<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 1-11986
TANGER FACTORY OUTLET CENTERS, INC.
(Exact name of Registrant as specified in its charter)
NORTH CAROLINA 56-1815473
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 WEST NORTHWOOD STREET (336) 274-1666
GREENSBORO, NC 27408 (Registrant's telephone number)
(Address of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
- ------------------- ------------------------------------
Common Shares, $.01 par value New York Stock Exchange
Series A Cumulative Convertible Redeemable
Preferred Shares, $.01 par value New York Stock Exchange
-------------------------------------
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
The aggregate market value of voting shares held by nonaffiliates of the
Registrant was approximately $193,306,000 based on the closing price on the New
York Stock Exchange for such stock on February 26, 1998.
The number of Common Shares of the Registrant outstanding as of February 26,
1998 was 7,856,706.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates certain information by reference from the Registrant's
definitive proxy statement to be filed with respect to the Annual Meeting of
Shareholders to be held May 8, 1998.
<PAGE>
PART I
ITEM 1. BUSINESS
THE COMPANY
Tanger Factory Outlet Centers, Inc. (the "Company"), a fully-integrated,
self-administered and self-managed real estate investment trust ("REIT"),
focuses exclusively on developing, acquiring, owning and operating factory
outlet centers, and provides all development, leasing and management services
for its centers. According to Value Retail News, an industry publication, the
Company is one of the largest owners and operators of factory outlet centers in
the United States. As of December 31, 1997, the Company owned and operated 30
factory outlet centers (the "Centers") with a total gross leasable area ("GLA")
of approximately 4.6 million square feet. These centers were approximately 98%
leased, contained over 1,210 stores and represented over 250 brand name
companies as of such date.
The Centers are presently held by, and all of the Company's operations are
conducted by, the Company's majority-owned subsidiary, Tanger Properties Limited
Partnership (the "Operating Partnership"). Accordingly, the descriptions of the
business, employees and properties of the Company are also descriptions of the
business, employees and properties of the Operating Partnership.
The Company is the sole managing general partner of the Operating Partnership
and The Tanger Family Limited Partnership ("TFLP") is the sole limited partner.
As of December 31, 1997, the ownership interests in the Operating Partnership
(the "Units") consisted of 7,853,936 partnership Units and 90,689 preferred
partnership Units (which are convertible into approximately 817,107 general
partnership Units) held by the Company and 3,033,305 partnership Units held by
the limited partner. The Units held by the limited partner are exchangeable,
subject to certain limitations to preserve the Company's status as a REIT, into
Common Shares. See "Business-The Operating Partnership". Management of the
Company beneficially owns approximately 27% of all outstanding Common Shares
(assuming the Series A Preferred Shares and the limited partner's Units are
exchanged for Common Shares but without giving effect to the exercise of any
outstanding stock and partnership Unit options).
Ownership of the Company's capital stock is restricted to preserve the Company's
status as a REIT for federal income tax purposes. Subject to certain exceptions,
a person may not actually or constructively own more than 4% of the Company's
Common Shares (including Common Shares which may be issued as a result of
conversion of Series A Preferred Shares) or more than 29,400 Series A Preferred
Shares (or a lesser number in certain cases). The Company also operates in a
manner intended to enable it to preserve its status as a REIT, including, among
other things, making distributions with respect to its outstanding capital stock
equal to at least 95% of its taxable income each year.
The Company's executive offices are located at 1400 West Northwood Street,
Greensboro, North Carolina, 27408 and its telephone number is (336) 274-1666.
The Company is a North Carolina corporation that was formed in March 1993.
RECENT DEVELOPMENTS
During 1997, the Company acquired three centers in resort areas totaling 302,554
square feet. Five Oaks Factory Stores, a factory outlet center in Sevierville,
Tennessee, was acquired in February 1997 at a purchase price of $18 million.
Shoppes on the Parkway, a factory outlet center in Blowing Rock, North Carolina,
and Soundings Factory Stores, a factory outlet center in Nags Head, North
Carolina, were acquired in September 1997 for an aggregate purchase price of
$19.5 million.
In addition, the Company has completed, or has under construction to be
completed by the end of the first quarter of 1998, the expansion of five
existing centers totaling 538,979 square feet. A summary of the 1997 acquired
centers and expansions is recapped below:
2
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1997 DEVELOPMENT Aggregate Open at
- ---------------- Size 12/31/97
(sq. ft.) (sq. ft.)
------------- --------------
ACQUISITIONS
Sevierville, TN 122,684 122,684
Blowing Rock, NC 97,408 97,408
Nags Head, NC 82,462 82,462
------------- --------------
302,554 302,554
------------- --------------
EXPANSIONS
Riverhead, NY 345,164 284,745
Commerce, GA 94,247 58,455
Sevierville, TN 50,357 25,060
Lancaster, PA 26,111 23,434
San Marcos, TX 23,100 11,000
------------- --------------
538,979 402,694
------------- --------------
841,533 705,248
============= ==============
The Company also is in the process of developing plans for additional expansions
and new centers for completion in 1998 and beyond. Currently, the Company is in
the preleasing stages for future centers at two potential sites located in
Concord, North Carolina (Charlotte) and Romulus, Michigan (Detroit) and for
further expansions of four existing centers. However, there can be no assurance
that any of these anticipated or planned developments or expansions will be
started or completed as scheduled, or that any development or expansion will
result in accretive funds from operations. In addition, the Company regularly
evaluates acquisition proposals, engages from time to time in negotiations for
acquisitions and may from time to time enter into letters of intent for the
purchase of properties. No assurance can be given that any of the prospective
acquisitions that are being evaluated or which are subject to a letter of intent
will be consummated, or if consummated, will result in accretive funds from
operations.
During September and October 1997, the Company completed a public offering of
1,080,000 Common Shares at a price of $29.0625 per share, receiving net proceeds
of approximately $29.2 million. The net proceeds were used to acquire, expand
and develop factory outlet centers and for general corporate purposes. On
October 24, the Operating Partnership issued $75 million of 7.875% senior,
unsecured notes, maturing October 24, 2004. The net proceeds were used to repay
substantially all amounts outstanding under the Company's existing lines of
credit. On November 3, 1997, the Company and the Operating Partnership filed a
new registration statement with the SEC to provide an issuance capacity under
shelf registration statements back to the original $100 million in equity
securities and $100 million in debt securities.
In anticipation of offering the senior, unsecured notes due 2004, the Company
entered into an interest rate protection agreement on October 3, 1997, which
fixed the index on the 10 year US Treasury rate at 5.995% for 30 days on a
notional amount of $70 million. The transaction settled on October 21, 1997, the
trade date of the $75 million senior, unsecured note issuance, and, as a result
of an increase in the US Treasury rate, the Company received $714,000 in
proceeds. Such amount is being amortized as a reduction to interest expense over
the life of the notes and will result in an overall effective interest rate on
the notes of 7.75%.
THE FACTORY OUTLET CONCEPT
Factory outlets are manufacturer-operated retail stores that sell primarily
first quality, branded products at significant discounts from regular retail
prices charged by department stores and specialty stores. Factory outlet centers
offer numerous advantages to both consumers and manufacturers. Manufacturers
selling in factory outlet stores are often able to charge customers lower prices
for brand name and designer products by eliminating the third party retailer,
and because factory outlet centers typically have lower operating costs than
other retailing formats. Factory outlet centers enable manufacturers to optimize
the size of production runs while continuing to maintain control of their
distribution channels. In addition, factory outlet centers benefit manufacturers
by permitting them to sell out-of-season, overstocked or discontinued
merchandise without alienating department stores or hampering the manufacturer's
brand name, as is often the case when merchandise is distributed via discount
chains.
3
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The Company's factory outlet centers range in size from 8,000 to 631,359 square
feet of GLA and are typically located at least 10 miles from downtown areas,
where major department stores and manufacturer-owned full-price retail stores
are usually located. Manufacturers prefer these locations so that they do not
compete directly with their major customers and their own stores. Many of the
Company's factory outlet centers are located near tourist destinations to
attract tourists who consider shopping to be a recreational activity and are
typically situated in close proximity to interstate highways to provide
accessibility and visibility to potential customers.
Management believes that factory outlet centers continue to present attractive
opportunities for capital investment by the Company, particularly with respect
to strategic expansions of existing centers. Management believes that under
present conditions such development or expansion costs, coupled with current
market lease rates, permit attractive investment returns. Management further
believes, based upon its contacts with present and prospective tenants, that
many companies, including prospective new entrants into the factory outlet
business, desire to open a number of new factory outlet stores in the next
several years, particularly where there are successful factory outlet centers in
which such companies do not have a significant presence or where there are few
factory outlet centers. Thus, the Company believes that its commitment to
developing and expanding factory outlet centers is justified by the potential
financial returns on such centers.
THE COMPANY'S FACTORY OUTLET CENTERS
The Company's factory outlet centers are designed to attract national brand name
tenants. As one of the original participants in this industry, the Company has
developed long-standing relationships with many national and regional
manufacturers. Because of its established relationships with many manufacturers,
the Company believes it is well positioned to capitalize on industry growth.
As of December 31, 1997, the Company had a diverse tenant base comprised of over
250 different well-known, upscale, national designer or brand name companies,
such as Liz Claiborne, Reebok International, Ltd., Tommy Hilfiger, Polo Ralph
Lauren, Off 5th- SAKS Fifth Avenue Outlet Store, The Gap, Nautica and Nike. A
majority of the factory outlet stores leased by the Company are directly
operated by the respective manufacturer. During 1997, the Company added
approximately 55 new national designers and brand name companies to its tenant
base.
No single tenant (including affiliates) accounted for 10% or more of combined
base and percentage rental revenues during 1997 and 1996. During 1995, one
tenant (including affiliates) accounted for approximately 10% of combined base
and percentage rental revenues. As of February 1, 1998, the Company's largest
tenant accounted for approximately 6.8% of its GLA. Because the typical tenant
of the Company is a large, national manufacturer, the Company has not
experienced any material problems with respect to rent collections or lease
defaults.
Minimum base rental revenues and operating expense reimbursements accounted for
approximately 96% of the Company's total revenues in 1997. Percentage rental
revenues accounted for approximately 3% of 1997 revenues. As a result, only a
small portion of the Company's revenues are dependent on contingent revenue
sources, such as percentage rents, which fluctuate depending on tenant's sales
performance.
BUSINESS HISTORY
Stanley K. Tanger, the Company's founder, Chairman and Chief Executive Officer,
entered the factory outlet center business in 1981. Prior to founding the
Company, Stanley K. Tanger and his son, Steven B. Tanger, the Company's
President and Chief Operating Officer, built and managed a successful family
owned apparel manufacturing business, Tanger/Creighton Inc.
("Tanger/Creighton"), which business included the operation of five factory
outlet stores. Based on their knowledge of the apparel and retail industries, as
well as their experience operating Tanger/Creighton's factory outlet stores, the
Tangers recognized that there would be a demand for factory outlet centers where
a number of manufacturers could operate in a single location and attract a large
number of shoppers.
4
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From 1981 to June of 1993, the Tangers developed 17 Centers with a total GLA of
approximately 1.5 million square feet. In June of 1993, the Company completed
its initial public offering ("IPO"), making Tanger Factory Outlet Centers, Inc.
the first publicly traded outlet center company. Since its IPO, the Company has
developed nine Centers and acquired four Centers and, together with expansions
of existing Centers, added approximately 3.1 million square feet of GLA to its
portfolio, bringing its portfolio of properties as of December 31, 1997 to 30
Centers totaling approximately 4.6 million square feet of GLA.
BUSINESS AND OPERATING STRATEGY
The Company intends to increase its cash flow and the value of its portfolio
over the long-term by continuing to own, manage, acquire, develop, and expand
factory outlet centers. The Company's strategy is to increase revenues through
new development, selective acquisitions and expansions of factory outlet centers
while minimizing its operating expenses by designing low maintenance properties
and achieving economies of scale. In connection with the ownership and
management of its properties, the Company places an emphasis on regular
maintenance and intends to make periodic renovations as necessary. In addition,
the Company will seek to maintain high occupancy rates and increasing rental
revenues with a tenant base of nationally recognized brand name tenants.
The Company typically seeks locations for its new centers that have at least 3.5
million people residing within an hour's drive, an average household income
within a 50 mile radius of at least $35,000 per year and access to a highway
with a traffic count of at least 35,000 cars per day. The Company will vary its
minimum conditions based on the particular characteristics of a site, especially
if the site is located near or at a tourist destination. The Company's current
goal is to target sites that are large enough to construct centers with
approximately 75 stores totaling at least 300,000 square feet of GLA. Generally,
the Company will build such centers in phases, with the first phase containing
150,000 to 200,000 square feet of GLA. Future phases have historically been less
expensive to build than the first phase because the Company generally
consummates land acquisition and finishes most of the site work, including
parking lots, utilities, zoning and other developmental work, in the first
phase.
The Company generally preleases at least 50% of the space in each center prior
to acquiring the site and beginning construction. Historically, the Company has
not begun construction until it has obtained a significant amount of signed
leases. Typically, construction of a new factory outlet center has taken the
Company four to six months from groundbreaking to the opening of the first
tenant store. Construction of expansions to existing properties typically takes
less time, usually between three to four months.
CAPITAL STRATEGY
The Company's capital strategy is to maintain a strong and flexible financial
position by: (1) maintaining a low level of leverage, (ii) extending and
sequencing debt maturity dates, (iii) managing its floating interest rate
exposure, (iv) maintaining its liquidity and (v) reinvesting a significant
portion of its cash flow by maintaining a low distribution payout ratio (defined
as annual distributions as a percent of funds from operations ("FFO" - See
discussion of FFO below) for such year).
FFO and EBITDA are widely accepted financial indicators used by certain
investors and analysts to analyze and compare one equity REIT with another on
the basis of operating performance. FFO is generally defined as net income
(loss), computed in accordance with generally accepted accounting principles,
before extraordinary items and gains (losses) on sale of properties, plus
depreciation and amortization uniquely significant to real estate. EBITDA is
generally defined as earnings before minority interest, interest expense, income
taxes, depreciation and amortization. The Company cautions that the calculations
of FFO and EBITDA may vary from entity to entity and as such the presentation of
FFO and EBITDA by the Company may not be comparable to other similarly titled
measures of other reporting companies. Neither FFO nor EBITDA represent net
income or cash flow from operations as defined by generally accepted accounting
principles and neither should be considered an alternative to net income as an
indication of operating performance or to cash from operations as a measure of
liquidity. FFO and EBITDA are not necessarily indicative of cash flows available
to fund dividends to shareholders and other cash needs.
The Company has successfully increased its dividend each of its first four years
as a public company. At the same time, the Company has reduced its payout ratio
in each of those years. The distribution payout ratio for the year ended
December 31, 1997 was 67%. As a result, the Company retained approximately $11
million of its 1997 FFO. A low distribution payout ratio policy allows the
Company to retain capital to maintain the quality of its portfolio as well as to
develop, acquire and expand properties.
5
<PAGE>
The Company's ratio of EBITDA to Annual Service Charge (defined as the amount
which is expensed or capitalized for interest on debt, excluding amortization of
deferred finance charges) was a strong 3.0 for the year ended December 31, 1997.
The Company's ratio of debt to total market capitalization (defined as the value
of the Company's outstanding Common Shares on a fully diluted basis after giving
effect to the conversion or exchange of outstanding partnership Units in the
Operating Partnership held by TFLP and the Series A Preferred Shares, plus total
consolidated debt) at December 31, 1997 was approximately 39% (assuming a value
for the Common Shares of the Company at December 31, 1997 of $30.5625 per
share).
During September and October 1997, the Company completed a public offering of
1,080,000 Common Shares at a price of $29.0625 per share, receiving net proceeds
of approximately $29.2 million. The net proceeds were used to acquire, expand
and develop factory outlet centers and for general corporate purposes. On
October 24, the Operating Partnership issued $75 million of 7.875% senior,
unsecured notes, maturing October 24, 2004. The net proceeds were used to repay
substantially all amounts outstanding under the Company's existing lines of
credit. On November 3, 1997, the Company and the Operating Partnership filed a
new registration statement with the SEC to provide, under shelf registration
statements, for the issuance of up to $100 million in additional equity
securities and $100 million in additional debt securities.
At December 31, 1997, the Company had revolving lines of credit with a borrowing
capacity of up to $125 million, of which $120 million was available for
additional borrowings. Based on the $5 million in variable rate debt outstanding
at December 31, 1997, the Company had an insignificant amount of exposure to
interest rate risk at year end. Also, with additional unsecured borrowings
during the year, the Company has effectively unencumbered approximately 64% of
its real estate assets as of December 31, 1997. In February 1998, the Company
amended two of its revolving lines to increase the amounts available by $20
million, bringing the total borrowing capacity under the lines to $145 million.
The Company intends to retain the ability to raise additional capital, including
additional debt, to pursue attractive investment opportunities that may arise
and to otherwise act in a manner that it believes to be in the best interests of
the Company and its shareholders.
THE OPERATING PARTNERSHIP
The Centers and other assets of the Company are held by, and all of the
Company's operations are conducted by, the Operating Partnership. As of December
31, 1997, the ownership interests in the Operating Partnership consisted of
7,853,936 partnership Units and 90,689 preferred partnership Units (which are
convertible into approximately 817,107 general partnership Units) held by the
Company and 3,033,305 partnership Units held by TFLP, the sole limited partner.
Each partnership Unit held by TFLP is exchangeable into one Common Share
(subject to certain antidilution adjustments and certain limitations on exchange
to preserve the Company's status as a REIT).
Each preferred partnership Unit entitles the Company to receive distributions
from the Operating Partnership, in an amount equal to the distribution payable
with respect to a share of Series A Preferred Shares, prior to the payment by
the Operating Partnership of distributions with respect to the general
partnership Units. Preferred partnership Units will be automatically converted
by holders into general partnership Units to the extent that the Series A
Preferred Shares are converted into Common Shares and will be redeemed by the
Operating Partnership to the extent that the Series A Preferred Shares are
redeemed by the Company.
COMPETITION
The Company carefully considers the degree of existing and planned competition
in a proposed area before deciding to develop, acquire or expand a new center.
The Company's centers compete for customers primarily with factory outlet
centers built and operated by different developers, traditional shopping malls
and full- and off-price retailers. However, management believes that the
majority of the Company's customers visit factory outlet centers because they
are intent on buying name-brand products at discounted prices. Traditional full-
and off-price retailers are often unable to provide such a variety of name-brand
products at attractive prices.
Tenants of factory outlet centers typically avoid direct competition with major
retailers and their own specialty stores, and, therefore, generally insist that
the outlet centers be located not less than 10 to 20 miles from the nearest
major department store or the tenants' own specialty stores. For this reason,
the Company's centers compete only to a very limited extent with traditional
malls in or near metropolitan areas.
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Management believes that the Company competes favorably with as many as four
large national developers of factory outlet centers and numerous small
developers. Competition with other factory outlet centers for new tenants is
generally based on cost, location, quality and mix of the centers' existing
tenants, and the degree and quality of the support and marketing services
provided by the property manager. The Company believes that its centers have an
attractive tenant mix, as a result of the Company's decision to lease
substantially all of its space to manufacturer operated stores rather than to
off-price retailers, and also as a result of the strong brand identity of the
Company's major tenants.
CORPORATE AND REGIONAL HEADQUARTERS
The Company owns a small office building in Greensboro, North Carolina in which
its corporate headquarters is located. In addition, the Company rents a regional
office in New York City, New York under a lease agreement and sublease
agreement, respectively to better service its principal fashion-related tenants,
many of whom are based in and around that area.
The Company maintains on-site managers and offices at 25 Centers and one
off-site manager and business office in Portsmouth, New Hampshire to service the
remaining 5 Centers in the New England area. The managers closely monitor the
development of those Centers from construction through opening and operation and
also provide effective and efficient management and marketing services.
INSURANCE
Management believes that the Centers are covered by adequate fire, flood and
property insurance provided by reputable companies and with commercially
reasonable deductibles and limits.
EMPLOYEES
As of February 1, 1998, the Company had 110 full-time employees, located at the
Company's corporate headquarters in North Carolina, its regional office in New
York and its 26 business offices.
7
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ITEM 2. BUSINESS AND PROPERTIES
As of February 1, 1998, the Company's portfolio consisted of 30 Centers located
in 23 states. The Company's Centers range in size from 8,000 to 631,359 square
feet of GLA. These Centers are typically strip shopping centers which enable
customers to view all of the shops from the parking lot, minimizing the time
needed to shop. The Centers are generally located near tourist destinations or
along major interstate highways to provide visibility and accessibility to
potential customers.
The Company believes that the Centers are well diversified geographically and by
tenant and that it is not dependent upon any single property or tenant. The only
Center that represents more than 10% of the Company's consolidated total assets
or consolidated gross revenues as of and for the year ended December 31, 1997 is
the property in Riverhead, NY. See "Business and Properties - Significant
Property". No other Center represented more than 10% of the Company's
consolidated total assets or consolidated gross revenues as of December 31,
1997.
LOCATION OF CENTERS (AS OF FEBRUARY 1, 1998)
Number of GLA %
State Centers (sq. ft.) of GLA
- ----------------- ------------- ----------------- ------------
Georgia 3 713,371 16%
New York 1 631,359 14
Texas 2 419,750 9
Iowa 1 275,706 6
Tennessee 2 267,791 6
Missouri 1 255,073 6
Louisiana 1 245,325 5
Pennsylvania 1 230,063 5
Oklahoma 1 197,878 4
Arizona 1 186,018 4
North Carolina 2 179,870 4
Indiana 1 141,051 3
Minnesota 1 134,480 3
Michigan 1 112,120 2
California 1 108,950 2
Oregon 1 97,749 2
Kansas 1 88,200 2
Maine 2 84,897 2
Alabama 1 80,730 2
New Hampshire 2 61,915 1
West Virginia 1 49,252 1
Massachusetts 1 23,417 1
Vermont 1 8,000 ---
------------- ----------------- ------------
Total 30 4,592,965 100%
============= ================= ============
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The table set forth below summarizes certain information with respect to the
Company's existing centers as of February 1, 1998.
PROPERTY PORTFOLIO
<TABLE>
<CAPTION>
MORTGAGE
DEBT FEE OR
GLA OUTSTANDING GROUND
DATE OPENED LOCATION (SQ. FT.) % LEASED (000'S) (4) LEASE
- ----------------- ---------------------------------------- ------------ ------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
JUN. 1986 KITTERY I, ME 56,312 100% $5,970 Fee
Aug. 1993 Expansion 3,882
--------
60,194
MAR. 1987 CLOVER, NORTH CONWAY, NH 11,000 100 --- Fee
NOV. 1987 MARTINSBURG, WV 42,346 89 --- Fee
Sep. 1994 Expansion 6,906
--------
49,252
APR. 1988 LL BEAN, NORTH CONWAY, NH 50,915 100 --- Fee
JUL. 1988 PIGEON FORGE, TN 94,480 100 --- Ground
Jul. 1994 Expansion 270 Lease
---------
94,750 (2086)
AUG. 1988 BOAZ, AL 78,550 100 --- Fee
May 1993 Expansion 2,180
--------
80,730
OCT. 1988 MANCHESTER, VT 8,000 100 --- Fee
JUN. 1989 KITTERY II, ME 23,119 100 --- Fee
Nov. 1993 Expansion 1,584
-------
24,703
JUL. 1989 COMMERCE, GA 100,100 97 10,121 Fee
Mar. 1990 Expansion 58,650
May 1992 Expansion 4,500
May 1993 Expansion 12,500
Sep. 1994 Expansion 10,000
--------
185,750
OCT. 1989 BOURNE, MA 23,417 100 --- Fee
FEB. 1991 WEST BRANCH, MI 75,120 98 6,836 Fee
Oct. 1992 Expansion 25,000
May 1994 Expansion 12,000
--------
112,120
MAY 1991 WILLIAMSBURG, IA 121,444 94 16,946 Fee
Nov. 1991 Expansion 50,675
Nov. 1992 Expansion 34,000 (1)
Dec. 1993 Expansion 43,400
Apr. 1996 Expansion 26,187
--------
275,706
FEB. 1992 CASA GRANDE, AZ 94,223 89 --- Fee
Dec. 1992 Expansion 91,795
--------
186,018
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MORTGAGE
DEBT FEE OR
GLA OUTSTANDING GROUND
DATE OPENED LOCATION (SQ. FT.) % LEASED (000'S) (4) LEASE
- ----------------- ---------------------------------------- ------------ ------------- ---------------- -------------
AUG. 1992 STROUD, OK 96,378 93 --- Fee
Nov. 1992 Expansion 37,500
Aug. 1993 Expansion 64,000 Fee
--------
197,878
DEC. 1992 NORTH BRANCH, MN 106,280 96 --- Fee
Aug. 1993 Expansion 28,200
--------
134,480
FEB. 1993 GONZALES, LA 105,985 98 --- Fee
Aug. 1993 Expansion 109,450
Feb. 1996 Expansion 29,890
--------
245,325
MAY 1993 SAN MARCOS, TX 98,820 100 10,206 Fee
Oct. 1993 Expansion 40,200
Nov. 1994 Expansion 17,500 (2)
April 1995 Expansion 32,750
July 1996 Expansion 29,945
Dec. 1997 Expansion 23,100 (6)
--------
242,315
DEC. 1993 LAWRENCE, KS 88,200 87 --- Fee
DEC. 1993 MCMINNVILLE, OR 97,749 72 --- Fee
AUG. 1994 RIVERHEAD, NY 286,195 99 --- Ground
Aug. 1997 Expansion 241,820 Lease
Dec. 1997 Expansion 103,344 (6) (2004)(3)
-------
631,359
AUG. 1994 TERRELL, TX 126,185 98 --- Fee
Oct. 1995 Expansion 51,250
--------
177,435
SEP. 1994 SEYMOUR, IN 141,051 95 8,184 Fee
OCT. 1994 (5) LANCASTER, PA 191,152 99 15,787 Fee
Nov. 1995 Expansion 12,800
Sep. 1997 Expansion 26,111 (6)
--------
230,063
NOV. 1994 BRANSON, MO 230,073 95 --- Fee
Jun. 1996 Expansion 25,000
--------
255,073
NOV. 1994 LOCUST GROVE, GA 168,700 97 --- Fee
Dec. 1995 Expansion 45,964
Aug. 1996 Expansion 34,190
--------
248,854
JAN. 1995 BARSTOW, CA 108,950 100 --- Fee
DEC. 1995 COMMERCE II, GA 148,520 98 --- Fee
Aug. 1996 Expansion 36,000
Dec. 1997 Expansion 94,247 (6)
--------
278,767
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MORTGAGE
DEBT FEE OR
GLA OUTSTANDING GROUND
DATE OPENED LOCATION (SQ. FT.) % LEASED (000'S) (4) LEASE
- ----------------- ---------------------------------------- ------------ ------------- ---------------- -------------
FEB. 1997 (5) SEVIERVILLE, TN 122,684 92 --- Ground
Dec. 1997 Expansion 50,357 (6) Lease
--------
173,041 (2046)
SEP. 1997 (5) BLOWING ROCK, NC 97,408 95 --- Fee
SEP. 1997 (5) NAGS HEAD, NC 82,462 93 --- Fee
- ----------------- ---------------------------------------- ------------ ------------- ---------------- -------------
Total 4,592,965 96% $74,050
================= ======================================== ============ ============= ================ =============
(1) GLA EXCLUDES 21,781 SQUARE FOOT LAND LEASE ON OUTPARCEL OCCUPIED BY PIZZA HUT.
(2) GLA EXCLUDES 17,400 SQUARE FOOT LAND LEASE ON OUTPARCEL OCCUPIED BY WENDY'S.
(3) THE ORIGINAL RIVERHEAD CENTER IS SUBJECT TO A GROUND LEASE WHICH MAY BE
RENEWED AT THE OPTION OF THE COMPANY FOR UP TO SEVEN ADDITIONAL TERMS OF
FIVE YEARS EACH. THE LAND ON WHICH THE RIVERHEAD CENTER EXPANSION IS
LOCATED IS OWNED BY THE COMPANY.
(4) AS OF DECEMBER 31, 1997. THE WEIGHTED AVERAGE INTEREST RATE FOR DEBT OUTSTANDING AT DECEMBER 31, 1997 WAS
8.5% AND THE WEIGHTED AVERAGE MATURITY DATE WAS OCTOBER 2002.
(5) REPRESENTS DATE ACQUIRED BY THE COMPANY.
(6) GLA INCLUDES SQUARE FEET OF NEW SPACE NOT YET OPEN AS OF DECEMBER 31, 1997,
WHICH TOTALED 136,285 SQUARE FEET (SAN MARCOS - 12,100; RIVERHEAD - 60,419;
LANCASTER - 2,677; COMMERCE II - 35,792; SEVIERVILLE - 25,297)
- --------------------------------
</TABLE>
Management has an ongoing program for acquiring Centers, developing new Centers
and expanding existing Centers. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
incorporated herein by reference from the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 for a discussion of the cost of such
programs and the sources of financing thereof.
Certain of the Company's Centers serve as collateral for mortgage notes payable
and the secured revolving line of credit. Of the 30 Centers, the Company owns
the land underlying 27 and has ground leases on three. The land on which the
Pigeon Forge and Sevierville Centers are located are subject to long-term ground
leases expiring in 2086 and 2046, respectively. The land on which the original
Riverhead Center is located, approximately 47 acres, is also subject to a ground
lease with an initial term expiring in 2004, with renewal at the option of the
Company for up to seven additional terms of five years each. The land on which
the Riverhead Center expansion is located, approximately 43 acres, is owned by
the Company.
The term of the Company's typical tenant lease ranges from five to ten years.
Generally, leases provide for the payment of fixed monthly rent in advance.
There are often contractual base rent increases during the initial term of the
lease. In addition, the rental payments are customarily subject to upward
adjustments based upon tenant sales volume. Most leases provide for payment by
the tenant of real estate taxes, insurance, common area maintenance, advertising
and promotion expenses incurred by the applicable Center. As a result,
substantially all operating expenses for the Centers are borne by the tenants.
11
<PAGE>
LEASE EXPIRATIONS
The following table sets forth, as of February 1, 1998, scheduled lease
expirations, assuming none of the tenants exercise renewal options. Most leases
are renewable for five year terms at the tenant's option.
<TABLE>
<CAPTION>
% of Gross
Annualized
Average Base Rent
No. of Approx. Annualized Annualized Represented
Leases GLA Base Rent Base Rent by Expiring
Year Expiring(1) (sq. ft.)(1) per sq. ft. (000's)(2) Leases
- ------------------------- --------------- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
1998 75 306,000 $12.78 $3,910 7%
1999 190 695,000 14.24 9,895 17
2000 168 581,000 14.39 8,363 14
2001 140 549,000 13.81 7,581 13
2002 242 904,000 15.14 13,684 24
2003 73 353,000 13.56 4,786 8
2004 61 314,000 14.32 4,497 8
2005 132 102,000 11.23 1,145 2
2006 4 58,000 10.91 633 1
2007 10 64,000 14.59 934 2
2008 & thereafter 36 255,000 8.76 2,235 4
- -------------------------------------------------------------------------------------------------------------
Total 1,131 4,181,000 $13.79 $57,663 100%
========================= =============== =============== =============== =============== ================
</TABLE>
(1) EXCLUDES LEASES THAT HAVE BEEN ENTERED INTO BUT WHICH TENANT HAS NOT YET
TAKEN POSSESSION, VACANT SUITES AND MONTH-TO-MONTH LEASES TOTALING
APPROXIMATELY 412,000 SQUARE FEET.
(2) BASE RENT IS DEFINED AS THE MINIMUM PAYMENTS DUE, EXCLUDING PERIODIC
CONTRACTUAL FIXED INCREASES.
RENTAL AND OCCUPANCY RATES
The following table sets forth information regarding the expiring leases during
each of the last five calendar years.
<TABLE>
<CAPTION>
Renewed by Existing Re-leased to
Total Expiring Tenants New Tenants
--------------------------------- ------------------------------------ --------------------------------
% of
Total % of % of
GLA Center GLA Expiring GLA Expiring
Year (sq. ft.) GLA (sq. ft.) GLA (sq. ft.) GLA
- ----------- --------------- ------------- --------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1997 238,250 5% 195,380 82% 18,600 8%
1996 149,689 4 134,639 90 15,050 10
1995 93,650 3 91,250 97 2,400 3
1994 115,697 3 105,697 91 10,000 9
1993 129,069 4 123,569 96 5,500 4
</TABLE>
12
<PAGE>
The following table sets forth the average base rental rate increases per square
foot upon re-leasing stores that were turned over or renewed during each of the
last five calendar years.
<TABLE>
<CAPTION>
Renewals of Existing Leases Stores Re-leased to New Tenants (1)
------------------------------------------------------------- -------------------------------------------------------
Average Annualized Base Rents Average Annualized Base Rents
($ per sq. ft.) ($ per sq. ft.)
-------------------------------------------- ----------------------------------------
GLA % GLA %
Year (sq. ft.) Expiring New Increase (sq. ft.) Expiring New Increase
- --------- ----------- ------------ ---------- ----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 195,380 $14.21 $14.41 1% 171,421 $14.59 $13.42 (8)%
1996 134,639 12.44 14.02 13 78,268 14.40 14.99 4
1995 91,250 11.54 13.03 13 59,445 13.64 14.80 9
1994 105,697 14.26 16.56 16 71,350 12.54 14.30 14
1993 123,569 12.83 13.94 9 29,000 10.81 14.86 38
- ---------------------
</TABLE>
(1) THE SQUARE FOOTAGE RELEASED TO NEW TENANTS FOR 1997, 1996, 1995, 1994 AND
1993 CONTAIN 18,600, 15,050, 2,400, 10,000 AND 5,500 SQUARE FEET,
RESPECTIVELY, THAT WAS RELEASED TO NEW TENANTS UPON EXPIRATION OF AN
EXISTING LEASE. THE REMAINING SPACE WAS RETENANTED PRIOR TO ANY LEASE
EXPIRATION.
The following table shows certain information on rents and occupancy rates for
the Centers during each of the last five calendar years.
<TABLE>
<CAPTION>
Aggregate
Average GLA Open at Percentage
% Anualized Base End of Each Number of Rents
Year Leased Rent per sq.ft. (1) Year Centers (000's)
- --------- ------------------ ----------------- ----------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
1997 98% $14.04 4,458,000 30 $2,637
1996 99% 13.89 3,739,000 27 2,017
1995 99% 13.92 3,507,000 27 2,068
1994 99% 13.43 3,115,000 25 1,658
1993 98% 13.03 1,980,000 19 1,323
- ---------------------
</TABLE>
(1) REPRESENTS TOTAL BASE RENTAL REVENUE DIVIDED BY WEIGHTED AVERAGE GLA OF THE
PORTFOLIO, WHICH AMOUNT DOES NOT TAKE INTO CONSIDERATION FLUCTUATIONS IN
OCCUPANCY THROUGHOUT THE YEAR.
OCCUPANCY COSTS
The Company believes that its ratio of average tenant occupancy cost (which
includes base rent, common area maintenance, real estate taxes, insurance,
advertising and promotions) to average sales per square foot is low relative to
other forms of retail distribution. The following table sets forth, for each of
the last five years, tenant occupancy costs per square foot as a percentage of
reported tenant sales per square foot.
Occupancy Costs as a
Year % of Tenant Sales
- --------------------- ----------------------------
1997 8.2%
1996 8.7
1995 8.5
1994 7.4
1993 6.5
13
<PAGE>
TENANTS
The following table sets forth certain information with respect to the Company's
ten largest tenants and their store concepts as of February 1, 1998.
<TABLE>
<CAPTION>
Number GLA % of Total
Tenant of Stores (sq. ft.) GLA open
- ------------------------------------------------------- ------------------- --------------
<S> <C> <C> <C>
PHILLIPS-VAN HEUSEN CORPORATION (1):
Bass Shoes 18 121,342 2.6%
Bass Apparel 1 3,300 0.1
Bass Company Store 1 6,500 0.1
Van Heusen 19 81,556 1.8
Geoffrey Beene Co. Store 12 48,640 1.1
Izod 15 35,567 0.8
Gant 5 13,000 0.3
----------------- ------------------- --------------
71 309,905 6.8
LIZ CLAIBORNE, INC.:
Liz Claiborne 25 285,041 6.2
Elizabeth 5 20,700 0.5
----------------- ------------------- --------------
30 305,741 6.7
REEBOK INTERNATIONAL, LTD. 22 158,400 3.5
SARA LEE CORPORATION:
L'eggs, Hanes, Bali 23 107,192 2.3
Champion 2 6,500 0.2
Coach 6 13,815 0.3
Socks Galore 7 8,680 0.2
----------------- ------------------- --------------
38 136,187 3.0
COUNTY SEAT STORES, INC. (2):
County Seat 3 15,000 0.3
Levi's by County Seat 8 91,700 2.0
----------------- ------------------- --------------
11 106,700 2.3
AMERICAN COMMERCIAL, INC.:
Mikasa Factory Store 13 105,500 2.3
BROWN GROUP RETAIL, INC.:
Famous Footwear 6 33,150 0.7
Naturalizer 7 17,200 0.4
Brown Shoes 2 10,500 0.2
Factory Brand Shoes 6 29,050 0.6
Air Step/Buster Brown 1 3,000 0.1
----------------- ------------------- --------------
22 92,900 2.0
VF FACTORY OUTLET, INC. 3 78,697 1.7
OSHKOSH B"GOSH, INC. 15 76,790 1.6
SAMSONITE CORPORATION:
American Tourister 11 31,392 0.7
Samsonite 13 43,395 0.9
----------------- ------------------- --------------
24 74,787 1.6
----------------- ------------------- --------------
Total of all tenants listed in table 249 1,455,607 31.5%
================= =================== ==============
</TABLE>
14
<PAGE>
(1) PHILLIPS-VAN HEUSEN CORPORATION ("PVH") HAS ANNOUNCED THE CLOSING OF A
SIGNIFICANT PORTION OF ITS UNDERPERFORMING STORES. GENERALLY, THE COMPANY'S
LEASES WITH PVH ARE LONG-TERM AND DO NOT PERMIT THE TENANT TO CLOSE THE STORE
DURING THE LEASE TERM. MANAGEMENT BELIEVES THAT THE RENTS DERIVED FROM STORES
THAT MIGHT BE CONSIDERED FOR CLOSING IN THE FUTURE BY PVH WOULD NOT HAVE A
MATERIAL EFFECT ON THE COMPANY'S RESULTS OF OPERATIONS OR FINANCIAL CONDITION.
