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: September 30, 1999
Commission File No. 1-11530
Taubman Centers, Inc.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-2033632
- -------------------------------------- ------------------------------
(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
- --------------------------------------------------------------------------------
(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 11, 1999, there were outstanding 53,277,693 shares of the
Company's common stock, par value $0.01 per share.
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
The following consolidated financial statements of Taubman Centers, Inc.
(the Company) are provided pursuant to the requirements of this item.
Consolidated Balance Sheet as of September 30, 1999 and December 31,
1998.......................................................................... 2
Consolidated Statement of Operations for the three months ended September 30,
1999 and 1998................................................................. 3
Consolidated Statement of Operations for the nine months ended September 30,
1999 and 1998................................................................. 4
Consolidated Statement of Cash Flows for the nine months ended September 30,
1999 and 1998................................................................. 5
Notes to Consolidated Financial Statements................................... 6
1
<PAGE>
TAUBMAN CENTERS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
September 30 December 31
------------ -----------
1999 1998
---- ----
Assets:
Properties, net $ 1,373,360 $ 1,308,642
Investment in Unconsolidated Joint Ventures 84,137 98,350
Cash and cash equivalents 14,795 19,045
Accounts and notes receivable, less allowance
for doubtful accounts of $1,557 and $333 in
1999 and 1998 25,348 20,595
Accounts receivable from related parties 4,760 7,092
Deferred charges and other assets 52,012 27,139
------------ -------------
$ 1,554,412 $ 1,480,863
============ =============
Liabilities:
Mortgage notes payable $ 856,975 $ 243,352
Unsecured notes payable 11,145 531,946
Accounts payable and accrued liabilities 108,358 171,669
Dividends payable 12,787 12,719
------------ -------------
$ 989,265 $ 959,686
Commitments and Contingencies (Note 5)
Series C Preferred Equity of TRG (Notes 1 and 6) $ 72,900
Partners' Equity of TRG allocable to minority
partners (Note 1)
Shareowners' Equity:
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, 1999 and December 31, 1998 $ 80 $ 80
Series B Non-Participating Convertible Preferred
Stock, $0.001 par and liquidation value,
40,000,000 shares authorized and 31,399,913
shares issued and outstanding at
September 30, 1999 andd December 31, 1998 31 28
Series C Cumulative Redeemable Preferred Stock
$0.01 par value, 1,000,000 shares authorized,
$75 million liquidation preference, none issued
(Note 6)
Common Stock, $0.01 par value, 250,000,000 shares
authorized, 53,277,693 and 52,995,904 issued
and outstanding at September 30, 1999 and
December 31, 1998 533 530
Additional paid-in capital 701,006 697,965
Dividends in excess of net income (209,403) (177,426)
------------ --------------
$ 492,247 $ 521,177
------------ --------------
$ 1,554,412 $ 1,480,863
============ ==============
See notes to consolidated financial statements.
2
<PAGE>
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share data)
Three Months Ended September 30
-------------------------------
1999 1998
---- ----
Income:
Minimum rents $ 35,575 $ 25,612
Percentage rents 1,422 1,195
Expense recoveries 19,329 14,721
Revenues from management, leasing and
development services 6,402 1,827
Other 4,038 6,002
Revenues - transferred centers (Note 1) 41,611
----------- -----------
$ 66,766 $ 90,968
----------- -----------
Operating Expenses:
Recoverable expenses $ 17,689 $ 13,913
Other operating 8,761 8,301
Management, leasing and development services 4,286 1,026
General and administrative 4,411 5,378
Restructuring 10,698
Expenses other than interest, depreciation
and amortization - transferred centers
(Note 1) 14,807
Interest expense 13,543 22,076
Depreciation and amortization (including
$8.0 million in 1998 relating to the
transferred centers) 13,569 16,111
----------- -----------
$ 62,259 $ 92,310
----------- -----------
Income (loss) before equity in net income of
Unconsolidated Joint Ventures, extraordinary
item, minority and preferred interests $ 4,507 $ (1,342)
Equity in net income of Unconsolidated Joint
Ventures 9,317 12,836
----------- -----------
Income before extraordinary item, minority
and preferred interests $ 13,824 $ 11,494
Extraordinary item (Note 3 ) (49,817)
Minority interest:
TRG income allocable to minority partners (4,166) 24,197
Distributions in excess of earnings allocable
to minority partners (3,342)
TRG Series C preferred distributions (Note 1) (525)
----------- -----------
Net income (loss) $ 5,791 $ (14,126)
Series A preferred dividends (4,150) (4,150)
----------- -----------
Net income (loss) available to common shareowners $ 1,641 $ (18,276)
=========== ===========
Basic earnings per common share:
Income before extraordinary item $ .03 $ .03
=========== ===========
Net income (loss) $ .03 $ (.35)
=========== ===========
Diluted earnings per common share:
Income before extraordinary item $ .03 $ .03
=========== ===========
Net income (loss) $ .03 $ (.34)
=========== ===========
Cash dividends declared per common share $ .24 $ .235
=========== ============
Weighted average number of common shares
outstanding 53,277,693 52,899,013
=========== ===========
See notes to consolidated financial statements.
3
<PAGE>
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share data)
Nine Months Ended September 30
------------------------------
1999 1998
---- ----
Income:
Minimum rents $ 103,874 $ 76,647
Percentage rents 4,200 2,995
Expense recoveries 58,306 43,134
Revenues from management, leasing and
development services 18,078 5,604
Other 12,345 12,179
Revenues - transferred centers (Note 1) 129,714
----------- -----------
$ 196,803 $ 270,273
----------- -----------
Operating Expenses:
Recoverable expenses $ 52,115 $ 39,404
Other operating 28,009 22,144
Management, leasing and development services 13,141 3,307
General and administrative 13,560 19,527
Restructuring 10,698
Expenses other than interest, depreciation and
amortization - transferred centers (Note 1) 44,260
Interest expense 38,231 66,662
Depreciation and amortization (including
$22.8 million in 1998 relating to the
transferred centers) 38,661 46,688
----------- -----------
$ 183,717 $ 252,690
----------- -----------
Income before equity in income before
extraordinary item of Unconsolidated
Joint Ventures, extraordinary items,
minority and preferred interests $ 13,086 $ 17,583
Equity in income before extraordinary item of
Unconsolidated Joint Ventures 29,051 35,512
----------- -----------
Income before extraordinary items, minority and
preferred interests $ 42,137 $ 53,095
Extraordinary items (Note 3) (301) (50,774)
Minority interest:
TRG income allocable to minority partners (13,093) 1,499
Distributions in excess of earnings allocable
to minority partners (9,430)
TRG Series C preferred distributions (Note 1) (525)
----------- -----------
Net income $ 18,788 $ 3,820
Series A preferred dividends (12,450) (12,450)
----------- -----------
Net income (loss) available to common shareowners $ 6,338 $ (8,630)
=========== ===========
Basic earnings per common share:
Income before extraordinary items $ .12 $ .22
=========== ===========
Net income (loss) $ .12 $ (.17)
=========== ===========
Diluted earnings per common share:
Income before extraordinary items $ .12 $ .22
=========== ===========
Net income (loss) $ .11 $ (17)
=========== ===========
Cash dividends declared per common share $ .72 $ .705
=========== ============
Weighted average number of common shares
outstanding 53,163,145 51,949,256
=========== ===========
See notes to consolidated financial statements.
4
<PAGE>
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended September 30
------------------------------
1999 1998
---- ----
Cash Flows from Operating Activities:
Income before extraordinary items, minority
and preferred interests $ 42,137 $ 53,095
Adjustments to reconcile income before
extraordinary items, minority and preferred
interests to net cash provided by operating
activities:
Depreciation and amortization 38,661 46,688
Provision for losses on accounts receivable 2,337 1,077
Amortization of deferred financing costs 3,410 2,129
Other 254 621
Gains on sales of land (1,363) (2,905)
Increase (decrease) in cash attributable
to changes in assets and liabilities:
Receivables, deferred charges and
other assets (9,461) (8,601)
Accounts payable and other liabilities (9,453) 22,153
----------- -----------
Net Cash Provided By Operating Activities $ 66,522 $ 114,257
----------- -----------
Cash Flows from Investing Activities:
Additions to properties $ (149,663) $ (206,675)
Proceeds from sales of land 1,433 4,302
Purchase of interest in Fashionmall.com,
Inc.(Note 8) (7,417)
Contributions to Unconsolidated Joint Ventures (37,881) (29,140)
Distributions from Unconsolidated
Joint Ventures in excess of income before
extraordinary item 47,794 54,913
----------- -----------
Net Cash Used In Investing Activities $ (145,734) $ (176,600)
----------- -----------
Cash Flows from Financing Activities:
Debt proceeds $ 607,123 $ 1,558,716
Debt payments (514,301) (130,913)
Early extinguishment of debt (1,167,746)
Debt issuance costs (10,325) (2,790)
Redemption of partnership units (77,698)
GMPT Exchange (9,737) (15,177)
Distributions to minority and preferred
interests (23,048) (58,366)
Issuance of stock 3,047 26,658
Issuance of TRG Series C Preferred Equity
(Note 1) 72,900
Cash dividends to common shareowners (38,247) (36,302)
Cash dividends to Series A preferred
shareowners (12,450) (12,450)
----------- -----------
Net Cash Provided By Financing Activities $ 74,962 $ 83,932
----------- -----------
Net Increase (Decrease) In Cash $ (4,250) $ 21,589
Cash and Cash Equivalents at Beginning of Period 19,045 8,965
Effect of consolidating TRG in connection with
the GMPT Exchange (TRG's cash balance at
Beginning of Period) (Note 1) 3,250
----------- -----------
Cash and Cash Equivalents at End of Period $ 14,795 $ 33,804
=========== ===========
Interest on mortgage notes and other loans paid during the nine months
ended September 30, 1999 and 1998, net of amounts capitalized of $10,570 and
$12,830, was $34,096 and $69,077, respectively.
See notes to consolidated financial statements.
5
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended September 30, 1999
Note 1 - Interim Financial Statements
Taubman Centers, Inc. (the Company or TCO), a real estate investment trust,
or REIT, is the managing general partner of The Taubman Realty Group Limited
Partnership (the Operating Partnership or TRG). The Operating Partnership is an
operating subsidiary that engages in the ownership, management, leasing,
acquisition, development, and expansion of regional retail shopping centers. The
Operating Partnership's portfolio as of September 30, 1999 includes 17 urban and
suburban shopping centers in seven states. Four additional centers are under
construction in Florida and Texas.
On September 30, 1998, the Company obtained a majority and controlling
interest in the Operating Partnership as a result of a transaction in which the
Operating Partnership transferred interests in 10 shopping centers, together
with $990 million of its debt, for all of the partnership units owned by two
General Motors pension trusts (GMPT), representing approximately 37% of the
Operating Partnership's equity (the GMPT Exchange).
The consolidated financial statements of the Company include all accounts
of the Company, the Operating Partnership and its consolidated subsidiaries; all
intercompany balances have been eliminated. Investments in joint ventures not
unilaterally controlled by ownership or contractual obligation (Unconsolidated
Joint Ventures) are accounted for under the equity method.
In September 1999, the Operating Partnership completed the private
placement of $75 million of 9% Cumulative Redeemable Preferred Partnership
Equity (the Series C Preferred Equity), which was purchased by an institutional
investor. At September 30, 1999, the Operating Partnership's equity included two
classes of Preferred Equity (Series A and Series C) and the net equity of the
partnership unitholders. Net income and distributions of the Operating
Partnership are allocable first to the preferred equity interests, and the
remaining amounts to the general and limited partners in the Operating
Partnership in accordance with their percentage ownership. The Series A
Preferred Equity is owned by the Company and is eliminated in consolidation.
Because the net equity of the unitholders is less than zero, the interest
of the noncontrolling unitholders is presented as a zero balance in the balance
sheet as of September 30, 1999 and December 31, 1998. Also, for periods
subsequent to the GMPT Exchange, the income allocated to the noncontrolling
unitholders is equal to their share of distributions. The net equity of the
Operating Partnership unitholders is less than zero because of accumulated
distributions in excess of net income and not as a result of operating losses.
Distributions to partners are usually greater than net income because net income
includes non-cash charges for depreciation and amortization.
The Company's ownership in the Operating Partnership at September 30, 1999
consisted of a 62.9% managing general partnership interest (53,277,693 of the
84,677,606 units of partnership interest outstanding), as well as the Series A
Preferred Equity interest. The Company's average ownership percentage in the
Operating Partnership for the three months ended September 30, 1999 and 1998 was
62.9% and 39.5%, respectively. The Company's average ownership percentage in the
Operating Partnership for the nine months ended September 30, 1999 and 1998 was
62.9% and 39.0%, respectively.
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, 1998. 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.
6
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2 - Investments in Unconsolidated Joint Ventures
Following are the Company's investments in various real estate
Unconsolidated Joint Ventures which own regional retail shopping centers. The
Operating Partnership is generally the managing general partner of these
Unconsolidated Joint Ventures. The Operating Partnership's interest in each
Unconsolidated Joint Venture is as follows:
Ownership
as of
Unconsolidated Joint Venture Shopping Center September 30, 1999
---------------------------- --------------- ------------------
Arizona Mills, L.L.C. Arizona Mills 37%
Dolphin Mall Associates
Limited Partnership Dolphin Mall (under construction) 50
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
In September 1999, the Company entered into a partnership agreement with
Swerdlow Real Estate Group (Note 8) to jointly develop Dolphin Mall, a 1.4
million square foot value regional center under construction in Miami, Florida,
expected to open in March 2001.
During the three months ended March 31, 1998, an Unconsolidated Joint
Venture incurred an extraordinary charge related to the extinguishment of debt,
primarily consisting of a prepayment premium.
The Company's carrying value of its Investment in Unconsolidated Joint
Ventures differs from its share of the deficiency in assets reported in the
combined balance sheet of the Unconsolidated Joint Ventures due to (i) the
Company's cost of its investment in excess of the historical net book values of
the Unconsolidated Joint Ventures and (ii) intercompany profits on sales of
services that are capitalized by the Unconsolidated Joint Ventures. The Company
reduces its investment in Unconsolidated Joint Ventures to eliminate the
intercompany profits and amortizes such amounts over the useful lives of the
related assets. The Company's additional basis allocated to depreciable assets
is recognized on a straight-line basis over 40 years.
Combined balance sheet and results of operations information is presented
below (in thousands) for all Unconsolidated Joint Ventures, followed by the
Operating Partnership's beneficial interest in the combined information.
Beneficial interest is calculated based on the Operating Partnership's ownership
interest in each of the Unconsolidated Joint Ventures. The accounts of Woodfield
Associates, formerly a 50% Unconsolidated Joint Venture transferred to GMPT
(Note 1), are included in these results for the three and nine months ended
September 30, 1998.
7
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
September 30 December 31
------------ -----------
1999 1998
---- ----
Assets:
Properties, net $ 670,618 $ 572,149
Other assets 67,310 73,046
------------- -------------
$ 737,928 $ 645,195
============= =============
Liabilities and partners'
accumulated deficiency in assets:
Debt $ 884,104 $ 825,927
Capital lease obligations 4,092 5,187
Other liabilities 48,478 47,622
TRG's accumulated deficiency
in assets (108,613) (103,545)
Unconsolidated Joint Venture
Partners'
accumulated deficiency in assets (90,133) (129,996)
------------- -------------
$ 737,928 $ 645,195
============= =============
TRG's accumulated deficiency
in assets (above) $ (108,613) $ (103,545)
Elimination of intercompany profit (6,183) (4,846)
TCO's additional basis 198,933 206,741
------------- -------------
Investment in Unconsolidated
Joint Ventures $ 84,137 $ 98,350
============= =============
Three Months Ended Nine Months Ended
------------------ -----------------
September 30 September 30
------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
Revenues $ 62,712 $ 76,193 $ 185,364 $ 220,651
----------- ------------ ----------- -----------
Recoverable and other
operating expenses $ 22,139 $ 26,831 $ 64,733 $ 78,078
Interest expense 16,114 18,431 46,561 53,788
Depreciation and
amortization 7,394 8,508 22,324 25,168
----------- ------------ ----------- -----------
Total operating costs $ 45,647 $ 53,770 $ 133,618 $ 157,034
----------- ------------ ----------- -----------
Income before
extraordinary item $ 17,065 $ 22,423 $ 51,746 $ 63,617
Extraordinary item (1,913)
----------- ------------ ----------- -----------
Net income $ 17,065 $ 22,423 $ 51,746 $ 61,704
=========== ============ =========== ===========
Net income allocable
to TRG $ 9,298 $ 11,917 $ 28,795 $ 32,398
Extraordinary item
allocable to TRG 957
Realized intercompany
profit 1,162 1,901 3,763 4,994
Depreciation of TCO's
additional basis (1,143) (982) (3,507) (2,837)
----------- ------------ ----------- -----------
Equity in income before
extraordinary item of
Unconsolidated
Joint Ventures $ 9,317 $ 12,836 $ 29,051 $ 35,512
=========== ============ =========== ===========
Beneficial interest in
Unconsolidated
Joint Ventures'
operations:
Revenues less
recoverable and
other operating
expenses $ 23,107 $ 28,036 $ 69,410 $ 79,902
Interest expense (8,745) (9,820) (25,177) (28,731)
Depreciation and
amortization (5,045) (5,380) (15,182) (15,659)
----------- ------------ ----------- -----------
Income before
extraordinary item $ 9,317 $ 12,836 $ 29,051 $ 35,512
=========== ============ =========== ===========
8
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3 - Beneficial Interest in Debt and Interest Expense
During the nine months ended September 30, 1999, the following debt
transactions occurred:
A ten-year financing of $270 million with an all-in rate of approximately
6.9% secured by The Mall at Short Hills was completed in April 1999. Also, a
ten-year financing of $80 million with an all-in rate of approximately 7.8%
secured by Biltmore Fashion Park was completed in June 1999. The Company used
the net proceeds from these financings to pay off the balance on its $340
million bridge loan.
