
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for the Affected Loan (or, in the case of a Conversion required by Sections 3.01
or 3.03, on such earlier date as such Bank may specify to Borrower).
To the extent that such Bank's Affected Loan has been so Converted, all
payments and prepayments of principal which would otherwise be applied to such
Bank's Affected Loan shall be applied instead to its Base Rate Loan and such
Bank shall have no obligation to Convert its Base Rate Loan into a LIBOR Loan.
In the event that the conditions giving rise to the suspension of any
Bank's obligations to permit an Election of a LIBOR Loan, to Continue its LIBOR
Loan, or to Convert its Base Rate Loan into a LIBOR Loan shall cease to exist,
such Bank shall provide Borrower with prompt written notice of same (with a copy
to Administrative Agent), and such Bank shall again be obligated to permit an
Election of a LIBOR Loan, to Continue its LIBOR Loan, or to Convert its Base
Rate Loan into a LIBOR Loan in accordance with this Agreement.
SECTION 3.05. Certain Compensation. Borrower shall pay to
Administrative Agent for the account of the applicable Bank, upon the request of
such Bank through Administrative Agent, such amount or amounts as shall be
sufficient (in the reasonable opinion of such Bank) to compensate it for any
loss, cost or expense which such Bank determines is attributable to:
(1) any payment, prepayment, Conversion or Continuation of a LIBOR
Loan made by such Bank on a date other than the last day of an applicable
Interest Period, whether by reason of acceleration or otherwise; or
(2) any failure by Borrower for any reason to Convert or Continue
a LIBOR Loan to be Converted or Continued by such Bank on the date
specified therefor in the relevant notice under Section 2.15; or
(3) any failure by Borrower to borrow (or to qualify for a
borrowing of) a LIBOR Loan which would otherwise be made hereunder on the
date specified in the relevant Election notice under Section 2.15 given or
submitted by Borrower.
Without limiting the foregoing, such compensation shall include an
amount equal to the present value (using as the discount rate an interest rate
equal to the rate determined under (2) below) of the excess, if any, of (1) the
amount of interest which otherwise would have accrued on the principal amount so
paid, prepaid, Converted or Continued (or not Converted, Continued or borrowed)
for the period from the date of such payment, prepayment, Conversion or
Continuation (or failure to Convert, Continue or borrow) to the last day of the
then current applicable Interest Period (or, in the case of a failure to
Convert, Continue or borrow, to the last day of the applicable Interest Period
which would have commenced on the date specified therefor in the relevant
notice) at the applicable rate of interest for the LIBOR Loan provided for
herein, over (2) the amount of interest (as reasonably determined by such Bank)
based upon the interest rate which such Bank would have bid in the London
interbank market for Dollar deposits, for amounts comparable to such principal
amount and maturities comparable to such
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period. A determination of any Bank as to the amounts payable pursuant to this
Section shall be conclusive absent manifest error.
SECTION 3.06. Capital Adequacy. If any Bank shall have determined that,
after the date hereof, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such Governmental Authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within fifteen (15)
days after demand by such Bank (with a copy to Administrative Agent), Borrower
shall pay to such Bank such additional amount or amounts as will compensate such
Bank (or its Parent) for such reduction. A certificate of any Bank claiming
compensation under this Section, setting forth in reasonable detail the basis
therefor, shall be conclusive absent manifest error.
SECTION 3.07. Substitution of Banks. If any Bank (an "Affected Bank")
(i) makes demand upon Borrower for (or if Borrower is otherwise required to pay)
Additional Costs pursuant to Section 3.01 or (ii) is unable to make or maintain
a LIBOR Loan as a result of a condition described in Section 3.03 or clause (2)
of Section 3.02, Borrower may, within ninety (90) days of receipt of such demand
or notice (or the occurrence of such other event causing Borrower to be required
to pay Additional Costs or causing said Section 3.03 or clause (2) of Section
3.02 to be applicable), as the case may be, give notice (a "Replacement Notice")
to Administrative Agent (which will promptly forward a copy of such notice to
each Bank) of Borrower's intention either (x) to prepay in full the Affected
Bank's Notes and to terminate the Affected Bank's entire Loan Commitment or (y)
to replace the Affected Bank with another financial institution (the
"Replacement Bank") designated in such Replacement Notice.
In the event Borrower opts to give the notice provided for in clause
(x) above, and if the Affected Bank shall not agree within thirty (30) days of
its receipt thereof to waive the payment of the Additional Costs in question or
the effect of the circumstances described in Section 3.03 or clause (2) of
Section 3.02, then, so long as no Default or Event of Default shall exist,
Borrower may (notwithstanding the provisions of clause (2) of Section 2.11(a))
terminate the Affected Bank's entire Loan Commitment, provided that in
connection therewith it pays to the Affected Bank all outstanding principal and
accrued and unpaid interest under the Affected Bank's Notes, together with all
other amounts, if any, due from Borrower to the Affected Bank, including all
amounts properly demanded and unreimbursed under Sections 3.01 and 3.05.
In the event Borrower opts to give the notice provided for in clause
(y) above, and if (i) Administrative Agent shall, within thirty (30) days of its
receipt of the Replacement Notice, notify Borrower and each Bank in writing that
the Replacement Bank is reasonably satisfactory to Administrative Agent and (ii)
the Affected Bank shall not, prior to the end of such thirty (30)-day period,
agree to waive the payment of the Additional Costs in question or the effect of
the
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circumstances described in Section 3.03 or clause (2) of Section 3.02, then the
Affected Bank shall, so long as no Default or Event of Default shall exist,
assign its Notes and all of its rights and obligations under this Agreement to
the Replacement Bank, and the Replacement Bank shall assume all of the Affected
Bank's rights and obligations, pursuant to an agreement, substantially in the
form of an Assignment and Assumption Agreement, executed by the Affected Bank
and the Replacement Bank. In connection with such assignment and assumption, the
Replacement Bank shall pay to the Affected Bank an amount equal to the
outstanding principal amount under the Affected Bank's Notes plus all interest
accrued thereon, plus all other amounts, if any (other than the Additional Costs
in question), then due and payable to the Affected Bank; provided, however, that
prior to or simultaneously with any such assignment and assumption, Borrower
shall have paid to such Affected Bank all amounts properly demanded and
unreimbursed under Sections 3.01 and 3.05. Upon the effective date of such
assignment and assumption, the Replacement Bank shall become a Bank Party to
this Agreement and shall have all the rights and obligations of a Bank as set
forth in such Assignment and Assumption Agreement, and the Affected Bank shall
be released from its obligations hereunder, and no further consent or action by
any party shall be required. Upon the consummation of any assignment pursuant to
this Section, substitute Notes shall be issued to the Replacement Bank by
Borrower, in exchange for the return of the Affected Bank's Notes. The
obligations evidenced by such substitute Notes shall constitute "Obligations"
for all purposes of this Agreement and the other Loan Documents. If the
Replacement Bank is not incorporated under the Laws of the United States of
America or a state thereof, it shall, prior to the first date on which interest
or fees are payable hereunder for its account, deliver to Borrower and
Administrative Agent certification as to exemption from deduction or withholding
of any United States federal income taxes in accordance with Section 10.13.
Borrower, Administrative Agent and the Banks shall execute such
modifications to the Loan Documents as shall be reasonably required in
connection with and to effectuate the foregoing.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.01. Conditions Precedent to the Initial Advance. The
obligations of the Banks hereunder and the obligation of each Bank to make
Initial Advance are subject to the condition precedent that Administrative Agent
shall have received on or before the Closing Date each of the following
documents, and each of the following requirements shall have been fulfilled:
(1) Fees and Expenses. The payment of (A) all fees and expenses
incurred by Administrative Agent (including, without limitation, the
reasonable fees and expenses of legal counsel) and (B) the fees specified
in the Supplemental Fee Letter to be paid on or before the Closing Date;
(2) Note. The Note for UBS, duly executed by Borrower;
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(3) Financials of Borrower. Audited TRG Consolidated Financial
Statements as of and for the year ended December 31, 1997 and unaudited TRG
Consolidated Financial Statements as of and for the quarter ended June 30,
1998, each acceptable to the Banks;
(4) Evidence of Formation of Borrower. Certified (as of the
Closing Date) copies of Borrower's certificate and agreement of limited
partnership, with all amendments thereto, and a certificate of the
Secretary of State of the jurisdiction of formation as to its good standing
therein;
(5) Evidence of All Partnership Action. Certified (as of the
Closing Date) copies of all documents evidencing partnership action taken
by Borrower authorizing the execution, delivery and performance of the Loan
Documents and each other document to be delivered by or on behalf of
Borrower pursuant to this Agreement;
(6) Incumbency and Signature Certificate of Borrower. A
certificate (dated as of the Closing Date) of the Secretary of the
Partnership Committee of Borrower certifying the names and true signatures
of each individual authorized to sign on behalf of Borrower;
(7) Solvency Certificate. A Solvency Certificate, duly executed,
from Borrower;
(8) Opinion of Counsel for Borrower. A favorable opinion, dated
the Closing Date, of Miro Weiner & Kramer, counsel for Borrower, as to such
matters as Administrative Agent may reasonably request;
(9) Authorization Letter. The Authorization Letter, duly
executed by Borrower;
(10) Certificate. The following statements shall be true and
Administrative Agent shall have received a certificate dated the Closing
Date signed by a duly authorized signatory of Borrower stating, to the best
of the certifying party's knowledge, the following:
(a) All representations and warranties contained in this
Agreement and in each of the other Loan Documents are true and
correct on and as of the Closing Date as though made on and as of
such date, and
(b) No Default or Event of Default has occurred and is
continuing, or could result from the transactions contemplated by
this Agreement and the other Loan Documents;
(11) Supplemental Fee Letter. The Supplemental Fee Letter, duly
executed by Borrower;
(12) Separation Agreement. A copy of the Separation Agreement,
certified by Borrower to be true and complete;
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(13) Evidence of Bond Defeasance. Evidence that at least 65% of
the indebtedness represented by the Bonds has been defeased and/or repaid;
(14) Evidence regarding Specified Credit Facilities. Evidence that
the Specified Credit Facilities have been repaid in full and terminated;
(15) Evidence regarding Schedule A and B Assets. Evidence that the
Schedule A Assets and the Schedule B Assets are not subject to any Lien to
secure all or any portion of Secured Indebtedness (other than the Woodfield
Mortgage Loan, the Stoneridge Mortgage Loan, the Columbus UDAG Loan and the
indebtedness described in the chart in the definition of "Unencumbered
Wholly-Owned Assets" in Section 1.01);
(16) Request for Advance. A request for an advance in accordance
with Section 2.04;
(17) Related Bridge Loan Fully Disbursed. The Related Bridge Loan
shall have been fully disbursed; and
(18) Additional Documentation. Such other approvals, opinions or
documents as Administrative Agent or any Bank may reasonably request.
SECTION 4.02. Conditions Precedent to Advances After the Initial
Advance. The obligation of each Bank to make advances of the Loans subsequent to
the Initial Advance shall be subject to satisfaction of the following conditions
precedent:
(1) All conditions of Section 4.01 shall have been and remain
satisfied as of the date of the advance;
(2) No Default or Event of Default shall have occurred and be
continuing as of the date of the advance;
(3) Administrative Agent shall have received a request for an
advance in accordance with Section 2.04; and
(4) In the case of the first such subsequent advance following the
consummation of the Unit Redemption Transaction, Administrative Agent shall
have received and approved (such approval not to be unreasonably withheld)
an amendment and restatement of Borrower's agreement of limited partnership
(it being understood that the form of amendment and restatement attached to
that certain Interim Agreement dated as of August 17, 1998 among TCI and
others is deemed approved).
SECTION 4.03. Deemed Representations. Each request by Borrower for, and
acceptance by Borrower of, an advance of proceeds of the Loans shall constitute
a representation and warranty by Borrower that, as of both the date of such
request and the date of the advance (1) no Default or Event of Default has
occurred and is continuing and (2) if any representation or warranty contained
in this Agreement or the other Loan Documents is untrue or incorrect, the
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condition giving rise to such untruthfulness or incorrectness is not likely to
result in a Material Adverse Change.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Administrative Agent and each Bank as
follows:
SECTION 5.01. Due Organization. Borrower is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, has the partnership power and authority to own its assets and to
transact the business in which it is now engaged, and, if applicable, is duly
qualified as a foreign partnership and in good standing under the laws of each
other jurisdiction in which such qualification is required.
SECTION 5.02. Power and Authority; No Conflicts; Compliance With Laws.
The execution, delivery and performance of the obligations required to be
performed by Borrower of the Loan Documents does not and will not (1) require
the consent or approval of its partners or such consent or approval has been
obtained, (2) contravene its partnership agreement, (3) violate any provision
of, or require any filing, registration, consent or approval under, any Law
(including, without limitation, Regulation U), order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to it, (4) result in a breach of or constitute a default under or
require any consent under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which it may be a party or by which it or its
properties may be bound or affected except for consents which have been
obtained, (5) result in, or require, the creation or imposition of any Lien,
upon or with respect to any of its properties now owned or hereafter acquired or
(6) cause it to be in default under any such Law, order, writ, judgment,
injunction, decree, determination or award or any such indenture, agreement,
lease or instrument; to the best of its knowledge, Borrower is in compliance
with all Laws applicable to it where the failure to be in compliance would cause
a Material Adverse Change to occur.
SECTION 5.03. Legally Enforceable Agreements. Each Loan Document is a
legal, valid and binding obligation of Borrower, enforceable against Borrower in
accordance with its terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally.
SECTION 5.04. Litigation. There are no actions, suits or proceedings
pending or, to its knowledge, threatened against Borrower or any of its
Affiliates before any court or arbitrator or any Governmental Authority except
actions, suits or proceedings which have been disclosed to Administrative Agent
and the Banks in writing and which are fully covered by insurance or would, if
adversely determined, not substantially impair the ability of Borrower to pay
when due any amounts which may become payable under the Notes or to otherwise
pay and perform its obligations in connection with the Loans.
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SECTION 5.05. Good Title to Properties. Borrower and each of its
Affiliates have good, marketable and legal title to all of the properties and
assets each of them purports to own (including, without limitation, those
reflected in the June 30, 1998 financial statements referred to in Section 5.13)
and, in the case of all of Borrower's shopping center properties, only with
exceptions which do not materially detract from the value of such property or
assets or the use thereof in Borrower's and such Affiliate's business, and
except to the extent that any such properties and assets have been encumbered or
disposed of since the date of such financial statements without violating any of
the covenants contained in Article VII or elsewhere in this Agreement. Borrower
and its Affiliates enjoy peaceful and undisturbed possession of all leased
property necessary in any material respect in the conduct of their respective
businesses. All such leases are valid and subsisting and are in full force and
effect.
SECTION 5.06. Taxes. Borrower has filed all tax returns (federal, state
and local) required to be filed and has paid all taxes, assessments and
governmental charges and levies due and payable without the imposition of a
penalty, including interest and penalties, except to the extent they are the
subject of a Good Faith Contest.
SECTION 5.07. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of ERISA. Neither a Reportable Event nor a
Prohibited Transaction has occurred with respect to any Plan; no notice of
intent to terminate a Plan has been filed nor has any Plan been terminated
within the past five (5) years; no circumstance exists which constitutes grounds
under Section 4042 of ERISA entitling the PBGC to institute proceedings to
terminate, or appoint a trustee to administer, a Plan, nor has the PBGC
instituted any such proceedings; Borrower and the ERISA Affiliates thereof have
not completely or partially withdrawn under Sections 4201 or 4204 of ERISA from
a Multiemployer Plan; Borrower and the ERISA Affiliates thereof have met the
minimum funding requirements of each under ERISA with respect to the plans of
each and there are no unfunded vested liabilities with respect to any plan
established or maintained by each; and Borrower and the ERISA Affiliates thereof
have not incurred any liability to the PBGC under ERISA.
SECTION 5.08. No Default on Outstanding Judgments or Orders. Borrower has
satisfied all judgments which are not being appealed and is not in default with
respect to any judgment, order, writ, injunction, decree, rule or regulation of
any court, arbitrator or federal, state, municipal or other Governmental
Authority, commission, board, bureau, agency or instrumentality, domestic or
foreign.
SECTION 5.09. No Defaults on Other Agreements. Except as disclosed to
the Bank Parties in writing, including anything disclosed on financial
statements, Borrower, to the best of its knowledge, is not a party to any
indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any partnership, trust or other restriction which is
likely to result in a Material Adverse Change. To the best of its knowledge,
Borrower is not in default in any respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument which is likely to result in a Material Adverse Change.
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SECTION 5.10. Government Regulation. Borrower is not subject to
regulation under the Investment Company Act of 1940, the Interstate Commerce
Act, the Federal Powers Act or any statute or regulation limiting any such
Person's ability to incur indebtedness for money borrowed as contemplated
hereby.
SECTION 5.11. Environmental Protection. To the best of Borrower's
knowledge, none of Borrower's or its Affiliates' properties contains any
Hazardous Materials that, under any Environmental Law currently in effect, (1)
would impose liability on Borrower that is likely to result in a Material
Adverse Change or (2) is likely to result in the imposition of a Lien on any
assets of Borrower or its Affiliates, in each case if not properly handled in
accordance with applicable Law. To the best of Borrower's knowledge, neither it
nor any of its Affiliates is in violation of, or subject to any existing,
pending or threatened investigation or proceeding by any Governmental Authority
under, any Environmental Law.
SECTION 5.12. Solvency. Borrower is, and upon consummation of the
transactions contemplated by this Agreement, the other Loan Documents and any
other documents, instruments or agreements relating thereto, will be, Solvent.
SECTION 5.13. Financial Statements. The TRG Consolidated Financial
Statements and TCI Financial Statements most recently delivered to the Banks
pursuant to the terms of this Agreement are in all material respects complete
and correct and fairly present the financial condition of the subjects thereof
as of the dates of and for the periods covered by such statements, all in
accordance with GAAP, and there has been no Material Adverse Change since the
date of such most recently delivered TRG Consolidated Financial Statements or
TCI Financial Statements, as the case may be.
SECTION 5.14. Valid Existence of Affiliates. As of the Closing Date,
the only material Affiliates of Borrower which own or lease operating shopping
centers or shopping centers under construction are listed on EXHIBIT D. Each
such Affiliate is a partnership, limited liability company or joint venture duly
organized and existing in good standing under the laws of the jurisdiction of
its formation. As to each such Affiliate, its correct name, the jurisdiction of
its formation and Borrower's percentage of beneficial interest therein are set
forth on said EXHIBIT D. Borrower and each of such Affiliates have the power to
own their respective properties and to carry on their respective businesses now
being conducted. Each of Borrower and such Affiliates is duly qualified as a
foreign partnership, company or venture to do business and is in good standing
in every jurisdiction in which the nature of the respective businesses conducted
by it or its respective properties, owned or held under lease, make such
qualification necessary.
SECTION 5.15. Insurance. Borrower and each of its Affiliates has in
force paid insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in the same or a similar business and similarly situated.
SECTION 5.16. Schedule A and B Assets. None of the Schedule A Assets or
Schedule B Assets is subject to (1) any Lien to secure all or any portion of
Secured Indebtedness
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(other than the Woodfield Mortgage Loan, the Stoneridge Mortgage Loan, the
Columbus UDAG Loan and the indebtedness described in the chart in the definition
of "Unencumbered Wholly-Owned Assets" in Section 1.01) or (2) any pledge or
agreement not to encumber.
SECTION 5.17. Accuracy of Information; Full Disclosure. To the best of
Borrower's knowledge, neither this Agreement nor any documents, financial
statements, reports, notices, schedules, certificates, statements or other
writings furnished by or on behalf of Borrower to Administrative Agent or any
Bank in connection with the negotiation of this Agreement or the consummation of
the transactions contemplated hereby, or required herein to be furnished by or
on behalf of Borrower, contains any untrue or misleading statement of a material
fact or omits a material fact necessary to make the statements herein or therein
not misleading. To the best of Borrower's knowledge, there is no fact which
Borrower has not disclosed to Administrative Agent and the Banks in writing
which materially affects adversely nor, so far as Borrower can now foresee, will
materially affect adversely the business, prospects, profits or financial
condition of Borrower or the ability of Borrower to perform this Agreement and
the other Loan Documents.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any of the Notes shall remain unpaid or the Loan Commitments
remain in effect, or any other amount is owing by Borrower to any Bank hereunder
or under any other Loan Document, Borrower shall:
SECTION 6.01. Maintenance of Existence. Preserve and maintain its legal
existence and, if applicable, good standing in the jurisdiction of organization
and, if applicable, qualify and remain qualified as a foreign partnership in
each jurisdiction in which such qualification is required, except to the extent
that failure to so qualify is not likely to result in a Material Adverse Change.
SECTION 6.02. Maintenance of Records. Keep adequate records and books
of account, in which complete entries will be made in accordance with GAAP,
reflecting all of its financial transactions.
SECTION 6.03. Maintenance of Insurance. At all times, maintain and keep
in force, and cause each of its Affiliates to maintain and keep in force,
insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in the same or a similar business and similarly situated,
which insurance may provide for reasonable deductibility from coverage thereof.
SECTION 6.04. Compliance with Laws; Payment of Taxes. Comply in all
respects with all Laws applicable to it or to any of its properties or any part
thereof, such compliance to include, without limitation, paying before the same
become delinquent all taxes, assessments and governmental charges imposed upon
it or upon its property, except to the extent they are the subject of a Good
Faith Contest.
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SECTION 6.05. Right of Inspection. At any reasonable time and from time
to time upon reasonable notice, permit Administrative Agent or any Bank or any
agent or representative thereof (provided that a representative of any Bank
must, at Borrower's request, be accompanied by a representative of Borrower), to
examine and make copies and abstracts from the records and books of account of,
and visit the properties of, Borrower and to discuss the affairs, finances and
accounts of Borrower with the independent accountants of Borrower.
SECTION 6.06. Compliance With Environmental Laws. Comply in all
material respects with all applicable Environmental Laws and immediately pay or
cause to be paid all costs and expenses incurred in connection with such
compliance, except to the extent there is a Good Faith Contest.
SECTION 6.07. Payment of Costs. Pay all costs and expenses required for
the satisfaction of the conditions of this Agreement.
SECTION 6.08. Maintenance of Properties. Do all things reasonably
necessary to maintain, preserve, protect and keep its and its Affiliates'
properties in good repair, working order and condition.
SECTION 6.09. Reporting and Miscellaneous Document Requirements.
Furnish directly to each of the Banks:
(1) Annual Financial Statements. As soon as available and in any
event within ninety (90) days after the end of each Fiscal Year, the TRG
Consolidated Financial Statements and, following the consummation of the
Unit Redemption Transaction, the TCI Financial Statements, in each case as
of the end of and for such Fiscal Year, in reasonable detail and stating
in comparative form the respective figures for the corresponding date and
period in the prior Fiscal Year and audited by Borrower's Accountants;
(2) Quarterly Financial Statements. As soon as available and in
any event within forty-five (45) days after the end of each calendar
quarter (other than the last quarter of the Fiscal Year), the unaudited
TRG Consolidated Financial Statements and, following the consummation of
the Unit Redemption Transaction, the TCI Financial Statements, in each
case as of the end of and for such calendar quarter, in reasonable detail
and stating in comparative form the respective figures for the
corresponding date and period in the prior Fiscal Year;
(3) Certificate of No Default and Financial Compliance. Within
forty five (45) days after the end of each of the first three quarters of
each Fiscal Year and within ninety (90) days after the end of each Fiscal
Year, a certificate of Borrower's chief financial officer or Treasurer (a)
stating that, to the best of his or her knowledge, no Default or Event of
Default has occurred and is continuing, or if a Default or Event of
Default has occurred and is continuing, specifying the nature thereof and
the action which is proposed to be taken with respect thereto, (b) stating
that the covenants contained in
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Sections 7.02, 7.03, 7.04 and 7.06 and in Article VIII have been complied
with (or specifying those that have not been complied with) and including
computations demonstrating such compliance (or non-compliance) and (c)
setting forth the details of all items comprising Total Outstanding
Indebtedness (including amount, maturity, interest rate and amortization
requirements), and Unsecured Indebtedness, each as of the end of such
quarter, and Combined EBITDA, Unencumbered Combined EBITDA, Interest
Expense, Unsecured Interest Expense and Fixed Charges, each for the twelve
(12)-month period ending with such quarter;
(4) Certificate of Borrower's Accountants. Simultaneously with the
delivery of the annual financial statements required by paragraph (1) of
this Section, a statement of Borrower's Accountants who audited such
financial statements comparing the computations set forth in the financial
compliance certificate required by paragraph (3)(b) of this Section to the
audited financial statements required by paragraph (1) of this Section
(where such information appears in such financial statements);
(5) Notice of Litigation. Promptly after the commencement and
knowledge thereof, notice of all actions, suits, and proceedings before
any court or arbitrator, affecting Borrower which, if determined adversely
to Borrower is likely to result in a Material Adverse Change;
(6) Notices of Defaults and Events of Default. As soon as possible
and in any event within ten (10) days after Borrower becomes aware of the
occurrence of a material Default or any Event of Default a written notice
setting forth the details of such Default or Event of Default and the
action which is proposed to be taken with respect thereto;
(7) Dispositions or Acquisitions of Assets. Within thirty (30)
days after the occurrence thereof, written notice of any Disposition or
acquisition of assets (other than acquisitions or Dispositions of
investments such as certificates of deposit, Treasury securities and money
market deposits in the ordinary course of Borrower's cash management) in
excess of $25,000,000, together with, in the case of any acquisition of
such an asset, (i) copies of the agreements governing the acquisition,
(ii) historical balance sheets (to the extent available) and statements of
income and cash flows with respect to the property acquired for at least
the preceding three (3) years (to the extent available) and Borrower's
revenue and expense projections for the property acquired for at least the
next five (5) years (all of the foregoing to be in form and detail
satisfactory to Administrative Agent), (iii) a certificate, of the sort
required by paragraph (3)(b) of this Section, containing covenant
compliance calculations that include the pro-forma adjustments set forth
in Section 8.03, which calculations shall demonstrate Borrower's
compliance, on a pro-forma basis, as of the end of the most recently ended
calendar quarter for which financial results are required hereunder to
have been reported by Borrower, with all covenants enumerated in said
paragraph (3)(b) and (iv) such other information relating to the
acquisition as Administrative Agent may reasonably request;
(8) Material Adverse Change. As soon as is practicable and in any
event within five (5) days after knowledge of the occurrence of any event
or circumstance
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which is likely to result in or has resulted in a Material Adverse Change,
written notice thereof;
(9) Bankruptcy of Tenants. Promptly after becoming aware of the
same, written notice of the bankruptcy, insolvency or cessation of
operations of any tenant in any property of Borrower or in which Borrower
has an interest to which 5% or more of minimum rent payable to Borrower
directly or through its Consolidated Businesses or UJVs is attributable;
(10) Offices. Thirty (30) days' prior written notice of any change
in the chief executive office or principal place of business of Borrower;
(11) Environmental and Other Notices. As soon as possible and in
any event within five (5) days after receipt, copies of all Environmental
Notices received by Borrower which are not received in the ordinary course
of business and which relate to a situation which is likely to result in a
Material Adverse Change;
(12) Insurance Coverage. Promptly, such information concerning
Borrower's insurance coverage as Administrative Agent may reasonably
request;
(13) Separation Agreement. Promptly, any changes in the Separation
Agreement or the Unit Redemption Transaction; and
(14) General Information. Promptly, such other information
respecting the condition or operations, financial or otherwise, of
Borrower or any properties of Borrower as Administrative Agent may from
time to time reasonably request.
ARTICLE VII
NEGATIVE COVENANTS
So long as any of the Notes shall remain unpaid, or the Loan
Commitments remain in effect, or any other amount is owing by Borrower to
Administrative Agent or any Bank hereunder or under any other Loan Document,
Borrower shall not do any or all of the following:
SECTION 7.01. Mergers Etc. Merge or consolidate with any Person (except
where Borrower or a Person wholly-owned by Borrower is the surviving entity), or
sell, assign, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) (or enter into any agreement to do any of the
foregoing).
SECTION 7.02. Investments. Make any loan or advance to any Person or
purchase or otherwise acquire any capital stock, assets, obligations or other
securities of, make any capital contribution to, or otherwise invest in, or
acquire any interest in, any Person (any such transaction, an "Investment") if
(1) the Investment is in connection with something other
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than a retail shopping center and the amount of any single such Investment (or
the aggregate amount of any single such Investment together with all related
Investments), would exceed 20% of Net Worth, (2) except to the extent permitted
by clause (3) below, such Investment constitutes the acquisition of a minority
interest in a Person (a "Minority Interest") and the amount of such Investment,
together with the value of all other Minority Interests acquired after the
Closing Date contributing to Capitalization Value, would exceed 10% of Net Worth
or (3) such Investment constitutes the acquisition of a Minority Interest in a
regional shopping center or portfolio of regional shopping centers and the
amount of such Investment, together with the value of all other such Minority
Interests, would exceed 20% of Net Worth. A 50% beneficial interest in a Person,
in connection with which the holder thereof exercises joint control over such
Person with the holder(s) of the other 50% beneficial interest, shall not
constitute a "Minority Interest" for purposes of this Section.
SECTION 7.03. Sale of Assets. Effect a Disposition of any of its now
owned or hereafter acquired assets, including assets in which Borrower owns a
beneficial interest through its ownership of interests in joint ventures,
aggregating more than 20% of Capitalization Value.
SECTION 7.04. Interest Rate Hedging. At any time following the date
ninety (90) days after the date hereof, permit or suffer more than 25% of Total
Outstanding Indebtedness not to be "hedged"; for purposes of this Section,
"hedged" shall mean bearing interest at an effective fixed rate, either pursuant
to the debt instrument itself or through the operation of a "cap", "collar",
"swap" or comparable interest rate protection contract, such debt instrument, or
instrument creating the "cap", "collar", "swap" or comparable interest rate
protection contract, as the case may be, having an original term of at least
twelve (12) months.
SECTION 7.05. Partnership Committee of Borrower. At any time until the
Unit Redemption Transaction has been consummated, permit or suffer the failure
or inability of any one or more of (1) TG Partners Limited Partnership and/or
Taub-Co Management, Inc., (2) the General Motors Hourly-Rate Employees Pension
Trust and/or the General Motors Salaried Employees Pension Trust, directly or
indirectly (or a single "GMPTS Transferee," as such quoted term is defined in
Borrower's Amended and Restated Agreement of Limited Partnership) and (3) TCI,
to designate a majority of Borrower's partnership committee; or, at any time
thereafter, permit or suffer the failure or inability of TCI to be the managing
general partner of Borrower.