(2) COUNTY SEAT STORES, INC. ("COUNTY SEAT") IS CURRENTLY IN BANKRUPTCY
PROCEEDINGS. MANAGEMENT BELIEVES THAT THIS BANKRUPTCY WILL NOT HAVE A MATERIAL
EFFECT ON THE COMPANY'S RESULTS OF OPERATIONS OR FINANCIAL CONDITION.
SIGNIFICANT PROPERTY
The Center in Riverhead, New York is the Company's only Center which comprises
more than 10% of consolidated total assets or consolidated total revenues. The
Riverhead Center was originally constructed in 1994. During 1997, the company
substantially completed an expansion totaling 241,820 square feet and is nearing
final completion of a further expansion which will total approximately 103,300
square feet. Upon completion of the expansions, the Riverhead Center will total
631,359 square feet.
Tenants at the Riverhead Center principally conduct retail sales operations. The
occupancy rate as of the end of 1997, 1996, 1995 and 1994, excluding expansions
under construction, was 99%, 100%, 100% and 100%. Average annualized base rental
rates during 1997, 1996, 1995 and 1994 were $18.65, $17.73, $17.63 and $18.18
per weighted average GLA.
Depreciation on the Riverhead Center is recognized on a straight-line basis over
33.33 years, resulting in a depreciation rate of 3% per year. At December 31,
1997, the net federal tax basis of this Center was approximately $73,134,000.
Real estate taxes assessed on this Center during 1997 amounted to $826,000. Real
estate taxes for 1998 are estimated to be approximately $1.6 million.
The following table sets forth, as of February 1, 1998, scheduled lease
expirations at the Riverhead Center assuming that none of the tenants exercise
renewal options:
<TABLE>
<CAPTION>
% of Gross
Annualized
Base Rent
No. of Annualized Annualized Represented
Leases GLA Base Rent Base Rent by Expiring
Year Expiring (1) (sq. ft.) (1) per sq. ft. (000) (2) Leases
- --------------------- ---------------- -------------- ----------------- ----------------- --------------------
<S> <C> <C> <C> <C> <C>
1998 --- --- $ --- $ --- ---%
1999 22 91,000 19.30 1,756 16
2000 5 17,000 19.94 339 3
2001 8 34,000 20.97 713 7
2002 70 240,000 20.77 4,985 46
2003 4 23,000 18.65 452 4
2004 18 79,000 19.24 1,520 14
2005 1 2,000 17.50 35 1
2006 --- --- --- --- ---
2007 4 24,000 16.83 404 4
2007 & thereafter 5 57,000 9.33 532 5
- --------------------- ---------------- -------------- ----------------- ----------------- --------------------
Total 137 567,000 $18.93 $10,736 100%
===================== ================ ============== ================= ================= ====================
</TABLE>
(1) EXCLUDES LEASES THAT HAVE BEEN ENTERED INTO BUT WHICH TENANT HAS NOT TAKEN
POSSESSION AND EXCLUDES MONTH-TO-MONTH LEASES.
(2) BASE RENT IS DEFINED AS THE MINIMUM PAYMENTS DUE, EXCLUDING PERIODIC
CONTRACTUAL FIXED INCREASES.
15
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Except for claims arising in the ordinary course of business, which are covered
by the Company's liability insurance, the Company is not presently involved in
any litigation involving claims against the Company, nor, to its knowledge, is
any material litigation threatened against the Company or its Centers which
would have a material adverse effect on the Company, its Centers or its
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended December 31, 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the executive
officers of the Company:
NAME AGE POSITION
---- --- --------
Stanley K. Tanger..........74 Founder, Chairman of the Board of Directors and
Chief Executive Officer
Steven B. Tanger...........49 Director, President and Chief Operating Officer
Rochelle G. Simpson .......59 Secretary and Senior Vice President -
Administration and Finance
Willard A. Chafin, Jr......60 Senior Vice President - Leasing, Site Selection,
Operations and Marketing
Frank C. Marchisello, Jr...39 Vice President - Chief Financial Officer
Joseph H. Nehmen...........49 Vice President - Operations
Virginia R. Summerell......39 Treasurer and Assistant Secretary
C. Randy Warren, Jr........33 Vice President - Leasing
Richard T. Parker..........49 Vice President - Development
Carrie A. Johnson..........35 Vice President - Marketing
Kevin M. Dillon............39 Vice President - Construction
The following is a biographical summary of the experience of the executive
officers of the Company:
STANLEY K. TANGER. Mr. Tanger is the founder, Chief Executive Officer and
Chairman of the Board of Directors of the Company. He also served as President
from inception of the Company to December 1994. Mr. Tanger opened one of the
country's first outlet shopping centers in Burlington, North Carolina in 1981.
Before entering the factory outlet center business, Mr. Tanger was President and
Chief Executive Officer of his family's apparel manufacturing business,
Tanger/Creighton, Inc., for 30 years.
STEVEN B. TANGER. Mr. Tanger is a director of the Company and was named
President and Chief Operating Officer effective January 1, 1995. Previously, Mr.
Tanger served as Executive Vice President since joining the Company in 1986. He
has been with Tanger-related companies for most of his professional career,
having served as Executive Vice President of Tanger/Creighton for 10 years. He
is responsible for all phases of project development, including site selection,
land acquisition and development, leasing, marketing and overall management of
existing outlet centers. Mr. Tanger is a graduate of the University of North
Carolina at Chapel Hill and the Stanford University School of Business Executive
Program. Mr. Tanger is the son of Stanley K. Tanger.
ROCHELLE G. SIMPSON. Ms. Simpson was named Senior Vice President -
Administration and Finance of the Company in October 1995. She is also the
Secretary of the Company and previously served as Treasurer from May 1993
through May 1995. She entered the factory outlet center business in January
1981, in general management and as chief accountant for Stanley K. Tanger and
later became Vice President - Administration and Finance of the Predecessor
Company. Ms. Simpson oversees the accounting and finance departments and has
overall management responsibility for the Company's headquarters.
16
<PAGE>
WILLARD A. CHAFIN, JR. Mr. Chafin was named Senior Vice President -
Leasing, Site Selection, Operations and Marketing of the Company in October
1995. He joined the Company in April 1990, and since has held various executive
positions where his major responsibilities included supervising the Marketing,
Leasing and Property Management Departments, and leading the Asset Management
Team. Prior to joining the Company, Mr. Chafin was the Director of Store
Development for the Sara Lee Corporation, where he spent 21 years. Before
joining Sara Lee, Mr. Chafin was employed by Sears Roebuck & Co. for nine years
in advertising/sales promotion, inventory control and merchandising.
FRANK C. MARCHISELLO, JR. Mr. Marchisello was named Vice President and
Chief Financial Officer of the Company in November 1994. Previously, he served
as Chief Accounting Officer since joining the Company in January 1993 and
Assistant Treasurer since February 1994. He was employed by Gilliam, Coble &
Moser, certified public accountants, from 1981 to 1992, the last six years of
which he was a partner of the firm in charge of various real estate clients.
While at Gilliam, Coble & Moser, Mr. Marchisello worked directly with the
Tangers since 1982. Mr. Marchisello is a graduate of the University of North
Carolina at Chapel Hill and is a certified public accountant.
JOSEPH H. NEHMEN. Mr. Nehmen joined the Company in September 1995 and was
elected Vice President of Operations in October 1995. Mr. Nehmen has over 20
years experience in private business. Prior to joining Tanger, Mr. Nehmen was
owner of Merchants Wholesaler, a privately held distribution company in St.
Louis, Missouri. He is a graduate of Washington University. Mr. Nehmen is the
son-in-law of Stanley K. Tanger and brother-in-law of Steven B. Tanger.
VIRGINIA R. SUMMERELL. Ms. Summerell was named Treasurer of the Company in
May 1995 and Assistant Secretary in November 1994. Previously, she held the
position of Director of Finance since joining the Company in August 1992, after
nine years with NationsBank. Her major responsibilities include cash management
and oversight of all project and corporate finance transactions. Ms. Summerell
is a graduate of Davidson College and holds an MBA from the Babcock School at
Wake Forest University.
C. RANDY WARREN, JR. Mr. Warren is the Vice President - Leasing of the
Company and joined the Company in November 1995. He was previously director of
anchor leasing at Prime Retail, L.P., where he managed anchor tenant relations
and negotiation on a national basis. Prior to that, he worked as a leasing
executive for the company. Before entering the outlet industry, he was founder
of Preston Partners, a development consulting firm in Baltimore, MD. Mr. Warren
is a graduate of Towson State University and holds an MBA from Loyola College.
RICHARD T. PARKER. Mr. Parker is the Vice President - Development and
joined the Company in April 1996. Prior to joining Tanger, Mr. Parker was with
The Mills Corporation for nine years where he served as Vice President of Land
Development responsible for organizing and planning the development,
merchandising and sale of peripheral land surrounding 2 million-plus square foot
super regional mall projects. Prior to joining The Mills Corporation, Mr. Parker
was employed by Marriott International for 6 years where he served as Director
of Franchise Development. Mr. Parker is a graduate of Golden Gate University and
a veteran of the United States Air Force.
CARRIE A. JOHNSON. Ms. Johnson was named Vice President - Marketing in
September 1996. Previously, she held the position of Assistant Vice President -
Marketing since joining the Company in December 1995. Prior to joining Tanger,
Ms. Johnson was with Prime Retail, L.P. for 4 years where she served as Regional
Marketing Director responsible for coordinating and directing marketing for five
outlet centers in the southeast region. Prior to joining Prime Retail, L.P., Ms.
Johnson was Marketing Manager for North Hills, Inc. for five years and also
served in the same role for the Edward J. DeBartolo Corp. for two years. Ms.
Johnson is a graduate of East Carolina University.
KEVIN M. DILLON. Mr. Dillon was named Vice President - Construction in
October 1997. Previously, he held the position of Director of Construction from
September 1996 to October 1997 and Construction Manager since November 1993, the
month he joined the Company, to September 1996. Prior to joining the Company,
Mr. Dillon was employed by New Market Development Company for six years where he
served as Senior Project Manager. Prior to joining New Market, Mr. Dillon was
the Development Director of Western Development Company where he spent 6 years.
17
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDERS' MATTERS
The Common Shares commenced trading on the New York Stock Exchange on May 28,
1993. The initial public offering price was $22.50 per share. The following
table sets forth the high and low sales prices of the Common Shares as reported
on the New York Stock Exchange Composite Tape, during the periods indicated.
Common
1997 High Low Dividends Paid
- ---------------------------- --------- ------------------ -------------------
First Quarter $27.500 $24.000 $.52
Second Quarter 27.250 23.000 .55
Third Quarter 29.875 26.875 .55
Fourth Quarter 31.000 26.500 .55
- ---------------------------- --------- ------------------ -------------------
Year 1997 $31.000 $23.000 $2.17
- ---------------------------- --------- ------------------ -------------------
Common
1996 High Low Dividends Paid
- ---------------------------- --------- ------------------ -------------------
First Quarter $26.000 $23.375 $.50
Second Quarter 25.375 22.625 .52
Third Quarter 24.875 22.875 .52
Fourth Quarter 27.375 23.500 .52
- ---------------------------- --------- ------------------ -------------------
Year 1996 $27.375 $22.625 $2.06
- ---------------------------- --------- ------------------ -------------------
As of February 1, 1998, there were approximately 510 shareholders of record.
Certain of the Company's debt agreements limit the payment of dividends such
that dividends shall not exceed FFO, as defined in the agreements, on an annual
basis or 95% of FFO on a cumulative basis. Based on continuing favorable
operations and available funds from operations, the Company intends to continue
to pay regular quarterly dividends.
18
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
- --------------------------------------- ------------- ------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
(In thousands, except per share and center data)
OPERATING DATA
Total revenues $85,271 $75,500 $68,604 $45,988 $29,204
Income before minority interest and
extraordinary item 17,583 16,177 15,352 15,147 8,555
Income before extraordinary
item(1) 12,827 11,752 11,218 11,168 4,574
Net income (1)(3) 12,827 11,191 11,218 11,168 1,898
- --------------------------------------- ------------- ------------- -------------- --------------- --------------
SHARE DATA (2) Basic:
Income before extraordinary item $1.57 $1.46 $1.36 $1.32 $.90
Net income (3) $1.57 $1.37 $1.36 $1.32 $.35
Weighted average common shares 7,028 6,402 6,095 5,177 4,858
Diluted:
Income before extraordinary item $1.54 $1.46 $1.36 $1.31 $.90
Net income (3) $1.54 $1.37 $1.36 $1.31 $.35
Weighted average common shares 7,140 6,408 6,096 5,211 4,869
Common dividends paid $2.17 $2.06 $1.96 $1.80 $.535
- --------------------------------------- ------------- ------------- -------------- --------------- --------------
BALANCE SHEET DATA
Real estate assets, before depreciation $454,708 $358,361 $325,881 $292,406 $137,666
Total assets 416,014 332,138 315,130 294,802 182,396
Long-term debt 229,050 178,004 156,749 121,323 20,316
Shareholders' equity (6) 122,119 101,738 107,560 115,413 121,605
- --------------------------------------- ------------- ------------- -------------- --------------- --------------
OTHER DATA
EBITDA (5) $52,857 $46,633 $41,058 $26,089 $17,519
Funds from operations (4) $35,840 $32,313 $29,597 $23,189 $12,008
Cash flows provided by (used in):
Operating activities $39,214 $38,051 $32,423 $21,304 $11,571
Investing activities $(93,636) $(36,401) $(44,788) $(143,683) $(49,277)
Financing activities $55,444 $(4,176) $13,802 $80,661 $81,324
Gross leasable area open at year end 4,458 3,739 3,507 3,115 1,980
Number of centers 30 27 27 25 19
- -----------------------
</TABLE>
(1) All earnings prior to the initial public offering ("IPO") on June 4, 1993
have been allocated to minority interest. Subsequent to the IPO, earnings
have been allocated to the Company and the minority interest based on their
respective weighted average ownership interests in the Operating
Partnership during the year.
(2) In 1997, the Company adopted SFAS 128, EARNINGS PER SHARE. As a result, the
Company's reported income per common share amounts for prior years have
been restated to conform with the current year presentation.
(3) Pro forma net income and net income per common share, which reflect
adjustments to historical information to present income information as if
the IPO had taken place on January 1, 1993, were $6,551 and $1.31 per basic
and diluted share during 1993.
(4) In 1996, the Company adopted the National Association of Real Estate
Investment Trusts' definition of funds from operations and restated all
prior year amounts. See Management's Discussion and Analysis of Financial
Condition and Results of Operations under the caption "Funds from
Operations" for a complete discussion of funds from operations.
(5) EBITDA represents earnings before minority interest, interest expense,
income taxes, depreciation and amortization. EBITDA is presented because it
is a widely accepted financial indicator used by certain investors and
analysts to analyze and compare companies on the basis of operating
performance. The Company cautions that the calculation of EBITDA may vary
from entity to entity and as such the presentation of EBITDA by the Company
may not be comparable to other similarly titled measures of other reporting
companies. EBITDA is not intended to represent cash flows for the period,
nor has it been presented as an alternative to operating income as an
indicator of operating performance, and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(6) Amounts have been restated to reflect an allocation from paid in capital
to minority interest for their interest in the net assets of the
Company after giving effect for the issuance of Common Shares and the
conversions of Preferred Shares into Common Shares.
19
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements appearing elsewhere in this report. Historical results and
percentage relationships set forth in the consolidated statements of operations,
including trends which might appear, are not necessarily indicative of future
operations.
The discussion of the Company's results of operations reported in the
consolidated statements of operations compares the years ended December 31, 1997
and 1996, as well as December 31, 1996 and 1995. Certain comparisons between the
periods are made on a percentage basis as well as on a weighted average gross
leasable area ("GLA") basis, a technique which adjusts for certain increases or
decreases in the number of centers and corresponding square feet related to the
development, expansion or disposition of rental properties. The computation of
weighted average GLA, however, does not adjust for fluctuations in occupancy
since GLA is not reduced when original occupied space subsequently becomes
vacant.
CAUTIONARY STATEMENTS
Certain statements contained in the discussion below, including, without
limitation, statements containing the words "believes," "anticipates,"
"expects," and words of similar import, constitute "forward-looking statements"
within the meaning of the Private Securities Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
the effects of future events on the Company's financial performance; the risk
that the Company may not be able to finance its planned development, acquisition
and expansion activities; risks related to the retail industry in which the
Company's outlet centers compete, including the potential adverse impact of
external factors such as inflation, tenant demand for space, consumer
confidence, unemployment rates and consumer tastes and preferences; risks
associated with the Company's development, acquisition and expansion activities,
such as the potential for cost overruns, delays and lack of predictability with
respect to the financial returns associated with these development activities;
the risk of potential increase in market interest rates from current rates;
risks associated with real estate ownership, such as the potential adverse
impact of changes in the local economic climate on the revenues and the value of
the Company's properties; and the risks that a significant number of tenants may
become unable to meet their lease obligations or that the Company may be unable
to renew or re-lease a significant amount of available space on economically
favorable terms. Given these uncertainties, current and prospective investors
are cautioned not to place undue reliance on such forward-looking statements.
The Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
GENERAL OVERVIEW
The Company continues to grow principally through acquisitions, new development
and expansions of factory outlet centers. During 1997, the Company acquired
three centers in resort areas totaling 302,554 square feet. Five Oaks Factory
Stores, a factory outlet center in Sevierville, Tennessee, was acquired in
February 1997 at a purchase price of $18 million. Shoppes on the Parkway, a
factory outlet center in Blowing Rock, North Carolina, and Soundings Factory
Stores, a factory outlet center in Nags Head, North Carolina, were acquired in
September 1997 for an aggregate purchase price of $19.5 million.
In addition, the Company has completed, or has under construction to be
completed by the end of the first quarter of 1998, the expansion of five
existing centers totaling 538,979 square feet. During 1996, the Company
completed six expansions totaling 181,142 square feet. A summary of the 1997
acquired centers and expansions is recapped below:
20
<PAGE>
1997 DEVELOPMENT Aggregate Open at
- ---------------- Size 12/31/97
(sq. ft.) (sq. ft.)
------------- --------------
ACQUISITIONS
Sevierville, TN 122,684 122,684
Blowing Rock, NC 97,408 97,408
Nags Head, NC 82,462 82,462
------------- --------------
302,554 302,554
------------- --------------
EXPANSIONS
Riverhead, NY 345,164 284,745
Commerce, GA 94,247 58,455
Sevierville, TN 50,357 25,060
Lancaster, PA 26,111 23,434
San Marcos, TX 23,100 11,000
------------- --------------
538,979 402,694
------------- --------------
841,533 705,248
============= ==============
A summary of the operating results for the years ended December 31, 1997, 1996
and 1995 is presented in the following table, expressed in amounts calculated on
a weighted average GLA basis.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1997 1996 1995
----------- ---------------- ----------------
<S> <C> <C> <C>
GLA open at end of period (000's) 4,458 3,739 3,507
Weighted average GLA (000's) (1) 4,046 3,642 3,292
Outlet centers in operation 30 27 27
New centers opened --- --- 2
New centers acquired 3 --- ---
Centers expanded 5 6 4
States operated in at end of period 23 22 22
PER SQUARE FOOT
---------------
Revenues
Base rentals $14.04 $13.89 $13.92
Percentage rentals .65 .55 .63
Expense reimbursements 6.10 6.04 6.05
Other income .29 .25 .24
-------- ---------------- ----------------
Total revenues 21.08 20.73 20.84
-------- ---------------- ----------------
Expenses
Property operating 6.49 6.47 6.83
General and administrative 1.52 1.50 1.54
Interest 4.16 3.84 3.44
Depreciation and amortization 4.56 4.52 4.37
-------- ---------------- ----------------
Total expenses 16.73 16.33 16.18
-------- ---------------- ----------------
Income before gain on sale of land, minority interest and
extraordinary item $4.35 $4.40 $4.66
=========== ================ =============
</TABLE>
(1) GLA WEIGHTED BY MONTHS OF OPERATIONS.
21
<PAGE>
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
Base rentals increased $6.2 million, or 12%, in 1997 when compared to the same
period in 1996 primarily as a result of the 11% increase in weighted average
GLA. Base rent increased approximately $1.5 million due to the effect of a full
year's operation of expansions completed in 1996 and approximately $4.8 million
for new or acquired leases added during 1997.
Percentage rentals increased $620,000, or $.10 per square foot, in 1997 compared
to 1996. The increase is primarily attributable to leases acquired during 1997,
leases added in 1996 completing their first full year of operation in 1997 and
due to increases in tenant sales. Same store sales, defined as weighed average
sales per square foot reported for tenant stores open all of 1997 and 1996,
increased approximately 2.3% to $241 per square foot.
Expense reimbursements, which represent the contractual recovery from tenants of
certain common area maintenance, insurance, property tax, promotional and
advertising and management expenses generally fluctuates consistently with the
reimbursable property operating expenses to which it relates. Expense
reimbursements, expressed as a percentage of property operating expenses,
increased from 93% in the 1996 period to 94% in the 1997 period due primarily to
a reduction in nonreimbursable property operating expenses.
Property operating expenses increased by $2.7 million, or 11%, in 1997 as
compared to the 1996 period. On a weighted average GLA basis, property operating
expenses increased to $6.49 from $6.47 per square foot. Slightly lower
promotional, real estate taxes, and insurance expenses per square foot incurred
in the 1997 period compared to the 1996 period were offset by higher common area
maintenance expenses per square foot due to additional customer service
amenities, such as trolleys, customer service counters and security and as
result of expanding the Riverhead Center which has a cost per foot higher than
the portfolio average.
General and administrative expenses increased $678,000 in 1997 as compared to
1996. As a percentage of revenues, general and administrative expenses remained
level at 7.2% in each year. On a weighted average GLA basis, general and
administrative expenses increased $.02 to $1.52 in 1997.
Interest expense increased $2.8 million during the 1997 period as compared to
the 1996 period due to higher average borrowings outstanding during the period.
Average borrowings increased principally to finance the first quarter
acquisition of Five Oaks Factory Stores (see "Overview" above) and expansions to
existing centers until the Company was able to issue additional equity in
October 1997. Depreciation and amortization per weighted average GLA increased
from $4.52 per square foot to $4.56 per square foot. The increase reflects the
effect of accelerating the recognition of depreciation expense on certain tenant
finishing allowances related to vacant space.
The extraordinary item in the 1996 period represents a write-off of the
unamortized deferred financing costs related to the lines of credit which were
extinguished using the proceeds from the Company's $75 million senior unsecured
notes issued in March 1996.
1996 COMPARED TO 1995
Base rentals increased $4.8 million, or 10%, for the year ended December 31,
1996 when compared to the same period in 1995 primarily as a result of a 11%
increase in weighted average GLA. Base rentals per weighted average GLA
decreased less than 1% from $13.92 per square foot to $13.89 per square foot
reflecting a slightly lower average occupancy rate during 1996 compared to 1995.
The increase in base rents in 1996 consists of $1.1 million associated with
leases added during 1996 and $3.7 million related to the effect of a full year's
operation of centers opened in 1995.
Percentage rentals decreased $51,000, or 2%, in 1996 compared to 1995 and
percentage rentals per weighted average GLA declined $.08 per square foot, or
13%, as a result of the dilutive effect of the increase in additional square
footage associated with the expansions since tenant sales at centers in their
first year of operation often do not reach the level on which percentage rentals
are required (the "breakpoint"). The decrease is also a result of escalating
breakpoints in certain leases renewing at existing centers without comparable
increases in sales. Tenant sales per square foot for centers which were opened
all of 1996 and 1995 increased 2% to approximately $226 per square foot.
22
<PAGE>
Expense reimbursements, which represent the contractual recovery from tenants of
certain common area maintenance, operating, property tax, promotional and
management expenses, increased $2.1 million during 1996 as compared to the same
period in 1995 due principally to the related increase in reimbursable operating
and maintenance expenses associated with the growth in GLA. Expense
reimbursements expressed as a percent of property operating expenses were 93% in
the 1996 period compared to 89% in the 1995 period due to certain contractual
increases and reductions in nonrecoverable operating and maintenance expenses.
Property operating expenses increased by $1.1 million, or 5%, in 1996 as
compared to 1995. On a weighted average GLA basis, property operating expenses
decreased from $6.83 per square foot to $6.47 per square foot primarily due to a
reduction in advertising and promotion expenses reflecting the Company's use of
cost efficient means in advertising and promoting its centers. The decrease was
partially offset by increases in real estate taxes as a result of reassessments
of recently completed properties, particularly the property in Riverhead, NY.
General and administrative expenses decreased 3% on a weighted average GLA basis
to $1.50 for the year ended 1996. General and administrative expenses as a
percent of revenues decreased 3% to 7.2% in 1996 compared to 7.4% in 1995.
Aggregate interest expense increased $2.7 million and $.40 per weighted average
GLA during 1996 period as compared to 1995. The increase is due to higher
average borrowings outstanding during the period associated with the growth in
GLA and due to a higher average interest rate under the senior unsecured notes
issued in March 1996 when compared with the short term lines of credit
previously utilized. Depreciation and amortization per weighted average GLA
increased 3% from $4.37 per square foot to $4.52 per square foot primarily due
to increases in tenant finishing allowances included in building and
improvements which are depreciated over shorter lives and the accelerated
depreciation of certain tenant finishing allowances related to tenants who
vacated or terminated their lease prior to the expiration of the lease term.
The extraordinary item represents the write off of previously deferred financing
costs of $831,000 in connection with the early retirement of debt with the
proceeds from the senior unsecured notes issued in March 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $39.2, $38.1, and $32.4 million
for the years ended December 31, 1997, 1996 and 1995, respectively. The
increases for all three years were primarily due to the incremental operating
income associated with acquired or developed centers. Net cash used in investing
activities amounted to $93.6, $36.4, and $44.8 million during 1997, 1996 and
1995, respectively, and reflects the levels of development and acquisition
activity over the past three years (841,533 square feet developed or acquired in
1997, 181,142 square feet in 1996, 392,312 square feet in 1995). Cash provided
by (used in) financing activities of $55.4, $(4.2) and $13.8 million in 1997,
1996 and 1995, respectively, and has fluctuated consistently with the capital
needed to fund the current development and acquisition activity. In 1997, the
significant increase was due to the equity offering ($29 million) and additional
debt to fund acquisitions and expansions.
Management believes, based upon its discussions with present and prospective
tenants, that many tenants, including prospective tenants new to the factory
outlet business, desire to open a number of new factory outlet stores in the
next several years, particularly where there are successful factory outlet
centers in which such tenants do not have a significant presence or where there
are few factory outlet centers. During 1997, the Company acquired three centers
totaling 302,554 square feet and completed, or has under construction to be
completed by the end of the first quarter of 1998, the expansion of five
existing centers totaling 538,879 square feet. (See "General Overview").
Commitments for construction of these projects (which represent only those costs
contractually required to be paid by the Company) amounted to $862,000 at
December 31, 1997.
The Company also is in the process of developing plans for additional expansions
and new centers for completion in 1998 and beyond. Currently, the Company is in
the preleasing stages for future centers at two potential sites located in
Concord, North Carolina (Charlotte) and Romulus, Michigan (Detroit) and for
further expansions of four existing Centers. However, there can be no assurance
that any of these anticipated or planned developments or expansions will be
started or completed as scheduled, or that any development or expansion will
result in accretive funds from operations. In addition, the Company regularly
evaluates acquisition proposals, engages from time to time in negotiations for
acquisitions and may from time to time enter into letters of intent for the
purchase of properties. No assurance can be given that any of the prospective
acquisitions that are being evaluated or which are subject to a letter of intent
will be consummated, or if consummated, will result in accretive funds from
operations.
23
<PAGE>
Management intends to continually have access to the capital resources necessary
to expand and develop its business and, accordingly, may seek to obtain
additional funds through equity offerings or debt financing. During September
and October 1997, the Company completed a public offering of 1,080,000 Common
Shares at a price of $29.0625 per share, receiving net proceeds of approximately
$29.2 million. The net proceeds were used to acquire, expand and develop factory
outlet centers and for general corporate purposes. On October 24, the Operating
Partnership issued $75 million of 7.875% senior, unsecured notes, maturing
October 24, 2004. The net proceeds were used to repay substantially all amounts
outstanding under the Company's existing lines of credit. On November 3, 1997,
the Company and the Operating Partnership filed a new registration statement
with the SEC to provide, under shelf registration statements, for the issuance
of up to $100 million in additional equity securities and $100 million in
additional debt securities.
In anticipation of the offering of the senior, unsecured notes, the Company
entered into an interest rate protection agreement on October 3, 1997, which
fixed the index on the 10 year US Treasury rate at 5.995% for 30 days on a
notional amount of $70 million. The transaction settled on October 21, 1997, the
trade date of the $75 million offering, and, as a result of an increase in the
US Treasury rate, the Company received $714,000 in proceeds. Such amount is
being amortized as a reduction to interest expense over the life of the notes
and will result in an overall effective interest rate on the notes of 7.75%.
At December 31, 1997, the Company had revolving lines of credit with a borrowing
capacity of up to $125 million, of which $120 million was available for
additional borrowings. Based on the $5 million in variable rate debt outstanding
at December 31, 1997, the Company had an insignificant amount of exposure to
interest rate risk at year end. Also, with additional unsecured borrowings
during the year, the Company has effectively unencumbered approximately 64% of
its real estate assets as of December 31, 1997. In February 1998, the Company
amended two of its revolving lines to increase amounts available by $20 million,
bringing the total borrowing capacity under the lines to $145 million. Based on
existing credit facilities, ongoing negotiations with certain financial
institutions and funds available under the shelf registration statements,
management believes that the Company has access to the necessary financing to
fund the planned capital expenditures during 1998.
The Company anticipates that adequate cash will be available to fund its
operating and administrative expenses, regular debt service obligations, and the
payment of dividends in accordance with REIT requirements in both the short and
long term. Although the Company receives most of its rental payments on a
monthly basis, distributions are made quarterly. Amounts accumulated for
distribution are invested in short-term money market or other suitable
instruments. Certain of the Company's debt agreements limit the payment of
dividends such that dividends will not exceed funds from operations ("FFO"), as
defined in the agreements, on an annual basis or 95% of FFO on a cumulative
basis from the date of the agreement.
NEW ACCOUNTING PRONOUNCEMENTS
In 1997, the Company adopted the Financial Accounting Standards Board's, SFAS
No. 128, EARNINGS PER SHARE, effective for fiscal periods ending after December
15, 1997. The new standard simplifies the computation of earnings per share by
replacing primary earnings per share with basic earnings per share. Basic
earnings per share does not include the effect of any potentially dilutive
securities, as under the previous accounting standard, and is computed by
dividing reported income available to common shareholders by the weighted
average common shares outstanding during the period. Fully diluted earnings per
share is now called diluted earnings per share and reflects the dilution of all
potentially dilutive securities. In adopting the standard, Companies are
required to restate all prior period earnings per share data. The adoption of
this standard by the Company had no impact on the historical reported earnings
per share amounts in 1996 and 1995 as the effect of potentially dilutive
securities were immaterial.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, "
Disclosures about Segments of an Enterprise and Related Information." SFAS No.
131 requires public business enterprises to adopt its provisions for periods
beginning after December 15, 1997, and to report certain information about
operating segments in complete sets of financial statements of the enterprise
and in condensed financial statements of interim periods issued to shareholders.
The Company is evaluating the provisions of SFAS No. 131, but has not yet
determined if additional disclosures will be required.
FUNDS FROM OPERATIONS
Management believes that to facilitate a clear understanding of the consolidated
historical operating results of the Company, FFO should be considered in
conjunction with net income as presented in the audited consolidated financial
24
<PAGE>
statements included elsewhere in this report. FFO is presented because it is a
widely accepted financial indicator used by certain investors and analysts to
analyze and compare one equity real estate investment trust ("REIT") with
another on the basis of operating performance. FFO is generally defined as net
income (loss), computed in accordance with generally accepted accounting
principles, before extraordinary items and gains (losses) on sale of properties,
plus depreciation and amortization uniquely significant to real estate. The
Company cautions that the calculation of FFO may vary from entity to entity and
as such the presentation of FFO by the Company may not be comparable to other
similarly titled measures of other reporting companies. FFO does not represent
net income or cash flow from operations as defined by generally accepted
accounting principles and should not be considered an alternative to net income
as an indication of operating performance or to cash from operations as a
measure of liquidity. FFO is not necessarily indicative of cash flows available
to fund dividends to shareholders and other cash needs.
Below is a calculation of funds from operations for the years ended December 31,
1997, 1996 and 1995 as well as actual cash flow and other data for those
respective years:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ----------------- ----------------
<S> <C> <C> <C>
(IN THOUSANDS)
FUNDS FROM OPERATIONS:
Income before gain on sale of land, minority interest
and extraordinary item $17,583 $16,018 $15,352
Adjusted for depreciation and amortization uniquely
significant to real estate 18,257 16,295 14,245
----------------- ----------------- ----------------
Funds from operations before minority interest $35,840 $32,313 $29,597
================= ================= ================
CASH FLOWS PROVIDED BY (USED IN):
Operating activities $39,214 $38,051 $32,423
Investing activities $(93,636) $(36,401) $(44,788)
Financing activities $55,444 $(4,176) $13,802
WEIGHTED AVERAGE SHARES OUTSTANDING (1) 11,000 10,601 10,596
================= ================= ================
</TABLE>
(1) ASSUMES THE PARTNERSHIP UNITS OF THE OPERATING PARTNERSHIP HELD BY THE
MINORITY INTEREST, PREFERRED SHARES OF THE COMPANY AND STOCK AND UNIT OPTIONS
ARE CONVERTED TO COMMON SHARES OF THE COMPANY.
ECONOMIC CONDITIONS AND OUTLOOK
Substantially all of the Company's leases contain provisions designed to
mitigate the impact of inflation. Such provisions include clauses for the
escalation of base rent and clauses enabling the Company to receive percentage
rentals based on tenants' gross sales (above predetermined levels, which the
Company believes often are lower than traditional retail industry standards)
which generally increase as prices rise. Most of the leases require the tenant
to pay their share of property operating expenses, including common area
maintenance, real estate taxes, insurance and advertising and promotion, thereby
reducing exposure to increases in costs and operating expenses resulting from
inflation.
Approximately 306,000 square feet of space is up for renewal during 1998 and
approximately 695,000 square feet will come up for renewal in 1999. In addition,
as typical in the retail industry, certain tenants have closed, or will close,
certain stores by terminating their lease prior to its natural expiration or as
a result of filing for protection under bankruptcy laws. Also, management may
grant, from time to time, a tenant's request for reduction in rent to remain in
operation. There can be no assurance that any tenant whose lease expires will
renew such lease or that renewals or terminated leases will be released on
economically favorable terms.
The Company's portfolio is currently 96% leased. Existing tenants' sales have
remained stable and renewals by existing tenants have remained strong. In
addition, the Company has continued to attract and retain additional tenants.
The Company's factory outlet centers typically include well known, national,
brand name companies. By maintaining a broad base of credit tenants and a
geographically diverse portfolio of properties located across the United States,
the Company reduces its operating and leasing risks. No one tenant (including
affiliates) accounts for more than 10% of the Company's combined base and
percentage rental revenues. Accordingly, management currently does not expect
any material adverse impact on the Company's results of operation and financial
condition as a result of leases to be renewed or stores to be released.
25
<PAGE>
The Company has evaluated its computer systems and applications for potential
software failures as a result of recognizing the year 2000 and beyond. Most of
the systems are compliant with the year 2000, or will be with normal upgrades
currently available to the Company. Therefore, the Company believes the costs to
bring the remaining systems and applications in compliance will be
insignificant.
CONTINGENCIES
There are no recorded amounts resulting from environmental liabilities as there
are no known material loss contingencies with respect thereto. Future claims for
environmental liabilities are not measurable given the uncertainties surrounding
whether there exists a basis for any such claims to be asserted and, if so,
whether any claims will, in fact, be asserted. Furthermore, no condition is
known to exist that would give rise to a material environmental liability for
site restoration, post-closure and monitoring commitments, or other costs that
may be incurred upon the sale or disposal of a property. Management has no plans
to abandon any of the properties and is unaware of any other material loss
contingencies.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is set forth at the pages indicated in
Item 14(a) below.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
Certain information required by Part III is omitted from this Report in that the
registrant will file a definitive proxy statement pursuant to Regulation 14A
(the "Proxy Statement") not later than 120 days after the end of the fiscal year
covered by this Report, and certain information included therein is incorporated
herein by reference. Only those sections of the Proxy Statement which
specifically address the items set forth herein are incorporated by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Company' directors required by this Item is
incorporated by reference to the Company's Proxy Statement.
The information concerning the Company's executive officers required by this
Item is incorporated by reference herein to the section in Part I, Item 4,
entitled "Executive Officers of the Registrant".