A three-year $170 million loan, secured by Great Lakes Crossing, was
finalized. The loan agreement provides for an option to extend the maturity date
one year. The loan bears interest at one-month LIBOR plus 1.50%. Proceeds from
the loan were used to repay the balance of the existing construction facility.
Payment of principal and interest are guaranteed by the Operating Partnership.
The loan agreement provides for a reduction of the interest rate and the amount
guaranteed as certain center performance and valuation criteria are met. In
addition, the Company finalized an amendment to the MacArthur Center
construction facility. The total availability under the facility is $120 million
with interest at one-month LIBOR plus 1.35%. The balance at September 30, 1999
was $115.2 million.
In June 1999, the Operating Partnership's $200 million line of credit
facility was securitized, with interests in Fairlane, LaCumbre, Paseo Nuevo, and
Regency Square serving as collateral. The rate on the line was decreased to
LIBOR plus 0.90%.
In August 1999, the 50% owned Unconsolidated Joint Venture that owns Cherry
Creek completed a $177 million, secured financing. The financing has an all-in
rate of 7.8% and matures in August 2006. The proceeds were used to repay the
existing $130 million mortgage and transaction costs. The remaining net proceeds
of approximately $45.2 million were distributed to the Operating Partnership,
which had contributed all of the funding for the 1998 expansion of Cherry Creek.
The Operating Partnership used the distribution to pay down its line of credit.
In September 1999, the Operating Partnership used the net proceeds from a
$75 million private placement of 9% Cumulative Redeemable Preferred Partnership
Equity (Series C Preferred Equity)to pay down lines of credit.
During the nine months ended September 30, 1999, extraordinary charges to
income of $0.3 million were recognized in connection with the extinguishment of
debt. During the nine months ended September 30, 1998, extraordinary charges of
$50.8 million were recognized related to the extinguishment of debt, primarily
in connection with the GMPT Exchange.
The Operating Partnership's beneficial interest in the debt, capital lease
obligations, capitalized interest, and interest expense of its consolidated
subsidiaries and its Unconsolidated Joint Ventures is summarized in the
following table. The Operating Partnership's beneficial interest excludes debt
and interest relating to the 30% minority interest in MacArthur Center, and
subsequent to the refinancing relating to Great Lakes Crossing, the 20% minority
interest in that center.
9
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
<TABLE>
<CAPTION>
Unconsolidated Share
Joint of Unconsolidated Consolidated Beneficial
Ventures Joint Ventures Subsidiaries Interest
--------------- ----------------- ------------ ----------
<S> <C> <C> <C> <C>
Debt as of:
September 30, 1999 $ 884,104 $ 468,196 $ 868,120 $ 1,267,753
December 31, 1998 825,927 439,271 775,298 1,186,192
Capital lease obligations:
September 30, 1999 $ 4,092 $ 2,254 -- $ 2,254
December 31, 1998 5,187 2,858 -- 2,858
Capitalized interest:
Nine months ended September 30,1999 $ 1,110 $ 555 $ 10,570 $ 11,125
Nine months ended September 30,1998 1,748 869 12,830 12,575
Interest expense (Net of capitalized interest):
Nine months ended September 30,1999 $ 46,561 $ 25,177 $ 38,231 $ 60,998
Nine months ended September 30,1998 53,788 28,731 66,662 95,393
</TABLE>
Note 4 - Incentive Option Plan
The Operating Partnership may issue options for up to 7.7 million units of
partnership interest under its incentive option plan for employees of its
subsidiary partnership, The Taubman Company Limited Partnership (the Manager).
The per unit exercise price of an option is the fair market value of a unit on
the date of grant. Incentive options generally vest in one-third increments on
the third, fourth, and fifth anniversaries (and expire on the tenth anniversary)
of the grant date. Options for 281,789 units and 135,628 units were exercised
during the first nine months of 1999 and 1998 at weighted average exercise
prices of $10.80 and $11.04, respectively. During the nine months ended
September 30, 1999, the Operating Partnership granted options for 1.0 million
units at $12.25 per unit and canceled options for 89,544 units at a weighted
average exercise price of $12.88 per unit. As of September 30, 1999, there were
vested options for 6.1 million units with a weighted exercise price of $11.24
per unit and outstanding options (including unvested options) for a total of 7.4
million units with a weighted average exercise price of $11.36 per unit.
Note 5 - Commitments and Contingencies
At the time of the Company's initial public offering (IPO) and acquisition
of its partnership interest in the Operating Partnership, the Company entered
into an agreement (the Cash Tender Agreement) with A. Alfred Taubman, who is the
Company's chairman and owns an interest in the Operating Partnership, whereby he
has the annual right to tender to the Company units of partnership interest in
the Operating Partnership (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 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.
Based on a market value at September 30, 1999 of $11.50 per common share,
the aggregate value of interests in the Operating Partnership that may be
tendered under the Cash Tender Agreement was approximately $277.5 million. The
purchase of these interests at September 30, 1999 would have resulted in the
Company owning an additional 28% interest in the Operating Partnership.
10
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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 the
Operating Partnership as the Company may, in its sole discretion, agree to
include in the continuing offer, and all existing and future optionees under the
Operating Partnership's incentive option plan to exchange shares of common stock
for partnership interests in the Operating Partnership (the Continuing Offer).
Under the Continuing Offer agreement, one unit of 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.
Note 6 - Preferred Equity
The Operating Partnership's Series C Preferred Equity has a fixed 9.0%
coupon rate, no stated maturity, sinking fund or mandatory redemption
requirements. The Series C Preferred Equity is exchangeable for Taubman Centers
Series C Cumulative Redeemable Preferred Stock beginning in 2009 at
substantially similar terms. The Series C Preferred Equity is callable by the
Operating Partnership beginning in 2004.
Note 7 - 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 the Operating Partnership (and therefore
earnings) are adjusted assuming the exercise of all options for units of
partnership interest under the Operating Partnership'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, 1999 and 1998,
options for 0.4 million and 0.2 million units of partnership interest with
average exercise prices of $13.57 and $13.89 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, 1999 and 1998, options for 0.3 million units
of partnership interest with average exercise prices of $13.68 and $13.79,
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.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
---------------------- ---------------------
1999 1998 1999 1998
---- ---- ---- ----
(in thousands, except share data)
<S> <C> <C> <C> <C>
Income before extraordinary items allocable
to common shareowners (Numerator):
Net income (loss) available to common
shareowners $ 1,641 $ (18,276) $ 6,338 $ (8,630)
Common shareowners' share of extraordinary items 19,699 189 20,066
---------- ---------- ---------- ----------
Basic income before extraordinary items $ 1,641 $ 1,423 $ 6,527 $ 11,436
Effect of dilutive options (71) (35) (238) (157)
---------- ---------- ---------- ----------
Diluted income before extraordinary items $ 1,570 $ 1,388 $ 6,289 $ 11,279
========== ========== ========== ==========
Shares (Denominator) - basic and diluted 53,277,693 52,899,013 53,163,145 51,949,256
========== ========== ========== ==========
Income before extraordinary items
per common share - basic and diluted $ .03 $ .03 $ .12 $ .22
========== ========== ========== ==========
</TABLE>
11
<PAGE>
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 8 - Investments in Fashionmall.com, Inc. and Swerdlow Real Estate Group
In June 1999, the Company made an investment in an e-commerce company that
markets and sells fashion apparel, footwear, and beauty products over the
Internet. The Company obtained 824,084 convertible preferred shares of
Fashionmall.com, Inc., a 9.9 percent interest in the company, for $7.4 million.
In connection with this investment, the Company received an option, exercisable
during a 60-day period commencing March 2000, to purchase an additional 924,898
shares of common stock at the initial public offering price of $13.00 per share.
The investment in Fashionmall.com, Inc. is accounted for under the cost method.
In September 1999, the Company acquired an approximately 5% interest in
Swerdlow Real Estate Group, a privately held real estate investment trust, for
approximately $10 million. The investment in Swerdlow is accounted for under the
cost method. The acquisition of this interest represents a non-cash investing
activity for the nine month period ended September 30, 1999, as the purchase
price is not payable until December 1999.
Note 9 - Subsequent Events
In October 1999,the 50% owned Unconsolidated Joint Venture that is
developing Dolphin Mall (Note 2) closed on a $200 million, three-year
construction facility. The rate on the facility is LIBOR plus 2%, decreasing to
LIBOR plus 1.75% when a certain coverage ratio is met. The Operating Partnership
has guaranteed the payment of 50% of any outstanding principal balance and 100%
of all accrued and unpaid interest. The guaranty will be reduced as certain
performance conditions are met. The Operating Partnership has the option to
extend the maturity date one year.
In November 1999, the Operating Partnership acquired Lord Associates, a
retail leasing firm based in Alexandria, Virginia, for $2.5 million in cash and
$5 million in partnership units, which are subject to certain contingencies. In
addition, approximately $1.0 million of the purchase price is contingent upon
profits achieved on acquired leasing contracts. Of the cash purchase price,
$750,000 was paid at closing and $1.75 million will be paid over five years. The
acquisition will be accounted for as a purchase.
In November 1999, the joint venture that is developing International Plaza
in Tampa, Florida closed on a $193.5 million, three-year construction
financing, with a one-year extension option. The rate on the facility is LIBOR
plus 1.90%. The Operating Partnership has guaranteed the payment of 100% of the
principal and interest. The loan agreement provides for reductions of the rate
and the amount guaranteed as certain center performance criteria are met.
12
<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.
General Background and Performance Measurement
The Company owns a managing general partner's interest in The Taubman
Realty Group Limited Partnership (the Operating Partnership), through which the
Company conducts all of its operations. The Operating Partnership owns,
develops, acquires and operates regional shopping centers nationally. The
Consolidated Businesses consist of shopping centers that are controlled by
ownership or contractual agreement, development projects for future regional
shopping centers and The Taubman Company Limited Partnership (the Manager).
Shopping centers that are not controlled and that are owned through joint
ventures with third parties (Unconsolidated Joint Ventures) are accounted for
under the equity method.
The operations of the shopping centers are best understood by measuring
their performance as a whole, without regard to the Company's ownership
interest. 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, the Operating Partnership exchanged interests in 10
shopping centers (nine Consolidated Businesses and one Unconsolidated Joint
Venture) and a share of the Operating Partnership's debt for all of the
partnership units owned by two General Motors pension trusts (GMPT) (the GMPT
Exchange). See Results of Operations -- GMPT Exchange and Related Transactions
below. Performance statistics presented below exclude these ten centers
(transferred centers). Because the Company's portfolio changed significantly as
a result of the GMPT Exchange, the results of operations of the transferred
centers have been separately classified within the Consolidated Businesses and
Unconsolidated Joint Ventures for purposes of analyzing and understanding the
historical results of the current portfolio.
Since the Company's interest in the Operating Partnership has been its sole
material asset throughout all periods presented, references in the following
discussion to "the Company" include the Operating Partnership, except where
intercompany transactions are discussed or as otherwise noted, even though the
Operating Partnership did not become a consolidated subsidiary until September
30, 1998.
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.
The following table summarizes certain quarterly operating data for 1998
and the first three quarters of 1999:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th 1st 2nd 3rd
Quarter Quarter Quarter Quarter Total Quarter Quarter Quarter
1998 1998 1998 1998 1998 1999 1999 1999
----------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mall Tenant Sales $ 467,698 $ 505,732 $ 507,098 $ 852,198 $ 2,332,726 $ 533,730 $ 598,956 $ 610,520
Revenues 98,960 99,993 106,250 126,424 431,627 117,901 129,173 126,715
Occupancy:
Average (1) 88.7% 89.3% 89.5% 90.0% 89.4% 88.5% 88.1% 88.9%
Ending 88.6% 89.3% 89.6% 90.2% 90.2% 87.5% 88.0% 89.5%
Leased Space 91.7% 92.0% 92.4% 92.3% 92.3% 91.3% 91.7% 92.8%
</TABLE>
(1) Average occupancy for centers that were owned and open for all of 1998
and 1999 was 89.8% and 88.7%, respectively, for the first quarter of
1999 and 1998, 89.3% for both the second quarters of 1999 and 1998,
and 89.7% and 89.5%, respectively, for the third quarter of 1999 and
1998.
13
<PAGE>
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 1998 and for the first three
quarters of 1999:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th 1st 2nd 3rd
Quarter Quarter Quarter Quarter Total Quarter Quarter Quarter
1998 1998 1998 1998 1998 1999 1999 1999
---------- ---------- ---------- ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Minimum Rents 11.6% 10.9% 11.0% 7.2% 9.7% 11.8% 10.8% 10.7%
Percentage Rents 0.2 0.2 0.2 0.4 0.3 0.2 0.4 0.3
Expense Recoveries 4.5 4.5 4.7 3.4 4.1 4.7 4.9 4.5
---- ---- ---- ---- ---- ---- ---- ----
Mall Tenant Occupancy Costs 16.3% 15.6% 15.9% 11.0% 14.1% 16.7% 16.1% 15.5%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
Rental Rates
Average base rent per square foot for all mall tenants at the 10 centers
owned and open for at least five years was $44.07 for the twelve months ended
September 30, 1999, compared to $41.98 for the twelve months ended September 30,
1998. As leases have expired in the shopping centers, the Company 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.
Results of Operations
The following represent significant debt and equity transactions, new
center openings and expansions which affect the operating results described
under Comparison of Three Months Ended September 30, 1999 to the Three Months
Ended September 30, 1998 and Comparison of Nine Months Ended September 30, 1999
to the Nine Months Ended September 30, 1998.
GMPT Exchange and Related Transactions
On September 30, 1998, the Operating Partnership 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), providing
the Company with a majority and controlling interest in the Operating
Partnership. The Operating Partnership continues to manage the centers exchanged
under management agreements with GMPT that expire December 31, 1999. Renewal of
the management agreements is currently under negotiation. Certain costs of
providing services under these agreements, including administrative and certain
other fixed costs, would not necessarily be eliminated if the contracts were not
renewed. The actual reduction of costs would be affected by whether all or a
portion of the contracts were not renewed, and actual or anticipated changes in
the Operating Partnership's owned or managed portfolio.
In anticipation of the GMPT Exchange, the Operating Partnership 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
the Operating Partnership'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. 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.
Concurrently with the GMPT Exchange, the Operating Partnership committed to
a restructuring of its operations, expecting to reduce its annual general and
administrative expense. During 1998, the Company recognized a $10.7 million
charge related to this restructuring. During the nine months ended September 30,
1999, general and administrative expense has been reduced to $13.6 million, a
decrease of $6.0 million from the corresponding period in 1998.
14
<PAGE>
Other Debt and Equity Transactions
In April 1999, a ten-year financing of $270 million with an all-in rate of
approximately 6.9% secured by The Mall at Short Hills was completed. Also, in
June 1999, a ten-year financing of $80 million with an all-in rate of
approximately 7.8% secured by Biltmore Fashion Park was completed. The net
proceeds of these financings were used to pay off the entire $340 million
balance on the bridge loan.
In April 1999, a three-year $170 million loan secured by Great Lakes
Crossing was finalized, with proceeds used to repay the balance of the existing
construction facility. The loan bears interest at one-month LIBOR plus 1.50%. In
addition, the Company finalized an amendment to the MacArthur Center
construction facility, with total availability under the facility of $120
million at an interest rate of one-month LIBOR plus 1.35%.
In June 1999, the Operating Partnership's $200 million line of credit
facility was securitized, with interests in Fairlane, LaCumbre, Paseo Nuevo, and
Regency Square serving as collateral. The rate on the line was decreased to
LIBOR plus 0.90%.
In August 1999, a seven-year secured financing of $177 million with an
all-in rate of 7.8% was completed by the 50% owned Unconsolidated Joint Venture
that owns Cherry Creek. The proceeds were used to repay the existing $130
million mortgage and transaction costs. The remaining net proceeds of
approximately $45.2 million were distributed to the Operating Partnership, which
had contributed all the funding for the 1998 expansion of Cherry Creek. The
Operating Partnership used the distribution to pay down lines of credit.
In September 1999, the Operating Partnership completed a $75 million
private placement of 9% Cumulative Redeemable Preferred Partnership Equity
(Series C Preferred Equity), which was purchased by an institutional investor.
The net proceeds were used to pay down lines of credit.
In November 1999, the Operating Partnership acquired Lord Associates, a
retail leasing firm based in Alexandria, Virginia, for $2.5 million in cash and
$5 million in partnership units, which are subject to certain contingencies. In
addition, approximately $1.0 million of the purchase price is contingent upon
profits achieved on acquired leasing contracts. Of the cash purchase price,
$750,000 was paid at closing and $1.75 million will be paid over five years. The
acquisition will be accounted for as a purchase.
Openings and Expansions
In March 1999, MacArthur Center, a 70% owned enclosed super-regional mall,
opened in Norfolk, Virginia. In November 1998, Great Lakes Crossing, an 80%
owned enclosed value super-regional mall, opened in Auburn Hills, Michigan. Both
Great Lakes Crossing and MacArthur Center are owned by joint ventures in which
the Operating Partnership has a controlling interest, and consequently the
results of these centers are consolidated in the Company's financial statements.
The Operating Partnership is entitled to a preferred return on its equity
contributions to these centers. The contributed capital was used to fund
construction costs. The income effect of the cumulative preferred return net of
the interest on the Operating Partnership's associated borrowings was
approximately $0.5 million and $1.5 million for the three and nine months ended
September 30, 1999, respectively, and is expected to total approximately $2
million in 1999. The net effect in 2000 of any recurring preference is expected
to be minimal. At Cherry Creek, a 132,000 square foot expansion opened in stages
throughout the fall of 1998.