SECTION 7.06. Disposition or Encumbrance of Certain Assets.
Notwithstanding anything to the contrary contained herein, at any time, effect a
Disposition of, mortgage, hypothecate or otherwise encumber to secure a Debt (it
being understood that, for purposes of this Section, an asset shall be deemed
"encumbered" if it is the subject of a pledge or agreement not to encumber), any
of the Schedule A Assets or the Schedule B Assets, or any portion of its
interest in any of such assets, in any such case, without the prior written
approval of the Required Banks, which approval may be granted or denied in the
sole and absolute discretion of the Required Banks, provided, however, that (1)
such consent shall not be required for the transfer of the Schedule B Assets to
GMPT Borrower in connection with the consummation of the Unit Redemption
Transaction, including the simultaneous assumption by GMPT Borrower of
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all of Borrower's obligations in respect of the Related Bridge Term Loan, all as
contemplated by the Term Credit Agreement governing the Related Bridge Term Loan
and (2) such consent shall not be required for the encumbrance of one or more of
the Schedule A Assets or Schedule B Assets to secure, in any such case, a
mortgage loan provided that such loan is non-recourse to Borrower and generates
proceeds of not less than 60% of the value of the applicable Schedule A Asset(s)
or Schedule B Asset(s) (as such values are reflected in the June 30, 1997
Taubman Realty Group Current Value Analysis previously delivered to
Administrative Agent) and such proceeds are applied in accordance with Section
2.17 of the Credit Agreement governing the Related Bridge Loan and Section 2.18
of the Term Credit Agreement governing the Related Bridge Term Loan. The Banks
acknowledge that the existence of Liens securing the Woodfield Mortgage Loan and
the indebtedness described in the chart in the definition of "Unencumbered
Wholly-Owned Assets" in Section 1.01 shall not violate this Section.
SECTION 7.07. Amendments to Separation Agreement. At any time, amend,
modify or supplement the Separation Agreement in any material respect without
the prior written consent of the Required Banks, which shall not be unreasonably
withheld or delayed.
SECTION 7.08. Certain Restrictions on Activities of TCI. At any time,
suffer or permit TCI to incur any Debt in its own name or to own any material
assets other than its interests in Borrower and incidental assets or engage in
any business other than the ownership of such interests.
ARTICLE VIII
FINANCIAL COVENANTS AND ADJUSTMENTS
SECTION 8.01. Covenants Prior to Certain Events. Prior to such time as
(a) the Related Bridge Loan has been repaid in full and the loan commitments of
the lenders thereof cease to be in effect, (b) (x) the Related Bridge Term Loan
has been repaid in full and the loan commitments of the lenders thereof cease to
be in effect or (y) the Related Bridge Term Loan has been assumed by GMPT
Borrower, as contemplated by the Term Credit Agreement governing the Related
Bridge Term Loan, (c) the Loans have become secured, as contemplated by Section
2.17 and (d) the Loan Commitments have terminated, the Notes have been repaid in
full and any other amounts owing by Borrower to Administrative Agent or any Bank
under this Agreement or under any other Loan Document have been repaid in full,
Borrower shall not permit or suffer:
(1) Net Worth. At any time, Net Worth to be less than $1,000,000,000; or
(2) Leverage Ratio. At any time, Leverage Ratio to exceed 60%; or
(3) Relationship of Combined EBITDA to Fixed Charges. As of the end of any
calendar quarter, the ratio of (i) Combined EBITDA to (ii) Fixed Charges, each
for the twelve (12)-month period then ended and taken as a whole, to be less
than 1.50 to 1.00; or
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(4) Relationship of Combined EBITDA to Interest Expense. As of the end of
any calendar quarter, the ratio of (i) Combined EBITDA to (ii) Interest Expense,
each for the twelve (12)-month period then ended and taken as a whole, to be
less than 1.85 to 1.00; or
(5) Relationship of Combined EBITDA to Total Outstanding Indebtedness. As
of the end of any calendar quarter, the ratio (expressed as a percentage) of (i)
Combined EBITDA for the twelve (12)-month period then ended and taken as a whole
to (ii) Total Outstanding Indebtedness as of the end of such calendar quarter,
to be less than 13.5%; or
(6) Payout Ratio. Any Restricted Payment to be made during any of its
fiscal quarters, which, when added to all Restricted Payments made during the
three (3) immediately preceding fiscal quarters, exceeds 90% of Distributable
Cash Flow; provided, however, that Borrower shall be permitted, provided there
exists no Event of Default, to make Restricted Payments in excess of 90% of
Distributable Cash Flow as may be necessary under Section 857(a) of the Code to
maintain TCI's tax status as a real estate investment trust. For purposes of
this Article, "Restricted Payment" means any distribution or other payment made
by Borrower to its partners, other than distributions pursuant to Section 5.3 of
Borrower's agreement of limited partnership; or
(7) Unsecured Debt Yield. As of the end of any calendar quarter, Unsecured
Debt Yield for such calendar quarter to be less than 13%; or
(8) Relationship of Unencumbered Combined EBITDA to Interest Expense on
Unsecured Indebtedness. As of the end of any calendar quarter, the ratio of (i)
Unencumbered Combined EBITDA to (ii) that portion of Interest Expense
attributable to Unsecured Indebtedness, each for the prior twelve (12)-month
period then ended and taken as a whole, to be less than 1.50 to 1.00.
SECTION 8.02. Covenants Subsequent to Certain Events. Subsequent to
such time as (a) the Related Bridge Loan has been repaid in full and the loan
commitments of the lenders thereof cease to be in effect, (b) (x) the Related
Bridge Term Loan has been repaid in full and the loan commitments of the lenders
thereof cease to be in effect or (y) the Related Bridge Term Loan has been
assumed by GMPT Borrower, as contemplated by the Term Credit Agreement governing
the Related Bridge Term Loan and (c) the Loans have become secured, as
contemplated by Section 2.17; and so long as any of the Notes shall remain
unpaid, or the Loan Commitments shall remain in effect, or any other amount is
owing by Borrower to Administrative Agent or any Bank under this Agreement or
under any other Loan Document, Borrower shall not permit or suffer:
(1) Net Worth. At any time, Net Worth to be less than $1,000,000,000; or
(2) Leverage Ratio. At any time, Leverage Ratio to exceed 70%; or
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(3) Relationship of Combined EBITDA to Fixed Charges. As of the end of any
calendar quarter, the ratio of (i) Combined EBITDA to (ii) Fixed Charges, each
for the twelve (12)-month period then ended and taken as a whole, to be less
than 1.40 to 1.00; or
(4) Relationship of Combined EBITDA to Total Outstanding Indebtedness. As
of the end of any calendar quarter, the ratio (expressed as a percentage) of (i)
Combined EBITDA for the twelve (12)-month period then ended and taken as a whole
to (ii) Total Outstanding Indebtedness as of the end of such calendar quarter,
to be less than 11.5%; or
(5) Payout Ratio. Any Restricted Payment to be made during any of its
fiscal quarters, which, when added to all Restricted Payments made during the
three (3) immediately preceding fiscal quarters, exceeds 95% of Distributable
Cash Flow; provided, however, that Borrower shall be permitted, provided there
exists no Event of Default, to make Restricted Payments in excess of 95% of
Distributable Cash Flow as may be necessary under Section 857(a) of the Code to
maintain TCI's tax status as a real estate investment trust; or
(6) Collateral Property Debt Yield. As of the end of any calendar quarter,
Collateral Property Debt Yield for such calendar quarter to be less than 13%; or
(7) Relationship of Collateral Property EBITDA to Interest Expense on
Loans. As of the end of any calendar quarter, the ratio of (i) Collateral
Property EBITDA to (ii) that portion of Interest Expense attributable to the
Loans, each for the prior twelve (12)-month period then ended and taken as a
whole, to be less than 1.75 to 1.00.
SECTION 8.03. Certain Pro-Forma Adjustments. For purposes of the
calculation of the financial covenants set forth in Sections 8.01 and 8.02, the
following adjustments shall be made in the case of each property acquired, or
each "property put into service", or each property disposed of, by Borrower
during the applicable test period:
(1) In the case of each property acquired or put into service, the
contribution of said property to Capitalization Value shall be the lesser
of (a) such property's contribution to Combined EBITDA, annualized based
on Borrower's period of ownership or operation, divided by 8.00% or (b)
the acquisition cost or cost of the property. In the case of each property
disposed of by Borrower during the applicable test period, such property
shall be deemed to have made no contribution to Capitalization Value for
the applicable twelve (12)-month period.
(2) In the case of each property acquired or put into service, the
contribution of said property to Combined EBITDA shall be an annualized
amount based upon the period of Borrower's ownership or operation. In the
case of each property disposed of by Borrower during the applicable test
period, such property shall be deemed to have made no contribution to
Combined EBITDA for the applicable twelve (12)-month period.
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(3) In the case of each property acquired or put into service, the
contribution of said property to Interest Expense for the applicable
twelve (12)-month period shall be equal to actual interest expense with
respect to the Debt incurred or assumed in connection with the
acquisition, from the date of the acquisition or the date the asset is put
into service until the end of such twelve (12)-month period, annualized.
In the case of each property disposed of during the applicable test
period, such property shall be deemed to have made no contribution to
Interest Expense for such period.
In addition, if any Debt of Borrower is refinanced during an applicable test
period, the calculation of Interest Expense shall be adjusted as follows. The
contribution of the Debt that was refinanced to Interest Expense for the
applicable twelve (12)-month period shall be equal to actual interest expense on
the refinanced Debt from the date of the refinancing to the end of such twelve
(12)-month period, annualized.
As used in this Section 8.03, the term "property put into service" means any
property that has been opened to the public for business and which has generated
revenues for a period of at least thirty (30) days.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01.Events of Default. Any of the following events shall be an
"Event of Default":
(1) If Borrower shall: fail to pay the principal of any Notes as
and when due; or fail to pay interest accruing on any Notes as and when
due and such failure to pay shall continue unremedied for five (5) days
after the due date of such amount; or fail to pay any fee or interest or
any other amount due under this Agreement or any other Loan Document or
the Supplemental Fee Letter as and when due and such failure to pay shall
continue unremedied for two (2) days after notice by Administrative Agent
of such failure to pay; or
(2) If any representation or warranty made by Borrower in this
Agreement or in any other Loan Document or which is contained in any
certificate, document, opinion, financial or other statement furnished at
any time under or in connection with a Loan Document shall prove to have
been incorrect in any material respect on or as of the date made; or
(3) If Borrower shall fail (a) to perform or observe any term,
covenant or agreement contained in Section 2.17, Article VII or Article
VIII or (b) to perform or observe any term, covenant or agreement
contained in Article VI or otherwise contained in this Agreement (other
than obligations specifically referred to elsewhere in this Section) or
any Loan Document, or in the Supplemental Fee Letter or any other document
executed by Borrower and delivered to Administrative Agent and/or the
Banks in connection with the transactions contemplated hereby and such
failure shall remain unremedied for thirty (30) consecutive calendar days
after notice by Administrative
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Agent to Borrower thereof (or such shorter cure period as may be expressly
prescribed in the applicable Loan Document); provided, however, that if
any such default under clause (b) above cannot by its nature be cured
within such thirty (30) day, or shorter, as the case may be, grace period
and so long as Borrower shall have commenced cure within such thirty (30)
day, or shorter, as the case may be, grace period and shall, at all times
thereafter, diligently prosecute the same to completion, Borrower shall
have an additional period, not to exceed sixty (60) days, to cure such
default; in no event, however, is the foregoing intended to effect an
extension of the Maturity Date; or
(4) If either Borrower or TCI shall fail (a) to pay any Debt
(other than the payment obligations described in paragraph (1) of this
Section) in an amount equal to or greater than $10,000,000 when due
(whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise) or (b) to perform or observe any material term, covenant, or
condition under any agreement or instrument relating to any such Debt,
when required to be performed or observed, if the effect of such failure
to perform or observe is to accelerate, or to permit the acceleration of,
after the giving of notice or the lapse of time, or both (other than in
cases where, in the judgment of the Required Banks, meaningful discussions
likely to result in (i) a waiver or cure of the failure to perform or
observe or (ii) otherwise averting such acceleration are in progress
between Borrower and the obligee of such Debt), the maturity of such Debt,
or any such Debt shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled or otherwise required
prepayment), prior to the stated maturity thereof; or
(5) If TCI, Borrower, or any Affiliate(s) of Borrower to which
$100,000,000 or more in the aggregate of Capitalization Value is
attributable, shall: (a) generally not, or be unable to, or shall admit in
writing its inability to, pay its debts as such debts become due; or (b)
make an assignment for the benefit of creditors, petition or apply to any
tribunal for the appointment of a custodian, receiver or trustee for it or
a substantial part of its assets; or (c) commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect; or (d) have had any such petition or application
filed or any such proceeding shall have been commenced, against it, in
which an adjudication or appointment is made or order for relief is
entered, or which petition, application or proceeding remains undismissed
or unstayed for a period of sixty (60) days or more; or (e) be the subject
of any proceeding under which all or a substantial part of its assets may
be subject to seizure, forfeiture or divestiture; or (f) by any act or
omission indicate its consent to, approval of or acquiescence in any such
petition, application or proceeding or order for relief or the appointment
of a custodian, receiver or trustee for all or any substantial part of its
property; or (g) suffer any such custodianship, receivership or
trusteeship for all or any substantial part of its property, to continue
undischarged for a period of sixty (60) days or more; or
(6) If one or more judgments, decrees or orders for the payment of
money in excess of $10,000,000 in the aggregate shall be rendered against
either Borrower or TCI, and any such judgments, decrees or orders shall
continue unsatisfied and in effect for a
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period of thirty (30) consecutive days without being vacated, discharged,
satisfied or stayed or bonded pending appeal; or
(7) If any of the following events shall occur or exist with
respect to Borrower, or any ERISA Affiliate of Borrower: (a) any
Prohibited Transaction involving any Plan; (b) any Reportable Event with
respect to any Plan; (c) the filing under Section 4041 of ERISA of a
notice of intent to terminate any Plan or the termination of any Plan; (d)
any event or circumstance which might constitute grounds entitling the
PBGC to institute proceedings under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to administer, any
Plan, or the institution by the PBGC of any such proceedings; or (e)
complete or partial withdrawal under Section 4201 or 4204 of ERISA from a
Multiemployer Plan or the reorganization, insolvency, or termination of
any Multiemployer Plan; and in each case above, if such event or
conditions, if any, could in the opinion of any Bank subject Borrower or
any ERISA Affiliate of Borrower to any tax, penalty, or other liability to
a Plan, Multiemployer Plan, the PBGC or otherwise (or any combination
thereof) which in the aggregate exceeds or may exceed $50,000; or
(8) If at any time TCI is not a qualified real estate investment
trust under Sections 856 through 860 of the Code or is not listed on the
New York Stock Exchange or the American Stock Exchange; or
(9) If at any time Borrower fails to operate as a real estate
operating company for ERISA purposes (within the meaning of C.F.R.
ss.2510.3-101); or
(10) If the Taubman Company Limited Partnership, the entity
presently providing property management and leasing services for all the
regional shopping center properties in which Borrower has an ownership
interest, shall discontinue providing such services for 25% or more of the
regional shopping center properties then owned in whole or in part by
Borrower;
(11) If there shall occur an "Event of Default" under any Mortgage
(as such quoted term is defined in such Mortgage); or
(12) If there shall occur an "Event of Default" (i) under the
Credit Agreement governing the Related Bridge Loan or (ii) until such time
as the Unit Redemption Transaction has been consummated and the Related
Bridge Term Loan has been repaid or assumed by GMPT Borrower, under the
Term Credit Agreement governing the Related Bridge Term Loan.
SECTION 9.02. Remedies. If any Event of Default shall occur and be
continuing, Administrative Agent shall, upon request of the Required Banks, by
notice to Borrower, (1) declare the outstanding Notes, all interest thereon, and
all other amounts payable under this Agreement, and any other Loan Documents to
be forthwith due and payable, whereupon the Notes, all such interest, and all
such amounts due under this Agreement and under any other Loan Document shall
become and be forthwith due and payable, without presentment, demand, protest,
or further notice of any kind, all of which are hereby expressly
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waived by Borrower; and/or (2) exercise any remedies provided in any of the Loan
Documents or by law.
ARTICLE X
ADMINISTRATIVE AGENT; RELATIONS AMONG BANKS
SECTION 10.01. Appointment, Powers and Immunities of Administrative
Agent. Each Bank hereby irrevocably appoints and authorizes Administrative Agent
to act as its agent hereunder and under any other Loan Document with such powers
as are specifically delegated to Administrative Agent by the terms of this
Agreement and any other Loan Document, together with such other powers as are
reasonably incidental thereto. Administrative Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and any
other Loan Document or required by law, and shall not by reason of this
Agreement be a fiduciary or trustee for any Bank except to the extent that
Administrative Agent acts as an agent with respect to the receipt or payment of
funds (nor shall Administrative Agent have any fiduciary duty to Borrower nor
shall any Bank have any fiduciary duty to Borrower or to any other Bank).
Administrative Agent shall not be responsible to the Banks for any recitals,
statements, representations or warranties made by Borrower or any officer,
partner or official of Borrower or any other Person contained in this Agreement
or any other Loan Document, or in any certificate or other document or
instrument referred to or provided for in, or received by any of them under,
this Agreement or any other Loan Document, or for the value, legality, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or any other document or instrument referred to or
provided for herein or therein, for the perfection or priority of any Lien
securing the Obligations or for any failure by Borrower to perform any of its
obligations hereunder or thereunder. Administrative Agent may employ agents and
attorneys-in-fact and shall not be responsible, except as to money or securities
received by it or its authorized agents, for the negligence or misconduct of any
such agents or attorneys-in-fact selected by it with reasonable care. Neither
Administrative Agent nor any of its directors, officers, employees or agents
shall be liable or responsible for any action taken or omitted to be taken by it
or them hereunder or under any other Loan Document or in connection herewith or
therewith, except for its or their own gross negligence or willful misconduct.
Borrower shall pay any fee agreed to by Borrower and Administrative Agent with
respect to Administrative Agent's services hereunder.
SECTION 10.02. Reliance by Administrative Agent. Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telegram or cable) believed by it to
be genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by Administrative Agent.
Administrative Agent may deem and treat each Bank as the holder of the Loan made
by it for all purposes hereof and shall not be required to deal with any Person
who has acquired a participation in any Loan or participation from a Bank. As to
any matters not expressly provided for by this Agreement or any other Loan
Document, Administrative Agent shall in all cases be fully protected in acting,
or in refraining from acting, hereunder in accordance with instructions signed
by the Required Banks, and such instructions of the
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Required Banks and any action taken or failure to act pursuant thereto shall be
binding on all of the Banks and any other holder of all or any portion of any
Loan or participation.
SECTION 10.03. Defaults. Administrative Agent shall not be deemed to
have knowledge of the occurrence of a Default or Event of Default unless
Administrative Agent has received notice from a Bank or Borrower specifying such
Default or Event of Default and stating that such notice is a "Notice of
Default." In the event that Administrative Agent receives such a notice of the
occurrence of a Default or Event of Default, Administrative Agent shall give
prompt notice thereof to the Banks. Administrative Agent, following consultation
with the Banks, shall (subject to Section 10.07) take such action with respect
to such Default or Event of Default which is continuing as shall be directed by
the Required Banks; provided that, unless and until Administrative Agent shall
have received such directions, Administrative Agent may take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Banks; and
provided further that Administrative Agent shall not send a notice of Default or
acceleration to Borrower without the approval of the Required Banks. In no event
shall Administrative Agent be required to take any such action which it
determines to be contrary to law.
SECTION 10.04. Rights of Administrative Agent as a Bank. With respect
to its Loan Commitment and the Loan provided by it, Administrative Agent in its
capacity as a Bank hereunder shall have the same rights and powers hereunder as
any other Bank and may exercise the same as though it were not acting as
Administrative Agent, and the term "Bank" or "Banks" shall, unless the context
otherwise indicates, include Administrative Agent in its capacity as a Bank.
Administrative Agent and its Affiliates may (without having to account therefor
to any Bank) accept deposits from, lend money to (on a secured or unsecured
basis), and generally engage in any kind of banking, trust or other business
with Borrower (and any Affiliates of Borrower) as if it were not acting as
Administrative Agent.
SECTION 10.05. Indemnification of Administrative Agent. Each Bank
agrees to indemnify Administrative Agent (to the extent not reimbursed under
Section 12.04 or under the applicable provisions of any other Loan Document, but
without limiting the obligations of Borrower under Section 12.04 or such
provisions), for its Pro Rata Share of any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against Administrative Agent in any way relating to or
arising out of this Agreement, any other Loan Document or any other documents
contemplated by or referred to herein or the transactions contemplated hereby or
thereby (including, without limitation, the costs and expenses which Borrower is
obligated to pay under Section 12.04) or under the applicable provisions of any
other Loan Document or the enforcement of any of the terms hereof or thereof or
of any such other documents or instruments; provided that no Bank shall be
liable for (1) any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the party to be indemnified, (2) any loss of
principal or interest with respect to Administrative Agent's Loan or (3) any
loss suffered by Administrative Agent in connection with a swap or other
interest rate hedging arrangement entered into with Borrower.
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SECTION 10.06. Non-Reliance on Administrative Agent and Other Banks.
Each Bank agrees that it has, independently and without reliance on
Administrative Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of
Borrower and the decision to enter into this Agreement and that it will,
independently and without reliance upon Administrative Agent or any other Bank,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under this Agreement or any other Loan Document. Administrative Agent
shall not be required to keep itself informed as to the performance or
observance by Borrower of this Agreement or any other Loan Document or any other
document referred to or provided for herein or therein or to inspect the
properties or books of Borrower. Except for notices, reports and other documents
and information expressly required to be furnished to the Banks by
Administrative Agent hereunder, Administrative Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of Borrower (or any
Affiliate of Borrower) which may come into the possession of Administrative
Agent or any of its Affiliates. Administrative Agent shall not be required to
file this Agreement, any other Loan Document or any document or instrument
referred to herein or therein, for record or give notice of this Agreement, any
other Loan Document or any document or instrument referred to herein or therein,
to anyone.
SECTION 10.07. Failure of Administrative Agent to Act. Except for
action expressly required of Administrative Agent hereunder, Administrative
Agent shall in all cases be fully justified in failing or refusing to act
hereunder unless it shall have received further assurances (which may include
cash collateral) of the indemnification obligations of the Banks under Section
10.05 in respect of any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action.
SECTION 10.08. Resignation or Removal of Administrative Agent.
Administrative Agent hereby agrees not to unilaterally resign except in the
event it becomes an Affected Bank and is removed or replaced as a Bank pursuant
to Section 3.07, in which event it shall have the right to resign.
Administrative Agent may be removed at any time with or without cause by the
Required Banks, provided that Borrower and the other Banks shall be promptly
notified thereof. Upon any such removal, the Required Banks shall have the right
to appoint a successor Administrative Agent which successor Administrative
Agent, so long as it is reasonably acceptable to the Required Banks, shall be
that Bank then having the greatest Loan Commitment. If no successor
Administrative Agent shall have been so appointed by the Required Banks and
shall have accepted such appointment within thirty (30) days after the Required
Banks' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent, which shall be one of the Banks. The Required Banks or the
retiring Administrative Agent, as the case may be, shall upon the appointment of
a successor Administrative Agent promptly so notify Borrower and the other
Banks. Upon the acceptance of any appointment as Administrative Agent hereunder
by a successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's removal hereunder
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as Administrative Agent, the provisions of this Article X shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Administrative Agent.
SECTION 10.09. Amendments Concerning Agency Function. Notwithstanding
anything to the contrary contained in this Agreement, Administrative Agent shall
not be bound by any waiver, amendment, supplement or modification of this
Agreement or any other Loan Document which affects its duties, rights, and/or
function hereunder or thereunder unless it shall have given its prior written
consent thereto.
SECTION 10.10. Liability of Administrative Agent. Administrative Agent
shall not have any liabilities or responsibilities to Borrower on account of the
failure of any Bank to perform its obligations hereunder or to any Bank on
account of the failure of Borrower to perform its obligations hereunder or under
any other Loan Document.
SECTION 10.11. Transfer of Agency Function. Without the consent of
Borrower or any Bank, Administrative Agent may at any time or from time to time
transfer its functions as Administrative Agent hereunder to any of its offices
wherever located in the United States, provided that Administrative Agent shall
promptly notify Borrower and the Banks thereof.
SECTION 10.12. Non-Receipt of Funds by Administrative Agent. Unless
Administrative Agent shall have received notice from a Bank or Borrower (either
one as appropriate being the "Payor") prior to the date on which such Bank is to
make payment hereunder to Administrative Agent of the proceeds of a Loan or
Borrower is to make payment to Administrative Agent, as the case may be (either
such payment being a "Required Payment"), which notice shall be effective upon
receipt, that the Payor will not make the Required Payment in full to
Administrative Agent, Administrative Agent may assume that the Required Payment
has been made in full to Administrative Agent on such date, and Administrative
Agent in its sole discretion may, but shall not be obligated to, in reliance
upon such assumption, make the amount thereof available to the intended
recipient on such date. If and to the extent the Payor shall not have in fact so
made the Required Payment in full to Administrative Agent, the recipient of such
payment shall repay to Administrative Agent forthwith on demand such amount made
available to it together with interest thereon, for each day from the date such
amount was so made available by Administrative Agent until the date
Administrative Agent recovers such amount, at the customary rate set by
Administrative Agent for the correction of errors among Banks for three (3)
Banking Days and thereafter at the Base Rate.
SECTION 10.13. Withholding Taxes. Each Bank represents that it is
entitled to receive any payments to be made to it hereunder without the
withholding of any tax and will furnish to Administrative Agent such forms,
certifications, statements and other documents as Administrative Agent or
Borrower may request from time to time to evidence such Bank's exemption from
the withholding of any tax imposed by any jurisdiction or to enable
Administrative Agent to comply with any applicable Laws or regulations relating
thereto. Without limiting the effect of the foregoing, if any Bank is not
created or organized under the laws of the United States of America or any state
thereof, such Bank will furnish to
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Administrative Agent Form 4224 or Form 1001 of the Internal Revenue Service, or
such other forms, certifications, statements or documents, duly executed and
completed by such Bank as evidence of such Bank's exemption from the withholding
of U.S. tax with respect thereto. Administrative Agent shall not be obligated to
make any payments hereunder to such Bank in respect of any Loan or participation
or such Bank's Loan Commitment or obligation to purchase participations until
such Bank shall have furnished to Administrative Agent the requested form,
certification, statement or document.
SECTION 10.14. Minimum Commitment by UBS. Notwithstanding the
provisions of Section 12.05, subsequent to the Closing Date, UBS hereby agrees
to maintain a Loan Commitment in an amount no less than $15,000,000, and further
agrees to hold and not to participate or assign any of such amount other than an
assignment to a Federal Reserve Bank of to the Parent or a majority-owned
subsidiary of UBS.
SECTION 10.15. Pro Rata Treatment. Except to the extent otherwise
provided, each advance of proceeds of the Loans shall be made by the Banks
ratably according to the amounts of their respective Loan Commitments.
SECTION 10.16. Sharing of Payments Among Banks. If a Bank shall obtain
payment of any principal of or interest on any Loan made by it through the
exercise of any right of setoff, banker's lien, counterclaim, or by any other
means (including direct payment), and such payment results in such Bank
receiving a greater payment than it would have been entitled to had such payment
been paid directly to Administrative Agent for disbursement to the Banks, then
such Bank shall promptly purchase for cash from the other Banks participations
in the Loans made by the other Banks in such amounts, and make such other
adjustments from time to time as shall be equitable to the end that all the
Banks shall share ratably the benefit of such payment. To such end the Banks
shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored. Borrower agrees that any Bank so purchasing a participation in the
Loans made by other Banks may exercise all rights of setoff, banker's lien,
counterclaim or similar rights with respect to such participation. Nothing
contained herein shall require any Bank to exercise any such right or shall
affect the right of any Bank to exercise, and retain the benefits of exercising,
any such right with respect to any other indebtedness of Borrower.
SECTION 10.17. Possession of Documents. Each Bank shall keep possession
of its own Notes. Administrative Agent shall hold all the other Loan Documents
and related documents in its possession and maintain separate records and
accounts with respect thereto, and shall permit the Banks and their
representatives access at all reasonable times to inspect such Loan Documents,
related documents, records and accounts.
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ARTICLE XI
NATURE OF OBLIGATIONS
SECTION 11.01. Absolute and Unconditional Obligations. Borrower
acknowledges and agrees that its obligations and liabilities under this
Agreement and under the other Loan Documents shall be absolute and unconditional
irrespective of (1) any lack of validity or enforceability of any of the
Obligations, any Loan Documents, or any agreement or instrument relating
thereto, (2) any change in the time, manner or place of payment of, or in any
other term in respect of, all or any of the Obligations, or any other amendment
or waiver of or consent to any departure from any Loan Documents or any other
documents or instruments executed in connection with or related to the
Obligations, (3) any exchange or release of any collateral, or of any other
Person from all or any of the Obligations or (4) any other circumstances which
might otherwise constitute a defense available to, or a discharge of, Borrower
or any other Person in respect of the Obligations.
The obligations and liabilities of Borrower under this Agreement and
other Loan Documents shall not be conditioned or contingent upon the pursuit by
any Bank or any other Person at any time of any right or remedy against Borrower
or any other Person which may be or become liable in respect of all or any part
of the Obligations or against any collateral or security or guarantee therefor
or right of setoff with respect thereto.
