SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file 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
GREENSBORO, NC 27408 (336) 274-1666
(Address of principal executive offices) (Registrant's telephone number)
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 $135,938,000 based on the closing price on the New
York Stock Exchange for such stock on March 1, 1999.
The number of Common Shares of the Registrant outstanding as of March 1, 1999
was 7,874,706.
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 7, 1999.
<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, 1998, the Company owned and operated 31
factory outlet centers (the "Centers") with a total gross leasable area ("GLA")
of approximately 5.1 million square feet. These centers were approximately 97%
leased, contained over 1,180 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, 1998, the ownership interests in the Operating Partnership
(the "Units") consisted of 7,897,606 partnership Units and 88,270 preferred
partnership Units (which are convertible into approximately 795,309 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 common and preferred shares are 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 common and preferred shares equal to at least 95% of its taxable
income each year.
The Company is a North Carolina corporation that was formed in March 1993. The
executive offices are currently located at 1400 West Northwood Street,
Greensboro, North Carolina, 27408 and the telephone number is (336) 274-1666.
Management anticipates completing the move to a new office at a nearby facility
in April 1999. The Company's new address will be 3200 Northline Drive, Suite
360, Greensboro, North Carolina, 27408 and the new telephone number will be
(336) 292-3010.
RECENT DEVELOPMENTS
During 1998, the Company added a total of 569,086 square feet to its portfolio
including: Dalton Factory Stores, a 173,430 square foot factory outlet center
located in Dalton, GA, acquired in March 1998; Sanibel Factory Stores, a 186,070
square foot factory outlet center located in Fort Myers, FL, acquired in July
1998; 132,223 square feet of expansions which were under construction at the end
of 1997; a 25,069 square foot expansion to its property in Branson, MO and
52,294 square feet out of a total of 243,674 square feet of expansion space
which is currently under construction throughout six of its centers. The
remaining 191,380 square feet is scheduled to open during the second half of
1999. Also during 1998, the Company completed the sale of its 8,000 square foot,
single tenant property in Manchester, VT for $1.85 million.
The Company also is in the process of developing plans for additional expansions
and new centers for completion in 1999 and beyond. Currently, the Company is in
the preleasing stages for a future center in Bourne, Massachusetts and for
further expansions of three existing Centers. However, these anticipated or
planned developments or expansions may not be started or completed as scheduled,
or may not result in accretive funds from operations. In addition, the Company
regularly evaluates acquisition or disposition proposals, engages from time to
time in negotiations for
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acquisitions or dispositions and may from time to time enter into letters of
intent for the purchase or sale of properties. Any prospective acquisition or
disposition that is being evaluated or which is subject to a letter of intent
also may not be consummated, or if consummated, may not result in accretive
funds from operations.
During 1998, the Company discontinued the development of its Concord, North
Carolina; Romulus, Michigan and certain other projects as the economics of these
transactions did not meet an adequate return on investment for the Company. As a
result, the Company recorded a $2.7 million charge in the fourth quarter to
write-off the carrying amount of these projects, net of proceeds received from
the sale of the Company's interest in the Concord project to an unrelated third
party.
During 1998, the Company terminated a $50 million secured line of credit and
increased its unsecured lines of credit by $25 million. At December 31, 1998,
approximately 76% of the outstanding long-term debt represented unsecured
borrowings and approximately 79% of the Company's real estate portfolio was
unencumbered. The weighted average interest rate on debt outstanding on December
31, 1998 was 8.2%.
During March 1999, the Company refinanced its 8.92% notes which had a carrying
amount of $47.4 million at December 31, 1998. The refinancing reduced the
interest rate to 7.875%, increased the loan amount to $66.5 million and extended
the maturity date to April 2009. The additional proceeds were used to reduce
amounts outstanding under the revolving lines of credit. As a result of this
refinance, management expects to realize a savings in interest cost of
approximately $300,000 over the next twelve months. In addition, the Company
extended the maturity of one of its revolving lines of credit from June 2000 to
June 2001.
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.
The Company's factory outlet centers range in size from 11,000 to 699,644 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.
With the decline in the real estate debt and equity markets, the Company may
not, in the short term, be able to access these markets on favorable terms in
order to maintain its historical rate of external growth. See ABusiness-Capital
Strategy" below.
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
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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, 1998, 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 1998, the Company added
approximately 17 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 1998, 1997 and 1996. As of March 1,
1999, the Company's largest tenant accounted for approximately 6.6% 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.
Revenues from fixed rents and operating expense reimbursements accounted for
approximately 92% of the Company's total revenues in 1998. Revenues from
contingent sources, such as percentage rents, which fluctuate depending on
tenant's sales performance, accounted for approximately 6% of 1998 revenues. As
a result, only a small portion of the Company's revenues are dependent on
contingent revenue sources.
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.
From 1981 to 1986, Stanley K. Tanger solely developed the first successful
factory outlet centers. Steven Tanger joined the company in 1986 and by June
1993, together, the Tangers had 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 six Centers and, together with expansions of
existing Centers, added approximately 3.5 million square feet of GLA to its
portfolio, bringing its portfolio of properties as of December 31, 1998 to 31
Centers totaling approximately 5.1 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.
While factory outlet stores continue to be a profitable and fundamental
distribution channel for brand name manufacturers, some retail formats are more
successful than others. 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.
As part of its strategy of aggressively managing its assets, the Company is
strengthening the tenant base in several of its centers by adding strong new
anchor tenants, such as Nike, GAP and Nautica. To accomplish this goal, stores
may remain vacant for a longer period of time in order to recapture enough space
to meet the size requirement of these upscale, high volume tenants.
Consequently, the Company anticipates that its average occupancy level will
remain strong, but may be more in line with the industry average.
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
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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 support 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 five years
as a public company. At the same time, the Company continues to have of one of
the lowest payout ratios in the REIT industry. The distribution payout ratio for
the year ended December 31, 1998 was 71%. As a result, the Company retained
approximately $11.6 million of its 1998 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.
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 2.8 for the year ended December 31, 1998.
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, 1998 was approximately 55% (assuming a value
for the Common Shares of the Company at December 31, 1998 of $21.1875 per
share).
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 interest of
the Company and its shareholders. The Company maintains revolving lines of
credit which provide for unsecured borrowings up to $100 million, of which $20.3
million was available for additional borrowings at December 31, 1998. As a
general matter, the Company anticipates utilizing its lines of credit as an
interim source of funds to acquire, develop and expand factory outlet centers
and repaying the credit lines with longer-term debt or equity when management
determines that market conditions are favorable. Under joint shelf registration,
the Company and the Operating Partnership could issue up to $100 million in
additional equity securities and $100 million in additional debt securities.
With the decline in the real estate debt and equity markets, the Company may
not, in the short term, be able to access these markets on favorable terms.
Management believes the decline is temporary and may utilize these funds as the
markets improve to continue its external growth. In the interim, the Company may
consider the use of operational and developmental joint ventures and other
related strategies to generate additional cash funding. Based on cash provided
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by operations, existing credit facilities, ongoing negotiations with certain
financial institutions and funds available under the shelf registration,
management believes that the Company has access to the necessary financing to
fund the planned capital expenditures during 1999.
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, 1998, the ownership interests in the Operating Partnership consisted of
7,897,606 partnership Units and 88,270 preferred partnership Units (which are
convertible into approximately 795,309 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.
Management believes that the Company competes favorably with as many as three
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. 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 currently owns a small office building in Greensboro, North Carolina
in which its corporate headquarters is located. The Company has outgrown this
space and has entered into an agreement to lease a larger office space at a
nearby facility in Greensboro, North Carolina to relocate its corporate
headquarters in April 1999. The current office building in Greensboro will be
offered for sale. 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 offices and employee on-site managers at 26 Centers. The
managers closely monitor the operation, marketing and local relationships at
each of their centers.
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.
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EMPLOYEES
As of March 1, 1999, the Company had 125 full-time employees, located at the
Company's corporate headquarters in North Carolina, its regional office in New
York and its 26 business offices.
ITEM 2. BUSINESS AND PROPERTIES
As of March 1, 1999, the Company's portfolio consisted of 31 Centers located in
23 states. The Company's Centers range in size from 11,000 to 699,644 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, 1998 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,
1998.
LOCATION OF CENTERS (AS OF MARCH 1, 1999)
<TABLE>
<S> <C> <C> <C>
Number of GLA %
State Centers (sq. ft.) of GLA
- --------------------------------------------- ---------- ------------- ---------
Georgia 4 886,794 17%
New York 1 699,644 14
Texas 2 414,830 8
Tennessee 2 362,280 7
Missouri 1 280,142 5
Iowa 1 277,237 5
Louisiana 1 245,325 5
Pennsylvania 1 230,063 4
Oklahoma 1 197,878 4
Florida 1 186,072 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 1 105,950 2
Oregon 1 97,749 2
Kansas 1 88,200 2
Maine 2 84,897 2
Alabama 1 80,730 1
New Hampshire 2 61,915 1
West Virginia 1 49,252 1
Massachusetts 1 23,417 ---
============================================= ========== ============= =========
Total 31 5,125,914 100%
============================================= ========== ============= =========
</TABLE>
Management has an ongoing strategy of 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"
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.
Of the 31 Centers, the Company owns the land underlying 28 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.
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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.
The table set forth below summarizes certain information with respect to the
Company's existing centers as of March 1, 1999.
<TABLE>
MORTGAGE
GLA DEBT FEE OR
(SQ. % OUTSTANDING GROUND
DATE OPENED LOCATION FT.) LEASED (000'S) (4) LEASE
- ----------------- --------------------------- --------- ----- ------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jun. 1986 Kittery I, ME 60,194 100% $5,878 Fee
Mar. 1987 Clover, North Conway, NH 11,000 100 --- Fee
Nov. 1987 Martinsburg, WV 49,252 69 --- Fee
Apr. 1988 LL Bean, North Conway, NH 50,915 100 --- Fee
Jul. 1988 Pigeon Forge, TN 94,750 94 --- Ground lease
Aug. 1988 Boaz, AL 80,730 96 --- Fee
Jun. 1989 Kittery II, ME 24,703 100 --- Fee
Jul. 1989 Commerce, GA 185,750 97 9,805 Fee
Oct. 1989 Bourne, MA 23,417 100 --- Fee
Feb. 1991 West Branch, MI 112,120 88 6,732 Fee
May 1991 Williamsburg, IA 277,237 (1) 99 16,686 Fee
Feb. 1992 Casa Grande, AZ 186,018 83 --- Fee
Aug. 1992 Stroud, OK 197,878 77 --- Fee
Dec. 1992 North Branch, MN 134,480 91 --- Fee
Feb. 1993 Gonzales, LA 245,325 94 --- Fee
May 1993 San Marcos, TX 237,395 (2) 100 10,050 Fee
Dec. 1993 Lawrence, KS 88,200 48 --- Fee
Dec. 1993 McMinnville, OR 97,749 77 --- Fee
Aug. 1994 Riverhead, NY 699,644 (6) 98 --- Ground lease (3)
Aug. 1994 Terrell, TX 177,435 96 --- Fee
Sep. 1994 Seymour, IN 141,051 86 8,059 Fee
Oct. 1994 (5) Lancaster, PA 230,063 (6) 96 15,580 Fee
Nov. 1994 Branson, MO 280,142 99 --- Fee
Nov. 1994 Locust Grove, GA 248,854 93 --- Fee
Jan. 1995 Barstow, CA 105,950 92 --- Fee
Dec. 1995 Commerce II, GA 278,760 100 --- Fee
Feb. 1997 (5) Sevierville, TN 267,530 (6) 100 --- Ground lease
Sep. 1997 (5) Blowing Rock, NC 97,408 93 --- Fee
Sep. 1997 (5) Nags Head, NC 82,462 100 --- Fee
Mar. 1998 (5) Dalton, GA 173,430 97 --- Fee
Jul. 1998 (5) Fort Myers, FL 186,072 97 --- Fee
================= =========================== ========= ===== ======= ============ =================
TOTAL 5,125,914 94% $72,790
================= =========================== ========= ===== ======= ============ =================
</TABLE>
(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, 1998. THE WEIGHTED AVERAGE INTEREST RATE FOR DEBT
OUTSTANDING AT DECEMBER 31, 1998 WAS 8.2% AND THE WEIGHTED AVERAGE MATURITY
DATE WAS APRIL 2002.
(5) REPRESENTS DATE ACQUIRED BY THE COMPANY.
(6) GLA INCLUDES SQUARE FEET OF NEW SPACE NOT YET OPEN AS OF DECEMBER 31, 1998,
WHICH TOTALED 114,554 SQUARE FEET (RIVERHEAD - 45,689; LANCASTER - 2,677;
SEVIERVILLE - 66,188)
- --------------------------------
8
<PAGE>
LEASE EXPIRATIONS
The following table sets forth, as of March 1, 1999, 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>
% 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>
1999 115 386,000 $13.06 $5,040 8%
2000 176 663,000 13.73 9,103 14
2001 181 652,000 13.84 9,025 14
2002 254 942,000 15.11 14,232 22
2003 207 889,000 14.23 12,652 20
2004 112 549,000 15.15 8,319 13
2005 22 123,000 13.00 1,599 2
2006 8 80,000 12.70 1,016 2
2007 8 62,000 14.23 882 1
2008 8 56,000 13.54 758 1
2009 & thereafter 28 254,000 8.26 2,097 3
===================== ============ =========== ============ ============ ===========
Total 1,119 4,656,000 $13.90 $64,723 100%
===================== ============ =========== ============ ============ ===========
</TABLE>
(1) EXCLUDES LEASES THAT HAVE BEEN ENTERED INTO BUT WHICH TENANT HAS NOT YET
TAKEN POSSESSION, VACANT SUITES AND MONTH-
TO-MONTH LEASES TOTALING APPROXIMATELY 470,000 SQUARE FEET.
(2) BASE RENT IS DEFINED AS THE MINIMUM PAYMENTS DUE, EXCLUDING PERIODIC
CONTRACTUAL FIXED INCREASES.
RENTAL AND OCCUPANCY RATES
The following table sets forth information regarding the expiring leases during
each of the last five calendar years.
<TABLE>
Renewed by Existing Re-leased to
Total Expiring Tenants New Tenants
------------------------ --------------------------- -------------------------
% of
GLA Total GLA % of % of
(sq. Center (sq. Expiring GLA Expiring
Year ft.) GLA ft.) GLA (sq.ft.) GLA
- ---------- ------------ ---------- ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1998 548,504 11% 407,837 74% 38,526 7%
1997 238,250 5 195,380 82 18,600 8
1996 149,689 4 134,639 90 15,050 10
1995 93,650 3 91,250 97 2,400 3
1994 115,697 3 105,697 91 10,000 9
</TABLE>
9
<PAGE>
The following table sets forth the average base rental rate increases per square
foot upon re-leasing stores that were turned over or renewed during each of the
last five calendar years.
<TABLE>
Renewals of Existing Leases Stores Re-leased to New Tenants (1)
------------------------------------------ ------------------------------------
Average Annualized Base Rents Average Annualized Base Rents
($ per sq. ft.) ($ per sq. ft.)
------------------------------- ------------------------------
GLA % GLA %
Year (sq.ft.) Expiring New Increase (sq.ft.) Expiring New Change
- --------- --------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 407,387 $13.83 $14.07 2% 220,890 $15.33 $13.87 (9)%
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
</TABLE>
- ---------------------
(1) THE SQUARE FOOTAGE RELEASED TO NEW TENANTS FOR 1998, 1997, 1996, 1995 AND
1994 CONTAIN 38,526, 18,600, 15,050, 2,400, AND 10,000 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>
Average Aggregate
Annualized GLA Open at Percentage
% Base Rent End of Each Number of Rents
Year Leased per sq.ft.(1) Year Centers (000's)
- --------- -------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
1998 97% $13.88 5,011,000 31 $3,087
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
</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
------------------ -----------------------
1998 7.9%
1997 8.2
1996 8.7
1995 8.5
1994 7.4
10
<PAGE>
TENANTS
The following table sets forth certain information with respect to the Company's
ten largest tenants and their store concepts as of March 1, 1999.