Presentation of Operating Results
In order to facilitate the analysis of the ongoing business for periods
prior to the GMPT Exchange, the following tables contain the combined operating
results of the Company and the Operating Partnership and also present separately
the revenues and expenses, other than interest, depreciation and amortization,
of the transferred centers. Income allocated to the noncontrolling partners and
preferred interests is deducted to arrive at the results allocable to the
Company's common shareowners. Because the net equity of the Operating
Partnership's unitholders is less than zero, for periods subsequent to the GMPT
Exchange, the income allocated to the noncontrolling partners is equal to their
share of distributions. The net equity of these minority partners is less than
zero due to accumulated distributions in excess of net income and not as a
result of operating losses. Distributions to partners are usually greater than
net income because net income includes non-cash charges for depreciation and
amortization. The Company's average ownership percentage of the Operating
Partnership was 62.9% for the three and nine months ended September 30, 1999 and
39.5% and 39.0% for the three and nine months ended September 30, 1998.
15
<PAGE>
Comparison of the Three Months Ended September 30, 1999 to the Three Months
Ended September 30, 1998
The following table sets forth operating results for the three months ended
September 30, 1999 and September 30, 1998, showing the results of the
Consolidated Businesses and Unconsolidated Joint Ventures:
<TABLE>
<CAPTION>
Three Months Ended September 30, 1999 Three Months Ended September 30, 1998
------------------------------------- -------------------------------------
UNCONSOLIDATED UNCONSOLIDATED
CONSOLIDATED JOINT CONSOLIDATED JOINT
BUSINESSES(1) VENTURES(2) TOTAL BUSINESSES(1) VENTURES(2) TOTAL
---------------------------------------------- ---------------------------------------------
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Minimum rents 33.6 39.3 72.9 23.7 37.2 60.9
Percentage rents 1.3 1.1 2.4 0.9 0.8 1.8
Expense recoveries 18.7 20.8 39.5 14.1 19.7 33.8
Management, leasing and
development 6.4 6.4 1.8 1.8
Other 4.0 1.6 5.5 6.0 2.0 8.0
Revenues
- transferred centers 41.6 16.2 57.8
----- ----- ----- ---- ----- -----
Total revenues 63.9 62.8 126.7 88.1 75.9 164.1
OPERATING COSTS:
Recoverable expenses 16.6 17.3 33.9 12.9 16.8 29.7
Other operating 6.8 3.5 10.3 6.3 2.4 8.6
Management, leasing
and development 4.3 4.3 1.0 1.0
Expenses other than
interest, depreciation
and amortization
-transferred centers 14.8 6.0 20.9
General and
administrative 4.4 4.4 5.4 5.4
Interest expense 13.5 16.4 29.9 22.1 18.5 40.6
Depreciation and
amortization 13.4 7.4 20.8 16.0 8.4 24.4
----- ----- ----- ----- ----- -----
Total operating costs 59.0 44.5 103.6 78.5 52.0 130.5
Net results of
Memorial City (1) (0.4) (0.4) (0.3) (0.3)
----- ----- ----- ----- ----- -----
4.5 18.3 22.8 9.4 23.9 33.3
===== ===== ===== =====
Equity in net income
of Unconsolidated Joint
Ventures 9.3 12.8
Restructuring loss (10.7)
----- -----
Income before
extraordinary item,
minority and preferred
interests 13.8 11.5
Extraordinary item (49.8)
TRG preferred
distributions (0.5)
TRG income allocable
to minority partners (7.5) 24.2
----- -----
Net income (loss) 5.8 (14.1)
Series A preferred
dividends (4.2) (4.2)
----- -----
Net income (loss) available
to common shareowners 1.6 (18.3)
===== =====
SUPPLEMENTAL
INFORMATION (3):
EBITDA contribution 30.4 23.1 53.5 47.7 28.0 75.7
Beneficial Interest
Expense (12.3) (8.7) (21.1) (22.1) (9.8) (31.9)
Non-real estate
depreciation (0.7) (0.7) (0.5) (0.5)
Preferred dividends
and distributions (4.7) (4.7) (4.2) (4.2)
----- ----- ----- ----- ----- -----
Funds from Operations
contribution 12.7 14.4 27.1 20.9 18.2 39.1
===== ===== ===== ===== ===== =====
</TABLE>
(1) The results of operations of Memorial City are presented net in this
table.
(2) With the exception of the Supplemental Information, amounts represent
100% of the Unconsolidated Joint Ventures. Amounts are net of
intercompany profits.
(3) EBITDA represents earnings before interest and depreciation and
amortization. Funds from Operations is defined and discussed in
Liquidity and Capital Resources.
(4) Amounts in the table may not add due to rounding.
(5) Certain 1998 amounts have been reclassified to conform to 1999
classifications.
16
<PAGE>
Consolidated Businesses
Total revenues for the three months ended September 30, 1999 were $63.9
million, a $17.4 million, or 37.4%, increase over the comparable period in 1998,
excluding revenues of the transferred centers. Minimum rents increased $9.9
million primarily due to the opening of MacArthur Center and Great Lakes
Crossing. Expense recoveries increased primarily due to the new centers.
Revenues from management, leasing, and development services increased primarily
due to the management agreements with GMPT. Other revenue decreased primarily
due to a decrease in gains on the sale of peripheral land, partially offset by
an increase in garage revenue.
Total operating costs were $59.0 million, a $4.7 million, or 7.4% decrease
over the comparable period in 1998, excluding expenses other than depreciation,
amortization and interest of the transferred centers. Recoverable expenses
increased primarily due to Great Lakes Crossing and MacArthur Center. Other
operating expense increased due to the new centers and an increase in bad debt
expense, partially offset by a decrease in center professional fees. Costs of
management, leasing and development services increased primarily due to the
management agreements with GMPT. General and administrative expense decreased
primarily due to decreases in payroll costs, travel and professional fees.
Interest expense decreased primarily due to the assumption of debt by GMPT as
part of the GMPT Exchange, partially offset by an increase in debt used to
finance Great Lakes Crossing and MacArthur Center and a decrease in capitalized
interest related to these centers. Depreciation and amortization expense
decreased due to the transferred centers, offset by an increase due to the new
centers.
During 1998, a $10.7 million loss on the restructuring was recognized,
which primarily represented the cost of certain involuntary terminations of
personnel.
Unconsolidated Joint Ventures
Total revenues for the three months ended September 30, 1999 were $62.8
million, a $3.1 million, or 5.2%, increase from the comparable period of 1998,
excluding revenues of the transferred center. Minimum rents increased due to the
expansion at Cherry Creek and to tenant rollovers. Expense recoveries increased
because of the Cherry Creek expansion and an increase in property taxes at
certain centers.
Total operating costs decreased by $7.5 million (of which $6.0 million
represented the expenses other than interest, depreciation, and amortization of
the transferred center), to $44.5 million for the three months ended September
30, 1999. Recoverable expenses increased primarily due to the Cherry Creek
expansion and an increase in property taxes at certain centers. Other operating
expense increased primarily due to increases in bad debt expense. Interest
expense decreased primarily due to the assumption of debt by GMPT as part of the
GMPT Exchange. Depreciation and amortization decreased due to the transferred
center, offset by an increase due to the Cherry Creek expansion.
Net income of the Unconsolidated Joint Ventures decreased by $5.6 million,
or 23.4%, to $18.3 million. The Company's equity in net income of the
Unconsolidated Joint Ventures was $9.3 million, a 27.3% decrease from the
comparable period in 1998.
Net Income
As a result of the foregoing, the Company's income before extraordinary
items, minority and preferred interests increased $2.3 million, or 20.0%, to
$13.8 million for the three months ended September 30, 1999. During the three
months ended September 30, 1998, an extraordinary charge was recognized related
to the extinguishment of debt in connection with the GMPT Exchange. The income
(loss) of the Operating Partnership allocable to minority partners increased to
$7.5 million, from $(24.2) million in 1998, primarily reflecting the Company's
increased ownership in the Operating Partnership due to the GMPT Exchange and
the results of operations discussed above. Distributions of $0.5 million to the
Operating Partnership's Series C Preferred Equity owners were made in 1999.
After payment of $4.2 million in Series A preferred dividends, net income (loss)
available to common shareowners for 1999 was $1.6 million compared to $(18.3)
million in 1998.
17
<PAGE>
Comparison of the Nine Months Ended September 30, 1999 to the Nine Months Ended
September 30, 1998
The following table sets forth operating results for the nine months ended
September 30, 1999 and September 30, 1998, showing the results of the
Consolidated Businesses and Unconsolidated Joint Ventures:
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999 Nine Months Ended September 30, 1998
------------------------------------ ------------------------------------
UNCONSOLIDATED UNCONSOLIDATED
CONSOLIDATED JOINT CONSOLIDATED JOINT
BUSINESSES(1) VENTURES(2) TOTAL BUSINESSES(1) VENTURES(2) TOTAL
---------------------------------------------- ---------------------------------------------
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Minimum rents 98.1 116.6 214.7 70.9 108.8 179.7
Percentage rents 3.9 2.8 6.7 2.5 2.2 4.8
Expense recoveries 56.2 61.1 117.3 41.1 56.3 97.5
Management, leasing
and development 18.1 18.1 5.6 5.6
Other 12.1 4.9 17.0 11.9 5.8 17.7
Revenues -
transferred centers 129.7 47.2 177.0
----- ----- ----- ----- ----- -----
Total revenues 188.3 185.5 373.8 261.8 220.4 482.2
OPERATING COSTS:
Recoverable expenses 48.9 50.4 99.3 36.4 47.0 83.5
Other operating 22.1 10.1 32.2 16.1 8.8 24.9
Management, leasing
and development 13.1 13.1 3.3 3.3
Expenses other than
interest, depreciation
and amortization
- transferred centers 44.3 17.7 62.0
General and administrative 13.6 13.6 19.5 19.5
Interest expense 38.2 46.9 85.2 66.7 54.0 120.7
Depreciation and
amortization 38.4 22.1 60.4 46.4 24.3 70.8
----- ----- ----- ----- ----- -----
Total operating costs 174.3 129.5 303.8 232.7 151.9 384.6
Net results of
Memorial City (1) (0.9) (0.9) (0.7) (0.7)
----- ----- ----- ----- ----- -----
13.1 55.9 69.0 28.3 68.5 96.8
===== ===== ===== =====
Equity in income before
extraordinary item
of Unconsolidated Joint
Ventures 29.1 35.5
Restructuring loss (10.7)
----- -----
Income before
extraordinary items,
minority and preferred
interests 42.1 53.1
Extraordinary items (0.3) (50.8)
TRG preferred distributions (0.5)
TRG income allocable
to minority partners (22.5) 1.5
----- -----
Net income 18.8 3.8
Series A preferred dividends (12.5) (12.5)
----- -----
Net income (loss) available
to common shareowners 6.3 (8.6)
===== =====
SUPPLEMENTAL INFORMATION (3):
EBITDA contribution 87.6 69.4 157.0 142.1 79.9 222.0
Beneficial Interest
Expense (35.8) (25.2) (61.0) (66.7) (28.7) (95.4)
Non-real estate
depreciation (1.9) (1.9) (1.6) (1.6)
Preferred dividends
and distributions (13.0) (13.0) (12.5) (12.5)
----- ----- ----- ----- ----- -----
Funds from Operations
contribution 36.9 44.2 81.1 61.4 51.2 112.6
===== ===== ===== ===== ===== =====
</TABLE>
(1) The results of operations of Memorial City are presented net in this
table.
(2) With the exception of the Supplemental Information, amounts represent
100% of the Unconsolidated Joint Ventures. Amounts are net of
intercompany profits.
(3) EBITDA represents earnings before interest and depreciation and
amortization. Funds from Operations is defined and discussed in
Liquidity and Capital Resources.
(4) Amounts in the table may not add due to rounding.
(5) Certain 1998 amounts have been reclassified to conform to 1999
classifications.
18
<PAGE>
Consolidated Businesses
Total revenues for the nine months ended September 30, 1999 were $188.3
million, a $56.2 million, or 42.5%, increase over the comparable period in 1998,
excluding revenues of the transferred centers. Minimum rents increased $27.2
million of which $23.7 million was caused by the opening of MacArthur Center and
Great Lakes Crossing. Minimum rents also increased due to tenant rollovers.
Percentage rent increased because of an increase in tenant sales. Expense
recoveries increased primarily due to the new centers. Revenues from management,
leasing, and development services increased primarily due to the management
agreements with GMPT. Other revenue increased primarily due to increases in
lease cancellation and garage revenues, offset by a decrease in gains on sales
of peripheral land.
Total operating costs were $174.3 million, a $14.1 million, or 7.5%
decrease over the comparable period in 1998, excluding expenses other than
depreciation, amortization and interest of the transferred centers. Recoverable
expenses increased primarily due to Great Lakes Crossing and MacArthur Center.
Other operating expense increased due to an increase in the charge to operations
for costs of unsuccessful and potentially unsuccessful pre-development
activities, the new centers, and bad debt expense. Costs of management, leasing
and development services increased primarily due to the management agreements
with GMPT. General and administrative expense decreased $5.9 million primarily
due to decreases in payroll costs, travel and professional fees. Interest
expense decreased primarily due to the assumption of debt by GMPT as part of the
GMPT Exchange, partially offset by an increase in debt used to finance Great
Lakes Crossing and MacArthur Center and a decrease in capitalized interest
related to these centers. Depreciation and amortization expenses decreased due
to the transferred centers, partially offset by an increase due to the new
centers.
During 1998, a $10.7 million loss on the restructuring was recognized,
which primarily represented the cost of certain involuntary terminations of
personnel
Unconsolidated Joint Ventures
Total revenues for the nine months ended September 30, 1999 were $185.5
million, a $12.3 million, or 7.1%, increase from the comparable period of 1998,
excluding revenues of the transferred center. Minimum rents increased due to the
expansion at Cherry Creek and tenant rollovers. Expense recoveries also
increased because of the Cherry Creek expansion and an increase in property
taxes at certain centers. Other revenue decreased by $0.9 million primarily due
to a decrease in gains on sales of peripheral land.
Total operating costs decreased by $22.4 million (of which $17.7 million
represented the expenses other than interest, depreciation, and amortization of
the transferred center), to $129.5 million for the nine months ended September
30, 1999. Recoverable expenses increased primarily due to the Cherry Creek
expansion and an increase in property taxes at certain centers. Other operating
expense increased primarily due to increases in bad debt expense. Interest
expense decreased primarily due to the assumption of debt by GMPT as part of the
GMPT Exchange. Depreciation and amortization decreased due to the tranferred
center, offset by an increase due to the Cherry Creek expansion.
Income before extraordinary item of the Unconsolidated Joint Ventures
decreased by $12.6 million, or 18.4%, to $55.9 million. The Company's equity in
income before extraordinary item of the Unconsolidated Joint Ventures was $29.1
million, an 18.0% decrease from the comparable period in 1998.
Net Income
As a result of the foregoing, the Company's income before extraordinary
items, minority and preferred interests decreased $11.0 million, or 20.7%, to
$42.1 million for the nine months ended September 30, 1999. The Company
recognized a $0.3 extraordinary loss related to the extinguishment of debt
during 1999, while an extraordinary charge for the extinguishment of debt,
primarily related to the GMPT Exchange, was recognized in 1998. The income of
the Operating Partnership allocable to minority partners increased to $22.5
million, from $1.5 million in 1998, primarily reflecting the Company's increased
ownership in the Operating Partnership due to the GMPT Exchange and the results
of operations discussed above. Distributions of $0.5 million to the Operating
Partnership's Series C Preferred Equity owners were made in 1999. After payment
of $12.5 million in Series A preferred dividends, net income (loss) available to
common shareowners for 1999 was $6.3 million compared to $(8.6) million in 1998.
19
<PAGE>
Liquidity and Capital Resources
On September 30, 1998, the Company obtained a majority and controlling
interest in the Operating Partnership as a result of the GMPT Exchange (See
Results of Operations - GMPT Exchange and Related Transactions above). As of
that date the Company consolidated the accounts of the Operating Partnership in
the Company's financial statements. Prior to that date the Company accounted for
its investment in the Operating Partnership under the equity method. In the
following discussion, references to beneficial interest represent the Operating
Partnership's share of the results of its consolidated and unconsolidated
businesses. The Company does not have and has not had any parent company
indebtedness; all debt discussed represents obligations of the Operating
Partnership or its subsidiaries and joint ventures.
The Company believes that its net cash provided by operating activities,
distributions from its joint ventures, the unutilized portion of its credit
facilities, and its ability to access the capital markets, assures adequate
liquidity to conduct its operations in accordance with its dividend and
financing policies.
As of September 30, 1999, the Company had a consolidated cash balance of
$14.8 million. Additionally, the Company has a secured $200 million line of
credit. The line had $73 million of borrowings as of September 30, 1999 and
expires in September 2001. The Company also has available an unsecured bank line
of credit of up to $40 million. The line had $9.0 million of borrowings as of
September 30, 1999. The maturity of the line has been extended while the Company
finalizes an agreement, which is expected to extend the maturity to November
2000 and to securitize the line.
Debt
In April 1999, a ten-year financing of $270 million with an all-in rate of
approximately 6.9% secured by The Mall at Short Hills was completed. Also, a
ten-year financing of $80 million with an all-in rate of approximately 7.8%
secured by Biltmore Fashion Park was completed in June 1999. The net proceeds
from these financings were used to pay off the $340 million bridge loan that was
established in September of 1998 to facilitate the GMPT transaction.
In April 1999, a three-year $170 million loan secured by Great Lakes
Crossing was finalized. The loan agreement provides for an option to extend the
maturity date one year. The loan bears interest at one-month LIBOR plus 1.50%.