The information regarding compliance with Section 16 of the Securities and
Exchange Act of 1934 is to be set forth in the Proxy Statement and is hereby
incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
26
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
(A) DOCUMENTS FILED AS A PART OF THIS REPORT:
1. Financial Statements
Report of Independent Accountants F-1
Consolidated Balance Sheets-December 31, 1997 and 1996 F-2
Consolidated Statements of Operations-
Years Ended December 31, 1997, 1996 and 1995 F-3
Consolidated Statements of Shareholders' Equity-
For the Years Ended December 31, 1997, 1996 and 1995 F-4
Consolidated Statements of Cash Flows-
Years Ended December 31, 1997, 1996 and 1995 F-5
Notes to Consolidated Financial Statements F-6 to F-14
2. Financial Statement Schedule
Schedule III
Report of Independent Accountants F-15
Real Estate and Accumulated Depreciation F-16 to F-18
All other schedules have been omitted because of the absence of
conditions under which they are required or because the required
information is given in the above-listed financial statements or notes
thereto.
3. Exhibits
Exhibit No. Description
----------- -----------
<TABLE>
<CAPTION>
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company. (Note 10)
3.1A Amendment to Articles of Incorporation dated May 29, 1996. (Note 10)
3.2 Amended and Restated By-Laws of the Company. (Note 1)
3.3 Amended and Restated Agreement of Limited Partnership for the Operating Partnership. (Note 1)
4.1 Form of Deposit Agreement, by and between the Company and the
Depositary, including Form of Depositary Receipt. (Note 1)
4.2 Form of Preferred Stock Certificate. (Note 1)
10.1 Unit Option Plan of the Company. (Note 2)
10.1A First Amendment to the Unit Option Plan. (Note 1)
10.1B Second Amendment to the Unit Option Plan. (Note 6)
10.1C Third Amendment to the Unit Option Plan. (Note 10)
10.1D Fourth Amendment to the Unit Option Plan.
10.2 Stock Option Plan of the Company. (Note 2)
10.2A First Amendment to the Stock Option Plan. (Note 1)
27
<PAGE>
10.2B Second Amendment to the Stock Option Plan. (Note 6)
10.2C Third Amendment to the Stock Option Plan. (Note 10).
10.2D Fourth Amendment to the Stock Option Plan.
10.3 Form of Stock Option Agreement between the Company and certain Directors. (Note 3)
10.4 Form of Unit Option Agreement between the Operating Partnership and certain employees. (Note 3)
10.5 Amended and Restated Employment Agreement for Stanley K. Tanger. (Note 10)
10.6 Amended and Restated Employment Agreement for Steven B. Tanger. (Note 10)
10.7 Amended and Restated Employment Agreement for Willard Chafin. (Note 10)
10.8 Amended and Restated Employment Agreement for Rochelle Simpson. (Note 10)
10.9 Employment Agreement for Joseph H. Nehmen. (Note 10)
10.10 Registration Rights Agreement among the Company, the Tanger Family Limited Partnership and Stanley
K. Tanger. (Note 2)
10.10A Amendment to Registration Rights Agreement among the Company, the Tanger Family Limited Partnership
and Stanley K. Tanger. (Note 6)
10.11 Agreement Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. (Note 2)
10.12 Assignment and Assumption Agreement among Stanley K. Tanger,
Stanley K. Tanger & Company, the Tanger Family Limited
Partnership, the Operating Partnership and the Company. (Note 2)
10.13 Promissory Notes by and between the Operating Partnership and John
Hancock Mutual Life Insurance Company aggregating $50,000,000,
dated as of December 13, 1994. (Note 4)
10.14 Promissory Note and Mortgage, Assignment of Leases and Rents, and
Security Agreement by and between the Operating Partnership and
New York Life Insurance Company, dated as of March 28, 1995. (Note
5)
10.15 Credit Agreement among Tanger Properties Limited Partnership, Tanger Factory Outlet Centers, Inc. and
National Westminister Bank, Plc dated January 15, 1996. (Note 7)
10.15A Amendment No. 1 to Credit Agreement among Tanger Properties Limited Partnership, Tanger Factory
Outlet Centers, Inc. and National Westminister Bank, Plc dated February 20, 1996. (Note 9)
10.15B Amendment No. 2 to Credit Agreement among Tanger Properties Limited Partnership, Tanger Factory
Outlet Centers, Inc. and National Westminister Bank, Plc dated May 31, 1996. (Note 10)
10.16 Form of Senior Indenture. (Note 8)
10.17 Form of First Supplemental Indenture (to Senior Indenture). (Note 8)
10.17A Form of Second Supplemental Indenture (to Senior Indenture) dated October 24, 1997 among Tanger
Propeties Limited Partnership, Tanger Factory Outlet Centers, Inc. and State Street Bank & Trust
Company. (Note 11)
10.18 Loan Agreement dated as of October 14, 1996 between Tanger Properties Limited Partnership and First
National Bank of Commerce. (Note 10)
28
<PAGE>
10.18A First Amendment to Loan Agreement between Tanger Properties
Limited Partnership and First National Bank of Commerce dated as
of August 13, 1997.
10.19 Loan Agreement dated as of November 18, 1996 between Tanger Properties Limited Partnership and
Southtrust Bank of Alabama, National Association. (Note 10)
10.19A First Amendment to Loan Agreement between Tanger Properties
Limited Partnership and Southtrust Bank of Alabama, National
Association dated as of May 22, 1997.
10.20 Revolving Credit Agreement dated as of December 18, 1997 between Tanger Properties Limited
Partnership and Fleet National Bank.
21.1 List of Subsidiaries. (Note 2)
23.1 Consent of Coopers & Lybrand L.L.P.
</TABLE>
Notes to Exhibits:
1. Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-11 filed October 6, 1993, as amended.
2. Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-11 filed May 27, 1993, as amended.
3. Incorporated by reference to the exhibits to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.
4. Incorporated by reference to the exhibits to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994
5. Incorporated by reference to the exhibits to the Company's Quarterly
Report of Form 10-Q for the period ended March 31, 1995..
6. Incorporated by reference to the exhibits to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
7. Incorporated by reference to the exhibits to the Company's Current
Report on Form 8-K dated January 23, 1996.
8. Incorporated by reference to the exhibits to the Company's Current
Report on Form 8-K dated March 6, 1996.
9. Incorporated by reference to the exhibits to the Company's Quarterly
Report of Form 10-Q for the period ended March 31, 1996.
10. Incorporated by reference to the exhibits to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
11. Incorporated by reference to the exhibits to the Company's Current
Report on Form 8-K dated October 24, 1997.
(B) REPORTS ON FORM 8-K - The Company filed the following reports on Form 8-K
during the quarter ended December 31, 1997:
The Company filed a Current Report on Form 8-K dated September 12, 1997 to
file the Consent of Coopers & Lybrand L.L.P, independent public
accountants, as an exhibit to a prospectus filed in September 1997.
The Company filed a Current Report on Form 8-K dated September 24, 1997 to
file a supplemental indenture agreement related to the issuance of $75
million in 7.875% senior unsecured notes.
The Company filed a Current Report on Form 8-K dated September 30, 1997 to
file financial statements and related schedules related to the acquisition
of Five Oaks Factory Stores, a factory outlet center in Sevierville,
Tennessee; Shoppes on the Parkway, a factory outlet center in Blowing Rock,
North Carolina; and Soundings Factory Stores, a factory outlet center in
Nags Head, North Carolina.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TANGER FACTORY OUTLET CENTERS, INC.
By: /s/ Stanley K. Tanger
---------------------------
Stanley K. Tanger
Chairman of the Board and
Chief Executive Officer
March 23, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stanley K. Tanger Chairman of the Board and March 23, 1998
- --------------------- Chief Executive Officer
Stanley K. Tanger (Principal Executive Officer)
/s/ Steven B. Tanger Director, President and March 23, 1998
- -------------------- Chief Operating Officer
Steven B. Tanger
/s/ Frank C. Marchisello, Jr. Vice President and March 23, 1998
- ----------------------------- Chief Financial Officer
Frank C. Marchisello, Jr. (Principal Financial and
Accounting Officer)
/s/ Jack Africk Director March 23, 1998
- ---------------
Jack Africk
/s/ William G. Benton Director March 23, 1998
- ---------------------
William G. Benton
/s/ Thomas E. Robinson Director March 23, 1998
- ----------------------
Thomas E. Robinson
</TABLE>
30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY:
We have audited the accompanying consolidated balance sheets of Tanger Factory
Outlet Centers, Inc. and Subsidiary as of December 31, 1997 and 1996, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Tanger Factory
Outlet Centers, Inc. and Subsidiary as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
As described in Note 2, the accompanying financial statements have been
restated.
COOPERS & LYBRAND L.L.P.
Greensboro, NC
January 19, 1998
F-1
<PAGE>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
------------- -----------------
<S> <C> <C>
ASSETS
Rental property
Land $48,059 $43,339
Buildings, improvements and fixtures 379,842 299,534
Developments under construction 26,807 15,488
------------- -----------------
454,708 358,361
Accumulated depreciation (64,177) (46,907)
------------- -----------------
Rental property, net 390,531 311,454
Cash and cash equivalents 3,607 2,585
Deferred charges, net 8,651 7,846
Other assets 13,225 10,253
------------- -----------------
TOTAL ASSETS $416,014 $332,138
============= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Long-term debt
Senior, unsecured notes $150,000 $75,000
Mortgages payable 74,050 75,204
Lines of credit 5,000 27,800
------------- -----------------
229,050 178,004
Construction trade payables 12,913 8,320
Accounts payable and accrued expenses 13,526 9,558
------------- -----------------
TOTAL LIABILITIES 255,489 195,882
------------- -----------------
Commitments
Minority interest 38,406 34,518
------------- -----------------
SHAREHOLDERS' EQUITY
Preferred shares, $.01 par value, 1,000,000 shares authorized, 90,689 and
106,419 shares issued and outstanding at December 31, 1997 and 1996 1 1
Common shares, $.01 par value, 50,000,000 shares authorized, 7,853,936 and
6,602,510 shares issued and outstanding at December 31, 1997 and 1996 78 66
Paid in capital 137,020 112,465
Distributions in excess of net income (14,980) (10,794)
------------- -----------------
TOTAL SHAREHOLDERS' EQUITY 122,119 101,738
------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $416,014 $332,138
============= =================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-2
<PAGE>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES
Base rentals $56,807 $50,596 $45,818
Percentage rentals 2,637 2,017 2,068
Expense reimbursements 24,665 21,991 19,913
Other income 1,162 896 805
------------- ------------- -------------
Total revenues 85,271 75,500 68,604
------------- ------------- -------------
EXPENSES
Property operating 26,269 23,559 22,467
General and administrative 6,145 5,467 5,079
Interest 16,835 13,998 11,337
Depreciation and amortization 18,439 16,458 14,369
------------- ------------- -------------
Total expenses 67,688 59,482 53,252
------------- ------------- -------------
INCOME BEFORE GAIN ON SALE OF LAND, MINORITY INTEREST
AND EXTRAORDINARY ITEM 17,583 16,018 15,352
Gain on sale of land --- 159 ---
------------- ------------- -------------
INCOME BEFORE MINORITY INTEREST AND EXTRAORDINARY ITEM 17,583 16,177 15,352
Minority interest (4,756) (4,425) (4,134)
------------- ------------- -------------
INCOME BEFORE EXTRAORDINARY ITEM 12,827 11,752 11,218
Extraordinary item - Loss on early extinguishment of debt, net of
minority interest of $270 --- (561) ---
------------- ------------- -------------
NET INCOME $12,827 $11,191 $11,218
============= ============= =============
BASIC EARNINGS PER COMMON SHARE:
Income before extraordinary item $1.57 $1.46 $1.36
Extraordinary item --- (.09) ---
------------- ------------- -------------
Net income $1.57 $1.37 $1.36
============= ============= =============
DILUTED EARNINGS PER COMMON SHARE:
Income before extraordinary item $1.54 $1.46 $1.36
Extraordinary item --- (.09) ---
------------- ------------- -------------
Net income $1.54 $1.37 $1.36
============= ============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-3
<PAGE>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands, except share data)
<TABLE>
<CAPTION>
Distributions Total
Preferred Common Paid in in Excess of Shareholders'
Shares Shares Capital Net Income Equity
---------- ------------ ------------ ------------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994,
as previously reported $2 $55 $120,927 $(2,807) $118,177
Adjustment for minority interest in
the Operating Partnership -- -- (2,764) -- (2,764)
---------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 2 55 118,163 (2,807) 115,413
Conversion of 87,960 preferred
shares into 792,506 common shares (l) 8 (7) --- ---
Issuance of 600 common shares upon
exercise of unit options --- --- 14 --- 14
Compensation under Unit Option Plan --- --- 224 --- 224
Adjustment for minority interest in the
Operating Partnership --- --- (4,489) --- (4,489)
Net income --- --- --- 11,218 11,218
Preferred dividends ($17.66 per share) --- --- --- (2,944) (2,944)
Common dividends ($1.96 per share) --- --- --- (11,876) (11,876)
---------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 1 63 113,905 (6,409) 107,560
Conversion of 35,065 preferred shares
into 315,929 common shares --- 3 (3) --- ---
Compensation under Unit Option Plan --- --- 229 --- 229
Adjustment for minority interest in the
Operating Partnership --- --- (1,666) --- (1,666)
Net income --- --- --- 11,191 11,191
Preferred dividends ($18.56 per share) --- --- --- (2,416) (2,416)
Common dividends ($2.06 per share) --- --- --- (13,160) (13,160)
---------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 1 66 112,465 (10,794) 101,738
Conversion of 15,730 preferred shares
into 141,726 common shares --- 1 (1) --- ---
Issuance of 29,700 common shares upon
exercise of unit options --- --- 703 --- 703
Issuance of 1,080,000 common shares,
net of issuance costs --- 11 29,230 --- 29,241
Compensation under Unit Option Plan --- --- 234 --- 234
Adjustment for minority interest in the
operating partnership --- --- (5,611) --- (5,611)
Net income --- --- --- 12,827 12,827
Preferred dividends ($19.55 per share) --- --- --- (1,789) (1,789)
Common dividends ($2.17 per share) --- --- --- (15,224) (15,224)
---------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 $1 $78 $137,020 $(14,980) $122,119
========== ============ ============ ============= ================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
<PAGE>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $12,827 $11,191 $11,218
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 18,439 16,458 14,369
Amortization of deferred financing costs 1,094 953 955
Minority interest 4,756 4,155 4,134
Loss on early extinguishment of debt --- 831 ---
Gain on sale of land --- (159) ---
Straight-line base rent adjustment (347) (1,192) (1,316)
Compensation under Unit Option Plan 338 338 334
Increase (decrease) due to changes in:
Other assets (1,861) 597 2,431
Accounts payable and accrued expenses 3,968 4,879 298
------------- ------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 39,214 38,051 32,423
------------- ------------- -------------
INVESTING ACTIVITIES
Additions to rental properties (92,295) (35,408) (43,758)
Additions to deferred lease costs (1,341) (1,167) (1,030)
Proceeds from sale of land --- 174 ---
------------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (93,636) (36,401) (44,788)
------------- ------------- -------------
FINANCING ACTIVITIES
Net proceeds from issuance of common shares 29,241 --- ---
Cash dividends paid (17,013) (15,576) (14,820)
Distributions to minority interest (6,583) (6,249) (5,945)
Proceeds from notes payable 75,000 75,000 16,250
Repayments on notes payable (1,154) (1,019) (949)
Proceeds from revolving lines of credit 118,450 70,301 113,555
Repayments on revolving lines of credit (141,250) (123,027) (93,430)
Additions to deferred financing costs (1,950) (3,606) (873)
Proceeds from exercise of unit options 703 --- 14
------------- ------------- -------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 55,444 (4,176) 13,802
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents 1,022 (2,526) 1,437
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,585 5,111 3,674
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $3,607 $2,585 $5,111
============= ============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
1. Organization and Formation of the Company
Tanger Factory Outlet Centers, Inc. (the "Company"), a fully-integrated,
self-administered, self-managed real estate investment trust ("REIT"), develops,
owns and operates factory outlet centers. Recognized as one of the largest
owners and operators of factory outlet centers in the United States, the Company
owned and operated 30 factory outlet centers (the "Properties") located in 23
states with a total gross leasable area of approximately 4.6 million square feet
at the end of 1997. The Company provides all development, leasing and management
services for its centers.
The factory outlet centers and other assets of the Company's business are held
by, and all of its operations are conducted by, the Company's majority owned
subsidiary, Tanger Properties Limited Partnership (the "Operating Partnership").
The Company is the sole general partner of the Operating Partnership and the
Tanger Family Limited Partnership ("TFLP") is the sole limited partner. Stanley
K. Tanger, the Company's Chairman of the Board and Chief Executive Officer, is
the general partner of TFLP.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The Company, as sole general partner,
consolidates the Operating Partnership for financial reporting purposes. All
significant intercompany balances and transactions have been eliminated in
consolidation.
MINORITY INTEREST - Minority interest reflects the limited partner's
percentage ownership of Operating Partnership Units (the "Units") . Allocation
of net income to the limited partner is based its respective ownership interest
(See Note 6).
RESTATEMENT - The accompanying consolidated financial position and
statements of shareholders' equity have been restated to reflect an allocation
from paid in capital to minority interest for their interest in the net assets
of the Company after giving effect for the issuance of Common Shares and the
conversions of Preferred Shares into Common Shares. This reallocation had no
effect on net income or earnings per share of the Company or allocations of
net income to the General and Limited Partners of the Operating Partnership.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The more significant estimates include reserves for uncollectible receivables
and reserves for potentially unsuccessful pre-construction costs.
RENTAL PROPERTIES - Rental properties are recorded at cost less accumulated
depreciation. Costs incurred for the acquisition, construction, and development
of properties are capitalized. Depreciation is computed on the straight-line
basis over the estimated useful lives of the assets. The Company generally uses
estimated lives ranging from 25 to 33 years for buildings, 15 years for land
improvements and seven years for equipment. Expenditures for ordinary
maintenance and repairs are charged to operations as incurred while significant
renovations and improvements, including tenant finishing allowances, that
improve and/or extend the useful life of the asset are capitalized and
depreciated over their estimated useful life.
Buildings, improvements and fixtures consist primarily of permanent
buildings and improvements made to land such as landscaping and infrastructure
and costs incurred in providing rental space to tenants. Interest costs
capitalized during 1997, 1996 and 1995 amounted to $1,877, $1,044, and $580, and
development costs capitalized amounted to $1,637, $1,321 and $1,253,
respectively. Depreciation expense for each of the years ended December 31,
1997, 1996 and 1995 was $17,327, $15,449 and $13,451, respectively.
The pre-construction stage of project development involves certain costs to
secure land control and zoning and complete other initial tasks essential to the
development of the project. These costs are transferred from other assets to
developments under construction when the pre-construction tasks are completed.
Costs of potentially unsuccessful pre-construction efforts are charged to
operations.
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS - All highly liquid investments with an original
maturity of three months or less at the date of purchase are considered to be
cash and cash equivalents. Cash balances at a limited number of banks may
periodically exceed insurable amounts. The Company believes that it mitigates
its risk by investing in or through major financial institutions. Recoverability
of investments is dependent upon the performance of the issuer.
DEFERRED CHARGES - Deferred lease costs consist of fees and costs incurred
to initiate operating leases and are amortized over the average minimum lease
term. Deferred financing costs include fees and costs incurred to obtain
long-term financing and are being amortized over the terms of the respective
loans. Unamortized deferred financing costs are charged to expense when debt is
retired before the maturity date.
IMPAIRMENT OF LONG-LIVED ASSETS - The Company has adopted Statement of
Financial Accounting Standards No. 121, ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED
ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF. This statement requires that
long-lived assets and certain intangibles to be held and used by an entity be
reviewed for impairment in the event that facts and circumstances indicate the
carrying amount of an asset may not be recoverable. In such an event, the
Company compares the estimated future undiscounted cash flows associated with
the asset to the asset's carrying amount, and if less, recognizes an impairment
loss in an amount by which the carrying amount exceeds its fair value. The
Company believes that no material impairment existed at December 31, 1997.
DERIVATIVES - The Company selectively enters into interest rate protection
agreements to mitigate changes in interest rates on its variable rate
borrowings. The notional amounts of such agreements are used to measure the
interest to be paid or received and do not represent the amount of exposure to
loss. None of these agreements are used for speculative or trading purposes. The
cost of these agreements are included in deferred financing costs and are being
amortized on a straight-line basis over the life of the agreements.
REVENUE RECOGNITION - Minimum rental income is recognized on a straight
line basis over the term of the lease. Substantially all leases contain
provisions which provide additional rents based on tenants' sales volume
("percentage rentals") and reimbursement of the tenants' share of advertising
and promotion, common area maintenance, insurance and real estate tax expenses.
Percentage rentals are recognized when earned. Expense reimbursements are
recognized in the period the applicable expenses are incurred. Payments received
from the early termination of leases are recognized when the applicable space is
released, or, otherwise are amortized over the remaining lease term.
INCOME TAXES - The Company operates in a manner intended to enable it to
qualify as a REIT under the Internal Revenue Code (the "Code"). A REIT which
distributes at least 95% of its taxable income to its shareholders each year and
which meets certain other conditions is not taxed on that portion of its taxable
income which is distributed to its shareholders. The Company intends to continue
to qualify as a REIT and to distribute substantially all of its taxable income
to its shareholders. Accordingly, no provision has been made for Federal income
taxes. The Company paid preferred dividends per share of $19.55, $18.56, and
$17.66 in 1997, 1996 and 1995, respectively, all of which are treated as
ordinary income. The table below summarizes the common dividends paid per share
and the amount representing estimated return of capital.
Common dividends per share 1997 1996 1995
- -------------------------- ------------ ------------ -------------
Ordinary income $1.779 $1.607 $1.352
Return of capital .391 .453 .608
------------ ------------ -------------
$2.170 $2.060 $1.960
============ ============ =============
CONCENTRATION OF CREDIT RISK - The Company's management performs ongoing
credit evaluations of their tenants. Although the tenants operate principally in
the retail industry, the properties are geographically diverse. During 1995, one
tenant accounted for approximately 10% of combined base and percentage rental
income. No single tenant accounted for 10% or more of combined base and
percentage rental income during 1997 and 1996.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
SUPPLEMENTAL CASH FLOW INFORMATION - The Company purchases capital
equipment and incurs costs relating to construction of new facilities, including
tenant finishing allowances. Expenditures included in construction trade
payables as of December 31, 1997, 1996 and 1995 amounted to $12,913, $8,320, and
$11,305, respectively. Interest paid, net of interest capitalized, in 1997, 1996
and 1995 was $12,337, 10,637, and $10,266, respectively.
RECLASSIFICATIONS - Certain prior year amounts have been reclassified to
conform with the current year presentation.
3. DEFERRED CHARGES
Deferred charges as of December 31, 1997 and 1996 consist of the following:
1997 1996
------------- -----------------
Deferred lease costs $7,658 $6,705
Deferred financing costs 6,607 4,657
------------- -----------------
14,265 11,362
Accumulated amortization 5,614 3,516
------------- -----------------
$8,651 $7,846
============= =================
Amortization of deferred lease costs for the years ended December 31, 1997, 1996
and 1995 was $873, $799 and $731, respectively. Amortization of deferred
financing costs, included in interest expense in the accompanying consolidated
statements of operations, for the years ended December 31, 1997, 1996 and 1995
was $1,094, $953 and $955, respectively. During 1996, the Company expensed the
remaining unamortized financing costs totaling $831 related to debt extinguished
with other current year borrowings. Such amount is shown as an extraordinary
item in the accompanying consolidated statements of operations.
4. LONG-TERM DEBT
Long-term debt at December 31, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>
1997 1996
------------- -----------------
<S> <C> <C>
8.75% Senior, unsecured notes, maturing March 2001 $75,000 $75,000
7.875% Senior, unsecured notes, maturing October 2004 75,000 ---
Mortgage notes with fixed interest at:
8.92%, maturing January 2002 48,142 48,817
8.625%, maturing September 2000 10,121 10,412
9.77%, maturing April 2005 15,787 15,975
Revolving lines of credit with variable interest rates ranging from
either prime less .25% to prime or from LIBOR plus 1.50%
to LIBOR plus 1.80% 5,000 27,800
------------- -----------------
$229,050 $178,004
============= =================
</TABLE>
The Company maintains revolving lines of credit which provide for borrowing up
to $125,000. The agreements expire at various times through the year 2000.
Interest is payable based on alternative interest rate bases at the Company's
option. Amounts available under these facilities at December 31, 1997 totaled
$120,000. Certain of the Company's properties, which had a net book value of
approximately $141,221 at December 31, 1997, serve as collateral for the fixed
rate mortgages and one revolving line of credit.
The credit agreements require the maintenance of certain ratios, including debt
service coverage and leverage, and limit the payment of dividends such that
dividends will not exceed funds from operations, as defined in the agreements,
on an annual basis or 95% of funds from operations on a cumulative basis. All
three existing fixed rate mortgage notes are with insurance companies and
contain prepayment penalty clauses.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
Maturities of the existing long-term debt are as follows:
Amount %
------------- -------------
1998 $1,261 1
1999 1,379 1
2000 15,566 6
2001 76,184 33
2002 45,117 20
Thereafter 89,543 39
------------- -------------
$229,050 100
============= =============
5. DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
In October 1995, the Company entered into an interest rate swap effective
through October 1998 with a notional amount of $10,000 which fixed the 30 day
LIBOR index at 5.99%. The impact of this agreement, together with an interest
rate swap agreement which expired during 1996, reduced mortgage interest expense
by $693 during 1995. The agreements had an insignificant effect on interest
expense during 1997 and 1996.
In anticipation of offering the senior, unsecured notes due 2004, the Company
entered into an interest rate protection agreement on October 3, 1997 which
fixed the index on the 10 year US Treasury rate at 5.995% for 30 days on a
notional amount of $70,000. The transaction settled on October 21, 1997, the
trade date of the $75,000 offering, and, as a result of an increase in the US
Treasury rate, the Company received proceeds of $714. Such amount is being
amortized as a reduction to interest expense over the life of the notes and will
result in an overall effective interest rate on the notes of 7.75%.
The carrying amount of cash equivalents approximates fair value due to the
short-term maturities of these financial instruments. The fair value of
long-term debt at December 31, 1997, which is estimated as the present value of
future cash flows, discounted at interest rates available at the reporting date
for new debt of similar type and remaining maturity, was approximately $232,152.
The estimated fair value of the interest rate swap agreement at December 31,
1997, as determined by the issuing financial institution, was an unrealized loss
of approximately $17.
6. SHAREHOLDERS' AND PARTNERSHIP EQUITY
During 1997, the Company completed an additional public offering of 1,080,000
Common Shares at a price of $29.0625 per share, receiving net proceeds of
approximately $29.2 million. The net proceeds, which were contributed to the
Operating Partnership in exchange for 1,080,000 partnership units, were used to
acquire, expand and develop factory outlet centers and for general corporate
purposes.
The Series A Cumulative Convertible Redeemable Preferred Shares (the "Preferred
Shares") were sold to the public during 1993 in the form of Depositary Shares,
each representing 1/10 of a Preferred Share. Proceeds from this offering, net of
underwriters discount and estimated offering expenses, were contributed to the
Operating Partnership in return for preferred partnership Units. The Preferred
Shares have a liquidation preference equivalent to $25 per Depositary Share and
dividends accumulate per Depositary Share equal to the greater of (i) $1.575 per
year or (ii) the dividends on the Common Shares or portion thereof, into which a
depositary share is convertible. The Preferred Shares rank senior to the Common
Shares in respect of dividend and liquidation rights.
The Preferred Shares are convertible at the option of the holder at any time
into Common Shares at a rate equivalent to .901 Common Shares for each
Depositary Share. At December 31, 1997, 817,107 Common Shares were reserved for
the conversion of Depositary Shares. The Preferred Shares and the related
Depositary Shares are not redeemable prior to
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
December 15, 1998. On and after December 15, 1998, the Preferred Shares and
Depositary Shares may be redeemed at the option of the Company, in whole or in
part, at a redemption price of $25 per Depositary Share, plus accrued and unpaid
dividends.
As of December 31, 1997, the ownership interests of the Operating Partnership
consisted of 7,853,936 partnership Units held by the Company, 90,689 preferred
partnership Units (which are convertible into approximately 817,107 general
partnership Units) held by the Company and 3,033,305 partnership Units held by
the limited partner. The limited partner's Units are exchangeable, subject to
certain limitations to preserve the Company's status as a REIT, on a one-for-one
basis for Common Shares of the Company. Preferred Units are automatically
converted into general partnership Units to the extent of any conversion of
Preferred Shares of the Company into Common Shares of the Company.
7. EARNINGS PER SHARE
In 1997, the Company adopted SFAS No. 128, EARNINGS PER SHARE. The impact of
adopting this statement had no effect on reported earnings per share for 1996
and 1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
------------- --------------- ------------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income before extraordinary item $12,827 $11,752 $11,218
Less: Preferred Share dividends (1,808) (2,399) (2,903)
------------- --------------- ------------
Income available to Common Shareholders $11,019 $9,353 $8,315
Weighted average Common Shares (in thousands) 7,028 6,402 6,095
Basic earnings per share $1.57 $1.46 $1.36
============= =============== ============
DILUTED EARNINGS PER SHARE
Income before extraordinary item $12,827 $11,752 $11,218
Less: preferred share dividends (1,808) (2,399) (2,903)
------------- --------------- ------------
Income available to Common Shareholders $11,019 $9,353 $8,315
------------- --------------- ------------
Shares (in thousands):
Weighted average Common Shares 7,028 6,402 6,095
Effect of outstanding share and unit options 112 6 1
------------- --------------- ------------
Weighted average Common Shares plus assumed
conversions 7,140 6,408 6,096
------------- --------------- ------------
Diluted earnings per share $1.54 $1.46 $1.36
============= =============== ============
</TABLE>
Options to purchase Common Shares excluded from the computation of diluted
earnings per share during 1997, 1996 and 1995 because the exercise price was
greater than the average market price of the Common Shares totaled 9,000,
150,992 and 538,391 shares. The assumed conversion of the preferred shares as of
the beginning of each year would have been anti-dilutive. The assumed conversion
of the Units held by the limited partner as of the beginning of the year, which
would result in the elimination of earnings allocated to the minority interest,
would have no impact on earnings per share since the allocation of earnings to
an Operating Partnership Unit is equivalent to earnings allocated to a Common
Share.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
8. EMPLOYEE BENEFIT PLANS
The Company has a qualified retirement plan, with a salary deferral feature
designed to qualify under Section 401 of the Code (the "401(k) Plan"), which
covers substantially all officers and employees of the Company. The 401(k) Plan
permits employees of the Company, in accordance with the provisions of Section
401(k) of the Code, to defer up to 20% of their eligible compensation on a
pre-tax basis subject to certain maximum amounts. Employee contributions are
fully vested and are matched by the Company at a rate of compensation deferred
to be determined annually at the Company's discretion. The matching contribution
is subject to vesting under a schedule providing for 20% annual vesting starting
with the third year of employment and 100% vesting after seven years of
employment.
The Company has a non-qualified and incentive stock option plan ("The 1993 Stock
Option Plan") and the Operating Partnership has a non-qualified Unit option plan
("The 1993 Unit Option Plan"). Units received upon exercise of Unit options are
exchangeable for Common Shares. The Company accounts for these plans under APB
Opinion No. 25, under which no compensation cost has been recognized.
Had compensation cost for these plans been determined for options granted since
January 1, 1995 consistent with SFAS #123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, the Company's net income and earnings per share would have been
reduced to the following pro forma amounts:
1997 1996 1995
------------- ------------- --------------
Net income: As reported $12,827 $11,191 $11,218
Pro forma $12,696 $11,114 $11,207
Basic EPS: As reported $1.57 $1.37 $1.36
Pro forma $1.55 $1.36 $1.36
Diluted EPS: As reported $1.54 $1.37 $1.36
Pro forma $1.53 $1.36 $1.36
Because the Statement 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions used for
grants in 1996 and 1995, respectively: expected dividend yields of 8%; expected
lives ranging from 5 years to 7 years; expected volatility 20%; and risk-free
interest rates ranging from 5.6% to 6.75% in 1996 and from 5.8% to 5.9% in 1995.
The Company may issue up to 1,500,000 shares under The 1993 Stock Option Plan
and The 1993 Unit Option Plan. The Company has granted 904,530 options, net of
options forfeited, through December 31, 1997. Under both plans, the option
exercise price is determined by the Stock and Unit Option Committee of the Board
of Directors. Non-qualified stock and Unit options granted expire 10 years from
the date of grant and are exercisable in five equal installments commencing one
year from the date of grant.
Options outstanding at December 31, 1997 have exercise prices between $22.50 and
$31.25, with a weighted average exercise price of $23.76 and a weighted average
remaining contractual life of 6.9 years. On January 6, 1998, the Company granted
to its directors and employees options to purchase an additional 15,000 Common
Shares and 242,600 Units in the Operating Partnership (which are exchangeable
for 242,600 Common Shares of the Company). The exercise price per share and unit
was set at the previous day's market closing price of $30.125.
Unamortized stock compensation, which relates to options that were granted at an
exercise price below the fair market value at the time of grant, was $195 and
$533 at December 31, 1997 and 1996. Compensation expense recognized during 1997,
1996 and 1995 was $338, $338 and $334, respectively.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
A summary of the status of the Company's two plans at December 31, 1997, 1996
and 1995 and changes during the years then ended is presented in the table and
narrative below:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -----
Wtd Avg Wtd Avg Wtd Avg
Shares Ex Price Shares Ex Price Shares Ex Price
------------ ------------ ---------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 915,950 $23.77 680,650 $23.58 546,000 $23.57
Granted --- --- 237,700 24.29 154,550 23.50
Exercised (29,700) 23.68 --- --- (600) 22.50
Forfeited (12,020) 24.41 (2,400) 23.59 (19,300) 22.70
------------ ------------ ---------------- ------------- ------------- -------------
Outstanding at end of year 874,230 $23.76 915,950 $23.77 680,650 $23.58
------------ ------------ ---------------- ------------- ------------- -------------
Exercisable at end of year 470,750 $23.46 320,410 $23.31 184,700 $23.11
Weighted average fair value of
options granted --- $2.70 $2.18
</TABLE>
9. SUPPLEMENTARY INCOME STATEMENT INFORMATION
The following amounts are included in property operating expenses for the years
ended December 31:
1997 1996 1995
------------- --------------- ------------
Advertising and promotion $8,452 $7,691 $8,884
Common area maintenance 11,113 9,497 8,403
Real estate taxes 5,004 4,699 3,483
Other operating expenses 1,700 1,672 1,697
------------- --------------- ------------
$26,269 $23,559 $22,467
============= =============== ============
10. LEASE AGREEMENTS
The Company is the lessor of a total of 1,210 stores in 30 factory outlet
centers, under operating leases with initial terms that expire from 1998 to
2015. Most leases are renewable for five years at the lessee's option. Future
minimum lease receipts under noncancellable operating leases as of December 31,
1997 are as follows:
1998 $57,242
1999 51,775
2000 42,204
2001 34,410
2002 25,180
Thereafter 41,353
---------------
$252,164
===============
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
11. COMMITMENTS
At December 31, 1997, commitments for construction of new developments and
additions to existing properties amounted to $862. Commitments for construction
represent only those costs contractually required to be paid by the Company.
The Company purchased the rights to lease land on which two of the outlet
centers are situated for $1,520. These leasehold rights are being amortized on a
straight-line basis over 30 and 40 year periods. Accumulated amortization was
$468 and $419 at December 31, 1997 and 1996, respectively. These land leases and
other land and equipment noncancellable operating leases, with initial terms in
excess of one year, have terms that expire from 2000 to 2085. Annual rental
payments for these leases aggregated $778, $315 and $312 for the years ended
December 31, 1997, 1996 and 1995, respectively. Minimum lease payments for the
next five years and thereafter are as follows:
1998 $1,052
1999 1,069
2000 1,070
2001 1,063
2002 1,015
Thereafter 43,121
---------------
$48,390
===============
12. ACQUISITIONS
During 1997, the Company completed the acquisition of three factory outlet
centers containing approximately 303,000 square feet of gross leasable area for
purchase prices which aggregated $37,500. The acquisitions were accounted for
using the purchase method whereby the purchase price was allocated to assets
acquired based on their fair values. The results of operations of the acquired
properties have been included in the consolidated results of operations since
the applicable acquisition date.
The following unaudited summarized pro forma results of operations reflect
adjustments to present the historical information as if the acquisitions had
occurred as of the beginning of the respective period. The pro forma information
is presented for informational purposes only and may not be indicative of what
actual results of operations would have been had the acquisitions occurred at
the beginning of the respective period, nor does it purport to represent the
results of operations for future periods.
1997 1996
------------- ---------------
(Unaudited)
Total revenues $87,314 $81,006
Income before extraordinary item 12,967 11,722
Net income 12,967 11,161
Basic net income per common share:
Income before extraordinary item 1.59 1.46
Net income 1.59 1.37
Diluted net income per common share:
Income before extraordinary item 1.56 1.46
Net income 1.56 1.37
============= ===============
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
13. QUARTERLY FINANCIAL INFORMATION (Unaudited)
The following table sets forth summary quarterly financial information
for the years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 BY QUARTER FIRST SECOND THIRD FOURTH
-------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Total revenues $19,225 $20,456 $21,657 $23,933
Income before minority interest 3,965 3,857 4,369 5,392
Net income 2,858 2,814 3,162 3,993
Basic net income per common share (1) .36 .34 .40 .45
Diluted net income per common share (1) .36 .34 .39 .44
-------------- ---------------- ----------------- -----------------
1996 BY QUARTER FIRST SECOND THIRD FOURTH
-------------- ---------------- ----------------- -----------------
Total revenues $18,123 $18,189 $19,453 $19,735
Income before minority interest and
extraordinary item 3,910 3,591 4,083 4,593
Income before extraordinary item 2,849 2,634 2,964 3,305
Net income 2,288 2,634 2,964 3,305
Basic earnings per common share:
Income before extraordinary item .35 .32 .37 .42
Net income .26 .32 .37 .42
Diluted earnings per common share:
Income before extraordinary item .35 .32 .37 .42
Net income .26 .32 .37 .42
-------------- ---------------- ----------------- -----------------
</TABLE>
(1) Quarterly amounts do not add to annual amounts due to the effect of
rounding on a quarterly basis.