SECTION 11.02. Non-Recourse to TRG Partners. Notwithstanding anything
to the contrary contained in this Agreement, in any of the other Loan Documents,
or in any other instruments, certificates, documents or agreements executed in
connection with the Loans (all of the foregoing, for purposes of this Section,
hereinafter referred to, individually and collectively, as the "Relevant
Documents"), no recourse under or upon any Obligation, representation, warranty,
promise or other matter whatsoever shall be had against any of the constituent
partners of Borrower or their successors or assigns (said constituent partners
and their successors and assigns, for purposes of this Section, hereinafter
referred to, individually and collectively, as the "TRG Partners") and each Bank
expressly waives and releases, on behalf of itself and its successors and
assigns, all right to assert any liability whatsoever under or with respect to
the Relevant Documents against, or to satisfy any claim or obligation arising
thereunder against, any of the TRG Partners or out of any assets of the TRG
Partners, provided, however, that nothing in this Section shall be deemed to (1)
release Borrower from any personal liability pursuant to, or from any of its
respective obligations under, the Relevant Documents, or from personal liability
for its fraudulent actions or fraudulent omissions, (2) release any TRG Partner
from personal liability for its or his own fraudulent actions or fraudulent
omissions, (3) constitute a waiver of any obligation evidenced or secured by, or
contained in, the Relevant Documents or affect in any way the validity or
enforceability of the Relevant Documents or (4) limit the right of
Administrative Agent and/or the Banks to proceed against or realize upon any
collateral hereafter given for the Loans or any and all of the assets of
Borrower (notwithstanding the fact that the TRG Partners have an ownership
interest in Borrower and, thereby, an interest in the assets of Borrower) or to
name Borrower (or, to the extent that the same are required by applicable law or
are determined by a court to be necessary parties in connection with an action
or suit against Borrower or any collateral hereafter given for the Loans, any of
the TRG Partners) as a party
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defendant in, and to enforce against any collateral hereafter given for the
Loans and/or assets of Borrower any judgment obtained by Administrative Agent
and/or the Banks with respect to, any action or suit under the Relevant
Documents so long as no judgment shall be taken (except to the extent taking a
judgment is required by applicable law or determined by a court to be necessary
to preserve Administrative Agent's and/or Banks' rights against any collateral
hereafter given for the Loans or Borrower, but not otherwise) or shall be
enforced against the TRG Partners, their successors and assigns, or their
assets.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Binding Effect of Request for Advance. Borrower agrees
that, by its acceptance of any advance of proceeds of the Loans under this
Agreement, it shall be bound in all respects by the request for advance
submitted on its behalf in connection therewith with the same force and effect
as if Borrower had itself executed and submitted the request for advance and
whether or not the request for advance is executed and/or submitted by an
authorized person.
SECTION 12.02. Amendments and Waivers. No amendment or material waiver
of any provision of this Agreement or any other Loan Document nor consent to any
material departure by Borrower therefrom, shall in any event be effective unless
the same shall be in writing and signed by the Required Banks and, solely for
purposes of its acknowledgment thereof, Administrative Agent, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given, provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all the Banks do any of the
following: (1) reduce the principal of, or interest on, the Notes or any fees
due hereunder or any other amount due hereunder or under any Loan Document; (2)
postpone any date fixed for any payment of principal of, or interest on, the
Notes or any fees due hereunder or under any Loan Document, or waive any default
in the payment of principal, interest or any other amount due hereunder or under
any Loan Documents; (3) change the definition of Required Banks; (4) amend this
Section or any other provision requiring the consent of all the Banks; or (5)
waive any default under paragraph (5) of Section 9.01. Any advance of proceeds
of the Loans made prior to or without the fulfillment by Borrower of all of the
conditions precedent thereto, whether or not known to Administrative Agent and
the Banks, shall not constitute a waiver of the requirement that all conditions,
including the non-performed conditions, shall be required with respect to all
future advances. No failure on the part of Administrative Agent or any Bank to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof or preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 12.03. Usury. Anything herein to the contrary notwithstanding,
the obligations of Borrower under this Agreement and the Notes shall be subject
to the limitation that payments of interest shall not be required to the extent
that receipt thereof would be contrary
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to provisions of law applicable to a Bank limiting rates of interest which may
be charged or collected by such Bank.
SECTION 12.04. Expenses; Indemnification. Borrower agrees to reimburse
Administrative Agent on demand for all reasonable costs, expenses, and charges
including, without limitation, all reasonable fees and charges of engineers,
appraisers and other consultants (provided such other consultants have been
engaged with Borrower's consent, not to be unreasonably withheld or delayed; it
being understood, however, that Borrower shall have no such right of consent
during the existence of an Event of Default) and external legal counsel incurred
by Administrative Agent in connection with the Loans and to reimburse each of
the Banks for reasonable legal costs, expenses and charges incurred by each of
the Banks in connection with the performance or enforcement of this Agreement,
the Notes, or any other Loan Documents; provided, however, that Borrower is not
responsible for costs, expenses and charges incurred by the Bank Parties in
connection with the day-to-day administration or the syndication of the Loans
(except as otherwise provided in the Supplemental Fee Letter). Borrower agrees
to indemnify Administrative Agent and each Bank and their respective Affiliates,
controlling Persons, directors, officers, employees and agents (each, an
"Indemnified Party) from, and hold each of them harmless against, any and all
losses, liabilities, claims, damages or expenses, joint or several, incurred by
any of them arising out of or by reason of (x) any claims by brokers due to acts
or omissions by Borrower or (y) any third-party claims relating to this
Agreement, the Loans, the use of proceeds of the Loans, and the performance by
UBS (including as Administrative Agent) or any of its Affiliates of the services
contemplated by this Agreement or the Supplemental Fee Letter, and Borrower will
reimburse any Indemnified Party for any and all reasonable expenses (including
reasonable counsel fees and expenses) as they are incurred in connection with
the investigation of or preparation for or defense of any pending or threatened
claim or any action or proceeding arising therefrom, whether or not such
Indemnified Party is a party and whether or not such claim, action or proceeding
is initiated or brought to be by or on behalf of Borrower or any of its
Affiliates and whether or not any of the transactions contemplated hereby or by
the Supplemental Fee Letter are consummated or this Agreement or the Loan
Commitments are terminated. Borrower will not be liable under the foregoing
indemnification provision to an Indemnified Party to the extent that any loss,
claim, damage, liability or expense is found in a final non-appealable judgment
by a court of competent jurisdiction to have resulted from such Indemnified
Party's bad faith or gross negligence or breach of this Agreement.
In any such action or proceeding Borrower shall have the right to
assume the defense thereof and select counsel reasonably acceptable to UBS;
however, in no event will such counsel, without the prior written consent of
UBS, not to be unreasonably withheld, be counsel to Borrower or to any of its
Affiliates.
Borrower also agrees that no Indemnified Party shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to Borrower or
its creditors related to or arising out of or in connection with this Agreement,
the Supplemental Fee Letter, the Loans, the use of proceeds of the Loans, any of
the transactions contemplated hereby or by the Supplemental Fee Letter or any
related transaction or the performance by UBS (including as Administrative
Agent) or any of its Affiliates of the services contemplated by this Agreement
or the Supplemental Fee Letter, except to the extent that any loss, claim,
damage or liability is found in a final non-
54
<PAGE>
appealable judgment by a court of competent jurisdiction to have resulted from
such Indemnified Party's bad faith or gross negligence or breach of this
Agreement.
Borrower agrees that, without UBS's prior written consent, which shall
not be unreasonably withheld, Borrower will not settle, compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding in respect of which indemnification has been or could be sought under
the indemnification provisions of this Agreement (whether or not UBS or any
other Indemnified Party is an actual or potential party to such claim, action or
proceeding), unless such settlement, compromise or consent (i) includes an
unconditional written release, in form and substance reasonably satisfactory to
the Indemnified Parties, of each Indemnified Party from all liability arising
out of such claim, action or proceeding and (ii) does not include any statement
as to an admission of fault, culpability or failure to act by or on behalf of
any Indemnified Party.
No Indemnified Party shall, without the prior consent of Borrower (not
to be unreasonably withheld or delayed) settle or compromise any action or claim
for which indemnity has been or could be sought hereunder.
If (a) an Indemnified Party is requested to appear as a witness in any
action brought by or on behalf of Borrower or any of its Affiliates or (b) an
Indemnified Party is required to appear as a witness in any action brought
against Borrower or any of Affiliates, in either case, in which such Indemnified
Party is not named as a defendant, Borrower agrees to reimburse such Indemnified
Party for all reasonable expenses incurred by it in connection with such
Indemnified Party's appearing and preparing to appear as such a witness,
including, without limitation, the reasonable fees and disbursements of its
legal counsel, and to compensate such Indemnified Party in an amount to be
reasonable and mutually agreed upon.
The obligations of Borrower under this Section shall survive the
repayment of all amounts due under or in connection with any of the Loan
Documents and the termination of the Loans.
SECTION 12.05. Assignment; Participation. This Agreement shall be
binding upon, and shall inure to the benefit of, Borrower, Administrative Agent,
the Banks and their respective successors and permitted assigns. Borrower may
not assign or transfer its rights or obligations hereunder.
Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Loan (the
"Participations") subject to Borrower's consent, provided there exists no Event
of Default, which consent shall not be unreasonably withheld or delayed. In the
event of any such grant by a Bank of a participating interest to a Participant,
whether or not Borrower or Administrative Agent was given notice, such Bank
shall remain responsible for the performance of its obligations hereunder, and
Borrower and Administrative Agent shall continue to deal solely and directly
with such Bank in connection with such Bank's rights and obligations hereunder.
Any agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of Borrower hereunder and under any other Loan Document
including, without limitation, the right to approve any amendment, modification
or
55
<PAGE>
waiver of any provision of this Agreement or any other Loan Document; provided
that such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in Section
12.02 without the consent of the Participant.
Any Bank having a Loan Commitment in an amount exceeding $15,000,000
may at any time assign to any bank or other institution with the acknowledgment
of Administrative Agent and, provided there exists no Event of Default, the
consent of Borrower, which consent shall not be unreasonably withheld or delayed
(such assignee, a "Consented Assignee"), or to one or more banks or other
institutions which are majority owned subsidiaries of a Bank or to the Parent of
a Bank (each Consented Assignee or subsidiary bank or institution, an
"Assignee") all, or a proportionate part of all, of its rights and obligations
under this Agreement and its Notes, and such Assignee shall assume rights and
obligations, pursuant to an Assignment and Assumption Agreement executed by such
Assignee and the assigning Bank, provided that, in each case, after giving
effect to such assignment, the Assignee's Loan Commitment, and, in the case of a
partial assignment, the assigning Bank's Loan Commitment, each will be equal to
or greater than $5,000,000. Upon (i) execution and delivery of such instrument,
(ii) payment by such Assignee to the Bank of an amount equal to the purchase
price agreed between the Bank and such Assignee and (iii) at Administrative
Agent's option, payment by such Assignee to Administrative Agent of a fee, for
Administrative Agent's own account, in the amount of $2,500, on account of
Administrative Agent's fees and expenses in connection with such assignment,
such Assignee shall be a Bank Party to this Agreement and shall have all the
rights and obligations of a Bank as set forth in such Assignment and Assumption
Agreement, and the assigning Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by any
party shall be required. Upon the consummation of any assignment pursuant to
this paragraph, substitute Notes shall be issued to the assigning Bank (in the
case of a partial assignment) and Assignee by Borrower, in exchange for the
return of the original Notes. The oblgations evidenced by such substitute notes
shall constitute "Obligations" for all purposes of this Agreement and the other
Loan Documents. If the Assignee is not incorporated under the laws of the United
States of America or a state thereof, it shall, prior to the first date on which
interest or fees are payable hereunder for its account, deliver to Borrower and
Administrative Agent certification as to exemption from deduction or withholding
of any United States federal income taxes in accordance with Section 10.13.
Any Bank may at any time assign all or any portion of its rights under
this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall
release the transferor Bank from its obligations hereunder.
Borrower recognizes that in connection with a Bank's selling of
Participations or making of assignments, any or all documentation, financial
statements, appraisals and other data, or copies thereof, relevant to Borrower
or the Loans may be exhibited to and retained by any such Participant or
assignee or prospective Participant or assignee. In addition, such documentation
etc. may be exhibited to and retained by Affiliates of a Bank. In connection
with a Bank's delivery of any financial statements and appraisals to any such
Participant or assignee or prospective Participant or assignee, such Bank shall
also deliver its standard confidentiality statement indicating that the same are
delivered on a confidential basis. Borrower agrees to
56
<PAGE>
provide all assistance reasonably requested by a Bank to enable such Bank to
sell Participations or make assignments of its Loan as permitted by this
Section. Each Bank agrees to provide Borrower with notice of all Participations
sold by such Bank.
Notwithstanding the foregoing provisions of this Section, prior to the
consummation of the Unit Redemption Transaction, no Bank shall assign, grant,
convey, or transfer all or any portion of or interest (participation or
otherwise) in the Loan to any Person if such Person is (i) a greater than 10%
partner (determined in accordance with Treasury Regulations Section
1.752-2(d)(1) of the Code) of Borrower (a "Greater than 10% Partner"), (ii) an
80% or greater partner, member or shareholder of any Greater than 10% Partner or
(iii) a person who is under 80% or greater common ownership with (x) a Greater
than 10% Partner or (y) a shareholder, member or partner of any Greater than 10%
Partner. For purposes of clauses (ii) and (iii), percentage ownership shall be
determined pursuant to Sections 267(b) and 707(b) of the Code as modified by
Treasury Regulations Section 1.752-4. Any Person described above is referred to
as a "Disqualified Person". Any Person who becomes a Bank or Participant in
accordance with the terms of this Agreement agrees to be bound by the provisions
of this Section and, other than obtaining, in connection with a bankruptcy
proceeding of a constituent partner of Borrower, any interest as (a) a partner
in Borrower or (b) an 80% or greater interest as a partner, member or
shareholder of any partner of Borrower, agrees not to take any action that would
make it a Disqualified Person. In addition, during the term of the Loans, any
Bank or Participant shall be a "qualified person" within the meaning of Section
465(b)(6)(D)(i) and 49(a)(1)(D)(iv) of the Code.
SECTION 12.06. Documentation Satisfactory. All documentation required
from or to be submitted on behalf of Borrower in connection with this Agreement
and the documents relating hereto shall be subject to the prior approval of, and
be satisfactory in form and substance to, Administrative Agent, its counsel and,
where specifically provided herein, the Banks. In addition, the persons or
parties responsible for the execution and delivery of, and signatories to, all
of such documentation, shall be acceptable to, and subject to the approval of,
Administrative Agent and its counsel and the Banks.
SECTION 12.07. Notices. Unless the party to be notified otherwise
notifies the other party in writing as provided in this Section, and except as
otherwise provided in this Agreement, notices shall be given to Administrative
Agent by telephone, confirmed by writing, and to the Banks and to Borrower by
ordinary mail or overnight courier addressed to such party at its address on the
signature page of this Agreement. Notices shall be effective (1) if by
telephone, at the time of such telephone conversation, (2) if given by mail,
three (3) days after mailing and (3) if given by overnight courier, upon
receipt.
SECTION 12.08. Setoff. Borrower agrees that, in addition to (and
without limitation of) any right of setoff, bankers' lien or counterclaim a Bank
may otherwise have, each Bank shall be entitled, at its option, to offset
balances (general or special, time or demand, provisional or final) held by it
for the account of Borrower at any of such Bank's offices, in Dollars or in any
other currency, against any amount payable by Borrower to such Bank under this
Agreement or such Bank's Notes, or any other Loan Document which is not paid
when due (regardless of whether such balances are then due to Borrower), in
which case it shall promptly
57
<PAGE>
notify Borrower and Administrative Agent thereof; provided that such Bank's
failure to give such notice shall not affect the validity thereof. Payments by
Borrower hereunder or under the other Loan Documents shall be made without
setoff or counterclaim.
SECTION 12.09. Year 2000. Borrower represents, warrants and covenants
that Borrower has taken and shall take all action reasonably necessary to assure
that its data processing and information technology systems are capable of
effectively processing data and information, including dates on and after
January 1, 2000, and shall not cease to perform, or provide, or cause any
software and/or system which is material to its operations or any interface
therewith to provide, invalid or incorrect results as a result of date
functionality and/or data, or otherwise experience any material degradation of
performance or functionality arising from, relating to or including date
functionality and/or data which represents or references different centuries or
more than one century or leap years, and that all such systems shall be
reasonably effective and accurate in managing and manipulating data derived
from, involving or relating in any way to dates (including single century
formulas and multi-century or leap year formulas), and will not cause a material
abnormally ending scenario within such systems or in any software and/or system
with which such systems interface, or generate materially incorrect values or
invalid results involving such dates. At the request of Administrative Agent,
Borrower shall provide Administrative Agent with reasonably acceptable assurance
of Borrower's year 2000 capability.
SECTION 12.10. Table of Contents; Headings. Any table of contents and
the headings and captions hereunder are for convenience only and shall not
affect the interpretation or construction of this Agreement.
SECTION 12.11. Severability. The provisions of this Agreement are
intended to be severable. If for any reason any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the validity
or enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
SECTION 12.12. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this Agreement by signing any
such counterpart.
SECTION 12.13. Integration. The Loan Documents and Supplemental Fee
Letter set forth the entire agreement among the parties hereto relating to the
transactions contemplated thereby and supersede any prior oral or written
statements or agreements with respect to such transactions.
SECTION 12.14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
58
<PAGE>
SECTION 12.15. Waivers. In connection with the obligations and
liabilities as aforesaid, Borrower hereby waives: (1) promptness and diligence;
(2) notice of any actions taken by any Bank Party under this Agreement, any
other Loan Document or any other agreement or instrument relating thereto except
to the extent otherwise provided herein; (3) all other notices, demands and
protests, and all other formalities of every kind in connection with the
enforcement of the Obligations, the omission of or delay in which, but for the
provisions of this Section, might constitute grounds for relieving Borrower of
its obligations hereunder; (4) any requirement that any Bank Party protect,
secure, perfect or insure any Lien on any collateral or exhaust any right or
take any action against Borrower or any other Person or any collateral; (5) any
right or claim of right to cause a marshalling of the assets of Borrower; and
(6) all rights of subrogation or contribution, whether arising by contract or
operation of law (including, without limitation, any such right arising under
the Federal Bankruptcy Code) or otherwise by reason of payment by Borrower,
either jointly or severally, pursuant to this Agreement or other Loan Documents.
SECTION 12.16. JURISDICTION; IMMUNITIES. BORROWER, ADMINISTRATIVE AGENT
AND EACH BANK HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK
STATE OR UNITED STATES FEDERAL COURT SITTING IN NEW YORK CITY OVER ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER
LOAN DOCUMENT. BORROWER, ADMINISTRATIVE AGENT, AND EACH BANK IRREVOCABLY AGREE
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH NEW YORK STATE OR UNITED STATES FEDERAL COURT. BORROWER,
ADMINISTRATIVE AGENT, AND EACH BANK IRREVOCABLY CONSENT TO THE SERVICE OF ANY
AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF
SUCH PROCESS TO BORROWER, ADMINISTRATIVE AGENT OR EACH BANK, AS THE CASE MAY BE,
AT THE ADDRESSES SPECIFIED HEREIN. BORROWER, ADMINISTRATIVE AGENT AND EACH BANK
AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW. BORROWER, ADMINISTRATIVE AGENT AND EACH BANK
FURTHER WAIVE ANY OBJECTION TO VENUE IN THE STATE OF NEW YORK AND ANY OBJECTION
TO AN ACTION OR PROCEEDING IN THE STATE OF NEW YORK ON THE BASIS OF FORUM NON
CONVENIENS. BORROWER, ADMINISTRATIVE AGENT AND EACH BANK AGREE THAT ANY ACTION
OR PROCEEDING BROUGHT AGAINST BORROWER, ADMINISTRATIVE AGENT OR ANY BANK, AS THE
CASE MAY BE, SHALL BE BROUGHT ONLY IN A NEW YORK STATE COURT SITTING IN NEW YORK
CITY OR A UNITED STATES FEDERAL COURT SITTING IN NEW YORK CITY.
Nothing in this Section shall affect the right of Borrower,
Administrative Agent or any Bank to serve legal process in any other manner
permitted by law.
To the extent that Borrower, Administrative Agent or any Bank have or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether
59
<PAGE>
from service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property,
Borrower, Administrative Agent and each Bank hereby irrevocably waive such
immunity in respect of its obligations under this Agreement, the Notes and any
other Loan Document.
BORROWER, ADMINISTRATIVE AGENT AND EACH BANK WAIVE ANY RIGHT EACH SUCH
PARTY MAY HAVE TO JURY TRIAL IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING
BROUGHT WITH RESPECT TO THIS AGREEMENT, THE NOTES OR THE LOANS. IN ADDITION,
BORROWER HEREBY WAIVES, IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING
BROUGHT BY ADMINISTRATIVE AGENT OR THE BANKS WITH RESPECT TO THE NOTES, ANY
RIGHT BORROWER MAY HAVE TO (1) INTERPOSE ANY COUNTERCLAIM THEREIN (OTHER THAN A
COUNTERCLAIM THAT IF NOT BROUGHT IN THE SUIT, ACTION OR PROCEEDING BROUGHT BY
ADMINISTRATIVE AGENT OR THE BANKS COULD NOT BE BROUGHT IN A SEPARATE SUIT,
ACTION OR PROCEEDING OR WOULD BE SUBJECT TO DISMISSAL OR SIMILAR DISPOSITION FOR
FAILURE TO HAVE BEEN ASSERTED IN SUCH SUIT, ACTION OR PROCEEDING BROUGHT BY
ADMINISTRATIVE AGENT OR THE BANKS) OR (2) HAVE THE SAME CONSOLIDATED WITH ANY
OTHER OR SEPARATE SUIT, ACTION OR PROCEEDING. NOTHING HEREIN CONTAINED SHALL
PREVENT OR PROHIBIT BORROWER FROM INSTITUTING OR MAINTAINING A SEPARATE ACTION
AGAINST ADMINISTRATIVE AGENT OR THE BANKS WITH RESPECT TO ANY ASSERTED CLAIM.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE TAUBMAN REALTY GROUP LIMITED
PARTNERSHIP, a Delaware limited partnership
By /s/ Steven Eder
---------------------------------------
Steven Eder,
-----------
its authorized signatory
Address for Notices:
c/o The Taubman Company Limited Partnership
200 East Long Lake Road - Suite 300
Bloomfield Hills, Michigan 48304
Attention: Mr. Steven E. Eder
with copy to:
Miro Weiner & Kramer
500 North Woodward Avenue
Suite 100 - P.O. Box 908
Bloomfield Hills, Michigan 48303-0908
Attention: Martin L. Katz, Esq.
61
<PAGE>
UBS AG, NEW YORK BRANCH
(as Bank and Administrative Agent)
By /s/ Tom Curtin
--------------------------------------
Name: Tom Curtin
Title: Managing Director
By /s/ Jeffrey W. Wald
---------------------------------------
Name: Jeffrey W. Wald
Title: Executive Director
Address for notices and Applicable Lending Office:
299 Park Avenue
New York, New York 10171
Attention: Ms. Xiomara Martez
Telephone: (212) 821-3872
with copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: George C. Weiss, Esq.
62
THE SECOND AMENDMENT AND RESTATEMENT
OF
AGREEMENT OF LIMITED PARTNERSHIP
OF
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
a Delaware limited partnership
September 30, 1998
<PAGE>
TABLE OF CONTENTS
THE SECOND AMENDMENT AND RESTATEMENT
OF
AGREEMENT OF LIMITED PARTNERSHIP
OF
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
a Delaware limited partnership
Page
----
I -- CONTINUATION; CHANGE OF JURISDICTION; NAME; PRINCIPAL OFFICE; AGENT
FOR SERVICE OF PROCESS; FILING OF CERTIFICATE(S); TERM; TITLE TO
PARTNERSHIP PROPERTY.
Section 1.1 Continuation; Change of Jurisdiction................. 2
Section 1.2 Name................................................. 2
Section 1.3 Principal Office; Agent for Service of Process....... 2
Section 1.4 Filing of Certificate(s) as Required................. 2
Section 1.5 Term................................................. 3
Section 1.6 Title to Partnership Property........................ 3
II -- DEFINITIONS......................................................... 4
III -- PURPOSES AND POWERS; PARTNERSHIP ONLY FOR PURPOSES SPECIFIED;
REPRESENTATIONS AND WARRANTIES; CERTAIN COVENANTS.
Section 3.1 Purposes and Powers of the Partnership............... 14
Section 3.2 Partnership Only for Purposes Specified.............. 17
Section 3.3 Representations and Warranties by the Partners;
Certain Covenants.................................... 17
Section 3.4 Real Estate Investment Trust Requirements............ 18
Section 3.5 ERISA Requirement.................................... 19
IV -- CAPITAL CONTRIBUTIONS; OPENING CAPITAL ACCOUNT BALANCES; PREFERRED
EQUITY; ANTICIPATED FINANCING; CAPITAL ACCOUNTS; PARTNERSHIP
INTERESTS; UNITS OF PARTNERSHIP INTEREST; PERCENTAGE INTERESTS;
PARTNERSHIP INTEREST CERTIFICATES; PURCHASE OF FRACTIONAL UNITS;
ADJUSTMENT OF UNITS OF PARTNERSHIP INTEREST.
Section 4.1 Capital Contributions; Opening Capital Account
Balances; Preferred Equity........................... 20
Section 4.2 Anticipated Financing................................ 20
Section 4.3 No Right to Withdraw Capital; No Requirement of
Further Contributions................................ 21
Section 4.4 No Interest on Capital Contributions or Capital
Accounts............................................. 21
Section 4.5 Capital Accounts..................................... 21
Section 4.6 Partnership Interests; Units of Partnership Interest;
Percentage Interests................................. 22
Section 4.7 Partnership Interest Certificates.................... 23
Section 4.8 Purchase of Fractional Units of Partnership Interest;
Adjustment of Units of Partnership Interest.......... 23
V -- ALLOCATIONS; DISTRIBUTIONS; BANK ACCOUNTS; BOOKS OF ACCOUNT; TAX
RETURNS; ACCOUNTING AND REPORTS; PARTNERSHIP FISCAL YEAR.
Section 5.1 Allocations.......................................... 25
Section 5.2 Distributions........................................ 28
Section 5.3 Guaranteed Payments; TCO's Right to Convert.......... 28
Section 5.4 Bank Accounts and Other Investments.................. 29
Section 5.5 Books of Account..................................... 29
Section 5.6 Tax Returns.......................................... 29
Section 5.7 Accounting and Reports, Etc.......................... 30
Section 5.8 Partnership Fiscal Year.............................. 30
<PAGE>
Page
----
VI -- MANAGEMENT; AUTHORITY AND AUTHORIZED ACTIONS BY THE MANAGING GENERAL
PARTNER; EXTRAORDINARY TRANSACTIONS; ANNUAL BUDGET; NOTICES; STANDARD
OF CONDUCT; MASTER SERVICES AGREEMENT AND CORPORATE SERVICES
AGREEMENT; ABSENCE OF AUTHORITY OF PARTNERS OTHER THAN THE MANAGING
GENERAL PARTNER; FIDELITY BONDS AND INSURANCE; ENGAGEMENT OF PARTNERS'
AFFILIATES; INDEMNITY AND REIMBURSEMENT; TAX MATTERS PARTNER.
Section 6.1 Management; Authority and Authorized Actions by
the Managing General Partner......................... 31
Section 6.2 Delegation of Authority and Designation of Officers.. 31
Section 6.3 Compensation of Certain Employees of the Manager;
Issuance of Incentive Options........................ 32
Section 6.4 Annual Budget; Notices............................... 32
Section 6.5 Master Services Agreement and Corporate Services
Agreement; Engagement of Partners' Affiliates........ 33
Section 6.6 Absence of Authority of Non-Managing Partners........ 33
Section 6.7 Fidelity Bonds and Insurance......................... 33
Section 6.8 Execution of Legal Instruments....................... 33
Section 6.9 Indemnity and Reimbursement; Advancement of Expenses
and Insurance 33..................................... 33
Section 6.10 Tax Matters Partner.................................. 34
VII -- OTHER VENTURES...................................................... 36
VIII -- TRANSFERS OF UNITS OF PARTNERSHIP INTEREST; SUBSTITUTION OF PARTNERS;
ADDITIONAL PARTNERSHIP INTERESTS; CONVERSION OF PARTNERSHIP INTERESTS.
Section 8.1 Transfers............................................ 37
Section 8.2 Substitution of Partners............................. 38
Section 8.3 Failure or Refusal to Grant Consent.................. 39
Section 8.4 Issuance of Additional Interests to TCO and Other
Persons or of Incentive Interests to Certain Persons. 39
Section 8.5 Conversion of Partnership Interests.................. 40
Section 8.6 No Change to TG Receivable Documents................. 40
IX -- WITHHOLDING......................................................... 41
X -- DISABLING EVENT OR EVENT OF WITHDRAWAL IN RESPECT OF A PARTNER;
SUCCESSION OF INTERESTS.
Section 10.1 Disabling Event or Event of Withdrawal in Respect
of a Partner 42..................................................... 42
Section 10.2 References to "Partner" and "Partners" in the Event
of Successors....................................................... 43
Section 10.3 Waiver of Dissolution if Transfer is in Full Compliance
with Agreement; Negation of Right to Dissolve Except as Herein
Provided; No Withdrawal............................................. 43
XI -- TERMINATION OF THE PARTNERSHIP, WINDING UP, AND LIQUIDATION.
Section 11.1 Liquidation of the Assets of the Partnership and
Disposition of the proceeds Thereof................................. 45
Section 11.2 Cancellation of Certificates.......................... 46
Section 11.3 Return of Capital..................................... 46
XII -- POWER OF ATTORNEY................................................... 47
XIII -- MISCELLANEOUS
Section 13.1 Notices............................................... 48
Section 13.2 Applicable Law........................................ 48
Section 13.3 Entire Agreement...................................... 48
Section 13.4 Word Meanings; Gender................................. 48
Section 13.5 Section Titles........................................ 48
Section 13.6 Waiver................................................ 49
Section 13.7 Separability of Provisions............................ 49
Section 13.8 Binding Agreement..................................... 49
Section 13.9 Equitable Remedies.................................... 49
Section 13.10 Partition............................................. 49
Section 13.11 Amendment............................................. 49
Section 13.12 No Third Party Rights Created Hereby.................. 50
Section 13.13 Liability of Partners................................. 50
Section 13.14 Additional Acts and Instruments....................... 50
Section 13.15 Agreement in Counterparts............................. 50
ii
<PAGE>
Section 13.16 Attorneys-In-Fact..................................... 50
Section 13.17 Execution by Trustee.................................. 50
Section 13.18 Lost Partnership Interest Certificates................ 51
Schedule A Units of Partnership Interest and Percentage Interests
of the Partners.....................................................
Schedule B Certain Interests of Partners in Tenants of Regional
Centers..............................................................
Schedule C Capital Account Balances of the Partners as of
September 30, 1998...................................................
Schedule D Initial Book Value of Partnership Assets as of
September 30, 1998...................................................
Schedule E Designated Properties..................................
Exhibit A Form of Partnership Interest Certificate.............
iii
<PAGE>
THE SECOND AMENDMENT AND RESTATEMENT
OF
AGREEMENT OF LIMITED PARTNERSHIP
OF
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
a Delaware limited partnership
THIS SECOND AMENDMENT AND RESTATEMENT OF AGREEMENT OF LIMITED PARTNERSHIP
(hereinafter, as the same may be amended and/or supplemented, referred to as
this "Agreement") is made the 30th day of September, 1998, by, between, and
among TAUBMAN CENTERS, INC. ("TCO"), a Michigan corporation, TG PARTNERS LIMITED
PARTNERSHIP ("TG"), a Delaware limited partnership, and TAUB-CO MANAGEMENT, INC.