<TABLE>
% of
Number GLA Total
Tenant of Stores (sq. ft.) GLA open
- ----------------------------------------------- ------------- -------------- -----------
<S> <C> <C> <C>
PHILLIPS-VAN HEUSEN CORPORATION:
Bass 22 146,053 2.8%
Van Heusen 21 89,656 1.8
Geoffrey Beene Co. Store 13 51,640 1.0
Izod 17 39,617 0.8
Gant 4 10,500 0.2
------------- -------------- -----------
77 337,466 6.6
LIZ CLAIBORNE, INC.:
Liz Claiborne 24 277,041 5.4
Liz Claiborne Shoes 1 2,000 ---
Elizabeth 6 23,700 0.5
DKNY Jeans 2 5,820 0.1
------------- -------------- -----------
33 308,561 6.0
REEBOK INTERNATIONAL, LTD. 24 172,161 3.4
SARA LEE CORPORATION:
L'eggs, Hanes, Bali 26 117,809 2.3
Champion 1 4,000 0.1
Coach 11 26,561 0.5
Socks Galore 7 8,680 0.2
------------- -------------- -----------
45 157,050 3.1
DRESS BARN INC. 16 107,878 2.1
AMERICAN COMMERCIAL, INC.:
Mikasa Factory Store 13 105,500 2.0
BROWN GROUP RETAIL, INC.:
Factory Brand Shoes 14 71,880 1.4
Naturalizer 8 20,240 0.4
Brown Shoes 2 10,500 0.2
------------- -------------- -----------
24 102,620 2.0
COUNTY SEAT STORES, INC. (1):
County Seat 3 15,000 0.3
Levi's by County Seat 7 81,700 1.6
------------- -------------- -----------
10 96,700 1.9
CORNING REVERE 19 83,267 1.6
VF FACTORY OUTLET, INC. 3 78,697 1.5
============= ============== ===========
Total of all tenants listed in table 264 1,549,900 30.2%
============= ============== ===========
</TABLE>
(1) 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.
11
<PAGE>
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. Upon completion of
expansions currently underway totaling approximately 68,000 square feet, the
Riverhead Center will total 699,644 square feet.
Tenants at the Riverhead Center principally conduct retail sales operations. The
occupancy rate as of the end of 1998, 1997, and 1996, excluding expansions under
construction, was 97%, 99%, and 100%. Average annualized base rental rates
during 1998, 1997, and 1996 were $18.89, $18.65, and $17.73 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,
1998, the net federal tax basis of this Center was approximately $84,975,000.
Real estate taxes assessed on this Center during 1998 amounted to $1,623,000.
Real estate taxes for 1999 are estimated to be approximately $2.1 million.
The following table sets forth, as of March 1, 1999, scheduled lease expirations
at the Riverhead Center assuming that none of the tenants exercise renewal
options:
<TABLE>
% 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>
1999 9 27,000 $21.96 $593 5%
2000 5 18,000 19.72 355 3
2001 8 48,000 19.23 923 8
2002 68 227,000 21.19 4,809 40
2003 21 86,000 18.90 1,625 14
2004 27 127,000 19.31 2,452 20
2005 1 2,000 17.50 35 ---
2006 --- --- --- --- ---
2007 3 21,000 16.76 352 3
2008 1 7,000 19.29 135 1
2009 & thereafter 5 73,000 9.95 726 6
================== ============= =========== ============ ============= ===============
Total 148 636,000 $18.88 $12,005 100%
================== ============= =========== ============ ============= ===============
</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.
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, 1998.
12
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the executive
officers of the Company:
<TABLE>
<S> <C> <C>
NAME AGE POSITION
Stanley K. Tanger................ 75 Founder, Chairman of the Board of Directors and
Chief Executive Officer
Steven B. Tanger................. 50 Director, President and Chief Operating Officer
Rochelle G. Simpson ............. 60 Secretary and Executive Vice President -
Administration and Finance
Willard A. Chafin, Jr............ 61 Executive Vice President - Leasing, Site Selection,
Operations and Marketing
Frank C. Marchisello, Jr......... 40 Senior Vice President - Chief Financial Officer
Joseph H. Nehmen................. 50 Senior Vice President - Operations
Virginia R. Summerell............ 40 Treasurer and Assistant Secretary
C. Randy Warren, Jr.............. 34 Senior Vice President - Leasing
Carrie A. Johnson-Warren......... 36 Vice President - Marketing
Kevin M. Dillon.................. 40 Vice President - Construction
</TABLE>
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 Executive Vice President -
Administration and Finance in January 1999. She previously held the position of
Senior Vice President - Administration and Finance since 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.
WILLARD A. CHAFIN, JR. Mr. Chafin was named Executive Vice President -
Leasing, Site Selection, Operations and Marketing of the Company in January
1999. Mr. Chafin previously held the position of Senior Vice President -
Leasing, Site Selection, Operations and Marketing since 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 Senior Vice President
and Chief Financial Officer in January 1999. He was named Vice President and
Chief Financial Officer 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
13
<PAGE>
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 was named Senior Vice President of Operations
in January 1999. He joined the Company in September 1995 and was named 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 was named Senior Vice President of Leasing
in January 1999. He joined the Company in November 1995 as Vice President of
Leasing. 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. Mr. Warren is the husband of
Ms. Carrie Johnson-Warren.
CARRIE A. JOHNSON-WARREN. Ms. Johnson-Warren 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-Warren 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-Warren 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-Warren is a graduate of East Carolina
University and is the wife of Mr. C. Randy Warren, Jr.
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 from 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.
14
<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.
<TABLE>
Common
Dividends
1998 High Low Paid
------------------------ ------------------ ------------- --------------
<S> <C> <C> <C>
First Quarter $31.1875 $28.5625 $.55
Second Quarter 31.8750 29.1250 .60
Third Quarter 31.8125 22.0000 .60
Fourth Quarter 23.8750 18.8125 .60
------------------------ ------------------- ------------- --------------
Year 1998 $31.8750 $18.8125 $2.35
------------------------ ------------------- ------------- --------------
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
------------------------ ------------------- ------------- --------------
</TABLE>
As of March 1, 1999, there were approximately 519 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, for the prior
fiscal year 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.
15
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
(In thousands, except per share and center data)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Total revenues $ 97,766 $ 85,271 $ 75,500 $ 68,604 $ 45,988
Income before minority interest and
extraordinary item 16,103 17,583 16,177 15,352 15,147
Income before extraordinary item 12,159 12,827 11,752 11,218 11,168
Net income 11,827 12,827 11,191 11,218 11,168
- ---------------------------------------------------------------------------------------------------------
SHARE DATA
Basic:
Income before extraordinary item $ 1.30 $ 1.57 $ 1.46 $ 1.36 $ 1.32
Net income $ 1.26 $ 1.57 $ 1.37 $ 1.36 $ 1.32
Weighted average common shares 7,886 7,028 6,402 6,095 5,177
Diluted:
Income before extraordinary item $ 1.28 $ 1.54 $ 1.46 $ 1.36 $ 1.31
Net income $ 1.24 $ 1.54 $ 1.37 $ 1.36 $ 1.31
Weighted average common shares 8,009 7,140 6,408 6,096 5,211
Common dividends paid $ 2.35 $ 2.17 $ 2.06 $ 1.96 $ 1.80
- ---------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Real estate assets, before depreciation $ 529,247 $ 454,708 $ 358,361 $ 325,881 $ 292,406
Total assets 471,795 416,014 332,138 315,130 294,802
Long-term debt 302,485 229,050 178,004 156,749 121,323
Shareholders' equity 114,039 122,119 101,738 107,560 115,413
- ---------------------------------------------------------------------------------------------------------
OTHER DATA
EBITDA (1) $ 60,285 $ 52,857 $ 46,633 $ 41,058 $ 26,089
Funds from operations (1) $ 39,748 $ 35,840 $ 32,313 $ 29,597 $ 23,189
Cash flows provided by (used in):
Operating activities $ 35,787 $ 39,214 $ 38,051 $ 32,423 $ 21,304
Investing activities $ (79,236) $ (93,636) $ (36,401) $ (44,788) $(143,683)
Financing activities $ 46,172 $ 55,444 $ (4,176) $ 13,802 $ 80,661
Gross leasable area open at year end 5,011 4,458 3,739 3,507 3,115
Number of centers 31 30 27 27 25
</TABLE>
- -----------------------
(1) EBITDA and Funds from Operations ("FFO") are widely accepted financial
indicators used by certain investors and analysts to analyze and compare
companies on the basis of operating performance. EBITDA represents earnings
before minority interest, interest expense, income taxes, depreciation and
amortization. Funds from operations is 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 calculations of EBITDA and FFO may vary from
entity to entity and as such the presentation of EBITDA and FFO by the
Company may not be comparable to other similarly titled measures of other
reporting companies. EBITDA and FFO are not intended to represent cash
flows for the period. EBITDA and FFO have not 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.
16
<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, 1998
and 1997, as well as December 31, 1997 and 1996. 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, acquisition, expansion or disposition of rental properties. The
computation of weighted average GLA, however, does not adjust for fluctuations
in occupancy which may occur subsequent to the original opening date.
CAUTIONARY STATEMENTS
Certain statements made below are forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995 and included this statement for purposes of complying with these safe
harbor provisions. Forward-looking statements, which are based on certain
assumptions and describe our future plans, strategies and expectations, are
generally identifiable by use of the words "believe", "expect", "intend",
"anticipate", "estimate", "project", or similar expressions. You should not rely
on forward-looking statements since they involve known and unknown risks,
uncertainties and other factors which are, in some cases, beyond our control and
which could materially affect our actual results, performance or achievements.
Factors which may cause actual results to differ materially from current
expectations include, but are not limited to, the following:
o general economic and local real estate conditions could change (for
example, our tenant's business may change if the economy changes, which
might effect (1) the amount of rent they pay us or their ability to pay
rent to us, (2) their demand for new space, or (3) our ability to renew
or re-lease a significant amount of available space on favorable terms;
o the laws and regulations that apply to us could change (for instance,
a change in the tax laws that apply to REITs could result in unfavorable
tax treatment for us);
o capital availability (for instance, financing opportunities may not be
available to us, or may not be available to us on favorable terms);
o our operating costs may increase or our costs to construct or acquire
new properties or expand our existing properties may increase or exceed
our original expectations.
GENERAL OVERVIEW
During 1998, the Company added a total of 569,086 square feet to its portfolio
including: Dalton Factory Stores, a 173,430 square foot factory outlet center
located in Dalton, GA, acquired in March 1998; Sanibel Factory Stores, a 186,070
square foot factory outlet center located in Fort Myers, FL, acquired in July
1998; 132,223 square feet of expansions which were under construction at the end
of 1997; a 25,069 square foot expansion to its property in Branson, MO and
52,294 square feet out of a total of 243,674 square feet of expansion space
which is currently under construction throughout six of its centers. The
remaining 191,380 square feet is scheduled to open during the second half of
1999. Also during 1998, the Company completed the sale of its 8,000 square foot,
single tenant property in Manchester, VT for $1.85 million.
17
<PAGE>
A summary of the operating results for the years ended December 31, 1998, 1997
and 1996 is presented in the following table, expressed in amounts calculated on
a weighted average GLA basis.
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
- --------------------------------------------------------- ------------ ----------- ------------
GLA open at end of period (000's) 5,011 4,458 3,739
Weighted average GLA (000's) (1) 4,768 4,046 3,642
Outlet centers in operation 31 30 27
New centers acquired 2 3 ---
Centers sold 1 --- ---
Centers expanded 1 5 6
States operated in at end of period 23 23 22
PER SQUARE FOOT
Revenues
Base rentals $13.88 $14.04 $13.89
Percentage rentals .65 .65 .55
Expense reimbursements 5.63 6.10 6.04
Other income .34 .29 .25
- --------------------------------------------------------- ------------ ----------- ------------
Total revenues 20.50 21.08 20.73
- --------------------------------------------------------- ------------ ----------- ------------
Expenses
Property operating 6.10 6.49 6.47
General and administrative 1.40 1.52 1.50
Interest 4.62 4.16 3.84
Depreciation and amortization 4.65 4.56 4.52
- --------------------------------------------------------- ------------ ----------- ------------
Total expenses 16.77 16.73 16.33
- --------------------------------------------------------- ------------ ----------- ------------
Income before gain on sale of real estate, minority
interest and extraordinary item $3.73 $4.35 $4.40
========================================================= ============ =========== ============
</TABLE>
(1) GLA WEIGHTED BY MONTHS OF OPERATIONS. GLA IS NOT ADJUSTED FOR FLUCTUATIONS
IN OCCUPANCY WHICH MAY OCCUR SUBSEQUENT TO THE ORIGINAL OPENING DATE.
RESULTS OF OPERATIONS
1998 COMPARED TO 1997
Base rentals increased $9.4 million, or 17%, in 1998 when compared to the same
period in 1997 primarily as a result of the 18% increase in weighted average
GLA. The increase in weighted average GLA is due primarily to the acquisitions
in October 1997 (180,000 square feet), March 1998 (173,000 square feet), and
July 1998 (186,000 square feet), as well as expansions completed in the fourth
quarter of 1997 and first quarter 1998. The decrease in base rentals per
weighted average GLA of $.16 in 1998 compared to 1997 reflects (1) the impact of
these acquisitions which collectively have a lower average base rental rate per
square foot and (2) lower average occupancy rates in 1998 compared to 1997. Base
rentals per weighted average GLA, excluding these acquisitions, during the 1998
period decreased $.08 per square foot to $13.96.
Percentage rentals increased $450,000, or 17%, in 1998 compared to 1997 due to
the acquisitions and expansions completed in 1997. Same store sales, defined as
the weighted average sales per square foot reported for tenant stores open all
of 1998 and 1997, decreased 2.7% to approximately $242 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,
decreased from 94% in 1997 to 92% in 1998 primarily as a result of the decrease
in occupancy.
Property operating expenses increased by $2.8 million, or 11%, in 1998 as
compared to 1997. On a weighted average GLA basis, property operating expenses
decreased from $6.49 from $6.10 per square foot. Higher expenses for real estate
taxes per square foot were offset by considerable decreases in advertising and
promotion and common area maintenance expenses per square foot. The decrease in
property operating expenses per square foot is also attributable
18
<PAGE>
to the acquisitions which collectively have a lower average operating cost per
square foot. Excluding the acquisitions, property operating expenses during 1998
were $6.19 per square foot.
General and administrative expenses increased $524,000 in 1998 compared to 1997.
As a percentage of revenues, general and administrative expenses decreased from
7.2% in 1997 to 6.8% in 1998. On a weighted average GLA basis, general and
administrative expenses decreased $.12 per square foot to $1.40 in 1998,
reflecting the absorption of the acquisitions in 1997 and 1998 without relative
increases in general and administrative expenses.
Interest expense increased $5.2 million during 1998 as compared to 1997 due to
higher average borrowings outstanding during the period and due to less interest
capitalized during 1998 as a result of a decrease in ongoing construction
activity during 1998 compared to 1997. Average borrowings have increased
principally to finance the acquisitions and expansions to existing centers (see
"General Overview" above). Depreciation and amortization per weighted average
GLA increased from $4.56 per square foot to $4.65 per square foot.
The asset write-down of $2.7 million in 1998 represents the write-off of
pre-development costs capitalized for certain projects, primarily the Romulus,
MI project, which were discontinued and terminated during the year.
The gain on sale of real estate for 1998 represents the sale of an 8,000 square
foot, single tenant property in Manchester, VT for $1.85 million and the sale of
three outparcels at other centers for sales prices aggregating $940,000. The
extraordinary item in 1998 represents a write-off of unamortized deferred
financing costs due to the termination of a $50 million secured line of credit.