F-14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of Tanger Factory
Outlet Centers, Inc. and Subsidiary is included on page F-1 of this Form 10-K.
In connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the index on page 27 of this
Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Greensboro, North Carolina
January 19, 1998
F-15
<PAGE>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent to Acquisition
Initial Cost to Company (Improvements)
Description -------------------------- --------------------------
- -------------------------------------- Buildings, Buildings,
Outlet Center Improvements Improvements
Name Location Encumbrances Land & Fixtures Land & Fixtures
- ---------------- -------------------- ---------------- ------------ ------------ --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Barstow Barstow, CA $ --- $3,941 $12,533 $ --- $863
Blowing Rock Blowing Rock, NC --- 1,963 9,424 --- ---
Boaz Boaz, AL --- 616 2,195 --- 1,048
Bourne Bourne, MA --- 899 1,361 --- 185
Branch N. Branch, MN --- 423 5,644 249 2,321
Branson Branson, MO --- 4,557 25,040 --- 3,296
Casa Grande Casa Grande, AZ --- 753 9,091 --- 1,196
Clover North Conway, NH --- 393 672 --- 49
Commerce I Commerce, GA 10,121 755 3,511 492 5,509
Commerce II Commerce, GA --- 1,299 14,046 541 9,661
Gonzales Gonzales, LA --- 947 15,895 17 3,381
Kittery-I Kittery, ME 5,970 1,242 2,961 229 1,173
Kittery-II Kittery, ME --- 921 1,835 530 222
Lancaster Lancaster, PA 15,787 3,691 19,907 --- 5,416
Lawrence Lawrence, KS --- 1,013 5,542 439 443
LL Bean North Conway, NH --- 1,894 3,351 --- 165
Locust Grove Locust Grove, GA --- 2,609 11,801 --- 6,980
Manchester Manchester, VT --- 500 857 --- 66
Martinsburg Martinsburg, WV --- 800 2,812 --- 1,256
McMinnville McMinnville, OR --- 1,071 8,162 5 518
Nags Head Nags Head, NC --- 1,853 6,679 --- ---
Pigeon Forge Pigeon Forge, TN --- 299 2,508 --- 995
Riverhead Riverhead, NY --- --- 36,374 6,152 53,088
San Marcos San Marcos, TX 10,206 2,012 9,440 17 8,940
Sevierville Sevierville, TN --- --- 18,495 --- 4,303
<CAPTION>
Gross Amount Carried at Close of Period
12/31/97 (1) Life Used to
Description ------------------------------------------ Compute
- ------------------------------------- Buildings, Depreciation
Outlet Center Improvements Accumulated Date of in Income
Name Location Land & Fixtures Total Depreciation Construction Statement
- ---------------- ------------------- --------- -------------- --------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Barstow Barstow, CA $3,941 $13,396 $17,337 $2,132 1995 (2)
Blowing Rock Blowing Rock, NC 1,963 9,424 11,387 79 1997 (3) (2)
Boaz Boaz, AL 616 3,243 3,859 1,232 1988 (2)
Bourne Bourne, MA 899 1,546 2,445 623 1989 (2)
Branch N. Branch, MN 672 7,965 8,637 2,226 1992 (2)
Branson Branson, MO 4,557 28,336 32,893 4,446 1994 (2)
Casa Grande Casa Grande, AZ 753 10,287 11,040 3,205 1992 (2)
Clover North Conway, NH 393 721 1,114 326 1987 (2)
Commerce I Commerce, GA 1,247 9,020 10,267 2,968 1989 (2)
Commerce II Commerce, GA 1,840 23,707 25,547 1,691 1995 (2)
Gonzales Gonzales, LA 964 19,276 20,240 4,494 1992 (2)
Kittery-I Kittery, ME 1,471 4,134 5,605 1,785 1986 (2)
Kittery-II Kittery, ME 1,451 2,057 3,508 737 1989 (2)
Lancaster Lancaster, PA 3,691 25,323 29,014 3,314 1994 (3) (2)
Lawrence Lawrence, KS 1,452 5,985 7,437 1,287 1993 (2)
LL Bean North Conway, NH 1,894 3,516 5,410 1,404 1988 (2)
Locust Grove Locust Grove, GA 2,609 18,781 21,390 2,542 1994 (2)
Manchester Manchester, VT 500 923 1,423 355 1988 (2)
Martinsburg Martinsburg, WV 800 4,068 4,868 1,500 1987 (2)
McMinnville McMinnville, OR 1,076 8,680 9,756 2,053 1993 (2)
Nags Head Nags Head, NC 1,853 6,679 8,532 63 1997 (3) (2)
Pigeon Forge Pigeon Forge, TN 299 3,503 3,802 1,373 1988 (2)
Riverhead Riverhead, NY 6,152 89,462 95,614 5,843 1993 (2)
San Marcos San Marcos, TX 2,029 18,380 20,409 2,929 1993 (2)
Sevierville Sevierville, TN --- 22,798 22,798 503 1997 (3) (2)
</TABLE>
F-16
<PAGE>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
SCHEDULE III - (CONTINUED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent to Acquisition
Description Initial Cost to Company (Improvements)
- -------------------------------------- -------------------------- --------------------------
Buildings, Buildings,
Outlet Center Improvements Improvements
Name Location Encumbrances Land & Fixtures Land & Fixtures
- ---------------- -------------------- ---------------- ------------ ------------ --------- --------------- -
<S> <C> <C> <C> <C> <C>
Seymour Seymour, IN 8,184 1,794 13,249 --- 16
Stroud Stroud, OK --- 446 7,048 --- 4,782
Terrell Terrell, TX --- 805 13,432 --- 3,850
West Branch West Branch, MI 6,836 350 3,428 120 3,516
Williamsburg Williamsburg, IA 16,946 706 6,781 716 9,337
- ---------------- -------------------- ---------------- ------------ ------------ --------- ---------------
Totals $74,050 $38,552 $274,074 $9,507 $132,575
================ ==================== ================ ============ ============ ========= =============== =
<CAPTION>
Gross Amount Carried at Close of Period
Description 12/31/97 (1) Life Used to
- -------------------------------------- ------------------------------------------ Compute
Buildings, Depreciation
Outlet Center Improvements Accumulated Date of in Income
Name Location Land & Fixtures Total Depreciation Construction Statement
- ---------------- -------------------- --------- -------------- --------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Seymour Seymour, IN 1,794 13,265 15,059 2,397 1994 (2)
Stroud Stroud, OK 446 11,830 12,276 3,348 1992 (2)
Terrell Terrell, TX 805 17,282 18,087 2,881 1994 (2)
West Branch West Branch, MI 470 6,944 7,414 1,863 1991 (2)
Williamsburg Williamsburg, IA 1,422 16,118 17,540 4,578 1991 (2)
- ---------------- -------------------- --------- -------------- --------------- --------------- -------------- --------------
Totals $48,059 $406,649 $454,708 $64,177
================ ==================== ========= ============== =============== =============== ============== ==============
</TABLE>
(1) AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS APPROXIMATELY $429,597,000
(2) THE COMPANY GENERALLY USES ESTIMATED LIVES RANGING FROM 25 TO 33 YEARS FOR
BUILDINGS AND 15 YEARS FOR LAND IMPROVEMENTS. TENANT FINISHING ALLOWANCES
ARE DEPRECIATED OVER THE INITIAL LEASE TERM.
(3) REPRESENTS YEAR ACQUIRED
F-17
<PAGE>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
SCHEDULE III - (CONTINUED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
The changes in total real estate for the three years ended December 31, 1997 are
as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------------------- ------------------- ---------------------
<S> <C> <C> <C>
Balance, beginning of year $292,406 $325,881 $358,361
Acquisition of real estate --- --- 37,500
Improvements 33,475 32,511 59,519
Dispositions and other --- (31) (672)
------------------- ------------------- ---------------------
Balance, end of year $325,881 $358,361 $454,708
=================== =================== =====================
</TABLE>
The changes in accumulated depreciation for the three years ended December 31,
1997 are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------------------- ------------------- ---------------------
<S> <C> <C> <C>
Balance, beginning of year $18,007 $31,458 $46,907
Depreciation for the period 13,451 15,449 17,327
Dispositions and other --- --- (57)
------------------- ------------------- ---------------------
Balance, end of year $31,458 $46,907 $64,177
=================== =================== =====================
</TABLE>
F-18
<PAGE>
FOURTH AMENDMENT
TO
THE PARTNERSHIP UNIT OPTION PLAN
FOR EXECUTIVE AND KEY EMPLOYEES
OF
TANGER PROPERTIES LIMITED PARTNERSHIP
THIS FOURTH AMENDMENT to the Partnership Unit Option Plan for Executive
and Key Employees of Tanger Properties Limited Partnership, dated February 17,
1997, is adopted by Tanger Properties Limited Partnership.
The Partnership Unit Option Plan for Executive and Key Employees of Tanger
Properties Limited Partnership is hereby amended in the following manner:
1. The text of Section 2.1 is amended and restated as follows:
SECTION 2.1 - UNITS SUBJECT TO PLAN
The aggregate number of Units of Partnership Interests which may be
issued upon exercise of Options shall not exceed 1,500,000; provided that such
aggregate number shall be reduced by one for each share of Common Stock that is
issued pursuant to the exercise of Options under the Stock Option Plan of Tanger
Factory Outlet Centers, Inc.
2. In all other respects, the Partnership Unit Option Plan for
Executive and Key Employees of Tanger Properties Limited Partnership shall
continue in full force and effect.
I hereby certify that the foregoing Fourth Amendment was duly adopted
by Tanger Properties Limited Partnership on February 17, 1997.
Executed on this 17th day of February, 1997.
\s\ Rochelle G. Simpson
-----------------------
Secretary
I hereby certify that the foregoing Fourth Amendment was duly adopted
by the shareholders of Tanger Factory Outlet Centers, Inc. on May 9, 1997.
Executed on this 9th day of May, 1997.
\s\ Rochelle G. Simpson
-----------------------
Secretary
FOURTH AMENDMENT
TO
THE STOCK OPTION PLAN
FOR DIRECTORS AND EXECUTIVE
AND KEY EMPLOYEES
OF
TANGER FACTORY OUTLET CENTERS, INC.
THIS FOURTH AMENDMENT to the Stock Option Plan for Directors and
Executive and Key Employees of Tanger Factory Outlet Centers, Inc., dated
February 17, 1997, is adopted by resolution of the Board of Directors of Tanger
Factory Outlet Centers, Inc., (the Company), a North Carolina Corporation.
The Stock Option Plan for Directors and Executive and Key Employees of Tanger
Factory Outlet Centers, Inc., is hereby amended in the following manner:
1. The text of Section 2.1 is amended and restated as follows:
SECTION 2.1 - SHARES SUBJECT TO PLAN
The shares of stock subject to Option shall be the shares of the
Company's no par value Common Stock. The aggregate number of such shares which
may be issued upon exercise options shall not exceed 1,500,000; provided that
such aggregate number shall be reduced by one for each Unit of Partnership
Interest that is issued pursuant to the exercise of Options under the
Partnership Unit Option Plan of Tanger Properties Limited Partnership.
2. In all other respects, the Stock Option Plan for Directors and
Executive and Key Employees of Tanger Factory Outlet Centers, Inc., shall
continue in full force and effect.
I hereby certify that the foregoing Fourth Amendment was duly adopted
by The Board of Directors of Tanger Factory Outlet Centers, Inc., on February
17, 1997.
Executed on this 17th day of February, 1997.
\s\ Rochelle G. Simpson
-----------------------
Secretary
I hereby certify that the foregoing Fourth Amendment was duly adopted
by the shareholders of Tanger Factory Outlet Centers, Inc. on May 9, 1997.
Executed on this 9th day of May, 1997.
\s\ Rochelle G. Simpson
-----------------------
Secretary
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment")
dated as of August 13, 1997, by and between TANGER PROPERTIES LIMITED
PARTNERSHIP, a North Carolina limited partnership (which, together with its
Subsidiaries from time to time, is referred to as the "Debtor"), FIRST NATIONAL
BANK OF COMMERCE (sometimes herein referred to as "First NBC"), a national
banking association (the "Agent"), as Agent for Banks, and FIRST NATIONAL BANK
OF COMMERCE, a national banking association and the other lenders listed on
Exhibit "A" attached hereto, as amended from time to time (each a "Bank" and
collectively the "Banks").
W I T N E S S E T H:
WHEREAS, Debtor applied for the issuance of a commitment for a
line of credit, and Banks have agreed to provide such credit facility to Debtor
subject to the terms and conditions of that certain Loan Agreement dated as of
October 14, 1996 (the "Agreement"); and
WHEREAS, Debtor has applied for an increase in the Commitment
Amount, as defined in the Agreement, and Agent and the Banks have agreed
thereto, subject to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the mutual covenants
herein set forth, the parties hereto agree effective on and after the date
hereof as follows:
I.
Debtor, Agent, and the Banks hereby delete the definition of
"Total Committed Unsecured Debt" in the Agreement.
II.
Debtor, Agent, and the Banks hereby insert a new definition
into the Agreement, "Total Outstanding Unsecured Debt," reading as follows:
"Total Outstanding Unsecured Debt" shall mean, at any time,
all of Debtor's unsecured Debt that is outstanding.
III.
Debtor, Agent, and the Banks hereby amend Section 5.9(d) to
read as follows:
(d) Debtor shall maintain Adjusted Unencumbered Assets equal
to its
<PAGE>
Total Outstanding Unsecured Debt.
IV.
Debtor, Agent, and the Banks hereby amend Exhibit "A" to the
Agreement by substituting therefor Exhibit "A" attached to this Amendment.
V.
Debtor, Agent, and the Banks hereby amend Exhibit "C" to the
Agreement by substituting therefor Exhibit "C" attached to this Amendment.
VI.
Debtor, Agent, and the Banks hereby amend Exhibit "D" to the
Agreement by substituting therefor Exhibit "D" attached to this Amendment. In
order to evidence the existing loans under the Agreement, as increased pursuant
to this Amendment, Debtor has executed and delivered a new Note, substantially
in the form of Exhibit "D" attached hereto.
VII.
Debtor, Agent and the Banks hereby amend Exhibit "E" to the
Agreement by substituting therefor Exhibit "E" attached to this Amendment.
VIII.
In order to evidence its guaranty of the loans as increased
pursuant to this Amendment and the Note executed by Debtor dated even date
herewith, Centers has executed and delivered a new Guaranty.
IX.
Any reference in the Agreement, the Note, or the Guaranty to
the "Agreement" or the "Loan Agreement" shall mean the Agreement, as amended
hereby; any reference in the Agreement or the Note to the "Guaranty" shall mean
the Guaranty executed by Centers dated even date herewith; and any reference in
the Agreement or the Guaranty to the "Note" or "Notes" shall mean the Note
executed by the Debtor dated even date herewith.
X.
Except as amended hereby, the Agreement shall remain in full
force and effect as executed and it is hereby expressly adopted and ratified.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed
-2-
<PAGE>
by their respective officers thereunto duly authorized, as of the date first
above written.
DEBTOR:
TANGER PROPERTIES LIMITED
PARTNERSHIP
BY: TANGER FACTORY OUTLET
CENTERS, INC.
General Partner
By: _______________________________
Stanley K. Tanger
Title: Chairman of the Board
Chief Executive Officer
AGENT:
FIRST NATIONAL AGENT OF COMMERCE
By: ________________________________
Stephen M. Valdes
Title: Vice President
Real Estate Division
BANKS:
FIRST NATIONAL BANK OF COMMERCE
By: ___________________________________
Stephen M. Valdes
Title: Vice President
Real Estate Division
-3-
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
Banks Commitment Applicable Percentage Address for Notes
<S> <C> <C> <C>
First National Bank of
Commerce $20,000,000.00 100%
201 St. Charles
Avenue
28th Floor
New Orleans, LA
70170
Attn: Stephen M.
Valdes
Real Estate Division
</TABLE>
-4-
<PAGE>
EXHIBIT C
Commitment Amount
$20,000,000
-5-
<PAGE>
EXHIBIT D
PROMISSORY NOTE
PRINCIPAL AMOUNT: [AMOUNT OF BANK'S COMMITMENT] DATE OF NOTE:
PROMISE TO PAY. TANGER PROPERTIES LIMITED PARTNERSHIP, a North Carolina Limited
Partnership ("Debtor") promises to pay to the order of [name of Bank]("Bank"),
in lawful money of the United States of America the sum of [amount of Bank's
Commitment] AND NO/100 DOLLARS ($[amount in numerals]) or such other or lesser
amounts as may be reflected from time to time on the books and records of Bank
as evidencing the aggregate unpaid principal balance of loan advances made to
Debtor on a multiple advance basis as provided below, together with simple
interest assessed at the Prime Rate or LIBOR Adjusted Rate as selected by Debtor
pursuant to Section 2.7 of the Loan Agreement (defined below), commencing on the
date hereof and continuing until this Note is paid in full, or until default
under this Note with interest thereafter being subject to the default interest
rate provisions set forth herein. This Note is one of the Notes issued pursuant
to, and entitled to the benefits of, that certain Loan Agreement dated as of
October 14, 1996 between Debtor, First National Bank of Commerce, as agent (the
"Agent"), and the banks party thereto from time to time, as the same may be
amended, modified, or restated from time to time, as amended by First Amendment
to Loan Agreement dated August 13, 1997, as the same may be amended, modified or
restated from time to time (as so amended, modified, or restated, the "Loan
Agreement"). Bank shall act exclusively through Agent with respect to all rights
and terms of this Note. This Note is further entitled to the benefits of the
Guaranty, as defined in the Loan Agreement.
MULTIPLE ADVANCE LOAN. This Note contemplates multiple loan advances. Debtor is
entitled to borrow, repay, and borrow again, provided, that the aggregate of all
loan advances outstanding at any time shall not exceed the principal amount
listed above, and provided further that the provisions of the Loan Agreement
shall govern the conditions and provisions of borrowings and repayments
hereunder. Debtor agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Debtor's deposit accounts with Bank in accordance with the instructions of an
authorized person. The unpaid principal balance owing on this Note at any time
may be evidenced by endorsements on this Note or by Bank's internal records,
including daily computer print-outs.
PAYMENT. Debtor will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on the Termination Date as defined in the Loan
Agreement. In addition, Debtor will pay monthly payments of accrued unpaid
interest beginning [first monthly date after date of Note] and all subsequent
interest payments are due on the same day of each month after that until this
Note is paid in full. Interest on this Note is computed on a 365/360 simple
interest basis; that is, by applying the ratio of the annual interest rate over
a year of 360 days, multiplied by the outstanding principal balance, multiplied
by the actual number of days the principal balance is outstanding. Debtor will
pay First National Bank of Commerce, as Agent under the Loan Agreement, and its
successors as Agent, at the address shown in the Loan Agreement, or at such
other place as Agent
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<PAGE>
may designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to accrued unpaid interest, then to principal,
and any remaining amount to any unpaid collection costs and late charges.
PREPAYMENT. Debtor may prepay this Note in whole or in part at any time subject
to the terms and provisions of the Loan Agreement. If Debtor prepays this Note
in full, or if Bank accelerates payment, Debtor understands that, unless
otherwise required by law, any prepaid fees or charges will not be subject to
rebate and will be earned by Bank at the time this Note is signed.
LATE CHARGE. If Debtor fails to pay any payment under this Note in full within
10 days of when due, Debtor agrees to pay Agent a late payment fee in an amount
equal to 3.000% of the unpaid amount of the payment, or U.S. $25.00, whichever
is greater, with a maximum of $200.00. Late charges will not be assessed
following declaration of default and acceleration of maturity of this Note.
DEFAULT. The following actions and/or inactions shall constitute Events of
Default under this Note: The occurrence of an Event of Default under the Loan
Agreement
BANK'S RIGHTS UPON DEFAULT. Should any one or more Events of Default occur or
exist under this Note as provided above, Bank shall have the right, at its sole
option, to declare formally this Note to be in default and to accelerate the
maturity and insist upon immediate payment in full of the unpaid principal
balance then outstanding under this Note, plus accrued interest, together with
reasonable attorneys' fees, costs, expenses and other fees and charges as
provided in the Loan Agreement.
INTEREST AFTER DEFAULT. If Bank declares this Note to be in default, based upon
an Event of Default, Bank has the right prospectively to adjust and fix the
simple interest rate under this Note until this Note is paid in full, to
eighteen (18%) percent per annum (the "Post-Default Rate")
ATTORNEYS' FEES. If Bank refers this Note to an attorney for collection, or
files suit against Debtor to collect this Note, or if Debtor files for
bankruptcy or other relief from creditors, Debtor agrees to pay Bank's
reasonable attorneys' fees in an amount not exceeding 25.000% of the unpaid debt
then owing under this Note.
NSF CHECK CHARGES. In the event that Debtor makes any payment under this Note by
check and Debtor's check is returned to Bank unpaid due to nonsufficient funds
in my deposit account, Debtor agrees to pay Bank an additional NSF check charge
equal to $15.00.
FINANCIAL STATEMENTS. Debtor agrees to provide Bank with such financial
statements and other related information at such frequencies and in such detail
as Bank may reasonably request as set forth in the Loan Agreement.
GOVERNING LAW. Debtor agrees that this Note and the loan evidenced hereby shall
be governed under the laws of the State of Louisiana. Specifically, this
business or commercial Note is subject to La. R.S. 9:3509 et seq.
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<PAGE>
WAIVERS. To the extent permitted by applicable law, Debtor and each guarantor of
this Note hereby waive presentment for payment, protest, notice of protest and
notice of nonpayment, and all pleas of division and discussion, and severally
agree that their obligations and liabilities to Bank hereunder shall be on a
"solidary" or "joint and several" basis. Debtor and each guarantor further
severally agree that discharge or release of any party who is or may be liable
to Bank for the indebtedness represented hereby shall not have the effect of
releasing any other party or parties, who shall remain liable to Bank Debtor and
each guarantor additionally agree that Bank's acceptance of payment other than
in accordance with the terms of this Note, or Bank's subsequent agreement to
extend or modify such repayment terms, or Bank's failure or delay in exercising
any rights or remedies granted to Bank shall likewise not have the effect of
releasing Debtor or any other party or parties from their respective obligations
to Bank, or of releasing any collateral that directly or indirectly secures
repayment hereof. In addition, any failure or delay on the part of Bank to
exercise any of the rights and remedies granted to Bank shall not have the
effect of waiving any of Bank's rights and remedies. Any partial exercise of any
rights and/or remedies granted to Bank shall furthermore not be construed as a
waiver of any other rights and remedies; it being Debtor's intent and agreement
that Bank's rights and remedies shall be cumulative in nature. Debtor and each
guarantor further agree that, should any Event of Default occur or exist under
this Note, any waiver or forbearance on the part of Bank to pursue the rights
and remedies available to Bank, shall be binding upon Bank only to the extent
that Bank specifically agrees to any such waiver or forbearance in writing. A
waiver or forbearance on the part of Bank as to one default event shall not be
construed as a waiver or forbearance as to any other default. Debtor and each
guarantor of this Note further agree that any late charges provided for under
this Note will not be charges for deferral of time for payment and will not and
are not intended to compensate Bank for a grace or cure period, and no such
deferral, grace or cure period has or will be granted to Debtor in return for
the imposition of any late charge. Debtor recognizes that Debtor's failure to
make timely payment of amounts due under this Note will result in damages to
Bank, including but not limited to Bank's loss of the use of amounts due, and
Debtor agrees that any late charges imposed by Bank hereunder will represent
reasonable compensation to Bank for such damages.
SUCCESSORS AND ASSIGNS LIABLE. Debtor's and each guarantor's obligations and
agreements under this Note shall be binding upon Debtor's and each guarantor's
respective successors, heirs, legatees, devisees, administrators, executors and
assigns. The rights and remedies granted to Bank under this Note shall inure to
the benefit of Bank's successors and assigns, as well as to any subsequent
holder or holders of this Note.
CAPTION HEADINGS. Caption headings of the sections of this Note are for
convenience purposes only and are not to be used to interpret or to define their
provisions. In this Note, whenever the context so requires, the singular
includes the plural and the plural also includes the singular.
SEVERABILITY. If any provision of this Note is held to be invalid, illegal or
unenforceable by any court, that provision shall be deleted from this Note and
the balance of this Note shall be interpreted as if the deleted provision never
existed.
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<PAGE>
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER HEREBY
WAIVES THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
BROUGHT BY BANK, AGENT OR BORROWER AGAINST THE OTHER TO THE EXTENT PERMITTED BY
APPLICABLE LAW.
BORROWER:
TANGER PROPERTIES LIMITED PARTNERSHIP
BY: TANGER FACTORY OUTLET CENTERS, INC.
BY: ___________________________________
Stanley K. Tanger
Chairman of Board
Chief Executive Officer
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<PAGE>
EXHIBIT E
Termination Date
June 30, 1999
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<PAGE>
PROMISSORY NOTE
PRINCIPAL AMOUNT: $20,000,000
DATE OF NOTE: AUGUST 13, 1997
PROMISE TO PAY. TANGER PROPERTIES LIMITED PARTNERSHIP, a North Carolina Limited
Partnership ("Debtor") promises to pay to the order of First National Bank of
Commerce ("Bank"), in lawful money of the United States of America the sum of
TWENTY MILLION AND NO/100 DOLLARS ($20,000,000.00) or such other or lesser
amounts as may be reflected from time to time on the books and records of Bank
as evidencing the aggregate unpaid principal balance of loan advances made to
Debtor on a multiple advance basis as provided below, together with simple
interest assessed at the Prime Rate or LIBOR Adjusted Rate as selected by Debtor
pursuant to Section 2.7 of the Loan Agreement (defined below), commencing on the
date hereof and continuing until this Note is paid in full, or until default
under this Note with interest thereafter being subject to the default interest
rate provisions set forth herein. This Note is one of the Notes issued pursuant
to, and entitled to the benefits of, that certain Loan Agreement dated as of
October 14, 1996 between Debtor, First National Bank of Commerce, as agent (the
"Agent"), and the banks party thereto from time to time, as amended by First
Amendment to Loan Agreement dated as of August 13, 1997, as the same may be
amended, modified, or restated from time to time (as so amended, modified, or
restated, the "Loan Agreement"), and represents an extension and renewal of, and
increase in principal amount of, that Note executed in the principal amount of
$15,000,000.00 dated October 14, 1996. Bank shall act exclusively through Agent
with respect to all rights and terms of this Note. This Note is further entitled
to the benefits of the Guaranty, as defined in the Loan Agreement.
MULTIPLE ADVANCE LOAN. This Note contemplates multiple loan advances. Debtor is
entitled to borrow, repay, and borrow again, provided, that the aggregate of all
loan advances outstanding at any time shall not exceed the principal amount
listed above, and provided further that the provisions of the Loan Agreement
shall govern the conditions and provisions of borrowings and repayments
hereunder. Debtor agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Debtor's deposit accounts with Bank in accordance with the instructions of an
authorized person. The unpaid principal balance owing on this Note at any time
may be evidenced by endorsements on this Note or by Bank's internal records,
including daily computer print-outs.
PAYMENT. Debtor will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on the Termination Date as defined in the Loan
Agreement. In addition, Debtor will pay monthly payments of accrued unpaid
interest beginning August 15, 1997 and all subsequent interest payments are due
on the same day of each month after that until this Note is paid in full.
Interest on this Note is computed on a 365/360 simple interest basis; that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Debtor will pay First National
Bank of Commerce, as Agent under the Loan Agreement, and its successors as
Agent, at
<PAGE>
the address shown in the Loan Agreement, or at such other place as Agent may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to accrued unpaid interest, then to principal,
and any remaining amount to any unpaid collection costs and late charges.
PREPAYMENT. Debtor may prepay this Note in whole or in part at any time subject
to the terms and provisions of the Loan Agreement. If Debtor prepays this Note
in full, or if Bank accelerates payment, Debtor understands that, unless
otherwise required by law, any prepaid fees or charges will not be subject to
rebate and will be earned by Bank at the time this Note is signed.
LATE CHARGE. If Debtor fails to pay any payment under this Note in full within
10 days of when due, Debtor agrees to pay Agent a late payment fee in an amount
equal to 3.000% of the unpaid amount of the payment, or U.S. $25.00, whichever
is greater, with a maximum of $200.00. Late charges will not be assessed
following declaration of default and acceleration of maturity of this Note.
DEFAULT. The following actions and/or inactions shall constitute Events of
Default under this Note: The occurrence of an Event of Default under the Loan
Agreement
BANK'S RIGHTS UPON DEFAULT. Should any one or more Events of Default occur or
exist under this Note as provided above, Bank shall have the right, at its sole
option, to declare formally this Note to be in default and to accelerate the
maturity and insist upon immediate payment in full of the unpaid principal
balance then outstanding under this Note, plus accrued interest, together with
reasonable attorneys' fees, costs, expenses and other fees and charges as
provided in the Loan Agreement.
INTEREST AFTER DEFAULT. If Bank declares this Note to be in default, based upon
an Event of Default, Bank has the right prospectively to adjust and fix the
simple interest rate under this Note until this Note is paid in full, to
eighteen (18%) percent per annum (the "Post-Default Rate")
ATTORNEYS' FEES. If Bank refers this Note to an attorney for collection, or
files suit against Debtor to collect this Note, or if Debtor files for
bankruptcy or other relief from creditors, Debtor agrees to pay Bank's
reasonable attorneys' fees in an amount not exceeding 25.000% of the unpaid debt
then owing under this Note.
NSF CHECK CHARGES. In the event that Debtor makes any payment under this Note by
check and Debtor's check is returned to Bank unpaid due to nonsufficient funds
in my deposit account, Debtor agrees to pay Bank an additional NSF check charge
equal to $15.00.
FINANCIAL STATEMENTS. Debtor agrees to provide Bank with such financial
statements and other related information at such frequencies and in such detail
as Bank may reasonably request as set forth in the Loan Agreement.
GOVERNING LAW. Debtor agrees that this Note and the loan evidenced hereby shall
be governed under the laws of the State of Louisiana. Specifically, this
business or commercial Note is subject
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<PAGE>
to La. R.S. 9:3509 et seq.
WAIVERS. To the extent permitted by applicable law, Debtor and each guarantor of
this Note hereby waive presentment for payment, protest, notice of protest and
notice of nonpayment, and all pleas of division and discussion, and severally
agree that their obligations and liabilities to Bank hereunder shall be on a
"solidary" or "joint and several" basis. Debtor and each guarantor further
severally agree that discharge or release of any party who is or may be liable
to Bank for the indebtedness represented hereby shall not have the effect of
releasing any other party or parties, who shall remain liable to Bank Debtor and
each guarantor additionally agree that Bank's acceptance of payment other than
in accordance with the terms of this Note, or Bank's subsequent agreement to
extend or modify such repayment terms, or Bank's failure or delay in exercising
any rights or remedies granted to Bank shall likewise not have the effect of
releasing Debtor or any other party or parties from their respective obligations
to Bank, or of releasing any collateral that directly or indirectly secures
repayment hereof. In addition, any failure or delay on the part of Bank to
exercise any of the rights and remedies granted to Bank shall not have the
effect of waiving any of Bank's rights and remedies. Any partial exercise of any
rights and/or remedies granted to Bank shall furthermore not be construed as a
waiver of any other rights and remedies; it being Debtor's intent and agreement
that Bank's rights and remedies shall be cumulative in nature. Debtor and each
guarantor further agree that, should any Event of Default occur or exist under
this Note, any waiver or forbearance on the part of Bank to pursue the rights
and remedies available to Bank, shall be binding upon Bank only to the extent
that Bank specifically agrees to any such waiver or forbearance in writing. A
waiver or forbearance on the part of Bank as to one default event shall not be
construed as a waiver or forbearance as to any other default. Debtor and each
guarantor of this Note further agree that any late charges provided for under
this Note will not be charges for deferral of time for payment and will not and
are not intended to compensate Bank for a grace or cure period, and no such
deferral, grace or cure period has or will be granted to Debtor in return for
the imposition of any late charge. Debtor recognizes that Debtor's failure to
make timely payment of amounts due under this Note will result in damages to
Bank, including but not limited to Bank's loss of the use of amounts due, and
Debtor agrees that any late charges imposed by Bank hereunder will represent
reasonable compensation to Bank for such damages.
SUCCESSORS AND ASSIGNS LIABLE. Debtor's and each guarantor's obligations and
agreements under this Note shall be binding upon Debtor's and each guarantor's
respective successors, heirs, legatees, devisees, administrators, executors and
assigns. The rights and remedies granted to Bank under this Note shall inure to
the benefit of Bank's successors and assigns, as well as to any subsequent
holder or holders of this Note.
CAPTION HEADINGS. Caption headings of the sections of this Note are for
convenience purposes only and are not to be used to interpret or to define their
provisions. In this Note, whenever the context so requires, the singular
includes the plural and the plural also includes the singular.
SEVERABILITY. If any provision of this Note is held to be invalid, illegal or
unenforceable by any court, that provision shall be deleted from this Note and
the balance of this Note shall be interpreted as if the deleted provision never
existed.
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<PAGE>
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BANK, AGENT AND
BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM BROUGHT BY BANK, AGENT OR BORROWER AGAINST THE OTHER TO THE EXTENT
PERMITTED BY APPLICABLE LAW.
BORROWER:
TANGER PROPERTIES LIMITED PARTNERSHIP
BY: TANGER FACTORY OUTLET CENTERS, INC.
BY: ___________________________________
Stanley K. Tanger
Chairman of Board
Chief Executive Officer
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<PAGE>
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated as of August 13, 1997(the "Guaranty"),
is given by TANGER FACTORY OUTLET CENTERS, INC., a North Carolina corporation
(the "Guarantor"); and extended to FIRST NATIONAL BANK OF COMMERCE, a national
banking association, with its principal offices located in New Orleans,
Louisiana, in its capacity as agent under the Loan Agreement (defined below) (in
such capacity, the "Agent") and in favor of each bank or other institution
(each, a "Bank" and collectively, the "Banks") now or hereafter party to the
Loan Agreement, for the benefit of TANGER PROPERTIES LIMITED PARTNERSHIP, a
limited partnership organized under the laws of the State of North Carolina (the
"Debtor").
RECITALS:
1. The Banks have agreed to make loans (the "Loans") of up to
$20,000,000.00 to Debtor pursuant to the terms and conditions of notes executed
pursuant to the Loan Agreement dated October 14, 1996 among Debtor, Agent, and
Banks, as amended by First Amendment to Loan Agreement dated as of August 13,
1997 among the same parties (as so amended, and as hereafter amended, modified,
renewed or extended from time to time, the "Loan Agreement") as amended,
modified, renewed, or extended from time to time (the "Notes"). All of the
definitions used in the Notes and the Loan Agreement are hereby incorporated
herein by reference and shall have the meaning set forth in the Notes and the
Loan Agreement unless otherwise defined herein. References herein to the "Loans"
and to the "Related Documents" refer to the Loans defined above and to the
Related Documents as defined in the Loan Agreement.
2. The Guarantor is the sole general partner of the Debtor.
3. Without this Guaranty the Banks would be unwilling to make the Loans
to Debtor.
4. Because of the direct benefit to the Guarantor from the loans to the
Debtor, the Guarantor agrees to guarantee to the Banks the obligations of the
Debtor as set forth herein.
5. This Guaranty is executed in substitution for and increase of that
certain Guaranty executed by Guarantor dated October 14, 1996.
NOW THEREFORE, in consideration of the Banks entering into the Loan
Agreement and making the Loans to Debtor, and subject to the covenants and
conditions of Item 19 below:
1. Guaranty of Payment. The Guarantor hereby unconditionally guarantees
to the Agent and the Banks the payment, when due, by acceleration or otherwise,
of the Indebtedness. For the purposes hereof, the term "Indebtedness" shall
include any and all indebtedness of the Debtor to the Agent and the Banks
evidenced by the Notes and the Loan Agreement and the Related Documents or
arising in connection with the Loans, including without limitation, all
principal, interest, fees and expenses, whether existing now or arising
hereafter, as such Notes, Loan Agreement and Related Documents may be modified,
extended, or renewed from time to time. The guaranty of the
<PAGE>
Guarantor as set forth in this section is a guaranty of payment and not of
collection.
2. Guaranty of Performance. The Guarantor additionally unconditionally
guarantees to the Agent and the Banks the timely performance of all other
obligations of the Debtor under the Loan Agreement and all of the Related
Documents.
In the event of the occurrence of an Event of Default as defined in the
Loan Agreement relating to any of the foregoing conditions, and without the
necessity of any notice from the Agent or the Banks to the Guarantor, the
Guarantor agrees to indemnify and hold the Agent and the Banks harmless from any
and all loss, cost, liability or expense the Agent and the Banks may suffer by
reason of any such event. The Agent and the Banks shall accept performance by
the Guarantor of the Debtor's obligations under the Loan Agreement and the
Related Documents, and so long as all of said obligations are being performed by
the Debtor or the Guarantor, the Agent and the Bank will make the Loan proceeds
available under the terms of the Loan Agreement, the Notes, and the Related
Documents. The obligation and liability of the Guarantor under this Section 2
shall not be limited or restricted by the existence of (or limitation on) the
guaranty of payment under Section 1.