("Taub-Co"), a Michigan corporation, who as the Appointing Persons pursuant to
Section 13.11 of the Amended and Restated Partnership Agreement, as amended,
have the full power and authority to amend the Amended and Restated Partnership
Agreement, as amended, on behalf of all of the partners of the Partnership with
respect to the matters herein provided.
RECITALS:
A. Effective November 30, 1992, the parties hereto together with others
entered into the Amended and Restated Limited Partnership Agreement of The
Taubman Realty Group Limited Partnership (the "Amended and Restated Partnership
Agreement").
B. The Amended and Restated Partnership Agreement was subsequently amended
effective September 30, 1997 (the "Amended and Restated Partnership Agreement,
as amended") in certain respects.
C. On September 23, 1998, the Partnership formed two (2) limited liability
companies (the "Companies") pursuant to the Delaware Limited Liability Company
Act by filing Certificates of Formation with the Secretary of State of the State
of Delaware and, in exchange for all of the membership interests in each of the
Companies, contributed to the Companies all of its right, title, and interest in
and to certain of its assets, subject to certain liabilities.
D. On September 30, 1998, the Partnership distributed the Partnership's
entire interest in the Companies to GMPTS in redemption of GMPTS's entire
interest in the Partnership, and GMPTS executed a Certificate of Withdrawal from
the Partnership.
E. Pursuant to Section 6.1(b) of the Amended and Restated Partnership
Agreement, as amended, as a result of GMPTS's withdrawal from the Partnership,
GMPTS is no longer an Appointing Person, the remaining Appointing Persons now
being only TCO, TG, and Taub-Co.
F. The parties hereto now wish to amend and restate in its entirety the
Amended and Restated Partnership Agreement, as amended, to reflect the
redemption of GMPTS's entire interest in the Partnership and GMPTS's withdrawal
from the Partnership, to provide for various new terms of the Partnership, and
for certain other purposes.
<PAGE>
NOW, THEREFORE, the parties hereto agree that the Amended and Restated
Partnership Agreement, as amended is hereby further amended and restated in its
entirety to read as follows:
I.
CONTINUATION; CHANGE OF JURISDICTION; NAME; PRINCIPAL OFFICE;
AGENT FOR SERVICE OF PROCESS; FILING OF CERTIFICATE(S);
TERM; TITLE TO PARTNERSHIP PROPERTY.
Section 1.1 Continuation; Change of Jurisdiction.
The parties hereto do hereby continue the Partnership as a Delaware limited
partnership pursuant to the applicable laws of the State of Delaware, including
the Delaware Revised Uniform Limited Partnership Act as in effect in the State
of Delaware, all as the same may be amended from time to time (all of such laws
being hereinafter referred to as the "Partnership Law"), upon the terms and
conditions herein set forth. If the Managing General Partner shall cause the
Partnership to change its jurisdiction, by merger, consolidation, or in any
other fashion or manner, the Partnership Law shall, for all purposes of this
Agreement, refer to the applicable laws of the new jurisdiction, as the same may
be amended from time to time. Without any further act, approval or vote of the
Partners, the Managing General Partner shall be authorized on behalf of the
Partners and the Partnership, as the case may be, to amend and/or restate this
Agreement and the Certificate of Limited Partnership, and to execute a plan of
merger or similar document, and all other documents determined by the Managing
General Partner, in all such cases as shall be necessary to effect solely a
change of jurisdiction.
Section 1.2 Name.
The name of the Partnership is "The Taubman Realty Group Limited Partnership"
or such other name or names as the Managing General Partner shall select from
time to time in compliance with the Partnership Law. The Managing General
Partner shall send written notice of any such name change to the Partners.
Section 1.3 Principal Office; Agent For Service of Process.
The principal office of the Partnership is located at 200 East Long Lake
Road, Bloomfield Hills, Michigan 48304, or at such other address(es) as shall be
designated from time to time by the Managing General Partner with written notice
thereof by the Managing General Partner to the other Partners. The address of
the office of the Partnership in the State of Delaware required to be maintained
pursuant to the Partnership Law is Corporation Service Company, 1013 Centre
Road, Wilmington, Delaware 19805, or such other address(es) as may be designated
from time to time by the Managing General Partner, with written notice thereof
by the Managing General Partner to the other Partners. The name and address of
the registered agent for service of process on the Partnership in the State of
Delaware is Corporation Service Company, 1013 Centre Road, Wilmington, Delaware
19805, or such other agent and address as may be designated from time to time by
the Managing General Partner in compliance with the Partnership Law, with
written notice thereof by the Managing General Partner to the other Partners.
Section 1.4 Filing of Certificate(s) as Required.
The Managing General Partner has caused or shall cause the execution and
filing of an appropriate partnership and/or assumed or fictitious name
certificate or certificates, or like instrument or instruments, or other filings
or applications, at any time and from time to time as required by the
Partnership Law or the law of any applicable jurisdiction in connection with the
existence or activities or business of the Partnership, a change in the
jurisdiction of the Partnership, and/or the use of a name (which name may be
different than the name of the Partnership), and all amendments thereto of
record. Copies of such certificates, instruments or other filings or
applications shall be furnished on a timely basis to all Partners.
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Section 1.5 Term.
The term of the Partnership shall end, and the Partnership shall dissolve, on
the first to occur of (i) the recordation of the last (or only) deed, or the
execution and delivery of the last (or only) assignment, completing the
conveyance and transfer by the Partnership of all property (other than cash and
cash equivalents) owned by the Partnership to one or more bona fide purchasers
for value, or if such purchaser or purchasers give the Partnership a purchase
money obligation, then upon the payment in full by such purchaser or purchasers
of such obligation or upon the disposition for cash of such obligation, provided
that neither a sale and leaseback by the Partnership nor any other transfer of
title for financing purposes or pursuant to the provisions of Section 1.6
hereof, shall be deemed to be a sale for the purpose of dissolving and
terminating the Partnership, (ii) the occurrence of any event which would, under
the terms of this Agreement or the Partnership Law, result in the dissolution of
the Partnership; provided, however, that the term of the Partnership shall not
end and the Partnership shall not be dissolved upon the occurrence of such an
event if the Partnership is continued as provided in this Agreement, (iii) an
entry of a decree of judicial dissolution pursuant to ss.17-802 of the
Partnership Law, or (iv) December 31, 2090.
Section 1.6 Title to Partnership Property.
All property owned by the Partnership, whether real or personal, tangible or
intangible, shall be deemed to be owned by the Partnership as an entity, and no
Partner, individually, shall have any ownership of such property. The
Partnership may hold any of its property in its own name or in the name of one
or more nominees.
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II.
DEFINITIONS.
Unless the context in which a term is used clearly indicates otherwise, the
following terms have the following respective meanings when used in this
Agreement, and the singular shall include the plural and vice versa, unless the
context requires otherwise:
"AAT" means A. Alfred Taubman.
"AAT Affiliates" means AAT, and any Affiliate of AAT or of any member of his
Immediate Family.
"Additional Interest" is defined in Section 8.4(a) hereof.
"Additional Required Amount" means, for the relevant period, an amount, as
set forth in the Additional Required Amount Notice, equal to the greater of (i)
the Tax Liability, and (ii) the Net Capital Gain.
"Additional Required Amount Notice" is defined in Section 6.4 hereof.
"Additional Tax" is defined in Article IX hereof.
"Affiliate" and "Affiliates" means, (i) with respect to any individual, any
member of such individual's Immediate Family, a Family Trust with respect to
such individual, and any Person (other than an individual) in which such
individual and/or his Affiliate(s) owns, Directly or Indirectly, more than fifty
percent (50%) of any class of Equity Security or of the aggregate Beneficial
Interest of all beneficial owners, or in which such individual or his Affiliate
is the sole general partner, or is the sole managing general partner, or is the
sole managing member, or which is Controlled By such individual and/or his
Affiliates; and (ii) with respect to any Person (other than an individual), any
Person (other than an individual) which Controls, is Controlled By, or is Under
Common Control With, such Person and any individual who is the sole general
partner, the sole managing general partner, or the sole managing member of, or
who Controls, such Person.
"Affiliate Financing" means financing or refinancing obtained from a Partner
or an Affiliate of a Partner by the Partnership or an Owning Entity, as the case
may be.
"Agreement" is defined in the Preamble to this Agreement.
"Alternative Minimum Tax Distribution Amount" means, for each Partnership
Fiscal Year, an amount equal to the quotient obtained by dividing (i) the
alternative minimum tax (as determined pursuant to Sections 55 through 59 of the
Code) of TCO for such Partnership Fiscal Year, by (ii) the Percentage Interest
of TCO on the Relevant Date.
"Amended and Restated Partnership Agreement" is defined in Recital A.
"Amended and Restated Partnership Agreement, as amended" is defined in
Recital B.
"Annual Budget" is defined in Section 6.4 hereof.
"Annual Development Budget" is defined in Section 6.4 hereof.
"Annual Operating Budget" is defined in Section 6.4 hereof.
"Appointing Person" means TCO, TG for so long as the aggregate Percentage
Interest held by Original Partner Affiliates and TTC Affiliates is not less than
seven and 7/10ths percent (7.7%), determined by including the total number of
Units of Partnership Interest over which Original Partner Affiliates and TTC
Affiliates have Incentive Options to the extent such Incentive Options are
vested, and Taub-Co for so long as Taub- Co has an interest in the Person that
is the Manager and the aggregate Percentage Interest held by Original Partner
Affiliates and TTC Affiliates is at least three percent (3%), determined by
including the total number of Units of Partnership Interest over which Original
Partner Affiliates and TTC Affiliates have Incentive Options to the extent such
Incentive Options are vested; it being understood that inasmuch as the
Partnership's partnership committee has been eliminated, Appointing Persons are
only relevant for purposes of Section 13.11 regarding amendment of this
Agreement.
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"Assigned Interest" is defined in Section 8.3(b) hereof.
"Bankrupt" or "Bankruptcy" as to any Person means (i) applying for or
consenting to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, administrator, liquidator, or the like of itself or of all
or a substantial portion of its assets, (ii) admitting in writing its inability,
or being generally unable or deemed unable under any applicable law, to pay its
debts as such debts become due, (iii) convening a meeting of creditors for the
purpose of consummating an out-of- court arrangement, or entering into a
composition, extension, or similar arrangement, with creditors in respect of all
or a substantial portion of its debts, (iv) making a general assignment for the
benefit of its creditors, (v) placing itself or allowing itself to be placed,
voluntarily or involuntarily, under the protection of the law of any
jurisdiction relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, (vi) taking any action for the purpose of
effecting any of the foregoing, or (vii) if a proceeding or case shall be
commenced against such Person in any court of competent jurisdiction, seeking
(x) the liquidation, reorganization, dissolution, winding-up, or composition or
adjustment of debts, of such Person, (y) the appointment of a trustee, receiver,
custodian, administrator, liquidator, or the like of such Person or of all or a
substantial portion of such Person's assets, or (z) similar relief in respect of
such Person under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, and such proceeding or case
shall continue undismissed for a period of ninety (90) Days, or an order,
judgment, or decree approving or ordering any of the foregoing shall be entered
and continue unstayed and in effect for a period of sixty (60) Days, or an order
for relief or other legal instrument of similar effect against such Person shall
be entered in an involuntary case under such law and shall continue unstayed and
in effect for a period of sixty (60) Days.
"Beneficial Interest" means an interest, whether as partner, joint venturer,
cestui que trust, or otherwise, a contract right, or a legal or equitable
position under or by which the possessor participates in the economic or other
results of the Person (other than an individual) to which such interest,
contract right, or position relates.
"Best Efforts" is defined to require that the obligated party make a
diligent, reasonable and good faith effort to accomplish the applicable
objective. Such obligation, however, does not require any material expenditure
of funds or the incurrence of any material liability on the part of the
obligated party, nor does it require that the obligated party act in a manner
which would otherwise be contrary to prudent business judgment or normal
commercial practices in order to accomplish the objective. The fact that the
objective is not actually accomplished is no indication that the obligated party
did not in fact utilize its Best Efforts in attempting to accomplish the
objective.
"Book Value" and "Book Values" are defined in Section 4.5(b) hereof.
"Business Day" means any Day that is not a Saturday, Sunday, or legal holiday
in New York, New York and on which commercial banks are open for business in New
York, New York.
"Capital Account" is defined in Section 4.5(a) hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time to time
(or any corresponding provisions of succeeding law).
"Communication" and "Communications" are defined in Section 13.1(a) hereof.
"Companies" is defined in Recital C.
"Conditional Transfer Determination" is defined in Section 8.1(e) hereof.
"Control(s)" (and its correlative terms "Controlled By" and "Under Common
Control With") means, with respect to any Person (other than an individual),
possession by the applicable Person or Persons of the power, acting alone (or,
solely among such applicable Person or Persons, acting together), to designate
and direct or cause the designation and direction of the management and policies
thereof, whether through the ownership of voting securities, by contract, or
otherwise.
"Day" or "Days" means each calendar day, including Saturdays, Sundays, and
legal holidays; provided, however, that if the Day on which a period of time for
consent or approval or other action begins or ends is not a Business Day, such
period shall begin or end, as applicable, on the next Business Day.
5
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"Deficiency Dividend" means, for any Partnership Fiscal Year, an amount equal
to the quotient obtained by dividing (i) the adjustment (as defined in Section
860(d)(2) of the Code) in respect of a determination (as defined in Section
860(e) of the Code) in respect of TCO for such Partnership Fiscal Year, by (ii)
the Percentage Interest of TCO on the Relevant Date.
"Deficiency Dividend Notice" is defined in Section 6.4 hereof.
"Depreciation" means for each Partnership Fiscal Year or other period, an
amount equal to the depreciation, amortization, or other cost recovery deduction
allowable under the Code with respect to an asset for such year or other period,
except that if the Book Value of an asset differs from its adjusted basis for
federal income tax purposes at the beginning of such year or other period,
Depreciation shall be an amount which bears the same ratio to such beginning
Book Value as the federal income tax depreciation, amortization, or other cost
recovery deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization, or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such beginning Book
Value using any reasonable method selected by the Managing General Partner.
"Designee Notice" is defined in Section 5.2(b) hereof.
"Development Opportunities" means any regional retail shopping center
developments and opportunities (through contract, option, or other rights) to
develop, redevelop, or expand regional retail shopping centers, including in all
such cases Peripheral Property in respect thereof, in which the Partnership has
a Direct or Indirect ownership interest and which is not yet a Regional Center.
Reference to a Development Opportunity includes any one of the Development
Opportunities.
"Development Opportunity Interest" or "Development Opportunity Interests"
means the interest or interests in a Development Opportunity or Development
Opportunities then held by the Partnership either Directly or Indirectly as the
holder of a Beneficial Interest, Directly or Indirectly, in an Owning Entity or
Owning Entities that own a Development Opportunity or Development Opportunities.
"Direct or Indirect" or "Directly or Indirectly", when used with respect to a
Person's, a Partner's, or the Partnership's interest in another partnership,
limited liability company, or joint venture which owns a Development Opportunity
or a Regional Center, or a Development Opportunity Interest or a Regional Center
Interest, means and includes all interests of, and acting in respect of all
interests of, the partner or partners or member or members therein, whether as
an owner or ground lessee, as a partner, member, or joint venturer of a
partnership, limited liability company, or joint venture which owns a
Development Opportunity or a Regional Center, as a stockholder of a corporation
which in turn owns an interest in a partnership, limited liability company, or
joint venture having an interest, direct or indirect, in a Development
Opportunity or a Regional Center, and as a beneficiary of a trust which has
legal title to a Development Opportunity or a Regional Center or owns a
partnership interest, limited liability company interest, or joint venture
interest in a partnership, limited liability company, or joint venture which
owns a Development Opportunity or a Regional Center, in each such case as the
context requires.
"Disabled Partner," "Disabled General Partner," and "Disabled Limited
Partner" are defined in Section 10.1(a)(2) hereof.
"Disabling Event" is defined in Section 10.1(a)(1) hereof.
"Distribution Date" is defined in Section 5.2(a)(i) hereof.
"Dollars" or "$" means United States dollars.
"Effective Date" means the date of the execution and delivery of this
Agreement.
"Equity Security" has the meaning ascribed to it in the Securities Exchange
Act of 1934, as amended from time to time, and the rules and regulations
thereunder (and any successor laws, rules and regulations of similar import).
"Equity Shares" means the shares of the common stock of TCO.
6
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"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time (or any corresponding provisions of succeeding law).
"Estimated Minimum Distribution Amount" means, for each Partnership Fiscal
Year, an amount equal to the greater of (i) the quotient obtained by dividing
(1) the sum of (x) TCO's allocable share of the Partnership's estimated Real
Estate Investment Trust Taxable Income for such Partnership Fiscal Year
(determined without regard to any deduction for dividends paid (as defined in
Section 561 of the Code)), and by excluding any net capital gain (as defined in
Section 1222(11) of the Code), and (y) TCO's allocable share of the
Partnership's estimated net income from foreclosure property for such
Partnership Fiscal Year, minus TCO's allocable share of the Partnership's
estimated excess noncash income (as determined under Section 857(e) of the
Code), if any, for such Partnership Fiscal Year, by (2) the Percentage Interest
of TCO on the Relevant Date, and (ii) the estimated Ordinary Tax Liability for
such Partnership Fiscal Year.
"Event of Withdrawal" is defined in Section 10.1(a)(5) hereof.
"Excise Tax Distribution Amount" means, for each Partnership Fiscal Year, an
amount equal to the quotient obtained by dividing (i) the excise tax imposed
pursuant to Section 4981(a) of the Code on TCO for such Partnership Fiscal Year,
by (ii) the Percentage Interest of TCO on the Relevant Date.
"Extraordinary Transaction" means (i) a sale, exchange, or other disposition
(including the encumbering) of all or substantially all of the Partnership's
assets or of any designated property described on Schedule E hereto, (ii) a
merger (including a triangular merger), consolidation, or other combination of
the Partnership with another Person, (iii) an issuance of Additional Interests
to any Person (including a Partner other than TCO) such that such Person
together with any of such Person's Affiliates would own a Percentage Interest in
excess of five percent (5%), (iv) the placing of the Partnership into
Bankruptcy, (v) a recapitalization of the Partnership, or (vi) the dissolution
of the Partnership, in each such case in any one (1) transaction or series of
transactions.
"Family Trust" means, with respect to an individual, a trust for the benefit
of such individual or for the benefit of any member or members of such
individual's Immediate Family or for the benefit of such individual and any
member or members of such individual's Immediate Family (for the purpose of
determining whether or not a trust is a Family Trust, the fact that one or more
of the beneficiaries (but not the sole beneficiary) of the trust includes a
Person or Persons, other than a member of such individual's Immediate Family,
entitled to a distribution after the death of the settlor if he, she, it, or
they shall have survived the settlor of such trust, which distribution may be
made of something other than a Partnership Interest and/or includes an
organization or organizations exempt from federal income taxes pursuant to the
provisions of Section 501(a) of the Code and described in Section 501(c)(3) of
the Code, shall be disregarded); provided, however, that in respect of transfers
by way of testamentary or inter vivos trust, the trustee or trustees shall be
solely such individual, a member or members of such individual's Immediate
Family, a responsible financial institution, an attorney that is a member of the
Bar of any State in the United States, and/or an individual or individuals
approved by the Managing General Partner.
"Fractional Unit" means a portion of, or less than the whole of, a Unit of
Partnership Interest.
"GAAP" means generally accepted accounting principles, consistently applied
in the United States.
"General Partner" and "General Partners" are (i) those Persons identified as
such on Schedule A hereto, in their capacities as general partners of the
Partnership, (ii) the successors to any portion or all of the Partnership
Interest of those Persons identified as General Partners on Schedule A hereto
who are admitted to the Partnership as general partners pursuant to Section 8.2
hereof, and (iii) any Person or Persons to whom an Additional Interest as a
general partner is issued pursuant to Section 8.4 hereof and who is admitted to
the Partnership as a general partner pursuant to Section 8.4 hereof.
"GMPTS" means "GMPTS Limited Partnership, a Delaware limited partnership, all
of the beneficial interests of which are held by General Motors Hourly-Rate
Employees Pension Trust u/t/a dated March 1, 1983, as amended, and General
Motors Salaried Employees Pension Trust u/t/a dated March 1, 1983, as amended.
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"Gross Income" means the income of the Partnership determined pursuant to
Section 61 of the Code before deduction of items of expense or deduction.
"Guaranteed Payment" means, as to each series of Preferred Equity, the
applicable Preferred Rate multiplied by the balance of such series of Preferred
Equity during the period to which the Guaranteed Payment relates, commencing on
the date of the contribution of such Preferred Equity pursuant to Section 4.1(b)
hereof, determined on the basis of a year of three hundred sixty (360) Days,
consisting of twelve (12), thirty (30)-day months, cumulative to the extent not
paid in any given month pursuant to Section 5.3 hereof.
"Immediate Family" means, with respect to a Person, (i) such Person's spouse
(former or then current), (ii) such Person's parents and grandparents, and (iii)
ascendents and descendants (natural or adoptive, of the whole or half blood) of
such Person's parents or of the parents of such Person's spouse (former or then
current).
"Incentive Interest" is defined in Section 8.4(b) hereof.
"Incentive Options" is defined in Section 6.3 hereof.
"Incentive Option Plan" means an incentive option plan or plans (whether now
existing or hereafter established) pursuant to which the Partnership has granted
or shall grant Incentive Options, as the same may be amended from time to time.
"Income Source Tax Distribution Amount" means, for each Partnership Fiscal
Year, an amount equal to the quotient obtained by dividing (i) the tax, if any,
of TCO calculated pursuant to Section 857(b)(5) of the Code for such Partnership
Fiscal Year, by (ii) the Percentage Interest of TCO on the Relevant Date.
"Indemnified Person" means each Partner, each officer, each member of the TCO
Board, each member of any committee established by the TCO Board, each Person
designated or delegated by a Partner, an officer, the TCO Board, or a member of
a committee established by the TCO Board, and each employee, partner, principal,
shareholder, agent, director, or officer of a Partner.
"Knowing" means with respect to any Person that is an individual, the
conscious awareness by such Person of the matter at issue.
"Limited Partner" and "Limited Partners" are (i) those Persons identified as
such on Schedule A hereto, in their capacities as limited partners of the
Partnership, (ii) the successors to any portion or all of the Partnership
Interest of those Persons identified as Limited Partners on Schedule A hereto
who are admitted to the Partnership as limited partners pursuant to Section 8.2
hereof, and (iii) any Person or Persons to whom an Additional Interest as a
limited partner is issued pursuant to Section 8.4 hereof and who is admitted to
the Partnership as a limited partner pursuant to Section 8.4 hereof.
"Liquidator" is defined in Section 11.1(a).
"Losses" is defined in Section 5.1(a) hereof.
"Majority in Interest of the Non-Managing Partners" means those Non-Managing
Partners holding in excess of fifty percent (50%) of the aggregate Percentage
Interests held by all such Non-Managing Partners.
"Major Stores" means those stores occupied by a single Person, the gross
leasable floor area of which is in excess of forty thousand (40,000) square
feet.
"Manager" means that Person who has by written contract with the Partnership
agreed to provide management, administration, leasing and development services
for the properties of the Partnership. On the Effective Date, the Manager is TTC
pursuant to the Master Services Agreement.
"Managing General Partner" means TCO, as defined in the Preamble to this
Agreement.
"Master Services Agreement" means the management, administration, leasing and
development services agreement dated as of November 30, 1992, between the
Partnership and TTC, engaging TTC as the Manager,
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as the same may be amended from time to time, or any agreement entered into
hereafter in replacement thereof.
"Minimum Distribution Amount" means, for each Partnership Fiscal Year, an
amount equal to the greater of (i) the quotient obtained by dividing (1) the sum
of (x) TCO's allocable share of the Partnership's Real Estate Investment Trust
Taxable Income for such Partnership Fiscal Year (determined without regard to
any deduction for dividends paid (as defined in Section 561 of the Code)), and
by excluding any net capital gain (as defined in Section 1222(11) of the Code),
and (y) TCO's allocable share of the Partnership's net income from foreclosure
property for such Partnership Fiscal Year, minus TCO's allocable share of the
Partnership's excess noncash income (as determined under Section 857(e) of the
Code), if any, for such Partnership Fiscal Year, by (2) the Percentage Interest
of TCO on the Relevant Date, and (ii) the Ordinary Tax Liability for such
Partnership Fiscal Year.
"Minimum Distribution Amount Adjustment" means, for each Partnership Fiscal
Year, an amount, as set forth in the Minimum Distribution Amount Adjustment
Notice, equal to the excess (if any) of (i) the sum of (1) the Minimum
Distribution Amount for such Partnership Fiscal Year, (2) the Net Capital Gain
for such Partnership Fiscal Year, (3) the Prohibited Transaction Tax
Distribution Amount for such Partnership Fiscal Year, (4) the Income Source Tax
Distribution Amount for such Partnership Fiscal Year, (5) the Alternative
Minimum Tax Distribution Amount for such Partnership Fiscal Year, and (6) the
Excise Tax Distribution Amount for such Partnership Fiscal Year, over (ii) the
amount of cash actually distributed to the Partners pursuant to Section 5.2(a)
hereof in respect of such Partnership Fiscal Year.
"Minimum Distribution Amount Adjustment Notice" is defined in Section 6.4
hereof.
"Minimum Gain" means an amount determined in accordance with Regulations
Section 1.704-2(d) by computing, with respect to each Nonrecourse Liability of
the Partnership, the amount of gain, if any, that the Partnership would realize
if it disposed of the property subject to such liability for no consideration
other than full satisfaction thereof, and by then aggregating the amounts so
computed.
"Minimum Gain Chargeback" is defined in Section 5.1(d)(1) hereof.
"Net Capital Gain" means, for the relevant period, an amount equal to the
quotient obtained by dividing (i) the net capital gain (as defined in Section
1222(11) of the Code) that is allocable to TCO for such period, by (ii) the
Percentage Interest of TCO on the Relevant Date.
"Ninety Day Period" is defined in Section 10.1(b) hereof.
"Non-Managing Partners" means all of the Partners other than the Managing
General Partner.
"Nonrecourse Deductions" is defined in Regulations Section 1.704-2(b)(1).
"Nonrecourse Liabilities and Nonrecourse Liability" are defined in
Regulations Section 1.704- 2(b)(3).
"Ordinary Tax Liability" means, for each Partnership Fiscal Year, an amount
equal to the product of (i) the highest individual federal income tax rate
applicable to ordinary income in effect for such Partnership Fiscal Year, and
(ii) the largest quotient obtained by dividing (a) each Partner's allocable
share of the taxable income of the Partnership for such Partnership Fiscal Year,
determined by taking into account allocation of items of income and deduction
pursuant to Section 704(c) of the Code and by excluding any items giving rise to
a capital gain or a capital loss, by (b) such Partner's Percentage Interest on
the Relevant Date.
"Original Assignor" is defined in Section 8.3(b) hereof.
"Original Partner" means each of those Persons listed on Schedule A hereto
other than TCO and GMPTS.
"Original Partner Affiliates" means AAT Affiliates, each Original Partner,
and any Affiliate of an Original Partner or of any member of an Original
Partner's Immediate Family.
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"Other Retail Property" or "Other Retail Properties" means a developed
regional retail shopping center or centers, whether part of a mixed-use property
or not, having a gross leasable area (including space occupied by Major Stores)
in excess of Two Hundred Thousand (200,000) square feet.
"Owning Entity" means any Person, other than the Partnership, owning a
Development Opportunity or a Regional Center, provided that the Partnership
holds, Directly or Indirectly, a Beneficial Interest in such Person. Reference
to the Owning Entities includes each Owning Entity.
"Owning Entity Agreement" means an agreement, in whatever form embodied
(including, without limitation, within the partnership agreement, limited
liability company agreement, or other document forming or governing an Owning
Entity), providing for management, administration, leasing and/or development
and/or like services between an Owning Entity and Taub-Co or TTC, including any
such agreement entered into by an Owning Entity with Taub-Co prior to the
Effective Date.
"Partner" and "Partners" are (i) those Persons named in the Preamble to this
Agreement, (ii) the successors to any portion or all of the Partnership Interest
of those Persons named in the Preamble to this Agreement who are admitted as a
Partner or Partners pursuant to Section 8.2 hereof, and (iii) any Person or
Persons to whom a Partnership Interest has been issued pursuant to Section 8.4
hereof.
"Partner Nonrecourse Debt" is defined in Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" is defined in Section 5.1(d)(2)
hereof.
"Partner Nonrecourse Deduction" is defined in Regulations Section 1.704-2(i).
"Partnership" means The Taubman Realty Group Limited Partnership, a Delaware
limited partnership.
"Partnership Accountants" means Deloitte & Touche and its successors, or any
firm of independent certified public accountants of recognized national standing
selected by the Managing General Partner.
"Partnership Fiscal Year" means the calendar year.
"Partnership Interest" is defined in Section 4.6(a) hereof.
"Partnership Interest Certificate" and "Partnership Interest Certificates"
are defined in Section 4.7 hereof.
"Partnership Interest Ledger" means a ledger maintained at the principal
office of the Partnership that shall set forth, among other things, the name and
address of each Partner and the nature of the Partnership Interest of each
Partner, the number of Units of Partnership Interest held by each Partner, and
the current Percentage Interest of each Partner.
"Partnership Law" is defined in Section 1.1 hereof.
"Percentage Interest" is defined in Section 4.6(b) hereof.
"Peripheral Property" means the real property adjacent or related to a
Development Opportunity or a Regional Center, owned by the Partnership or an
Owning Entity and improved or unimproved and held as distinct from or in some
manner differentiated from, but intended as integrated with, the Regional Center
(or anticipated Regional Center).
"Person" or "Persons" means an individual, a partnership (general or
limited), limited liability company, corporation, joint venture, business trust,
cooperative, association, or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane, or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision, or other instrumentality thereof, or any other entity.
"Pledge" means a pledge or grant of a mortgage, security interest, lien or
other encumbrance in respect of a Partnership Interest.
"Preferred Equity" means, on any date, an amount equal to the aggregate
contributions to the capital of the Partnership made by TCO pursuant to Section
4.1(b) hereof, to the extent such contributions have not yet
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been converted to Additional Interests pursuant to Sections 5.3 and 8.4 hereof.
Each contribution of Preferred Equity shall be designated as a separate series,
e.g., Series A Preferred Equity.
"Preferred Rate" means, a fixed rate per annum, specified by TCO as to a
given series of Preferred Equity, which rate shall be equal to the dividend rate
for the Related Issue.