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 a
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 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.
19
<PAGE>
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.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $35.8, $39.2 and $38.1 million for
the years ended December 31, 1998, 1997 and 1996, respectively. Net cash
provided by operating activities during 1997 and 1996 increased primarily due to
the incremental operating income associated with acquired or expanded centers.
Net cash provided by operating activities decreased $3.4 million in 1998
compared to 1997 as decreases in accounts payable offset the increases from the
incremental operating income associated with acquired or expanded centers. Net
cash used in investing activities amounted to $79.2, $93.6 and $36.4 million
during 1998, 1997 and 1996, respectively, and reflects the fluctuation in
construction and acquisition activity during each year. Net cash used in
investing activities also decreased in 1998 compared to 1997 due to
approximately $2.6 million in net proceeds received from the sale of one factory
outlet center and three parcels of land from other existing centers. Cash
provided by (used in) financing activities of $46.2, $55.4 and $(4.2) million in
1998, 1997 and 1996, respectively, and has fluctuated consistently with the
capital needed to fund the current development and acquisition activity. In
1998, net cash provided by financing activities was further reduced by the
dividends paid on the additional 1.1 million common shares outstanding during
all of 1998 as a result of a common share offering in September of 1997.
During 1998, the Company added a total of 569,086 square feet to its portfolio
including: Dalton Factory Stores, a 173,430 square foot factory outlet center
located in Dalton, GA, acquired in March 1998; Sanibel Factory Stores, a 186,070
square foot factory outlet center located in Fort Myers, FL, acquired in July
1998; 132,223 square feet of expansions which were under construction at the end
of 1997; a 25,069 square foot expansion to its property in Branson, MO and
52,294 square feet out of a total of 243,674 square feet of expansion space
which is currently under construction throughout six of its centers. The
remaining 191,380 square feet is scheduled to open during the second half of
1999 (See "General Overview"). Commitments for construction of these projects
(which represent only those costs contractually required to be paid by the
Company) amounted to $5.6 million at December 31, 1998.
The Company also is in the process of developing plans for additional expansions
and new centers for completion in 1999 and beyond. Currently, the Company is in
the preleasing stages for a future center in Bourne, Massachusetts and for
further expansions of three existing Centers. However, these anticipated or
planned developments or expansions may not be started or completed as scheduled,
or may not result in accretive funds from operations. In addition, the Company
regularly evaluates acquisition or disposition proposals, engages from time to
time in negotiations for acquisitions or dispositions and may from time to time
enter into letters of intent for the purchase or sale of properties. Any
prospective acquisition or disposition that is being evaluated or which is
subject to a letter of intent also may not be consummated, or if consummated,
may not result in accretive funds from operations.
During 1998, the Company discontinued the development of its Concord, North
Carolina; Romulus, Michigan and certain other projects as the economics of these
transactions did not meet an adequate return on investment for the Company. As a
result, the Company recorded a $2.7 million charge in the fourth quarter to
write-off the carrying amount of these projects, net of proceeds received from
the sale of the Company's interest in the Concord project to an unrelated third
party.
The Company maintains revolving lines of credit which provide for unsecured
borrowings up to $100 million, of which $20.3 million was available for
additional borrowings at December 31, 1998. As a general matter, the Company
anticipates utilizing its lines of credit as an interim source of funds to
acquire, develop and expand factory outlet centers and repaying the credit lines
with longer-term debt or equity when management determines that market
conditions are favorable. Under joint shelf registration, the Company and the
Operating Partnership could issue up to $100 million in additional equity
securities and $100 million in additional debt securities. With decline in the
real estate debt and equity markets, the Company may not, in the short term, be
able to access these markets on favorable terms. Management believes the decline
is temporary and may utilize these funds as the markets improve to continue its
external growth. In the interim, the Company may consider the use of operational
and developmental joint ventures and other related strategies to generate
additional capital. Based on cash provided by operations, existing credit
facilities, ongoing negotiations with certain financial institutions and funds
available under the shelf registration, management believes that the Company has
access to the necessary financing to fund the planned capital expenditures
during 1999.
20
<PAGE>
During 1998, the Company terminated a $50 million secured line of credit and
increased its unsecured lines of credit by $25 million. At December 31, 1998,
approximately 76% of the outstanding long-term debt represented unsecured
borrowings and approximately 79% of the Company's real estate portfolio was
unencumbered. The weighted average interest rate on debt outstanding on December
31, 1998 was 8.2%.
During March 1999, the Company refinanced its 8.92% notes which had a carrying
amount of $47.4 million at December 31, 1998. The refinancing reduced the
interest rate to 7.875%, increased the loan amount to $66.5 million and extended
the maturity date to April 2009. The additional proceeds were used to reduce
amounts outstanding under the revolving lines of credit. As a result of this
refinance, management expects to realize a savings in interest cost of
approximately $300,000 over the next twelve months. In addition, the Company
extended the maturity of one of its revolving lines of credit from June 2000 to
June 2001.
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 to shareholders are made quarterly and interest
payments on the senior, unsecured notes are made semi-annually. Amounts
accumulated for such payments will be used in the interim to reduce the
outstanding borrowings under the existing lines of credit or 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, for the
prior fiscal year on an annual basis or 95% of FFO on a cumulative basis from
the date of the agreement.
MARKET RISK
The Company is exposed to various market risks, including changes in interest
rates. Market risk is the potential loss arising from adverse changes in market
rates and prices, such as interest rates. The Company does not enter into
derivatives or other financial instruments for trading or speculative purposes.
The Company enters into interest rate swap agreements to manage its exposure to
interest rate changes. The swaps involve the exchange of fixed and variable
interest rate payments based on a contractual principal amount and time period.
Payments or receipts on the agreements are recorded as adjustments to interest
expense. At December 31, 1998, the Company had an interest rate swap agreement
effective through October 2001 with a notional amount of $20 million. Under this
agreement, the Company receives a floating interest rate based on the 30 day
LIBOR index and pays a fixed interest rate of 5.47%. These swaps effectively
change the Company's payment of interest on $20 million of variable rate debt to
fixed rate debt for the contract period.
The fair value of the interest rate swap agreement represents the estimated
receipts or payments that would be made to terminate the agreements. At December
31, 1998, the Company would have paid $218,000 to terminate the agreements. A 1%
decrease in the 30 day LIBOR index would increase the amount paid by
approximately $491,000. The fair value is based on dealer quotes, considering
current interest rates.
The fair market value of long-term fixed interest rate debt is subject to
interest rate risk. Generally, the fair market value of fixed interest rate debt
will increase as interest rates fall and decrease as interest rates rise. The
estimated fair value of the Company's total long-term debt at December 31, 1998
was $309.1 million. A 1% increase from prevailing interest rates at December 31,
1998 would result in a decrease in fair value of total long-term debt by
approximately $4.2 million. Fair values were determined from quoted market
prices, where available, using current interest rates considering credit ratings
and the remaining terms to maturity.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION ("SFAS 131"). SFAS 131 requires public
business enterprises to adopt its provisions for fiscal years beginning after
December 15, 1997, and to report certain information about operating segments in
complete sets of financial statements of the enterprise issued to shareholders.
The Company believes all of its centers have similar economic characteristics
and provide similar products and services to similar types and classes of
customers. In accordance with the provisions of SFAS 131, the Company has
aggregated the financial information of all of its centers into one reportable
operating segment.
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<PAGE>
On June 15, 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (ASFAS
133"). SFAS 133 is effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. SFAS 133 requires that all derivative instruments
be recorded on the balance sheet at their fair value. Changes in the fair value
of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. Management of
the Company anticipates that, due to its limited use of derivative instruments,
the adoption of SFAS 133 will not have a significant effect on the Company's
results of operations or its financial position.
FUNDS FROM OPERATIONS
Management believes that for a clear understanding of the consolidated
historical operating results of the Company, FFO should be considered along with
net income as presented in the audited consolidated financial 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,
1998, 1997 and 1996 as well as actual cash flow and other data for those
respective years (in thousands):
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
- ------------------------------------------------- ------------- ------------ -------------
FUNDS FROM OPERATIONS:
Income before gain on sale of real estate,
minority interest $15,109 $17,583 $16,018
and extraordinary item
Adjusted for:
Depreciation and amortization uniquely 21,939 18,257 16,295
significant to real estate
Asset write-down 2,700 -- --
- ------------------------------------------------- ------------- ------------ -------------
Funds from operations before minority interest $39,748 $35,840 $32,313
================================================= ============= ============ =============
CASH FLOWS PROVIDED BY (USED IN):
Operating activities $35,787 $39,214 $38,051
Investing activities $(79,236) $(93,636) $(36,401)
Financing activities $46,172 $55,444 $(4,176)
WEIGHTED AVERAGE SHARES OUTSTANDING (1) 11,847 11,000 10,601
================================================= ============= ============ =============
</TABLE>
(1) ASSUMES THE PARTNERSHIP UNITS OF THE OPERATING PARTNERSHIP HELD BY THE
MINORITY INTEREST, PREFERRED SHARES OF THE COMPANY AND SHARE AND UNIT OPTIONS
ARE ALL CONVERTED TO COMMON SHARES OF THE COMPANY.
ECONOMIC CONDITIONS AND OUTLOOK
The majority 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.
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<PAGE>
While factory outlet stores continue to be a profitable and fundamental
distribution channel for brand name manufacturers, some retail formats are more
successful than others. 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.
As part of its strategy of aggressively managing its assets, the Company is
strengthening the tenant base in several of its centers by adding strong new
anchor tenants, such as Nike, GAP and Nautica. To accomplish this goal, stores
may remain vacant for a longer period of time in order to recapture enough space
to meet the size requirement of these upscale, high volume tenants.
Consequently, the Company anticipates that its average occupancy level will
remain strong, but may be more in line with the industry average.
Approximately 29% of the Company's lease portfolio is scheduled to expire during
the next two years. Approximately 778,000 square feet of space is up for renewal
during 1999 and approximately 663,000 square feet will come up for renewal in
2000. If the Company were unable to successfully renew or release a significant
amount of this space on favorable economic terms, the loss in rent could have a
material adverse effect on our results of operations.
Existing tenants' sales have remained stable and renewals by existing tenants
have remained strong. Approximately 323,000, or 41%, of the square feet
scheduled to expire in 1999 has already been renewed. In addition, the Company
continues 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 creditworthy 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 8% 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.
YEAR 2000 COMPLIANCE
The year 2000 ("Y2K") issue refers generally to computer applications using only
the last two digits to refer to a year rather than all four digits. As a result,
these applications could fail or create erroneous results if they recognize "00"
as the year 1900 rather than the year 2000. The Company has taken Y2K
initiatives in three general areas which represent the areas that could have an
impact on the company - Information technology systems, non-information
technology systems and third-party issues. The following is a summary of these
initiatives:
INFORMATION TECHNOLOGY SYSTEMS. The Company has focused its efforts on the
high-risk areas of the corporate office computer hardware, operating systems and
software applications. The Company's assessment and testing of existing
equipment and software revealed that certain older desktop personal computers,
the network operating system and the DOS-based accounting system were not Y2K
compliant. The non-compliant personal computers have since been replaced. The
Company is currently in the process of installing and testing current upgrades
for the DOS-based accounting and the network operating systems which will make
these systems compliant with Y2K and expects to complete this process by June
30, 1999.
NON-INFORMATION TECHNOLOGY SYSTEMS. Non-information technology consists mainly
of facilities management systems such as telephone, utility and security systems
for the corporate office and the outlet centers. The Company is in the process
of relocating its corporate office to a nearby facility. The Company has
reviewed the corporate facility management systems and made inquiry of the
building owner/manager and concluded that the corporate office building systems
including telephone, utilities, fire and security systems are Y2K compliant. The
Company is in the process of identifying date sensitive systems and equipment
including HVAC units, telephones, security systems and alarms, fire warning
systems and general office systems at its 31 outlet centers. Assessment and
testing of these systems is about 84% complete and expected to be completed by
June 30, 1999. Critical non-compliant systems will be replaced in early 1999.
Based on preliminary assessment, the cost of replacement is not expected to be
significant.
THIRD PARTIES. The Company has third-party relationships with approximately 260
tenants and over 8,000 suppliers and contractors. Many of these third parties
are publicly-traded corporations and subject to disclosure requirements. The
Company has begun assessment of major third parties' Y2K readiness including
tenants, key suppliers of outsourced services including stock transfer, debt
servicing, banking collection and disbursement, payroll and benefits, while
simultaneously responding to their inquiries regarding the Company's readiness.
The majority of the Company's vendors are small suppliers that the Company
believes can manually execute their business and are readily replaceable.
Management also believes there is no material risk of being unable to procure
necessary supplies and services from third
23
<PAGE>
parties who have not already indicated that they are currently Y2K compliant.
Third-party assessment is abut 50% complete and the Company is diligently
working to substantially complete this part of the project. The Company also
intends to monitor Y2K disclosures in SEC filings of publicly-owned third
parties commencing with the current quarter filings.
COSTS. The accounting software and network operating system upgrades are being
executed under existing maintenance and support agreements with software
vendors, and thus the Company does not expect to incur additional costs to bring
those systems in compliance . Approximately $220,000 has been spent to upgrade
or replace equipment or systems specifically to bring them in compliance with
Y2K. The total cost of Y2K compliance activities, expected to be less than
$400,000, has not been, and is not expected to be material to the operating
results or financial position of the Company.
The identification and remediation of systems at the outlet centers is being
accomplished by in-house business systems personnel and outlet center general
managers whose costs are recorded as normal operating expenses. The assessment
of third-party readiness is also being conducted by in-house personnel whose
costs are recorded as normal operating expenses. The Company is not yet in a
position to estimate the cost of third-party compliance issues, but has no
reason to believe, based upon its evaluations to date, that such costs will
exceed $100,000.
RISKS. The principal risks to the Company relating to the completion of its
accounting software conversion is failure to correctly bill tenants by December
31, 1999 and to pay invoices when due. Management believes it has adequate
resources, or could obtain the needed resources, to manually bill tenants and
pay bills until the systems became operational.
The principal risks to the Company relating to non-information systems at the
outlet centers are failure to identify time-sensitive systems and inability to
find a suitable replacement system. The Company believes that adequate
replacement components or new systems are available at reasonable prices and are
in good supply. The Company also believes that adequate time and resources are
available to remediate these areas as needed.
The principal risks to the Company in its relationships with third parties are
the failure of third-party systems used to conduct business such as tenants
being unable to stock stores with merchandise, use cash registers and pay
invoices; banks being unable to process receipts and disbursements; vendors
being unable to supply needed materials and services to the centers; and
processing of outsourced employee payroll. Based on Y2K compliance work done to
date, the Company has no reason to believe that key tenants, banks and suppliers
will not be Y2K compliant in all material respects or can not be replaced within
an acceptable time frame. The Company will attempt to obtain compliance
certification from suppliers of key services as soon as such certifications are
available.
CONTINGENCY PLANS. The Company intends to deal with contingency planning during
the first half of 1999 after the results of the above assessments are known. The
Company description of its Y2K compliance issues are based upon information
obtained by management through evaluations of internal business systems and from
tenant and vendor compliance efforts. No assurance can be given that the Company
will be able to address the Y2K issues for all its systems in a timely manner or
that it will not encounter unexpected difficulties or significant expenses
relating to adequately addressing the Y2K issue. If the Company or the major
tenants or vendors with whom the Company does business fail to address their
major Y2K issues, the Company's operating results or financial position could be
materially adversely affected.
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.