3. Subordination. Upon the occurrence and during the continuance of any
Event of Default as defined in the Loan Agreement, no payments shall be made by
Debtor or received by the Guarantor on any indebtedness, now or hereafter
existing, of the Debtor to the Guarantor.
4. Waiver of Rights. The Guarantor expressly waives: (a) notice of
acceptance of this Guaranty by the Banks and of all extensions of credit
pursuant to the Loan Agreement, the Notes, and the Related Documents to the
Debtor by the Banks; (b) presentment and demand for payment of any of the
Indebtedness; (c) protest and notice of dishonor or of default to the Guarantor
or to any other party with respect to the Indebtedness; (d) demand for payment
under this Guaranty; and (e) any right to assert against the Agent or the Banks,
as a defense, counterclaim, set-off, or cross-claim any defense (legal or
equitable), set-off, counterclaim or claim which the Guarantor may now or
hereafter have against the Agent or the Banks or the Debtor, but such waiver
shall not prevent the Guarantor from asserting against the Agent or the Banks in
a separate action, any claim, action, cause of action, or demand that the
Guarantor might have, whether or not arising out of this Guaranty.
5. Primary Liability of the Guarantor. The Guarantor agrees that this
Guaranty may be enforced by the Agent for the benefit of the Banks and Guarantor
waives all rights of division and discussion. The Guarantor further agrees that
nothing contained herein shall prevent the Agent, for the benefit of the Banks,
from suing on the Note or from exercising any other rights available to it under
the Notes, the Loan Agreement, or any other instrument evidencing the
Indebtedness if neither the Debtor nor the Guarantor timely performs the
obligations of the Debtor thereunder, and the exercise of any of the aforesaid
rights shall not constitute a discharge of any of the Guarantor's obligations
hereunder; it being the purpose and intent of the Guarantor that the Guarantor's
obligations hereunder shall be absolute, independent and unconditional under any
and all circumstances. Neither the Guarantor's obligations under the Guaranty
nor any remedy for the enforcement thereof shall be impaired, modified, changed
or released in any manner whatsoever by an impairment, modification, change,
release or limitation of the liability of the Debtor or any co-
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<PAGE>
guarantor or by reason of the Debtor's or any co-guarantor's bankruptcy or
insolvency. The Guarantor acknowledges that the term "Indebtedness" as used
herein includes any payments made by the Debtor to the Banks and subsequently
recovered by the Debtor or a trustee for the Debtor pursuant to the Debtor's
bankruptcy or insolvency. At any time the Agent, for the benefit of the Banks,
is entitled to exercise its remedies hereunder, it may in its discretion elect
to demand payment or performance. In the event the Agent, for the benefit of the
Banks, elects to demand performance, it shall at all times thereafter have the
right to demand payment until all of the Indebtedness has been paid in full. In
the event the Agent, for the benefit of the Banks, elect to demand payment, it
shall at all times thereafter have the right to demand performance until all of
the Indebtedness has been paid in full.
6. Waiver of Subrogation Rights. The Guarantor agrees that (i) during
the period prior to the payment in full of the Indebtedness the Guarantor shall
have no rights of subrogation, reimbursement, contribution or indemnity
whatsoever against Debtor for the Guarantor's payment to the Agent or any Bank
of the Guarantor's obligation under this Guaranty (hereinafter referred to as
the "Rights"), and (ii) the Guarantor waives and renounces but only during the
period set forth in (i) above any Rights the Guarantor has or may have against
the Debtor for the Guarantor's payment to the Agent or any Bank of Guarantor's
obligations under this Guaranty. This waiver is expressly intended to prevent
the existence of any claim (as defined in the Bankruptcy Code) in respect of
such Rights by the Guarantor and to prevent the Guarantor from being a creditor
of Debtor due to such Rights unless the Bank has received payment in full of the
Indebtedness.
7. Attorney's Fees and Costs of Collection. If at any time or times
hereafter the Agent or the Banks employ counsel to pursue collection, to
intervene, to sue for enforcement of the terms hereof or of the Loan Agreement,
the Notes, or the Related Documents, or to file a petition, complaint, answer,
motion or other pleading in any suit or proceeding relating to this Guaranty or
the Loan Agreement, the Notes, or the Related Documents, then in such event, all
of the reasonable attorneys' fees relating thereto shall be an additional
liability of the Guarantor to the Agent and the Banks, payable on demand.
8. Term of Guaranty; Warranties. This Guaranty shall continue in full
force and effect until the Indebtedness is fully paid. This Guaranty covers the
Indebtedness whether presently outstanding or arising subsequent to the date
hereof including all amounts advanced by the Banks in stages or installments and
all revolving credit loans and advances made pursuant to the Loan Agreement, the
Notes, or the Related Documents. The Guarantor warrants and represents to the
Agent and the Banks, (i) that this Guaranty is binding upon and enforceable
against the Guarantor, in accordance with its terms, (ii) that the execution and
delivery of this Guaranty do not violate or constitute a breach of any agreement
to which the Guarantor is a party or of any applicable laws, (iii) that there is
no litigation, claim, action or proceeding pending, or to the best knowledge of
the Guarantor, threatened against the Guarantor which would materially adversely
affect the financial condition of the Guarantor or its ability to fulfill its
obligations hereunder. Guarantor agrees to submit annually to the Agent current
financial statements in the same form and with the same substance and level of
detail required of the Debtor pursuant to the Loan Agreement. Guarantor agrees
to promptly inform the Agent of the adverse determination of any litigation,
claim, action or proceeding or the institution of any litigation, claim, action
or proceeding against Guarantor which
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<PAGE>
does or could materially adversely affect the financial condition of the
Guarantor or its ability to fulfill its obligations hereunder. This Guaranty is
binding on and enforceable against the Guarantor, its successors and assigns.
The Guarantor represents and warrants that (i) it is a corporation duly
organized, existing and in good standing under the laws of the State of North
Carolina, with stock outstanding that has been duly and validly issued, (ii) it
has the corporate power, authority and legal right to carry on the business now
being conducted by it and to engage in the transactions contemplated by this
Guaranty and the Loan Documents, and (iii) the execution and delivery of this
Guaranty and the performance and observance of the provisions hereof have been
duly authorized by all necessary corporate and, if required, stockholder action.
9. Further Representations and Warranties. The Guarantor further
represents to the Agent and the Banks that the Guarantor has knowledge of the
Debtor's financial condition and affairs and represents and agrees that it will
keep so informed while this Guaranty is in force. The Guarantor agrees that the
Agent and the Banks will have no obligation to investigate the financial
condition or affairs of the Debtor for the benefit of the Guarantor nor to
advise the Guarantor of any fact respecting, or any change in, the financial
condition or affairs of the Debtor which might come to the knowledge of the
Agent and the Banks at any time, whether or not the Agent and the Banks know or
believe or have reason to know or believe that any such fact or change is
unknown to the Guarantor or might (or does) materially increase the risk of the
Guarantor as guarantor or might (or would) affect the willingness of the
Guarantor to continue as guarantor with respect to the Indebtedness.
10. Additional Liability of the Guarantor. If the Guarantor is or
becomes liable for any indebtedness owing by the Debtor to the Agent and the
Banks by endorsement or otherwise than under this Guaranty, such liability shall
not be in any manner impaired or reduced hereby but shall have all and the same
force and effect it would have had if this Guaranty had not existed and the
Guarantor's liability hereunder shall not be in any manner impaired or reduced
thereby.
11. Cumulative Rights. All rights of the Agent and the Banks hereunder
or otherwise arising under any documents executed in connection with the
Indebtedness are separate and cumulative and may be pursued separately,
successively or concurrently, or not pursued, without affecting or limiting any
other right of the Agent and the Banks and without affecting or impairing the
liability of the Guarantor.
12. Usury. Notwithstanding any other provisions herein contained, no
provision of this Guaranty shall require or permit the collection from the
Guarantor of interest in excess of the maximum rate or amount that the Guarantor
may be required or permitted to pay pursuant to any applicable law.
13. Multiple Counterparts; Pronouns; Captions; Severability. This
Guaranty may be executed in multiple counterparts, each of which shall be deemed
an original but all of which shall constitute but one and the same document. The
pronouns used in this instrument shall be construed as masculine, feminine or
neuter as the occasion may require. Captions are for reference only and in no
way limit the terms of this Guaranty. Invalidation of any one or more of
the provisions of this Guaranty shall in no way affect any of the other
provisions hereof, which shall remain in full force
-4-
<PAGE>
and effect.
14. Bank Assigns. This Guaranty is intended for and shall inure to the
benefit of the Agent and each Bank and each and every person who shall from time
to time be or become the "Agent" under the Loan Agreement or the owner or holder
of any of the Indebtedness, and each and every reference herein to the "Agent"
shall include successors and assigns of First National Bank of Commerce in such
capacity and every reference herein to "Bank" shall include and refer to each
and every successor or assignee of the Bank at any time holding or owning any
part of or interest in any part of the Indebtedness.
This Guaranty shall be transferable and negotiable with the same force
and effect, and to the same extent, that the Indebtedness is transferable and
negotiable, it being understood and stipulated that upon assignment or transfer
by the Agent of its rights and duties under the Loan Agreement or by any Bank of
any of the Indebtedness, the successor Agent under the Loan Agreement, or the
legal holder or owner of said Indebtedness (or a part thereof or interest
therein thus transferred or assigned by the Bank), as the case may be, shall
(except as otherwise stipulated by the Bank in its assignment) have and may
exercise all of the rights granted to the Agent or such Bank under this Guaranty
to the extent of that part of or interest in the Indebtedness thus assigned or
transferred to said person. The Guarantor expressly waives notice of transfer or
assignment of the Indebtedness, or any part thereof, or of the rights of the
Agent or such Bank hereunder. Failure to give notice will not affect the
liability of the Guarantor hereunder.
15. Application of Payments. The Banks may apply any payments received
by it from any source against that portion of the Indebtedness (principal,
interest, court costs, attorneys' fees or other) in such priority and fashion as
it may deem appropriate.
16. Notices. All notices required to be given hereunder shall be in
writing and shall be deemed served at the earlier of (i) receipt or (ii)
seventy-two (72) hours after deposit in registered, certified or first-class
United States mail, postage prepaid, or (iii) upon delivery when deposited with
Federal Express, Airborne Express, or other similar courier providing next-day
deliveries, in each case, addressed to the parties at the following addresses,
or such other addresses as may from time to time be designated by written notice
given as herein required:
to the Guarantor:
Tanger Factory Outlet Centers, Inc.
1400 West Northwood Street [zip 27408]
P.O. Box 29168
Greensboro, North Carolina 27429
Attention: Mr. Stanley K. Tanger
and Ms. Rochelle Simpson
-5-
<PAGE>
to the Agent or the Banks:
Mr. Stephen M. Valdes
Vice President
Hospitality Division
First National Bank of Commerce
201 St. Charles Avenue
28th Floor
New Orleans, LA 70170
Personal delivery to any officer, agent or employee of a party at its address
herein shall constitute receipt. Rejection or other refusal to accept or
inability to deliver because of changed address of which no notice has been
received shall also constitute receipt. Notwithstanding the foregoing, no notice
of change of address shall be effective until the date of receipt thereof. This
section shall not be construed in any way to affect or impair any waiver of
notice of demand herein provided or to require giving of notice or demand to or
upon the Guarantor in any situation or for any reason.
17. Governing Law. This Guaranty shall be deemed to be a contract made
under, and for all purposes shall be construed in accordance with, the internal
laws and judicial decisions of the State of Louisiana. The Guarantor, the Agent,
and the Banks agree that any dispute arising out of this Guaranty shall be
subject to the jurisdiction of both the state and federal courts in the States
of Louisiana or North Carolina, and acknowledges that Agent shall have the sole
and complete discretion regarding the selection of which of the two
jurisdictions in which it will elect to bring suit. For that purpose, the
Guarantor hereby submits to the jurisdiction of the state and federal courts of
the States of Louisiana and North Carolina. The Agent and the Banks agree that
they will not seek to enforce this Guaranty in any other jurisdiction, so long
as Guarantor is domiciled in North Carolina and is subject to service of process
in the State of Louisiana. The Guarantor further agrees to accept service of
process out of any of the before mentioned courts in such dispute by registered
or certified mail addressed to the Guarantor.
18. Federal Tax Identification Number. The Guarantor hereby certifies
to the Bank that the Guarantor's federal tax identification number is
56-1815473.
19. Bank Covenants. Notwithstanding any other provisions of this
Guaranty by accepting this Guaranty Agent and each Bank warrants, covenants and
agrees as follows: (a) no Bank may enforce any rights under this Guaranty
directly, but all rights hereunder shall be enforced solely by and through the
Agent; (b) such Bank will not authorize or direct Agent, on its behalf, to
institute an action against the Guarantor or exercise any of such Bank's
remedies under this Guaranty unless and until an Event of Default (as defined in
the Loan Agreement) has occurred and is continuing; (c) the Loan may be prepaid
in full without penalty (other than any payments due as a result of prepaying a
LIBOR Rate Loan (as defined in the Loan Agreement) prior to the termination of
the then applicable Interest Period (as defined in the Loan Agreement)) at any
time during which an Event of Default has occurred and is continuing; and (d)
such Bank will not authorize or direct Agent, on its behalf, to enforce its
rights against the Guarantor, unless in the same proceeding, the
-6-
<PAGE>
Agent shall also seek recovery (unless Agent is prohibited, temporarily or
permanently, by bankruptcy, dissolutions, injunction inability to achieve
service of process or other similar legal impediment) from the Debtor of any
outstanding balance due on the Indebtedness. Nothing herein shall limit Banks'
rights against Guarantor to pursue only a deficiency judgment or otherwise
obligate Banks to take actions other than as set forth above.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty under seal
as of the day and year first above written.
TANGER FACTORY OUTLET CENTERS, INC.
[CORPORATE SEAL]
BY: _____________________________________
ATTEST: Stanley K. Tanger
Chairman of the Board
Chief Executive Officer
- -------------------------
Secretary
-7-
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT to the Loan Agreement referred to below (the
"First Amendment"), is made and entered into as of this 22nd day of May, 1997,
by and between TANGER PROPERTIES LIMITED PARTNERSHIP, a North Carolina limited
partnership (which, together with its Subsidiaries from time to time, is
referred to as the "Debtor"), and SOUTHTRUST BANK OF ALABAMA, NATIONAL
ASSOCIATION, a national banking association (the "Bank").
WITNESSETH:
WHEREAS, Debtor and Bank are parties to a Loan Agreement dated as of
November 18, 1996 (as amended, restated or otherwise modified, the "Loan
Agreement"); and,
WHEREAS, the Debtor has requested that the Bank amend the Loan
Agreement to increase the Commitment Amount thereunder to Twenty Million Dollars
($20,000,000), and the Bank has agreed to do so, but only on the terms and
conditions set forth below in this Amendment.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged by the parties, and of the mutual
promises contained herein, the parties hereto agree as follows effective on and
after the date hereof:
SECTION 1. Definitions. (a) Capitalized terms not otherwise defined in
this First Amendment shall have the meanings ascribed thereto in the Loan
Agreement.
(b) "EFFECTIVE DATE" means the date of this Amendment or such later
Business Day upon which each condition described below shall be satisfied or
waived in a manner acceptable to the Bank.
(c) Section 1.1 of the Loan Agreement is hereby amended by deleting the
defined term "Commitment Amount" and substituting the following in lieu thereof:
"COMMITMENT AMOUNT" shall mean the amount not less than $20,000,000 as
set forth on Exhibit "A" hereto, as amended from time to time.
SECTION 2. Modifications to Loan Agreement. The parties hereto agree
that the Loan Agreement is modified as follows:
(a) Section 2.10 of the Loan Agreement is hereby amended by deleting it
in its entirety and substituting the following in lieu thereof:
"Section 2.10. Commitment Fee; Credit Fee. Debtor agrees to pay to Bank
(a) on the date hereof and on each anniversary of the date hereof, in advance an
annual commitment fee of 0.25% of Commitment Amount, (b) on the closing date of
any increase, in advance an annual commitment fee of 0.25% of the increase
amount, and (c) in arrears due ten days after receipt of invoice from the
<PAGE>
Bank, prepared as of the last day of December, March, June and September and on
the Termination Date, commencing December 31, 1996, a quarterly credit fee equal
to 0.125% per annum of the average unused portion of the Commitment Amount. The
commitment fees payable pursuant to (a) and (b) shall be pro-rated in the event
that the remaining term of the Loan is less than one (1) year.
(b) Section 9.3 of the Loan Agreement is hereby amended to provide
notices to the Bank shall be given to :
SouthTrust Bank of Alabama, National Association
150 Second Avenue North
Suite 470
St. Petersburg, FL 33701
Attention: Florida Corporate Office
(c) Exhibit "A" and Exhibit "B are hereby deleted in their entirety and
Exhibit "A" , Exhibit "B" , and Exhibit "C" attached hereto shall be substituted
in lieu thereof.
SECTION 3. Conditions. The effectiveness of this First Amendment shall
be conditioned upon delivery to the Bank of the following items:
(a) Promissory Note. The Debtor shall issue and deliver to the
Bank, in exchange for the Promissory Note issued on November 18, 1996, a duly
executed Promissory Note payable to the Bank, in the amount of the Commitment as
increased hereby.
(b) Up-front Fees. The Bank shall receive on the Effective
Date an up-front commitment fee equal to $6,250 based on one-quarter of one
percent (1/4%) of the Five Million Dollars ($5,000,000) increase as calculated
annually, pro-rata for the period from the Effective Date to November 18, 1997,
the anniversary of the Commitment.
(c) Certificate of the Borrower. The Bank shall have received
a certificate dated as of the Effective Date from the Debtor, in form and
substance satisfactory to the Bank, certifying on behalf of the Debtor that all
representations and warranties of the Debtor contained in this Amendment and the
Loan Documents to the extent applicable as of the Effective Date are true and
correct in all material respects; that the Debtor is not in violation of any of
the covenants contained in the other Loan Documents; that, after giving effect
to the transactions contemplated by this Amendment, no Default or Event of
Default has occurred and is continuing; and that the Debtor has satisfied each
of the closing conditions regarding the First Amendment to be satisfied thereby.
(d) Certificate of Secretary. The Bank shall have received a
certificate of the secretary or assistant secretary of the Debtor certifying on
behalf of the Debtor that the articles of incorporation and bylaws of the Debtor
delivered to the Bank on November 18, 1996 have not been repealed, revoked,
rescinded or amended in any respect; that attached thereto is a true and
complete copy of resolutions duly adopted by the Board of Directors of the
Debtor, authorizing the execution, delivery and performance of this Amendment
and the continued effectiveness of the other Loan Documents; and as to the
incumbency and genuineness of the signature of each officer of the Debtor
<PAGE>
executing Loan Documents to which the Debtor is a party.
(e) Opinion of Counsel. The Bank shall have received a
favorable opinion of counsel to the Debtor, dated as of the Effective Date and
addressed to the Bank, in form and substance satisfactory to the Bank.
(f) Additional Items. Receipt by the Bank of any other
document or instrument reasonably requested by it in connection with the
execution of this First Amendment.
SECTION 4. Limited Amendment. Except as expressly amended herein, the
Loan Agreement and each other Loan Documents shall continue to be, and shall
remain, in full force and effect. This First Amendment shall not be deemed (a)
to be a waiver of, or consent to, or a modification or amendment of, any other
term or condition of the Loan Agreement or any other Loan Documents or (b) to
prejudice any other right or rights which the Bank may now have or may have in
the future under or in connection with the Loan Agreement or the Loan Documents
or any of the instruments or agreements referred to therein, as the same may be
amended, restated or otherwise modified from time to time.
SECTION 5. Representations and Warranties. By its execution hereof, the
Debtor hereby certifies on behalf of itself that each of the representations and
warranties set forth in the Loan Agreement and the other Loan Documents is true
and correct to the extent applicable as of the date hereof as if fully set forth
herein and that as of the date hereof no Default or Event of Default has
occurred and is continuing.
SECTION 6. Expenses. The Debtor shall pay all closing costs in
connection with the preparation, execution and delivery of this First Amendment
and any related documents, including, without limitation, the reasonable
attorney's fees incurred by the Bank.
SECTION 7. Counterparts. This First Amendment may be executed in
separate counterparts, each of which when executed and delivered is an original
but all of which taken together constitute one and the same instrument.
SECTION 8. Miscellaneous. This First Amendment contains the final,
complete, and exclusive expression of the understanding between the parties
regarding the transaction contemplated by it. A waiver or modification of any
provisions of this First Amendment is valid only if the waiver or modification
is in writing and signed by each party. The failure or delay by the Bank to
exercise any right, power or privilege under this First Amendment will not
operate as a waiver of any such right, power or privilege. The titles and
headings preceding the text of the sections of this First Amendment have been
inserted solely for convenience of reference and do not affect this agreement's
meaning or effect. Debtor may not assign its interest in the Loan Agreement, as
modified by the First Amendment, without the prior written approval of the Bank,
and this First Amendment binds the successors and assigns of the parties.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the date set forth above.
DEBTOR: BANK:
TANGER PROPERTIES LIMITED SOUTHTRUST BANK OF ALABAMA,
PARTNERSHIP NATIONAL ASSOCIATION
By: TANGER FACTORY OUTLET
CENTERS, INC.
By:____________________________ By:________________________________
Stanley K. Tanger Name:___________________________
Chairman of the Board Title:__________________________
Chief Executive Officer
STATE OF_____________________
COUNTY OF____________________
The foregoing First Amendment was sworn to and subscribed before me
this _____ day of May, 1997, by Stanley K. Tanger, who is personally known to
me, as Chairman of the Board and Chief Executive Officer of Tanger Factory
Outlet Centers, Inc., General Partner of Tanger Properties Limited Partnership.
---------------------------------
Print Name:
Notary Public, State of ______
My Commission Number is:
My Commission Expires:
<PAGE>
Exhibit A
Commitment Amount
$20,000,000.00
<PAGE>
Exhibit B
Form of Note
PROMISSORY NOTE
PRINCIPAL AMOUNT: $20,000,000.00 Date of Note: May 22, 1997
PROMISE TO PAY. TANGER PROPERTIES LIMITED PARTNERSHIP, a North Carolina Limited
Partnership ("Debtor") promises to pay to the order of SOUTHTRUST BANK OF
ALABAMA, NATIONAL ASSOCIATION ("Bank"), in lawful money of the United States of
America the sum of TWENTY MILLION AND NO/100 DOLLARS ($20,000,000) or such other
or lesser amounts as may be reflected from time to time on the books and records
of Bank as evidencing the aggregate unpaid principal balance of loan advances
made to Debtor on a multiple advance basis as provided below, together with
simple interest assessed at the Prime Rate or LIBOR Adjusted Rate as selected by
Debtor pursuant to the Loan Agreement (defined below), commencing on the date
hereof and continuing until this Note is paid in full, or until default under
this Note with interest thereafter being subject to the default interest rate
provisions set forth herein. This Note is issued pursuant to, and entitled to
the benefits of, that certain Loan Agreement dated as of November 18, 1996, and
First Amendment to Loan Agreement of even date herewith between Debtor and the
Bank, as the same may be amended, modified, or restated from time to time (as so
amended, modified, or restated, the "Loan Agreement"). This Note is further
entitled to the benefits of the Guaranty, as defined in the Loan Agreement.
MULTIPLE ADVANCE LOAN. This Note contemplates multiple loan advances. Debtor is
entitled to borrow, repay, and borrow again, provided, that the aggregate of all
loan advances outstanding at any time shall not exceed the principal amount
listed above, and provided further that the provisions of the Loan Agreement
shall govern the conditions and provisions of borrowings and repayments
hereunder. Debtor agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Debtor's deposit accounts with Bank in accordance with the instructions of an
authorized person. The unpaid principal balance owing on this Note at any time
may be evidenced by endorsements on this Note or by Bank's internal records,
including daily computer print-outs.
PAYMENT. Debtor will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on the Termination Date as defined in the Loan
Agreement. In addition, Debtor will pay monthly payments of accrued unpaid
interest beginning June 15, 1997 and all subsequent interest payments are due on
the same day of each month after that until this Note is paid in full. Interest
on this Note is computed on a 365/360 simple interest basis; that is, by
applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Debtor will pay Bank at the
address shown in the Loan Agreement, or at such other place as Bank may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to accrued unpaid interest, then to principal,
and any remaining amount to any unpaid collection costs and late charges.
<PAGE>
PREPAYMENT. Debtor may prepay this Note in whole or in part at any time subject
to the terms and provisions of the Loan Agreement. If Debtor prepays this Note
in full, or if Bank accelerates payment, Debtor understands that, unless
otherwise required by law, any prepaid fees or charges will not be subject to
rebate and will be earned by Bank at the time this Note is signed.
LATE CHARGE. If Debtor fails to pay any payment under this Note in full within
10 days of when due, Debtor agrees to pay Bank a late payment fee in an amount
equal to 3.000% of the unpaid amount of the payment, or U.S. $25.00, whichever
is greater, with a maximum of $200.00. Late charges will not be assessed
following declaration of default and acceleration of maturity of this Note.
DEFAULT. The following actions and/or inactions shall constitute Events of
Default under this Note: The occurrence of an Event of Default under the Loan
Agreement.
BANK'S RIGHTS UPON DEFAULT. Should any one or more Events of Default occur or
exist under this Note as provided above, Bank shall have the right, at its sole
option, to declare formally this Note to be in default and to accelerate the
maturity and insist upon immediate payment in full of the unpaid principal
balance then outstanding under this Note, plus accrued interest, together with
reasonable attorneys' fees, costs, expenses and other fees and charges as
provided in the Loan Agreement.
INTEREST AFTER DEFAULT. If Bank declares this Note to be in default, based upon
an Event of Default, Bank has the right prospectively to adjust and fix the
simple interest rate under this Note until this Note is paid in full, to
eighteen (18%) percent per annum (the "Post-Default Rate").
ATTORNEYS' FEES. If Bank refers this Note to an attorney for collection, or
files suit against Debtor to collect this Note, or if Debtor files for
bankruptcy or other relief from creditors, Debtor agrees to pay Bank's
reasonable attorneys' fees in an amount not exceeding 25.000% of the unpaid debt
then owing under this Note.
NSF CHECK CHARGES. In the event that Debtor makes any payment under this Note by
check and Debtor's check is returned to Bank unpaid due to nonsufficient funds
in the deposit account, Debtor agrees to pay Bank an additional NSF check charge
equal to $15.00.
FINANCIAL STATEMENTS. Debtor agrees to provide Bank with such financial
statements and other related information at such frequencies and in such detail
as Bank may reasonably request as set forth in the Loan Agreement.
GOVERNING LAW. Debtor agrees that this Note and the loan evidenced hereby shall
be governed under the laws of the State of Alabama.
WAIVERS. To the extent permitted by applicable law, Debtor and each guarantor of
this Note hereby waive presentment for payment, protest, notice of protest and
notice of nonpayment, and severally agree that their obligations and liabilities
to Bank hereunder shall be on a "solidary" or "joint and several" basis. Debtor
and each guarantor further severally agree that discharge or release
<PAGE>
of any party who is or may be liable to Bank for the indebtedness represented
hereby shall not have the effect of releasing any other party or parties, who
shall remain liable to Bank. Debtor and each guarantor additionally agree the
Bank's acceptance of payment other than in accordance with the terms of this
Note, or Bank's subsequent agreement to extend or modify such repayment terms,
or Bank's failure or delay in exercising any rights or remedies granted to Bank
shall likewise not have the effect of releasing Debtor or any other party or
parties from their respective obligations to Bank, or of releasing any
collateral that directly or indirectly secures repayment hereof. In addition,
any failure or delay on the part of Bank to exercise any of the rights and
remedies granted to Bank shall not have the effect of waiving any of Bank's
rights and remedies. Any partial exercise of any rights and/or remedies granted
to Bank shall furthermore not be construed as a waiver of any other rights and
remedies; it being Debtor's intent and agreement that Bank's rights and remedies
shall be cumulative in nature. Debtor and each guarantor further agree that,
should any Event of Default occur or exist under this Note, any waiver or
forbearance on the part of Bank to pursue the rights and remedies available to
Bank, shall be binding upon Bank only to the extent that Bank specifically
agrees to any such waiver or forbearance in writing. A waiver or forbearance on
the part of Bank as to one default event shall not be construed as a waiver or
forbearance as to any other default. Debtor and each guarantor of this Note
further agree that any late charges provided for under this Note will not be
charges for deferral of time for payment and will not and are not intended to
compensate Bank for a grace or cure period, and no such deferral, grace or cure
period has or will be granted to Debtor in return for the imposition of any late
charge. Debtor recognizes that Debtor's failure to make timely payment of
amounts due under this Note will result in damages to Bank, including but not
limited to Bank's loss of the use of amounts due, and Debtor agrees that any
late charges imposed by Bank hereunder will represent reasonable compensation to
Bank for such damages.
SUCCESSORS AND ASSIGNS LIABLE. Debtor's and each guarantor's obligations and
agreements under this Note shall be binding upon Debtor's and each guarantor's
respective successors, heirs, legatees, devisees, administrators, executors and
assigns. The rights and remedies granted to Bank under this Note shall inure to
the benefit of Bank's successors and assigns, as well as to any subsequent
holder or holders of this Note.
CAPTION HEADINGS. Caption headings of the sections of this Note are for
convenience purposes only and are not to be used to interpret or to define their
provisions. In this Note, whenever the context so requires, the singular
includes the plural and the plural also includes the singular.
SEVERABILITY. If any provision of this Note is held to be invalid, illegal or
unenforceable by any court, that provision shall be deleted from this Note and
the balance of this Note shall be interpreted as if the deleted provision never
existed.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER HEREBY
WAIVES THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
BROUGHT BY BANK OR BORROWER AGAINST THE OTHER TO THE EXTENT PERMITTED BY
APPLICABLE LAW.
<PAGE>
BORROWER:
TANGER PROPERTIES LIMITED PARTNERSHIP
By: TANGER FACTORY OUTLET CENTERS, INC.
By: ______________________________
Stanley K. Tanger
Chairman of Board
Chief Executive Officer
STATE OF_________________________
COUNTY OF________________________
The foregoing Promissory Note was sworn to and subscribed before me this
day of , 1997, by Stanley K. Tanger, who is
personally known to me, as Chairman of the Board and Chief Executive Officer of
Tanger Factory Outlet Centers, Inc., general partner of Tanger Properties
Limited Partnership.
__________________________________
Print Name:
Notary Public, State of___________
My Commission Number is:
My Commission Expires:
<PAGE>
Exhibit C
Termination Date
April 30, 1999
REVOLVING CREDIT AGREEMENT
Dated: As of December 18, 1997
Between
TANGER PROPERTIES LIMITED PARTNERSHIP
("Borrower")
and
FLEET NATIONAL BANK
("Lender")
$25,000,000.00
<PAGE>
TABLE OF CONTENTS
1. BACKGROUND
1.1 Defined Terms
1.2 Borrower
1.3 Use of Proceeds
1.4 Guaranties and Indemnities
1.5 Facility
2. ESTABLISHMENT OF FACILITY.
2.1 Facility
2.2 Advances
2.2.1 Time of Advance.
2.2.2 Certifications.
2.3 Maximum Facility
2.4 Interest Rate and Payment Terms
2.5 Fees
2.5.1 Commitment Fee
2.5.2 Facility Fee
3. LOAN DOCUMENTS
4. CONTINUING AUTHORITY OF AUTHORIZED REPRESENTATIVES
5. CONDITIONS PRECEDENT
5.1 Satisfactory Loan Documents
5.2 No Material Change
5.3 Warranties and Representations Accurate
5.4 Financials
5.5 Hazardous Waste, Hazardous Materials and Toxic
Substances
5.6 Organizational Documents and Entity Agreements
5.7 Votes, Consents and Authorizations
5.8 Legal and Other Opinions
5.9 Leasing Matters
5.10 No Event of Default
6. WARRANTIES AND REPRESENTATIONS
6.1 Financial Information
6.2 No Violations
6.3 No Litigation
6.4 Compliance With Legal Requirements and Environmental
Legal Requirements
6.5 Required Licenses and Permits
6.6 Use of Proceeds
6.7 Entity Matters
6.7.1 Organization
6.7.2 Ownership and Taxpayer Identification Numbers
6.7.3 Authorization
6.8 Valid and Binding
6.9 Deferred Compensation and ERISA
6.10 Conditions Satisfied
6.11 No Material Change; No Event of Default
-i-
<PAGE>
6.12 No Broker or Finder
6.13 Background Information and Certificates
6.14 Guarantor's Warranties and Representations
7. COVENANTS
7.1 Notices
7.2 Financial Statements and Reports
7.2.1 Annual Statements
7.2.2 Periodic Statements
7.2.3 Data Requested
7.3 Payment of Taxes and Other Obligations
7.4 Conduct of Business; Compliance With Law
7.5 Insurance
7.6 Indemnification Against Payment of Brokers' Fees
7.7 Limitations On Certain Transactions
7.7.1 No Merger or Acquisition
7.7.2 Guarantor's Status as a REIT
7.7.3 Limitations on Investments
7.7.4 Limitations on Conduct
7.7.5 Limitations on Acquisitions
7.7.6 Consent to Certain Actions
7.8 Deposit of Proceeds; Other Bank Accounts
7.9 Place for Records: Inspection
7.10 Costs and Expenses
7.11 Indemnification
7.12 Maintenance of Borrower's properties
7.13 Acquisitions and Dispositions of Borrower's assets
8. FINANCIAL COVENANTS
8.1 Fair Market Minimum Net Worth
8.2 Total Liabilities to Total Adjusted Asset Value
8.3 Secured Indebtedness to Total Adjusted Asset Value
8.4 EBITDA to Debt Service
8.5 Total Outstanding Unsecured Indebtedness to Adjusted
Unencumbered Asset Value
8.6 Unencumbered EBITDA to Total Outstanding Unsecured
Indebtedness
8.7 Distributions
8.8 Projects Under Development to Total Adjusted Asset
Value
8.9 Undeveloped Land Holdings to Total Adjusted Asset Value
8.10 Total Variable Rate Indebtedness to Total Adjusted
Asset Value
9. EVENTS OF DEFAULT
9.1 Events of Default
9.1.1 Generally
9.1.2 Note and Other Loan Documents
9.1.3 Other Indebtedness
9.1.4 Financial Status and Insolvency
9.1.5 Breach of Representation or Warranty
9.1.6 Guarantor Default
9.2 Grace Periods and Notice
ii
<PAGE>
9.2.1 No Notice or Grace Period
9.2.2 Nonpayment of Interest
9.2.3 Other Monetary Defaults
9.2.4 Nonmonetary Defaults Capable of Cure
9.3 Certain Lender Remedies
9.3.1 Accelerate Debt
9.3.2 Pursue Remedies
9.3.3 Written Waivers
10. ADDITIONAL REMEDIES OF LENDER
10.1 Remedies
10.2 Reimbursement
10.3 Power of Attorney
11. GENERAL PROVISIONS
11.1 Notices
11.2 Limitations on Assignment
11.3 Further Assurances
11.4 Parties Bound
11.5 Waivers, Extensions and Releases
11.6 Governing Law; Consent to Jurisdiction; Mutual Waiver
of Jury Trial
11.6.1 Substantial Relationship
11.6.2 Place of Delivery
11.6.3 Governing Law
11.6.4 Consent to Jurisdiction
11.6.5 Jury Trial Waiver
11.7 Survival
11.8 Cumulative Rights
11.9 Claims Against Lender
11.9.1 Borrower Must Notify
11.9.2 Remedies
11.9.3 Limitations
11.10 Obligations Absolute
11.11 Table of Contents, Title and Headings
11.12 Counterparts
11.13 Satisfaction of Commitment
11.14 Right to Sell
11.15 Right to Participate
11.16 Time Of the Essence
11.17 No Oral Change
11.18 Monthly Statements
11.19 Exculpation
iii
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Signatures
Exhibit A - Definitions
Exhibit B - Ownership Interests and Taxpayer
Identification Numbers
Exhibit C - Authorized Representatives
Exhibit D - Certificate of Compliance
iv
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REVOLVING CREDIT AGREEMENT
This is a Revolving Credit Agreement (this "Revolving Credit
Agreement") made and entered into as of the 18th day of December, 1997, by and
between TANGER PROPERTIES LIMITED PARTNERSHIP, a North Carolina limited
partnership having an address at 1400 West Northwood Street, Greensboro, North
Carolina 27408 ("Borrower") and FLEET NATIONAL BANK, a national banking
association having an address at 75 State Street, Boston, Massachusetts, 02109
("Lender").
WITNESSETH:
1. BACKGROUND.
1.1 Defined Terms. Capitalized terms used in this Revolving Credit
Agreement are defined either in Exhibit A, or in specific sections of this
Revolving Credit Agreement, or in another Loan Document, as referenced in
Exhibit A
1.2 Borrower. Borrower is a limited partnership organized under the
laws of the State of North Carolina of which the sole general partner is Tanger
Factory Outlet Centers, Inc., a corporation organized under the laws of the
State of North Carolina.
1.3 Use of Proceeds. Borrower has applied to Lender to establish a
revolving line of credit facility (the "Facility") in the maximum amount of
$25,000,000.00, the proceeds of which are to be used for the development or
acquisition of additional properties by the Borrower, the expansion and
improvement of any properties of the Borrower, supporting working capital needs,
the repayment of any other indebtedness of the Borrower, and to pay costs and
expenses incident to closing the Facility.
1.4 Guaranties and Indemnities. As an inducement to Lender to establish
the Facility, Tanger Factory Outlet Centers, Inc., having an address a 1400 West
Northwood Street, Greensboro, North Carolina (the "Guarantor") has agreed to
furnish a certain guaranty.