"Primarily Engaged" means, with respect to a private or public Person (other
than an individual), that (i) Other Retail Properties held by such Person (other
than an individual) at the relevant time represent at least twenty-five percent
(25%) of the value of all of the assets of such Person (other than an
individual), or (ii) at least twenty-five percent (25%) of the average annual
gross revenues of such Person (other than an individual) during the immediately
preceding twenty-four (24) month period were derived from the development and/or
management of Other Retail Properties not owned by such Person (other than an
individual), or (iii) if each of the percentages determined under clauses (i)
and (ii) is less than twenty-five percent (25%), the percentages determined
under both clauses (i) and (ii) in the aggregate equal at least forty-five
percent (45%).
"Profits" is defined in Section 5.1(a) hereof.
"Prohibited Transaction" means such term as defined in Section
857(b)(6)(B)(iii) of the Code.
"Prohibited Transaction Tax Distribution Amount" means, for each Partnership
Fiscal Year, an amount equal to the quotient obtained by dividing (i) one
hundred percent (100%) of the net income of TCO derived from prohibited
transactions (as defined in Section 857(b)(6)(B)(i) of the Code) for such
Partnership Fiscal Year, by (ii) the Percentage Interest of TCO on the Relevant
Date.
"Qualified Appraiser" means a Third Party designated by the Managing General
Partner and who is a member in good standing of the American Institute of Real
Estate Appraisers, or a Member, Appraisal Institute (or a member of the
successor to either such organization).
"Qualified Institutional Transferee" means any transferee of a Partnership
Interest that is or are (i) a pension fund, profit-sharing fund or similar fund,
or an organization or organizations exempt from federal income taxes pursuant to
the provisions of Section 501(a) of the Code and described in Section 501(c)(3)
of the Code, in each such case possessing more than Fifty Million Dollars
($50,000,000) in assets, (ii) an organization described in Section 509 of the
Code, and having a Partner as a "substantial contributor" (as defined in Section
507(d)(2) of the Code), (iii) pooled funds for Keogh plans, individual
retirement plans, profit-sharing plans, pension plans or similar tax-exempt
plans, in each such case possessing more than One Hundred Million Dollars
($100,000,000) in assets, (iv) insurance companies or banks, in each such case
possessing more than Two Billion Dollars ($2,000,000,000) in assets, (v) a
domestic entity organized as a mutual fund or registered investment company in
each case possessing more than One Hundred Million Dollars ($100,000,000) in
assets, (vi) any other Person (a "QIT Entity"), all the Beneficial Interests in
which at the time of such Transfer and thereafter are owned by one or more of
the foregoing, or (vii) a QIT Entity that has as one (1) or more of its
constituent partners, a foreign entity that is organized as a mutual fund or
investment company that is not Primarily Engaged and, in each such case, that
possesses more than One Hundred Million Dollars ($100,000,000) in assets,
provided that such QIT Entity is at no time a nonresident alien, foreign
corporation, foreign trust, or foreign estate, within the meaning of Section
7701 of the Code; provided that a Transfer to such transferee will not cause a
prohibited transaction (as defined in Section 4975(c) of the Code or Section 406
of ERISA) to occur.
"QIT Entity" is defined in the definition of "Qualified Institutional
Transferee."
"REAs" means reciprocal easement and operating or like agreements.
"Real Estate Investment Trust" means such term as defined in Section 856 of
the Code.
"Real Estate Investment Trust Taxable Income" means such term as defined in
Section 857(b)(2) of the Code.
"Record Partner" means a Person set forth as a Partner on the books and
records of the Partnership. No Person other than a Person that is a Partner on
the Effective Date shall be a Record Partner until such Person
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has become a substitute Partner in the Partnership pursuant to Section 8.2
hereof, or has acquired an Additional Interest or an Incentive Interest pursuant
to Section 8.4 hereof and has become a Partner in the Partnership pursuant to
Section 8.4 hereof.
"Regional Center Interest" or "Regional Center Interests" means the interest
or interests in a Regional Center or Regional Centers then held by the
Partnership either Directly or Indirectly as the holder of a Beneficial
Interest, Directly or Indirectly, in an Owning Entity or Owning Entities that
own or owns a Regional Center or Regional Centers.
"Regional Centers" means those regional retail shopping centers, including
Peripheral Property in respect thereof, and any other real property owned,
acquired and/or developed by the Partnership, provided that some portion of the
enclosed mall portion thereof is open for business to the public generally, in
each case for so long as the Partnership has a Direct or Indirect Beneficial
Interest therein.
Reference to a Regional Center includes any one of the Regional Centers.
"Regulations" (including Temporary Regulations or Proposed Regulations) means
Department of Treasury regulations promulgated under the Code, as such
regulations may be amended from time to time (including corresponding provisions
of succeeding regulations).
"REIT Requirements" is defined in Section 3.4 hereof.
"Related Issue" and "Related Issues" are defined in Section 4.1(b) hereof.
"Relevant Date" means, (i) with respect to a Minimum Distribution Amount, the
date of the Annual Budget setting forth such amount, or the date of an amendment
thereto which provides a change in such amount, (ii) with respect to an
Additional Required Amount, the date of the Additional Required Amount Notice in
respect thereof, and (iii) with respect to a Minimum Distribution Amount
Adjustment, or any component thereof, or a Tax Adjustment Amount, the date of
the TCO Information Notice in respect thereof.
"Representative" is defined in Section 10.1(a)(3) hereof.
"Required Distribution Amount" means an amount, as set forth in the Annual
Budget, equal to the aggregate cash (or cash per Unit of Partnership Interest)
to be distributed to the Partners for such Partnership Fiscal Year, as such
amount may be increased or decreased from time to time by the Managing General
Partner, in consultation with the Manager, but in no event less than the
Estimated Minimum Distribution Amount.
"Successor" is defined in Section 10.1(a)(4) hereof.
"Successor General Partner" is defined in Section 10.1(b) hereof.
"Taub-Co" is defined in the Preamble to this Agreement.
"Tax Adjustment Amount" means, for each Partnership Fiscal Year, an amount
equal to the excess (if any) of (i) the sum of (x) TCO's Real Estate Investment
Trust Taxable Income for such Partnership Fiscal Year (determined without regard
to any deduction for dividends paid (as defined in Section 561 of the Code)),
and by excluding any net capital gain (as defined in Section 1222(11) of the
Code), and (y) TCO's net income from foreclosure property for such Partnership
Fiscal Year, minus its excess noncash income (as determined under Section 857(e)
of the Code) for such Partnership Fiscal Year, over (ii) the sum of (A) TCO's
allocable portion of the Required Distribution Amount distributed to TCO during
such Partnership Fiscal Year, and (B) TCO's allocable portion of the Minimum
Distribution Amount Adjustment distributed to TCO during the current Partnership
Fiscal Year, to the extent such Minimum Distribution Amount Adjustment was a
distribution in respect of those amounts determined under subclauses (x) and (y)
of clause (i) hereof.
"Tax Adjustment Notice" is defined in Section 6.4 hereof.
"Tax Liability" means, for the relevant period, the product of (i) the
highest individual federal income tax rate applicable to capital gains (taking
into account the relevant holding period for the applicable capital asset) in
effect for such period, and (ii) the largest quotient obtained by dividing (a)
each Partner's (other
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than TCO's) allocable share of net capital gain (as defined in Section 1222(11)
of the Code) of the Partnership for such period, by (b) such Partner's (other
than TCO's) Percentage Interest on the Relevant Date, taking into account
allocation of gain pursuant to Section 704(c) of the Code; provided, however,
that in no event shall the Tax Liability for any period exceed the cash proceeds
received or to be received by the Partnership on the sale during such period of
capital assets.
"Tax Matters Partner" is defined in Section 6.10(a) hereof.
"TCO" means Taubman Centers, Inc., a Michigan corporation.
"TCO Board" means the Board of Directors of TCO.
"TCO Information Notice" is defined in Section 5.7(b) hereof.
"TG" is defined in the Preamble to this Agreement.
"TG Receivables" means those certain loan receivables created by the TG
Receivable Documents and held by TG in respect of the amounts owed to TG by
certain of its partners.
"TG Receivable Documents" means that certain Loan Agreement dated August 1,
1985, among the Partnership and certain of the partners of TG, the promissory
notes, and all other documents, agreements, certificates and other instruments
(as the same have been amended through the Effective Date) executed in
connection with the authorization and consummation of those certain loans made
pursuant to such Loan Agreement, and as the same may be amended, restated or
supplemented.
"Third Party" or "Third Parties" means a Person or Persons who is or are
neither a Partner or Partners nor an Affiliate or Affiliates of a Partner or
Partners.
"Third Party Financing" means financing or refinancing obtained from a Third
Party by the Partnership or an Owning Entity, as the case may be.
"Transfer" means any assignment, sale, transfer, conveyance, Pledge, grant of
an option or proxy, or other disposition or act of alienation, whether voluntary
or involuntary, or by operation of law.
"Transfer Determination" is defined in Section 8.1(b) hereof.
"TTC" is The Taubman Company Limited Partnership, a Delaware limited
partnership, its successors and assigns, the present constituency of which is
Taub-Co and the Partnership.
"TTC Affiliates" means all officers and employees of TTC for so long as they
are actively employed by TTC, and for so long as any of such individuals are
included within such definition of TTC Affiliates, any Affiliate of such
individual. Reference to a TTC Affiliate includes any one of the TTC Affiliates.
"Unit of Partnership Interest" and "Units of Partnership Interest" are
defined in Section 4.6(a) hereof.
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III.
PURPOSES AND POWERS; PARTNERSHIP ONLY FOR
PURPOSES SPECIFIED; REPRESENTATIONS AND WARRANTIES;
CERTAIN COVENANTS.
Section 3.1 Purposes and Powers of the Partnership.
The Partnership has been formed pursuant to the Partnership Law and continued
in accordance with this Agreement for the purposes of (i) owning, operating,
maintaining, administering, developing, holding, improving, rehabilitating,
redeveloping, renovating, expanding, leasing, mortgaging, selling, exchanging,
disposing of, and generally dealing in and with, the Development Opportunities,
the Development Opportunity Interests, the Regional Centers, the Regional Center
Interests, and any other property owned by the Partnership, (ii) financing or
refinancing for any of the foregoing purposes, or for any other purpose in
furtherance of, or necessary, convenient, or incidental to the business or
requirements of the Partnership, (iii) seeking to acquire, acquiring, obtaining
options or other rights to acquire (pursuant to a purchase for cash and/or other
consideration, exchange, merger, contribution to the capital of the Partnership,
or otherwise) interests in, or in Persons owning, or owning an interest or
interests in, regional retail shopping centers (including mixed-use properties
the retail component of which is or is anticipated to be of significant value in
relation to the value of the entire mixed-use property), or property or
properties in anticipation of developing same as a regional retail shopping
center or centers, or any other property as shall be specifically, in all such
cases, designated from time to time by the Managing General Partner, (iv)
holding an interest as a partner (general and/or limited), member of a limited
liability company, or shareholder in a management, leasing, development,
administrative or other service company, including interests incidental to such
interest, and (v) engaging in any other activities (including the ownership of
property) that are in furtherance of or necessary or incidental or related to
any of the foregoing.
In furtherance of its purposes, but subject to the provisions of this
Agreement, the Partnership has the power and is hereby authorized to, Directly
or Indirectly:
(i) retain, own, hold, do business with, acquire (pursuant to a purchase
for cash and/or other consideration, exchange, merger, contribution to the
capital of the Partnership, or otherwise), renovate, rehabilitate, improve,
expand, lease, operate, maintain, and administer and sell, convey, assign,
exchange, mortgage, finance, refinance, or demolish, or deal in any manner
with, a Development Opportunity, a Development Opportunity Interest, a
Regional Center, a Regional Center Interest, and any real or personal
property used in connection therewith or which may be in furtherance of, or
necessary, convenient, or incidental to the accomplishment of, the purposes
of the Partnership;
(ii) borrow, including without limitation, borrowing to obtain funds to
acquire, own, obtain an option or other right to acquire, develop, and/or
improve (including, without limitation, to renovate, rehabilitate, expand,
lease, operate, maintain, and administer) a regional retail shopping center
or other venture opportunity, a Regional Center, or a Regional Center
Interest, and make capital improvements and/or investments in one or more
Owning Entities or Regional Centers, and refinance any indebtedness or
borrowing in furtherance of, or necessary, convenient, or incidental to the
accomplishment of, any purposes or requirements of the Partnership, issue
evidences of indebtedness to evidence such borrowings which may be
convertible in whole or in part into Partnership Interests (to be issued in
accordance with the provisions of Section 8.4 hereof) and which may be
unsecured or secured by a mortgage, deed of trust, assignment, pledge, or
other lien on a Regional Center or Regional Center Interest or any other
asset(s) of the Partnership and/or an Owning Entity, and enter into guaranty
agreements and/or indemnity agreements in connection with any such borrowings
or in connection with a borrowing by or indebtedness of any other Person in
which the Partnership holds an interest;
(iii) contribute to the capital of, or lend to, an Owning Entity, acquire,
own, obtain an option or other right to acquire (pursuant to a purchase for
cash and/or other consideration, exchange, merger, contribution to the
capital of the Partnership, or otherwise), develop, renovate, rehabilitate,
improve,
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expand, lease, make capital improvements to, satisfy obligations of, or
operate a regional retail shopping center, or other venture opportunity, a
Regional Center, or a Regional Center Interest;
(iv) seek and/or locate regional retail shopping centers or other venture
opportunities that are or are intended to be in furtherance of, or necessary,
convenient, or incidental to the accomplishment of, any purposes of the
Partnership;
(v) perform and/or engage others to perform studies and/or investigation
or analysis of any sort in respect of a possible or proposed regional retail
shopping center or other venture opportunity;
(vi) acquire and/or obtain options or other rights to acquire (pursuant to
a purchase for cash and/or other consideration, exchange, merger,
contribution to the capital of the Partnership, or otherwise) regional retail
shopping centers (including interests therein) or other venture opportunities
that are or are intended to be in furtherance of, or necessary, convenient,
or incidental to the accomplishment of, the purposes of the Partnership, as
shall be specifically, from time to time, designated by the Managing General
Partner, and enter into and perform any and all agreements, execute any and
all instruments and documents, and take any and all actions with respect
thereto;
(vii) accept, in exchange for a Partnership Interest and, if desired,
admission as a Partner in the Partnership, and as a contribution to the
capital of the Partnership, or through the liquidation of a corporation or
other entity, or otherwise, regional retail shopping centers, interests in
regional retail shopping centers, development or other venture opportunities,
or interests in development or other venture opportunities;
(viii) take any action reasonably anticipated to enhance, protect, defend
and/or preserve, the value of a Development Opportunity, a Development
Opportunity Interest, a Regional Center, a Regional Center Interest or other
venture opportunity, or the Partnership and the return to the Partners;
(ix) act as one of the general and/or limited partners or members of, or
act as the sole general or limited partner or member of, an Owning Entity and
exercise all the powers and authorities given to the Partnership by the
partnership agreement, limited liability company agreement, or other
governing document covering such Owning Entity, or otherwise own all or any
part or portion of a Development Opportunity, a Development Opportunity
Interest, a Regional Center, or a Regional Center Interest;
(x) enter into, consent to, and enter into amendments of, any partnership
or limited liability company agreement or other governing document covering
an Owning Entity or any other agreement to which the Partnership or an Owning
Entity is or is to be a party;
(xi) enter into ground leases, as a tenant or landlord, in respect of all
or any part or portion of the Partnership's real property;
(xii) convert a Regional Center or a Regional Center Interest, or a part
thereof, to condominium or cooperative status;
(xiii) prepay in whole or in part, and refinance, recast, increase,
modify, amend, extend, or assign any loan, secured or unsecured, and in
connection therewith, execute any extensions, renewals, or modifications of
any mortgage or deed of trust or lien securing any such loan;
(xiv) act as one of the general and/or limited partners or members, or
shareholders of, or act as the sole general or limited partner or member or
shareholder of, or otherwise employ, a management, leasing, development, or
other service company, to perform or engage others to perform all activities
and services in respect of a Development Opportunity, a Development
Opportunity Interest, a Regional Center, or a Regional Center Interest or
other venture opportunity, or to perform administrative services for the
Partnership and the Managing General Partner, and pay compensation for such
services;
(xv) enter into, perform, and carry out contracts or agreements of any
kind, including, without limitation, contracts or agreements with a Partner
or an Affiliate or Affiliates of a Partner, in furtherance of, or necessary,
convenient, or incidental to the accomplishment of, the purposes of the
Partnership,
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including, without limitation, the execution and delivery of all agreements,
certificates, instruments, or documents required by lenders or in connection
with any mortgage, deed of trust, or assignment;
(xvi) place record ownership to a Development Opportunity, a Development
Opportunity Interest, a Regional Center, a Regional Center Interest (or any
part thereof), or other venture opportunity, or any other Partnership
property in the name or names of a nominee or nominees, or establish a trust
("nominee" or otherwise) to own or hold a Development Opportunity, a
Development Opportunity Interest, a Regional Center, or a Regional Center
Interest, or any other Partnership property, including to direct, select, and
remove the trustee(s) thereof and amend or terminate such trust, all for the
purpose of financing or any other convenience;
(xvii) execute contracts with governmental agencies, including, without
limitation, any documents required in connection with any debt;
(xviii) execute any lease or leases (without limit as to the term thereof
(including beyond the term of the Partnership), whether or not the space so
leased is to be occupied by the lessee or, in turn, sub-leased in whole or in
part to others) with respect to all or any part of a Development Opportunity,
a Development Opportunity Interest, a Regional Center, or a Regional Center
Interest;
(xix) obtain, through contract or otherwise, goods and services;
(xx) maintain insurance;
(xxi) invest in, reinvest, and oversee the investment of, cash a nd cash-
like assets;
(xxii) make or revoke any election permitted the Partnership by any taxing
or other authority;
(xxiii) grant and enter into and amend REAs and impose restrictions with
respect to all or any part of a Development Opportunity, a Development
Opportunity Interest, a Regional Center, a Regional Center Interest,
Peripheral Property, or other property;
(xxiv) foreclose upon any property;
(xxv) admit a Person as a Partner to the Partnership, or increase or
decrease the interest of a Partner in the Partnership, pursuant to the terms
of this Agreement;
(xxvi) sell, exchange, or otherwise dispose of, upon any terms, all or any
part or portion of Partnership property or the property of an Owning Entity;
(xxvii) enter into, perform, and carry out contracts which may be lawfully
carried out or performed by a partnership under applicable laws including,
without limitation, the Master Services Agreement;
(xxviii) enter into an agreement to merge with or into another partnership
having similar purposes as the Partnership and having the Partnership or such
other partnership as the surviving partnership;
(xxix) retain legal counsel, the Partnership Accountants, appraisers, and
any other professionals in connection with the business of the Partnership or
of an Owning Entity;
(xxx) execute or deliver any assignment for the benefit of creditors of
the Partnership or of an Owning Entity;
(xxxi) negotiate with, defend, and resolve all matters with any Person;
(xxxii) sue on, defend, pursue, or compromise any and all claims or
liabilities in favor of or against the Partnership or an Owning Entity,
submit any or all such claims or liabilities to arbitration, and confess a
judgment against the Partnership or an Owning Entity in connection with
litigation in which the Partnership or an Owning Entity may be involved;
(xxxiii) take any action and exercise any right (including the assignment
or disposition of same) under any contract or agreement to which the
Partnership or an Owning Entity is a party;
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(xxxiv) terminate, dissolve, and liquidate any Person, including, without
limitation, an Owning Entity, and retain and deal in and with the assets
(subject to liabilities and obligations) received as a result of any such
liquidation;
(xxxv) amend, modify, or terminate and deal in any manner with any
instrument, including without limitation, any trust instrument, corporate
document, partnership agreement, limited liability company agreement, or
joint venture agreement covering or in respect of an Owning Entity, a
Development Opportunity, a Development Opportunity Interest, a Regional
Center, or a Regional Center Interest;
(xxxvi) indemnify the Indemnified Persons and satisfy such
indemnifications from the assets of the Partnership; and
(xxxvii) in addition to the foregoing, take or omit to take any action as
may be necessary, convenient, or desirable to further the purposes or intent
of the Partnership or of an Owning Entity, and have and exercise all of the
powers and rights conferred upon limited partnerships formed pursuant to the
Partnership Law.
Section 3.2 Partnership Only for Purposes Specified.
The Partnership shall be a partnership only for the purposes specified in
Section 3.1 hereof, and this Agreement shall not be deemed to create a
partnership among the Partners with respect to any activities whatsoever other
than the activities within the purposes of the Partnership as specified in
Section 3.1 hereof. Except as otherwise provided in this Agreement, no Partner
shall have any authority to act for, bind, commit, or assume any obligation or
responsibility on behalf of the Partnership, its properties, or any other
Partner. No Partner, in its capacity as a Partner under this Agreement, shall be
responsible or liable for any indebtedness or obligation of another Partner, nor
shall the Partnership be responsible or liable for any indebtedness or
obligation of any Partner, incurred either before or after the execution and
delivery of this Agreement by such Partner, except as to those responsibilities,
liabilities, indebtedness, or obligations incurred pursuant to and as limited by
the terms of this Agreement or incurred pursuant to the Partnership Law.
Section 3.3 Representations and Warranties by the Partners; Certain Covenants.
(a) Each Partner that is an individual represents and warrants to each
other Partner, that (i) the consummation of the transactions contemplated by
this Agreement to be performed by such Partner will not result in a breach or
violation of, or a default under, any agreement by which such Partner or any
of such Partner's properties is or are bound, or any statute, regulation,
order, or other law to which such Partner is subject, (ii) such Partner is
not a "foreign person" within the meaning of Section 1445(f) of the Code,
(iii) except as specifically provided on Schedule B attached hereto, such
Partner does not own, Directly or Indirectly, (1) two percent (2%) or more of
the total combined voting power of all classes of stock entitled to vote, or
two percent (2%) or more of the total number of shares of all classes of
stock, of any corporation that is a tenant of a Regional Center, or (2) an
interest of two percent (2%) or more in the assets or net profits of any
tenant of a Regional Center, and (iv) this Agreement is binding upon, and
enforceable against, such Partner in accordance with its terms.
(b) Each Partner that is not an individual represents and warrants to each
other Partner, that (i) all transactions contemplated by this Agreement to be
performed by it have been duly authorized by all necessary action, including
without limitation, that of its general partner(s), committee(s), trustee(s),
beneficiaries, directors, and/or shareholder(s), as the case may be, as
required, (ii) the consummation of such transactions shall not result in a
breach or violation of, or a default under, its partnership agreement, trust
agreement, charter, or by-laws, as the case may be, any agreement by which
such Partner or any of such Partner's properties or any of its partners,
beneficiaries, trustees, or shareholders, as the case may be, is or are
bound, or any statute, regulation, order, or other law to which such Partner
or any of its partners, trustees, beneficiaries, or shareholders, as the case
may be, is or are subject, (iii) such Partner is neither a "foreign person"
within the meaning of Section 1445(f) of the Code nor a "foreign partner"
within the
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meaning of Section 1446(e) of the Code, (iv) except as specifically provided
on Schedule B attached hereto, such Partner does not own, Directly or
Indirectly, (1) two percent (2%) or more of the total combined voting power
of all classes of stock entitled to vote, or two percent (2%) or more of the
total number of shares of all classes of stock, of any corporation that is a
tenant of a Regional Center, or (2) an interest of two percent (2%) or more
in the assets or net profits of any tenant of a Regional Center, and (v) this
Agreement is binding upon, and enforceable against, such Partner in
accordance with its terms.
(c) The representations and warranties contained in Sections 3.3(a) and
3.3(b) hereof shall survive the execution and delivery of this Agreement by
each Partner and the dissolution, liquidation and termination of the
Partnership; provided, however, that in the event of a breach of any such
representation or warranty the sole source of recovery by the Partners shall
be a Partner's Partnership Interest.
(d) TCO covenants and agrees that, (i) it will not Directly or Indirectly
through ownership of another Person (including a wholly owned direct or
indirect subsidiary) engage in any business other than through the
Partnership except for the acquisition of businesses held for the sole
benefit of the Partnership or a subsidiary partnership or limited liability
company, (ii) it will own all Regional Center Interests and Development
Opportunity Interests only through the Partnership, (iii) it will not incur
any indebtedness for borrowed money other than to effect a distribution to
satisfy the REIT Requirements, to contribute or loan such proceeds to the
Partnership to accomplish the Partnership's purposes, or to refinance any
existing indebtedness of the Partnership, and (iv) it will not assign or
otherwise dispose of its right to a Guaranteed Payment or the corresponding
series of Preferred Equity or its right to any loan and corresponding
interest described in Section 4.1(b) hereof, other then as set forth in
Section 5.3 hereof.
(e) Each Partner hereby acknowledges that no representations as to
potential profit, cash flows, or yield, if any, in respect of the Partnership
or any one or more or all of the Regional Centers or Regional Center
Interests or Development Opportunities or Development Opportunity Interests
have been made by any Partner or any employee or representative or Affiliate
of any Partner, and that projections and any other information, including,
without limitation, financial and descriptive information and documentation,
which may have been in any manner submitted to such Partner shall not
constitute any representation or warranty, express or implied.
Section 3.4 Real Estate Investment Trust Requirements.
Notwithstanding anything to the contrary contained in this Agreement, for so
long as TCO is a Partner, the Partnership shall operate in such a manner and the
Partnership shall take or omit to take all actions as may be necessary
(including making appropriate distributions from time to time), so as to permit
TCO (i) to continue to qualify as a Real Estate Investment Trust under Sections
856 through 860 of the Code so long as such requirements exist and as such
provisions may be amended from time to time, or corresponding provisions of
succeeding law (the "REIT Requirements"), and (ii) to minimize its exposure to
the imposition of an excise tax under Section 4981(a) of the Code or a tax under
Section 857(b)(5) of the Code, so long as such taxes may be imposed and as such
provisions may be amended from time to time, or corresponding provisions of
succeeding law, each of (i) and (ii) to at all times be determined (a) as if
TCO's sole asset is its Partnership Interest, and (b) without regard to the
action or inaction of TCO with respect to distributions (by way of dividends or
otherwise) and the timing thereof. The Managing General Partner may cause the
Partnership to obtain an opinion of tax counsel selected by the Managing General
Partner, regarding the impact of any proposed action affecting TCO's continuing
ability to qualify as a Real Estate Investment Trust, or its exposure to an
excise tax under Section 4981(a) of the Code, or a tax under Section 857(b)(5)
of the Code, so long as such taxes exist and as such provisions may be amended
from time to time or corresponding provisions of succeeding law.
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Section 3.5 ERISA Requirement.
Notwithstanding anything to the contrary contained in this Agreement, the
Partnership shall operate in such a manner and the Partnership shall take or
omit to take all actions as may be necessary so as (i) to permit the Partnership
to satisfy the requirements of a "real estate operating company" (as defined by
Department of Labor Regulations 29 C.F.R. ss.2510.3-101), as such requirements
exist and as such provisions may be amended from time to time, or corresponding
provisions of succeeding law, and (ii) to prevent the occurrence of a
"prohibited transaction" (as defined in Section 4975(c) of the Code or Section
406 of ERISA).
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IV.
CAPITAL CONTRIBUTIONS; OPENING CAPITAL ACCOUNT BALANCES;
PREFERRED EQUITY; ANTICIPATED FINANCING; CAPITAL ACCOUNTS;
PARTNERSHIP INTERESTS; UNITS OF PARTNERSHIP INTEREST;
PERCENTAGE INTERESTS; PARTNERSHIP INTEREST CERTIFICATES;
PURCHASE OF FRACTIONAL UNITS; ADJUSTMENT OF UNITS OF
PARTNERSHIP INTEREST.
Section 4.1 Capital Contributions; Opening Capital Account Balances; Preferred
Equity.
(a) The Partners have contributed to the capital of the Partnership such
assets and amounts as set forth on the books and records of the Partnership.
(b) TCO may contribute, from time to time, amounts to the capital of the
Partnership as Preferred Equity, which amounts have been obtained from the
sale by TCO of any one or more series of shares of preferred stock. In lieu
of contributing such proceeds as Preferred Equity, TCO shall have the right
to lend such proceeds to the Partnership. Any such loan shall be on the same
terms and conditions as the Related Issue except that in lieu of dividends
payable by TCO on the Related Issue, interest shall be payable by the
Partnership to TCO. The Partnership shall assume and pay the expenses
(including applicable underwriter discounts) incurred by TCO in connection
with any contributions or loans by TCO to the capital of the Partnership
pursuant to this Section 4.1(b). Any such loan made by TCO to the Partnership
may at any time be converted by TCO to Preferred Equity pursuant to Section
5.3 hereof. Each contribution or loan made by TCO pursuant to this Section
4.1(b) shall be identified by the series of preferred shares which provided
TCO with the funds to contribute or loan to the Partnership (individually, a
"Related Issue," and collectively, the "Related Issues").
(c) The Capital Account balances of the Partners as of the Effective Date
shall be as set forth opposite their respective names on Schedule C attached
hereto.
Section 4.2 Anticipated Financing.
The Partnership may obtain funds which it considers necessary to meet the
needs and obligations and requirements of the Partnership, including, without
limitation, the Partnership's obligation to lend and/or contribute funds to, or
the Partnership's obligations in respect of, an Owning Entity, or to maintain
adequate working capital or to repay Partnership indebtedness, and to carry out
the Partnership's purposes, from the proceeds of Third Party Financing or
Affiliate Financing, in each case pursuant to such terms, provisions, and
conditions and in such manner (including the engagement of brokers and/or
investment bankers to assist in providing such financing) and amounts as the
Managing General Partner shall determine. Any and all funds required or
expended, Directly or Indirectly, by the Partnership for capital expenditures
may be obtained or replenished through Partnership borrowings. Any Third Party
Financing or Affiliate Financing obtained by the Managing General Partner on
behalf of the Partnership may be convertible in whole or in part into Additional
Interests (to be issued in accordance with Section 8.4 hereof), may be
unsecured, may be secured by a mortgage or mortgages, or deed(s) of trust and/or
assignments on or in respect of all or any portion of the assets of the
Partnership or an Owning Entity, may include or be obtained through the public
or private placement of debt and/or other instruments, domestic and foreign, and
may include the provision for the option to acquire Additional Interests (to be
issued in accordance with Section 8.4 hereof), and may include the acquisition
of or provision for interest rate swaps, credit enhancers, and/or other
transactions or items in respect of such Third Party Financing or Affiliate
Financing; provided, however, that in no event may the Partnership obtain any
Third Party Financing that is recourse to any Partner or any Affiliate, partner,
shareholder, beneficiary, principal, officer, or director of any Partner without
the consent of the Person or Persons to whom such recourse may be had.