Proceeds from the loan were used to repay the balance of the existing
construction facility. Payment of principal and interest are guaranteed by the
Operating Partnership. The loan agreement provides for a reduction of the
interest rate and the amount guaranteed as certain center performance and
valuation criteria are met. In addition, the Company finalized an amendment to
the MacArthur Center construction facility. The total availability under the
facility is $120 million with interest at one-month LIBOR plus 1.35%. The
balance at September 30, 1999 was $115.2 million.
In June 1999, the Operating Partnership's $200 million line of credit
facility was securitized, with interests in Fairlane, LaCumbre, Paseo Nuevo, and
Regency Square serving as collateral. The rate on the line was decreased to
LIBOR plus 0.90%.
In August 1999, the 50% owned Unconsolidated Joint Venture that owns Cherry
Creek completed a $177 million, secured financing. The financing has an all-in
rate of 7.8% and matures in August 2006. The proceeds were used to repay the
existing $130 million mortgage and transaction costs. The remaining net proceeds
of approximately $45.2 million were distributed to the Operating Partnership,
which had contributed all of the funding for the 1998 expansion of Cherry Creek.
The Operating Partnership used the distribution to pay down its line of credit.
Proceeds from additional borrowings provided funding of $200.9 million for
the first nine months of 1999 compared to $373.4 million of borrowings and
equity issuances in the comparable period of 1998 (including $77.7 million for
the redemption of 6.1 million units of partnership interest in January 1998).
Additionally, the proceeds were used to fund capital expenditures for the
Consolidated Businesses and contributions to Unconsolidated Joint Ventures for
construction costs.
In September 1999, the net proceeds from the Operating Partnership's $75
million private placement of 9% Cumulative Redeemable Preferred Partnership
Equity (Series C Preferred Equity), were used to pay down lines of credit.
20
<PAGE>
At September 30, 1999, the Operating Partnership's debt and its beneficial
interest in the debt of its Consolidated and Unconsolidated Joint Ventures
totaled $1,267.8 million. As shown in the following table, there was no unhedged
floating rate debt at September 30, 1999. Interest rates shown do not include
amortization of debt issuance costs and interest rate hedging costs. These items
are reported as interest expense in the results of operations. In the aggregate,
these costs added 0.39% to the effective rate of interest on beneficial interest
in debt at September 30, 1999. Included in beneficial interest in debt is debt
used to fund development and expansion costs. Beneficial interest in assets on
which interest is being capitalized totaled $249.2 million as of September 30,
1999. Beneficial interest in capitalized interest was $3.5 million and $11.1
million for the three and nine months ended September 30, 1999.
Beneficial Interest in Debt
-----------------------------------------------
Amount Interest LIBOR Frequency LIBOR
(in millions Rate at Cap of Rate at
of dollars) 9/30/99 Rate Resets 9/30/99
------------ --------- ------ --------- -------
Total beneficial interest in
fixed rate debt $842.6 7.53%(1)
Floating rate debt hedged
via interest rate caps:
Through December 1999 87.8 (2) 6.37 (1) 7.00% Monthly 5.40%
Through August 2000 136.0 6.88 6.00 Monthly 5.40
Through October 2000 80.6 6.72 6.50 Monthly 5.40
Through October 2001 25.0 5.83 8.55 Monthly 5.40
Through January 2002 52.4 6.61 9.50 Monthly 5.40
Through July 2002 43.4 6.53 6.50 Monthly 5.40
-----
Total beneficial interest in debt $1,267.8 7.22 (1)
========
(1) Denotes weighted average interest rate.
(2) This debt is additionally hedged via an interest rate cap for the period
December 1999 to December 2000 at a one-month LIBOR cap rate of 7%.
Certain loan agreements contain various restrictive covenants, including
limitations on net worth, 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. The Operating Partnership is in
compliance with all of such covenants.
In October 1999, the 50% owned Unconsolidated Joint Venture that is
developing Dolphin Mall closed on a $200 million, three-year construction
facility. The rate on the facility is LIBOR plus 2%, decreasing to LIBOR plus
1.75% when a certain coverage ratio is met. The Operating Partnership has
guaranteed the payment of 50% of any outstanding principal balance and 100% of
all accrued and unpaid interest. The guaranty on the payment of principal will
be reduced to 25% when certain performance conditions are met. The Operating
Partnership has the option to extend the maturity date one year.
In November 1999, the joint venture that is developing International Plaza
in Tampa, Florida closed on a $193.5 million, three-year construction
financing, with a one-year extension option. The rate on the facility is LIBOR
plus 1.90%. The Operating Partnership has guaranteed the payment of 100% of the
principal and interest. The loan agreement provides for reductions of the rate
and the amount guaranteed as certain center performance criteria are met.
Sensitivity Analysis
The Company has exposure to interest rate risk on its debt obligations and
interest rate instruments. Based on the Operating Partnership's beneficial
interest in debt and interest rates in effect at September 30, 1999, a one
percent increase or decrease in interest rates on floating rate debt would
decrease or increase annual earnings and cash flows by approximately $3.0
million. Based on the Company's consolidated debt and interest rates in effect
at September 30, 1999, a one percent increase or decrease in interest rates
would decrease or increase the fair value of debt by approximately $28 million.
Funds from Operations
A principal factor that the Company considers in determining dividends to
shareowners is Funds from Operations (FFO), which is defined as income before
extraordinary and unusual items, real estate depreciation and amortization, and
the allocation to the minority interest in the Operating Partnership, less
preferred dividends and distributions.
21
<PAGE>
Funds from Operations does 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.
In October 1999, NAREIT approved certain clarifications of the definition
of FFO, including that non-recurring items that are not defined as
"extraordinary" under generally accepted accounting principles should be
reflected in the calculation of FFO. The clarified definition is effective
January 1, 2000 and restatement of all periods presented is recommended. Under
the clarified definition, the Company would have included in FFO, for three and
nine month period ended September 30, 1998, the $10.7 million restructuring
charge (Results of Operations - GMPT Exchange and Related Transactions),
resulting in an approximate $0.08 decrease to the Company's FFO per share
reported for those periods. There would have been no change to these amounts
reported for 1999.
Reconciliation of Net Income to Funds from Operations
Three Months Ended Three Months Ended
September 30, 1999 September 30, 1998
------------------- -------------------
(in millions of dollars)
Income before extraordinary item,
minority and preferred interests (1) 13.8 11.5
Restructuring loss 10.7
Depreciation and amortization (2) 13.6 16.1
Share of Unconsolidated Joint Ventures
depreciation and amortization (3) 5.0 5.4
Other income/expenses, net 0.1
Non-real estate depreciation (0.7) (0.5)
Preferred dividends and distributions (4.7) (4.2)
---- ----
Funds from Operations 27.1 39.1
==== ====
Funds from Operations allocable to
the Company 17.0 15.3
==== ====
(1) Includes gains on peripheral land sales of $0.5 million and $2.9 million
for the three months ended September 30, 1999 and September 30, 1998,
respectively.
(2) Includes $0.5 million and $0.8 million of mall tenant allowance
amortization for the three months ended September 30, 1999 and September
30, 1998, respectively.
(3) Includes $0.4 million of mall tenant allowance amortization for each of the
three periods ended September 30, 1999 and September 30, 1998.
(4) Amounts in the tables may not add due to rounding.
Nine Months Ended Nine Months Ended
September 30, 1999 September 30, 1998
------------------ ------------------
(in millions of dollars)
Income before extraordinary item,
minority and preferred interests (1) 42.1 53.1
Restructuring loss 10.7
Depreciation and amortization (2) 38.7 46.7
Share of Unconsolidated Joint Ventures
depreciation and amortization (3) 15.2 15.7
Other income/expenses, net 0.5
Non-real estate depreciation (1.9) (1.6)
Preferred dividends and distributions (13.0) (12.5)
----- -----
Funds from Operations 81.1 112.6
===== =====
Funds from Operations allocable to
the Company 51.0 43.4
===== =====
(1) Includes gains on peripheral land sales of $1.4 million and $3.3 million
for the nine months ended September 30, 1999 and September 30, 1998,
respectively.
(2) Includes $1.5 million and $2.3 million of mall tenant allowance
amortization for the nine months ended September 30, 1999 and September 30,
1998, respectively.
(3) Includes $0.9 million and $1.0 million of mall tenant allowance
amortization for the nine months ended September 30, 1999 and September 30,
1998, respectively.
(4) Amounts in the table may not add due to rounding.
22
<PAGE>
Dividends
The Company pays regular quarterly dividends to its common and Series A
preferred shareowners. 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.
On September 7, 1999, the Company declared a quarterly dividend of $0.24
per common share payable October 20, 1999 to shareowners of record on September
30, 1999. 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, 1999, which was paid on September 30, 1999
to shareowners of record on September 17, 1999. The tax status of total 1999
common dividends declared and to be declared, assuming continuation of a $0.24
per common share quarterly dividend, is estimated to be approximately 40% return
of capital, and approximately 60% of ordinary income. The tax status of total
1999 dividends to be paid on Series A Preferred Stock is estimated to be 100%
ordinary income. These are forward-looking statements and certain significant
factors could cause the actual results to differ materially, including: 1) the
amount of dividends declared; 2) changes in the Company's share of anticipated
taxable income of the Operating Partnership due to the actual results of the
Operating Partnership; 3) changes in the number of the Company's outstanding
shares; 4) property acquisitions or dispositions; 5) financing transactions,
including refinancing of existing debt; and 6) changes in the Internal Revenue
Code or its application.
The annual determination of the Company's common dividends is based on
anticipated Funds from Operations available after preferred dividends and
distributions, as well as financing considerations and other appropriate
factors. Further, the Company has decided that the growth in common dividends
will be less than the growth in Funds from Operations for the immediate future.
Any inability of the Operating Partnership or its Joint Ventures to obtain
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 the Operating Partnership and funds available to
the Company for the payment of dividends.
Capital Spending
Capital spending for routine maintenance of the 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 1999:
<TABLE>
<CAPTION>
1999
-----------------------------------------------------------
Beneficial Interest in
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 223.4(3) 145.5(4) 250.1
Mall tenant allowances 4.3 5.6 7.4
Pre-construction development and other 16.5 4.0 18.5
----- ----- -----
Total 244.2 155.1 276.0
===== ===== =====
</TABLE>
(1) Costs are net of intercompany profits.
(2) Includes the Operating Partnership's share of construction costs for
MacArthur Center (a 70% owned consolidated joint venture), The Mall at
Wellington Green (a 90% owned consolidated joint venture), International
Plaza (a 50.1% owned consolidated joint venture) and Dolphin Mall (a 50%
owned unconsolidated joint venture).
(3) Includes costs related to MacArthur Center, The Shops at Willow Bend, The
Mall at Wellington Green, and International Plaza.
(4) Includes costs related to Dolphin Mall (a 50% owned unconsolidated joint
venture).
MacArthur Center, a new center in Norfolk, Virginia, opened in March 1999.
The 930,000 square foot center is anchored by Nordstrom and Dillard's. This
center is owned by a joint venture in which the Operating Partnership has a 70%
controlling interest and cost approximately $157 million.
23
<PAGE>
International Plaza, a new 1.3 million square foot center under
construction in Tampa, Florida, will be anchored by Nordstrom, Lord & Taylor,
Dillard's and Neiman Marcus. This project, scheduled to open on September 14,
2001, is owned by a joint venture in which the Operating Partnership has a
controlling 50.1% interest. The Shops at Willow Bend, a new 1.5 million square
foot center under construction in Plano, Texas, will be anchored by Neiman
Marcus, Saks Fifth Avenue, Lord & Taylor, Foley's and Dillard's. The center is
scheduled to open August 17, 2001; Saks Fifth Avenue will open in 2004. The Mall
at Wellington Green, a 1.3 million square foot center under construction in west
Palm Beach County, Florida, will be anchored by Nordstrom, Lord & Taylor,
Burdine's, Dillard's and JCPenney. The center, scheduled to open on October 5,
2001, will be owned by a joint venture in which the Operating Partnership has a
90% controlling interest. In September 1999, the Company finalized a partnership
agreement with Swerdlow Real Estate Group to jointly develop Dolphin Mall, a 1.4
million square foot value regional center located in Miami, Florida. The center
is scheduled to open March 1, 2001.
The total cost of these four projects is anticipated to be approximately $1
billion. The Company's beneficial investment in the projects will be
approximately $680 million, as three of these projects are joint ventures. While
the Company intends to finance approximately 75 percent of each new center with
construction debt, the Company will have a greater responsibility for the
project equity (approximately $210 million). Approximately $150 million of this
amount has been funded through the Operating Partnership's preferred equity
offering and borrowing under the Company's lines of credit. Additional sources
of funding are additional borrowings under the Company's lines of credit,
proceeds from the refinancings of certain centers, contributions from a
potential new joint venture partner, or other equity offerings. With respect to
the construction loan financing, the Company has closed on financing for Dolphin
Mall, and financing for International Plaza is fully underwritten and expected
to close by year-end. The financings on the two remaining projects are expected
to be completed in 2000.
New food courts recently opened at Fairlane Town Center and Lakeside, both
in the Detroit metropolitan area. Additionally, a 30-screen theater will be
added at Fairlane and is anticipated to open in the spring of 2000. At Fair Oaks
in the Washington, D.C. area, Hecht's expansion will open in the spring of 2000,
and a JCPenney expansion and a newly constructed Macy's store will open in the
fall of 2000. The Operating Partnership's share of the cost of these projects is
expected to be approximately $35 million.
In 1996, the Operating Partnership entered into an agreement to lease
Memorial City Mall, a 1.4 million square foot shopping center located in
Houston, Texas. The lease was subject to certain provisions that enabled the
Operating Partnership to explore significant redevelopment opportunities and
terminate the lease obligations in the event such redevlopment opportunities
were not deeemed to be sufficient. In November 1999, the Operating Partnership
exercised its option to terminate the lease. Under the terms of the lease, the
Operating Partnership will continue to manage the center for the ensuing six
month period. The Operating Partnership is continuing to asssess the potential
redevelopment opportunities of the center and is in discussion with the lessor
to determine the redevelopments viability.
The Operating Partnership 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. A number of locations across the nation are targeted for
future initiatives.
The Operating Partnership anticipates that its share of costs for
development projects, scheduled to be completed in 2001 will be as much as $258
million in 2000. The Operating Partnership's estimates of 1999 and 2000 capital
spending include only projects approved by the Company's Board of Directors and,
consequently, estimates will change as new projects are approved. 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.
24
<PAGE>
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 implemented a 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 Year 2000 on third parties with which it conducts
business, including tenants, vendors, contractors, creditors, and others. The
Company has completed the assessment, inventory, planning and testing phases of
its plan and has determined that substantially all of the Company's internal
systems and all of its mission critical systems are Year 2000 compliant. The
Company has requested information and has obtained commitments from tenants,
vendors, suppliers and business partners and has developed contingency plans to
minimize the impact on the Company in the event they do not meet their Year 2000
commitments. The Company's contingency plans include arrangements to have
personnel available at its home office and each of the centers to respond to any
operational needs as the year changes.
The Company performed a full system test during the first quarter of 1999
and continues to remediate any operational issues encountered with application
and infrastructure systems through repair and/or replacement. Minor operational
issues remain at only a limited number of centers; these issues are non-critical
in nature and are covered by the Company's contingency plans. The estimated
costs of addressing the Year 2000 issue are not expected to be material to 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 utility companies to meet their
commitments might result in temporary business interruption at centers. The
Company is finalizing contingency plans in response to such exposure, and will
continue to do so up until the turn of the calendar year. Failure of third
parties with which the Company 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 the Operating Partnership (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.
Based on a market value at September 30, 1999 of $11.50 per common share,
the aggregate value of interests in the Operating Partnership that may be
tendered under the Cash Tender Agreement was approximately $277.5 million. The
purchase of these interests at September 30, 1999 would have resulted in the
Company owning an additional 28% interest in the Operating Partnership.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
requires companies to record derivatives on the balance sheet as assets and
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivatives and whether it qualifies for hedge accounting. This statement is
not expected to have a material impact on the Company's consolidated financial
statements. This statement is effective for fiscal years beginning after June
15, 2000.
25
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is included in this report at Item 2
under the caption "Liquidity and Capital Resources - Sensitivity Analysis".
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
3(a) -- Certificate of Amendment to the Articles of
Incorporation of Taubman Centers, Inc. dated
September 3, 1999(incorporated herein by reference
to exhibit 10(a) being filed herewith).
3(b) -- Composite copy of Articles of Incorporation of
Taubman Centers, Inc., including all amendments
to date.
10(a)-- Second Amendment to the Second Amendment and
Restatement of Agreement of Limited Partnership of
The Taubman Realty Group Limited Partnership
effective as of September 3, 1999.
10(b)-- Private Placement Purchase Agreement dated as
of September 3, 1999 among The Taubman Realty
Group Limited Partnership, Taubman Centers, Inc.
and Goldman Sachs 1999 Exchange Place Fund, L.P.
10(c)-- Registration Rights Agreement entered into as of
September 3, 1999 by and between Taubman Centers,
Inc. and Goldman Sachs 1999 Exchange Place Fund,
L.P.
12 -- Statement Re: Computation of Taubman Centers, Inc.
Ratio of Earnings to Combined Fixed Charges
and Preferred Dividends and Distributions.
27 -- Financial Data Schedule.
b) --Current Reports on Form 8-K.
None
26
<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 15, 1999 By: /s/ Lisa A. Payne
--------------------------
Lisa A. Payne
Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number
3(a) -- Certificate of Amendment to the Articles of Incorporation of
Taubman Centers, Inc. dated September 3, 1999 (incorporated
herein by reference to exhibit 10(a) being filed herewith).
3(b) -- Composite copy of Articles of Incorporation of Taubman Centers,
Inc., including all amendments to date.
10(a) -- Second Amendment to the Second Amendment and Restatement of
Agreement of Limited Partnership of The Taubman Realty Group
Limited Partnership effective as of September 3, 1999.