24
<PAGE>
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.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
(A) DOCUMENTS FILED AS A PART OF THIS REPORT:
<TABLE>
<S> <C>
1. Financial Statements
Report of Independent Accountants F-1
Consolidated Balance Sheets-December 31, 1998 and 1997 F-2
Consolidated Statements of Operations-
Years Ended December 31, 1998, 1997 and 1996 F-3
Consolidated Statements of Shareholders' Equity-
For the Years Ended December 31, 1998, 1997 and 1996 F-4
Consolidated Statements of Cash Flows-
Years Ended December 31, 1998, 1997 and 1996 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-17
</TABLE>
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.
25
<PAGE>
<TABLE>
3. Exhibits
Exhibit No. Description
----------- -----------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company. (Note 7)
3.1A Amendment to Amended and Restated Articles of Incorporation dated May 29, 1996. (Note 7)
3.1B Amendment to Amended and Restated Articles of Incorporation dated August 20, 1998.
3.2 Restated By-Laws of the Company.
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)
4.3 Rights Agreement, dated as of August 20, 1998, between Tanger Factory
Outlet Centers, Inc. and BankBoston, N.A., which includes the form of
Articles of Amendment to the Amended and Restated Articles of
Incorporation, designating the preferences, limitations and relative
rights of the Class B Preferred Stock as Exhibit A, the form of Right
Certificate as Exhibit B and the Summary of Rights as Exhibit C.
(Note 9)
10.1 Amended and Restated Unit Option Plan.
10.2 Amended and Restated Share Option Plan of the Company.
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, as of January 1, 1998.
10.6 Amended and Restated Employment Agreement for Steven B. Tanger, as of January 1, 1998.
10.7 Amended and Restated Employment Agreement for Willard Albea Chafin,
Jr., as of January 1, 1999.
10.8 Amended and Restated Employment Agreement for Rochelle Simpson, as of
January 1, 1999.
10.9 Amended and Restated Employment Agreement for Joseph Nehmen, as of
January 1, 1999.
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 5)
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 Form of Senior Indenture. (Note 6)
</TABLE>
26
<PAGE>
<TABLE>
<S> <C>
10.15 Form of First Supplemental Indenture (to Senior Indenture). (Note 6)
10.15A Form of Second Supplemental Indenture (to Senior Indenture) dated
October 24, 1997 among Tanger Properties Limited Partnership, Tanger
Factory Outlet Centers, Inc. and State Street Bank & Trust Company.
(Note 8)
21.1 List of Subsidiaries. (Note 2)
23.1 Consent of PricewaterhouseCoopers LLP.
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 Annual Report
on Form 10-K for the year ended December 31, 1995.
6. Incorporated by reference to the exhibits to the Company's Current
Report on Form 8-K dated March 6, 1996.
7. Incorporated by reference to the exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 1996.
8. Incorporated by reference to the exhibits to the Company's Current
Report on Form 8-K dated October 24, 1997.
9. Incorporated by reference to Exhibit 1.1 to the Company's Registration
Statement on Form 8-A, filed August 24, 1998.
(B) REPORTS ON FORM 8-K - none.
</TABLE>
27
<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 26, 1999
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>
<S> <C> <C>
Signature Title Date
----------- ----- -----
/s/ Stanley K. Tanger Chairman of the Board and March 26, 1999
- ----------------------------- Chief Executive Officer
Stanley K. Tanger (Principal Executive Officer)
/s/ Steven B. Tanger Director, President and March 26, 1999
- ----------------------------- Chief Operating Officer
Steven B. Tanger
/s/ Frank C. Marchisello, Jr. Senior Vice President and March 26, 1999
- ----------------------------- Chief Financial Officer
Frank C. Marchisello, Jr. (Principal Financial and
Accounting Officer)
/s/ Jack Africk Director March 26, 1999
- -----------------------------
Jack Africk
/s/ William G. Benton Director March 26, 1999
- -----------------------------
William G. Benton
/s/ Thomas E. Robinson Director March 26, 1999
- -----------------------------
Thomas E. Robinson
</TABLE>
28
<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, 1998 and 1997, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.
PricewaterhouseCoopers LLP
Greensboro, NC
January 18, 1999
F-1
<PAGE>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
DECEMBER 31,
1998 1997
- ------------------------------------------------------------------------ ----------- ----------
<S> <C> <C>
ASSETS
Rental property
Land $53,869 $48,059
Buildings, improvements and fixtures 458,546 379,842
Developments under construction 16,832 26,807
- ------------------------------------------------------------------------ ----------- ----------
529,247 454,708
Accumulated depreciation (84,685) (64,177)
- ------------------------------------------------------------------------ ----------- ----------
Rental property, net 444,562 390,531
Cash and cash equivalents 6,330 3,607
Deferred charges, net 8,218 8,651
Other assets 12,685 13,225
- ------------------------------------------------------------------------ ----------------------
TOTAL ASSETS $471,795 $416,014
======================================================================== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Long-term debt
Senior, unsecured notes $150,000 $150,000
Mortgages payable 72,790 74,050
Lines of credit 79,695 5,000
- ------------------------------------------------------------------------ ----------- ----------
302,485 229,050
Construction trade payables 9,224 12,913
Accounts payable and accrued expenses 10,723 13,526
- ------------------------------------------------------------------------ ----------- ----------
TOTAL LIABILITIES 322,432 255,489
- ------------------------------------------------------------------------ ----------- ----------
Commitments
Minority interest 35,324 38,406
- ------------------------------------------------------------------------ ----------- ----------
SHAREHOLDERS' EQUITY
Preferred shares, $.01 par value, 1,000,000 shares authorized, 88,270 and
90,689 shares issued and outstanding
at December 31, 1998 and 1997 1 1
Common shares, $.01 par value, 50,000,000 shares authorized,
7,897,606 and 7,853,936 shares issued and outstanding
at December 31, 1998 and 1997 79 78
Paid in capital 137,530 137,020
Distributions in excess of net income (23,571) (14,980)
- ------------------------------------------------------------------------ ----------- ----------
TOTAL SHAREHOLDERS' EQUITY 114,039 122,119
- ------------------------------------------------------------------------ ----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $471,795 $416,014
======================================================================== =========== ==========
</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>
YEAR ENDED DECEMBER 31,
1998 1997 1996
- --------------------------------------------------------------- --------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Base rentals $66,187 $56,807 $50,596
Percentage rentals 3,087 2,637 2,017
Expense reimbursements 26,852 24,665 21,991
Other income 1,640 1,162 896
- --------------------------------------------------------------- --------- ---------- ----------
Total revenues 97,766 85,271 75,500
- --------------------------------------------------------------- --------- ---------- ----------
EXPENSES
Property operating 29,106 26,269 23,559
General and administrative 6,669 6,145 5,467
Interest 22,028 16,835 13,998
Depreciation and amortization 22,154 18,439 16,458
Asset write-down 2,700 --- ---
- --------------------------------------------------------------- --------- ---------- ----------
Total expenses 82,657 67,688 59,482
- --------------------------------------------------------------- --------- ---------- ----------
INCOME BEFORE GAIN ON SALE OF REAL ESTATE, MINORITY INTEREST
AND EXTRAORDINARY ITEM 15,109 17,583 16,018
Gain on sale of real estate 994 --- 159
- --------------------------------------------------------------- --------- ---------- ----------
INCOME BEFORE MINORITY INTEREST AND EXTRAORDINARY ITEM 16,103 17,583 16,177
Minority interest (3,944) (4,756) (4,425)
- --------------------------------------------------------------- --------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM 12,159 12,827 11,752
Extraordinary item - Loss on early extinguishment of debt,
net of minority interest of $128 in 1998 and $270 in 1996 (332) --- (561)
- --------------------------------------------------------------- --------- ---------- ----------
NET INCOME 11,827 12,827 11,191
Less preferred share dividends (1,911) (1,808) (2,399)
- --------------------------------------------------------------- --------- ---------- ----------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $9,916 $11,019 $8,792
=============================================================== ========= ========== ==========
BASIC EARNINGS PER COMMON SHARE:
Income before extraordinary item $ 1.30 $ 1.57 $ 1.46
Extraordinary item (.04) --- (.09)
- --------------------------------------------------------------- --------- ---------- ----------
Net income $ 1.26 $ 1.57 $ 1.37
=============================================================== ========= ========== ==========
DILUTED EARNINGS PER COMMON SHARE:
Income before extraordinary item $ 1.28 $ 1.54 $ 1.46
Extraordinary item (.04) --- (.09)
- --------------------------------------------------------------- --------- ---------- ----------
Net income $ 1.24 $ 1.54 $ 1.37
=============================================================== ========= ========== ==========
</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, 1998, 1997, AND 1996
(In thousands, except share data)
<TABLE>
<S> <C> <C> <C> <C> <C>
Distributions
in Equity
Preferred Common Paid in Excess of Total
Shares Shares Capital Net Income Shareholders'
- ------------------------------------ ------- --------- --------- --------- ----------
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
Conversion of 2,419 preferred
shares into 21,790 common shares --- 1 (1) --- ---
Issuance of 31,880 common shares
upon exercise of unit options --- --- 762 --- 762
Repurchase and retirement of 10,000
common shares --- --- (216) --- (216)
Compensation under Unit Option Plan --- --- 142 --- 142
Adjustment for minority interest
in the Operating Partnership --- --- (177) --- (177)
Net income --- --- --- 11,827 11,827
Preferred dividends ($21.17 per
share) --- --- --- (1,894) (1,894)
Common dividends ($2.35 per share) --- --- --- (18,524) (18,524)
- ------------------------------------ ------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1998 $ 1 $ 79 $137,530 $(23,571) $114,039
==================================== ======= ========= ========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
<PAGE>
<TABLE>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
YEAR ENDED DECEMBER 31,
1998 1997 1996
-------------------------------------------------------------- --------- ---------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $11,827 $12,827 $11,191
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 22,154 18,439 16,458
Amortization of deferred financing costs 1,076 1,094 953
Minority interest 3,816 4,756 4,155
Loss on early extinguishment of debt 460 --- 831
Asset write-down 2,700 --- ---
Gain on sale of real estate (994) --- (159)
Straight-line base rent adjustment (688) (347) (1,192)
Compensation under Unit Option Plan 195 338 338
Increase (decrease) due to changes in:
Other assets (1,956) (1,861) 597
Accounts payable and accrued expenses (2,803) 3,968 4,879
-------------------------------------------------------------- --------- ---------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 35,787 39,214 38,051
-------------------------------------------------------------- --------- ---------- ---------
INVESTING ACTIVITIES
Acquisition of real estate (44,650) (37,500) ---
Additions to rental properties (35,252) (54,795) (35,408)
Additions to deferred lease costs (1,895) (1,341) (1,167)
Proceeds from sale of real estate 2,561 --- 174
-------------------------------------------------------------- --------- ---------- ---------
NET CASH USED IN INVESTING ACTIVITIES (79,236) (93,636) (36,401)
-------------------------------------------------------------- --------- ---------- ---------
FINANCING ACTIVITIES
Net proceeds from issuance of common shares --- 29,241 ---
Repurchase of common shares (216) --- ---
Cash dividends paid (20,418) (17,013) (15,576)
Distributions to minority interest (7,128) (6,583) (6,249)
Proceeds from notes payable --- 75,000 75,000
Repayments on mortgages payable (1,260) (1,154) (1,019)
Proceeds from revolving lines of credit 152,760 118,450 70,301
Repayments on revolving lines of credit (78,065) (141,250) (123,027)
Additions to deferred financing costs (263) (1,950) (3,606)
Proceeds from exercise of unit options 762 703 ---
-------------------------------------------------------------- --------- ---------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 46,172 55,444 (4,176)
-------------------------------------------------------------- --------- ---------- ---------
Net increase (decrease) in cash and cash equivalents 2,723 1,022 (2,526)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,607 2,585 5,111
-------------------------------------------------------------- --------- ---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $6,330 $3,607 $2,585
============================================================== ========= ========== =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 31 factory outlet centers located in 23 states with a total
gross leasable area of approximately 5.1 million square feet at the end of 1998.
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"). Income is
allocated to the limited partner based on its respective ownership interest (See
Note 7).
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.
OPERATING SEGMENTS - The Company aggregates the financial information of
all its centers into one reportable operating segment because the centers all
have similar economic characteristics and provide similar products and services
to similar types and classes of customers.
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 1998, 1997 and 1996 amounted to $762,000, $1,877,000 and
$1,044,000, and development costs capitalized amounted to $1,903,000, $1,637,000
and $1,321,000, respectively. Depreciation expense for each of the years ended
December 31, 1998, 1997 and 1996 was $20,873,000, $17,327,000 and $15,449,000,
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.
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.
F-6
<PAGE>
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, 1998.
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 specified targets that trigger the
contingent rent are met. 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 $21.17, $19.55, and
$18.56 in 1998, 1997, and 1996, 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: 1998 1997 1996
------------------------------------------- --------- --------- ---------
Ordinary income $1.340 $1.779 $1.607
Return of capital 1.010 .391 .453
------------------------------------------- --------- --------- ---------
$2.350 $2.170 $2.060
=========================================== ========= ========= =========
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. No single tenant
accounted for 10% or more of combined base and percentage rental income during
1998, 1997 and 1996.
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, 1998, 1997 and 1996 amounted to $9,224,000,
$12,913,000 and $8,320,000 respectively. Interest paid, net of interest
capitalized, in 1998, 1997 and 1996 was $20,690,000, $12,337,000 and
$10,637,000, respectively.
F-7
<PAGE>
3. DEFERRED CHARGES
Deferred charges as of December 31, 1998 and 1997 consist of the following
(in thousands):
1998 1997
-------------------------------------------------------- -------- --------
Deferred lease costs $9,551 $7,658
Deferred financing costs 5,691 6,607
-------------------------------------------------------- -------- --------
15,242 14,265
Accumulated amortization 7,024 5,614
-------------------------------------------------------- -------- --------
$8,218 $8,651
======================================================== ======== ========
Amortization of deferred lease costs for the years ended December 31, 1998, 1997
and 1996 was $1,019,000, $873,000 and $799,000, respectively. Amortization of
deferred financing costs, included in interest expense in the accompanying
consolidated statements of operations, for the years ended December 31, 1998,
1997 and 1996 was $1,076,000, $1,094,000 and $953,000 respectively. During 1998
and 1996, the Company expensed the remaining unamortized financing costs
totaling $460,000 and $831,000 related to debt extinguished prior to its
respective maturity date. Such amounts are shown as extraordinary items in the
accompanying consolidated statements of operations.
4. ASSET WRITE-DOWN
During 1998, the Company discontinued the development of its Concord, North
Carolina, Romulus, Michigan and certain other projects as the economics of these
transactions did not meet an adequate return on investment for the Company. As a
result, the Company recorded a $2.7 million charge in the fourth quarter to
write-off the carrying amount of these projects, net of proceeds received from
the sale of the Company's interest in the Concord project to an unrelated third
party.
5. LONG-TERM DEBT
Long-term debt at December 31, 1998 and 1997 consists of the following
(in thousands):
1998 1997
---------------------------------------------------------- ---------- ---------
8.75% Senior, unsecured notes, maturing March 2001 $75,000 $75,000
7.875% Senior, unsecured notes, maturing October 2004 75,000 75,000
Mortgage notes with fixed interest at:
8.92%, maturing January 2002 47,405 48,142
8.625%, maturing September 2000 9,805 10,121
9.77%, maturing April 2005 15,580 15,787
Revolving lines of credit with variable interest rates
ranging from
either prime less .25% to prime or from LIBOR plus 79,695 5,000
1.55% to LIBOR plus 1.60%
------------------------------------------------------ ---------- ---------
$302,485 $229,050
====================================================== ========== =========
The Company maintains revolving lines of credit which provide for borrowing up
to $100 million. The agreements expire at various times through the year 2001.
Interest is payable based on alternative interest rate bases at the Company's
option. Amounts available under these facilities at December 31, 1998 totaled
$20.3 million. Certain of the Company's properties, which had a net book value
of approximately $85.1 million at December 31, 1998, serve as collateral for the
fixed rate mortgages.