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Section 4.3 No Right to Withdraw Capital; No Requirement of Further
Contributions.
Except as specifically provided in this Agreement, no Partner (i) shall have
the right to withdraw any part of its Capital Account or to demand or receive
the return of its capital contributions, or any part thereof, or to receive any
distributions from the Partnership, (ii) shall be entitled to make, or have any
obligation to make, any contribution to the capital of, or any loan to, or
provide a guaranty with respect to any loan to, the Partnership, or (iii) except
as provided in Section 11.1(d) hereof, shall have any liability for the return
of any other Partner's Capital Account or contributions to the capital of the
Partnership. No Partner shall be liable for the liabilities and obligations of
the Partnership except as otherwise provided by the Partnership Law; provided,
however, that any and all obligations and liabilities to a Partner or an
Affiliate of a Partner shall be satisfied solely from Partnership assets and no
Partner shall have any personal liability on account thereof.
Section 4.4 No Interest on Capital Contributions or Capital Accounts.
No Partner shall receive any interest or return in the nature of interest on
its contributions to the capital of the Partnership, or on the positive balance,
if any, in its Capital Account.
Section 4.5 Capital Accounts.
(a) The Partnership shall establish and maintain a separate capital account
("Capital Account") for each Partner, including a substitute partner who shall
pursuant to the provisions hereof acquire a Partnership Interest, which Capital
Account shall be:
(1) credited with the amount of cash and the initial Book Value (net of
liabilities secured by such contributed property that the Partnership assumes
or takes subject to) of any other property contributed by such Partner to the
capital of the Partnership, such Partner's distributive share of Profits, and
any items in the nature of income or gain that are allocated to such Partner
pursuant to Section 5.1 hereof, but excluding tax items described in
Regulations Section 1.704-1(b)(4)(i); and
(2) debited with the amount of cash and the Book Value (net of liabilities
secured by such distributed property that such Partner assumes or takes
subject to) of any Partnership property distributed to such Partner pursuant
to any provision of this Agreement, such Partner's distributive share of
Losses, any items in the nature of expenses or losses that are allocated to
such Partner pursuant to Section 5.1 hereof, but excluding tax items
described in Regulations Section 1.704-1(b)(4)(i), and such Partner's share,
determined in accordance with its Percentage Interest, of any expenditures of
the Partnership described in Section 705(a)(2)(B) of the Code or treated as
Section 705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i).
In the event that a Partner's Partnership Interest or portion thereof is
transferred within the meaning of Regulations Section 1.704- 1(b)(2)(iv)(l), the
transferee shall succeed to the Capital Account of the transferor to the extent
that it relates to the Partnership Interest or portion thereof so transferred.
In the event that the Book Values of Partnership assets are adjusted as
described below in Section 4.5(b) hereof, the Capital Accounts of the Partners
shall be adjusted simultaneously to reflect the aggregate net adjustments as if
the Partnership recognized gain or loss for federal income tax purposes equal to
the amount of such aggregate net adjustment.
The foregoing provisions and the other provisions of this Agreement relating
to the maintenance of Capital Accounts are intended to comply with Section
1.704-1(b) of the Regulations, and shall be interpreted and applied as provided
in the Regulations. In the event that the Managing General Partner reasonably
determines that the manner in which the Capital Accounts, or any debits or
credits thereto, are maintained or computed under the Regulations should be
further amended, the Managing General Partner shall be authorized, without the
approval, consent or act of any of the Partners, to amend this Agreement,
provided that such amendment shall not directly and adversely affect the
Partnership Interest of a Partner, including without limitation, the right to
receive distributions allocable thereto, without the written concurrence of such
Partner. In determining whether this Agreement should be amended to reflect the
foregoing, the Managing
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General Partner shall be entitled to rely on the advice of the Partnership
Accountants and/or counsel to the Partnership.
(b) Except as otherwise provided in this Agreement, the term "Book Value"
or "Book Values" means, with respect to any asset, such asset's adjusted
basis for federal income tax purposes, except:
(1) the initial Book Value of any asset contributed by a Partner to the
Partnership shall be the gross fair market value of such asset;
(2) the Book Value of all Partnership assets may be adjusted to equal
their respective gross fair market values as of the following times, as
determined by the Managing General Partner (unless such adjustment shall
be required by Regulations Section 1.704-1(b)(2)(iv)(f)): (i) the
acquisition from the Partnership, in exchange for more than a de minimis
capital contribution, of a Partnership Interest by an additional partner
or an additional Partnership Interest by an existing Partner; (ii) the
distribution by the Partnership to a Partner of more than a de minimis
amount of Partnership property (including money) as consideration for an
interest in the Partnership; and (iii) the liquidation of the Partnership
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) if there is
an in-kind distribution of Partnership property or an installment sale of
Partnership assets, or if, pursuant to the penultimate sentence of
Regulations Section 1.704-1(b)(2)(ii)(b), the Partnership establishes
reserves to provide for Partnership liabilities in connection with the
liquidation of the Partnership;
(3) if the Book Value of an asset has been determined or adjusted as
provided in Section 4.5(b)(1) or 4.5(b)(2) hereof, the Book Value of such
asset shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing Profits and Losses;
and
(4) the Book Value of any Partnership asset distributed to any Partner
shall be the gross fair market value of such asset on the date of
distribution.
(c) In the event that subsequent to the Effective Date any provision of
this Article IV requires the determination of the fair market value of any
asset, such fair market value shall be as determined by the Managing General
Partner and the relevant Partner, provided that (i) such value is reasonably
agreed to by such Persons in arm's-length negotiations and (ii) such Persons
have sufficiently adverse interests, as provided in Regulations Section
1.704-1(b)(2)(iv)(h). In the event that the requirements of clauses (i) and
(ii) of this Section 4.5(c) are not met, then the fair market value shall be
determined by a Qualified Appraiser. The cost of any such appraisal shall be
an expense of the Partnership.
Section 4.6 Partnership Interests; Units of Partnership Interest; Percentage
Interests.
(a) For the purpose of this Agreement, the term "Partnership Interest"
means, with respect to a Partner, such Partner's right to the allocations
(and each item thereof) specified in Section 5.1 hereof and distributions
from the Partnership, its share of expenditures of the Partnership described
in Section 705(a)(2)(B) of the Code (or treated as such under Regulations
Section 1.704- 1(b)(2)(iv)(i)) and its rights of management, consent,
approval, or participation, if any, as provided in this Agreement. Each
Partner's Partnership Interest shall be divided into units (herein referred
to collectively as the "Units of Partnership Interest" and individually as a
"Unit of Partnership Interest") and shall be represented by that number of
Units of Partnership Interest set forth opposite such Partner's name on
Schedule A attached hereto, as such Schedule may be amended from time to time
pursuant to Section 4.8, Article VIII or Article X hereof. The Partnership
may issue additional Units of Partnership Interest in accordance with Section
8.4 hereof. The Partnership and TCO shall conduct their respective
operations, to the extent they are able to do so, so that one Unit of
Partnership Interest will be equal in value to one (1) share of TCO's common
stock.
(b) For the purpose of this Agreement, the term "Percentage Interest"
means, with respect to each Partner, the percentage set forth opposite such
Partner's name on Schedule A attached hereto, as such Schedule may be amended
from time to time pursuant to Section 4.8, Article VIII or Article X hereof,
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and shall at any time be equal to a fraction, the numerator of which is the
aggregate number of Units of Partnership Interest held by such Partner, and
the denominator of which is the aggregate number of all Units of Partnership
Interest that are issued and outstanding. For purposes of calculating
Percentage Interests, no interest in the Partnership that is Preferred Equity
shall be taken into account.
Section 4.7 Partnership Interest Certificates.
Units of Partnership Interest shall be evidenced by Partnership Interest
Certificates (herein referred to collectively as "Partnership Interest
Certificates" and individually as a "Partnership Interest Certificate") which
shall be issued in accordance with this Section 4.7 and Section 13.18 hereof, in
the form attached hereto as Exhibit A, as such form may be amended from time to
time by the Managing General Partner. Each Partnership Interest Certificate
shall be signed by an authorized signatory or signatories of the Partnership and
shall bear the following legend:
"The Unit(s) of Partnership Interest represented by this certificate
is(are) subject to and transferable only in compliance with The Second
Amendment and Restatement of Agreement of Limited Partnership of The Taubman
Realty Group Limited Partnership, as the same may be amended and/or
supplemented from time to time (the "Partnership Agreement"), a copy of which
is on file at the office of The Taubman Realty Group Limited Partnership. Any
assignment, sale, transfer, conveyance, mortgage, or other encumbrance,
pledge, grant of an option or proxy, or other disposition or act of
alienation, whether voluntary or involuntary, or by operation of law, in
respect of a Unit of Partnership Interest made other than as permitted in the
Partnership Agreement shall be null and void and have no force or effect
whatsoever."
Transfers (except by way of a Pledge) of Units of Partnership Interest shall be
made only upon the request of the Person named in the Partnership Interest
Certificate, or by its attorney lawfully constituted in writing, and upon
surrender and cancellation of a Partnership Interest Certificate for a like
number of Units of Partnership Interest, a duly executed and acknowledged
written instrument of assignment, and with such proof of authenticity of the
signatures as the Managing General Partner may reasonably require. In the event
of a Transfer of a Unit of Partnership Interest or the issuance of additional
Units of Partnership Interest pursuant to the provisions of Article VIII or
Article X hereof, the Managing General Partner shall cause the Partnership to
issue Partnership Interest Certificates to the appropriate Persons to reflect
any Transfer of Units of Partnership Interest or issuance of additional Units of
Partnership Interest, as the case may be. In the event that the Partnership
shall purchase any Units of Partnership Interest (including Fractional Units),
such Units of Partnership Interest (or Fractional Units) shall be extinguished
and the Partnership Interest Certificates with respect thereto shall be
surrendered and cancelled.
Section 4.8 Purchase of Fractional Units of Partnership Interest; Adjustment of
Units of Partnership Interest.
If as a result of any division or combination of Units of Partnership
Interest (as provided below in this Section 4.8) or Transfer or issuance of
Units of Partnership Interest, there shall be outstanding any Fractional Unit,
the Managing General Partner may, but shall not be obligated to, at any time
cause the Partnership to purchase such Fractional Unit, in which event the
Partner holding such Fractional Unit shall sell such Fractional Unit to the
Partnership for an amount equal to the fair market value of such Fractional Unit
as determined in good faith by the Managing General Partner.
The Managing General Partner, in good faith, may, from time to time, divide
or combine all Units of Partnership Interest then issued and outstanding;
provided, however, that in no event shall the Managing General Partner combine
the Units of Partnership Interest unless the fair market value of each resulting
Unit of Partnership Interest is One Hundred Thousand Dollars ($100,000) or less.
Accordingly, divisions or combinations of Units of Partnership Interests may
provide for fractional ratios. In the event of any such action to combine or
divide Units of Partnership Interest as provided in this Section 4.8, all
references in this Agreement to a number of Units of Partnership Interest shall
be combined or divided by the same divisor or multiplier, as the case may be.
Any action to divide or combine Units of Partnership Interest pursuant to this
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Section 4.8 shall be effective on the date set forth as the effective date for
such action, and each Partner or Person to whom a Unit of Partnership Interest
has been pledged shall have the right to request a certification from the
Partnership as to the date of the last division or combination of Units of
Partnership Interest. Promptly following any such action, Schedule A shall be
amended to reflect such action, notice of such action shall be provided to each
of the Partners and to any Person to whom a Unit of Partnership Interest has
been pledged (provided the Partnership shall have received notice of such Pledge
and the identity and address of such pledgee), and appropriate substitute
Partnership Interest Certificates shall be issued as of the effective date of
such action, in exchange for outstanding Partnership Interest Certificates
pursuant to such terms as shall be established by the Managing General Partner.
For the purpose of this Section 4.8, fair market values shall be as determined
in good faith by the Managing General Partner.
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V.
ALLOCATIONS; DISTRIBUTIONS; BANK ACCOUNTS;
BOOKS OF ACCOUNT; TAX RETURNS; ACCOUNTING AND
REPORTS; PARTNERSHIP FISCAL YEAR.
Section 5.1 Allocations.
(a) For the purpose of this Agreement, the terms "Profits" and "Losses"
mean, respectively, for each Partnership Fiscal Year or other period, the
Partnership's taxable income or loss for such Partnership Fiscal Year or
other period, determined in accordance with Section 703(a) of the Code (for
this purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Section 703(a)(1) of the Code shall be included
in taxable income or loss), adjusted as follows:
(1) any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Section 5.1(a) shall be added to such taxable income or
loss;
(2) in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Partnership Fiscal
Year or other period; and
(3) any items that are specially allocated pursuant to Section 5.1(d)
or 5.1(f) hereof shall not be taken into account in computing Profits or
Losses.
(b) Except as otherwise provided in Section 5.1(d) or 5.1(f) hereof, the
Profits and Losses of the Partnership (and each item thereof) for each
Partnership Fiscal Year shall be allocated among the Partners in accordance
with their respective Percentage Interests.
(c) For the purpose of Section 5.1(b) hereof, gain or loss resulting from
any disposition of Partnership property shall be computed by reference to the
Book Value of the property disposed of, notwithstanding that the adjusted tax
basis of such property for federal income tax purposes differs from its Book
Value.
(d) Notwithstanding the foregoing provisions of this Section 5.1, the
following provisions shall apply:
(1) Nonrecourse Deductions shall be allocated in accordance with the
Partners' Percentage Interests; provided, however, a Partner shall not
receive an allocation of any Partnership deduction that would result in
total loss allocations attributable to Nonrecourse Liabilities in excess
of such Partner's share of Minimum Gain (as determined under Regulations
Section 1.704- 2(g)). If there is a net decrease in Partnership Minimum
Gain for a Partnership Fiscal Year, in accordance with Regulations Section
1.704-2(f) and the exceptions contained therein, the Partners shall be
allocated items of Partnership income and gain for such Partnership Fiscal
Year (and, if necessary, for subsequent Partnership Fiscal Years) equal to
the Partners' respective shares of the net decrease in Minimum Gain within
the meaning of Regulations Section 1.704-2(g)(2) (the "Minimum Gain
Chargeback"). The items to be allocated pursuant to this Section 5.1(d)(1)
shall be determined in accordance with Regulations Section 1.704-2(f) and
(j).
(2) Any item of Partner Nonrecourse Deduction with respect to a Partner
Nonrecourse Debt shall be allocated to the Partner or Partners who bear
the economic risk of loss for such Partner Nonrecourse Debt in accordance
with Regulations Section 1.704-2(i)(1). Subject to Section 5.1(d)(1)
hereof, but notwithstanding any other provision of this Agreement, in the
event that there is a net decrease in Minimum Gain attributable to a
Partner Nonrecourse Debt (such Minimum Gain being hereinafter referred to
as "Partner Nonrecourse Debt Minimum Gain") for a Partnership Fiscal Year,
then after taking into account allocations pursuant to Section 5.1(d)(1)
hereof, but before any other allocations are made for such taxable year,
and subject to the exceptions set forth in Regulations Section
1.704-2(i)(4), each Partner with a share of Partner Nonrecourse Debt
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Minimum Gain at the beginning of such Partnership Fiscal Year shall be
allocated items of income and gain for such Partnership Fiscal Year (and,
if necessary, for subsequent Partnership Fiscal Years) equal to such
Partner's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain as determined in a manner consistent with the provisions of
Regulations Section 1.704-2(g)(2). The items to be allocated pursuant to
this Section 5.1(d)(2) shall be determined in accordance with Regulations
Section 1.704-2(i)(4) and (j).
(3) For the purpose of determining each Partner's share of excess
nonrecourse liabilities of the Partnership, and solely for such purpose,
each Partner's interest in Partnership profits shall be reasonably
determined by the Managing General Partner in accordance with Internal
Revenue Service authority interpreting Regulations Section 1.752-3(a)(3).
(4) No Partner shall be allocated any item of deduction or loss of the
Partnership if such allocation would cause such Partner's Capital Account
to become negative by more than the sum of (i) any amount such Partner is
obligated to restore upon liquidation of the Partnership, plus (ii) such
Partner's share of the Partnership's Minimum Gain and Partner Nonrecourse
Debt Minimum Gain. An item of deduction or loss that cannot be allocated
to a Partner pursuant to this Section 5.1(d)(4) shall be allocated among
the General Partners in proportion to their respective Percentage
Interests. For this purpose, in determining the Capital Account balance of
such Partner, the items described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5), and (6) shall be taken into account. In the
event that (A) any Limited Partner unexpectedly receives any adjustment,
allocation, or distribution described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5), or (6), and (B) such adjustment, allocation,
or distribution causes or increases a deficit balance (net of amounts
which such Limited Partner is obligated to restore or deemed obligated to
restore under Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5) and
determined after taking into account any adjustments, allocations, or
distributions described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
(5), or (6) that, as of the end of the Partnership Fiscal Year, reasonably
are expected to be made to such Limited Partner) in such Limited Partner's
Capital Account as of the end of the Partnership Fiscal Year to which such
adjustment, allocation, or distribution relates, then items of Gross
Income (consisting of a pro rata portion of each item of Gross Income) for
such Partnership Fiscal Year and each subsequent Partnership Fiscal Year
shall be allocated to such Limited Partner until such deficit balance or
increase in such deficit balance, as the case may be, has been eliminated.
In the event that this Section 5.1(d)(4) and Section 5.1(d)(1) and/or (2)
hereof apply, Section 5.1(d)(1) and/or (2) hereof shall be applied prior
to this Section 5.1(d)(4).
(5) In accordance with Sections 704(b) and 704(c) of the Code and the
Regulations thereunder, income, gain, loss, and deduction with respect to
any property contributed to the capital of the Partnership shall, solely
for federal income tax purposes, be allocated among the Partners so as to
take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and the initial Book
Value of such property as set forth on Schedule D hereto. If the Book
Value of any Partnership property is adjusted pursuant to Section 4.5(b)
hereof, subsequent allocations of income, gain, loss, and deduction with
respect to such asset shall take account of any variation between the
adjusted basis of such asset for federal income tax purposes and the Book
Value of such asset in the manner prescribed under Sections 704(b) and
704(c) of the Code and the Regulations thereunder.
(e) Notwithstanding anything to the contrary contained in this Section
5.1, the allocation of Profits and Losses for any Partnership Fiscal Year
during which a Person acquires a Partnership Interest (other than upon
formation of the Partnership) shall take into account the Partners' varying
interests for such Partnership Fiscal Year pursuant to any method permissible
under Section 706 of the Code that is selected by the Managing General
Partner (notwithstanding any agreement between the assignor and assignee of
such Partnership Interest although the Managing General Partner may recognize
any such agreement), which method may take into account the date on which the
Transfer or an agreement to Transfer becomes irrevocable pursuant to its
terms, as determined by the Managing General Partner.
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(f) In the event of a sale or exchange of a Partner's Partnership Interest
or portion thereof or upon the death of a Partner, if the Partnership has not
theretofore elected, pursuant to Section 754 of the Code, to adjust the basis
of Partnership property, the Managing General Partner shall cause the
Partnership to elect, if the Person acquiring such Partnership Interest or
portion thereof so requests, pursuant to Section 754 of the Code, to adjust
the basis of Partnership property. In addition, in the event of a
distribution referred to in Section 734(b) of the Code, if the Partnership
has not theretofore elected, the Managing General Partner may, in the
exercise of its reasonable discretion, cause the Partnership to elect,
pursuant to Section 754 of the Code, to adjust the basis of Partnership
property. Except as provided in Regulations Section 1.704-1(b)(2)(iv)(m),
such adjustment shall not be reflected in the Partners' Capital Accounts and
shall be effective solely for federal and (if applicable) state and local
income tax purposes. Each Partner hereby agrees to provide the Partnership
with all information necessary to give effect to such election. With respect
to such election:
(1) Any change in the amount of the depreciation deducted by the
Partnership and any change in the gain or loss of the Partnership, for
federal income tax purposes, resulting from an adjustment pursuant to
Section 743(b) of the Code shall be allocated entirely to the transferee
of the Partnership Interest or portion thereof so transferred. Neither the
capital contribution obligations of, nor the Partnership Interest of, nor
the amount of any cash distributions to, the Partners shall be affected as
a result of such election, and except as provided in Regulations Section
1.704-1(b)(2)(iv)(m), the making of such election shall have no effect
except for federal and (if applicable) state and local income tax
purposes.
(2) Solely for federal and (if applicable) state and local income tax
purposes and not for the purpose of maintaining the Partners' Capital
Accounts (except as provided in Regulations Section 1.704-1(b)(2)(iv)(m)),
the Partnership shall keep a written record for those assets, the basis of
which is adjusted as a result of such election, and the amount at which
such assets are carried on such record shall be debited (in the case of an
increase in basis) or credited (in the case of a decrease in basis) by the
amount of such basis adjustment. Any change in the amount of the
depreciation deducted by the Partnership and any change in the gain or
loss of the Partnership, for federal and (if applicable) state and local
income tax purposes, attributable to the basis adjustment made as a result
of such election shall be debited or credited, as the case may be, on such
record.
(g) The Profits, Losses, gains, deductions, and credits of the Partnership
(and all items thereof) for each Partnership Fiscal Year shall be determined
in accordance with the accounting method followed by the Partnership for
federal income tax purposes.
(h) Except as provided in Sections 5.1(d)(5) and 5.1(f) hereof, for
federal income tax purposes, each item of income, gain, loss, or deduction
shall be allocated among the Partners in the same manner as its correlative
item of "book" income, gain, loss, or deduction has been allocated pursuant
to this Section 5.1.
(i) Such portion of the gain allocated pursuant to this Section 5.1 that
is treated as ordinary income attributable to the recapture of depreciation
shall, to the extent possible, be allocated among the Partners in the
proportion that (i) the amount of depreciation previously allocated to each
Partner relating to the property that is the subject of the disposition bears
to (ii) the total of such depreciation allocated to all of the Partners. This
Section 5.1(i) shall not alter the amount of allocations among the Partners
pursuant to this Section 5.1, but merely the character of gain so allocated.
(j) To the extent permitted by Regulations Sections 1.704-2(h)(3) and
1.704-2(i)(6), the Managing General Partner shall endeavor to treat a
distribution of the proceeds of Nonrecourse Liabilities (that would otherwise
be allocable to an increase in Partnership Minimum Gain) or Partner
Nonrecourse Debt (that would otherwise be allocable to an increase in Partner
Nonrecourse Debt Minimum Gain) as a distribution that is not allocable to an
increase in Partnership Minimum Gain or Partner Nonrecourse Debt Minimum Gain
to the extent that such distribution does not cause or increase a deficit
balance in any Partner's Capital Account that exceeds the amount such Partner
is otherwise
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obligated to restore (within the meaning of Regulations Section
1.704-1(b)(2)(ii)(c)) as of the end of the Partnership's taxable year in
which the distribution occurs.
Section 5.2 Distributions.
(a) Subject, on liquidation of the Partnership to Section 11.1(a) hereof,
and to Section 11.1(e) hereof on liquidation of a Partner's interest in the
Partnership that is not in connection with the liquidation of the
Partnership, for the term of the Partnership, as set forth in Section 1.5
hereof:
(i) a cash distribution shall be made to the Partners, in accordance
with their respective Percentage Interests, not later than the fifteenth
(15th) Day of each month (the "Distribution Date") of each Partnership
Fiscal Year, in an amount equal to one-twelfth (1/12) of the Required
Distribution Amount for such Partnership Fiscal Year;
(ii) a cash distribution shall be made to the Partners, in accordance
with their respective Percentage Interests, on the Distribution Date
immediately following the date of an Additional Required Amount Notice, in
an amount equal to the Additional Required Amount; provided, however, that
if such Distribution Date is less than twenty (20) Days after the date of
such Additional Required Amount Notice, the Additional Required Amount
shall be distributed on the next Distribution Date;
(iii) in the event of a Minimum Distribution Amount Adjustment Notice, a
cash distribution shall be made to the Partners, in accordance with their
respective Percentage Interests, not later than the fifteenth (15th) Day of
the first month of each Partnership Fiscal Year, in an amount equal to the
Minimum Distribution Amount Adjustment for the prior Partnership Fiscal
Year;
(iv) in the event of a Tax Adjustment Notice, a cash distribution shall
be made to the Partners, in accordance with their respective Percentage
Interests, not later than the last Day of the fourth (4th) month of each
Partnership Fiscal Year, in an amount equal to the quotient obtained by
dividing (x) the Tax Adjustment Amount for the prior Partnership Fiscal
Year, by (y) the Percentage Interest of TCO on the Relevant Date; and
(v) in the event of a Deficiency Dividend Notice, a cash distribution
shall be made to the Partners, in accordance with their respective
Percentage Interests, as and when required by TCO, in an amount equal to
the Deficiency Dividend.
(b) All distributions pursuant to Section 5.2(a), Section 11.1(a), and
Section 11.1(e) hereof shall be made in accordance with the terms and
provisions of this Agreement to the Record Partner; provided, however, that
in the event of an assignment of a Partnership Interest pursuant to Section
8.3(a) hereof to a Person that does not become a substitute Partner in the
Partnership, the Record Partner may, subject to the provisions of Section
8.3(a) hereof, by written notice (a "Designee Notice") to the Manager, the
Partnership, and the Managing General Partner, designate such Person to
receive those distributions pursuant to Section 5.2(a) and Section 11.1(a) to
which the Record Partner would otherwise be entitled. The Managing General
Partner shall not incur any liability for distributions made in good faith to
any Record Partner or the designee of any Record Partner set forth in a
Designee Notice as provided above in this Section 5.2(b), notwithstanding
that another Person may have an interest in or be affected by such
distribution. Distributions to the Partners under this Agreement shall be
subject to any restriction imposed by applicable law, and the Managing
General Partner may refrain from making any distribution hereunder without
liability if it believes that the distribution would be in violation of any
applicable law.
Section 5.3 Guaranteed Payments; TCO's Right to Convert.
Not later than the fifteenth (15th) Day of each month of each Partnership
Fiscal Year, the Partnership shall pay to TCO, in cash or by good certified or
official bank check or by Fedwire transfer of immediately available funds, an
amount equal to the excess, if any, of (i) the cumulative Guaranteed Payment on
all Preferred Equity, over (ii) the sum of all prior payments made to TCO
pursuant to this Section 5.3, such amounts to be paid in the priorities, if any,
set forth in the applicable series. Amounts paid pursuant to this Section
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5.3 are intended to constitute guaranteed payments within the meaning of Section
707(c) of the Code and shall not be treated as distributions for purposes of
computing TCO's Capital Account balance.
TCO shall have the right, but not the obligation, to convert all or any
portion of the proceeds loaned to the Partnership pursuant to Section 4.1(b) to
Preferred Equity, which Preferred Equity shall be entitled to a Guaranteed
Payment in lieu of the payment of interest.
In the event of the redemption by TCO, in whole or in part, of any series of
preferred shares that constitute a Related Issue, TCO may convert that portion
of its Preferred Equity equal to the portion of the Related Issue that was
redeemed (exclusive of any accrued but unpaid dividends), to an Additional
Interest by contributing to the capital of the Partnership all of its right,
title, and interest, in and to the payment of any future Guaranteed Payment on
that portion of the converted Preferred Equity, with the effect that the portion
of the converted Preferred Equity and related right to the payment of any future
Guaranteed Payment shall be converted to an Additional Interest in accordance
with Section 8.4(a) hereof, such Additional Interest to be provided by a
proportionate reduction in the Percentage Interests of all of the Partners, as
provided in Section 8.4(a) hereof. Upon and to the extent of the conversion of
Preferred Equity to Additional Interests in accordance with this Section 5.3,
Schedule A to this Agreement shall be amended accordingly.
Section 5.4 Bank Accounts and Other Investments.
Funds of the Partnership shall be deposited in one or more bank accounts in
federal or state chartered banks having a shareholder capital and undistributed
surplus of not less than One Hundred Million Dollars ($100,000,000), all as
determined by the Managing General Partner. All withdrawals therefrom shall be
made upon the signature or signatures of whomever shall be designated in writing
from time to time by the Managing General Partner. Any checks of the Partnership
may be signed by any Person(s) designated in writing, from time to time, by the
Managing General Partner. In addition, funds of the Partnership may be invested
in highly liquid investments pursuant to an investment policy determined from
time to time by the Managing General Partner.
Section 5.5 Books of Account.
The Partnership shall maintain at its principal office complete and accurate
books of account and records of its operations showing the assets, liabilities,
costs, expenditures, receipts, profits, and losses of the Partnership, and which
books of account and records shall include provision for separate Capital
Accounts for the Partners and shall provide for such other matters and
information as may be required by the Partnership Law or as the Managing General
Partner shall otherwise determine, together with copies of all documents
executed on behalf of the Partnership. In addition, the Partnership shall
maintain at its principal office a Partnership Interest Ledger of the
Partnership, which shall set forth the information contained in Schedule A
attached hereto, and which shall be kept current by the Managing General
Partner. Each Limited Partner and its representatives, duly authorized in
writing, shall have the right to inspect and examine, at all reasonable times,
at the principal office of the Partnership, all such books of account, records,
ledgers, and documents.
Section 5.6 Tax Returns.
(a) The Managing General Partner shall determine the methods to be used in
the preparation of federal, state, and local income and other tax returns for
the Partnership in connection with all items of income and expense, including
but not limited to, valuation of assets, the methods of depreciation and cost
recovery, elections, credits, and tax accounting methods and procedures.
(b) To the extent all necessary information is available, within ninety
(90) Days after the end of each Partnership Fiscal Year, and in any event
within one hundred twenty (120) Days after the end of each Partnership Fiscal
Year, the Partnership shall cause to be prepared and transmitted to the
Partners federal and appropriate state and local Partnership Income Tax
Schedules "K-1," or any substitute therefor, with respect to such Partnership
Fiscal Year on appropriate forms prescribed.
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Section 5.7 Accounting and Reports, Etc.
(a) Within ninety (90) Days after the end of each Partnership Fiscal Year,
the Partnership shall cause to be prepared and transmitted to each Partner,
an annual report of the Partnership relating to the previous Partnership
Fiscal Year containing a statement of financial condition as of the year then
ended, and statements of operations, cash flow and Partnership equity for the
year then ended, which annual statements shall be prepared in accordance with
GAAP and shall be audited by the Partnership Accountants. The Partnership
shall also cause to be prepared and transmitted to each Partner within
forty-five (45) Days after the end of each of the first three (3) quarters of
each Partnership Fiscal Year, a quarterly unaudited report of the
Partnership's financial condition and statements of operations, cash flow and
Partnership equity relating to the fiscal quarter then just ended, prepared
in accordance with GAAP. The Partnership shall further cause to be prepared
and transmitted to TCO (i) such reports and/or information as are necessary
for TCO to fulfill its obligations under the Securities Act of 1933, the
Securities and Exchange Act of 1934 and the applicable stock exchange rules,
and under any other regulations to which TCO or the Partnership may be
subject, and (ii) such other reports and/or information as are necessary for
TCO to determine its qualification as a Real Estate Investment Trust under
the REIT Requirements or its liability for a tax as a consequence of its
Partnership Interest, including its distributive share of taxable income, in
each case, in a manner that will permit TCO to comply with such obligations
or make such determinations in a timely fashion.