10(b) -- Private Placement Purchase Agreement dated as of September 3,
1999 among The Taubman Realty Group Limited Partnership, Taubman
Centers, Inc. and Goldman Sachs 1999 Exchange Place Fund, L.P.
10(c) -- Registration Rights Agreement entered into as of September 3,
1999 by and between Taubman Centers, Inc. and Goldman Sachs
1999 Exchange Place Fund, L.P.
12 -- Statement Re: Computation of Taubman Centers, Inc. Ratio of
Earnings to Combined Fixed Charges and Preferred Dividends and
Distributions.
27 -- Financial Data Schedule.
<PAGE>
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;
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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.
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
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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.
(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
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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 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.
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(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' 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
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(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
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allowance for unpaid dividends, regardless of whether in
arrears, on called Series A Preferred Stock.
(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)
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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 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 Non-Participating 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
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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 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
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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 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
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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 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
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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.
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(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 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).
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(iii) Series C 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 C Preferred Stock (defined
below) of the Corporation.
(a) There is hereby established a series of Preferred Stock
designated "9% Series C Cumulative Redeemable Preferred Stock, par
value $0.01 per share" (the "Series C Preferred Stock"), which shall
consist of 1,000,000 authorized shares.
(b) All shares of Series C 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 C 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 C Preferred Stock as to the payment of
dividends and distribution of assets upon liquidation (the "Senior
Preferred Stock"), (ii) pari passu with the Series A and Series B
Preferred Stock and 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 C 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 C 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 9% of the $75 per share liquidation preference (i.e., $6.75 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 except that, if such business day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding business day, in each case with the same force
and effect as if made on such date (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 may be for less than a full quarter. All dividends
on the Series C 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").
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(2) No dividends on the Series C 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 C 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 C 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 C 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 the payment
thereof is set apart for such payment on the Series C 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 C Preferred Stock
and the shares of any other series of Preferred Stock ranking on a
parity as to dividends with the Series C Preferred Stock, all
dividends declared upon the Series C Preferred Stock and any other
series of Preferred Stock ranking on a parity as to dividends with the
Series C Preferred Stock shall be declared pro rata, so that the
amount of dividends declared per share of Series C 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 C
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 C Preferred Stock that may be in
arrears. Holders of shares of the Series C 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 C
Preferred Stock as provided above. Any dividend payment made on shares
of the Series C 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 (iii) of this Subsection (c) of this Section 2 of
this Article III, unless full cumulative dividends on the Series C
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
the Series B Preferred Stock (or any other Preferred Stock ranking
junior to or on a parity with the Series C Preferred Stock as to
dividends or upon liquidation); and (ii) no shares of Common Stock or
the Series B Preferred Stock (or any other Preferred Stock of the
Corporation ranking junior to or on a parity with the Series C
Preferred Stock as to dividends or upon liquidation) shall be
redeemed, purchased, or otherwise acquired for any consideration (nor
shall any
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<PAGE>
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 C
Preferred Stock shall be the amount that the total dividends paid or
made available to the holders of the Series C Preferred Stock for the
year bears to the Total Dividends.
(6) Notwithstanding anything to the contrary set forth
herein, the Corporation may declare and pay a dividend on the Common
Stock, without preserving the priority of distributions described in
Subparagraphs 3 and 4 of this Paragraph (d) of this Item (iii) of this
Subsection (c) of this Section 2 of this Article III, but only to the
extent such dividends are required to preserve the Real Estate
Investment Trust status of the Corporation and to avoid the imposition
of an excise tax on the Corporation.
(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 C
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 $75 per share in cash (or property having a
fair market value as determined by the Board of Directors valued at
$75 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 C 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 (iii).
(f) (1) The Series C Preferred Stock is not redeemable prior to
September 3, 2004. On and after September 3, 2004, the Corporation, at
its option upon not less than 30 nor more than 60 days' written
notice, may redeem shares of the Series C Preferred Stock, in whole or
in part, at any time and from time to time, for a cash redemption
price of $75 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 C 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 C 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
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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 C Preferred Stock; (ii)
such shares of Series C 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 C Preferred Stock is to be
redeemed, the Series C 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
C 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 C Preferred Stock shall be
redeemed unless all outstanding shares of Series C Preferred Stock are
simultaneously redeemed, and the Corporation shall not purchase or
otherwise acquire directly or indirectly any shares of Series C
Preferred Stock (except by exchange for Junior Stock); however, the
foregoing shall not prevent the purchase or acquisition of shares of
Series C Preferred Stock pursuant to a purchase or exchange offer made
on the same terms to holders of all outstanding shares of Series C
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 C
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 C 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 C Preferred
Stock to be redeemed; (iv) the place or places where the Series C
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 C 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 C Preferred Stock to be redeemed from such holder.
(5) The holders of Series C 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 C 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 C Preferred Stock.
(6) The Series C Preferred Stock has no stated maturity and
no sinking fund shall be required and shall not be subject to
mandatory redemption. The Series C Preferred Stock is not convertible
into any other securities of the Corporation, but is subject
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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 (iii) of this Subsection (c) of this
Section 2 of this Article III, the holders of Series C Preferred Stock
shall not be entitled to vote. On all matters with respect to which
the Series C Preferred Stock is entitled to vote, each share of Series
C Preferred Stock shall be entitled to one vote.
(2) Whenever dividends on the Series C Preferred Stock are
in arrears (which shall, with respect to any quarterly dividend, mean
that any such divided has not been paid in full whether or not earned
or declared) for six or more quarterly periods (whether consecutive or
not), the number of directors then constituting the Board of Directors
shall be increased by two, and the holders of Series C Preferred Stock
(voting separately as a class with all other series of 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 C 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 C 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 C Preferred Stock shall have been paid in full or set aside for
payment in full, the holders of the Series C Preferred Stock shall be
divested of the foregoing voting rights (but subject always to the
same provision for the vesting of such voting rights in the case of
any similar future arrearages in six quarterly dividends), 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 C Preferred Stock and the Voting
Parity Preferred shall terminate.
(3) As long as any shares of Series C 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 C 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 C 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 or exchangeable for 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 C
Preferred Stock or the holders thereof; however, as long as the Series
C 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 C
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
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of the Series C Preferred Stock or any other series of
Preferred Stock, in the case of either (x) or (y) ranking on a parity
with or junior to the Series C 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 C 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 C Preferred Stock have
been redeemed or called for redemption, and sufficient funds have been
deposited in trust for the benefit of the holders of the Series C
Preferred Stock to effect such redemption.
(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 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
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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 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,
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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.
"Family Trust" means, with respect to an individual, a trust
for the benefit of such
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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
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(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).
"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
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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 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
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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
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
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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
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
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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
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Price determined using the date of
the purported Transfer that resulted in the Excess Stock as the
relevant date.
(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
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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 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.
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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 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
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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.
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.
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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.
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 a true and complete composite as of the 15th day of
November, 1999.
/s/ ROBERT S. TAUBMAN
Robert S. Taubman
President and Chief Executive Officer
Through amendment filed September 10, 1999.
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SECOND AMENDMENT TO THE SECOND AMENDMENT AND
RESTATEMENT OF AGREEMENT OF LIMITED PARTNERSHIP OF
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
THIS SECOND AMENDMENT (this "Amendment") TO THE SECOND AMENDMENT AND
RESTATEMENT OF AGREEMENT OF LIMITED PARTNERSHIP OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP (the "Second Amended and Restated Partnership Agreement"),
is entered into effective as of September 3, 1999, and is made by, between, and
among TAUBMAN CENTERS, INC., a Michigan corporation ("TCO"), TG PARTNERS LIMITED
PARTNERSHIP, a Delaware limited partnership ("TG"), and TAUB-CO MANAGEMENT,
INC., a Michigan corporation ("Taub-Co"), who, as the Appointing Persons,
pursuant to Section 13.11 of the Second Amended and Restated Partnership
Agreement, have the full power and authority to amend the Second Amended and
Restated Partnership Agreement on behalf of all of the partners of The Taubman
Realty Group Limited Partnership, a Delaware limited partnership (the
"Partnership") with respect to the matters herein provided. (Capitalized terms
used herein that are not herein defined, shall have the meanings ascribed to
them in the Second Amended and Restated Partnership Agreement.)
Recitals:
A. On September 30,1998, TCO, TG, and Taub-Co entered into the Second
Amended and Restated Partnership Agreement as an amendment and restatement of
the then-existing partnership agreement (the "Amended and Restated Partnership
Agreement"), as authorized under Section 13.11 of the Amended and Restated
Partnership Agreement.
B. On March 4, 1999, TCO, TG, and Taub-Co entered into a First Amendment to
the Second Amended and Restated Partnership Agreement to facilitate a proposed
pledge of Units of Partnership Interest in the Partnership (the Second Amended
and Restated
<PAGE>
Partnership Agreement, as so amended, is herein referred to as the
"Partnership Agreement").
C. As authorized under Section 13.11 of the Partnership Agreement, the
parties hereto wish to further amend the Partnership Agreement to provide for
the contribution of preferred capital in exchange for a preferred equity
interest, and for certain other purposes.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Article II of the Partnership Agreement is hereby amended by inserting
the following new definitions therein, in alphabetical order:
"Adjusted Capital Account Balance" means a Partner's Capital Account
balance increased by the sum of (i) any amount of cash or property such
Partner is unconditionally obligated to restore upon liquidation of the
Partnership and (ii) such Partner's share of Partnership Minimum Gain and
Partner Nonrecourse Debt Minimum Gain.
"Designation, Distribution, Redemption, Exchange, and Consent Provisions"
means those certain provisions to be set forth in an Annex attached hereto
and incorporated herein by reference, which Annex serves as a further
amendment to the Partnership Agreement.
"Parity Preferred Equity" means, on any date, an amount equal to the
aggregate contributions to the capital of the Partnership made pursuant to
Section 4.1(c) hereof, to the extent such Parity Preferred Equity has not
been redeemed or converted to Additional Interests pursuant to Section
8.1(c) hereof. Each contribution of Parity Preferred Equity shall be
designated as a separate series, e.g., the 9% Series C Cumulative
Redeemable Preferred Equity is called "Series C" because such series is
convertible into Series C Preferred Stock (as defined in the Restated
Articles of Incorporation of TCO).
"Parity Preferred Equity Balances" means, on any date and as to any series
of Parity Preferred Equity, an amount equal to the then aggregate Capital
Account balances of the Parity Preferred Partners of such series. Reference
to a Parity Preferred Equity Balance includes any one of the Parity
Preferred Equity Balances.
"Parity Preferred Partner" and "Parity Preferred Partners" are (i) that
Person or those Persons who shall contribute Parity Preferred Equity to the
Partnership pursuant to Section 4.1(c) hereof, and (ii) TCO in the event
that it acquires any portion or all of the Partnership Interest(s) of the
Person(s) identified in clause (i) hereof.
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"Parity Preferred Return" means, as to each series of Parity Preferred
Equity, the cumulative return to a series based upon the product of the
Parity Preferred Rate for such series and the amount of capital contributed
with respect to such series (taking into account any redemptions or
conversions to Additional Interests, pursuant to Section 8.1(c) hereof)
during the period to which the Parity Preferred Return relates, commencing
on the date of the contribution of such Parity Preferred Equity pursuant to
Section 4.1(c) hereof, determined on the basis of a year of three hundred
sixty (360) Days, consisting of twelve (12), 30-day months, cumulative to
the extent not paid in any given quarter pursuant to Section 5.2(a)(i)
hereof. Any Unpaid Parity Preferred Return shall not itself bear interest
or be subject to any Parity Preferred Rate. Reference to Parity Preferred
Returns includes each Parity Preferred Return.
"Parity Preferred Rate" means a fixed rate per annum (together with all
other provisions), specified by the Appointing Persons in the Designation,
Distribution, Redemption, Exchange, and Consent Provisions, as to a given
series.
"Parity Related Issue" means the series of preferred shares of TCO into
which a series of Parity Preferred Equity may be converted in accordance
with the Designation, Distribution, Redemption, Exchange, and Consent
Provisions for such series.
"Unallocated Parity Preferred Return" means, with respect to a series of
Parity Preferred Equity, the excess of the Parity Preferred Return with
respect to such series over the cumulative amount of allocations pursuant
to Section 5.1(b)(1)(B) hereof with respect to such series.
"Unpaid Parity Preferred Return" means, with respect to a series of Parity
Preferred Equity, the excess of the Parity Preferred Return with respect to
such series of Parity Preferred Equity over the cumulative amount of
distributions pursuant to Section 5.2(a)(i) with respect to such series."
2. Article II of the Partnership Agreement is hereby further amended by
deleting the definitions of "Indemnified Person", "Limited Partner" and "Limited
Partners", "Non-Managing Partners", "Partner" and "Partners", "Partnership
Interest Ledger", "Qualified Institutional Transferee", and "Record Partner" in
their entirety, and by inserting the following new definitions in the place
thereof:
"Indemnified Person" means each Partner (other than a Parity Preferred
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 (other than a Parity Preferred Partner), an officer,
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<PAGE>
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 (other than a Parity Preferred Partner).
"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, (iii) any Parity Preferred Partner, and
(iv) 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.
"Non-Managing Partners" means all of the Partners other than the Managing
General Partner and other than any Parity Preferred Partner.
"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, (iii) any Parity Preferred Partner, and (iv) any Person or Persons
to whom a Partnership Interest has been issued pursuant to Section 8.4
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, if any, and the current Percentage Interest of each Partner, if
any.
"Qualified Institutional Transferee" means (a) so long as its ownership
interest in the Partnership consists solely of a Partnership Interest as a
Parity Preferred Partner, any Parity Preferred Partner, and (b) 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
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<PAGE>
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.
"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 was a
Partner on the Effective Date shall be a Record Partner until such Person
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. Notwithstanding the foregoing, a Parity
Preferred Partner is a Record Partner."
3. Section 3.3 of the Partnership Agreement is hereby amended by inserting
the following new paragraph (e) therein, and by relettering the succeeding
paragraph accordingly:
"(e) Each Parity Preferred Partner owning a series of Parity Preferred
Equity covenants and agrees that it will not Transfer its rights to a
Parity Preferred Return or the corresponding Parity Preferred Equity other
than as set forth in Section 8.1(c) hereof and in accordance with and only
to the extent permitted by the Designation, Distribution, Redemption,
Exchange, and Consent Provisions relating to the applicable series."
4. Section 4.1 of the Partnership Agreement is hereby amended by deleting
paragraph (c) thereof in its entirety, and by inserting the following new
paragraphs (c) and (d) in the place thereof:
(c) With the approval of the Appointing Persons, a Person may
contribute, from time to time, amounts to the capital of the Partnership as
Parity Preferred Equity.
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(d) The Capital Account balances of the Partners as of September 3,
1999 shall be as set forth opposite their respective names on Schedule C
attached hereto."
5. Section 4.6 of the Partnership Agreement is hereby deleted in its
entirety, and the following new Section 4.6 is inserted in the place thereof:
"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 (other than TCO's Preferred Equity and other than a Parity
Preferred Partner's Parity Preferred Equity) 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
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<PAGE>
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 (other than a Parity Preferred
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, 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 or
Parity Preferred Equity shall be taken into account."
6. Section 5.1 of the Partnership Agreement is hereby amended by deleting
paragraph (b) thereof in its entirety, and by inserting the following new
paragraph (b) in the place thereof:
"(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 this Section 5.1(b).
(1) Profits shall be allocated:
(A) first, to TCO, in an amount equal to the excess, if any,
of the cumulative amount of Losses allocated to TCO pursuant to
Section 5.1(b)(2)(C) hereof over the cumulative amount of Profits
allocated to TCO pursuant to this Section 5.1(b)(1)(A); and then
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<PAGE>
(B) second, to the Parity Preferred Partners, in an amount
equal to the Unallocated Parity Preferred Return with respect to
each series (proportionate as to such Unallocated Parity
Preferred Return among each series); and then
(C) third, to the Parity Preferred Partners, in an amount
equal to the excess, if any, of the cumulative amount of Losses
allocated to the Parity Preferred Partners pursuant to Section
5.1(b)(2)(B) hereof over the cumulative amount of Profits
allocated to the Parity Preferred Partners pursuant to this
Section 5.1(b)(1)(C) (proportionate as to the amount of such
excess among each series); and then
(D) fourth, to the Partners in an amount equal to the
excess, if any, of the cumulative amount of Losses allocated to
the Partners pursuant to Section 5.1(b)(2)(D) hereof over the
cumulative amount of Profits allocated to the Partners pursuant
to this Section 5.1(b)(1)(D) (proportionate as to such excess
amounts); and then
(E) fifth, to the Partners holding Units of Partnership
Interest in accordance with their respective Percentage
Interests; provided, however, that Profits for any Partnership
Fiscal Year allocated to the Parity Preferred Partners may be
limited if so provided in the Designation, Distribution,
Redemption, Exchange, and Consent Provisions of the applicable
series.
(2) Losses shall be allocated:
(A) first, to Partners holding Units of Partnership Interest
until the Adjusted Capital Account Balances of all such
8
<PAGE>
Partners
are reduced to zero, excluding, for purposes of calculating TCO's
Adjusted Capital Account Balance, the Preferred Equity (in
proportion to such positive Adjusted Capital Account Balances
(excluding the Preferred Equity)); and then
(B) second, to the Parity Preferred Partners until the
Adjusted Capital Account Balances of the Parity Preferred
Partners are reduced to zero (in proportion to such positive
Adjusted Capital Account Balances); and then
(C) third, to TCO until the Adjusted Capital Account Balance
of TCO, including the Preferred Equity, is reduced to zero; and
then
(D) fourth, to the General Partners or any Limited Partner
which has made an election under Section 11.1(d) hereof, in
proportion to their respective Percentage Interests."