1.5 Facility. Subject to all of the terms, conditions and provisions of
this Revolving Credit Agreement, and of the agreements and instruments referred
to herein, Lender agrees to establish the Facility and Borrower agrees to accept
and repay proceeds outstanding under the Facility.
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2. ESTABLISHMENT OF FACILITY.
2.1 Facility. The Lender hereby establishes the Facility in the
Borrower's favor pursuant to which the Lender agrees to lend to the Borrower
until the Termination Date, and the Borrower agrees to borrow from the Lender,
from time to time, loans and advances (the "Advances"), provided that the
aggregate principal amount of the Facility at any one time outstanding hereunder
shall not exceed the Maximum Commitment Amount.
2.2 Advances. The Borrower may request in writing Advances under the
Facility.
2.2.1 Time of Advance. At the time of each Advance under the
Facility, the Borrower shall immediately become indebted to the Lender
for the amount thereof. Each Advance made by the Lender may, at the
Lender's option, be (i) credited by the Lender to any deposit account
of the Borrower; (ii) paid to the Borrower; or (iii) applied to any
Obligation of the Borrower to the Lender (each of the foregoing of
which may be by check, draft, or other written order or by bank wire or
other transfer).
2.2.2 Certifications. Upon requesting an Advance under the
Facility, the Borrower shall be deemed to have certified that as of the
date of such request, the following representations are each true and
correct:
(i) to the best of the Borrower's knowledge, there has
been no material adverse change in the Borrower's or
Guarantor's financial condition from the most recent financial
information furnished the Lender pursuant to this Revolving
Credit Agreement; and
(ii) to the best of the Borrower's knowledge, the
Borrower and the Guarantor are in compliance with, and have
not breached any of, the covenants contained in this Revolving
Credit Agreement; and
(iii) no event has occurred nor failed to occur which
occurrence or failure is, or with the passage of time or
giving of notice (or both), would constitute, an Event of
Default (as described herein), whether or not the Lender has
exercised any of its rights upon such occurrence or failure.
2.3 Maximum Facility. The maximum availability under the Facility shall
be $25,000,000.00 (the "Maximum Commitment Amount").
2.4 Interest Rate and Payment Terms. The Facility shall be payable as
to interest and principal in accordance with the provisions of a certain
Promissory Note dated even date herewith
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(the "Note"). The Note also provides for interest at a Default Rate (as defined
in the Note), Late Charges (as defined in the Note) and prepayment rights and
fees.
2.5 Fees.
2.5.1 Commitment Fee. Borrower shall pay a loan commitment fee
in the amount of One Hundred Twenty Five Thousand Dollars
($125,000.00), representing one half of one percent (0.50%) of the
Maximum Commitment Amount, of which Thirty One Thousand Two Hundred and
Fifty Dollars ($31,250.00) has been paid previously, (ii) Thirty One
Thousand Two Hundred and Fifty Dollars ($31,250.00) has been paid as of
the date hereof, and (iii) the balance of which shall be payable on the
earlier of (x) the date one (1) year from the date hereof or (y) the
Termination Date; provided however, the Commitment Fee shall be
entirely earned as of the date hereof.
2.5.2 Facility Fee. Borrower shall pay annually, as
compensation for the Lender's maintenance of sufficient funds available
for such purpose, in arrears, a facility fee in an amount equal to
twelve and one half (12.5) basis points computed on the average undrawn
portion of the Facility. The facility fee shall be calculated as of the
18th day of December of each year; provided however, as of the
Termination Date, the facility fee shall be calculated in its entirety
for that portion of the year expired as of the Termination Date. The
facility fee shall be due and payable on or before twenty (20) days
after Borrower's receipt of a statement from the Lender as to the
amount of such facility fee. The Lender agrees to provide the Borrower
with a worksheet detailing each calculation of the average undrawn
portion of the Facility.
3. LOAN DOCUMENTS. The obligations outstanding under the Facility
together with interest thereon and all other charges and amounts payable by, and
all other obligations of, Borrower to Lender, whenever incurred, direct or
indirect, absolute or contingent, arising under the Facility or the Loan
Documents ("Obligations") shall be made, evidenced, administered, and governed
by all of the terms, conditions and provisions of the "Loan Documents", each as
the same may be hereafter modified or amended, consisting of: (i)this Revolving
Credit Agreement; (ii) the Note; (iii) the Guaranty from Guarantor; and (iv) any
other documents, instruments, or agreements executed to further evidence or
secure the Facility. Each of the Loan Documents listed in items (i) through
(iv), inclusive is dated of even date herewith.
4. CONTINUING AUTHORITY OF AUTHORIZED REPRESENTATIVES. Lender is
authorized to rely upon the continuing authority of the persons, officers,
signatories or agents hereafter designated
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("Authorized Representatives") to bind Borrower with respect to all matters
pertaining to establishment of the Facility and the Loan Documents including,
but not limited to, requests for Advances and the selection of interest rates.
Such authorization may be changed only upon written notice to Lender accompanied
by evidence, reasonably satisfactory to Lender, of the authority of the person
giving such notice and such notice shall be effective not sooner than five (5)
Business Days following receipt thereof by Lender. The present Authorized
Representatives are listed on Exhibit C. Lender shall have a right of approval,
not to be unreasonably withheld or delayed, over the identity of the Authorized
Representatives so as to assure Lender that each Authorized Representative is a
responsible and senior official of Borrower.
5. CONDITIONS PRECEDENT. It shall be a condition precedent of Lender's
obligation to establish the Facility and make each future Advance thereunder
that each of the following conditions precedent be satisfied in full (as
determined by Lender in its discretion, which discretion shall be exercised in
good faith), unless specifically waived in writing by Lender at or prior to
closing and at or prior to each Advance under the Facility:
5.1 Satisfactory Loan Documents. Each of the Loan Documents shall be
satisfactory in form, content and manner of execution and delivery to Lender and
its counsel.
5.2 No Material Change. No material adverse change shall have occurred
in the financial condition, business, affairs, operations or control of Borrower
or Guarantor, since the date of their respective financial statements most
recently delivered to Lender: as of the date hereof, September 30, 1997 for
Borrower; September 30, 1997 for Guarantor.
5.3 Warranties and Representations Accurate. All warranties and
representations made by or on behalf of any of Borrower, or Guarantor, to Lender
shall be true, accurate and complete in all material respects and shall not omit
any material fact necessary to make the same not misleading.
5.4 Financials. Lender shall have received and approved financial
statements from Borrower and Guarantor complying with the standards set forth in
Section 7.2.
5.5 Hazardous Waste, Hazardous Materials and Toxic Substances. The
Lender shall have received, and in its sole discretion approved, satisfactory
reports from acceptable, qualified professionals prepared in accordance with
Lender's protocols indicating the acceptability of the environmental risk for
such of the Borrower's properties, as requested by the Lender.
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5.6 Organizational Documents and Entity Agreements. Lender shall have
received and approved (i) the partnership agreement and organizational documents
of the Borrower and (ii) the corporate organizational documents of the
Guarantor.
5.7 Votes, Consents and Authorizations. Lender shall have received and
approved certified copies of all partnership, entity and corporate votes,
consents and authorizations as may be reasonably required to evidence authority
for: (i) establishing the Facility and the transactions contemplated hereby;
(ii) providing continuing authorization to designated persons to deal in all
respects on behalf of Borrower; and (iii) the execution of all Loan Documents.
5.8 Legal and Other Opinions. Lender shall have received and approved
legal opinion letters from counsel representing Borrower and Guarantor which
meet Lender's legal opinion requirements previously furnished to Borrower and
Guarantor.
5.9 Leasing Matters. To the extent requested, Lender shall have
received and approved current rent rolls for the Borrower's properties.
5.10 No Event of Default. There shall not be any Event of Default under
any of the Loan Documents.
6. WARRANTIES AND REPRESENTATIONS. Borrower warrants and represents to
Lender for the express purpose of inducing Lender to enter into this Revolving
Credit Agreement, to make Advances under the Facility, and to otherwise complete
all of the transactions contemplated hereby, that as of the date of this
Revolving Credit Agreement, upon the date the initial Advance is funded and at
all times thereafter until the Facility has been repaid and all Obligations to
Lender have been satisfied as follows:
6.1 Financial Information. True, accurate and complete financial
statements of Borrower and Guarantor have been delivered to Lender and the same
fairly present the financial condition of Borrower and Guarantor as of the dates
thereof and no material and adverse change has occurred in such financial
condition since the dates thereof. All financial statements of Borrower and
Guarantor hereafter furnished to Lender shall be true, accurate and complete and
shall fairly present the financial condition of Borrower and Guarantor as of the
dates thereof.
6.2 No Violations. The establishment of the Facility and the subsequent
payment and performance of the obligations evidenced by the Loan Documents shall
not constitute a violation of, or conflict with, any law, order, regulation,
contract, agreement or organizational document to which Borrower or
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Guarantor is a party or by which Borrower or Guarantor, or the property thereof,
may be bound.
6.3 No Litigation. There is no material litigation now pending, or to
the best of Borrower's knowledge threatened, against Borrower or Guarantor which
if adversely decided could materially impair the ability of Borrower or
Guarantor to pay and perform its obligations hereunder or under the other Loan
Documents.
6.4 Compliance With Legal Requirements and Environmental Legal
Requirements. The use, operation, ownership, and development of the Borrower's
properties comply with, and shall continue to comply with, all material Legal
Requirements and Environmental Legal Requirements, and any and all covenants,
conditions, restrictions or other matters which materially affect the Borrower's
properties.
6.5 Required Licenses and Permits. All Licenses and Permits which are
reasonably required in order to use, operate, own and develop the Borrower's
properties in the usual course of business have been duly and properly obtained,
and will remain in full force and effect, and have been, and shall be complied
with, in all material respects.
6.6 Use of Proceeds. The Advances under the Facility shall be used
solely and exclusively to provide funds to support development or acquisition of
additional properties by the Borrower, the expansion and improvement of any
properties of the Borrower, supporting working capital needs, the repayment of
any other indebtedness of the Borrower, and to pay costs and expenses incident
to establishment of the Facility. No portion of the proceeds of the Facility
shall be used directly or indirectly, and whether immediately, incidentally or
ultimately (i) to purchase or carry any margin stock, or to extend credit to
others for the purpose thereof, or to repay or refund indebtedness previously
incurred for such purpose, or (ii) for any purpose which would violate or is
inconsistent with the provisions of regulations of the Board of Governors of the
Federal Reserve System including, without limitation, Regulations G, T, U and X
thereof.
6.7 Entity Matters.
6.7.1 Organization.
(i) Borrower. Borrower is a duly organized validly
existing limited partnership in good standing under the laws
of North Carolina, and is duly qualified in each jurisdiction
where the nature of its business is such that qualification is
required and has all requisite power and authority to conduct
its business
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and to own its property, as now conducted or owned, and
as contemplated by this Revolving Credit Agreement.
(ii) Guarantor. Guarantor is a duly organized validly
existing corporation in good standing under the laws of North
Carolina, and is duly qualified in each jurisdiction where the
nature of its business is such that qualification is required
and has all requisite power and authority to conduct its
business, as now conducted, and as contemplated by this
Revolving Credit Agreement.
6.7.2 Ownership and Taxpayer Identification Numbers. All of
the general partners of Borrower, and a description of the ownership
interests of Borrower held by the same, are listed in Exhibit B. The
identity and ownership of any Guarantor which is not natural person is
accurately stated on Exhibit B. The taxpayer identification numbers of
Borrower and the Guarantor are accurately stated in Exhibit B.
6.7.3 Authorization. All required partnership and corporate
actions and proceedings have been duly taken so as to authorize the
execution and delivery by Borrower and, where applicable, Guarantor of
the Loan Documents.
6.8 Valid and Binding. Each of the Loan Documents constitute legal,
valid and binding obligations of Borrower and, where applicable, Guarantor, in
accordance with the respective terms thereof, subject to bankruptcy, insolvency
and similar laws of general application affecting the rights and remedies of
creditors and, with respect to the availability of the remedies of specific
enforcement, subject to the discretion of the court before which any proceeding
therefor may be brought.
6.9 Deferred Compensation and ERISA. Borrower does not have any
pension, profit sharing, stock option, insurance or other arrangement or plan
for employees covered by Title IV of the Employment Retirement Security Act of
1974, as now or hereafter amended ("ERISA") except as may be designated to
Lender in writing by Borrower from time to time ("ERISA Plan") and no
"Reportable Event" as defined in ERISA has occurred and is now continuing with
respect to any such ERISA Plan. The establishing of the Facility, the
performance by Borrower of its obligations under the Loan Documents and
Borrower's conducting of its operations do not and will not violate any
provisions of ERISA.
6.10 Conditions Satisfied. Assuming that Lender has approved all
matters requiring their approval, all of the conditions precedent to
establishing the Facility set forth in Section 5 have been satisfied.
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6.11 No Material Change; No Event of Default. There has been no
material adverse change in the financial condition, business, affairs or control
of Borrower or Guarantor since the date of their respective last financial
statements most recently delivered to the Lender in accordance with the
requirements of Section 7.2 hereof. No Event of Default exists under any of the
Loan Documents. There is no Event of Default on the part of Borrower or
Guarantor under this Revolving Credit Agreement or any of the other Loan
Documents and to the best of the Borrower's knowledge, no event has occurred and
is continuing which could constitute an Event of Default under any Loan
Document. Borrower has filed all required federal, state and local tax returns
and has paid all taxes due pursuant to such returns or any assessments against
Borrower or the Borrower's assets.
6.12 No Broker or Finder. Neither Borrower, nor Guarantor, nor anyone
on behalf thereof, has dealt with any broker, finder or other person or entity
who or which may be entitled to a broker's or finder's fee, or other
compensation, payable by Lender in connection with establishing of the Facility.
6.13 Background Information and Certificates. All of the factual
information contained or referred to in Section 1 of this Revolving Credit
Agreement and in the Exhibits to this Revolving Credit Agreement or the other
Loan Documents, and in the certificates and opinions furnished to Lender by or
on behalf of Borrower in connection with the Facility, is true, accurate and
complete in all material respects, and omits no material fact necessary to make
the same not misleading.
6.14 Guarantor's Warranties and Representations. Borrower has no reason
to believe that any warranties or representations made in writing by Guarantor
to Lender are untrue, incomplete or misleading in any respect.
7. COVENANTS. Borrower covenants and agrees that from the date hereof
and so long as any Obligations remain outstanding hereunder, or there exists any
availability to make Advances under the Facility, as follows:
7.1 Notices. Borrower shall, with reasonable promptness, but in all
events within ten (10) days after it has actual knowledge thereof, notify Lender
in writing of the occurrence of any act, event or condition (i) which
constitutes an Event of Default under any of the Loan Documents or (ii) which
would constitute, solely with the passage of time or the giving of notice, an
Event of Default. Such notification shall include a written statement of any
remedial or curative actions which Borrower proposes to undertake to cure or
remedy such Event of Default.
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7.2 Financial Statements and Reports. Borrower shall furnish or cause
to be furnished to Lender from time to time, the following financial statements
and reports and other information, all in form, manner of presentation and
substance acceptable to Lender:
7.2.1 Annual Statements. Within 120 days of the fiscal year
end of the Borrower and the Guarantor, audited consolidating financial
statements of Borrower and Guarantor prepared in accordance with GAAP,
or other recognized method of accounting acceptable to Lender,
consistently applied, by an independent, certified public accountant
acceptable to Lender, such financial statements to include and to be
supplemented by such detail and supporting data and schedules as Lender
may from time to time reasonably determine, including, without
limitation, consolidated financial statements consisting of a balance
sheet as of the end of the fiscal year, income statements, and
statements of cash flows for the fiscal year, setting forth in each
case in comparative form the corresponding figures for the previous
fiscal year, as reported in the Form 10-K of the Borrower and
Guarantor, which are required to be filed with the Securities and
Exchange Commission, all being certified by the General Partner of the
Borrower and the chief financial officer of the Guarantor;
7.2.2 Periodic Statements. Within 45 days following the end of
each fiscal quarter the following,
(i) Certified Internally Prepared Financial
Statements. For the Borrower and the Guarantor, internally
prepared financial statements consisting of the consolidated
and consolidating balance sheets, income statements, and
statement of cash flows for the quarter just ended, and for
the fiscal year through the quarter, as reported in the Form
10-Q of the Borrower and Guarantor, which are required to be
filed with the Securities and Exchange Commission, all
certified by the General Partner and the chief financial
officer of the Guarantor, as having been prepared in
accordance with GAAP consistently applied; and
(ii) Certificate of Compliance. Contemporaneously with
the delivery of the reports referred to in clause (i) above, a
certification by the general partner of Borrower and the chief
financial officer of the Guarantor (the "Certificate of
Compliance")(x) as to the status and compliance of the
financial covenants set forth in Section 8 below and (y) to
the Borrower's knowledge that there is not occurring an Event
of Default, which certification shall be in the form attached
hereto as Exhibit D.
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7.2.3 Data Requested. Within a reasonable period of time and
from time to time, but no more frequently than quarterly unless an
Event of Default has occurred and is continuing, such other financial
data or information as Lender may reasonably request with respect to
the Borrower or the Guarantor, including, without limitation, the Form
8- K of the Borrower and Guarantor, which are required to be filed with
the Securities and Exchange Commission.
7.3 Payment of Taxes and Other Obligations. Borrower shall duly pay and
discharge, or cause to be paid and discharged, before the same shall become
overdue, all taxes, assessments and other governmental charges payable by it, or
with respect to any of the Borrower's properties.
7.4 Conduct of Business; Compliance With Law. Borrower shall own,
develop, operate and use its properties and conduct its affairs in a lawful
manner and in compliance with all Legal Requirements and Environmental Legal
Requirements applicable thereto and all provisions of ERISA to the extent that a
failure to do so would result in a material adverse effect in the conduct of the
Borrower's business or the ability of the Borrower to perform its obligations
hereunder.
7.5 Insurance. Borrower shall at all times maintain in full force and
effect the insurance coverages satisfactory to the Lender. All insurance
premiums shall be paid annually, in advance, and Lender shall be provided with
evidence of such prepayment of insurance premiums prior to closing and upon the
request of Lender. The Lender acknowledges that the insurance as of the date
hereof as reflected in the Certificate of Insurance provided by the Borrower is
satisfactory to the Lender.
7.6 Indemnification Against Payment of Brokers' Fees. Borrower agrees
to defend, indemnify and save harmless Lender from and against any and all
liabilities, damages, penalties, costs, and expenses, relating in any manner to
any brokerage or finder's fees in respect of establishing the Facility.
7.7 Limitations On Certain Transactions. Borrower and Guarantor agrees
to the following limitations:
7.7.1 No Merger or Acquisition. Neither the Borrower nor the
Guarantor shall dissolve or liquidate, nor, without notice to the
Lender, merge or consolidate with any other entity.
7.7.2 Guarantor's Status as a REIT. The Guarantor is and shall
continue to be in compliance with all requirements of law relative to
its status as a Real Estate Investment Trust ("REIT") (including
without limitation the Securities Act and the Securities Exchange Act,
and the applicable rules and regulations thereunder, state securities
laws and
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"Blue Sky") applicable to it and its respective businesses, in each
case, where the failure to comply would have a material adverse effect
on the Guarantor's status a REIT. The Guarantor has made all filings
with and obtained all consents of the Securities and Exchange
Commission as required under the Securities Act and the Securities
Exchange Act in connection with the execution, delivery and performance
by the Guarantor of each of the Obligations incurred in connection with
the Loan Documents.
7.7.3 Limitations on Investments. Except for its interest in
the Borrower, Guarantor shall be prohibited from investing in any other
partnerships, corporations, limited liability companies or other
entities whatsoever.
7.7.4 Limitations on Conduct. Guarantor shall be prohibited
from engaging in, or conducting, any business whatsoever other than the
operations conducted in its capacity as general partner of the
Borrower.
7.7.5 Limitations on Acquisitions. Guarantor shall be
prohibited from purchasing or acquiring any assets whatsoever other
than those assets purchased or acquired in its capacity as general
partner of the Borrower.
7.7.6 Consent to Certain Actions. The Guarantor shall be
allowed to undertake any of the actions prohibited in Sections 7.7.3,
7.7.4 or 7.7.5, with the prior written consent of the Lender. In the
event that the Borrower requests any such consent in writing, if the
Lender does not within fifteen (15) Business Days of the Lender's
receipt of such written request, and all information reasonably
required in order to evaluate such request, provide either the Lender's
written consent or disapproval thereof, such consent shall be deemed to
have been granted by the Lender.
7.8 Deposit of Proceeds; Other Bank Accounts.
7.8.1 Borrower shall establish a demand (checking) account
with Lender. The following account(s) have been opened for the purpose
of creating a depository account for the Property: Account No.
________________ at Fleet National Bank in the name of Tanger
Properties Limited Partnership(the "Account").
7.8.2 Lender is hereby authorized, on or after the due date,
to charge the Account with the amount of all payments due under this
Revolving Credit Agreement, the Note or the other Loan Documents. The
failure of Lender to so charge such account shall not affect or limit
Borrower's obligation to make any required payment.
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7.8.3 (i) If any payment is not made when due under any of the
Loan Documents, after giving regard to applicable grace periods, if
any, or (ii) if any Event of Default or other event which would entitle
Lender to accelerate the indebtedness under the Note; then, in any such
event, any deposits, balances or other sums credited by or due from
Lender in the Account, may to the fullest extent not prohibited by
applicable law at any time or from time to time, without regard to the
existence, sufficiency or adequacy of any other collateral, and without
notice or compliance with any other condition precedent now or
hereafter imposed by statute, rule of law or otherwise, all of which
are hereby waived, be set off, debited and appropriated, and applied by
Lender against any or all of Borrower's Obligations irrespective of
whether demand shall have been made and although such Obligations may
be unmatured, in such manner as Lender in its sole and absolute
discretion may determine. Within five (5) Business Days of making any
such set off, debit or appropriation and application with respect to
the Account, Lender agrees to notify Borrower thereof, provided the
failure to give such notice shall not affect the validity of such set
off, debit or appropriation and application.
7.9 Place for Records: Inspection. Borrower shall maintain business
records at the address specified at the beginning of this Revolving Credit
Agreement, as such address may be changed upon notice to the Lender. Upon notice
and at reasonable times during normal business hours Lender shall have the right
(through such agents or consultants as Lender may designate) to examine
Borrower's assets, including, without limitation, the Borrower's properties, and
make copies of and abstracts from Borrower's books of account, correspondence
and other records and to discuss its financial and other affairs with any of its
partners and any accountants hired by Borrower, it being agreed that Lender
shall use reasonable efforts to not divulge information obtained from such
examination to others except in connection with Legal Requirements and in
connection with administering the Facility, enforcing its rights and remedies
under the Loan Documents and in the conduct, operation and regulation of its
banking and lending business (which may include, without limitation, the
transfer of the Facility or of participation interests therein). Any transferee
of the Facility or any holder of a participation interest in the Facility shall
be entitled to deal with such information in the same manner and in connection
with any subsequent transfer of its interest in the Facility or of further
participation interests therein.
7.10 Costs and Expenses. Borrower shall pay all fees, costs and
expenses reasonably incurred by Lender in connection with the preparation,
negotiation, execution, and delivery of the Loan Documents and any subsequent
amendments thereto, and the enforcement of Lender's rights under the Loan
Documents,
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including, without limitation, reasonable legal fees and disbursements.
7.11 Indemnification. Borrower shall at all times, both before and
after repayment of the Obligations, at its sole cost and expense defend,
indemnify, exonerate and save harmless Lender and all those claiming by, through
or under Lender ("Indemnified Party") against and from all damages, losses,
liabilities, obligations, penalties, claims, litigation, demands, defenses,
judgments, suits, proceedings, costs, disbursements or expenses of any kind
whatsoever, including, without limitation, reasonable attorneys' fees and
experts, fees and disbursements, which may at any time be imposed upon, incurred
by or asserted or awarded against the Indemnified Party and arising from or out
of:
(i) any Hazardous Materials or any violation of any
Environmental Legal Requirements applicable to the Borrower's
properties, the Borrower, or both;
(ii) any liability for damage to person or property
arising out of any violation of any Legal Requirement
applicable to the Borrower's properties, Borrower, or both; or
(iii) any act, omission, negligence or conduct at the
Borrower's properties, or arising or claimed to have arisen,
out of any act, omission, negligence or conduct of Borrower or
any contractor, sub contractor, tenant, occupant or invitee
thereof, which is in any way related to the Borrower's
properties.
Notwithstanding the foregoing, an Indemnified Party shall not be entitled to
indemnification in respect of claims arising from acts of its own gross
negligence or willful misconduct to the extent that such gross negligence or
willful misconduct is determined by the final judgment of a court of competent
jurisdiction, not subject to further appeal, in proceedings to which such
Indemnified Party is a proper party.
7.12 Maintenance of Borrower's properties. Borrower shall protect and
maintain, or cause to be maintained, in a manner consistent with Borrower's
current maintenance standards at all times, the buildings and structures now
standing or hereafter erected on the Borrower's properties, and any additions
and improvements thereto, and all personal property now or hereafter situated
therein, and the utility services, the parking areas and access roads, and all
building fixtures and equipment and articles of personal property now or
hereafter acquired and used in connection with the operation of the Borrower's
properties.
7.13 Acquisitions and Dispositions of Borrower's assets.
Borrower shall provide Lender with written notice of all
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dispositions or acquisitions of Projects within fifteen (15)days of said
disposition or acquisition.
7.14 Replacement Documentation. Upon receipt of an affidavit of an
officer of Lender as to the loss, theft, destruction or mutilation of the Note
or any other security document which is not of public record, and, in the case
of any such loss, theft, destruction or mutilation, upon surrender and
cancellation of such Note or other security document, Borrower will issue, in
lieu thereof, a replacement Note or other security document in the same
principal amount thereof and otherwise of like tenor.
8. FINANCIAL COVENANTS. Each of the financial covenants set forth
hereunder shall be calculated as of the Calculation Date, and shall be
determined in a manner acceptable to Lender.
8.1 Fair Market Minimum Net Worth. Borrower shall maintain a Fair
Market Minimum Net Worth equal to or in excess of $175,000,000.00.
8.2 Total Liabilities to Total Adjusted Asset Value. Borrower shall not
permit the ratio of Total Liabilities to Total Adjusted Asset Value to exceed
sixty (60%) percent.
8.3 Secured Indebtedness to Total Adjusted Asset Value. Borrower shall
not permit the ratio of Secured Indebtedness to Total Adjusted Asset Value to
exceed forty (40%) percent.
8.4 EBITDA to Debt Service. Borrower shall maintain the ratio of (i)
EBITDA for the twelve (12) month period ending on the Calculation Date to (ii)
Debt Service for the twelve (12) month period ending on such Calculation Date
equal to or in excess of 2.0: 1.0.
8.5 Total Outstanding Unsecured Indebtedness to Adjusted Unencumbered
Asset Value. Borrower shall not permit the ratio of Total Outstanding Unsecured
Indebtedness to Adjusted Unencumbered Asset Value to exceed sixty (60%) percent.
8.6 Unencumbered EBITDA to Total Outstanding Unsecured Indebtedness.
Borrower shall maintain the ratio of (i) Unencumbered EBITDA for the twelve (12)
month period ending on the Calculation Date to (ii) that portion of interest
expense attributable to Total Outstanding Unsecured Indebtedness for the twelve
(12) month period ending on the Calculation Date, equal to or in excess of 2.25:
1.0.
8.7 Distributions. Annual dividends and distributions will not exceed
Funds From Operations, and will be measured at each fiscal year end.
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8.8 Projects Under Development to Total Adjusted Asset Value. Borrower
will not permit the ratio of the cost value of Projects Under Development to
exceed twenty five (25%) percent of Total Adjusted Asset Value.
8.9 Undeveloped Land Holdings to Total Adjusted Asset Value. Borrower
shall not permit the ratio of cost value of all undeveloped holdings (raw
land)(exclusive of any properties determined to be Projects Under Development)
determined in accordance with GAAP to exceed fifteen (15%) percent of Total
Adjusted Asset Value.
8.10 Total Variable Rate Indebtedness to Total Adjusted Asset Value.
Borrower will not permit the ratio of Total Variable Rate Indebtedness to exceed
twenty (20%) percent of Total Adjusted Asset Value.
9. EVENTS OF DEFAULT. The following provisions deal with Events of
Default, notice, grace and cure periods, and certain rights of Lender following
an Event of Default.
9.1 Events of Default. Each of the following events, unless cured
within any applicable grace period set forth or referred to below in this
Section 9.2 shall constitute an "Event of Default":
9.1.1 Generally. A default by Borrower in the performance of
any term, provision or condition of this Revolving Credit Agreement to
be performed by Borrower, or a breach, or other failure to satisfy, any
other term, provision, condition, covenant or warranty under this
Revolving Credit Agreement and such default is not waived and remains
uncured beyond any applicable specific grace period provided for in
this Revolving Credit Agreement, or as set forth in Section 9.2 below;
9.1.2 Note and Other Loan Documents. A default by Borrower in
the payment of any principal or interest due under the Note on the due
date thereof or performance of any term or provision of the Note, or of
any of the other Loan Documents, or a breach, or other failure to
satisfy, any other term, provision, condition or warranty under the
Note, or any other Loan Document, regardless of whether the then
undisbursed portion of the Facility is sufficient to cover any payment
of money required thereby, and the specific grace period, if any,
allowed for the default in question shall have expired without such
default having been cured or waived;
9.1.3 Other Indebtedness. The occurrence of an event
constituting a default (after the expiration of any
applicable grace period without the cure or waiver thereof)
under the terms of any other Indebtedness of the Borrower to
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any one third party in the amount in excess of Five Million Dollars
($5,000,000.00); provided however, if the Indebtedness is non-recourse
to the Borrower, the occurrence of an event constituting a default
after the expiration of any applicable grace period without the cure or
waiver thereof under the terms of such Indebtedness of the Borrower to
any one third party in the amount in excess of Ten Million Dollars
($10,000,000.00).
9.1.4 Financial Status and Insolvency.
A. Borrower shall: (i) admit in writing its inability
to pay its debts generally as they become due; (ii) file a
petition in bankruptcy or a petition to take advantage of any
insolvency act; (iii) make an assignment for the benefit of
creditors; (iv) consent to, or acquiesce in, the appointment
of a receiver, liquidator or trustee of itself or of the whole
or any substantial part of its properties or assets; (v) file
a petition or answer seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under the Federal Bankruptcy laws or any other
applicable law; (vi) have a court of competent jurisdiction
enter an order, judgment or decree appointing a receiver,
liquidator or trustee of Borrower, or of the whole or any
substantial part of the property or assets of Borrower, and
such order, judgment or decree shall remain unvacated or not
set aside or unstayed for sixty (60) days; (vii) have a
petition filed against it seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under the Federal Bankruptcy laws or any other
applicable law and such petition shall remain undismissed for
sixty (60) days; (viii) have, under the provisions of any
other law for the relief or aid of debtors, any court of
competent jurisdiction assume custody or control of Borrower
or of the whole or any substantial part of its property or
assets and such custody or control shall remain unterminated
or unstayed for sixty (60) days; (ix) have an attachment or
execution levied against any substantial portion of the real
estate owned by Borrower; or (x) have any materially adverse
change in its financial condition since the date of this
Revolving Credit Agreement; or
B. any such event as set forth in Section 9.1.3 or
Section 9.1.4. A. shall occur with respect to any Guarantor or
any general partner of Borrower; or
9.1.5 Breach of Representation or Warranty. Any material
representation or warranty made by Borrower or
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Guarantor herein or in any other instrument or document relating to the
Facility shall at any time be materially false or misleading, or any
warranty shall be materially breached and such is not waived by Lender;
9.1.6 Guarantor Default. A default by Guarantor in the
performance of any term or provision of any Loan Document to which
Guarantor is a party, or the breach, or any other failure to satisfy
any other term, provision, condition or warranty imposed upon the
Guarantor in any Loan Document to which Guarantor is a party or by
which Guarantor is bound, after the expiration of any applicable grace
period without the cure or waiver thereof, such cure period being
determined in the same manner as for the Borrower.
9.2 Grace Periods and Notice. As to each of the foregoing events the
following provisions relating to grace periods and notice shall apply:
9.2.1 No Notice or Grace Period. There shall be no grace
period and no notice provision with respect to the payment of principal
at maturity and no grace period and no notice provision with respect to
defaults related to the voluntary filing of bankruptcy or
reorganization proceedings or an assignment for the benefit of
creditors, or with respect to nonmonetary defaults which are not
reasonably capable of being cured, or with respect to a breach of a
material warranty or representation under Section 6.
9.2.2 Nonpayment of Interest. As to any payment which is made
by an overdraft to Borrower's account which overdraft is not repaid
within three (3) Business Days or as to the nonpayment of interest,
there shall be a ten (10) day grace period without any requirement of
notice from Lender.
9.2.3 Other Monetary Defaults. All other monetary defaults
shall have a five (5) Business Day grace period following notice from
Lender, or, if shorter, a grace period without notice until five (5)
Business Days before the last day on which payment is required to be
made in order to avoid: (i) the cancellation or lapse of required
insurance, or (ii) a tax sale or the imposition of late charges or
penalties in respect of taxes or other municipal charges.
9.2.4 Nonmonetary Defaults Capable of Cure. As to nonmonetary
defaults which are reasonably capable of being cured or remedied,
unless there is a specific shorter or longer grace period provided for
in this Revolving Credit Agreement or in another Loan Document, there
shall be a thirty (30) day grace period following notice from Lender
or, if such default would reasonably require more than thirty (30) days
to cure or remedy, such longer period of time not to exceed a total of
one hundred and twenty (120)
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days from Lender's notice as may be reasonably required so long as
Borrower shall commence reasonable actions to remedy or cure the
default within thirty (30) days following such notice and shall
diligently prosecute such curative action to completion within such one
hundred and twenty (120) day period. However, where there is an
emergency situation in which there is danger to person or property such
curative action shall be commenced as promptly as possible. As to
breaches of warranties and representations (other than those related to
financial information or construction documents) there shall be a
thirty (30) day grace period following notice from Lender.
9.3 Certain Lender Remedies. If an Event of Default shall occur,
Lender:
9.3.1 Accelerate Debt. May declare the indebtedness evidenced
by the Note and the Obligations immediately due and payable (provided
that in the case of a voluntary petition in bankruptcy filed by
Borrower or (after the expiration of the grace period if any set forth
above) an involuntary petition in bankruptcy filed against Borrower,
such acceleration shall be automatic). Upon such an acceleration all
principal, accrued interest and costs and expenses shall be due and
payable together with interest on such principal at the Default Rate
and any applicable Yield Maintenance Prepayment Fee (as defined in the
Note); and
9.3.2 Pursue Remedies. May pursue any and all remedies
provided for hereunder, or under any one or more of the other Loan
Documents.
9.3.3 Written Waivers. If an Event of Default is waived by
Lender, in its sole discretion, pursuant to a specific written
instrument executed by an authorized officer of Lender, the Event of
Default so waived shall be deemed to have never occurred.
10. ADDITIONAL REMEDIES OF LENDER.
10.1 Remedies. Upon the occurrence of an Event of Default, whether or
not the indebtedness evidenced by the Note shall be due and payable or Lender
shall have instituted any action for the enforcement of the Note, Lender may, in
addition to any other remedies which Lender may have hereunder or under the
other Loan Documents, and not in limitation thereof, and in Lender's sole and
absolute discretion, proceed to protect and enforce its rights and remedies
under this Revolving Credit Agreement, the Note or any of the other Loan
Documents by suit in equity, action at law or other appropriate proceeding,
whether for the specific performance of any covenant or agreement contained in
this Revolving Credit Agreement and the other Loan Documents or any instrument
pursuant to which the Obligations are
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evidenced, including as permitted by applicable law, the obtaining of the ex
parte appointment of a receiver, and, if any amount owed to the Lender shall
have become due, by declaration or otherwise, proceed to enforce the payment
thereof or any other legal or equitable right of the Lender. No remedy conferred
upon the Lender or the holder of the Note in this Revolving Credit Agreement or
in any of the other Loan Documents is intended to be exclusive of any other
remedy and each and every remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or thereunder or now or hereafter existing at
law or in equity or by statute or any other provision of law.
10.2 Reimbursement. Lender shall have the right to collect and seek
reimbursement for all sums paid or incurred pursuant to any of the Loan
Documents, including Section 7.10, and all payments made or incurred by Lender
hereunder shall be paid by Borrower to Lender upon demand with interest at the
Default Rate from the date of payment by Lender to the date of payment to
Lender.
10.3 Power of Attorney. For the purpose of exercising the rights
granted by this Section 10.3, as well as any and all other rights and remedies
of Lender, Borrower hereby irrevocably constitutes and appoints Lender (or any
agent designated by Lender) its true and lawful attorney-in-fact, upon and
following any Event of Default, to execute, acknowledge and deliver any
instruments and to do and perform any acts permitted hereunder or by law in the
name and on behalf of Borrower.