(b) TCO shall, from time to time, upon the reasonable request of the
Manager, or as and when such information first becomes available to it,
provide the Manager, by written notice (the "TCO Information Notice"), with
such information necessary to permit the Manager to determine the Minimum
Distribution Amount Adjustment, including TCO's allocable portion of any
component thereof, for each Partnership Fiscal Year, any Tax Adjustment
Amount for any prior Partnership Fiscal Year, to the extent such Tax
Adjustment Amount has not yet been distributed or previously taken into
account in calculating a Tax Adjustment Amount, and any Deficiency Dividend.
Section 5.8 Partnership Fiscal Year.
The Partnership's fiscal year (and taxable year) shall be the Partnership
Fiscal Year.
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VI.
MANAGEMENT; AUTHORITY AND AUTHORIZED ACTIONS BY THE
MANAGING GENERAL PARTNER; EXTRAORDINARY TRANSACTIONS;
ANNUAL BUDGET; NOTICES; STANDARD OF CONDUCT; MASTER
SERVICES AGREEMENT AND CORPORATE SERVICES AGREEMENT;
ABSENCE OF AUTHORITY OF PARTNERS OTHER THAN THE MANAGING
GENERAL PARTNER; FIDELITY BONDS AND INSURANCE;
ENGAGEMENT OF PARTNERS' AFFILIATES; INDEMNITY AND
REIMBURSEMENT; TAX MATTERS PARTNER.
Section 6.1 Management; Authority and Authorized Actions by the Managing General
Partner.
(a) The Managing General Partner shall be responsible for the management
of the Partnership and, subject to Section 6.1(b) hereof, shall have the full
and exclusive right, power and authority, on behalf of and in the name of the
Partnership, to carry out any and all objectives and purposes of the
Partnership and to exercise any and all of the powers of the Partnership and
to perform any and all acts and enter into and perform any and all contracts,
agreements, and other undertakings which it may deem necessary or advisable
in furtherance of the purposes of the Partnership or incidental thereto. In
such capacity, the Managing General Partner shall use its Best Efforts to
carry out the purposes of the Partnership and shall have in respect of its
management of the Partnership all of the powers of the Partnership and shall
devote such time and attention to the Partnership as is reasonably necessary
for the proper management of the Partnership and its properties. The Managing
General Partner may employ or engage others including one or more Affiliates
of a Partner (e.g., TTC) to satisfy its obligations in respect of all
actions, decisions, determinations, designations, delegations, directions,
appointments, consents, approvals, selections, and the like to be taken,
made, or given by and/or with respect to the Partnership, its business and
its properties as well as management of all Partnership affairs, and all such
actions, decisions, determinations, designations, delegations, directions,
appointments, consents, approvals, selections, and the like shall be
controlling and binding upon the Partnership. Any Person employed or engaged
by the Managing General Partner shall have and be subject to all of the
rights, obligations and restrictions of the Managing General Partner, all as
provided in this Agreement.
The Managing General Partner shall supervise the Manager and review on a
regular basis the reports and other information furnished by the Manager from
time to time pursuant to the Master Services Agreement.
(b) For so long as the aggregate Percentage Interest held by AAT
Affiliates equals or exceeds five percent (5%), without the prior written
consent of a Majority in Interest of the Non-Managing Partners, the Managing
General Partner shall not enter into any Extraordinary Transaction. For
purposes of this Section 6.1(b), a Majority in Interest of the Non-Managing
Partners shall be deemed to have consented to an Extraordinary Transaction,
without the requirement of an actual vote of the Non-Managing Partners, if
those Non-Managing Partners holding in excess of fifty percent (50%) of the
aggregate Percentage Interests held by all the Non-Managing Partners consent
to such transaction in writing.
Section 6.2 Delegation of Authority and Designation of Officers.
(a) The Managing General Partner may delegate any of its powers
hereinbefore, hereinafter, or by law provided or conferred to one (1) or more
Persons, or designate one (1) or more Persons to do or perform those matters
to be done or performed by the Managing General Partner. In addition, the
Managing General Partner may designate one (1) or more employees or agents of
the Partnership who are denominated as officers who shall exercise such
powers and shall have such duties as may from time to time be assigned or
established by the Managing General Partner. Any designated officer of the
Partnership shall serve at the pleasure of the Managing General Partner and
may be removed at any time with or without cause, by the Managing General
Partner.
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(b) The Partners, by their execution and delivery of this Agreement,
irrevocably authorize the Managing General Partner and any Person or Persons
designated or delegated by the Managing General Partner to do any act that
the Managing General Partner has the right, power, and authority to do under
the provisions of this Agreement, without any other or subsequent
authorizations, approvals, or consents of any kind. No Person dealing with
the Partnership shall be required to investigate or inquire as to the
authority of the Managing General Partner, and any Person or Persons
designated or delegated by the Managing General Partner to exercise the
rights, powers, and authority herein conferred upon them. Any Person dealing
with the Partnership shall be entitled to rely upon any action taken by the
Managing General Partner and any Person or Persons designated or delegated by
the Managing General Partner, and the Partnership shall be bound thereby. Any
Person dealing with the Partnership shall be entitled to rely upon any
document or instrument executed and delivered by a Person or Persons
designated by the Managing General Partner, and the Partnership shall be
bound thereby. No purchaser of any property or interest owned by the
Partnership, or lender, or Third Party in respect of any matter shall be
required to determine the sole and exclusive authority of the Person or
Persons designated or delegated by the Managing General Partner to execute
and deliver on behalf of the Partnership any such instrument of transfer or
security, or to see to the application or distribution of revenues or
proceeds paid or credited in connection therewith.
Section 6.3 Compensation of Certain Employees of the Manager; Issuance of
Incentive Options.
The Managing General Partner shall approve the compensation of any employee
of the Manager or the Partnership who is also at such time an AAT Affiliate and
administer a program or programs whereby the Partnership shall from time to
time, and without the consent of any Partner, grant to employees of TTC options
(the "Incentive Options") to acquire limited partner Partnership Interests
pursuant to an Incentive Option Plan, which plan and any amendments thereto
shall have been approved by the Managing General Partner. After review of
recommendations made by Taub-Co, the Managing General Partner may direct the
Partnership to issue the Incentive Options to employees of TTC.
Section 6.4 Annual Budget; Notices.
Pursuant to the Master Services Agreement, the Manager is required to prepare
and submit to the Managing General Partner for approval, prior to the beginning
of each Partnership Fiscal Year, an annual development budget (the "Annual
Development Budget"), and an annual operating budget (the "Annual Operating
Budget") for the Partnership, which shall reflect a reasonable estimate of the
proposed operations (including development) and expenses of the Partnership for
such Partnership Fiscal Year, and which shall include the Required Distribution
Amount for such Partnership Fiscal Year and any annual business plan, leasing
plan or similar materials required of the Manager under the Master Services
Agreement. (The Annual Development Budget and the Annual Operating Budget are
referred to together as the "Annual Budget".)
In addition to the foregoing, pursuant to the Master Services Agreement, the
Manager will be engaged to: (i) advise the Managing General Partner by written
notice (an "Additional Required Amount Notice"), within thirty (30) Days after
the closing of any capital gain transaction of the Partnership, of the
Additional Required Amount with respect to such capital gain transaction of the
Partnership, (ii) after a TCO Information Notice in respect of a Tax Adjustment
Amount, advise the Managing General Partner by written notice (a "Tax Adjustment
Notice") not less than ten (10) Days prior to TCO's first regular dividend date,
of the Tax Adjustment Amount for such Partnership Fiscal Year, (iii) after a TCO
Information Notice, in respect of a Minimum Distribution Amount Adjustment, not
later than December 1 of each Partnership Fiscal Year, advise the Managing
General Partner, by written notice (a "Minimum Distribution Amount Adjustment
Notice") of the Minimum Distribution Amount Adjustment for such Partnership
Fiscal Year, and (iv) after a TCO Information Notice, in respect of TCO's
obligation to declare and pay a deficiency dividend pursuant to Section
860(f)(1) of the Code as a result of a determination (as defined in Section
860(e) of the Code), advise the Managing General Partner by written notice (the
"Deficiency Dividend Notice") of the Deficiency Dividend for such Partnership
Fiscal Year.
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Section 6.5 Master Services Agreement and Corporate Services Agreement;
Engagement of Partners' Affiliates.
The Managing General Partner shall manage and perform, or employ or engage
others, including one or more Affiliates of a Partner (e.g., TTC), to manage and
perform all activities and services in furtherance of the purposes of the
Partnership including, without limitation, seeking Development Opportunities,
and Regional Centers, and further including without limitation, all activities
and services in respect of Development Opportunities, all activities and
services in respect of the expansion, reconstruction, repair, renovation, or
alteration of Regional Centers and/or the development of any Peripheral
Property, and all other activities and services in respect of the management,
administration, leasing, financing, refinancing, development, improvement,
acquisition and disposition of Regional Centers. The Partnership has heretofore
entered into the Master Services Agreement. In addition, the Partnership may
provide in the partnership agreement, limited liability company agreement, or
other agreement forming or covering an Owning Entity or in separate agreements
entered into between an Owning Entity and TTC, which agreements may include an
Owning Entity Agreement, for such terms, provisions, and conditions, and
compensation to TTC, all in respect of the activities of TTC for the benefit of
a Development Opportunity or a Regional Center, as shall be determined by the
Managing General Partner, and TTC or as shall be available pursuant to
negotiations with Third Parties having an interest in such Development
Opportunity or Regional Center. The compensation to be paid to TTC, as
applicable, as well as all reimbursements for or in respect of services rendered
to the Partnership shall be as provided in the Master Services Agreement, an
Owning Entity Agreement, or other applicable agreement forming or covering an
Owning Entity. The Partnership has heretofore entered into the Corporate
Services Agreement, pursuant to which TCO has engaged TTC to assist with,
implement and effect the actions to be taken by TCO as the Managing General
Partner, and to do or perform those matters to be done or performed by TCO as
the Managing General Partner in accordance with the terms and provisions of this
Agreement.
Section 6.6 Absence of Authority of Non-Managing Partners.
Except as specifically provided in this Agreement, the Non-Managing Partners,
as such, shall take no part in, nor have the right to take part in, nor
interfere in, nor have the right to interfere or participate in, in any manner,
the conduct or control of the business of the Partnership or have any right or
authority to act for or on behalf of the Partnership.
Section 6.7 Fidelity Bonds and Insurance.
The Partnership shall obtain fidelity bonds with reputable surety companies,
covering all Persons having access to the Partnership funds, indemnifying the
Partnership against loss resulting from fraud, theft, dishonesty, and other
wrongful acts of such Persons. The Partnership shall carry or cause to be
carried on its behalf, with companies and in amounts determined by the Managing
General Partner all property, liability, and workers' compensation insurance as
shall be required under applicable mortgages, leases, agreements, and other
instruments and statutes by which the Partnership or its properties are bound,
as well as such additional insurance and coverages as the Managing General
Partner, shall from time to time propose or approve.
Section 6.8 Execution of Legal Instruments.
All legal instruments affecting the Partnership or Partnership property need
be executed by, and only by, that Person or those Persons (who need not be
Partners) designated in writing by the Managing General Partner and such
designated Person's(s') signature(s) shall be sufficient to bind the Partnership
and its properties.
Section 6.9 Indemnity and Reimbursement; Advancement of Expenses and Insurance.
(a) To the fullest extent permitted by law, the Partnership shall and does
hereby indemnify, defend, and hold harmless each Indemnified Person from any
claim, demand, or liability, and from any loss, cost, or expense including,
without limitation, attorneys' fees and court costs, which may be asserted
against,
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imposed upon, or suffered by such Indemnified Person by reason of any act
performed for or on behalf of the Partnership, or in furtherance of the
Partnership's business, to the extent authorized hereby, or by reason of any
omission, except for any act or omission that constitutes a breach of a duty
of loyalty, any act or omission not in good faith or which involves
intentional misconduct or a Knowing violation of law, and provided that with
respect to any criminal action or proceeding, such Indemnified Person had no
reasonable cause to believe its or his conduct was unlawful, and provided
further that no indemnification shall be made in respect of any claim,
demand, or liability, or for any loss, cost, or expense, as to which such
Indemnified Person shall have been adjudged to be liable to the Partnership
unless and only to the extent that a court shall determine, despite the
adjudication of liability but in view of all the circumstances of the case,
such Indemnified Person is fairly and reasonably entitled to indemnity. Each
Indemnified Person shall not have any personal liability to the Partnership
or its Partners for monetary damages for breach of fiduciary duty except (i)
for a breach of a duty of loyalty, or (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a Knowing violation of law.
Any indemnity under this Section 6.9(a) shall be provided out of and to the
extent of Partnership assets only, and only with respect to amounts actually
and reasonably incurred, and no Partner shall have any personal liability on
account thereof.
(b) Expenses (including attorneys' fees) incurred by an Indemnified Person
in defending any civil, criminal, administrative or investigative action,
suit, or proceeding relating to any action or omission in respect of the
Partnership shall be paid by the Partnership in advance of the final
disposition of the action, suit, or proceeding upon receipt of an undertaking
by or on behalf of such Indemnified Person to repay such amount if it is
ultimately determined that such Indemnified Person is not entitled to be
indemnified by the Partnership.
(c) The Partnership may purchase and maintain insurance, as determined by
the Managing General Partner in respect of each Indemnified Person against
any liability relating to any act or omission in respect of the Partnership,
whether or not the Partnership may indemnify such Indemnified Person against
such liability.
(d) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 6.9 shall survive the liquidation,
dissolution and termination of the Partnership and the termination of this
Agreement, shall continue as to any Person who has terminated his
relationship with the Partnership and shall inure to the benefit of such
Person's heirs, executors and administrators and shall, to the extent
permitted by the Partnership Law, be binding on the Partnership's successors
and assigns.
Section 6.10 Tax Matters Partner.
(a) As used in this Agreement, "Tax Matters Partner" has the meaning set
forth in Section 6231(a)(7) of the Code. The Managing General Partner is
hereby designated Tax Matters Partner for the Partnership. The Tax Matters
Partner shall comply with the requirements of Sections 6221 through 6233 of
the Code applicable to a Tax Matters Partner. To the fullest extent permitted
by law, the Partnership shall and does hereby indemnify, defend, and hold
harmless the Tax Matters Partner from any claim, demand, or liability, and
from any loss, cost, or expense including, without limitation, attorneys'
fees and court costs, which may be asserted against, imposed upon, or
suffered by the Tax Matters Partner by reason of any act performed for or on
behalf of the Partnership in its capacity as Tax Matters Partner to the
extent authorized hereby, or by reason of any omission, except acts or
omissions not in good faith or which involve intentional misconduct or a
Knowing violation of law. Any indemnity under this Section 6.10(a) shall be
provided out of and to the extent of Partnership assets only, and only with
respect to amounts actually and reasonably incurred, and no Partner shall
have any personal liability on account thereof. The indemnity provided in
this Section 6.10 shall survive the liquidation, dissolution, and termination
of the Partnership and the termination of this Agreement and shall, to the
extent permitted by the Partnership Law, be binding on the Partnership's
successors and assigns.
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(b) The Tax Matters Partner shall have a continuing obligation to provide
the Internal Revenue Service with sufficient information so that proper
notice can be mailed to all Partners as provided in Section 6223 of the Code,
provided that each Partner shall furnish the Tax Matters Partner with all
such information (including information specified in Section 6230(e) of the
Code) as is required with respect to such Partner for such purpose.
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VII.
OTHER VENTURES.
The Partners acknowledge and agree that each of them and their respective
constituents and Affiliates may have interests in other present or future
ventures, of whatever nature, including real estate, and further including
without limitation, ventures that are competitive with the Partnership and that,
notwithstanding its status as a Partner in the Partnership, a Partner and their
respective constituents and Affiliates shall be entitled to obtain and/or
continue their respective individual participation in all such ventures without
(i) accounting to the Partnership or the other Partners for any profits with
respect thereto, (ii) any obligation to advise the other Partners of business
opportunities for the Partnership which may come to its or its constituents' or
Affiliates' attention as a result of its or its Affiliates' or constituents'
participation in such other ventures or in the Partnership, and (iii) being
subject to any claims whatsoever on account of such participation.
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VIII.
TRANSFERS OF UNITS OF PARTNERSHIP INTEREST;
SUBSTITUTION OF PARTNERS; ADDITIONAL PARTNERSHIP
INTERESTS; CONVERSION OF PARTNERSHIP INTERESTS.
Section 8.1 Transfers.
(a) No Partner may Transfer all or any portion of its Partnership Interest
or, if such Partner is an entity (other than TCO and other than a Qualified
Institutional Transferee that is not a QIT Entity), permit a Transfer of an
interest in such Partner, to any Person except as specifically permitted in
this Article VIII.
(b) A Partner (other than TCO) may Transfer all or any portion of its
Partnership Interest (but not less than one (1) Unit of Partnership Interest)
to any other Partner, or to one (1) or more members of such Partner's
Immediate Family, or to a Family Trust, or to any Qualified Institutional
Transferee, or to an entity consisting of or owned entirely by one (1) or
more of the foregoing Persons, or to the Partnership, or, in the event that a
Partner is a partnership, or other entity (other than TCO and other than a
Qualified Institutional Transferee that is not a QIT Entity), to one (1) or
more of the constituent partners, or owners of such Partner or other entity,
or to one (1) or more members of the respective Immediate Families or Family
Trusts of the constituent partners, or owners of such Partner or other
entity, or to any Qualified Institutional Transferee, or to an entity
consisting of or owned entirely by one (1) or more of the foregoing Persons,
or to the Partnership, provided that, in each case, the Managing General
Partner has determined by written notification (a "Transfer Determination"),
to the transferring Partner, which Transfer Determination shall not be
unreasonably withheld and shall be deemed given if not refused within seven
(7) Business Days of the date of notice thereof to the Partnership, that
either (A) such Transfer will not cause (i) any lender of the Partnership or
an Owning Entity to hold in excess of ten percent (10%) of the Percentage
Interests or any other percentage of the Percentage Interests that would,
pursuant to the Regulations under Section 752 of the Code or any successor
provision, cause a loan by such lender to constitute Partner Nonrecourse Debt
or (ii) a violation of any partnership agreement or other document forming or
governing an Owning Entity, or (B) the Managing General Partner has
determined to waive such requirement in its reasonable discretion, after
having determined that the Transfer will not materially adversely affect the
Partnership, its assets or any Partner, or constitute a violation of the
Partnership Law, or any other law to which the Partnership or an Owning
Entity is subject.
In addition to the foregoing, in the event that a Partner is a partnership
or other entity (other than the Managing General Partner and other than a
Qualified Institutional Transferee that is not a QIT Entity), such Partner
may permit a Transfer of an interest in such Partner to any constituent
partner or owner of such Partner, to one (1) or more members of any
constituent partner's or owner's Immediate Family or a Family Trust with
respect to any constituent partner or owner, or to any Qualified
Institutional Transferee, or to any Partner, provided that, in each case, the
Managing General Partner has made a Transfer Determination prior to the
proposed Transfer.
(c) TCO may Transfer all or any portion of its Partnership Interest (but
not less than one (1) Unit of Partnership Interest) to, and only to, the
Partnership or to any other Partner(s) or to any Qualified Institutional
Transferee(s) provided that TCO retains at least a thirty percent (30%)
Percentage Interest in the Partnership. Notwithstanding anything to the
contrary contained in this Agreement, in the event of a Transfer (other than
a Transfer to an existing General Partner or to the Partnership) of a portion
of TCO's Partnership Interest pursuant to this Section 8.1(c), such
Partnership Interest (or a portion thereof) shall immediately convert to a
Partnership Interest as a limited partner in the Partnership, which
transferee, subject to the provisions of Section 8.2 hereof, shall have and
be subject to all of the rights, obligations, restrictions, and attributes of
a limited partner, all as provided in this Agreement. In the event of a
conversion of a portion of TCO's Partnership Interest pursuant to this
Section 8.1(c), without the approval, consent or act of any Partner, the
Managing General Partner may amend this Agreement, the
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Certificate of Limited Partnership (if required by the Partnership Law), and
any other document determined by the Managing General Partner to be necessary
to reflect the foregoing.
(d) Transfers of ownership interests in TCO and in any Qualified
Institutional Transferee (other than a QIT Entity) as well as the change in a
trustee of any trust that is a Partner or of any trust that holds an interest
in any Partner may be made without restriction by the terms of this
Agreement. Without the approval, consent or act of any Partner, the Managing
General Partner may amend this Agreement, the Certificate of Limited
Partnership (if required by the Partnership Law), and any other document
determined by the Managing General Partner to be necessary to reflect any
such Transfer or, if necessary, change in trustee.
(e) In the event that the Managing General Partner is unable to provide a
Transfer Determination to a Partner in accordance with this Section 8.1, upon
request of such Partner, the Managing General Partner may provide a
conditional Transfer Determination (a "Conditional Transfer Determination"),
which Conditional Transfer Determination shall be subject to such terms and
conditions as the Managing General Partner shall determine and so state in
the Conditional Transfer Determination.
(f) Any action contrary to the provisions of this Article VIII shall be
null and void and ineffective for all purposes.
Section 8.2 Substitution of Partners.
Regardless of compliance with any of the provisions hereof (including,
without limitation, the provisions of Section 8.1 and Article IX hereof)
permitting a Transfer of a Partnership Interest, no Transfer (except by way of a
Pledge) of a Partnership Interest shall be recognized by or be binding upon the
Partnership unless:
(i) such instruments as may be required by the Partnership Law or other
applicable law or to effect the continuation of the Partnership and the
Partnership's ownership of its properties are executed and delivered and/or
filed;
(ii) the assignee delivers to the Partnership, a Partnership Interest
Certificate evidencing the number of Units of Partnership Interest which are
the subject of the Transfer, together with a duly executed and acknowledged
written instrument of assignment, which instrument of assignment binds the
assignee to all of the terms and conditions of this Agreement as if the
assignee were a signatory party hereto and does not release the assignor from
any liability or obligation (accrued to the date of Transfer) of or in
respect of the Partnership Interest which is the subject of the Transfer;
(iii) the instrument of assignment is manually signed by the assignee and
assignor with such proof of authenticity of the signatures as the Managing
General Partner may reasonably require; and
(iv) in the event that such assignee is not then a Partner in the
Partnership, the Managing General Partner shall have consented (which consent
may be withheld for any reason or for no reason) in writing to the admission
of the assignee as a substitute partner (in respect of the Partnership
Interest acquired) in the Partnership.
An assignee of a Partnership Interest pursuant to a Transfer permitted in
this Agreement may, subject to the provisions of this Article VIII, be admitted
as a partner in the Partnership in the place and stead of the assignor Partner
in respect of the Partnership Interest acquired from the assignor Partner and
shall, except as otherwise specifically provided in this Agreement, have all of
the rights, powers, obligations, and liabilities, and be subject to all of the
restrictions, of the assignor Partner, including, without limitation, the
liability of the assignor Partner for any existing unperformed obligations of
the assignor Partner. In the event that a Partner pledges or proposes to pledge
its Partnership Interest or any portion thereof (but not less than one (1) Unit
of Partnership Interest) in connection with a financing transaction, such
Partner may request that the Managing General Partner consent in writing, at the
time of the financing transaction or in contemplation thereof, to the admission
of a pledgee or pledgees (or transferee(s) upon the foreclosure or like action
in respect of such Pledge) as a substitute partner(s) in the Partnership (which
consent may be withheld for any reason or for
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no reason). Each of the Partners, on behalf of itself and its permitted
successors and assigns, HEREBY AGREES AND CONSENTS to the admission of any such
substitute partners as herein provided.
Section 8.3 Failure or Refusal to Grant Consent.
(a) The Managing General Partner's failure or refusal to grant its consent
to the admission of an assignee as a substitute Partner in the Partnership as
provided in clause (iv) of Section 8.2 hereof, shall not affect the validity
or effectiveness of any such instrument as an assignment by the assignor to
the assignee of the right to receive the share of the Profits or Losses or
other items, or distributions from the Partnership, or the return of the
contribution to which such assignor would be entitled and which was thereby
assigned, provided that such assignor has received a Transfer Determination
from the Managing General Partner in accordance with Section 8.1(b) hereof in
respect of such Transfer, and a duly executed and acknowledged written
instrument of assignment in form reasonably satisfactory to the Managing
General Partner, the terms of which are not in contravention of any of the
provisions of this Agreement, and which terms shall contain appropriate
indemnifications in favor of the Partnership with respect to distributions
and other matters as the Managing General Partner may reasonably require, is
filed with the Partnership; provided, however, that the assignor shall
continue to be a Partner for all purposes of the Partnership, except that the
assignee (and not the assignor) shall be considered to hold the interest (and
the related Units of Partnership Interest) assigned for purposes of
exercising all rights of approval under this Agreement.
(b) An assignee of any portion of or an interest in a Partnership Interest
(an "Assigned Interest") pursuant to a Transfer with respect to which a
Transfer Determination has been granted that has not, for any reason, been
admitted as, or become, a partner in the Partnership in the place and stead
of an assignor Partner (the "Original Assignor") in respect of the Assigned
Interest, may, by prior written notice to the Managing General Partner,
assign the Assigned Interest, in accordance with and subject to the
provisions of this Article VIII, in all respects as if or with the same
effect as if such assignee were a Partner, and in the event that any
subsequent assignee is admitted as a substitute partner in accordance with
and subject to Section 8.2 hereof, the Original Assignor, simultaneously with
such subsequent assignment, shall Transfer all of its remaining right, title,
and interest in the Partnership Interest relating to the Assigned Interest,
to the Partner acquiring the Assigned Interest, which Partner shall act and
be the partner in respect of the Assigned Interest in the place and stead of
the Original Assignor. Each assignor Partner, on behalf of itself and its
permitted successors and assigns, hereby agrees to enter into an appropriate
amendment to this Agreement, the Certificate of Limited Partnership (if
required by the Partnership Law), and any other document determined by the
Managing General Partner to be necessary to reflect the foregoing.
Section 8.4 Issuance of Additional Interests to TCO and Other Persons or of
Incentive Interests to Certain Persons.
(a) At any time after the Effective Date, the Managing General Partner,
subject to (i) Section 6.1(b) hereof, (ii) a determination in accordance with
the Transfer Determination provisions of Section 8.1(b) hereof in respect of
the issuance of additional Partnership Interests, and (iii) a determination
that such issuance will be in the best interests of the Partnership, may
cause the Partnership to issue additional Partnership Interests in the
Partnership to and, if desired, admit as a Partner in the Partnership, any
Person including TCO (herein referred to as an "Additional Interest") in
exchange for the contribution to the Partnership by such Person of
development or other venture opportunities, interests in development or other
venture opportunities, regional shopping center developments, interests in
regional shopping center developments, cash, cash equivalents and/or other
assets, as determined by the Managing General Partner in accordance with
Section 3.1 hereof. In the event that an Additional Interest is issued by the
Partnership pursuant to this Section 8.4(a), such Additional Interest shall
be provided by a proportionate reduction in the Percentage Interests of all
of the Partners. The Managing General Partner shall be authorized on behalf
of each of the Partners to amend this Agreement and the Certificate of
Limited Partnership (if required by the Partnership Law), to reflect the
admission
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of an additional partner or an increase in the Percentage Interest of a
Partner, as applicable, and the corresponding reduction in the Percentage
Interests of the Partners.
(b) At any time and without the consent of any Partner, the Managing
General Partner, subject to a determination by the Managing General Partner
in accordance with the Transfer Determination provisions of Section 8.1(b)
hereof in respect of the issuance of additional Partnership Interests, may
cause the Partnership to issue, pursuant to an Incentive Option Plan,
Partnership Interests (herein referred to as an "Incentive Interest") to and,
if desired, admit as Partners in the Partnership, Persons upon exercise of
the Incentive Options in exchange for the contribution to the capital of the
Partnership of the exercise price, in accordance with the Incentive Option
Plan governing such grant. In the event that any individual that is granted
an Incentive Option is not permitted to be a partner in the Partnership as a
result of Section 8.1(b)(i) hereof, and is not prohibited from acquiring
additional Equity Shares pursuant to the provisions of TCO's Articles of
Incorporation, as the same may be amended from time to time, such individual
shall assign to TCO its rights under the Incentive Option Plan in exchange
for Equity Shares prior to the actual issuance of such Partnership Interest
to such individual. In the event that an Incentive Interest is issued by the
Partnership pursuant to this Section 8.4(b), such Incentive Interest shall be
provided by a proportionate reduction in the Percentage Interests of all of
the Partners. The Managing General Partner shall be authorized on behalf of
each of the Partners to amend this Agreement and the Certificate of Limited
Partnership (if required by the Partnership Law), to reflect the admission of
an additional limited partner and the corresponding reduction in the
Percentage Interests of all of the Partners.
Section 8.5 Conversion of Partnership Interests.
(a) Taub-Co shall have no obligation to remain a General Partner of the
Partnership. Taub-Co, at any time, may, without the consent of any Partner
including the Managing General Partner, convert all, or any portion, of its
Partnership Interest as a General Partner to a Partnership Interest as a
limited partner, which limited partner shall have and be subject to all of
the rights, obligations, restrictions, and attributes of a limited partner,
all as provided in this Agreement but shall retain all of those specific
rights and attributes provided Taub-Co as a Non-Managing Partner under this
Agreement. In the event of a conversion of all or a portion of Taub-Co's
Partnership Interest pursuant to this Section 8.5(a), the Managing General
Partner may, without the approval, consent or act of any Partner, amend this
Agreement, the Certificate of Limited Partnership (if required by the
Partnership Law), and any other document determined by the Managing General
Partner, or reasonably requested by Taub-Co, to be necessary to reflect the
foregoing.
(b) TG and TCO shall each remain a General Partner of the Partnership. In
the event that TCO acquires all or a portion of the Partnership Interest of a
Limited Partner, such Partnership Interest shall, without any further action,
automatically convert to a general partner's Partnership Interest in the
Partnership; provided, however, that without the approval, consent or act of
any Partner, the Managing General Partner may amend this Agreement, the
Certificate of Limited Partnership (if required by the Partnership Law), and
any other document determined by the Managing General Partner to be necessary
to reflect the foregoing.