7. Section 5.2 of the Partnership Agreement is hereby amended by deleting
that portion of paragraph (a) thereof prior to clause (i) thereof and clause (i)
thereof in their entirety, by inserting the following in the place thereof, and
by renumbering the succeeding clauses accordingly:
"(a) Subject, on liquidation of the Partnership or on liquidation of
substantially all of the assets 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 Parity Preferred
Partners of each series in an amount equal to the Unpaid Parity
Preferred
9
<PAGE>
Return for such series, at such times as are specified in
the Designation, Distribution, Redemption, Exchange, and Consent
Provisions (such distributions to be proportionate among the series);
provided, however, that no distribution shall be made to a Parity
Preferred Partner which would reduce its Adjusted Capital Account
Balance below zero."
8. The following new paragraph (c) is hereby inserted in Section 5.2 of the
Partnership Agreement, immediately after paragraph (b) thereof:
"(c) Except as specifically provided in Section 5.2(a)(i) or Section
11.1(a)(5) hereof and in the Designation, Distribution, Redemption,
Exchange, and Consent Provisions, a Parity Preferred Partner shall have no
right to any Partnership distributions."
9. Section 5.3 of the Partnership Agreement is hereby amended by deleting
the last paragraph thereof in its entirety and by inserting the following new
paragraph in the place thereof:
"In the event of a redemption by TCO, in whole or in part, of any
series of preferred shares that constitutes a Related Issue through the
issuance of common equity, TCO shall convert its Preferred Equity (or a
portion thereof) (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
10
<PAGE>
Partners, as provided in Section 8.4(a)
hereof. Any such redemption shall be effected so that, following such
redemption, the number of Units of Partnership Interest then held by TCO
shall equal the number of shares of TCO's common stock then outstanding.
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. In the event of a redemption by TCO, in whole
or in part, of any series of preferred shares that constitutes a Related
Issue through the issuance of preferred equity, TCO shall 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) by
appropriate amendment, whether by Annex or otherwise, to Preferred Equity
having terms equivalent to the then newly issued preferred equity through
which the Related Issue was redeemed."
10. Section 6.1 of the Partnership Agreement is hereby amended by inserting
the following new paragraph immediately following existing paragraph (b)
thereof:
"A Parity Preferred Partner as to a given series of Parity Preferred
Equity shall have no voting rights or rights of consent, approval or the
like as to any matter in respect of the Partnership including, without
limitation, as to its constituency, properties or operations, unless and to
the extent specified in the Designation, Distribution, Redemption,
Exchange, and Consent Provisions relating to the applicable series."
11. Section 6.6 of the Partnership Agreement is hereby deleted in its
entirety and the following new Section 6.6 is inserted in the place thereof:
"Section 6.6 Absence of Authority of Non-Managing Partners; Limited Rights
of Parity Preferred Partners.
11
<PAGE>
(a) Except as specifically provided in this Agreement, the
Non-Managing Partners and the Parity Preferred 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.
(b) The Parity Preferred Partners shall have only the following rights
as to all matters in respect of the Partnership, including, without
limitation, as to its constituency, properties, and operations: (i) rights
of notice, inspection, and reports as provided generally to Partners in
accordance with Sections 1.2, 1.3, 1.4, 5.5, 5.7(a), and 6.10 hereof, (ii)
rights of distributions and allocations as provided in Sections 5.1,
5.2(a)(i), and 11.1(a)(5) hereof, and in the Designation, Distribution,
Redemption, Exchange, and Consent Provisions of the applicable series, (iv)
rights of Transfer as provided in Sections 8.1(a) and 8.1(c) hereof and in
the Designation, Distribution, Redemption, Exchange, and Consent Provisions
of the applicable series, and (v) such other rights as are provided in the
Designation, Distribution, Redemption, Exchange, and Consent Provisions of
the applicable series. No Parity Preferred Partner shall have any right to
Series B Preferred Stock (as defined in the Restated Articles of
Incorporation of TCO, as amended)."
12. Section 8.1 of the Partnership Agreement is hereby amended by deleting
paragraph (b) thereof in its entirety, by inserting the following new paragraphs
(b) and (c) in the place thereof, and by relettering the succeeding paragraphs
accordingly:
"(b) A Partner (other than TCO and other than a Parity Preferred
Partner) may Transfer all or any portion of its Partnership Interest (but
not less
12
<PAGE>
than one (1) Unit of Partnership Interest) to any other Partner
(other than a Parity Preferred 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 (other than a Parity Preferred Partner), 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 (other than a Parity
Preferred Partner), 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
13
<PAGE>
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 (other than a Parity Preferred Partner), or to any
Partner (other than a Parity Preferred Partner), provided that, in each
case, the Managing General Partner has made a Transfer Determination prior
to the proposed Transfer.
In addition to the foregoing, in connection with a financing
transaction, any Record Partner (other than TCO) may pledge some or all of
the Units of Partnership Interest that such Record Partner owns on the
effective date of the pledge (the "Pledge Units") to any Person (the
"Pledgee"), subject to the restrictions set forth in this paragraph of
Section 8.1(b). Before effecting the pledge of any Pledge Units, the
pledging Partner must first receive a Transfer Determination with respect
to the pledge, and the Pledgee must irrevocably agree, pursuant to a
written instrument acceptable to the Managing General Partner, that (A)
unless (i) the Pledgee is a Person described in the preceding paragraphs of
this Section 8.1(b) as a Person to whom a Partner may Transfer its
Partnership Interest (a "Permitted
14
<PAGE>
Transferee") and (ii) the Managing
General Partner has agreed, in writing, to the admission of the Pledgee as
a substitute Partner with respect to some or all of the Pledge Units upon a
default under the loan to be secured by the pledge of Pledge Units, (B) the
Pledgee (1) shall not, at any time, have or exercise any rights as a
Partner with respect to any of the Pledge Units (including any right to
consent or vote with respect to any matter affecting the Partnership),
other than (a) the right to receive any distributions from the Partnership
that are or may be payable with respect to the Pledge Units as and when the
same become payable and (b) the right to receive the return of any
contribution to which the pledging Partner would be entitled with respect
to the Pledge Units, and (2) shall not, upon the pledging Partner's default
or otherwise, have any right (or claim or attempt to exercise any right) to
Transfer (or cause the Transfer of) the Pledge Units (or any interest in
the Pledge Units) other than to TCO in exchange for Equity Shares or
another Permitted Transferee.
(c) The Partnership shall have the right to redeem the Parity
Preferred Equity of a given series in accordance with the Designation,
Distribution, Redemption, Exchange, and Consent Provisions for such series.
Each Parity Preferred Partner shall have the right to exchange such
Partner's Parity Preferred Equity of a given series for shares of the
Parity Related Issue in accordance with the Designation, Distribution,
Redemption, Exchange, and Consent Provisions relating to such series. A
Parity Preferred Partner owning a series of Parity Preferred Equity may
Transfer its Parity Preferred Equity and right to any Parity Preferred
Return only to TRG and/or TCO pursuant to the foregoing provisions of this
Section 8.1(c) and in accordance with the
15
<PAGE>
Designation, Distribution,
Redemption, Exchange, and Consent Provisions relating to the applicable
series.
In the event of the redemption by TCO, in whole or in part, of any
series of preferred shares that constitutes a Parity Related Issue through
the issuance of common equity, TCO shall convert its Parity Preferred
Equity (or a portion thereof) (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 Parity Preferred Return on that portion of the converted Parity
Preferred Equity, with the effect that the portion of the converted Parity
Preferred Equity and related right to the payment of any future Parity
Preferred Return 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. Any such redemption shall be effected
so that, following such redemption, the number of Units of Partnership
Interest then held by TCO shall equal in value the number of shares of
TCO's common stock then outstanding. 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. In the event of a redemption by TCO, in whole or in part, of
any series of preferred shares that constitutes a Parity Related Issue
through the issuance of preferred equity, TCO shall convert that portion of
its Parity Preferred Equity equal to the portion of the Parity Related
Issue that was redeemed (exclusive of any accrued but unpaid dividends) by
appropriate amendment, whether by Annex or otherwise, to Parity Preferred
Equity having
16
<PAGE>
terms equivalent to the newly issued preferred equity through
which the Parity Related Issue was redeemed. Upon and to the extent of the
conversion of any portion of a Parity Preferred Equity Balance to
Additional Interests in accordance with this Section 8.1(c), Schedule A to
this Agreement shall be amended accordingly."
13. Section 10.1 of the Partnership Agreement is hereby amended by deleting
paragraph (b) thereof in its entirety, and by inserting the following new
paragraph (b) in the place thereof:
"(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
17
<PAGE>
Withdrawal (the "Ninety Day Period") all Partners (other than any
Parity Preferred Partner) 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 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
18
<PAGE>
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."
14. Section 11.1 of the Partnership Agreement is hereby amended by deleting
paragraph (a) thereof in its entirety, and by inserting the following new
paragraph (a) in the place 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
19
<PAGE>
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 other than any Parity
Preferred Return; and then
(3) to TCO in an amount equal to any accrued but unpaid
Guaranteed Payment (proportionate among each series); and then
(4) to TCO in an amount equal to that portion of its Capital
Account attributable to its Preferred Equity (proportionate among each
series); and then
(5) to the Parity Preferred Partners in an amount equal to their
respective Parity Preferred Equity Balances (proportionate with
respect to the amount of such balances among each series); and then
(6) to the Partners in accordance with and in proportion to their
positive Capital Account balances. For this purpose, the
20
<PAGE>
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), Section 5.3, Section 11.1(a)(4), and Section
11.1(a)(5) 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)."
15. The attached Schedule C is inserted in the Partnership Agreement in the
place of the existing Schedule C.
16. Section and clause references within the Partnership Agreement are
renumbered accordingly.
17. Except as expressly set forth herein, the terms and provisions of the
Partnership Agreement continue unmodified and are hereby confirmed and ratified.
18. This Amendment shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
19. This Amendment shall be governed by and construed in accordance with
the laws of the State of Delaware.
20. This Amendment may be executed in two (2) or more counterparts, all of
which as so executed shall constitute one (1) Amendment, 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
Amendment shall become effective
21
<PAGE>
and binding unless and until all parties hereto
have duly executed this Amendment, at which time this Amendment shall then
become effective and binding as of the date first above written.
IN WITNESS WHEREOF, the undersigned Appointing Persons, in accordance with
Section 13.11 hereof, on behalf of all of the Partners, have entered into this
Amendment as of the date first above written.
TAUBMAN CENTERS, INC., a Michigan
corporation
By: /s/ Lisa A. Payne
Its: Executive Vice President
TG PARTNERS LIMITED PARTNERSHIP,
a Delaware limited partnership
By: TG Michigan, Inc., a Michigan
corporation, Managing General
Partner
By: /s/ Robert S. Taubman
Its: President
TAUB-CO MANAGEMENT, INC., a
Michigan corporation
By: /s/ Lisa A. Payne
Its: Executive Vice President
22
<PAGE>
PRIVATE PLACEMENT PURCHASE AGREEMENT
Goldman Sachs 1999 Exchange Place Fund, L.P.
c/o Goldman, Sachs & Co.
One New York Plaza
New York, New York 10004
Attention: Elizabeth C. Groves
Ladies and Gentlemen:
1. Certain Representations; Opinions of Counsel
(a) The Taubman Realty Group Limited Partnership (the "Company") and
Taubman Centers, Inc., the managing general partner of the Company
("TCO"), represent and warrant to the undersigned ("Subscriber") as
follows:
(i) TCO has made with the Securities Exchange Commission ("SEC") all
filings required to be made by it (the "SEC Reports"). Since
September 30, 1998, the Company has not been, and is not,
required to file any reports with the SEC. The SEC Reports were
prepared and filed in compliance with the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or the Securities Act
of 1933, as amended (the "Securities Act"), as applicable, and
the rules and regulations promulgated by the SEC thereunder, and
did not, as of their respective dates, contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not
misleading. The financial statements and the interim financial
statements of TCO included in the SEC Reports were prepared in
accordance with generally accepted accounting principles (except
as may be indicated in the notes thereto) and fairly presented
the financial condition and results of operations of TCO and its
subsidiaries as at the dates thereof and for the periods then
ended, subject, in the case of the interim financial statements,
to normal year-end adjustments and any other adjustments
described therein.
(ii) there has been no material adverse change in or affecting the
business, assets or financial condition of the Company since the
most recent such filing;
(iii)the Company and TCO have all requisite corporate and limited
partnership authority and power to execute and deliver this
Private Placement Purchase Agreement, the Registration Rights
Agreement (as hereinafter defined) the Certificate with Respect
to Tax Matters of even date herewith executed and delivered by
the Company, the Second Amendment to The Second Amendment and
Restatement of Agreement of Limited Partnership of the Company
and the Designation, Distribution,
<PAGE>
Redemption, Exchange, and
Consent Provisions with Respect to the 9% Series C Cumulative
Redeemable Preferred Equity of the Company (collectively, the
"Transaction Documents") and to consummate the transactions
contemplated thereby. The execution and delivery of the
Transaction Documents and the consummation of the transactions
contemplated thereby have been duly and validly authorized by all
requisite corporate or limited partnership action on the part of
the Company and TCO, and no other proceedings on the part of the
Company or TCO are necessary to authorize the Transaction
Documents or to consummate the transactions contemplated hereby.
The Transaction Documents have been duly and validly executed and
delivered by the Company and TCO. The Transaction Documents
constitute valid and binding obligations of the Company and TCO,
enforceable in accordance with their terms;
(iv) neither the execution, delivery nor performance of the
Transaction Documents by the Company or TCO will conflict with,
result in a default, right to accelerate or loss of rights under,
or result in the creation of any lien, charge or encumbrance
pursuant to, any provision of the Company's or TCO's
organizational documents or any franchise, mortgage, deed of
trust, lease, license, agreement, understanding, law, rule or
regulation or any order, judgement or decree to which the Company
or TCO is a party or by which the Company or TCO may be bound or
affected;
(v) the 1998 financial statements of the Company and TCO, including
the notes thereto, and supporting schedules have been prepared in
conformity with GAAP applied on a consistent basis (except as
otherwise noted therein) and present fairly the financial
position of the Company and TCO as of the dates indicated and the
results of its operations for the periods shown;
(vi) there is no action, suit, proceeding or investigation pending or,
to the Company's or TCO's knowledge, currently threatened against
the Company or TCO that questions the validity of any of the
Transaction Documents or the issuance of Parity Preferred Equity
(as defined below), or the right of the Company or TCO to enter
into any of the Transaction Documents or to consummate the
transactions contemplated thereby or that could reasonably be
expected to interfere with the ability of the Company or TCO to
perform their obligations thereunder;
(vii)the Equity (as defined below) when issued, sold and delivered by
the Company, shall be duly and validly issued and outstanding,
fully paid, and non-assessable and will be free of any liens,
claims, security interests, encumbrances, restrictions or rights
of third parties of any kind (collectively, "Encumbrances"). The
Shares (as defined below) when issued in redemption of the
Equity, shall be duly and valued issued and
2
<PAGE>
outstanding, fully
paid, and non-assessable and will be free of any Encumbrances;
and
(viii) a true and complete copy of the Company's Partnership Agreement
is set forth as Exhibit A hereto. There are no interests in the
Company authorized, issued or outstanding that rank senior to, or
on a parity with, the Equity with respect to liquidation, winding
up, dividends or distributions other than the Series A Preferred
Equity. There are no equity interests in TCO authorized, issued
or outstanding that rank senior to, or on a parity with, the
Shares with respect to liquidation, winding up, dividends or
distributions other than the Series A Preferred Stock of TCO and
the Series B Preferred Stock of TCO, and TCO will not authorize,
create or issue any such senior equity interests without the
prior written consent of Subscriber.
(ix) the foregoing representations and warranties will continue to be
true and correct on the Closing Date (as defined below).
(b) The Company will make the tax and securities representations set forth
on Exhibit B on the Closing Date.
(c) Counsel to the Company and TCO is concurrently herewith rendering an
opinion to Subscriber attached hereto as Exhibit C.
2. Sale of Equity
(a) The Company hereby agrees to sell to Subscriber, and Subscriber hereby
agrees to purchase from the Company, $75,000,000 of Series C Preferred
Equity of the Company (the "Equity"). The purchase price of the Equity
is $75,000,000, and is payable in cash at the Closing (as defined
below).
(b) The sale and purchase of the Equity (the "Closing") shall take place
at the offices of Subscriber on September 3, 1999 (the "Closing
Date").
(c) On the Closing Date, Subscriber shall, if the condition set forth in
Section 2(d) below is satisfied on the Closing Date, pay to the
Company by wire transfer of immediately available funds the purchase
price of the Equity purchased by such Subscriber, against delivery to
the Subscriber of each of the documents set forth on Schedule A
attached hereto.
(d) It shall be a condition to the Closing that the Company's and TCO's
representations and warranties hereunder then continue to be true and
correct.
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3. Registration
(a) TCO will file a registration statement with respect to the Series C
Preferred Stock to be issued to the Company upon exchange of the
Equity (the "Shares"), into such shares, in accordance with the
Registration Rights Agreement attached hereto as Exhibit D (the
"Registration Agreement") which is being executed and delivered
simultaneously herewith.
4. Covenants of the Company and TCO
(a) No later than June 30, 2000, TCO shall amend its Restated Articles of
Incorporation so that TCO will have the authority to issue additional
shares of preferred stock. Simultaneously therewith, TCO shall amend
its series designation creating the Series C Preferred Stock to
increase from 1,000,000 to 2,000,000 the number of shares of Series C
Preferred Stock constituting the series. Thereafter, subject to the
Second Amendment and Restatement of Agreement of Limited Partnership
of the Company, as amended, including the Designation, Redemption,
Exchange, and Voting Provisions with Respect to the Series C Preferred
Equity (the "Partnership Agreement"), the holders of the Equity will
be able to convert $75 in liquidation value of the Equity for one
share of Series C Preferred Stock, it being understood that the
aggregate amount in liquidation value of the equity shall remain
$75,000,000.