11. GENERAL PROVISIONS.
11.1 Notices. Any notice or other communication (other than routine
reporting as required under the Loan Documents) in connection with this
Revolving Credit Agreement, the Note, or any of the other Loan Documents, shall
be in writing, and (i) deposited in the United States Mail, postage prepaid, by
registered or certified mail, or (ii) hand delivered by any commercially
recognized courier service or overnight delivery service such as Federal
Express, or (iii) sent by facsimile transmission, if a FAX Number is designated
below, provided a copy is also sent by first-class mail addressed:
If to Borrower:
Tanger Properties Limited Partnership
1400 West Northwood Street
Greensboro, North Carolina 27408
FAX Number: (910) 274-6632 (after December 15,
1997, Area Code 336)
Attention: Virginia R. Summerell
with copies by regular mail or such hand delivery or facsimile
transmission to:
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Vernon, Vernon, Wooten, Brown,
Andrews & Garrett
522 S. Lexington Avenue
Burlington, North Carolina 27216
FAX Number: (919) 226-3866
Attn: R. Joyce Garrett, Esquire
If to Lender:
Fleet National Bank
75 State Street
Boston, Massachusetts 02108
FAX Number: (617) 346-3220
Attention: Commercial Real Estate Loan
Administration Manager
with copies by regular mail or such hand delivery or facsimile
transmission to:
Riemer & Braunstein
Three Center Plaza
Boston, Massachusetts 02108
FAX Number: (617) 723-6831
Attention: Steven J. Weinstein, Esquire
If to the Guarantor:
Tanger Factory Outlet Centers, Inc.
1400 West Northwood Street
Greensboro, North Carolina 27408
FAX Number:(910) 274-6632 (after December 15,
1997, Area Code 336)
Attention: Virginia R. Summerell
with copies by regular mail or such hand delivery or facsimile
transmission to:
Vernon, Vernon, Wooten, Brown,
Andrews & Garrett
522 S. Lexington Avenue
Burlington, North Carolina 27216
FAX Number: (919) 226-3866
Attn: R. Joyce Garrett, Esquire
Any such addressee may change its address for such notices to such other address
in the United States as such addressee shall have specified by written notice
given as set forth above. All periods of notice shall be measured from the
deemed date of delivery.
A notice shall be deemed to have been given, delivered and received for
the purposes of all Loan Documents upon the earliest
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of: (i) if sent by such certified or registered mail, on the third Business Day
following the date of postmark, or (ii) if hand delivered at the specified
address by such courier or over night delivery service, when delivered or
tendered for delivery during customary business hours on a Business Day, or
(iii) if so mailed, on the date of actual receipt at evidenced by the return
receipt, or (iv) if so delivered, upon actual receipt, or (v) if facsimile
transmission is a permitted means of giving notice, upon receipt during
customary business hours on a Business Day as evidenced by confirmation.
11.2 Limitations on Assignment. Borrower may not assign this Revolving
Credit Agreement or the monies due thereunder without the prior written consent
of Lender in each instance.
11.3 Further Assurances. Borrower shall upon request from Lender from
time to time execute, seal, acknowledge and deliver such further instruments or
documents which Lender may reasonably require to better perfect and confirm its
rights and remedies hereunder, under the Note and under each of the other Loan
Documents,
11.4 Parties Bound. The provisions of this Revolving Credit Agreement
and of each of the other Loan Documents shall be binding upon and inure to the
benefit of Borrower and Lender and their respective successors and assigns,
except as otherwise prohibited by this Revolving Credit Agreement or any of the
other Loan Documents.
This Revolving Credit Agreement is a contract by and between Borrower
and Lender for their mutual benefit, and no third person shall have any right,
claim or interest against either Lender or Borrower by virtue of any provision
hereof.
11.5 Waivers, Extensions and Releases. Lender may at any time and from
time to time waive any one or more of the conditions contained herein or in any
of the other Loan Documents, but any such waiver, extension or release shall be
deemed to be made in pursuance and not in modification hereof, and any such
waiver in any instance, or under any particular circumstance, shall not be
considered a waiver of such condition in any other instance or any other
circumstance.
11.6 Governing Law; Consent to Jurisdiction; Mutual Waiver of Jury
Trial.
11.6.1 Substantial Relationship. It is understood and agreed
that all of the Loan Documents were negotiated, executed and delivered
in the Commonwealth of Massachusetts the parties agree has a
substantial relationship to the parties and to the underlying
transactions embodied by the Loan Documents.
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11.6.2 Place of Delivery. Borrower agrees to furnish to Lender
at the Lender's office in Boston, Massachusetts all further
instruments, certifications and documents to be furnished hereunder.
11.6.3 Governing Law. This Revolving Credit Agreement and each
of the other Loan Documents shall in all respects be governed,
construed, applied and enforced in accordance with the internal laws of
the Commonwealth of Massachusetts without regard to principles of
conflicts of law.
11.6.4 Consent to Jurisdiction. Borrower hereby consents to
personal jurisdiction in any state or Federal court located within the
Commonwealth of Massachusetts.
11.6.5 Jury Trial Waiver. BORROWER AND LENDER MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED ON THIS REVOLVING CREDIT
AGREEMENT, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS REVOLVING
CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR BORROWER AND
LENDER TO ENTER INTO THE TRANSACTIONS CONTEMPLATED HEREBY.
11.7 Survival. All representations, warranties, covenants and
agreements of Borrower, or Guarantor, herein or in any other Loan Document, or
in any notice, certificate, or other paper delivered by or on behalf of Borrower
or Guarantor pursuant hereto are significant and shall be deemed to have been
relied upon by Lender notwithstanding any investigation made by Lender or on its
behalf and shall survive the delivery of the Loan Documents and the
establishment of the Facility and each advance pursuant thereto. No review by
Lender, or by its representatives, of any opinion letters, certificates from
professionals or other item of any nature shall relieve Borrower or anyone else
of any of the obligations, warranties or representations made by or on behalf of
Borrower or Guarantor, or any one or more of them, under any one or more of the
Loan Documents.
11.8 Cumulative Rights. All of the rights of Lender hereunder and under
each of the other Loan Documents and any other agreement now or hereafter
executed in connection herewith or therewith, shall be cumulative and may be
exercised singly, together, or in such combination as Lender may determine in
its sole good faith judgment.
11.9 Claims Against Lender.
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11.9.1 Borrower Must Notify. Lender shall not be in default
under this Revolving Credit Agreement, or under any other Loan
Document, unless a written notice specifically setting forth the claim
of Borrower shall have been given to Lender within thirty (30) days
after Borrower first had actual knowledge or actual notice of the
occurrence of the event which Borrower alleges gave rise to such claim
and Lender does not remedy or cure the default, if any there be, with
reasonable promptness thereafter. Such actual knowledge or actual
notice shall refer to what was actually known by, or expressed in a
written notification furnished to, any of the persons or officials
referred to in Exhibit C as Authorized Representatives.
11.9.2 Remedies. If it is determined by the final order of a
court of competent jurisdiction, which is not subject to further
appeal, that Lender has breached any of its obligations under the Loan
Documents and has not remedied or cured the same with reasonable
promptness following notice thereof, Lender's responsibilities shall be
limited to: (i) where the breach consists of the failure to grant
consent or give approval in violation of the terms and requirements of
a Loan Document, the obligation to grant such consent or give such
approval and to pay Borrower's reasonable costs and expenses including,
without limitation, reasonable attorneys, fees and disbursements in
connection with such court proceedings; and (ii) the case of any such
failure to grant such consent or give such approval, or in the case of
any other such default by Lender, where it is also so determined that
Lender acted in bad faith, or that Lender's default constituted gross
negligence or willful misconduct, the payment of any actual, direct,
compensatory damages sustained by Borrower as a result thereof plus
Borrower's reasonable costs and expenses, including, without
limitation, reasonable attorneys' fees and disbursements in connection
with such court proceedings.
11.9.3 Limitations. In no event, however, shall Lender be
liable to Borrower or to Guarantor or anyone else for other damages
such as, but not limited to, indirect, speculative or punitive damages
whatever the nature of the breach by Lender of its obligations under
this Revolving Credit Agreement or under any of the other Loan
Documents. In no event shall Lender be liable to Borrower or to
Guarantor or anyone else unless a written notice specifically setting
forth the claim of Borrower shall have been given to Lender within the
time period specified above.
11.10 Obligations Absolute. Except to the extent prohibited by
applicable law which cannot be waived, the Obligations of Borrower and the
obligations of the Guarantor under the Loan Documents shall be absolute,
unconditional and irrevocable and shall be paid strictly in accordance with the
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terms of the Loan Documents under all circumstances whatsoever, including,
without limitation, the existence of any claim, set off, defense or other right
which Borrower or any Guarantor may have at any time against Lender whether in
connection with the Facility or any unrelated transaction.
11.11 Table of Contents, Title and Headings. Any Table of Contents, the
titles and the headings of sections are not parts of this Revolving Credit
Agreement or any other Loan Document and shall not be deemed to affect the
meaning or construction of any of their provisions.
11.12 Counterparts. This Revolving Credit Agreement may be executed in
several counterparts, each of which when executed and delivered is an original,
but all of which together shall constitute one instrument. In making proof of
this agreement, it shall not be necessary to produce or account for more than
one such counterpart which is executed by the party against whom enforcement of
such loan agreement is sought.
11.13 Satisfaction of Commitment. The establishment of the Facility
being made pursuant to the terms hereof and of the other Loan Documents is being
made in satisfaction of Lender's obligations under the Commitment dated as of
October 14, 1997. The terms, provisions and conditions of this Revolving Credit
Agreement and the other Loan Documents supersede the provisions of the
Commitment.
11.14 Right to Sell. Lender shall have the unrestricted right at any
time or from time to time, to assign all or any portion of its rights and
obligations hereunder to one or more banks or other financial institutions
(each, an "Assignee"), subject to the Borrower's prior written approval as to
the identity and number, such approval not to be unreasonably withheld, and
Borrower and each Guarantor agrees that it shall execute, or cause to be
executed, such documents, including without limitation, amendments to this
Revolving Credit Agreement and to any other documents, instruments and
agreements executed in connection herewith (provided such amendments do not
increase Borrower's obligations or reduce or restrict Borrower's rights) as
Lender shall deem necessary to effect the foregoing. In addition, at the request
of Lender and any such Assignee, Borrower shall issue one or more new promissory
notes, as applicable, to any such Assignee and, if Lender has retained any of
its rights and obligations hereunder following such assignment, to Lender, which
new promissory notes shall be issued in replacement of, but not in discharge of,
the liability evidenced by the Note held by Lender prior to such assignment and
shall reflect the amount of the respective commitments and loans held by such
Assignee and Lender after giving effect to such assignment. Upon the execution
and delivery of appropriate assignment documentation, amendments and any other
documentation required by Lender in connection with such assignment, and
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written notice from the Lender to the Borrower of the effectiveness of such
assignment, such Assignee shall be a party to this Revolving Credit Agreement
and shall have all of the rights and obligations of Lender hereunder (and under
any and all other guaranties, documents, instruments and agreements executed in
connection herewith) to the extent that such rights and obligations have been
assigned by Lender pursuant to the assignment documentation between Lender and
such Assignee, and Lender shall be released from its obligations hereunder and
thereunder to a corresponding extent. Borrower shall be responsible for all fees
and expenses incurred by Lender or any Assignee relating to an increase in the
availability under the Facility and/or extension of the Maturity Date (as
defined in the Note) of the Facility. Notwithstanding the rights and obligations
granted to the Assignee, Lender shall act as sole agent for the Assignee's in
connection with the Facility and Borrower shall continue to deal solely and
directly with Lender in connection with Lender's and Assignee's rights and
obligations hereunder, unless Borrower gives prior written approval otherwise.
11.15 Right to Participate. Lender shall have the unrestricted right at
any time and from time to time, to grant to one or more banks or other financial
institutions (each, a "Participant") participating interests in Lender's
obligation to lend hereunder and/or any or all of the loans held by Lender
hereunder. In the event of any such grant by Lender of a participating interest
to a Participant, whether or not upon notice to Borrower, Lender shall remain
responsible for the performance of its obligations hereunder and Borrower shall
continue to deal solely and directly with Lender in connection with Lender's
rights and obligations hereunder, unless Borrower gives prior written approval
otherwise.
Lender may furnish any information concerning Borrower in its
possession from time to time to prospective Assignees and Participants, provided
that Lender shall require any such prospective Assignee or Participant to agree
in writing to maintain the confidentiality of such information.
11.16 Time Of the Essence. Time is of the essence of each provision of
this Revolving Credit Agreement and each other Loan Document.
11.17 No Oral Change. This Revolving Credit Agreement and each of the
other Loan Documents may only be amended, terminated, extended or otherwise
modified by a writing signed by the party against which enforcement is sought
(except no such writing shall be required for any party which, pursuant to a
specific provision of any Loan Document, is required to be bound by changes
without such party's assent). In no event shall any oral agreements, promises,
actions, inactions, knowledge, course of conduct, course of dealings or the like
be effective to amend, terminate,
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extend or otherwise modify this Revolving Credit Agreement or any of the other
Loan Documents.
11.18 Monthly Statements. While Lender may issue invoices or other
statements on a monthly or periodic basis (a "Statement"), it is expressly
acknowledged and agreed that: (i) the failure of Lender to issue any Statement
on one or more occasions shall not affect Borrower's obligations to make
payments under the Loan Documents as and when due; (ii) the inaccuracy of any
Statement shall not be binding upon Lender and so Borrower shall always remain
obligated to pay the full amount(s) required under the Loan Documents as and
when due notwithstanding any provision to the contrary contained in any
Statement; (iii) all Statements are issued for information purposes only and
shall never constitute any type of offer, acceptance, modification, or waiver of
the Loan Documents or any of Lender's rights or remedies thereunder; and (iv) in
no event shall any Statement serve as the basis for, or a component of, any
course of dealing, course of conduct, or trade practice which would modify,
alter, or otherwise affect the express written terms of the Loan Documents.
11.19 Exculpation. The Loan Documents have been negotiated, executed
and delivered on behalf of the Borrower by its Authorized Representatives or by
the Guarantor, in its capacity as the Borrower's sole general partner, or
officers thereof in their representative capacity and not individually, and bind
only the Borrower and Guarantor and no employee, agent, officer, partner or
shareholder ("Exculpated Party") of the Borrower or Guarantor shall be bound or
held to any personal liability in connection with the Obligations of the
Borrower or Guarantor thereunder, and any person or entity dealing with the
Borrower in connection therewith shall look solely to the Borrower and the
Guarantor for the payment of any claim or for the performance of any obligation
thereunder.
IN WITNESS WHEREOF this Revolving Credit Agreement has been duly
executed and delivered as a sealed instrument.
BORROWER: TANGER PROPERTIES LIMITED
PARTNERSHIP
By its General Partner
Tanger Factory Outlet Centers,
Inc.
By: /s/ Stanley K. Tanger
-------------------------
Name: Stanley K. Tanger
Title: Chairman of the Board
and Chief Executive Officer
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<PAGE>
LENDER: FLEET NATIONAL BANK
By: /s/ Aron D. Levine
----------------------
Name: Aron D. Levine
Title: Vice-President
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<PAGE>
EXHIBITS:
Exhibit A - Definitions
Exhibit B - Ownership Interests and Taxpayer
Identification Numbers
Exhibit C - Authorized Representatives
Exhibit D - Certificate of Compliance
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EXHIBIT A TO REVOLVING CREDIT AGREEMENT
DEFINITIONS
Account as defined in Section 7.8.
Adjusted Unencumbered Asset Value shall mean, as of the Calculation Date, the
sum of (A) plus (B):
"(A)" shall mean the sum of:
(i) 100% of Borrower's unrestricted operating cash and
equivalents; plus
(ii) cost value of Projects Under Development which are
included in Unencumbered Assets; plus
(iii) cost value of New Developments which are included in
Unencumbered Assets.
"(B)" shall mean
(i) (x) an amount equal to Unencumbered EBITDA for the most
recently ended fiscal quarter (as adjusted by the Borrower (1)
to take into account the Unencumbered EBITDA of any
dispositions during the subject fiscal quarter of Unencumbered
Assets owned by the Borrower and (2) to deduct Unencumbered
EBITDA for any Projects Under Development and New Developments
which are included in Unencumbered Assets, each of which
adjustments must be approved by the Lender in its reasonable
discretion), multiplied by four (4), minus (y) a capital
expenditure allowance of $0.15 times owned the gross leasable
area of Unencumbered Assets (excluding Projects Under
Development and New Developments which are included in
Unencumbered Assets); divided by
(ii) 0.10.
Advance(s) as defined in Section 2.1.
Authorized Representatives as defined in Section 4 and listed on Exhibit C.
Borrower as defined in the Preamble.
Business Day shall mean: any day of the year on which offices of
Fleet National Bank are not required or authorized by law to be
closed for business in Boston, Massachusetts. If any day on
which a payment is due is not a Business Day, then the payment
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<PAGE>
shall be due on the next day following which is a Business Day. Further, in the
event a payment is due on a specified day of the month, if there is no
corresponding day for a payment in the given calendar month (i.e., there is no
"February 30th"), the payment shall be due on the last Business Day of the
calendar month.
Calculation Date shall mean the last day of each calendar quarter commencing
with December 31, 1997.
Certificate of Compliance as defined in Section 7.2.2.
Debt Service shall mean, as of the Calculation Date, the sum of all principal
and interest payments due on all loan obligations of the Borrower for such
period, exclusive of balloon maturity payments.
Dollars shall mean lawful money of the United States.
EBITDA shall mean, as of the Calculation Date, Borrower's earnings before
interest, taxes, depreciation, and amortization, all determined in accordance
with GAAP consistently applied and excluding earnings attributable to any
project in which the Borrower owns a minority interest and any extraordinary
gains or losses.
Environmental Legal Requirements shall mean all applicable past (which have
current effect), present or future (which have effect during the term of the
Facility) federal, state, county and local laws, rules, regulations, codes and
ordinances, or any judicial or administrative interpretations thereof, and the
requirements of any governmental agency or authority having or claiming
jurisdiction with respect thereto, including, without limitation, all orders,
decrees, judgments, rulings, requirements, directives or notices of violation,
imposed through any public or private enforcement proceedings, that create one
or more duties, obligations, responsibilities or liabilities on the Borrower
with respect to the existence, use, storage, treatment, discharge, release,
containment, transportation, generation manufacture, refinement, handling,
production, disposal or management of any Hazardous Materials, or otherwise
regulating or providing for the protection of the environment, and further
including, without limitation the Comprehensive Environmental Response
Compensation and Liability Act (42 U.S.C. ss.9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. ss.1801 et seq.), the Public Health
Service Act (42 U.S.C. ss.300(f) et seq.), the Pollution Prevention Act (42
U.S.C. ss.13101 et seq.), the Federal insecticide, Fungicide and Rodenticide Act
(7 U.S.C. 5136 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
ss.6901 et seq.), the Federal Clean Water Act (33 U.S.C. ss.1251 et seq.), the
Federal Clean Air Act (42 U.S.C. ss.7401 et seq.).
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<PAGE>
ERISA and ERISA Plan each as defined in Section 6.9.
Event of Default as defined in Section 9.
Facility is defined in Section 1.3.
Fair Market Minimum Net Worth shall mean, as of the Calculation
Date, the Borrower's Total Adjusted Asset Value less Total
Liabilities.
Funds From Operations shall be as currently defined by NAREIT.
GAAP shall mean generally accepted accounting principles.
Guaranty shall mean the unconditional, continuing guaranty from Guarantor
guaranteeing payment of the Facility, and performance of all Borrower's
Obligations under the Loan Documents.
Guarantor as defined in Section 1.4.
Hazardous Materials shall mean and include asbestos, flammable materials,
explosives, radioactive substances, polychlorinated biphenyls, radioactive
substances, other carcinogens, oil and other petroleum products, pollutants or
contaminants that could be a detriment to the environment, and any other
hazardous or toxic materials, wastes, or substances in quantities which are
defined, determined or identified as such in any Environmental Legal
Requirement.
Indebtedness shall mean all obligations, contingent and otherwise in respect of
(a) all debt and similar monetary obligations, whether direct or indirect; (b)
all liabilities secured by any mortgage, pledge, security interest, lien,
charge, or other encumbrance existing on property owned or acquired subject
thereto, whether or not the liability secured thereby shall have been assumed;
(c) all liabilities under capitalized leases; and (d) all guarantees,
endorsements and other contingent obligations whether direct or indirect in
respect of indebtedness of others, including the obligations to reimburse the
issuer in respect of any letters of credit.
Indemnified Party as defined in Section 7.11.
Legal Requirements shall mean all applicable federal, state, county and local
laws, rules, regulations, codes and ordinances, and the requirements of any
governmental agency or authority having or claiming jurisdiction with respect
thereto, including, but not limited to, those applicable to zoning, subdivision,
building, health, fire, safety, sanitation, the protection of the handicapped,
and environmental matters and shall also include all orders and directives of
any court, governmental agency or authority having or claiming jurisdiction as
to the Borrower with respect thereto.
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<PAGE>
Lender as defined in the Preamble.
Leverage shall mean, as of the Calculation Date, the ratio of Total Liabilities
to Total Adjusted Asset Value.
Liabilities shall mean all Indebtedness and all other liabilities that in
accordance with GAAP should be classified upon the obligor's balance sheet as
liabilities, or to which reference should be made by footnotes thereto.
Licenses and Permits shall mean all licenses, permits, authoriza tions and
agreements issued by or agreed to by any governmental authority, and including,
but not limited to, building permits, occupancy permits and such special
permits, variances and other relief as may be required pursuant to Legal
Requirements which may be applicable to the Portfolio Properties.
Limited Partnership Agreement shall mean that certain limited partnership
agreement of the Borrower dated as of December 16, 1993.
Loan Documents as defined in Section 3.
Maturity shall mean the Maturity Date, or in any instance, the Termination Date,
if the Facility has been accelerated by Lender upon an Event of Default.
Maturity Date as defined in the Note.
Maximum Commitment Amount as defined in Section 2.3.
NAREIT means the National Association of Real Estate Investment
Trusts.
New Development shall mean, as of the Calculation Date, (x) any Project which
was a Project Under Development during the prior quarterly reporting period and
as to which conditions (i), (ii) and (iii) as provided for in the definition of
Projects Under Development have been satisfied, and (y) any project acquired
during the subject fiscal quarter, such project(s) being a New Development only
for the subject quarterly reporting period.
Obligations as defined in Section 3.
Projects Under Development shall mean, as of the Calculation Date, any project
under development by the Borrower (i) classified as construction in progress on
the Borrower's quarterly financial statements; or (ii) as to which a certificate
of occupancy has not been issued; or (iii) as to which a minimum of 70% of total
gross leasable area has not been leased and occupied by paying tenants.
Prime Rate as defined in the Note.
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<PAGE>
Projects shall mean any and all properties of the Borrower having buildings with
a gross leaseable area in excess of 50,000 sq. ft.
Revolving Credit Agreement as defined in the Preamble.
Secured Indebtedness shall mean any Indebtedness of the Borrower secured by any
encumbrance or by any security interest, lien, privilege, or charge on any real
or personal property.
Statement as defined in Section 11.18.
Termination Date shall mean the earlier of (x) the occurrence of an Event of
Default, or (y) the payment in full of Advances outstanding under the Facility
and the termination of the Borrower's right to request Advances under the
Facility, or (z) the Maturity Date.
Total Adjusted Asset Value shall mean, as of the Calculation Date, (A) plus (B)
in which:
"(A)" shall mean the sum of:
(i) unrestricted cash and cash equivalents (excluding
any tenant deposits); plus
(ii) cost value of Projects Under Development; plus
(iii) cost value of New Developments.
"(B)" shall mean:
(i) (x) an amount equal to EBITDA for the most recently ended
fiscal quarter (as adjusted by the Borrower (1) to take into
account the EBITDA of any dispositions during the subject
fiscal quarter of projects owned by the Borrower and (2) to
deduct EBITDA for any Projects Under Development or New
Developments, each of which adjustments must be approved by
Lender in its reasonable discretion), multiplied by four (4),
minus (y) a capital expenditure allowance of $0.15 times owned
gross leasable area (excluding Projects Under Development and
New Developments); divided by
(ii) 0.10.
Total Liabilities shall mean, as of the Calculation Date, the sum, after
eliminating intercompany items, of all Liabilities (including, without
limitation, deferred taxes) other than those liabilities relating to projects in
which the Borrower owns a
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<PAGE>
minority interest, of the Borrower determined in accordance with GAAP.
Total Outstanding Unsecured Indebtedness shall mean, as of the Calculation Date,
all unsecured Indebtedness of the Borrower outstanding as of the end of such
fiscal quarter, other than trade indebtedness incurred in the ordinary course of
business.
Total Variable Rate Indebtedness shall mean, as of the Calculation Date, all
Indebtedness as to which interest accrues or is payable at a variable interest
rate, exclusive of any such Indebtedness as to which the Borrower has obtained a
fixed rate interest hedge.
Unencumbered Assets shall mean real property that is wholly-owned by the
Borrower or by a partnership in which the Borrower is the sole general partner
that is not subject to a mortgage lien or to any agreement with any other lender
that prohibits the creation of a lien on such property.
Unencumbered EBITDA shall mean, as of the Calculation Date, Borrower's earnings
before interest, taxes, depreciation, and amortization on all Unencumbered
Assets, all determined in accordance with GAAP consistently applied and
excluding any extraordinary gains or losses with respect to Unencumbered Assets.
Yield Maintenance Prepayment Fee as defined in the Note.
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<PAGE>
EXHIBIT B TO REVOLVING CREDIT AGREEMENT
OWNERSHIP INTERESTS AND
TAXPAYER IDENTIFICATION NUMBERS
Borrower: Tanger Properties Limited Partnership
Tax ID 56-1822494
Owners:
General Partners: Tanger Factory Outlet Centers, Inc.
Tax ID 56-1815473
Limited Partner: Tanger Family Limited Partnership
Guarantor: Tanger Factory Outlet Centers, Inc.
Tax ID 56-1815473
Owners: New York Stock Exchange Traded Public Company
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EXHIBIT C TO REVOLVING CREDIT AGREEMENT
AUTHORIZED REPRESENTATIVES
As of the date hereof:
Stanley K. Tanger
Frank C. Marchisello, Jr.
Rochelle G. Simpson
Virginia R. Summerell
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<PAGE>
EXHIBIT D
CERTIFICATE OF COMPLIANCE
Date: _______________________
To: Fleet National Bank
75 State Street
Boston, Massachusetts
Re: Certificate of Compliance
Calculation Date: ________________________
Pursuant to Section 7.2.2 of the Revolving Credit Agreement (the
"Revolving Credit Agreement") dated as of December 18, 1997 by and between
Tanger Properties Limited Partnership (the "Borrower") and Fleet National Bank
(the "Bank"), the undersigned hereby certifies: (i) to the best of the
undersigned's knowledge, the information provided on the accompanying Financial
Statements are true and accurate in all material respects; (ii) the Borrower is
in compliance with the Financial Covenants contained in the Revolving Credit
Agreement to the extent set forth below; (iii) to the best of the undersigned's
knowledge, an Event of Default has not occurred and is continuing under the
Revolving Credit Agreement.
All capitalized terms not otherwise defined herein shall have the same
meaning as defined in the Revolving Credit Agreement, as applicable.
I. COVENANT COMPLIANCE. All calculations to support the
information set forth in the "Actual" column below are attached
hereto and are based upon the accompanying Financial Statements.
COVENANT REQUIREMENT ACTUAL
- ----------------------------------------------------------------------
Fair Market Minimum $175,000,000.00
Net Worth
Total Liabilities to Not to exceed 60%
Total Adjusted Asset
Value
Secured Indebtedness Not to exceed 40%
to Total Adjusted
Asset Value.
EBITDA to Debt Equal to or in
Service excess of 2.0:1.0
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Total Outstanding Not to exceed 60%
Unsecured
Indebtedness to
Adjusted
Unencumbered Asset
Value
Unencumbered EBITDA Equal to or in
TO Total Outstanding excess of 2.25: 1.0
Unsecured
Indebtedness
Distributions Will not exceed
Funds From
Operations
Projects Under Not to exceed 25%
Development to Total
Adjusted Asset Value
Undeveloped Land Not to exceed 15%
Holdings to Total
Adjusted Asset Value
Total Variable Rate Not to exceed 20%
Indebtedness to
Total Adjusted Asset
Value
II. LEVERAGE CALCULATION
1. Total Liabilities...........................________________
2. Total Adjusted Asset Value..................________________
3. Total Liabilities/Total Asset Value.........________________
The undersigned certifies that the information provided herein is true
and accurate, to the best of its knowledge.
TANGER PROPERTIES LIMITED
PARTNERSHIP
By its General Partner
Tanger Factory Outlet Centers,
Inc.
By:___________________________
Name:_________________________
Title: Chief Financial Officer
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PROMISSORY NOTE
25,000,000.00 As of December 18, 1997
1. Promise To Pay.
FOR VALUE RECEIVED, TANGER PROPERTIES LIMITED PARTNERSHIP, a North
Carolina limited partnership having an address at 1400 West Northwood Street,
Greensboro, North Carolina 27408 ("Borrower") promises to pay to the order of
FLEET NATIONAL BANK, a national banking association, having an address at 75
State Street, Boston, Massachusetts 02109 ("Lender"), the principal sum of
TWENTY FIVE MILLION ($25,000,000.00) DOLLARS, or so much thereof as may be
advanced, with interest thereon, or on the amount thereof from time to time
outstanding, to be computed, as hereinafter provided, on each advance from the
date of its disbursement until such principal sum shall be fully paid. Interest
shall be payable in installments as set forth in Section 4 below. The total
principal sum, or the amount thereof outstanding, together with any accrued but
unpaid interest, shall be due and payable in full on January 15, 2000 ("Maturity
Date"), which term is further defined in, and is subject to acceleration in
accordance with, the Revolving Credit Agreement pursuant to which this Note has
been issued.
2. Revolving Credit Agreement.
This Note is issued pursuant to the terms, provisions and conditions of
an agreement captioned "Revolving Credit Agreement" dated as of even date
between Borrower and Lender and evidences the Facility and Advances made
pursuant thereto. Capitalized terms used herein which are not otherwise
specifically defined shall have the same meaning herein as in the Revolving
Credit Agreement.
3. Interest Rates.
3.1. Borrower's Options. Principal amounts outstanding under the
Facility shall bear interest at the following rates, at Borrower's selection,
subject to the conditions and limitations provided for in this Note: (i)
Variable Rate or (ii) Eurodollar Rate.
3.1.1 Selection To Be Made. Borrower shall select, and thereafter may
change the selection of, the applicable interest rate, from the alternatives
otherwise provided for in this Note, by giving Lender a Notice of Rate
Selection: (i) prior to each Advance, or (ii) prior to the end of each Interest
Period applicable to a Eurodollar Advance, or (iii) on any Business Day on which
Borrower desires to convert an outstanding Variable Rate Advance to a Eurodollar
Advance.
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3.1.2 Notice. A "Notice of Rate Selection" shall be a written notice,
given by cable, tested telex, telecopier (with authorized signature), or by
telephone if immediately confirmed by such a written notice, from an Authorized
Representative of Borrower which: (i) is irrevocable; (ii) is received by Lender
not later than 12:00 o'clock Noon Eastern Time: (a) if a Eurodollar Rate is
selected, at least two (2) Business Days prior to the first day of the Interest
Period to which such selection is to apply, (b) if a Variable Rate is selected,
on the first day of the Interest Period to which it applies; and (iii) as to
each selected interest rate option, sets forth the aggregate principal amount(s)
to which such interest rate option(s) shall apply and the Interest Period(s)
applicable to each Eurodollar Advance.
3.1.3 If No Notice. If Borrower fails to select an interest rate option
in accordance with the foregoing prior to an Advance, or prior to the last day
of the applicable Interest Period of an outstanding Eurodollar Advance, or if a
Eurodollar Advance is not available, any new Advance made shall be deemed to be
a Variable Rate Advance, and on the last day of the applicable Interest Period
all outstanding principal amounts shall be deemed converted to a Variable Rate
Advance.
3.2. Telephonic Notice. Without any way limiting Borrower's obligation
to confirm in writing any telephonic notice, Lender may act without liability
upon the basis of telephonic notice believed by Lender in good faith to be from
an Authorized Representative of the Borrower prior to receipt of written
confirmation. In each case Borrower hereby waives the right to dispute Lender's
record of the terms of such telephonic Notice of Rate Selection.
3.3. Limits On Options, Selections Per Month. Each Eurodollar Advance
shall be in a minimum amount of $1,000,000 . At no time shall there be
outstanding a total of more than five (5) Eurodollar Advances combined at any
time. If Borrower shall make more than three (3) Eurodollar Rate selections in
any thirty (30) day period, excluding conversions of outstanding advances made
at the end of an applicable Interest Period of any previously outstanding
Eurodollar Advance, Lender may impose and Borrower shall pay a reasonable
processing fee for each such additional selection.
4. Payment of Interest and Principal.
4.1. Payment and Calculation of Interest. All interest shall be: (a)
payable in arrears commencing January 15, 1998 and on the same day of each month
thereafter until the principal together with all interest and other charges
payable with respect to the Facility shall be fully paid; and (b) calculated on
the basis of a 360 day year and the actual number of days elapsed. Each change
in the Prime Rate shall simultaneously change the Variable Rate payable under
this Note. Interest at the Eurodollar Rate shall be computed
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from and including the first day of the applicable Interest Period
to, but excluding, the last day thereof.
4.2. Principal. The entire principal balance shall be due and payable
in full upon Maturity.
4.3. Prepayment. The Facility or any portion thereof may be prepaid in
full or in part at any time upon three (3) days, prior written notice to the
holder of this Note without premium or penalty with respect to Variable Rate
Advances and, with respect to Eurodollar Advances subject to a Yield-Maintenance
Fee. Any partial prepayment of principal shall first be applied to any
installment of principal then due and then be applied to the principal due in
the reverse order of maturity, and no such partial prepayment shall relieve
Borrower of the obligation to pay each subsequent installment of principal when
due.
4.4. Maturity. At maturity all accrued interest, principal and other
charges due with respect to the Facility shall be due and payable in full and
the principal balance and such other charges, but not unpaid interest, shall
continue to bear interest at the Default Rate until so paid.
4.5. Method of Payment; Date of Credit. All payments of interest,
principal and fees shall be made in lawful money of the United States in
immediately available funds: (a) by direct charge to an account of Borrower
maintained with Lender (or the then holder of this Note), or (b) by wire
transfer to Lender or (c) to such other bank or address as the holder of this
Note may designate in a written notice to Borrower. Payments shall be credited
on the Business Day on which immediately available funds are received prior to
one o'clock P.M. Eastern Time; payments received after one o'clock P.M. Eastern
Time shall be credited to the Facility on the next Business Day. Payments which
are by check, which Lender may at its option accept or reject, or which are not
in the form of immediately available funds shall not be credited to the Facility
until such funds become immediately available to Lender, and, with respect to
payments by check, such credit shall be provisional until the item is finally
paid by the payor bank.
4.6. Billings. Lender may submit monthly billings reflecting payments
due; however, any changes in the interest rate which occur between the date of
billing and the due date may be reflected in the billing for a subsequent month.
Neither the failure of Lender to submit a billing nor any error in any such
billing shall excuse Borrower from the obligation to make full payment of all
Borrower's payment obligations when due, however, if Borrower makes timely
payment as specified in any such billing, the Borrower shall not be in default
under the terms of this Note or any of the other Loan Documents due to the
failure to pay any additional amount owed as reflected in any corrected billing
(the "Additional Payment Amount"), unless the Borrower fails to pay the
Additional Payment
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Amount within the grace period provided for in the Revolving Credit Agreement
from the date on which the Borrower obtains knowledge of such error.
4.7. Default Rate. Lender shall have the option of imposing, and
Borrower shall pay upon billing therefor, an interest rate which is four percent
(4%) per annum above the interest rate otherwise payable ("Default Rate"): (a)
while any monetary Default exists and is continuing, during that period between
the due date and the date of payment; (b) following any Event of Default, unless
and until the Event of Default is waived by Lender; and (c) after Maturity.
Borrower's right to select pricing options shall cease upon the occurrence of a
monetary Default or following any Event of Default.
4.8. Late Charges. Borrower shall pay, upon billing there for, a "Late
Charge" equal to three percent (3%) of the amount of any payment of principal,
other than principal due at Maturity, interest, or both, which is not paid
within ten (10) days of the due date thereof. Late charges are: (a) payable in
addition to, and not in limitation of, the Default Rate, (b) intended to
compensate Lender for administrative and processing costs incident to late
payments, (c) are not interest, and (d) shall not be subject to refund or rebate
or credited against any other amount due.
4.9. Calculation of Yield Maintenance.
(i) The Yield Maintenance Fee due in accordance with Section 4.3 shall
be calculated separately for each Eurodollar Advance prepaid prior to the
expiration of the applicable Interest Period in accordance with the following:
(A) if the Treasury Rate (with a maturity corresponding to the
last day of the applicable Interest Period) is greater than the
applicable Eurodollar Rate, there shall be no Yield Maintenance Fee
payable for such installment or balance.
(B) If the Treasury Rate (with a maturity corresponding to the
last day of the applicable Interest Period) is less than the applicable
Eurodollar Rate, the Yield Maintenance Fee shall equal the aggregate of
all Present Values, computed separately for each such Eurodollar
Advance having a separate Interest Period, of the product of:
1. the amount of each Eurodollar Advance prepaid,
multiplied by
2. the amount by which the Eurodollar Rate, expressed
as a percentage, exceeds the Treasury Rate, expressed as a
percentage, computed separately for each
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Eurodollar Advance having a different Interest Period,
and
3. which product in turn shall be multiplied by a
fraction, computed separately for each Eurodollar Advance
having a different Interest Period, the numerator of which is
the number of days from the date of prepayment to the last day
of the applicable Interest Period and the denominator of which
is 360.
(ii) The Yield Maintenance Fee shall be payable in respect of all
prepayments of Eurodollar Advances whether voluntary or involuntary including,
without limitation, prepayments made upon acceleration of the Facility.
(iii) once written notice of intention to prepay is given, the
Facility, or the applicable portion thereof, shall become due and payable in
full on the date specified in the notice of prepayment and the failure to so
prepay on such date, together with any applicable Yield Maintenance Fees
computed in accordance with Section 4.9(i), above, shall constitute an Event of
Default.