The credit agreements require the maintenance of certain ratios, including debt
service coverage and leverage, and limit the payment of dividends such that
dividends and distributions will not exceed funds from operations, as defined in
the agreements, for the prior fiscal year 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>
During March 1999, the Company refinanced its 8.92% notes. The refinancing
reduced the interest rate to 7.875%, increased the loan amount to $66.5 million
and extended the maturity date to April 2009. The additional proceeds were used
to reduce amounts outstanding under the revolving lines of credit. In addition,
the Company extended the maturity of one of its revolving lines of credit from
June 2000 to June 2001.
Maturities of the existing long-term debt, after giving consideration to the
refinance and extension as described above, are as follows (in thousands):
Year Amount %
----------------------- --------- ----------
1999 $1,461 ---
2000 15,273 5
2001 132,316 44
2002 1,403 ---
2003 1,521 1
Thereafter 150,511 50
----------------------- --------- ----------
$302,485 100
======================= ========= ==========
6. DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
In October 1998, the Company entered into an interest rate swap agreement
effective through October 2001 with a notional amount of $20 million which fixed
the 30 day LIBOR index at 5.47%. A similar agreement with a notional amount of
$10 million at a fixed 30 day LIBOR index of 5.99% expired during 1998 . The
impact of these agreements had an insignificant effect on interest expense
during 1998, 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 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 proceeds of $714,000. Such amount is
being amortized as a reduction to interest expense over the life of the notes
and results 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, 1998, 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 $309.1
million. The estimated fair value of the interest rate swap agreement at
December 31, 1998, as determined by the issuing financial institution, was an
unrealized loss of approximately $218,000.
On June 15, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES ("SFAS 133"). SFAS 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999. SFAS 133 requires
that all derivative instruments be recorded on the balance sheet at their fair
value. Changes in the fair value of derivatives are recorded each period in
current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. Management of the Company anticipates that, due to its
limited use of derivative instruments, the adoption of SFAS 133 will not have a
significant effect on the Company's results of operations or its financial
position.
F-9
<PAGE>
7. 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, 1998, 795,309 common shares were reserved for
the conversion of Depositary Shares. 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, 1998, the ownership interests of the Operating Partnership
consisted of 7,897,606 partnership Units held by the Company, 88,270 preferred
partnership Units (which are convertible into approximately 795,309 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.
On October 13, 1998, the Company's Board of Directors authorized the repurchase
of up to $5 million of the Company's common shares. The timing and amount of
purchases will be at the discretion of management. As of December 31, 1998, the
Company had paid $216,000 for the repurchase and retirement of 10,000 common
shares, leaving a balance of $4,784,000 authorized for future repurchases.
8. SHAREHOLDERS' RIGHTS PLAN
On July 30, 1998, the Company's Board of Directors declared a distribution of
one Preferred Share Purchase Right (a "Right") for each then outstanding common
share of the Company to shareholders of record on August 27, 1998. The Rights
are exercisable only if a person or group acquires 15% or more of the Company's
outstanding common shares or announces a tender offer the consummation of which
would result in ownership by a person or group of 15% or more of the common
shares. Each Right entitles shareholders to buy one-hundredth of a share of a
new series of Junior Participating Preferred Shares of the Company at an
exercise price of $120, subject to adjustment.
If an acquiring person or group acquires 15% or more of the Company's
outstanding common shares, an exercisable Right will entitle its holder (other
than the acquirer) to buy, at the Right's then-current exercise price, common
shares of the Company having a market value of two times the exercise price of
one Right. If an acquirer acquires at least 15%, but less than 50%, of the
Company's common shares, the Board may exchange each Right (other than those of
the acquirer) for one common share (or one-hundredth of a Class B Preferred
Share) per Right. In addition, under certain circumstances, if the Company is
involved in a merger or other business combination where it is not the surviving
corporation, an exercisable Right will entitle its holder to buy, at the Right's
then-current exercise price, common shares of the acquiring company having a
market value of two times the exercise price of one Right. The Company may
redeem the Rights at $.01 per Right at any time prior to a person or group
acquiring a 15% position. The Rights will expire on August 26, 2008.
F-10
<PAGE>
9. EARNINGS PER SHARE
A reconciliation of the numerators and denominators in computing earnings per
share in accordance with Statement of Financial Accounting Standards No. 128,
EARNINGS PER SHARE, for the years ended December 31, 1998, 1997 and 1996 is set
forth as follows (in thousands, except per share amounts):
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
-------------------------------------------------- --------- --------- ---------
Numerator:
Income before extraordinary item $12,159 $12,827 $11,752
Less preferred share dividends (1,911) (1,808) (2,399)
-------------------------------------------------- --------- --------- ---------
Income available to common shareholders -
numerator for basic and diluted earnings per share $10,248 $11,019 $9,353
-------------------------------------------------- --------- --------- ---------
Denominator:
Basic weighted average common shares 7,886 7,028 6,402
Effect of outstanding share and unit options 123 112 6
-------------------------------------------------- --------- --------- ---------
Diluted weighted average common shares 8,009 7,140 6,408
-------------------------------------------------- --------- --------- ---------
Basic earnings per share before extraordinary item $ 1.30 $ 1.57 $ 1.46
================================================== ========= ========= =========
Diluted earnings per share before extraordinary item $ 1.28 $ 1.54 $ 1.46
================================================== ========= ========= =========
</TABLE>
Options to purchase common shares excluded from the computation of diluted
earnings per share during 1998, 1997 and 1996 because the exercise price was
greater than the average market price of the common shares totaled 268,569,
9,000, and 150,992 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.
10. EMPLOYEE BENEFIT PLANS
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 Statement of Financial Accounting Standards No.
123, ACCOUNTING FOR STOCK-BASED COMPENSATION (SFAS 123), the Company's net
income and earnings per share would have been reduced to the following pro forma
amounts (in thousands, except per share amounts):
1998 1997 1996
---------------- ---------------- -------- -------- --------
Net income: As reported $11,827 $12,827 $11,191
Pro forma $11,651 $12,696 $11,114
Basic EPS: As reported $ 1.26 $ 1.57 $ 1.37
Pro forma $ 1.24 $ 1.55 $ 1.36
Diluted EPS: As reported $ 1.24 $ 1.54 $ 1.37
Pro forma $ 1.22 $ 1.53 $ 1.36
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Because the SFAS 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 1998 and 1996, respectively: expected dividend yields ranging from 8%
to 10%; expected lives ranging from 5 years to 7 years; expected volatility 20%;
and risk-free interest rates ranging from 5.42% to 6.75%.
The Company may issue up to 1,750,000 shares under The 1993 Stock Option Plan
and The 1993 Unit Option Plan. The Company has granted 1,131,240 options, net of
options forfeited, through December 31, 1998. 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, 1998 have exercise prices between $22.50 and
$31.25, with a weighted average exercise price of $25.27 and a weighted average
remaining contractual life of 6.6 years. On January 8, 1999, the Company granted
to its directors and employees options to purchase an additional 15,000 common
shares and 229,300 Units in the Operating Partnership (which are exchangeable
for 229,300 common shares of the Company). The exercise price per share and unit
was set at the previous day's market closing price of $22.125.
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 fully
amortized in 1998 and was $195,000 and $533,000 at December 31, 1997 and 1996.
Compensation expense recognized during 1998, 1997 and 1996 was $195,000,
$338,000 and $338,000, respectively.
A summary of the status of the Company's two plans at December 31, 1998, 1997
and 1996 and changes during the years then ended is presented in the table and
narrative below:
<TABLE>
1998 1997 1996
----------------- ----------------- --------------------
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 874,230 $23.76 915,950 $23.77 680,650 $23.58
year
Granted 277,600 30.15 --- --- 237,700 24.29
Exercised (31,880) 23.91 (29,700) 23.68 --- ---
Forfeited (50,890) 26.94 (12,020) 24.41 (2,400) 23.59
- ------------------------------ --------- --------- ------------ --------- ---------- ----------
Outstanding at end of year 1,069,060 $25.27 874,230 $23.76 915,950 $23.77
============================== ========= ========= ============ ========= ========== ==========
Exercisable at end of year 608,520 $23.51 470,750 $23.46 320,410 $23.31
Weighted average fair value
of options granted $1.59 --- $2.70
</TABLE>
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.
F-12
<PAGE>
11. SUPPLEMENTARY INCOME STATEMENT INFORMATION
The following amounts are included in property operating expenses for the years
ended December 31, 1998, 1997 and 1996 (in thousands):
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
-------------------------------------------------- -------- -------- -------
Advertising and promotion $ 9,069 $ 8,452 $7,691
Common area maintenance 11,929 11,113 9,497
Real estate taxes 6,202 5,004 4,699
Other operating expenses 1,906 1,700 1,672
-------------------------------------------------- -------- -------- -------
$29,106 $26,269 $23,559
================================================== ======== ======== =======
</TABLE>
12. LEASE AGREEMENTS
The Company is the lessor of a total of 1,182 stores in 31 factory outlet
centers, under operating leases with initial terms that expire from 1999 to
2017. Most leases are renewable for five years at the lessee's option. Future
minimum lease receipts under noncancellable operating leases as of December 31,
1998 are as follows (in thousands):
1999 $63,145
2000 54,895
2001 46,451
2002 36,508
2003 20,956
Thereafter 35,479
----------------------- ------
$257,434
======================= ===========
13. COMMITMENTS
At December 31, 1998, commitments for construction of new developments and
additions to existing properties amounted to $5.6 million. 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 $1,520,000. These leasehold rights are being amortized
on a straight-line basis over 30 and 40 year periods. Accumulated amortization
was $517,000 and $468,000 at December 31, 1998 and 1997, 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 $1,090,000, $778,000, and
$315,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
Minimum lease payments for the next five years and thereafter are as follows (in
thousands):
1999 $1,522
2000 1,777
2001 1,715
2002 1,669
2003 1,550
Thereafter 56,604
----------------------- ------
$64,837
======================= =========
F-13
<PAGE>
14. QUARTERLY FINANCIAL INFORMATION
The following table sets forth summary quarterly financial information
for the years ended December 31, 1998 and 1997 (unaudited and in
thousands, except per share data).
<TABLE>
<S> <C> <C> <C> <C>
1998 BY QUARTER First Second Third Fourth
-------- --------- -------- --------
Total revenues $22,806 $24,350 $25,067 $25,543
Income before minority interest and
extraordinary item 5,523 4,335 3,891 2,354
Income before extraordinary item 4,115 3,265 2,945 1,834
Net income 3,783 3,265 2,945 1,834
Basic earnings per common share:
Income before extraordinary item .46 .35 .31 .17
Net income .42 .35 .31 .17
Diluted earnings per common share:
Income before extraordinary item (1) .45 .34 .31 .17
Net income (1) .41 .34 .31 .17
-------- --------- -------- --------
1997 BY QUARTER First Second Third Fourth
-------- --------- -------- --------
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
-------- --------- -------- --------
</TABLE>
(1) Quarterly amounts do not add to annual amounts due to the effect of
rounding on a quarterly basis.
15. ACQUISITIONS
During 1998, the Company completed the acquisitions of two factory outlet
centers containing approximately 359,000 square feet of gross leasable area for
purchase prices which aggregated $44.7 million. During 1997, the Company
completed the acquisitions of three factory outlet centers containing
approximately 303,000 square feet for purchase prices which aggregated $37.5
million. 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 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 each period presented, nor does it
purport to represent the results of operations for future periods. The following
unaudited summarized pro forma results of operations reflect adjustments to
present the historical information as if the all of the acquisitions had
occurred as of the January 1, 1997 (unaudited and in thousands, except per share
data).
1998 1997
-------------------------------------------------- --------- ----- --------
Total revenues $100,840 $93,988
Income before extraordinary item 12,349 13,020
Net income 12,017 13,020
Basic net income per common share:
Income before extraordinary item 1.32 1.60
Net income 1.28 1.60
Diluted net income per common share:
Income before extraordinary item 1.30 1.57
Net income 1.26 1.57
================================================== ========= ===== ========
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 25 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.
PricewaterhouseCcoopers LLP
Greensboro, North Carolina
January 18, 1999
F-15
<PAGE>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands)
<TABLE>
Costs Capitalized
Initial Cost to Subsequent to Acquisition Gross Amount Carried at Close of Period
Description Company (Inprovements) 12/31/98 (1)
- ------------------------------- ---------------- ------------------- ----------------------------------------
Buildings, Buildings, Buildings,
Outlet Center Improvements Improvements Improvements
Name Location Encumbrances Land & Fixtures Land & Fixtures Land & Fixtures Total
- -------------- ---------------- ----------- -------- ---------- ------ ----------- ---- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Barstow Barstow, CA $ --- $3,941 $12,533 $ --- $1,034 $3,941 $13,567 $17,508
Blowing Rock Blowing Rock, NC --- 1,963 9,424 --- 138 1,963 9,562 11,525
Boaz Boaz, AL --- 616 2,195 --- 1,153 616 3,348 3,964
Bourne Bourne, MA --- 899 1,361 --- 303 899 1,664 2,563
Branch N. Branch, MN --- 329 5,644 249 2,349 578 7,993 8,571
Branson Branson, MO --- 4,557 25,040 --- 6,055 4,557 31,095 35,652
Casa Grande Casa Grande, AZ --- 753 9,091 --- 1,196 753 10,287 11,040
Clover North Conway, NH --- 393 672 --- 246 393 918 1,311
Commerce I Commerce, GA 9,805 755 3,511 492 5,647 1,247 9,158 10,405
Commerce II Commerce, GA --- 1,299 14,046 541 11,614 1,840 25,660 27,500
Dalton Dalton, GA --- 1,641 15,596 --- --- 1,641 15,596 17,237
Gonzales Gonzales, LA --- 947 15,895 17 3,447 964 19,342 20,306
Kittery-I Kittery, ME 5,878 1,242 2,961 229 1,193 1,471 4,154 5,625
Kittery-II Kittery, ME --- 921 1,835 530 233 1,451 2,068 3,519
Lancaster Lancaster, PA 15,580 3,691 19,907 --- 6,074 3,691 25,981 29,672
Lawrence Lawrence, KS --- 1,013 5,542 429 443 1,442 5,985 7,427
LL Bean North Conway, NH --- 1,894 3,351 --- 552 1,894 3,903 5,797
Locust Grove Locust Grove, GA --- 2,609 11,801 --- 7,065 2,609 18,866 21,475
Martinsburg Martinsburg, WV --- 800 2,812 --- 1,259 800 4,071 4,871
McMinnville McMinnville, OR --- 1,071 8,162 5 756 1,076 8,918 9,994
Nags Head Nags Head, NC --- 1,853 6,679 --- 564 1,853 7,243 9,096
Pigeon Forge Pigeon Forge, TN --- 299 2,508 --- 1,334 299 3,842 4,141
Riverhead Riverhead, NY --- --- 36,374 6,152 63,049 6,152 99,423 105,575
San Marcos San Marcos, TX 10,050 1,953 9,440 17 9,988 1,970 19,428 21,398
Sanibel Sanibel, FL 4,916 23,196 --- --- 4,916 23,196 28,112
Sevierville Sevierville, TN --- --- 18,495 --- 13,143 --- 31,638 31,638
Seymour Seymour, IN 8,059 1,710 13,249 --- 248 1,710 13,497 15,207
Stroud Stroud, OK --- 446 7,048 --- 4,840 446 11,888 12,334
Terrell Terrell, TX --- 805 13,432 --- 3,906 805 17,338 18,143
West Branch West Branch, MI 6,732 350 3,428 120 4,323 470 7,751 8,221
Williamsburg Williamsburg,IA 16,686 706 6,781 716 11,217 1,422 17,998 19,420
============== ================ ======== ======== ========== = ===== =========== == ==== =========== ===========
Totals $72,789 $44,372 $312,009 $9,497 $163,369 $53,869 $475,378 $529,247
============== ================ ======== ======== ========== = ===== =========== == ==== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Description Life Used to
- --------------- Compute
Depreciation
Outlet Center Accumulated Date of in Income
Name Depreciation Construction Statement
- -------------- ----------- ---------- -----------
<S> <C> <C> <C>
Barstow $2,793 1995 (2)
Blowing Rock 402 1997 (3) (2)
Boaz 1,414 1988 (2)
Bourne 690 1989 (2)
Branch 2,598 1992 (2)
Branson 6,057 1994 (2)
Casa Grande 3,650 1992 (2)
Clover 361 1987 (2)
Commerce I 3,419 1989 (2)
Commerce II 3,034 1995 (2)
Dalton 398 1998 (3) (2)
Gonzales 5,542 1992 (2)
Kittery-I 1,977 1986 (2)
Kittery-II 830 1989 (2)
Lancaster 4,558 1994 (3) (2)
Lawrence 1,584 1993 (2)
LL Bean 1,572 1988 (2)
Locust Grove 3,516 1994 (2)
Martinsburg 1,685 1987 (2)
McMinnville 2,549 1993 (2)
Nags Head 342 1997 (3) (2)
Pigeon Forge 1,541 1988 (2)
Riverhead 9,889 1993 (2)
San Marcos 3,918 1993 (2)
Sanibel 315 1998 (3) (2)
Sevierville 1,321 1997 (3) (2)
Seymour 3,123 1994 (2)
Stroud 4,007 1992 (2)
Terrell 3,795 1994 (2)
West Branch 2,277 1991 (2)
Williamsburg 5,528 1991 (2)
============== ========== ========== ===========
Totals $84,685
============== =========== ========== ===========
</TABLE>
(1) AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS APPROXIMATELY $527,122,000
(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-16
<PAGE>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
SCHEDULE III - (CONTINUED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands)
The changes in total real estate for the three years ended December 31, 1998 are
as follows:
1998 1997 1996
-------- --------- --------
Balance, beginning of year $454,708 $358,361 $325,881
Acquisition of real estate 44,650 37,500 ---
Improvements 31,599 59,519 32,511
Dispositions and other (1,710) (672) (31)
-------- --------- --------
Balance, end of year $529,247 $454,708 $358,361
======== ========= ========
The changes in accumulated depreciation for the three years ended December 31,
1998 are as follows:
1998 1997 1996
-------- --------- --------
Balance, beginning of year $64,177 $46,907 $31,458
Depreciation for the period 20,873 17,327 15,449
Dispositions and other (365) (57) ---
-------- --------- --------
Balance, end of year $84,685 $64,177 $46,907
======== ========= ========
F-17
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
3.1 Amended and Restated Articles of Incorporation of the Company.
(Note 7)
3.1A Amendment to Amended and Restated Articles of Incorporation dated
May 29, 1996. (Note 7)
3.1B Amendment to Amended and Restated Articles of Incorporation dated
August 20, 1998.
3.2 Restated By-Laws of the Company.
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)
4.3 Rights Agreement, dated as of August 20, 1998, between Tanger
Factory Outlet Centers, Inc. and BankBoston, N.A., which includes
the form of Articles of Amendment to the Amended and Restated
Articles of Incorporation, designating the preferences,
limitations and relative rights of the Class B Preferred Stock as
Exhibit A, the form of Right Certificate as Exhibit B and the
Summary of Rights as Exhibit C. (Note 9)
10.1 Amended and Restated Unit Option Plan.
10.2 Amended and Restated Share Option Plan of the Company.
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,
as of January 1, 1998.
10.6 Amended and Restated Employment Agreement for Steven B. Tanger,
as of January 1, 1998.
10.7 Amended and Restated Employment Agreement for Willard Albea
Chafin, Jr., as of January 1, 1999.
10.8 Amended and Restated Employment Agreement for Rochelle Simpson,
as of January 1, 1999.
10.9 Amended and Restated Employment Agreement for Joseph Nehmen, as
of January 1, 1999.
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 5)
10.11 Agreement Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K.
(Note 2)
F-18
<PAGE>
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)
10.15 Form of Senior Indenture. (Note 6)
10.16 Form of First Supplemental Indenture (to Senior Indenture). (Note
6)
10.16A Form of Second Supplemental Indenture (to Senior Indenture) dated
October 24, 1997 among Tanger Properties Limited Partnership,
Tanger Factory Outlet Centers, Inc. and State Street Bank & Trust
Company. (Note 8)
21.1 List of Subsidiaries. (Note 2)
23.1 Consent of PricewaterhouseCoopers LLP.
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 Annual Report on
Form 10-K for the year ended December 31, 1995.
6. Incorporated by reference to the exhibits to the Company's Current Report on
Form 8-K dated March 6, 1996.
7. Incorporated by reference to the exhibits to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
8. Incorporated by reference to the exhibits to the Company's Current Report on
Form 8-K dated October 24, 1997.
9. Incorporated by reference to Exhibit 1.1 to the Company's Registration
Statement on Form 8-A, filed August 24, 1998.
Exhibit 3.1b
ARTICLES OF AMENDMENT
to
AMENDED AND RESTATED ARTICLES OF INCORPORATION
designating the preferences, limitations and relative rights of
CLASS B PREFERRED SHARES
of
TANGER FACTORY OUTLET CENTERS, INC.
(Pursuant to Section 55-6-02 of the
North Carolina Business Corporation Act)
The undersigned corporation hereby submits these Articles of Amendment
to the Secretary of State of the State of North Carolina for the purpose of
amending its articles of incorporation to determine and fix the preferences,
limitations and relative rights of its Class B Preferred Shares, par value $0.01
per share:
1. The name of the corporation is Tanger Factory Outlet Centers, Inc.
(hereinafter called the "Corporation").
2. Pursuant to the authority Section 55-6-02 of the Business Corporation
Act and the provisions of Article II. Section D of the Corporation's Amended and
Restated Articles of Incorporation as heretofore amended (the "Articles of
Incorporation"), the following amendment to the Articles of Incorporation was
duly adopted by the Board of Directors of the Corporation at a meeting duly
called and held on July 30, 1998:
The following is added as a new Paragraph I of Article II of the Corporation's
Amended and Restated Articles of Incorporation:
I. Class B Preferred Shares. The 8,000,000 Class B Preferred Shares with
a par value of $0.01 per share (the "Class B Preferred Shares") that the
Corporation is authorized to issue pursuant to Paragraph A of this Article II
shall have the following preferences, limitations and relative rights:
<PAGE>
1. Dividends and Distributions.
(a) Subject to the rights of the holders of any shares of any
class or series of Preferred Shares (or any similar shares), whether now
or hereafter outstanding, ranking prior and superior to the Class B
Preferred Shares with respect to dividends, the holders of Class B
Preferred Shares, in preference to the holders of Common Shares, par
value $0.01 per share (the "Common Shares"), of the Corporation, and of
any other shares ranking junior as to dividends to the Class B Preferred
Shares, shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of March, June,
September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a whole or
fraction of a Class B Preferred Share, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $1 or (b) subject to
the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions, other than a dividend payable in Common Shares
or a subdivision of the outstanding Common Shares (by reclassification
or otherwise), declared on the Common Shares since the immediately
preceding Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any whole
or fraction of a Class B Preferred Share. In the event the Corporation
shall at any time declare or pay any dividend on the Common Shares
payable in Common Shares, or effect a subdivision or combination or
consolidation of the outstanding Common Shares (by reclassification or
otherwise than by payment of a dividend in Common Shares) into a greater
or lesser number of Common Shares, then in each such case the amount to
which holders of Class B Preferred Shares were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of
which is the number of Common Shares outstanding immediately after such
event and the denominator of which is the number of Common Shares that
were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on
the Class B Preferred Shares as provided in paragraph (A) of this
Section immediately after it declares a dividend or distribution on the
Common Shares (other than a dividend payable in Common Shares); provided
that, in the event no dividend or distribution shall have been declared
on the Common Shares during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $1 per share on the Class B Preferred Shares shall
nevertheless by payable on such subsequent Quarterly Dividend Payment
Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding Class B Preferred Shares from the Quarterly Dividend Payment
Date next preceding the date
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<PAGE>
of issue of such shares, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date,
in which case dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the
determination of holders of Class B Preferred Shares entitled to receive
a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the Class B
Preferred Shares in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of Class B Preferred Shares entitled to
receive payment of a dividend or distribution declared thereon, which
record date shall be not more than 60 days prior to the date fixed for
the payment thereof.
2. Voting Rights. The holders of Class B Preferred Shares shall have the
following voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each Class B Preferred Share shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the shareholders of the
Corporation. In the event the Corporation shall at any time declare or
pay any dividend on the Common Shares payable in Common Shares, or
effect a subdivision or combination or consolidation of the outstanding
Common Shares (by reclassification or otherwise than by payment of a
dividend in Common Shares) into a greater or lessor number of Common
Shares, then in each such case the number of votes per share to which
holders of Class B Preferred Shares were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction,
the numerator of which is the number of Common Shares outstanding
immediately after such event and the denominator of which is the number
of Common Shares that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in any other Articles of
Amendment to the Articles of Incorporation creating, or establishing the
preferences, limitations and relative rights of, another class or series
of preferred shares or any similar shares, or by law, the holders of
Class B Preferred Shares and the holders of Common Shares and any other
capital stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of shareholders
of the Corporation.
(c) Except as set forth herein, or as otherwise provided by law,
holders of Class B Preferred Shares shall have no special voting rights
and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Shares as set forth herein) for
taking any corporate action.
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3. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Class B Preferred Shares as provided in
Section 1 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on Class B
Preferred Shares outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or may any other
distributions, on any shares ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Class B Preferred
Shares;
(ii) declare or pay dividends, or make any other
distributions, on any shares ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Class B
Preferred Shares, except dividends paid ratably on the Class B Preferred
Shares and all such parity shares on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration any shares ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Class B Preferred Shares,
provided that the Corporation may at any time redeem, purchase or
otherwise acquire any such junior shares in exchange for any of the
Corporation's shares ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Class B Preferred Shares;
or
(iv) redeem or purchase or otherwise acquire for
consideration any Class B Preferred Shares, or any shares ranking on a
parity with the Class B Preferred Shares, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result
in fair and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any of
the Corporation's shares unless the Corporation could under paragraph
(A) of this Section 3, purchase or otherwise acquire such shares at such
time and in such manner.
4. Reacquired Shares. Any Class B Preferred Shares purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued Class B Preferred Shares and
may be reissued as part of a new series of Class B Preferred Shares subject to
the conditions and restrictions on issuance set forth herein, in the Articles of
Incorporation, or in any other Articles of Amendment to the Articles of
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<PAGE>
Incorporation creating a series of Class B Preferred Shares or any similar
shares or as otherwise required by law.
5. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Class B Preferred Shares unless,
prior thereto, the holders of Class B Preferred Shares shall have received $100
per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of Class B Preferred Shares shall be entitled to
receive an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount to be distributed
per share to holders of Common Shares, or (2) to the holders of shares ranking
on a parity (either as to dividends or upon liquidation, dissolution or winding
up) with the Class B Preferred Shares, except distributions made ratably on the
Class B Preferred Shares and all such parity shares in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Shares payable in Common
Shares, or effect a subdivision or combination or consolidation of the
outstanding Common Shares (by reclassification or otherwise than by payment of a
dividend in Common Shares) into a greater or lesser number of Common Shares,
then in each such case the aggregate amount to which holders of Class B
Preferred Shares were entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to such event.
6. Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the Common
Shares are exchanged for or changed into other shares or securities, cash and/or
any other property, then in any such case each Class B Preferred Share shall at
the same time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount of shares, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Shares is changed or exchanged. In the event the Corporation shall at any
time declare or pay any dividend on the Common Shares payable in Common Shares,
or effect a subdivision or combination or consolidation of the outstanding
Common Shares (by reclassification or otherwise than by payment of a dividend in
Common Shares) into a greater or lesser number of Common Shares, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of Class B Preferred Shares shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to such event.
7. No Redemption. The Class B Preferred Shares shall not be redeemable.
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<PAGE>
8. Rank. The Class B Preferred Shares shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Corporation's Preferred Shares, whether now or hereafter
outstanding.
9. Restrictions on Ownership and Transfer to Preserve Tax Benefit;
Conversion and Exchange for Excess Class B Preferred Shares; Redemption of Class
B Preferred Shares in Certain Circumstances. Notwithstanding anything to the
contrary contained herein, the Class B Preferred Shares shall be subject to the
same (i) restrictions on ownership and transfer, (ii) provisions with respect to
conversion and exchange for a series of Excess Shares (as defined in the
Articles of Incorporation), (iii) redemption in certain specified circumstances
and (iv) all such other terms and conditions as are contained in Section H of
Article II of the Articles of Incorporation (including, without limitation,
paragraphs 8, 9 and 10 of Section H of Article II of the Articles of
Incorporation), which, in each case, currently apply to the Series A Cumulative
Convertible Redeemable Preferred Shares of the Corporation and are intended to,
among other things, protect or preserve the Corporation's REIT status, and such
provisions are incorporated herein by reference by replacing all references to
the "Series A Cumulative Convertible Redeemable Preferred Shares" or "Series A
Preferred Shares" with references to the "Class B Preferred Shares". Any
question or ambiguity as to the applicability, interpretation or effect of this
Section 9 or the provisions incorporated herein by reference pursuant to this
Section 9 shall be determined and resolved by the Board in its sole discretion,
and such determination or resolution shall be final and binding.
10. Amendment. The Articles of Incorporation shall not be amended in any
manner which would materially alter or change the powers, preferences or special
rights of the Class B Preferred Shares so as to affect them adversely without
the affirmative vote of the holders of at least two-thirds of the outstanding
Class B Preferred Shares, voting together as a single class.
This the ______ day of August, 1998.
Tanger Factory Outlet Centers, Inc.
BY: _____________________________
Stanley K. Tanger, Chairman of
the Board of Directors
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Exhibit 3.2
BY-LAWS OF
TANGER FACTORY OUTLET CENTERS, INC.
[RESTATED TO REFLECT AMENDMENTS MADE JULY 29, 1998]
1. Registered Office
The initial registered office of the Corporation shall be located at
1400 West Northwood Street, Greensboro, North Carolina, 27408 or at such other
place within the State of North Carolina as may be designated by the corporation
from time to time.
2. Shareholders
2.1 Annual Meetings. The annual meetings of the shareholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held at such date and time as shall be
fixed by the Directors from time to time.
2.2 Substitute Annual Meeting. If the annual meeting shall not be held
on the day designated by the Directors, a substitute annual meeting may be
called in the manner provided for the call of a special meeting in accordance
with the provisions of Section 2.3 and a substitute annual meeting so called
shall be designated as and shall be treated, for all purposes, as the annual
meeting.
2.3 Special Meetings. Special meetings of the shareholders may be called
at any time by the Directors, the Chairman of the Board of Directors, if any,
the Vice Chairman of the Board of Directors, if any, the President, or by any
officer instructed by the directors or the President to call the meeting. Only
business within the purpose or purposes described in the notice of meeting may
be conducted at a special meeting of shareholders.
2.4 Place of Meetings. All meetings of shareholders shall be held at
such place, within or outside the State of North Carolina, as may be designated
by the Directors from time to time.