5. Subscriber's Representations.
(a) Subscriber represents and warrants that it is purchasing the Equity
solely for investment solely for its own account and not with a view
to or for the resale or distribution thereof except as permitted under
the Registration Agreement or as otherwise permitted under applicable
law, including the Securities Act of 1933, as amended (the "Securities
Act").
(b) Subscriber understands that it may sell or otherwise transfer the
Equity or the shares issuable on conversion of the Equity only if such
transaction is duly registered under the Securities Act, or if
Subscriber shall have received the favorable opinion of counsel to
Subscriber, which opinion shall be reasonably satisfactory to counsel
to the Company, to the effect that such sale or other transfer may be
made in the absence of registration under the Securities Act, and
registration or qualification in every applicable state. Subscriber
realizes that the Equity is not a liquid investment. Subscriber has
the knowledge and experience to evaluate the Company and the risks and
merits relating thereto.
(c) Subscriber represents and warrants that Subscriber is an "accredited
investor" as such term is defined in Rule 501 of the Regulation D
promulgated pursuant to the Securities Act, and shall be such on the
date any Equity is issued to Subscriber; Subscriber acknowledges that
Subscriber is able to bear the economic risk of losing Subscriber's
entire investment in the Equity and understands that an
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investment in
the Company involves substantial risks; Subscriber has the power and
authority to enter into this Agreement, and the execution and delivery
of, and performance under this Agreement, shall not conflict with any
rule, regulation, judgement or agreement applicable to Subscriber.
Subscriber has had the opportunity to discuss the Company's affairs
with the Company's officers.
(d) Subscriber represents and warrants that it was not formed with a
principal purpose of permitting the Company to satisfy the 100 partner
limitation of Treas. Reg. ss. 1.7704.1(h)(1)(ii).
6. Execution of Partnership Agreement
By executing this Private Placement Purchase Agreement, Subscriber agrees
to be bound by and subject to the terms of the Partnership Agreement as if
a signatory thereto.
7. Miscellaneous
This Agreement may not be changed or terminated except by written agreement
of both parties. It shall be binding on the parties and on their permitted
assigns. It sets forth all agreements of the parties, and may be signed in
counterparts.
This Agreement shall be governed by, and construed in accordance with, the
laws of New York without regard to conflicts of law principles thereof. The
federal and state courts sitting in New York, New York shall have exclusive
jurisdiction over all matters relating to this Agreement.
All notices, requests, service of process, consents, and other
communications under this Agreement shall be in writing and shall be deemed
to have been delivered (i) on the date personally delivered or (ii) one day
after properly sent by recognized overnight courier, addressed to the
respective parties at their address set forth in this Agreement or (iii) on
the day transmitted by facsimile so long as a confirmation copy is
simultaneously forwarded by recognized overnight courier, in each case
addressed to the respective parties at their address set forth in this
Agreement. Either party hereto may designate a different address by
providing written notice of such new address to the other party hereto as
provided above.
Dated: September 3, 1999
THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
By: /s/ Lisa A. Payne
Name: Lisa A. Payne
Title: Executive Vice President
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TAUBMAN CENTERS, INC.
By: /s/ Lisa A. Payne
Name: Lisa A. Payne
Title: Executive Vice President
SUBSCRIBER
GOLDMAN SACHS 1999 EXCHANGE PLACE FUND, L.P.
By: /s/ Elizabeth C. Groves
Name: Elizabeth C. Groves
Title:
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of September 3, 1999 by and between Taubman Centers, Inc., a Michigan
corporation (the "Company"), and Goldman Sachs 1999 Exchange Place Fund, L.P., a
Delaware limited partnership ("Holder").
WHEREAS, Holder is receiving on the date hereof Series C Preferred Equity
(the "Equity") in The Taubman Realty Group Limited Partnership, a Delaware
limited partnership (the "Partnership");
WHEREAS, in connection therewith, the Company has agreed to grant to Holder
the Registration Rights (as defined in Section 1 hereof);
NOW, THEREFORE, the parties hereto, in consideration of the foregoing and
the mutual covenants and agreements hereinafter set forth, hereby agree as
follows:
SECTION 1. REGISTRATION RIGHTS
If Holder receives 9% Series C Cumulative Redeemable Preferred Stock of the
Company (the "Preferred Stock") upon exchange of the Equity (the "Exchange
Shares") pursuant to the terms of the Amended and Restated Agreement of Limited
Partnership of the Partnership, as the same has been and may be amended from
time to time (the "Partnership Agreement"), then unless such Exchange Shares are
issued to Holder pursuant to an Issuer Registration Statement as provided in
Section 2 below, Holder shall be entitled to offer for sale pursuant to a shelf
registration statement, the Exchange Shares, subject to the terms and conditions
set forth in Section 3 hereof (the "Registration Rights").
SECTION 2. ISSUER REGISTRATION STATEMENT
Anything contained herein to the contrary notwithstanding, in the event
that the Exchange Shares are issued by the Company to Holder pursuant to an
effective registration statement (an "Issuer Registration Statement") filed with
the Securities and Exchange Commission (the "Commission"), the Company shall be
deemed to have satisfied all of its registration obligations under this
Agreement.
SECTION 3. DEMAND REGISTRATION RIGHTS
3.1 (a) Registration Procedure. Unless such Exchange Shares are issued
pursuant to an Issuer Registration Statement as provided in Section 2 hereof,
then subject to Sections 3.1(c) and 3.2 hereof, if Holder desires to exercise
its Registration Rights with respect to the Exchange Shares, Holder shall
deliver to the Company a written notice (a "Registration Notice") informing the
Company of such exercise and specifying the number of shares to be offered by
such Holder (such shares to be offered being referred to herein as the
"Registrable Securities"). Such notice may be given at any time on or after the
date
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a notice of exchange is delivered by Holder to the Partnership pursuant to the
Partnership Agreement, but must be given at least fifteen (15) Business Days
prior to the anticipated consummation of the sale of Registrable Securities,
which consummation shall in any event be subject to an effective Shelf
Registration Statement (as hereinafter defined) or an effective New Registration
Statement (as hereinafter defined). As used in this Agreement, a "Business Day"
is any Monday, Tuesday, Wednesday, Thursday or Friday other than a day on which
banks and other financial institutions are authorized or required to be closed
for business in the State of New York or Michigan. Upon receipt of the
Registration Notice, the Company, if it has not already caused the Registrable
Securities to be included as part of an existing shelf registration statement
(prior to the filing of which the Company shall have given ten (10) Business
Days notice to Holder) and related prospectus that the Company than has on file
with the Commission (the "Shelf Registration Statement") (in which event the
Company shall be deemed to have satisfied its registration obligation under this
Section 3), will cause to be filed with the Commission as soon as reasonably
practicable after receiving the Registration Notice a new registration statement
and related prospectus (a "New Registration Statement") that complies as to form
in all material respects with applicable Commission rules providing for the sale
by Holder of the Registrable Securities, and agrees (subject to Section 3.2
hereof) to use its best efforts to cause such New Registration Statement to be
declared effective by the Commission as soon as practicable. (As used herein,
"Registration Statement" and "Prospectus" refer to the Shelf Registration
Statement and related prospectus (including any preliminary prospectus) or the
New Registration Statement and related prospectus (including any preliminary
prospectus), whichever is utilized by the Company to satisfy Holder's
Registration Rights pursuant to this Section 3, including in each case any
documents incorporated therein by reference.) Holder agrees to provide in a
timely manner information regarding the proposed distribution by Holder of the
Registrable Securities and such other information reasonably requested by the
Company in connection with the preparation of and for inclusion in the
Registration Statement. The Company agrees (subject to Section 3.2 hereof) to
use its best efforts to keep the Registration Statement effective (including the
preparation and filing of any amendments and supplements necessary for that
purpose) until the earlier of (i) the date on which Holder consummates the sale
of all of the Registrable Securities registered under the Registration
Statement, or (ii) the date on which all of the Registrable Securities are
eligible for sale pursuant to Rule 144(k) (or any successor provision) or in a
single transaction pursuant to Rule 144(e) (or any successor provision) under
the Securities Act of 1933, as amended (the "Act"), provided, that except with
respect to any Shelf Registration, such period need to extend beyond nine months
after the effective date of the Registration Statement; and provided further,
that with respect to any Shelf Registration, such period need not extend beyond
the time period provided in this Section 3.1(a), and which periods, in any
event, shall terminate when all the Exchange Shares covered by such Registration
Statement have been sold (but not before the expiration of the time period
provided in Section 4(3) of the Act and Rule 174 thereunder, if applicable). The
Company agrees to provide to Holder a reasonable number of copies of the final
Prospectus and any amendments or supplements thereto. Notwithstanding the
foregoing, the Company may at any time, in its sole discretion and prior to
receiving any Registration Notice from Holder, include all of Holder's Exchange
Shares or any portion thereof in any Shelf Registration Statement. In connection
with any Registration Statement utilized by the Company to satisfy Holder
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Registration Rights pursuant to this Section 3, Holder agrees that it will
respond within ten (10) Business Days to any request by the Company to provide
or verify information regarding Holder or Holder's Registrable Securities as may
be required to be included in such Registration Statement pursuant to the rules
and regulations of the Commission.
(b) Offers and Sales. All offers and sales by Holder under the Registration
Statement referred to in this Section 3 shall be completed within the period
during which the Registration Statement is required to remain effective pursuant
to Section 3.1(a) of this Section 3, and upon expiration of such period Holder
will not offer or sell any Registrable Securities under the Registration
Statement. If directed by the Company, Holder will return all undistributed
copies of the Prospectus in its possession upon the expiration of such period.
(c) Limitations on Registration Rights. Each exercise of a Registration
Right shall be with respect to a minimum of the lesser of (i) five hundred
thousand (500,000) Preferred Stock or (ii) the total number of Exchange Shares
held by Holder at such time plus the number of Exchange Shares that may be
issued upon exchange of the Equity by Holder. The right of Holder to deliver a
Registration Notice commences upon the first date Holder is permitted to
exchange the Equity pursuant to the Partnership Agreement and Holder's
acceptance of Partnership Agreement pursuant to that certain Private Placement
Purchase Agreement of even date herewith between Holder and the Partnership. The
right of Holder to deliver a Registration Notice shall expire on the date on
which all of the Exchange Shares held by Holder or issuable upon exchange of the
Equity held by Holder are eligible for sale pursuant to Rule 144(k) (or any
successor provision) under the Act. The Registration Rights granted pursuant to
this Section 3.1 may be exercised in connection with an underwritten public
offering provided that the Company shall have the right to select the
Underwriter or Underwriters in connection with such public offering, which shall
be subject to the reasonable approval of Holder.
3.2 Suspension of Offering. Upon any notice by the Company, either before
or after Holder has delivered a Registration Notice, that a negotiation or
consummation of a transaction by the Company or any of its subsidiaries is
pending or an event has occurred, which negotiation, consummation or event would
require additional disclosure by the Company in a Registration Statement of
material information which the Company has a bona fide business purpose for
keeping confidential and the nondisclosure of which in the Registration
Statement might cause the Registration Statement to fail to comply with
applicable disclosure requirements (a "Materiality Notice"), Holder agrees that
it will immediately discontinue offers and sales of the Registrable Securities
under the Registration Statement until Holder receives copies of a supplemental
or amended Prospectus that corrects the misstatement(s) or omission(s) referred
to above and receives notice that any post-effective amendment has become
effective; provided, that the Company may delay, suspend or withdraw the
Registration Statement for such reason for no more than sixty (60) days after
delivery of the Materiality Notice at any one time but may not do so more than
two times in any twelve month period. If so directed by the Company, Holder will
deliver to the Company all copies of the Prospectus covering the Registrable
Securities current at the time of receipt of any Materiality Notice.
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3.3 Qualification. The Company agrees to use its best efforts to register
or qualify the Registrable Securities by the time the applicable Registration
Statement is declared effective by the Commission under all applicable state
securities or "blue sky" laws of such jurisdictions as Holder shall reasonably
request in writing, to keep each such registration or qualification effective
during the period such Registration Statement is required to be kept effective
or during the period offers or sales are being made by Holder after delivery of
a Registration Notice to the Company, whichever is shorter, and to do any and
all other acts and things which may be reasonably necessary or advisable to
enable Holder to consummate the disposition in each such jurisdiction of the
Registrable Securities owned by Holder; provided, however, that the Company
shall not be required to (x) qualify generally to do business in any
jurisdiction or to register as a broker or dealer in such jurisdiction where it
would not otherwise be required to qualify but for this Section 3.3, (y) subject
itself to taxation in any such jurisdiction, or (z) submit to the general
service of process in any such jurisdiction.
3. 4 Whenever the Company is required to effect the registration of
Exchange Shares under the Securities Act pursuant to Section 3.1 of this
Agreement, subject to Section 3.2 hereof, the Company shall:
(a) prepare and file with the Commission (as soon as reasonably practical
after receiving the Registration Notice, and in any event within 60 days after
receipt of such Registration Notice) the requisite Registration Statement to
effect such registration, which Registration Statement shall comply as to form
in all material respects with the requirements of the applicable form and
include all financial statements required by the Commission to be filed
therewith, and the Company shall use its reasonable best efforts to cause such
Registration Statement to become effective; provided, however, that before
filing a Registration Statement or Prospectus or any amendments or supplements
thereto, or comparable statements under securities or blue sky laws of any
jurisdiction, the Company shall (i) provide Holder with an adequate and
appropriate opportunity to participate in the preparation of such Registration
Statement and each Prospectus included therein (and each amendment or supplement
thereto or comparable statement) to be filed with the Commission and (ii) not
file any such Registration Statement or Prospectus (or amendment or supplement
thereto or comparable statement) with the Commission to which Holder's counsel
or any underwriter designated by the Holder and approved by the Company, which
approval shall not be unreasonably withheld (the "Underwriter"), shall have
reasonably objected on the grounds that such filing does not comply in all
material respects with the requirements of the Act or of the rules or
regulations thereunder.
(b) prepare and file with the Commission such amendments and supplements to
such Registration Statement and the Prospectus used in connection therewith as
may be necessary (i) to keep such Registration Statement effective and (ii) to
comply with the provisions of the Act with respect to the disposition of the
Redemption Shares covered by such Registration Statement, in each case until
such time as all of such Redemption Shares have been disposed of in accordance
with the intended methods of disposition by the seller(s) thereof set forth in
such Registration Statement; provided, that except with respect to any Shelf
Registration, such period need not extend beyond nine months after the effective
date of the Registration Statement; and provided further, that with respect to
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any Shelf Registration, such period need not extend beyond the time period
provided in Section 3.1(a), and which periods, in any event, shall terminate
when all the Redemption Shares covered by such Registration Statement have been
sold (but not before the expiration of the time period referred to in Section
4(3) of the Act and Rule 174 thereunder, if applicable);
(c) furnish, without charge, to the Holder and each Underwriter, if any, of
the securities covered by such Registration Statement, such number of copies of
such Registration Statement, each amendment and supplement thereto (in each case
including all exhibits), and the Prospectus included in such Registration
Statement (including each preliminary Prospectus) in conformity with the
requirements of the Act, and other documents, as the Holder and such Underwriter
may reasonably request in order to facilitate the public sale or other
disposition of the Redemption Shares owned by the Holder;
(d) prior to any public offering of Redemption Shares, use its reasonable
best efforts to register or qualify the Redemption Shares covered by such
Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Holder or the sole or lead managing Underwriter, if any,
may reasonably request to enable the Holder to consummate the disposition in
such jurisdictions of the Redemption Shares owned by the Holder and to continue
such registration or qualification in effect in each such jurisdiction for as
long as such Registration Statement remains in effect (including through new
filings or amendments or renewals), and do any and all other acts and things
which may be necessary or advisable to enable the Holder to consummate the
disposition in such jurisdictions of the Redemption Shares owned by it,
provided, however, that the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section, (ii) subject itself to taxation in any
such jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
(e) Promptly notify Holder and the sole or lead managing Underwriter, if
any: (i) when the Registration Statement, any pre-effective amendment, the
Prospectus or any prospectus supplement related thereto or post-effective
amendment to the Registration Statement has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the Commission or any state securities or blue
sky authority for amendments or supplements to the Registration Statement or the
Prospectus related thereto or for additional information, (iii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration or the initiation or threat of any proceedings for that purpose,
(iv) of the receipt by the Company of any notification with respect to the
suspension of qualification of any Exchange Shares for sale under the securities
or blue sky laws of any jurisdiction or the initiation of any proceeding for
such purpose, (v) of the existence of any fact of which the Company becomes
aware or the happening of any event which results in (A) the Registration
Statement containing an untrue statement of a material fact or omitting to state
a material fact required to be stated therein or necessary to make any
statements therein not misleading, or (B) the Prospectus included in such
Registration Statement containing an untrue statement of a material fact or
omitting to
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state a material fact required to be stated therein or necessary to make any
statements therein, in the light of the circumstances under which they were
made, not misleading, and (vi) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate or
that there exists circumstances not yet disclosed to the public which make
further sales under such Registration Statement inadvisable pending such
disclosure and post-effective amendment; and, if the notification relates to an
event described in any of the clauses (v) or (vi) of this Section, subject to
Section 3.2, the Company shall promptly prepare a supplement or post-effective
amendment to such Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document, so that
(1) such Registration Statement shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (2) as thereafter
delivered to the purchasers of the Exchange Shares being sold thereunder, such
Prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading (and shall furnish to Holder and each Underwriter, if any, a
reasonable number of copies of such Prospectus so supplemented or amended); and
if the notification relates to an event described in clauses (ii) through (iv)
of this Section, the Company shall use its reasonable best efforts to remedy
such matters;
(f) make reasonably available for inspection by Holder, any sole or lead
managing Underwriter participating in any disposition pursuant to such
Registration Statement, Holder's counsel and any attorney, accountant or other
agent retained by any such seller or any Underwriter material financial and
other relevant information concerning the business and operations of the Company
and the properties of the Company and any subsidiaries thereof as may be in
existence at such time as shall be necessary, in the reasonable opinion of such
Holder's and such Underwriters' respective counsel, to enable them to conduct a
reasonable investigation within the meaning of the Securities Act, and cause the
Company's and any subsidiaries' officers, directors and employees, and the
independent public accountants of the Company, to supply such information as may
be reasonably requested by any such parties in connection with such Registration
Statement;
(g) obtain an opinion from the Company's counsel and a "cold comfort"
letter from the Company's independent public accountants who have certified the
Company's financial statements included or incorporated by reference in such
Registration Statement in customary form and covering such matters as are
customarily covered by such opinions and "cold comfort" letters delivered to
Underwriters in underwritten public offerings, which opinion and letter shall be
reasonably satisfactory to the sole or lead managing Underwriter, if any, and to
Holder, and furnish to Holder participating in the offering and to each
Underwriter, if any, a copy of such opinion and letter addressed to Holder (in
the case of the opinion) and Underwriter (in the case of the opinion and the
"cold comfort" letter);
(h) in the case of an underwritten offering, make generally available to
its security-holders as soon as practicable, but in any event not later than
eighteen months after the effective date of the Registration Statement (as
defined in Rule 158(c)), an
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earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and regulations
of the Commission thereunder (including, at the option of the Company, Rule
158);
(i) use its reasonable best efforts to cause all such Exchange Shares to be
listed (i) on the national securities exchange on which the Company's common
shares are then listed or (ii) if common shares of the Company are not at the
time listed on any national securities exchange (or if the listing of Exchange
Shares is not permitted under the rules of such national securities exchange on
which the Company's common shares are then listed), on another national
securities exchange;
(j) furnish to Holder and the sole or lead managing Underwriter, if any,
without charge, at least one manually signed copy of the Registration Statement
and any post-effective amendments thereto, including financial statements and
schedules, all documents incorporated therein by reference and all exhibits
(including those deemed to be incorporated by reference);
(k) if requested by the sole or lead managing Underwriter or Holder of
Exchange Shares, incorporate in a prospectus supplement or post-effective
amendment such information concerning Holder, the Underwriters or the intended
method of distribution as the sole or lead managing Underwriter or Holder
reasonably requests to be included therein and as is appropriate in the
reasonable judgment of the Company, including, without limitation, information
with respect to the number of Exchange Shares being sold to the Underwriters,
the purchase price being paid therefor by such Underwriters and with respect to
any other terms of the underwritten offering of the Exchange Shares to be sold
in such offering; and
(l) use its reasonable best efforts to take all other steps necessary to
expedite or facilitate the registration and disposition of the Exchange Shares
contemplated hereby, including obtaining necessary governmental approvals and
effecting required filings; entering into customary agreements (including
customary underwriting agreements, if the public offering is underwritten);
cooperating with Holder and any Underwriters in connection with any filings
required by the NASD; providing appropriate certificates not bearing restrictive
legends representing the Exchange Shares; and providing a CUSIP number and
maintaining a transfer agent and registrar for the Exchange Shares.