5. Certain Definitions and Provisions Relating To Interest Rate.
5.1. Adjusted LIBOR Rate. The term "Adjusted LIBOR Rate" means for each
Interest Period the rate per annum obtained by dividing (i) the LIBOR Rate for
such Interest Period, by (ii) a percentage equal to one hundred percent (100%)
minus the maximum reserve percentage applicable during such Interest Period
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System for determining the maximum reserve requirements
(including, without limitation, any basic, supplemental, marginal and emergency
reserve requirements) for Lender (or of any subsequent holder of this Note which
is subject to such reserve requirements, provided such reserve percentage for
such subsequent holder is not greater than the reserve percentage of Fleet
National Bank) in respect of liabilities or assets consisting of or including
Eurocurrency liabilities. (as such term is defined in Regulation D of the Board
of Governors of the Federal Reserve System) having a term equal to the Interest
Period.
5.2. Applicable Increment. The term "Applicable Increment" means the
additional amount of basis points added to the Adjusted LIBOR Rate for purposes
of determining the Eurodollar Rate for any applicable Interest Period. The
"Applicable Increment" shall be determined for each Interest Period on the first
day of such Interest Period as follows:
(A) If the Leverage is greater than or equal to fifty (50%)
percent, the Applicable Increment shall be one hundred and seventy five
(175) basis points;
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(B) If the Leverage is less than fifty (50%) percent, but
greater than forty (40%) percent, the Applicable Increment shall be one
hundred and sixty (160) basis points; and
(C) If the Leverage is less than or equal to forty (40%)
percent, the Applicable Increment shall be one hundred and fifty (150)
basis points.
Leverage shall be determined as of the last Calculation Date as to which the
Lender (i) has received a Certificate of Compliance and (ii) has provided
Borrower with the Interest Rate Notice.
5.3. Banking Day. The term "Banking Day" means a day on which banks are
not required or authorized by law to close in the city in which Lender's
principal office is situated.
5.4. Business Day; Same Calendar Month. For purposes of this Note, the
term "Business Day" means any Banking Day and, if the applicable Business Day
relates to the selection or determination of any Eurodollar Rate, any London
Banking Day. If any day on which a payment is due is not a Business Day, then
the payment shall be due on the next day following which is a Business Day,
unless, with respect to Eurodollar Advances, the effect would be to make the
payment due in the next calendar month, in which event such payment shall be due
on the next preceding day which is a Business Day. Further, in the event a
payment is due on a specified day of the month, if there is no corresponding day
for a payment in the given calendar month (i.e., there is no "February 30th"),
the payment shall be due on the last Business Day of the calendar month.
5.5. Dollars. The term "Dollars" or "$" means lawful money of the
United States.
5.6. Eurodollar Advance. The term "Eurodollar Advance" means any
principal outstanding under this Note which pursuant to this Note bears interest
at the Eurodollar Rate.
5.7. Eurodollar Rate. The term "Eurodollar Rate" means the per annum
rate equal to the Adjusted LIBOR Rate plus an the Applicable Increment.
5.8. Interest Period.
(A) The term "Interest Period" means with respect to each Eurodollar
Advance: a period of one (1), two (2), three (3), four (4), or six (6)
consecutive months, subject to availability, as selected, or deemed selected, by
Borrower at least two (2) Business Days prior to an Advance, or if an Advance is
already outstanding, at least two (2) Business Days prior to the first day of
the Interest Period to which such selection is to apply. Each such Interest
Period shall commence on the Business Day so selected, or
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<PAGE>
deemed selected, by Borrower and shall end on the numerically corresponding day
in the first, second, third, fourth, or sixth month thereafter, as applicable.
Provided, however: (i) if there is no such numerically corresponding day, such
Interest Period shall end on the last Business Day of the applicable month, (ii)
if the last day of such an Interest Period would otherwise occur on a day which
is not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day; but (iii) if such extension would otherwise cause such
last day to occur in a new calendar month, then such last day shall occur on the
next preceding Business Day.
(B) The term "Interest Period" shall mean with respect to each Variable
Rate Advance consecutive periods of one (1) day each.
(C) No Interest Period may be selected which would end beyond the then
Maturity Date of the Facility. If the last day of an Interest Period would
otherwise occur on a day which is not a Business Day, such last day shall be
extended to the next succeeding Business Day, except as provided above in clause
(A) relative to a Eurodollar Advance.
5.9. Interest Rate Notice. The term "Interest Rate Notice" shall mean
written notice delivered by the Lender to the Borrower after receipt of the
Certificate of Compliance setting forth the Applicable Increment for Advances
made thereafter and until delivery of the next Interest Rate Notice; provided,
however, if the Lender does not provide the Borrower within five (5) Business
Days of the receipt of any such Certificate of Compliance either the Interest
Rate Notice or a written objection to the calculation of Leverage as provided
therein, the Applicable Increment shall be determined based upon the
calculations included in such Certificate of Compliance.
5.10. LIBOR Rate. The term "LIBOR Rate" means, with respect to each
Interest Period, the rate of interest, expressed as an annual rate, equal to the
simple average, rounded up to the nearest 1/16 of 1%, of the rates shown on the
display referred to as the "Telerate Page 3750" (or any display substituted
therefor) of the Dow Jones Telerate Service as being the respective rates at
which deposits in Dollars would be offered by the principal London offices of
each of the banks named thereon to major banks in the London interbank market at
approximately 11:00 A.M. (London time) on the second London Banking Day before
the first day of such Interest Period for a period substantially coextensive
with such Interest Period.
5.11. London Banking Day. The term "London Banking Day" means any day
on which dealings in deposits in Dollars are transacted in the London interbank
market.
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<PAGE>
5.12. Maturity. The term "Maturity" shall mean the Maturity Date, or in
any instance, the Termination Date, if the Facility has been accelerated by
Lender upon an Event of Default.
5.13. Maturity Date. The term "Maturity Date" shall mean January 15,
2000.
5.14. Present Value. The term "Present Value" means the value at the
last day of the applicable Interest Period discounted to the date of prepayment
using the Treasury Rate.
5.15. Prime Rate. The term "Prime Rate" means the per annum rate of
interest so designated from time to time by Lender as its prime rate. The Prime
Rate is a reference rate and does not necessarily represent the lowest or best
rate being charged to any customer.
5.16. Treasury Rate. The term "Treasury Rate, means, as of the date of
any calculation or determination, the latest published rate for United States
Treasury Notes or Bills (but the rate on Bills issued on a discounted basis
shall be converted to a bond equivalent) as published weekly in the Federal
Reserve Statistical Release H.15(519) of Selected Interest Rates in an amount
which approximates (as determined by Lender) the amount prepaid and with a
maturity closest to the last day of the applicable Interest Period as to the
Eurodollar Advance which is prepaid in whole or in part.
5.17. Variable Rate. The term "Variable Rate" means a per annum rate
equal at all times to the Prime Rate less twenty five (25) basis points, with
changes therein to be effective simultaneously with any change in the Prime
Rate.
5.18. Variable Rate Advance. The term "Variable Rate Advance" means any
principal amount outstanding under this Note which pursuant to this Note bears
interest at the Variable Rate.
6. Additional Provisions Related to Interest Rate Selection.
6.1. Increased Costs. If, due to any one or more of: (i) the
introduction of any applicable law or regulation or any change (other than any
change by way of imposition or increase of reserve requirements already referred
to in the definition of Eurodollar Rate) in the interpretation or application by
any authority charged with the interpretation or application thereof of any law
or regulation; or (ii) the compliance with any guideline or request from any
governmental central bank or other governmental authority (whether or not having
the force of law), there shall be an increase in the cost to Lender of agreeing
to make or making, funding or maintaining Eurodollar Advances, including without
limitation changes which affect or would affect the amount of capital or
reserves required or expected to be maintained by
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<PAGE>
Lender, with respect to all or any portion of the Facility, or any corporation
controlling Lender, on account thereof, then Borrower from time to time shall,
upon written demand by Lender, either (x) pay Lender additional amounts
sufficient to indemnify Lender against the increased cost incurred, subject to
the delivery of a certificate as to the amount of the increased cost and the
reason therefor being submitted to Borrower by Lender, which in the absence of
manifest error, shall be conclusive and binding for all purposes, or (y) convert
the Eurodollar Advances to Variable Rate Advances (and pay to the Lender any
applicable Yield Maintenance Fee, as provided herein).
6.2. Illegality. Notwithstanding any other provision of this Note, if
the introduction of or change in or in the interpretation of any law, treaty,
statute, regulation or interpretation thereof shall make it unlawful, or any
central bank or government authority shall assert by directive, guideline or
otherwise, that it is unlawful, for Lender to make or maintain Eurodollar
Advances or to continue to fund or maintain Eurodollar Advances then, on written
notice thereof and demand by Lender to Borrower, (a) the obligation of Lender to
make Eurodollar Advances and to convert or continue any Advances as Eurodollar
Advances shall terminate and (b) Borrower shall convert all principal
outstanding under this Note into Variable Rate Advances.
6.3. Additional Eurodollar Conditions. The selection by Borrower of a
Eurodollar Rate and the maintenance of Advances at such rate shall be subject to
the following additional terms and conditions:
(i) Availability. If, before or after Borrower has selected to
take or maintain a Eurodollar Advance, Lender notifies Borrower that:
(a) dollar deposits in the amount and for the
maturity requested are not available to Lender in the London
interbank market at the rate specified in the definition of
LIBOR Rate set forth above, or
(b) reasonable means do not exist for Lender to
determine the Eurodollar Rate for the amounts and maturity
requested,
then the principal which would have been a Eurodollar Advance shall be
a Variable Rate Advance.
(ii) Payments Net of Taxes. All payments and prepayments of
principal and interest under this Note shall be made net of any taxes
and costs the collection or payment of which is imposed on Borrower
resulting from having principal outstanding at or computed with
reference, to a Eurodollar Rate. Without limiting the generality of the
preceding
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<PAGE>
obligation, illustrations of such taxes and costs are taxes, or the
withholding of amounts for taxes, of any nature whatsoever including
income, excise, interest equalization taxes (other than United States
or state income taxes) as well as all levies, imposts, duties or fees
whether now in existence or as the result of a change in or
promulgation of any treaty, statute, regulation, or interpretation
thereof or any directive guideline or otherwise by a central bank or
fiscal authority (whether or not having the force of law) or a change
in the basis of, or the time of payment of, such taxes and other
amounts resulting therefrom.
6.4. Variable Rate Advances. Each Variable Rate Advance shall continue
as a Variable Rate Advance until Maturity, unless sooner converted, in whole or
in part, to a Eurodollar Advance, subject to the limitations and conditions set
forth in this Note.
6.5. Conversion of Other Advances. At the end of each applicable
Interest Period, the applicable Eurodollar Advance shall be converted to a
Variable Rate Advance unless Borrower selects another option in accordance with
the provisions of this Note.
7. Acceleration; Event of Default.
At the option of the holder, this Note and the indebtedness evidenced
hereby shall become immediately due and payable without further notice or
demand, and notwithstanding any prior waiver of any breach or default, or other
indulgence, upon the occurrence at any time of any one or more of the following
events, each of which shall be an "Event of Default" hereunder and under the
Revolving Credit Agreement and each other Loan Document: (i) an Event of Default
as defined in the Revolving Credit Agreement as the same may from time to time
hereafter be amended; or (ii) an event which pursuant to any express provision
of the Revolving Credit Agreement, or of any other Loan Document, gives Lender
the right to accelerate the Facility.
8. Certain Waivers, Consents and Agreements.
The Borrower and the Guarantor hereby agree and acknowledge that: (a)
the Borrower (i) waives presentment, demand, protest, suretyship defenses and
defenses in the nature thereof; (ii) waives any defenses based upon and
specifically assents to any and all extensions and postponements of the time for
payment, changes in terms and conditions and all other indulgences and
forbearances which may be granted by the holder to any party now or hereafter
liable hereunder or for the indebtedness evidenced hereby; (iii) agrees to any
substitution, exchange, release, surrender or other delivery of any security or
collateral now or hereafter held hereunder or in connection with the Revolving
Credit Agreement, or any of the other Loan Documents, and to the addition or
release of any other party or person primarily or secondarily liable; (iv)
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<PAGE>
agrees that if any security or collateral given to secure this Note or the
indebtedness evidenced hereby or to secure any of the obligations set forth or
referred to in the Revolving Credit Agreement, or any of the other Loan
Documents, shall be found to be unenforceable in full or to any extent, or if
Lender or any other party shall fail to duly perfect or protect such collateral,
the same shall not relieve or release any party liable hereon or thereon nor
vitiate any other security or collateral given for any obligations evidenced
hereby or thereby; (v) subject to the terms of the Revolving Credit Agreement,
agrees to pay all costs and expenses incurred by Lender or any other holder of
this Note in connection with the indebtedness evidenced hereby, including,
without limitation, all attorneys' fees and costs, for the implementation of the
Facility, the collection of the indebtedness evidenced hereby and the
enforcement of rights and remedies hereunder or under the other Loan Documents,
whether or not suit is instituted; and (vi) consents to all of the terms and
conditions contained in this Note, and all other instruments now or hereafter
executed evidencing or governing all or any portion of the security or
collateral for this Note and for such Revolving Credit Agreement, or any one or
more of the other Loan Documents, and (b) the Guarantor has waived certain
rights as provided in a certain Guaranty Agreement dated as of the date hereof
executed and delivered by the Guarantor to the Lender.
9. Delay Not A Bar.
No delay or omission on the part of the holder in exercising any right
hereunder or any right under any instrument or agreement now or hereafter
executed in connection herewith, or any agreement or instrument which is given
or may be given to secure the indebtedness evidenced hereby or by the Revolving
Credit Agreement, or any other agreement now or hereafter executed in connection
herewith or therewith shall operate as a waiver of any such right or of any
other right of such holder, nor shall any delay, omission or waiver on any one
occasion be deemed to be a bar to or waiver of the same or of any other right on
any future occasion.
10. Partial Invalidity.
The invalidity or unenforceability of any provision hereof, of the
Revolving Credit Agreement, of the other Loan Documents, or of any other
instrument, agreement or document now or hereafter executed in connection with
the establishment of the Facility made pursuant hereto and thereto shall not
impair or vitiate any other provision of any of such instruments, agreements and
documents, all of which provisions shall be enforceable to the fullest extent
now or hereafter permitted by law.
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<PAGE>
11. Compliance With Usury Laws.
All agreements between Borrower, the Guarantor and Lender are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the indebtedness evidenced hereby or
otherwise, shall the amount paid or agreed to be paid to Lender for the use or
the forbearance of the indebtedness evidenced hereby exceed the maximum
permissible under applicable law. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof, provided, however, that in
the event there is a change in the law which results in a lesser or higher
maximum permissible rate of interest, then this Note shall be governed by such
new law as of its effective date. In this regard, it is expressly agreed that it
is the intent of Borrower and Lender in the execution, delivery and acceptance
of this Note to contract in strict compliance with the laws of the Commonwealth
of Massachusetts from time to time in effect. If, under or from any
circumstances whatsoever, fulfillment of any provision hereof or of any of the
Loan Documents at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by applicable law, then
the obligation to be fulfilled shall automatically be reduced to the limit of
such validity, and if under or from any circumstances whatsoever Lender should
ever receive as interest an amount which would exceed the highest lawful rate,
such amount which would be excessive interest shall be applied to the reduction
of the principal balance evidenced hereby and not to the payment of interest.
This provision shall control every other provision of all agreements between
Borrower, the Guarantor and Lender.
12. Use of Proceeds.
All proceeds of the Facility shall be used solely for the purposes more
particularly provided for and limited by the Revolving Credit Agreement.
13. Notices.
Any notices given with respect to this Note shall be given in the
manner provided for in the Revolving Credit Agreement.
14. Governing Law and Consent to Jurisdiction.
14.1. Substantial Relationship. The parties agree that the Commonwealth
of Massachusetts has a substantial relationship to the parties and to the
underlying transactions embodied by the Loan Documents.
14.2. Place of Delivery. Borrower agrees to furnish to Lender at
Lender's office in Boston, Massachusetts all further instruments, certifications
and documents to be furnished hereunder.
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<PAGE>
14.3. Governing Law. This Note and each of the other Loan Documents
shall in all respects be governed, construed, applied and enforced in accordance
with the internal laws of the Commonwealth of Massachusetts without regard to
principles of conflicts of law.
14.4. Exceptions. Notwithstanding the foregoing choice of law
provisions of Federal law and the law of the state in which a Portfolio
Property lies shall apply in defining the terms Hazardous Materials,
Hazardous Materials Legal Requirements, Environmental Legal
Requirements and Legal Requirements applicable to the Portfolio
Properties as such terms are used in the Revolving Credit Agreement,
and the other Loan Documents.
14.5. Consent to Jurisdiction. Borrower hereby consents to personal
jurisdiction in any state or Federal court located within the Commonwealth of
Massachusetts.
15. Waiver of Jury Trial.
BORROWER AND LENDER (BY ACCEPTANCE OF THIS NOTE) MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BETWEEN THE BORROWER AND THE LENDER BASED HEREON,
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER LOAN
DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR LENDER TO ACCEPT
THIS NOTE AND ESTABLISH THE FACILITY.
16. No Oral Change.
This Note and the other Loan Documents may only be amended, terminated,
extended or otherwise modified by a writing signed by the party against which
enforcement is sought. In no event shall any oral agreements, promises, actions,
inactions, knowledge, course of conduct, course of dealing, or the like be
effective to amend, terminate, extend or otherwise modify this Note or any of
the other Loan Documents.
17. Rights of the Holder.
This Note and the rights and remedies provided for herein may be
enforced by Lender or any subsequent holder hereof. Wherever the context permits
each reference to the term "holder" herein shall mean and refer to Lender or the
then subsequent holder of this Note.
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<PAGE>
18. Right to Pledge.
Lender may at any time pledge all or any portion of its rights under
the Loan Documents including any portion of this Note to any of the twelve (12)
Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or enforcement thereof shall release Lender
from its obligations under any of the Loan Documents.
19. Setoff
Lender shall have the rights of set-off provided for in the Revolving
Credit Agreement.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed
as of the date set forth above as a sealed instrument.
Witness: TANGER PROPERTIES LIMITED
PARTNERSHIP
By its General Partner,
- -----------------
Tanger Factory Outlet Centers,
Inc.
By:___________________________
Name: Stanley K. Tanger
Title: Chairman of the Board
and Chief Executive Officer
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<PAGE>
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated as of December18, 1997 (the "Guaranty"),
is given by TANGER FACTORY OUTLET CENTERS, INC., a North Carolina corporation,
with its principal offices located at 1400 West Northwood Street, Greensboro,
North Carolina 27408 (the "Guarantor"); and extended to FLEET NATIONAL BANK,
national banking association, with its principal offices located at 75 State
Street, Boston, Massachusetts 02109, (the "Lender") for the benefit of TANGER
PROPERTIES LIMITED PARTNERSHIP, a limited partnership organized under the laws
of the State of North Carolina, with its principal offices located at 1400 West
Northwood Street, Greensboro, North Carolina 27408 (the "Borrower").
RECITALS:
1. The Lender has agreed to establish, in accordance with the terms and
provisions of, amongst other documents, a certain Revolving Credit Agreement of
even date herewith (as amended, modified, renewed or extended from time to time,
the "Revolving Credit Agreement) and a certain Promissory Note of even date (as
amended, modified, renewed, or extended from time to time (the "Note"), a
certain revolving credit facility (the "Facility") in the maximum amount of
$25,000,000.00, the proceeds of which are to be used by the Borrower for the
development or acquisition of additional properties by the Borrower, the
expansion and improvement of any properties of the Borrower, supporting working
capital needs, and the repayment of any other indebtedness of the Borrower. All
of the definitions used in the Note and the Revolving Credit Agreement are
hereby incorporated herein by reference and shall have the meaning set forth in
the Note and the Revolving Credit Agreement unless otherwise defined herein.
2. The Guarantor is the sole general partner of the Borrower.
3. Without this Guaranty the Lender would be unwilling to establish the
Facility and make Advances thereunder to Borrower.
4. Because of the direct benefit to the Guarantor from the
establishment of the Facility for the use of the Borrower, the Guarantor agrees
to guarantee to the Lender the Obligations.
NOW THEREFORE, in consideration of the Lender entering into the
Revolving Credit Agreement and establishing the Facility and making the Advances
thereunder to the Borrower, and subject to the covenants and conditions of
Section 20 below:
1. Guaranty of Payment. The Guarantor hereby unconditionally guarantees
to the Lender the payment, when due, by acceleration or otherwise, of the
Obligations. For the purposes hereof, the term "Obligations" shall have the
meaning ascribed to it under the Revolving Credit Agreement and include, without
limitation, Advances under the Facility, whether existing now or arising
hereafter.
2. Guaranty of Performance. The Guarantor additionally unconditionally
guarantees the Lender the timely performance of all other liabilities and
obligations of the Borrower under the Revolving Credit Agreement and all of the
Loan Documents.
In the event of the occurrence of an Event of Default as defined in the
Revolving Credit Agreement relating to any of the foregoing conditions, and
without the necessity of any notice from the Lender to the Guarantor, the
Guarantor agrees to indemnify and hold the Lender harmless from any and all
loss, cost, liability or expense the Lender may suffer by reason of any such
event. The Lender shall accept performance by the Guarantor of the Obligations
under the Revolving Credit Agreement and the Loan Documents, and so long as all
of said Obligations are being performed by
<PAGE>
the Borrower or the Guarantor and there is occurring no other Event of Default,
the Lender will make the Facility proceeds available under the terms of the
Revolving Credit Agreement, the Note, and the Loan Documents.
3. Subordination. Upon the occurrence and during the continuance of any
Event of Default as defined in the Revolving Credit Agreement, no payments shall
be made by Borrower or received by the Guarantor on any indebtedness, now or
hereafter existing, of the Borrower to the Guarantor.
4. Waiver of Rights. Subject to all other provisions of this Guaranty,
including, but not limited to, Section 20, the Guarantor expressly waives and
relinquishes to the fullest extent now or hereafter not prohibited by applicable
law, with respect to the Obligations and the Loan Documents: (a) notice of
acceptance of this Guaranty by the Lender and of all extensions of credit
pursuant to the Revolving Credit Agreement, the Note, and the Loan Documents to
the Borrower by the Lender; (b) presentment and demand for payment of any of the
Obligations; (c) demand for payment under this Guaranty; (d) all suretyship
defenses and defenses in the nature thereof , (e) any right or claim of right to
cause a marshalling of the assets of the Borrower, or to cause Lender to proceed
against any of the other security for the Obligations before proceeding under
this Guaranty against the Guarantor, or if there shall be more than one
guarantor, to require Lender to proceed against any other guarantor or any of
such guarantors in any particular order, (f) notice of the acceptance hereof,
presentment, demand for payment, protest, notice of protest, notice of dishonor,
or any and all notice of nonpayment, nonperformance, nonobservance or default,
or other proof or notice of demand whereby to charge Guarantor therefor; and (g)
any right to assert against the Lender, as a defense, counterclaim, set-off, or
cross-claim any defense (legal or equitable), set-off, counterclaim or claim
which the Guarantor may now or hereafter have against the Lender or the
Borrower. Such waiver shall not prevent the Guarantor from asserting against the
Lender in a separate action, any claim, action cause of action, or demand that
the Guarantor might have arising out of this Guaranty or the Revolving Credit
Agreement, the Note or any other Loan Documents, to the extent not arising out
of a suretyship defense or any other claim otherwise waived pursuant to
subparagraphs (a), (b), (c), (e), (f), or (g), above.
Guarantor and Lender (evidenced by the acceptance of this Guaranty)
mutually hereby knowingly, voluntarily and intentionally waives the right to a
trial by jury in respect of any litigation based on this Guaranty, arising out
of, under or in connection with this Guaranty or any of the other Loan Documents
or, in connection with this Guaranty, any course of conduct, course of dealings,
statements, (whether verbal or written) or actions of any party. This waiver is
given as a material inducement to Lender to accept this Guaranty and to
establish the Facility.
5. Primary Liability of the Guarantor. The Guarantor agrees that this
Guaranty may be enforced by the Lender. The Guarantor further agrees that
nothing contained herein shall prevent the Lender, from suing on the Note or
from exercising any other rights available to it under the Note, the Revolving
Credit Agreement, or any other instrument evidencing the Obligations if neither
the Borrower nor the Guarantor timely performs the Obligations, and the exercise
of any of the aforesaid rights shall not constitute a discharge of any of the
Guarantor's obligations hereunder, it being the purpose and intent of the
Guarantor that the Guarantor's obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances. Neither the
Guarantor's obligations under the Guaranty nor any remedy for the enforcement
thereof shall be impaired, modified, changed or released in any manner
whatsoever by an impairment, modification, change, release or limitation of the
liability of the Borrower or any co-guarantor or by reason of the Borrower's or
any co- guarantor's bankruptcy or insolvency. The Guarantor acknowledges that
the term "Obligations" as used herein includes any payments made by the Borrower
to the Lender and subsequently recovered by the Borrower or a trustee for the
Borrower pursuant to the Borrower's bankruptcy or insolvency. At any time the
Lender is entitled to exercise its remedies hereunder, it may in its discretion
elect
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<PAGE>
to demand payment or performance. In the event the Lender elects to demand
performance, it shall at all times thereafter have the right to demand payment
until all of the Obligations have been paid in full. In the event the Lender
elects to demand payment, it shall at all times thereafter have the right to
demand performance until all of the Obligations have been paid in full.
6. No Impairment. Subject to all other provisions of this Guaranty,
including, but not limited to, Section 20, the liability of Guarantor hereunder
shall in no way be limited or impaired by, and Guarantor hereby assents to and
agrees to be bound by, any amendment or modification of the provisions of the
Loan Documents to or with Lender by Borrower or any other Guarantor. In
addition, the liability for the repayment of the Obligations to the Lender of
Guarantor under this Guaranty and the other Loan Documents shall in no way be
limited or impaired by:
A. any extensions of time for performance required by
any of the Loan Documents;
B. any amendment to or modification of any of the
Loan Documents;
C. any sale or assignment of the Loan;
D. the accuracy or inaccuracy of any of the
representations or warranties made by or on behalf
of Borrower, any general partner of Borrower, or
Guarantor, under any Loan Document or otherwise;
E. the release of Borrower, or any other person or
entity, from performance or observance of any of
the agreements, covenants, terms or conditions
contained in any of the Loan Documents by
operation of law, Lender's voluntary act, or
otherwise;
F. the filing of any bankruptcy or reorganization
proceeding by or against Borrower;
G. the release of any other party now or hereafter
liable upon or in respect of this Guaranty or any
of the other Loan Documents; or
H. the invalidity or unenforceability of all or any
portion of any of the Loan Documents as to
Borrower or any other person or entity.
Any of the foregoing may be accomplished with or without
notice to Borrower, or any Guarantor and with or without
consideration
7. Waiver of Subrogation Rights. The Guarantor agrees that (i) during
the period prior to the payment in full of the Obligations the Guarantor shall
have no rights of subrogation, reimbursement, contribution, exoneration or
indemnity whatsoever against Borrower for the Guarantor's payment to the Lender
of the Guarantor's obligation under this Guaranty (hereinafter referred to as
the "Rights"), and (ii) the Guarantor waives and renounces but only during the
period set forth in (i) above any Rights the Guarantor has or may have against
the Borrower for the Guarantor's payment to the Lender of Guarantor's
obligations under this Guaranty. This waiver is expressly intended to prevent
the existence of any claim (as defined in the Bankruptcy Code) in respect of
such Rights by the Guarantor and to prevent the Guarantor from being a creditor
of Borrower due to such Rights unless the Lender has received payment in full of
the Obligations.
8. Attorney's Fees and Costs of Collection. If at any time or times
hereafter the Lender employs counsel to pursue collection, to intervene, to sue
for enforcement of the terms hereof or of
-3-
<PAGE>
the Revolving Credit Agreement, the Note, or the Loan Documents, or to file a
petition, complaint, answer, motion or other pleading in any suit or proceeding
relating to this Guaranty or the Revolving Credit Agreement, the Note, or the
Loan Documents, then in such event, all of the reasonable attorneys' fees
relating thereto shall be an additional liability of the Guarantor to the
Lender, payable on demand.
9. Term of Guaranty; Warranties. This Guaranty shall continue in full
force and effect until the Obligations are fully paid. This Guaranty covers the
Obligations whether presently outstanding or arising subsequent to the date
hereof including all Advances under the Facility made pursuant to the Revolving
Credit Agreement, the Note, or the Loan Documents. The Guarantor warrants and
represents to the Lender, (i) that this Guaranty is binding upon and enforceable
against the Guarantor, in accordance with its terms, (ii) that the execution and
delivery of this Guaranty do not violate or constitute a breach of any agreement
to which the Guarantor is a party or of any applicable laws, (iii) that there is
no litigation, claim, action or proceeding pending, or to the best knowledge of
the Guarantor, threatened against the Guarantor which would materially adversely
affect the financial condition of the Guarantor or its ability to fulfill its
obligations hereunder. Guarantor agrees to submit to the Lender financial
statements in accordance with the terms and provisions of the Revolving Credit
Agreement. Guarantor agrees to promptly inform the Lender of the adverse
determination of any litigation, claim, action or proceeding or the institution
of any litigation, claim, action or proceeding against Guarantor which does or
could materially adversely affect the financial condition of the Guarantor or
its ability to fulfill its obligations hereunder. This Guaranty is binding on
and enforceable against the Guarantor, its successors and assigns. The Guarantor
represents and warrants that (i) it is a corporation duly organized, existing
and in good standing under the laws of the State of North Carolina, with stock
outstanding that has been duly and validly issued, (ii) it has the corporate
power, authority and legal right to carry on the business now being conducted by
it and to engage in the transactions contemplated by this Guaranty and the Loan
Documents, and (iii) the execution and delivery of this Guaranty and the
performance and observance of the provisions hereof have been duly authorized by
all necessary corporate and, if required, stockholder action.
10. Further Representations and Warranties. The Guarantor further
represents to the Lender that the Guarantor has knowledge of the Borrower's
financial condition and affairs and represents and agrees that it will keep so
informed while the Guaranty is in force. The Guarantor agrees that the Lender
will have no obligation to investigate the financial condition or affairs of the
Borrower for the benefit of the Guarantor nor to advise the Guarantor of any
fact respecting, or any change in, the financial condition or affairs of the
Borrower which might come to the knowledge of the Lender at any time, whether or
not the Lender knows or believes or has reason to know or believe that any such
fact or change is unknown to the Guarantor or might (or does) materially
increase the risk of the Guarantor as guarantor or might (or would) affect the
willingness of the Guarantor to continue as guarantor with respect to the
Obligations.
11. Additional Liability of the Guarantor. If the Guarantor is or
becomes liable for any indebtedness owing by the Borrower to the Lender by
endorsement or otherwise than under this Guaranty, such liability shall not be
in any manner impaired or reduced hereby but shall have all the same force and
effect it would have if this Guaranty had not existed and the Guarantor's
liability hereunder shall not be in any manner impaired or reduced thereby.
12. Cumulative Rights. All rights of the Lender hereunder or otherwise
arising under any documents executed in connection with the Obligations are
separate and cumulative and may be pursued separately, successively or
concurrently, or not pursued, without affecting or limiting any other right of
the Lender and without affecting or impairing the liability of the Guarantor.
-4-
<PAGE>
13. Usury. Notwithstanding any other provisions herein contained, no
provision of this Guaranty shall require or permit the collection from the
Guarantor of interest in excess of the maximum rate or amount that the Guarantor
may be required or permitted to pay pursuant to any applicable law.
14. Multiple Counterparts; Pronouns; Captions; Severability. This
Guaranty may be executed in multiple counterparts, each of which shall be deemed
an original but all of which shall constitute but one and the same document. The
pronouns used in this instrument shall be construed as masculine, feminine or
neuter as the occasion may require. Captions are for reference only and in no
way limit the terms of this Guaranty. Invalidation of any one or more of the
provisions of this Guaranty shall in no way affect any of the other provisions
hereof, which shall remain in full force and effect.
15. Lender Assigns. This Guaranty is intended for and shall inure to
the benefit of the Lender and each and every person who shall from time to time
be or become the owner or holder of any of the Obligations, and each and every
reference herein to the "Lender" shall include and refer to each and every
successor or assignee of the Lender at any time holding or owning any part of or
interest in any part of the Obligations.
This Guaranty shall be transferable and negotiable with the same force
and effect and to the same extent, that the Obligations are transferable and
negotiable, it being understood and stipulated that upon assignment or transfer
by the Lender of its rights and duties under the Revolving Credit Agreement or
by the Lender of any of the Obligations, the successor under the Revolving
Credit Agreement, or the legal holder or owner of said Obligations (or a part
thereof or interest therein thus transferred or assigned by the Lender), as the
case may be, shall (except as otherwise stipulated by the Lender in its
assignment) have and may exercise all of the rights granted to the Lender under
this Guaranty to the extent of that part of or interest in the Obligations thus
assigned or transferred to said person. The Guarantor expressly waives notice of
transfer or assignment of the Obligations, or any part thereof, or of the rights
of the Lender hereunder. Failure to give notice will not affect the liability of
the Guarantor hereunder.
16. Application of Payments. The Lender may apply any payments received
by it from any source against that portion of the Obligations (principal,
interest, court costs, attorneys' fees or other) in such priority and fashion as
it may deem appropriate.
17. Notices. All notices required to be given hereunder shall be in
writing and shall be deemed served at the earlier of (i) receipt or (ii)
seventy-two (72) hours after deposit in registered, certified or first-class
United States mail, postage prepaid, or (iii) upon delivery when deposited with
Federal Express, Airborne Express, or other similar courier providing next-day
deliveries, in each case, addressed to the parties at the following addresses,
or such other addresses as may from time to time be designated by written notice
given as herein required.
to the Guarantor:
Tanger Factory Outlet Centers, Inc.
1400 West Northwood Street [zip 27408]
P.O. Box 29168
Greensboro, NC 27429
Attention: Mr. Stanley K. Tanger and
Ms. Virginia Summerell
-5-
<PAGE>
to the Lender:
Fleet National Bank
75 State Street
Boston, Massachusetts 02109
Attn: Commercial Real Estate Loan Administration
Personal delivery or any officer, agent or employee of a party at its address
herein shall constitute receipt. Rejection or other refusal to accept or
inability to deliver because of changed address of which no notice has been
received shall also constitute receipt. Notwithstanding the foregoing, no notice
of change of address shall be effective until the date of receipt thereof. This
section shall not be construed in any way to affect or impair any waiver of
notice of demand herein provided or to require giving of notice or demand to or
upon the Guarantor in any situation or for any reason.
18. Governing Law. This Guaranty shall be deemed to be a contract made
under and for all purposes shall be construed in accordance with, the internal
laws and judicial decisions of the Commonwealth of Massachusetts. The Guarantor
and the Lender agree that any dispute arising out of this Guaranty shall be
subject to the jurisdiction of both the state and federal courts in the
Commonwealth of Massachusetts. For that purpose, the Guarantor hereby submits to
the jurisdiction of the state and federal courts of the Commonwealth of
Massachusetts. The Guarantor further agrees to accept service of process out of
any of the before mentioned courts in such dispute by registered or certified
mail addressed to the Guarantor.
19. Federal Tax Identification Number. The Guarantor hereby certifies
to the Lender that the Guarantor's federal tax identification number is
56-1815473.
20. Lender Covenants. Notwithstanding any other provisions of this
Guaranty by accepting this Guaranty Lender warrants, covenants and agrees as
follows: (a) Lender will not institute an action against the Guarantor or
exercise any of Lender's remedies under this Guaranty unless and until an Event
of Default (as defined in the Revolving Credit Agreement) has occurred and is
continuing; (b) the Facility may be prepaid in full without penalty (other than
any payments due as a result of prepaying a Eurodollar Advance (as defined in
the Note) prior to the termination of the then applicable Interest Period (as
defined in the Note) at any time during which an Event of Default has occurred
and is continuing; and (c) Lender will not enforce its rights against the
Guarantor, unless in the same proceeding, the Lender shall also seek recovery
(unless Lender is prohibited, temporarily or permanently, by bankruptcy,
dissolutions, injunction, inability to achieve service of process or other
similar legal impediment) from the Borrower of any outstanding balance due on
the Obligations. Nothing herein shall limit Lender's rights against Guarantor to
pursue only a deficiency judgment or otherwise obligate Lender to take actions
other than as set forth above.
-6-
<PAGE>
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty under seal
as of the day and year first above written.
TANGER FACTOR OUTLET CENTERS,
INC.
[CORPORATE SEAL]
By:_________________________________
ATTEST: Stanley K. Tanger
Chairman of the Board
Chief Executive Officer
- ----------------------------
Secretary
STATE OF ____________________
COUNTY OF __________________
The foregoing Guaranty Agreement was sworn to and subscribed before me
this ____ day of __________, 199_, by Stanley K. Tanger, who is personally known
to me, as Chairman of the Board and Chief Executive Officer of Tanger Factory
Outlet Centers, Inc., general partner of Tanger Properties Limited Partnership.
---------------------------------
Print Name:
Notary Public, State of _______________
My Commission Number is: ___________
My Commission Expires:______________
-7-
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Tanger Factory Outlet Centers, Inc. and Subsidiary on Form S-8
(File No. 33-80450) and Form S-3 (File Nos. 33-99736, 333-3526 and 333-39365) of
our reports dated January 19, 1998 on our audits of the consolidated financial
statements and financial statement schedule of Tanger Factory Outlet Centers,
Inc. and Subsidiary as of December 31, 1997 and 1996, and for the years ended
December 31, 1997, 1996 and 1995, which reports are included in this Annual
Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Greensboro, North Carolina
March 23, 1998
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