2.5 Notice of Meetings. The corporation shall notify shareholders of the
date, time, and place of each annual and special shareholders' meeting. Such
notice shall be no fewer than ten nor more than sixty days before the meeting
date. Unless the North Carolina Business Corporation Act (the "Business
Corporation Act") or the articles of incorporation require otherwise, notice of
an annual meeting need not include a description of the purpose or purposes for
which the meeting is called. Notice of a special meeting must include a
description of the purpose or purposes for which the meeting is called. Unless
the Business Corporation Act or the articles of incorporation require otherwise,
the corporation is required to give notice only to shareholders entitled to vote
at the meeting. A shareholder may waive any notice required by the Business
Corporation Act, the articles of incorporation or the Bylaws before or after the
time stated in the notice. The waiver must be in writing, be signed by the
shareholder entitled
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<PAGE>
to the notice, and be delivered to the corporation for inclusion in the minutes
or filing with the corporate records. A shareholder's attendance at a meeting
waives objection to lack of notice or defective notice of the meeting, unless
the shareholder at the beginning of the meeting objects to holding the meeting
or transacting business at the meeting; and waives objection to consideration of
a particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to considering
the matter before it is voted upon.
If a meeting shall be adjourned for more than one hundred and twenty
(120) days notice of such adjourned meeting shall be given as in the case of an
original meeting and if the adjournment shall be for less than one hundred and
twenty (120) days no notice thereof need be given except that such adjournment
shall be announced at the meeting at which the adjournment is taken. A
shareholder may waive any notice required for a meeting, either before or after
the meeting, by a written waiver, signed by the shareholder and delivered to the
Corporation to be filed with the corporate records or made a part of the minutes
of the meeting.
2.6 Voting Lists. After fixing the record date for each meeting, the
corporation shall prepare an alphabetical list of the names of the shareholders
entitled to vote at such meeting. The list must be arranged by voting group (and
within each voting group, by class or series of shares) and set forth the
address of, and the number of shares held by, each shareholder. The shareholder
list must be available for inspection by any shareholder, beginning two (2)
business days after notice of the meeting is given and continuing through the
meeting at the corporation's principal office or at a place identified in the
meeting notice in the city where the meeting will be held. A shareholder, or his
agent or attorney, is entitled on written demand to inspect and, subject to the
requirements of G.S. 55-16-02(c), to copy the list, during regular business
hours and at his expense, during the period it is available for inspection. The
corporation shall make the shareholders' list available at the meeting, and any
shareholder, or his agent or attorney, is entitled to inspect the list at any
time during the meeting or any adjournment of the meeting.
2.7 Quorum; Adjournment. Unless the articles of incorporation or the
Business Corporation Act provides otherwise, a majority of the votes entitled to
be cast on a matter by a voting group constitutes a quorum of that voting group
for action on that matter. The Chairman of the meeting or a majority of the
shares so represented may adjourn the meeting from time to time, whether or not
there is such a quorum. Shares entitled to vote as a separate voting group may
take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. Once a share is represented for any purpose at a
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
must be set for that adjourned meeting.
2.8 Voting. Directors are elected by a plurality of the votes cast by
the shares entitled to vote in the election at a meeting at which a quorum is
present. If a quorum exists, action on a matter, other than the election of
directors, by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action unless the
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<PAGE>
articles of incorporation, a Bylaw adopted by the shareholders, or the Business
Corporation Act requires a greater number of affirmative votes.
A shareholder may appoint a proxy to vote or otherwise act for him by
signing an appointment form, either personally or by his attorney-in-fact. A
telegram, telex, facsimile, or other form of wire or wireless communication
appearing to have been transmitted by a shareholder, or a photocopy or
equivalent reproduction of a writing appointing one or more proxies, shall be
deemed a valid appointment form. An appointment of a proxy is effective when
received by the Secretary or other officer or agent authorized to tabulate
votes. An appointment is valid for eleven months, unless a different period is
expressly provided in the appointment form. An appointment of a proxy is
revocable by the shareholder unless the appointment form conspicuously states
that it is irrevocable and the appointment is coupled with an interest.
The corporation may establish a procedure by which the beneficial owner
of shares that are registered in the name of a nominee is recognized by the
corporation as a shareholder. The extent of this recognition may be determined
in the procedure.
2.9 Notice of Shareholder Business and Nominations.
(a) Annual Meetings of Shareholders.
(1) Nominations of persons for election to the Board of
Directors of the corporation and the proposal of business to be
considered by the shareholders may be made at an annual meeting of
shareholders (a) pursuant to the corporation's notice of meeting, (b) by
or at the direction of the Board of Directors or (c) by any shareholder
of the corporation who was a shareholder of record at the time of giving
of notice provided for in this By-Law, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this
By-Law.
(2) For nominations or other business to be properly
brought before an annual meeting by a shareholder pursuant to clause (c)
of paragraph (a)(1) of this ByLaw, the shareholder must have given
timely notice thereof in writing to the Secretary of the corporation and
such other business must otherwise be a proper matter for shareholder
action. To be timely, a shareholder's notice shall be delivered to the
Secretary at the principal executive offices of the corporation not
later than the close of business on the 90th day nor earlier than the
close of business on the 120th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event
that the date of the annual meeting is more than 30 days before or more
than 60 days after such anniversary date, notice by the shareholder to
be timely must be so delivered not earlier than the close of business on
the 120th day prior to such annual meeting and not later than the close
of business on the later of the 90th day prior to such annual meeting or
the 10th day following the day on which public announcement of the date
of such meeting is first made by the corporation. In no event shall the
public
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<PAGE>
announcement of an adjournment of an annual meeting commence a new time
period for giving of a shareholder's notice as described above. Such
shareholder's notice shall set forth (a) as to each person whom the
shareholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an
election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a director
if elected); (b) as to any other business that the shareholder proposes
to bring before the meeting, a brief description of the business desired
to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of
such shareholder and the beneficial owner, if any, on whose behalf the
proposal is made; and (c) as to the shareholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal
is made (i) the name and address of such shareholder, as they appear on
the corporation's books, and of such beneficial owner and (ii) the class
and number of shares of the corporation which are owned beneficially and
of record by such shareholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (a)(2) of this By-Law to the contrary, in the event that the
number of directors to be elected to the Board of Directors of the
corporation is increased and there is no public announcement naming all
of the nominees for director or specifying the size of the increased
Board of Directors made by the corporation at least 70 days prior to the
first anniversary of the preceding year's annual meeting, a
shareholder's notice required by this By-Law shall also be considered
timely, but only with respect to nominees for any new positions created
by such increase, it if shall be delivered to the Secretary at the
principal executive offices of the corporation not later than the close
of business on the 10th day following the day on which such public
announcement is first made by the corporation.
(b) Special Meetings of Shareholders. Only business within the
purpose or purposes described in the notice of meeting may be conducted at a
special meeting of shareholders. Nominations of persons for election to the
Board of Directors may be made at a special meeting of shareholders at which
directors are to be elected pursuant to the corporation's notice of meeting (a)
by or at the direction of the Board of Directors or (b) provided that the Board
of Directors has determined that directors shall be elected at such meeting, by
any shareholder of the corporation who is a shareholder of record at the time of
giving of notice provided for in this By-Law, who shall be entitled to vote at
the meeting and who complies with the notice procedures set forth in this
By-Law. In the event the corporation calls a special meeting of shareholders for
the purpose of electing one or more directors to the Board of Directors, any
such shareholder may nominate a person or persons (as the case may be), for
election to such position(s) as specified in the corporation's notice of
meeting, if the shareholder's notice required by paragraph (a)(2) of this By-Law
shall be delivered to the Secretary at the principal executive offices of the
corporation not earlier than the close of
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<PAGE>
business on the 120th day prior to such special meeting and not later than the
close of business on the later of the 90th day prior to such special meeting or
the 10th day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time period
for the giving of a shareholder's notice as described above.
(c) General.
(1) Only such persons who are nominated in accordance with
the procedures set forth in this By-Law shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
shareholders as shall have been brought before the meeting in accordance
with the procedures set forth in this By-Law. Unless the Business
Corporation Act, the articles of incorporation or these By-Laws require
otherwise, the Chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought
before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this By-Law, and, if any
proposed nomination or business is not in compliance with this By-Law,
to declare that such defective proposal or nomination shall be
disregarded.
(2) For purposes of this By-Law, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a
document publicly filed by the corporation with the Securities and
Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange
Act.
(3) Notwithstanding the foregoing provisions of this
By-Law, a shareholder shall also comply with all applicable requirements
of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this By-Law. Nothing in this By-Law
shall be deemed to affect any rights (i) of shareholders to request
inclusion of proposals in the corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act or (ii) of the holders of any series
of Preferred Stock to elect directors under specified circumstances.
2.10 Inspectors of Elections; Opening and Closing the Polls. The Board
of Directors by resolution shall appoint one or more inspectors, which inspector
or inspectors may include individuals who serve the corporation in other
capacities, including, without limitation, as officers, employees, agents or
representatives, to act at the meetings of shareholders and make a written
report thereof. One or more persons may be designated as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate has been
appointed to act or is able to act at a meeting of shareholders, the Chairman of
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before discharging his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
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<PAGE>
according to the best of his or her ability. The inspectors shall have the
duties prescribed by law.
The Chairman of the meeting shall fix and announce at the meeting the
date and time of the opening and the closing of the polls for each matter upon
which the shareholders will vote at a meeting.
2.11 Action by Shareholders Without a Meeting. Any action required or
permitted by the provisions of the Business Corporation Act to be taken at a
shareholders' meeting may be taken without a meeting, if one or more written
consents are signed by all the shareholders before or after such action,
describing the action taken, are delivered to the corporation for inclusion in
the minutes or filing with the corporate records. If the Business Corporation
Act requires that notice of proposed action be given to nonvoting shareholders
and the action is to be taken by unanimous consent of the voting shareholders,
the corporation must give its nonvoting shareholders written notice of the
proposed action at least ten days before the action is taken. The notice must
contain or be accompanied by the same material that, under the Business
Corporation Act, would have been required to be sent to nonvoting shareholders
in a notice of a meeting at which the proposed action would have been submitted
to the shareholders for action. Provided however, no action may be taken in lieu
of convening an annual meeting of the shareholders which is in violation of the
policies of the New York Stock Exchange.
2.12 Record Date for Action by Written Consent. In order that the
corporation may determine the shareholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than 10 days after the date upon which the resolution fixing
the record date is adopted by the Board of Directors. Any shareholder of record
seeking to have the shareholders authorize or take corporate action by written
consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within 10 days after the date on which such a request is received,
adopt a resolution fixing the record date. If no record date has been fixed by
the Board of Directors within 10 days of the date on which such a request is
received, the record date for determining shareholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required by applicable law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the registered agent of the corporation at its corporation's
principal office shown in its most recent annual report on file in the office of
the Secretary of State. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by applicable law, the record date for
determining shareholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the date on which the
Board of Directors adopts the resolution taking such prior action.
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2.13 Inspectors of Written Consent. In the event of the delivery, in the
manner provided by Section 2.11, to the corporation of the requisite written
consent or consents to take corporate action and/or any related revocation or
revocations, the corporation shall engage nationally recognized independent
inspectors of elections for the purpose of promptly performing a ministerial
review of the validity of the consents and revocations. For the purpose of
permitting the inspectors to perform such review, no action by written consent
without a meeting shall be effective until such date as the independent
inspectors certify to the corporation that the consents delivered to the
corporation in accordance with Section 2.11 represent at least the minimum
number of votes that would be necessary to take the corporate action. Nothing
contained in this paragraph shall in any way be construed to suggest or imply
that the Board of Directors or any shareholder shall not be entitled to contest
the validity of any consent or revocation thereof, whether before or after such
certification by the independent inspectors, or to take any other action
(including, without limitation, the commencement, prosecution or defense of any
litigation with respect thereto, and the seeking of injunctive relief in such
litigation).
2.14 Effectiveness of Written Consent. Every written consent shall bear
the date of signature of each shareholder who signs the consent and no written
consent shall be effective to take the corporate action referred to therein
unless, within 60 days of the date the earlier dated written consent was
received in accordance with Section 2.10, a written consent or consents signed
by a sufficient number of holders to take such action are delivered to the
corporation in the manner prescribed in Section 2.10.
2.15 Conduct of Meeting. Meetings of the shareholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting - the Chairman of the Board of Directors, if any, the Vice-Chairman
of the board, if any, the President, a Vice-President, if any, or, if none of
the foregoing is in office and present and acting, by a chairman to be chosen by
the shareholders. The Secretary of the corporation, or in his absence, an
Assistant Secretary, shall act as secretary of every meeting, but, if neither
the Secretary nor an Assistant Secretary is present, the chairman of the meeting
shall appoint a secretary of the meeting.
3. Board of Directors
3.1 General Powers. All corporate powers shall be exercised by or under
the authority of, and the business and affairs of the corporation managed under
the direction of, a Board of Directors.
3.2 Number Term of Office and Qualifications. A director need not be a
shareholder, a citizen of the United States, or a resident of the State of North
Carolina. The number of directors shall not be less than three nor more than
fifteen. The number of directors may be fixed or changed, from time to time,
within such minimum and maximum, by the shareholders or by the Board of
Directors. If not so fixed and subject to the provisions of Subparagraph (5) of
Section H of Article II of the Amended and Restated Articles of Incorporation,
the number
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<PAGE>
of directors shall be five. After shares are issued, only the shareholders may
change the range for the size of the Board of Directors or change from a
variable-range number of directors to a fixed number of directors or vice versa.
3.3 Election, Term and Vacancy. Except as provided in this Section 3.3,
the directors shall be elected at the annual meeting of shareholders by a
plurality of the votes cast. If a vacancy occurs on the Board of Directors,
including without limitation, a vacancy resulting from an increase in the number
of directors or from the failure by the shareholders to elect the full
authorized number of directors, the shareholders or the Board of Directors may
fill the vacancy; or if the directors remaining in office constitute fewer than
a quorum of the Board of Directors, they may fill the vacancy by the affirmative
vote of a majority of all the directors, or by the sole director, remaining in
office. If the vacant office was held by a director elected by a voting group of
shareholders, only the remaining director or directors elected by that voting
group or the holders of shares of that voting group are entitled to fill the
vacancy. Directors shall hold office until their successors are elected and
qualified.
3.4 Removal of Directors. The shareholders may remove one or more
directors with or without cause pursuant to the provisions of Section 55-8-08 of
the Business Corporation Act.
3.5 Compensation of Directors. The Board may fix the compensation of
directors, provided, however, that no person who is a full-time employee of the
corporation shall receive any separate compensation for serving as a director of
the corporation, other than reimbursement of their expenses, if any. The
directors who are not officers of the corporation shall be paid their expenses,
if any, and a fixed sum for their attendance at each meeting of the Board of
Directors and each committee meeting. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
3.6 Committees. The Board of Directors may create one or more committees
and appoint members of the Board of Directors to serve on them. The creation of
a committee and the appointment of members to it must be approved by the greater
of (a) a majority of all the directors in office when the action is taken, or
(b) the number of directors required by the articles of incorporation or these
Bylaws to take such action under the provisions of Section 55- 8-24 of the
Business Corporation Act. The provisions of Sections 55-8-20 through 55-8-24 of
the Business Corporation Act, which govern meetings, action without meetings,
notice and waiver of notice, and quorum and voting requirements of the Board of
Directors, apply to committees and their members as well. To the extent
specified by the Board of Directors, the articles of incorporation, or these
Bylaws, each committee may exercise the authority of the Board of Directors
under Section 55-8-01 of the Business Corporation Act except such authority as
may not be delegated under the Business Corporation Act.
3.7 Transactions With Interested Directors. No transaction between the
Corporation and one or more of its directors, or between the Corporation and any
other corporation, firm,
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association or other entity in which one or more of its directors are directors
or officers or are financially interested ("Interested Directors") shall be
either void or voidable for this reason alone, provided that such transaction
shall be approved by a majority of the directors other than the Interested
Directors present at the meeting of the Board of Directors or of the committee
authorizing or confirming such transaction or otherwise complies with the
provisions of the Business Corporation Act with respect to transactions with
interested directors.
4. Meetings of Directors
4.1 Regular Meetings. Meetings shall be held at such time as the Board
shall fix, except that the first meeting of a newly elected Board shall be held
as soon after its election as the directors may conveniently assemble.