Section 8.6 No Change to TG Receivable Documents.
The approval of the Managing General Partner shall be required to amend the
TG Receivable Documents, to permit a Transfer, or a prepayment (in whole or in
part), of the TG Receivables or permit any Person to be released from liability
thereunder.
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IX.
WITHHOLDING.
If the Partnership is required by any state or federal law or regulation to
withhold tax attributable to allocations of Profits or items of the foregoing or
distributions to a Partner or if the Managing General Partner in its discretion,
determines it to be in the best interest of the Partnership to withhold amounts
in connection with a Partner's tax liability (e.g., to file a unified state
income tax return for nonresidents of a particular state) (all such amounts
being herein referred to collectively as the "Additional Tax"), any Additional
Tax shall (i) be withheld from cash otherwise currently distributable to such
Partner, and (ii) to the extent cash is not distributable to such Partner for
the taxable period as to which such withholding is required, be treated as a
loan from the Partnership to such Partner, which loan shall bear interest at the
Partnership's cost of funds, and the portion of all cash subsequently
distributable to such Partner shall, to the extent of the unpaid principal
amount of, and the accrued interest on, such loan, be retained by the
Partnership and applied against such loan.
For the purpose of determining a Partner's Capital Account, any amount of
cash allocable to a Partner that is retained by the Partnership pursuant to this
Article IX shall be treated as if such cash had been actually distributed to
such Partner.
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X.
DISABLING EVENT OR EVENT OF WITHDRAWAL IN RESPECT
OF A PARTNER; SUCCESSION OF INTERESTS.
Section 10.1 Disabling Event or Event of Withdrawal in Respect of a Partner.
(a) For purposes of this Article X:
(1) a "Disabling Event" means, with respect to a Partner, such Partner's
(A) in the case of a Partner that is a natural person, death, (B)
Bankruptcy, (C) in the case of a Partner who is a natural person, the entry
by a court of competent jurisdiction adjudicating him incompetent to manage
his person or his property, (D) in the case of a Partner who is acting as a
Partner by virtue of being a trustee of a trust, the termination of the
trust (but not merely the substitution of a new trustee), (E) in the case
of a Partner that is a separate partnership or limited liability company,
the dissolution and commencement of winding up of the separate partnership
or limited liability company, or (F) in the case of a Partner that is a
corporation, the filing of a certificate of dissolution, or its equivalent,
for the corporation or the revocation of its charter and the expiration of
ninety (90) Days after the date of notice to the corporation or revocation
without a reinstatement of its charter;
(2) a "Disabled Partner" or the "Disabled General Partner" or the
"Disabled Limited Partner" means a Partner (General or Limited, as the case
may be) who has suffered a Disabling Event or an Event of Withdrawal;
(3) a "Representative" means, with respect to a Disabled Partner, (A)
the personal representative(s), executor(s), or administrator(s) of the
estate of a deceased Partner, and (B) the committee or other legal
representative(s) of the estate of an insane, incompetent, or Bankrupt
Partner;
(4) a "Successor" means, with respect to a Disabled Partner, the legal
representative(s) or successor(s) of a corporation, partnership or other
business organization, or trust or other entity which is dissolved (without
timely reconstitution or continuation) or terminated or whose legal
existence has ceased; and
(5) "Event of Withdrawal" means, with respect to a Partner, such
Partner's retirement, resignation, other withdrawal from the Partnership
pursuant to the Partnership Law or any other event (which is not a
Disabling Event) that causes a Partner to cease to be a Partner under the
Partnership Law.
(b) Upon the occurrence of a Disabling Event or an Event of Withdrawal in
respect of a General Partner the Partnership shall dissolve; provided,
however, that the Partnership shall not be dissolved if the remaining General
Partners, by an affirmative, unanimous vote of such General Partners, elect
to continue the Partnership in all respects pursuant to this Agreement, and
the Partnership Interest of the Disabled General Partner shall automatically
become that of a limited partner except to the extent such Disabled General
Partner, at such time or any time thereafter, assigns its Partnership
Interest to another General Partner, subject to the provisions of Section 8.1
hereof; and such Disabled General Partner or Successor shall thereupon have
the same interest in the Partnership capital, profits, losses, and
distributions as the Disabled General Partner, but otherwise shall have and
be subject to all the rights, obligations, restrictions, and attributes of a
limited partner, all as provided in this Agreement. Upon the occurrence of a
Disabling Event or an Event of Withdrawal in respect of the last remaining
General Partner, the Partnership shall dissolve; provided, however, that the
Partnership shall not be dissolved if within ninety (90) Days after such
Disabling Event or Event of Withdrawal (the "Ninety Day Period") all Partners
agree in writing to continue the business of the Partnership and to the
appointment, effective as of the date of such Disabling Event or Event of
Withdrawal, of one (1) or more general partners of the Partnership as
successor general partner(s) ("Successor General Partner") to act as, and be
in all respects under this Agreement, a general partner. If any such election
is made, the Partnership shall continue pursuant to this Agreement for the
term provided in Section 1.5 hereof, and the Partnership
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Interest of the Disabled General Partner in the Partnership (except to the
extent such interest is held by the Successor General Partner) shall
automatically become that of a limited partner; and such Representative or
Successor to the Disabled General Partner (subject, in the case of a
Representative or Successor, to Sections 8.1 and 8.2 hereof) shall thereupon
have the same interest in the Partnership capital, profits, losses, and
distributions as the Disabled General Partner, but otherwise (except to the
extent a Successor to the Disabled General Partner shall be the Successor
General Partner) shall have and be subject to all the rights, obligations,
restrictions, and attributes of a limited partner, all as provided in this
Agreement. In the event of the selection of a Successor General Partner, as
provided in this Section 10.1(b), (1) each of the Partners, on behalf of
itself and its permitted successors and assigns, HEREBY AGREES AND CONSENTS
to the admission of any such Successor General Partner as herein provided;
and (2) the then Partners shall execute and deliver such instruments and
documents, and shall take such actions, as shall be necessary or advisable,
in the sole and absolute discretion of the Successor General Partner to carry
out the provisions of this Article X, including, but not limited to, (x) the
execution of conformed counterparts of this Agreement, amendments to this
Agreement, and/or an amended limited partnership agreement, (y) the execution
and filing of certificates of discontinuance, assumed or fictitious name
certificates, certificates of co-partnership, and/or certificates of limited
partnership, and/or amended certificates of limited partnership, and (z) the
execution of such instruments and documents (including, but not limited to,
deeds, bills of sale, and other instruments of conveyance and/or assignments
of Partnership Interest) as shall be necessary or advisable to effect any
necessary transfer (nominal or otherwise) of the property, assets,
investments, rights, liabilities, and business of the Partnership or of a
Partnership Interest and/or to accomplish the purpose and intent of this
Article X. In the event that a Partner shall fail to execute any such
instruments or documents or fail to take any such actions, when requested to
do so by the Successor General Partner, the Successor General Partner and/or
any Person designated by the Successor General Partner, as attorney-in-fact
for each of the Partners, shall have the right and power for, on behalf of,
and in the name of each of the Partners to execute any and all such
instruments and documents and take any and all such actions.
(c) The occurrence of a Disabling Event or an Event of Withdrawal in
respect of a Limited Partner shall not, in and of itself, dissolve the
Partnership. Subject to the provisions of Section 8.1 hereof, in the event of
a Disabling Event or an Event of Withdrawal in respect of a Limited Partner,
the Disabled Limited Partner or its Representative or Successor, upon
compliance with the provisions of Section 8.2 hereof, shall remain or be
admitted as a limited partner in the Partnership and shall have all the
rights of the Disabled Limited Partner as a limited partner in the
Partnership to the extent of the Disabled Limited Partner's Partnership
Interest, subject to the terms, provisions, and conditions of this Agreement.
Section 10.2 References to "Partner" and "Partners" in the Event of Successors.
In the event that any Partner's Partnership Interest is held by one or more
successors to such Partner, references in this Article X to "Partner" and
"Partners" shall refer, as applicable and except as otherwise provided herein,
to the collective Partnership Interests of all successors to the Partnership
Interest of such Partner.
Section 10.3 Waiver of Dissolution if Transfer is in Full Compliance with
Agreement; Negation of Right to Dissolve Except as Herein Provided; No
Withdrawal.
(a) Each of the Partners hereby waives its right to terminate or cause the
dissolution and winding up of the Partnership (as such right is or may be
provided under the Partnership Law) upon the Transfer of any Partner's
Partnership Interest.
(b) No Partner shall have the right to terminate this Agreement or
dissolve the Partnership by such Partner's express will.
(c) No Partner shall have any right to retire, resign, or otherwise
withdraw from the Partnership and have the value of such Partner's
Partnership Interest ascertained and receive an amount equal to the value of
such Partnership Interest.
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(d) In the event of an Event of Withdrawal in respect of a Partner in
breach of this Agreement but pursuant to such Partner's statutory powers
under the Partnership Law, to the extent that such powers exist in the face
of a prohibition against withdrawal in this Agreement, then the value of such
Partner's Partnership Interest shall be ascertained in accordance with the
Partnership Law, and such Partner shall receive from the Partnership in
exchange for the relinquishment of such Partner's Partnership Interest an
amount equal to the lesser of (i) the value of such Partner's Partnership
Interest as so determined less any damages incurred by the Partnership as a
result of such Partner's breach of this Agreement, and (ii) ninety percent
(90%) of the value of such Partner's Partnership Interest as so determined.
In no event shall a Partner be considered to have withdrawn from the
Partnership solely as a result of such Partner having suffered a Disabling
Event.
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XI.
TERMINATION OF THE PARTNERSHIP,
WINDING UP, AND LIQUIDATION.
Section 11.1 Liquidation of the Assets of the Partnership and Disposition of the
Proceeds Thereof.
(a) Upon the dissolution of the Partnership, the Managing General Partner,
or in the event that the Managing General Partner has suffered a Disabling
Event or an Event of Withdrawal and there are one or more remaining General
Partners, such remaining General Partner(s), or in the event that there is no
remaining General Partner, a Person selected by those Partners holding in the
aggregate a Percentage Interest of in excess of fifty percent (50%) (the
Managing General Partner or such Person so selected is herein referred to as
the "Liquidator"), shall proceed to wind up the affairs of the Partnership,
liquidate the property and assets of the Partnership, and terminate the
Partnership, and the proceeds of such liquidation shall be applied and
distributed in the following order of priority:
(1) to creditors, to the extent otherwise permitted by law, in
satisfaction of liabilities of the Partnership (whether by payment or by
making a reasonable provision for payment) other than obligations of the
Partnership to the Partners and liabilities for distribution to Partners on
account of their respective interests in the Partnership; and then
(2) to the satisfaction of all obligations of the Partnership to
Partners other than the Guaranteed Payment; and then
(3) to TCO in an amount equal to the accrued but unpaid Guaranteed
Payment (in the priorities, if any, set forth in the applicable series);
and then
(4) to TCO in an amount equal to the Preferred Equity (in the
priorities, if any, set forth in the applicable series); and then
(5) to the Partners in accordance with and in proportion to their
positive Capital Account balances. For this purpose, the determination of
the Partners' Capital Account balances shall be made after adjustment to
reflect the allocation of all Profits, Losses, and items in the nature of
income, gain, expense, or loss under Section 5.1 hereof, and all
distributions to the Partners pursuant to Section 5.2(a), Section 5.2(b),
and Section 11.1(a)(4) hereof, in each case for all Partnership Fiscal
Years through and including the Partnership Fiscal Year of liquidation.
Subject to the provisions of clause (1) of this Section 11.1(a), all
distributions pursuant to this Section 11.1(a) shall be made by the end of
the Partnership Fiscal Year of liquidation (or if later, within ninety (90)
Days after the date of such liquidation).
(b) Subject to the requirements of Regulations Section
1.704-1(b)(2)(ii)(b)(2), a reasonable time shall be allowed for the orderly
liquidation of the property and assets of the Partnership and the payment of
the debts and liabilities of the Partnership in order to minimize the losses
normally attendant upon a liquidation.
(c) Each Partner hereby appoints the Liquidator as its true and lawful
attorney-in-fact to hold, collect, and disburse, in accordance with this
Agreement, the applicable requirements of Regulations Section 1.704-1(b), and
the terms of any receivables, any Partnership receivables existing at the
time of the termination of the Partnership and the proceeds of the collection
of such receivables, including those arising from the sale of Partnership
property and assets. Notwithstanding anything to the contrary in this
Agreement, the foregoing power of attorney shall terminate upon the
distribution of the proceeds of all such receivables in accordance with the
provisions of this Agreement.
(d) Notwithstanding anything to the contrary contained in this Agreement,
if a General Partner or any Limited Partner which, by written notice to the
Partnership, in its sole discretion, elects to be bound by this Section
11.1(d) shall have a negative balance in its Capital Account upon liquidation
of the Partnership or upon liquidation of its Partnership Interest, after
giving effect to the allocation of all Profits, Losses, gain or loss and
items of the foregoing under Section 5.1 hereof and all distributions to the
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Partners pursuant to Section 5.2 hereof in each case for all Partnership
Fiscal Years through and including the Partnership Fiscal Year of such
liquidation, such Partner shall be obligated to make an additional capital
contribution to the Partnership by the end of the Partnership Fiscal Year of
liquidation (or, if later, within ninety (90) Days after the date of such
liquidation), in an amount sufficient to eliminate the negative balance in
its Capital Account. For purposes of this Section 11.1(d), "liquidation"
shall be as defined in Regulations Section 1.704-1(b)(2)(ii)(g).
(e) In connection with a liquidation of a Partner's interest in the
Partnership within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g) that is not in connection with a liquidation of the
Partnership, distributions to such Partner shall be made in accordance with
the requirements of Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(2).
Section 11.2 Cancellation of Certificates.
After the affairs of the Partnership have been wound up, the property and
assets of the Partnership have been liquidated, and the proceeds thereof have
been applied and distributed as provided in Section 11.1(a) hereof and the
Partnership has been terminated, appropriate Persons shall, if required by law,
execute and file a certificate of dissolution or cancellation of the Certificate
of Limited Partnership and/or assumed or fictitious name certificate (or a
similar writing) to effect the cancellation, of record, of the certificate(s) of
partnership of the Partnership (or similar writing), and the Partnership
Interest Certificates.
Section 11.3 Return of Capital.
Except as otherwise provided in Section 11.1(d) hereof, anything in this
Agreement to the contrary notwithstanding, no General Partner shall be
personally liable for the return of the capital contributions or Capital Account
of any Partner, or any portion thereof, it being expressly understood that any
such return shall be made only from and to the extent of Partnership assets.
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XII.
POWER OF ATTORNEY.
Each Partner hereby constitutes and appoints the Managing General Partner and
any Person or Persons designated or delegated by the Managing General Partner
its true and lawful attorney-in-fact with full power of substitution, and with
power and authority to act in its name and on its behalf, to make, execute and
deliver, swear to, acknowledge, file, and record:
(a) this Agreement (and copies hereof) and amendments hereto or
restatements hereof adopted pursuant to the provisions hereof (including,
without limitation, any such amendment required upon the admission of a
substitute or additional partner, the continuation of the Partnership, the
formation of a successor partnership, or the doing of any act requiring the
amendment of this Agreement under the Partnership Law or under the applicable
laws of any other jurisdiction in which the Managing General Partner deems
such action to be necessary or desirable, or by any regulatory agency) and,
upon termination of the Partnership (or its successor), a certificate or
agreement of dissolution and termination, as and if the same may be required
by applicable law, or by any regulatory agency;
(b) the Certificate of Limited Partnership (and copies thereof) and any
amendments thereto or restatements thereof adopted pursuant to the provisions
hereof (including, without limitation, any amendment required upon the
admission of a substitute or additional partner, the continuation of the
Partnership, the formation of a successor partnership, or the doing of any
act requiring the amendment of the Certificate of Limited Partnership under
applicable law or regulatory agency, or the filing of a new or restated or
amended Certificate of Limited Partnership (or amendment thereto) after the
filing of a Certificate of Discontinuance or Dissolution or Termination, a
cancellation, or the like, to evidence a new or changed constituency of, or a
termination of, the Partnership, as the Managing General Partner deems said
filing to be necessary or desirable);
(c) any certificate of fictitious or assumed name and any amendment
thereto, if required by law;
(d) any other certificates or instruments as may be required under
applicable laws or by any regulatory agency, as the Managing General Partner,
deems necessary or desirable;
(e) all such other instruments as the Managing General Partner deems
necessary or desirable and not inconsistent with this Agreement to carry out
the provisions hereof in accordance with the terms hereof, including, without
limitation, to execute and issue Partnership Interest Certificates in
accordance with Section 4.7 or Section 13.18 hereof; and
(f) any document(s) to confirm the foregoing. Such attorney-in-fact shall,
as such, have the right, power, and authority as such to amend or modify this
Agreement and all certificates and the like required when acting in such
capacity, so long as such amendment, modification, and/or filing is(are)
specifically permitted by this Agreement.
The power of attorney granted in this Article XII (and each other power of
attorney granted under or pursuant to this Agreement) is a special power of
attorney coupled with an interest, is irrevocable, and shall survive the
Transfer by a Partner of his Partnership Interest and shall survive his
insanity, disability, incapacity, incompetency, Bankruptcy, and death and may be
exercised by the attorney-in-fact by his signature on behalf of all Partners.
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XIII.
MISCELLANEOUS.
Section 13.1 Notices.
(a) Any and all notices, approvals, directions, consents, offers,
elections, and other communications (herein sometimes referred to
collectively as the "Communications" and individually as a "Communication")
required or permitted under this Agreement shall be deemed adequately given
only if in writing.
(b) All Communications to be sent hereunder to a Partner or the Manager
shall be given or served only if addressed to such Partner at its address set
forth in the records of the Partnership or the Manager at its address as set
forth in the Master Services Agreement or applicable management,
administration, leasing, and development services contract, and if delivered
by hand (with delivery receipt required), by telecopier (confirmation of
receipt requested), or by certified mail, return receipt requested, or
Federal Express or similar expedited overnight commercial carrier or courier.
(c) All Communications shall be deemed to have been properly given or
served, if delivered by hand or mailed, on the date of receipt or date of
refusal to accept shown on the delivery receipt or return receipt, if
delivered by Federal Express or similar expedited overnight commercial
carrier or courier, on the date that is one Business Day after the date upon
which the same shall have been delivered to Federal Express or similar
expedited overnight commercial carrier, addressed to the recipient, with all
shipping charges prepaid, provided that the same is actually received (or
refused) by the recipient in the ordinary course, and if sent by telecopier,
on the date of confirmed delivery. The time to respond to any Communication
given pursuant to this Agreement shall run from the date of receipt or
confirmed delivery, as applicable.
(d) By giving to the Managing General Partner written notice thereof, the
parties hereto and their respective successors and assigns shall have the
right from time to time and at any time during the term of this Agreement to
change the Person to receive Communications and their respective addresses
effective upon receipt by the other parties of such notice and each shall
have the right to specify as its address any other address within the United
States of America.
Section 13.2 Applicable Law.
This Agreement shall be governed by and construed in accordance with, the
laws (other than the law governing choice of law) of the State of Delaware. In
the event of a conflict between any provision of this Agreement and any
non-mandatory provision of the Partnership Law, the provision of this Agreement
shall control and take precedence.
Section 13.3 Entire Agreement.
This Agreement contains the entire agreement among the parties hereto
relative to the Partnership.
Section 13.4 Word Meanings; Gender.
The words such as "herein," "hereinafter," "hereof," and "hereunder" refer to
this Agreement as a whole and not merely to a subdivision in which such words
appear unless the context otherwise requires. The singular shall include the
plural and the masculine gender shall include the feminine and neuter, and vice
versa, unless the context otherwise requires.
Section 13.5 Section Titles.
Section titles are for descriptive purposes only and shall not control or
alter the meaning of this Agreement as set forth in the text.
48
<PAGE>
Section 13.6 Waiver.
No consent or waiver, express or implied, by a Partner to or of any breach or
default by any other Partner in the performance by such other Partner of its
obligations hereunder shall be deemed or construed to be a consent or waiver to
or of any other breach or default in the performance by such other Partner of
the same or any other obligation of such Partner hereunder. Failure on the part
of a Partner to object to any act or failure to act of any other Partner or to
declare such other Partner in default, irrespective of how long such failure
continues, shall not constitute a waiver by such Partner of its rights
hereunder.
Section 13.7 Separability of Provisions.
Each provision of this Agreement shall be considered separable and if for any
reason any provision or provisions herein are determined to be invalid,
unenforceable, or illegal under any existing or future law, such invalidity,
unenforceability, or illegality shall not impair the operation of or affect the
other portions of this Agreement.
Section 13.8 Binding Agreement.
Subject to the restrictions on Transfers set forth herein, this Agreement
shall inure to the benefit of and be binding upon the undersigned Partners and
their respective heirs, executors, personal representatives, successors, and
assigns. Whenever, in this instrument, a reference to any party or Partner is
made, such reference shall be deemed to include a reference to the permitted
heirs, executors, personal representatives, successors, and assigns of such
party or Partner.
Section 13.9 Equitable Remedies.
Except as otherwise provided in this Agreement, the rights and remedies of
the Partners hereunder shall not be mutually exclusive, i.e., the exercise of a
right or remedy under any given provision hereof shall not preclude or impair
exercise of any other right or remedy hereunder. Each of the Partners confirms
that damages at law may not always be an adequate remedy for a breach or
threatened breach of this Agreement and agrees that, in the event of a breach or
threatened breach of any provision hereof, the respective rights and obligations
hereunder shall be enforceable by specific performance, injunction, or other
equitable remedy, but nothing herein contained is intended to, nor shall it,
limit or affect any rights at law or by statute or otherwise of any party
aggrieved as against the other for a breach or threatened breach of any
provision hereof.
Section 13.10 Partition.
No Partner nor any successor-in-interest to a Partner shall have the right
while this Agreement remains in effect to have any property of the Partnership
partitioned, or to file a complaint or institute any proceeding at law or in
equity to have such property of the Partnership partitioned, and each Partner,
on behalf of itself and its successors and assigns, hereby waives any such
right. It is the intention of the Partners that the rights of the parties hereto
and their successors-in-interest to Partnership property, as among themselves,
shall be governed by the terms of this Agreement, and that the rights of the
Partners and their successors-in-interest to Transfer any interest in the
Partnership shall be subject to the limitations and restrictions set forth in
this Agreement.
Section 13.11 Amendment.
Except as otherwise provided in Sections 1.1, 4.5(a), 8.1, 8.2, 8.4, 8.5, and
Article X hereof, a proposed amendment to this Agreement may be adopted and
effective as an amendment hereto if it receives the written concurrence of each
Appointing Person. Notwithstanding the foregoing, but except as otherwise
provided in Sections 1.1, 4.5(a), 8.1, 8.2, 8.4, 8.5, and Article X hereof, (i)
no such amendment shall change a Partner's Percentage Interest or increase a
Partner's obligation to contribute to the capital of (or require a Partner to
loan to) the Partnership or change the proviso at the end of Section 4.2 hereof,
or change the provisions hereof relating to the allocation of Profits, Losses,
or other items, or change the distribution provisions of Section 5.2(a) hereof
except for the timing of such distributions within the Partnership Fiscal Year
and within
49
<PAGE>
thirty (30) Days thereafter and except for the timing of notices, including
notices to be given pursuant to Section 6.4 hereof, with respect to
distributions, or change the provisions of Section 8.5(a) hereof, or cause a
limited partner to become a general partner, or remove a Partner, or remove a
Partner's right to consent, approve, or vote or right to assign any such right
as herein provided, or change the ability of a Partner to assign its Partnership
Interest as provided in Article VIII hereof, without, in each such case, the
written concurrence of each Partner, if any, whose Partnership Interest will be
directly and adversely affected by such amendment, (ii) no such amendment shall
change the provisions of Section 8.1(c) hereof without the written concurrence
of those Partners holding in the aggregate a Percentage Interest equal to at
least the sum of (x) the Percentage Interest held by TCO at the time of any such
amendment plus (y) ninety-five percent (95%) of the difference between one
hundred percent (100%) and the Percentage Interest held by TCO at the time of
any such amendment, and (iii) no such amendment shall permit a combination of
Units of Partnership Interest where the fair market value of each resulting Unit
of Partnership Interest is in excess of One Hundred Thousand Dollars ($100,000)
or change the provisions of this Section 13.11 without in either case the
written concurrence of each Partner.
Section 13.12 No Third Party Rights Created Hereby.
The provisions of this Agreement are solely for the purpose of defining the
interests of the Partners, inter se; and no other person, firm, or entity (i.e.,
a party who is not a signatory hereto or a permitted successor to such signatory
hereto) shall have any right, power, title, or interest by way of subrogation or
otherwise, in and to the rights, powers, titles, and provisions of this
Agreement.
Section 13.13 Liability of Partners.
Except as otherwise provided in this Agreement, as among the Partners, any
liability or debt of the Partnership shall first be satisfied out of the assets
of the Partnership, including the proceeds of any liability insurance which the
Partnership may recover, and thereafter, in accordance with the applicable
provisions of the Partnership Law.
Section 13.14 Additional Acts and Instruments.
Each Partner hereby agrees to do such further acts and things and to execute
any and all instruments necessary or desirable and as reasonably required in the
future to carry out the full intent and purpose of this Agreement.
Section 13.15 Agreement in Counterparts.
This Agreement may be executed in two (2) or more counterparts, all of which
as so executed shall constitute one (1) Agreement, binding on all of the parties
hereto, notwithstanding that all the parties are not signatory to the original
or the same counterpart; provided, however, that no provision of this Agreement
shall become effective and binding unless and until all parties hereto have duly
executed this Agreement, at which time this Agreement shall then become
effective and binding as of the date first above written.
Section 13.16 Attorneys-In-Fact.
Any Partner may execute a document or instrument or take any action required
or permitted to be executed or taken under the terms of this Agreement by and
through an attorney-in-fact duly appointed for such purpose (or for purposes
including such purpose) under the terms of a written power of attorney
(including any power of attorney granted herein).
Section 13.17 Execution by Trustee.
Any trustee executing this Agreement shall be considered as executing this
Agreement solely in his capacity as a trustee of the trust of which he is a
trustee, and such trustee shall have no personal liability hereunder.
50
<PAGE>
Section 13.18 Lost Partnership Interest Certificates.
In the event that any Partnership Interest Certificate shall be lost, stolen,
or destroyed, the Managing General Partner may authorize the issuance of a
substitute Partnership Interest Certificate in place of the Partnership Interest
Certificate so lost, stolen, or destroyed. In each such case, the applicant for
a substitute Partnership Interest Certificate shall furnish to the Managing
General Partner evidence to their satisfaction of the loss, theft, or
destruction of such Partnership Interest Certificate and of the ownership
thereof, and also such security or indemnity as they may reasonably require.
51
<PAGE>
IN WITNESS WHEREOF, the undersigned Appointing Persons, in accordance with
Section 13.11 of the Amended and Restated Partnership Agreement, as amended, on
behalf of all of the Partners, have executed this Agreement as of the date first
above written.
TAUBMAN CENTERS, INC., a Michigan
corporation
By: /s/ LISA A. PAYNE
------------------------------
Lisa A. Payne
Its: Executive Vice President and
Chief Financial Officer
TG PARTNERS LIMITED PARTNERSHIP,
a Delaware limited partnership
By: TG Michigan, Inc., a Michigan
corporation, managing general
partner
By: /s/ ROBERT S. TAUBMAN
------------------------------
Robert S. Taubman
Its: President and Chief Executive
Officer
TAUB-CO MANAGEMENT, INC., a
Michigan corporation
By: /s/ ROBERT S. TAUBMAN
------------------------------
Robert S. Taubman
Its: President and Chief Executive
Officer
52
Exhibit 12 (a)
TAUBMAN CENTERS, INC.
Computation of Ratio of Earnings to Preferred Stock Dividends
(in thousands, except ratio)
Nine Months Ended
September 30, 1998
------------------
Net Earnings from Continuing Operations $23,886
Preferred Stock Dividends 12,450
Ratio of Earnings to Preferred Stock Dividends 1.9
Note: The Company did not have any fixed charges during the nine months ended
September 30, 1997.
Exhibit 12 (b)
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
Computation of Ratios of Earnings to Fixed Charges and Preferred Distributions
(in thousands, except ratios)
Nine Months Ended September 30
------------------------------
1998 1997
---- ----
Net Earnings from Continuing Operations (1) $ 1,150,385 $ 68,795
Add back:
Fixed charges 115,094 91,710
Amortization of previously
capitalized interest (2) 1,842 1,487
Deduct:
Capitalized interest (2) (13,699) (10,649)
----------- ---------
Earnings Available for Fixed Charges
and Preferred Distributions $ 1,253,622 $ 151,343
=========== =========
Fixed Charges
Mortgage notes and other $ 66,662 $ 54,002
Capitalized interest 12,830 6,798
Interest portion of rent expense 5,258 5,595
Proportionate share of Unconsolidated
Joint Ventures' fixed charges 30,344 25,315
----------- ---------
Total Fixed Charges $ 115,094 $ 91,710
=========== =========
Preferred Distributions 12,450
----------- ---------
Total Fixed Charges and Preferred
Distributions $ 127,544 $ 91,710
=========== =========
Ratio of Earnings to Fixed Charges and
Preferred Distributions 9.8 1.7
- -----------------
(1) Amount includes the approximately $1.1 billion gain on the GMPT Exchange
that was recognized during the nine months ended September 30, 1998.
(2) Amounts include TRG's pro rata share of capitalized interest and
amortization of previously capitalized interest of the Unconsolidated Joint
Ventures.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TAUBMAN CENTERS, INC. BALANCE SHEET AS OF SEPTEMBER 30, 1998 AND THE TAUBMAN
CENTERS, INC. STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000890319
<NAME> TAUBMAN CENTERS, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 33,804
<SECURITIES> 0
<RECEIVABLES> 23,063
<ALLOWANCES> 386
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 1,371,790
<DEPRECIATION> 167,259
<TOTAL-ASSETS> 1,378,381
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 683,465
0
80
<COMMON> 529
<OTHER-SE> 526,728
<TOTAL-LIABILITY-AND-EQUITY> 1,378,381
<SALES> 0
<TOTAL-REVENUES> 24,655
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 188
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 23,886
<INCOME-TAX> 0
<INCOME-CONTINUING> 23,886
<DISCONTINUED> 0
<EXTRAORDINARY> (20,066)
<CHANGES> 0
<NET-INCOME> 3,820
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
<FN>
<F1> THE COMPANY HAS AN UNCLASSIFIED BALANCE SHEET.
</FN>
</TABLE>