3.5 Indemnification by the Company. The Company agrees to indemnify and
hold harmless Holder and each person, if any, who controls Holder within the
meaning of Section 15 of the Act or Section 20 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of or based upon any untrue statement
or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which the
Registrable Securities were registered under the Act, including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated
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therein or necessary to make the statements therein not misleading or
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any amendment
or supplement thereto), including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including
reasonable fees and disbursements of counsel), reasonably incurred in
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced
or threatened, in each case whether or not a party, or any claim whatsoever
based upon any such untrue statement or omission, or any such alleged
untrue statement or omission, to the extent that any such expense is not
paid under subparagraph (i) or (ii) above;
provided, however, that the indemnity provided pursuant to this Section 3.4 does
not apply with respect to any loss, liability, claim, damage or expense to the
extent arising out of (A) any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with written
information furnished to the Company by Holder expressly for use in the
Registration Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto), or (B) Holder's failure to deliver an amended
or supplemental Prospectus provided to the Holder by the Company if such loss,
liability, claim, damage or expense would not have arisen had such delivery
occurred.
3.6 Indemnification by Holder. Holder (and each permitted assignee of
Holder, on a several basis) agrees to indemnify and hold harmless the Company,
and each of its directors and officers (including each director and officer of
the Company who signed a Registration Statement), and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of or based upon any untrue statement
or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which the
Registrable Securities were registered under the act, including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (or any amendment or supplement
thereto), including
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all documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of Holder; and
(iii) against any and all expense whatsoever, as incurred (including
reasonable fees and disbursements of counsel), reasonably incurred in
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced
or threatened, in each case whether or not a party, or any claim whatsoever
based upon any such untrue statement or omission, or any such alleged
untrue statement or omission, to the extent that any such expense is not
paid under subparagraph (i) or (ii) above;
provided, however, that the indemnity provided pursuant to this Section 3.5
shall only apply with respect to any loss, liability, claim, damage or expense
to the extent arising out of (A) any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
written information furnished to the Company by Holder expressly for use in the
Registration Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto), or (B) Holder's failure to deliver an amended
or supplemental Prospectus provided to Holder by the Company if such loss,
liability, claim, damage or expense would not have arisen had such delivery
occurred. Notwithstanding the provisions of this Section 3.6, Holder and any
permitted assignee shall not be required to indemnify the Company, its officers,
directors or control persons with respect to any amount in excess of the amount
of the total proceeds to Holder or such permitted assignee, as the case may be,
from sales of the Registrable Securities of Holder under the Registration
Statement.
3.7 Conduct of Indemnification Proceedings. An indemnified party hereunder
shall give reasonably prompt notice to the indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify the indemnifying party (i) shall not relieve
it from any liability which it may have under the indemnity agreement provided
in Section 3.5 or 3.6 above, unless and to the extent it did not otherwise learn
of such action and the lack of notice by the indemnified party results in the
forfeiture by the indemnifying party of substantial rights and defenses, and
(ii) shall not, in any event, relieve the indemnifying party from any
obligations to the indemnified party other than the indemnification obligation
provided under Section 3.5 or 3.6 above. If the indemnifying party so elects
within a reasonable time after receipt of such notice, the indemnifying party
may assume the defense of such action or proceeding at such indemnifying party's
own expense with counsel chosen by the indemnifying party and approved by the
indemnified party, which approval shall not be
9
<PAGE>
unreasonably withheld; provided, however, that the indemnifying party will not
settle any such action or proceeding without the written consent of the
indemnified party unless, as a condition to such settlement, the indemnifying
party secures the unconditional release of the indemnified party; and provided
further, that if the indemnified party reasonably determines that a conflict of
interest exists where it is advisable for the indemnified party to be
represented by separate counsel or that, upon advice of counsel, there may be
legal defenses available to it which are different from or in addition to those
available to the indemnifying party, then the indemnifying party shall not be
entitled to assume such defense and the indemnified party shall be entitled to
separate counsel at the indemnifying party's expense. If the indemnifying party
is not entitled to assume the defense of such action or proceeding as a result
of the second proviso to the preceding sentence, the indemnifying party's
counsel shall be entitled to conduct the indemnifying party's defense and
counsel for the indemnified party shall be entitled to conduct the defense of
the indemnified party, it being understood that both such counsel will cooperate
with each other to conduct the defense of such action or proceeding as
efficiently as possible. If the indemnifying party is not so entitled to assume
the defense of such action or does not assume such defense, after having
received the notice referred to in the first sentence of this paragraph, the
indemnifying party will pay the reasonable fees and expenses of counsel for the
indemnified party. In such event, however, the indemnifying party will not be
liable for any settlement effected without the written consent of the
indemnifying party. If an indemnifying party is entitled to assume, and assumes,
the defense of such action or proceeding in accordance with this paragraph, the
indemnifying party shall not be liable for any fees and expenses of counsel for
the indemnified party incurred thereafter in connection with such action or
proceeding.
3.8 Contribution. In order to provide for just and equitable contribution
in circumstances in which the indemnity agreement provided for in Sections 3.5
and 3.6 above is for any reason held to be unenforceable by the indemnified
party although applicable in accordance with its terms, the Company and Holder
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by the
Company and Holder, (i) in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and Holder on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative fault of but also the relative
benefits to the Company on the one hand and Holder on the other, in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits to the indemnifying party and indemnified party shall be
determined by reference to, among other things, the total proceeds received by
the indemnifying party and indemnified party in connection with the offering to
which such losses, claims, damages, liabilities or expenses relate. The relative
fault of the indemnifying party and indemnified party shall be determined by
reference to, among other things, whether the action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, the indemnifying party or the indemnified party, and
10
<PAGE>
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such action.
The parties hereto agree that it would not be just or equitable if
contribution pursuant to this Section 3.8 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 3.8, Holder shall not be required
to contribute any amount in excess of the amount of the total proceeds to Holder
from sales of the Registrable Securities of Holder under the Registration
Statement.
Notwithstanding the foregoing, no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 3.8, each person, if any, who
controls Holder within the meaning of Section 15 of the Act shall have the same
rights to contribution as Holder, and each director of the Company, each officer
of the Company who signed a Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act shall have the
same rights to contribution as the Company.
SECTION 4. EXPENSES
The Company shall pay all expenses incident to the performance by the
Company of the Company's registration obligations under Sections 2 and 3,
including (i) all stock exchange, Commission and state securities registration,
listing and filing fees, (ii) all expenses incurred in connection with the
preparation, printing and distributing of any Issuer Registration Statement or
Registration Statement and Prospectus, and (iii) fees and disbursements of
counsel for the Company and of the independent public accountants of the
Company. Holder shall be responsible for the payment of any brokerage and sales
commissions, fees and disbursements of Holder's counsel, accountants and other
advisors, and any transfer taxes relating to the sale or disposition of the
Registrable Securities by Holder pursuant to Section 3 or otherwise.
SECTION 5. RULE 144 COMPLIANCE
The Company covenants that it will use its best efforts to timely file the
reports required to be filed by the Company under the Act and the Exchange Act
so as to enable Holder to sell Registrable Securities pursuant to Rule 144 under
the Act. In connection with any sale, transfer or other disposition by Holder of
any Registrable Securities pursuant to Rule 144 under the Act, the Company shall
cooperate with Holder to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
Act legend, and enable certificates for such Registrable Securities to be for
such number of shares and registered in such names as Holder may reasonably
11
<PAGE>
request at least ten (10) Business Days prior to any sale of Registrable
Securities hereunder.
SECTION 6. MISCELLANEOUS
6.1 Integration; Amendment. This Agreement constitutes the entire agreement
between the parties hereto with respect to the matters set forth herein and
supersedes and renders of no force and effect all prior oral or written
agreements, commitments and understandings among the parties with respect to the
matters set forth herein. Except as otherwise expressly provided in this
Agreement, no amendment, modification or discharge of this Agreement shall be
valid or binding unless set forth in writing and duly executed by the Company
and Holder.
6.2 Waivers. No waiver by a party hereto shall be effective unless made in
a written instrument duly executed by the party against whom such waiver is
sought to be enforced, and only to the extent set forth in such instrument.
Neither the waiver by any of the parties hereto of a breach or a default under
any of the provisions of this Agreement, nor the failure of any of the parties,
on one or more occasions, to enforce any of the provisions of this Agreement or
to exercise any right or privilege hereunder shall thereafter be construed as a
waiver of any subsequent breach or default of a similar nature, or as a waiver
of any such provisions, rights or privileges hereunder.
6.3 Assignment; Successors and Assigns. This Agreement and the rights
granted hereunder may not be assigned by Holder without the written consent of
the Company, provided, however, that Holder may assign its rights and
obligations hereunder, following at least ten (10) days' prior written notice to
the Company, to the direct equity owners (e.g., partners or members) or
beneficiaries, if, such persons agree in writing to be bound by all of the
provisions hereof. This Agreement shall inure to the benefit of and be binding
upon the successors and permitted assigns of all of the parties hereto.
6.4 Notices. All notices called for under this Agreement shall be in
writing and shall be deemed given upon receipt if delivered personally or by
facsimile transmission and followed promptly by mail, or mailed by registered or
certified mail (return receipt requested), postage prepaid, to the parties at
the addresses set forth below their names in the signature page hereto, or to
any other address or addressee as any party entitled to receive notice under
this Agreement shall designate, from time to time, to others in the manner
provided in this Section 6.4 for the service of notices; provided, however, that
notice of a change of address shall be effective only upon receipt thereof. Any
notice delivered to the party hereto to whom it is addressed shall be deemed to
have been given and received on the day it was received; provided, however, that
if such day is not a Business Day then the notice shall be deemed to have been
given and received on the Business Day next following such day and if any party
rejects delivery of any notice attempted to be given hereunder, delivery shall
be deemed given on the date of such rejection. Any notice sent by facsimile
transmission shall be deemed to have been given and received on the Business Day
next following the transmission.
12
<PAGE>
6.5 Specific Performance. The Parties hereto acknowledge that the
obligations undertaken by them hereunder are unique and that there would be no
adequate remedy at law if either party fails to perform any of its obligations
hereunder, and accordingly agree that each party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to (i)
compel specific performance of the obligations, covenants and agreements of the
other party under this Agreement in accordance with the terms and conditions of
this Agreement and (ii) obtain preliminary injunctive relief to secure specific
performance and to prevent a breach or contemplated breach of this Agreement in
any court of the United States or any State thereof having jurisdiction.
6.6 Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of Michigan, but not
including the choice of law rules thereof.
6.7 Headings. Section and subsection headings contained in this Agreement
are inserted for convenience of reference only, shall not be deemed to be a part
of this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
6.8 Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of
the person or entity may require.
6.9 Execution in Counterparts. To facilitate execution, this Agreement may
be executed in as many counterparts as may be required. It shall not be
necessary that the signature of or on behalf of each party appears on each
counterpart, but it shall be sufficient that the signature of or on behalf of
each party appears on one or more of the counterparts. All counterparts shall
collectively constitute a single agreement. It shall not be necessary in any
proof of this Agreement to produce or account for more than a number of
counterparts containing the respective signatures of or on behalf of both of the
parties.
6.10 Severability. If fulfillment of any provision of this Agreement, at
the time such fulfillment shall be due, shall transcend the limit of validity
prescribed by law, then the obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision contained in this
Agreement operates or would operate to invalidate this Agreement, in whole or in
part, then such clause or provision only shall be held ineffective, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect.
13
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf as of the date first herein above set forth.
TAUBMAN CENTERS, INC.
By: /s/ Lisa A. Payne
Name: Lisa A. Payne
Title: Executive Vice President
Address: 200 East Long Lake Road
Suite 300
Bloomfield Hills, MI 48304
GOLDMAN SACHS 1999 EXCHANGE PLACE
FUND L.P.
By: /s/ Elizabeth C. Groves
Name: Elizabeth C. Groves
Title:
Address: c/o Goldman Sachs & Co.
One New York Plaza
New York, New York 10004
Attn: Elizabeth C. Groves
Exhibit 12
TAUBMAN CENTERS, INC.
Computation of Ratios of Earnings to Combined Fixed Charges and Preferred
Dividends and Distributions
(in thousands, except ratios)
Nine Months Ended September 30
------------------------------
1999 1998
---- ----
Net Earnings from Continuing Operations $ 42,137 $ 53,095
Add back:
Fixed charges 78,310 115,094
Amortization of previously capitalized
interest (1) 1,617 1,842
Equity in net income in excess of distributions of
less than 50% owned Unconsolidated Joint
Ventures (108)
Deduct:
Capitalized interest (1) (11,125) (13,699)
--------- ---------
Earnings Available for Fixed Charges
and Preferred Dividends and
Distributions $ 110,831 $ 156,332
========== ===========
Fixed Charges
Interest expense $ 38,231 $ 66,662
Capitalized interest 10,570 12,830
Interest portion of rent expense 3,033 5,258
Proportionate share of Unconsolidated Joint
Ventures' fixed charges 26,476 30,344
----------- ----------
Total Fixed Charges $ 78,310 $ 115,094
----------- ----------
Preferred Dividends and Distributions 12,975 12,450
----------- ----------
Total Fixed Charges and Preferred
Dividends and Distributions $ 91,285 $ 127,544
=========== ==========
Ratio of Earnings to Fixed Charges and
Preferred Dividends and Distributions 1.2 1.2
- ----------------
(1) 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. (TCO) CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999
AND THE TAUBMAN CENTERS, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000890319
<NAME> TAUBMAN CENTERS, INC.
<MULTIPLIER> 1,000 <F1>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 14,795
<SECURITIES> 0
<RECEIVABLES> 31,665
<ALLOWANCES> 1,557
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F2>
<PP&E> 1,571,917
<DEPRECIATION> 198,557
<TOTAL-ASSETS> 1,554,412
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 868,120
0
111
<COMMON> 533
<OTHER-SE> 491,603
<TOTAL-LIABILITY-AND-EQUITY> 1,554,412
<SALES> 0
<TOTAL-REVENUES> 196,803
<CGS> 0
<TOTAL-COSTS> 131,926
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,231
<INCOME-PRETAX> 42,137 <F3>
<INCOME-TAX> 0
<INCOME-CONTINUING> 42,137 <F3>
<DISCONTINUED> 0
<EXTRAORDINARY> (301)
<CHANGES> 0
<NET-INCOME> 18,788
<EPS-BASIC> .12
<EPS-DILUTED> .11
<FN>
<F1> EXCEPT FOR PER SHARE DATA.
<F2> TCO HAS AN UNCLASSIFIED BALANCE SHEET.
<F3> REPRESENTS INCOME BEFORE EXTRAORDINARY ITEM AND MINORITY
AND PREFERRED INTERESTS. THE DEDUCTION FOR MINORITY AND
PREFERRED INTERESTS WAS $23.048 MILLION.
</FN>
</TABLE>