4.2 Special Meetings. No call shall be required for regular meetings for
which the time and place have been fixed. Special meetings may be called by or
at the direction of the Chairman of the Board, if any, of the Vice-Chairman of
the Board, if any, of the President, or of a majority of the directors in
office.
4.3 Place of Meetings; Conference Telephone Meetings. The Board of
Directors may hold regular or special meetings in or out of the State of North
Carolina as such place shall be fixed by the Board. Members of the Board of
Directors, or any committee thereof, may participate in a meeting of the Board
of Directors or such committee by use of any means of communication by which all
persons participating may simultaneously hear each other, and such participation
in a meeting shall constitute presence in person at such meeting.
4.4 Notice of Meetings and Waiver of Notice. Regular meetings of the
Board of Directors may be held without notice of the date, time, place, or
purpose of the meeting. Written, or oral, notice of the time and place shall be
given for special meetings in sufficient time for the convenient assembly of the
directors thereat. The notice of any meeting need not describe the purpose of
the meeting. A director may waive any notice required by the Business
Corporation Act, the articles of incorporation, or by these Bylaws before or
after the date and time stated in the notice. A director's attendance at or
participation in a meeting waives any required notice to the director of the
meeting unless the director at the beginning of the meeting, or promptly upon
his arrival, objects to holding the meeting or transacting business at the
meeting and does not thereafter vote for or assent to action taken at the
meeting. Except as hereinbefore provided, a waiver shall be in writing, signed
by the director entitled to the notice, and filed with the minutes or corporate
records.
4.5 Quorum and Manner of Acting. A quorum of the Board of Directors
consists of a majority of the number of directors prescribed in or fixed in
accordance with these Bylaws. If a quorum is present when a vote is taken, the
affirmative vote of a majority of directors present is the act of the Board of
Directors. The Board of Directors may permit any or all directors to participate
in a regular or special meeting by, or conduct the meeting through use of, any
means of communication by which all directors participating may simultaneously
hear
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<PAGE>
each other during the meeting. A director participating in a meeting by this
means is deemed to be present in person at the meeting.
Meetings of the Board of Directors shall be presided over by the
following directors in the order of seniority and if present and acting - the
Chairman of the Board, if any, the Vice- Chairman of the Board, if any, the
President, or any other director chosen by the Board.
4.6 Action of Directors Without a Meeting. Action required or permitted
by the Business Corporation Act to be taken at a Board of Directors' meeting may
be taken without a meeting if the action is taken by all members of the Board.
The action must be evidenced by one or more written consents, signed by each
director before or after such action, describing the action taken, and included
in the minutes or filed with the corporate records. Action taken under this
paragraph is effective when the last director signs the consent, unless the
consent specifies a different effective date.
5. Officers
5.1 Number of Officers. The officers of the Corporation shall consist of
a President, a Secretary, a Treasurer, and such Vice-Presidents, Assistant
Secretaries, Assistant Treasurers and other officers as may be appointed by or
under the authority of the Board of Directors. Any two or more offices may be
held by the same person, but no officer may act in more than one capacity where
action of two or more officers is required.
5.2 Election, Term of Office and Qualifications. The officers of the
Corporation shall be appointed by the Board of Directors or by a duly appointed
officer authorized by the Board of directors to appoint one or more officers or
assistant officers. Each officer shall hold office until his death, resignation,
retirement, removal, disqualification, or his successor shall have been
appointed.
5.3 Compensation. The compensation of all officers of the Corporation
shall be fixed by or under the authority of the board of Directors, and no
officer shall serve the Corporation in any other capacity and receive
compensation therefor unless such additional compensation shall be duly
authorized. The appointment of an officer does not itself create contract
rights.
5.4 Removal. Any officer may be removed by the board at any time with or
without cause; but such removal shall not itself affect the officer's contract
rights, if any, with the Corporation.
5.5 Resignation. Any officer may resign at any time by communicating his
resignation to the corporation, orally or in writing. A resignation is effective
when communicated unless it specifies in writing a later effective date. If a
resignation is made effective at a later date that is accepted by the
corporation, the Board of Directors may fill the pending vacancy before the
effective date if the Board provides that the successor does not take
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<PAGE>
office until the effective date. An officer's resignation does not affect the
corporation's contract rights, if any, with the officer.
5.6 Bonds. The Board of Directors may by resolution require any officer,
agent or employee of the corporation to give bond to the Corporation, with
sufficient sureties, conditioned on the faithful performance of the duties of
such person's respective office or position, and to comply with such other
conditions as may from time to time be required by the Board of Directors.
5.6 Vacancies. A vacancy in any office because of death, resignation,
removal, or disqualification, or any other cause, shall be filled for the
unexpired portion of the term in the manner prescribed by these By-Laws for
regular appointments or elections to such offices.
5.7 President. The President shall be the chief executive officer of the
Corporation and, subject to the control of the Board of Directors, shall in
general supervise and control all of the business and affairs of the
Corporation. The President shall, when present, preside at all meetings of the
shareholders and of the Board of Directors. The President shall sign, with the
Secretary, an Assistant Secretary, or any other proper officer of the
Corporation thereunto authorized by the Board of Directors, certificates for
shares of the Corporation, any deeds, mortgages, bonds, contracts or other
instruments which the Board of Directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the Board of Directors or by these bylaws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or executed; and
in general the President shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Board of Directors
from time to time.
5.8 Vice President. In the absence of the President or in the event of
his death, inability or refusal to act, the Executive Vice-President, unless
otherwise determined by the Board of Directors, shall perform the duties of the
President, and when so acting shall have all the powers of and be subject to all
the restrictions upon the President. The Executive Vice-President may sign,
with the Secretary or an Assistant Secretary, certificates for shares of the
Corporation; and shall perform such other duties as from time to time may be
prescribed by the President or Board of Directors.
5.9 Secretary. The Secretary shall: (a) keep the minutes of the meetings
of shareholders, of the Board of Directors, and of all committees in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these bylaws or as required by law; (c)
maintain and authenticate the records of the Corporation and be custodian of the
seal of the Corporation and see that the seal of the Corporation is affixed to
all documents the execution of which on behalf of the Corporation under its seal
is duly authorized; (d) sign with the President, or the Executive
Vice-President, certificates for shares of the Corporation, the issuance of
which shall have been authorized by resolution of the Board of Directors; (e)
maintain and have general charge of the share transfer books of the Corporation;
(f) prepare or cause to be prepared shareholder lists prior to each meeting of
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<PAGE>
shareholders as required by law; (g) attest the signature or certify the
incumbency or signature of any officer of the Corporation; and (h) in general
perform all duties incident to the office of secretary and such other duties as
from time to time may be prescribed by the President or by the Board of
Directors.
5.10 Assistant Secretaries. In the absence of the Secretary or in the
event of the Secretary's death, inability or refusal to act, the Assistant
Secretaries in the order of their length of service as Assistant Secretary,
unless otherwise determined by the Board of Directors, shall perform the duties
of the Secretary, and when so acting shall have all the powers of and be subject
to all the restrictions upon the Secretary. They shall perform such other duties
as may be prescribed by the Secretary, by the President, or by the Board of
Directors. Any Assistant Secretary may sign, with the President or a
Vice-President, certificates for shares of the Corporation.
5.11 Treasurer. The Treasurer shall: (a) have charge and custody of and
be responsible for all funds and securities of the Corporation; receive and give
receipts for moneys due and payable to the Corporation from any source
whatsoever, and deposit all such moneys in the name of the Corporation in such
depositories as shall be selected by or under the authority of the Board of
Directors; (b) maintain appropriate accounting records as required by law; (c)
prepare, or cause to be prepared, annual financial statements of the Corporation
that include a balance sheet as of the end of the fiscal year and an income and
cash flow statement for that year, which statements, or a written notice of
their availability, shall be mailed to each shareholder within 120 days after
the end of such fiscal year; and (d) in general perform all of the duties
incident to the office of treasurer and such other duties as from time to time
may be prescribed by the President or by the Board of Directors.
5.12 Assistant Treasurers. In the absence of the Treasurer or in the
event of the Treasurer's death, inability or refusal to act, the Assistant
Treasurers in the order of their length of service as such, unless otherwise
determined by the Board of Directors, shall perform the duties of the Treasurer,
and when so acting shall have all the powers of and be subject to all the
restrictions upon the Treasurer. They shall perform such other duties as may be
prescribed by the Treasurer, by the President or by the Board of Directors.
6. Contracts, Loans, Checks and Deposits.
6.1 Contracts. The Board of Directors may authorize any officer or
officers, agent or agents to enter into any contract or to execute and deliver
any instrument on behalf of the Corporation, and such authority may be general
or confined to specific instances.
6.2 Loans. No loans shall be contracted on behalf of the Corporation and
no evidence of indebtedness shall be issued in its name, unless as authorized by
the Board of Directors. Such authority may be general or confined to specific
instances.
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<PAGE>
6.3 Checks and Drafts. All checks, drafts or other orders for the
payment of money, issued in the name of the Corporation, shall be signed by such
officer or officers, agent or agents of the Corporation and in such manner as
shall from time to time be determined by the Board of Directors.
6.4 Deposits. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in such
depositories as may be selected by or under the authority of the Board of
Directors.
6.5 Exercise of Ownership Rights. Any share or other ownership interest
in any other corporation, partnership or other entity which may from time to
time be held by the Corporation may be represented and voted at any meeting of
shareholders, partners or members of such other corporation, partnership or
other entity by any officer duly authorized to so act on behalf of the
Corporation by the Board of Directors or if no officer is so authorized, by the
President or the Executive Vice President or by any proxy appointed in writing
by the President or the Executive Vice President.
The President is expressly authorized to act on behalf of the
Corporation in carrying out and performing the duties and responsibilities of
the Corporation as the general partner of Tanger Properties Limited Partnership
(the "Operating Partnership") and, acting for the Corporation as general
partner, the President shall have general charge of the business, affairs and
property of the Operating Partnership and control over its agents and employees
in accordance with the Operating Partnership Agreement.
7. Certificates for Shares and Their Transfer
7.1 Certificate for Shares. Certificates evidencing fully-paid shares of
the corporation shall set forth thereon the statements prescribed by Section
55-6-25 of the Business Corporation Act and by any other applicable provision of
law, shall be signed, either manually or in facsimile, by any two of the
following officers: the President, a Vice-President, the Secretary, an Assistant
Secretary, the Treasurer, an Assistant Treasurer, or by any two officers
designated by the Board of Directors, and may bear the corporate seal or its
facsimile. If a person who signed in any capacity, either manually or in
facsimile, a share certificate no longer holds office when the certificate is
issued, the certificate is nevertheless valid.
7.2 Fractional Shares or Scrip. The corporation may issue fractions of a
share or pay in money the value of fractions of a share; arrange for disposition
of fractional shares by the shareholders; and issue scrip in registered or
bearer form entitling the holder to receive a full share upon surrendering
enough scrip to equal a full share. Each certificate representing scrip must be
conspicuously labeled "scrip" and must contain the information required by
subsection (b) of Section 55-6-25 of the Business Corporation Act. The holder of
a fractional share is entitled to exercise the rights of a shareholder,
including the right to vote, to receive dividends, and to participate in the
assets of the corporation upon liquidation. The holder of scrip is not entitled
to any of these rights unless the scrip provides for them. The Board of
Directors may
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<PAGE>
authorize the issuance of scrip subject to any condition considered desirable,
including (a) that the scrip will become void if not exchanged for full shares
before a specified date; and (b) that the shares for which the scrip is
exchangeable may be sold and the proceeds paid to the script holders.
7.3 Transfers of Shares. Upon compliance with any provisions restricting
the transferability of shares that may be set forth in the articles of
incorporation, these Bylaws, or any written agreement in respect thereof,
transfers of shares of the corporation shall be made only on the books of the
corporation by the registered holder thereof, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the corporation, or with a transfer agent or a registrar and on surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon, if any. Except as may be otherwise provided by law, the
articles of incorporation or these Bylaws, the person in whose name shares stand
on the books of the corporation shall be deemed the owner thereof for all
purposes as regards the corporation; provided that whenever any transfer of
shares shall be made for collateral security, and not absolutely, such fact, if
known to the Secretary of the corporation, shall be so expressed in the entry of
transfer.
7.4 Record Date for Shareholders. In order to determine the shareholders
who are entitled to notice of a shareholders' meeting, to demand a special
meeting, to vote, or to take any other action, the Board of Directors of the
corporation may fix a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy days before the
meeting or action requiring such determination of shareholders. A determination
of shareholders entitled to notice of or to vote at a shareholders' meeting is
effective for any adjournment of the meeting unless the Board of Directors fixes
a new record date, which it must do if the meeting is adjourned to a date more
than one hundred twenty days after the date fixed for the original meeting.
8. Indemnification.
8.1 General Indemnification of Officers and Directors. The corporation
shall to the fullest extent permitted by the provisions of the North Carolina
Business Corporation Act, as the same may be amended and supplemented, indemnify
officers and directors whom it shall have power to indemnify under said
provisions from and against any and all of the fees, expenses, charges,
liabilities or obligations referred to in or covered by said provisions, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under the Articles of
Incorporation, any other Bylaw, vote of shareholders or disinterested directors,
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director or officer and shall inure to the benefit of the
heirs, executors and administrators of such a person.
8.2 Specific Indemnified. Without in any way limiting the
indemnification provided in Section 8.1 hereof, the corporation shall indemnify
and hold harmless each of the following
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<PAGE>
described persons, including the estate or personal representative of such
person, against any and all the liabilities and expenses described below:
(a) Any person who serves or has served as a director or officer
shall be indemnified against (i) any liability for or obligation to pay
expenses, including attorneys' fees, as and when incurred by such person, in
connection with any proceeding arising out of his status as a director or
officer or any activities of such person in his capacity as a director or
officer and (ii) any liability for or obligation to pay any judgment,
settlement, penalty or fine (including an excise tax assessed with respect to an
employee benefit plan) in any such proceeding; and
(b) Any person who serves or has served as a director or officer
and who, at the request of the corporation, serves or has served as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or as a trustee or
administrator under an employee benefit plan shall be indemnified against (i)
any liability for or obligation to pay expenses, including attorneys' fees,
incurred by such person in connection with any proceeding arising out of his
status as a director or officer of the corporation and\or as a director,
officer, partner, trustee, employee or agent of such other corporation,
partnership, joint venture, trust or other enterprise and\or as a trustee or
administrator under an employee benefit plan or any activities of such person in
any of such capacities and (ii) any liability for or obligation to pay any
judgment, settlement, penalty or fine (including an excise tax assessed with
respect to an employee benefit plan) in any such proceeding.
Provided however, such indemnification will not extend to any liability or
expense such person may incur on account of his activities which, at the time
taken, were known or believed by him to be clearly in conflict with the best
interests of the corporation.
The term "proceeding" as used herein includes any threatened, pending or
completed civil, criminal, administrative or investigative action, suit or
proceeding (and any appeal therein), whether formal or informal and whether or
not brought by or on behalf of the corporation.
8.3 Board Assistance. The Board of Directors shall take all such action
as may be necessary and appropriate to authorize the corporation to pay, and to
have the corporation pay, the indemnification required by this Section 8. To the
extent required by law, the Board shall give notice to, and obtain approval by,
the shareholders of the corporation for any decision to indemnify.
8.4 Contract Right; Reliance Upon Corporation's Indemnification. Any
person who at any time after the effective date of this by-law serves or has
served in a capacity that would entitle him to be indemnified under the
foregoing provisions of this Section 8 shall be deemed to be serving and acting,
or to have served and acted, in such capacity in reliance upon, and as
consideration for, the corporation's agreement to provide the indemnification
described in this Section 8. Any such person, or his legal representative, shall
have a right to require the corporation to provide the indemnification described
herein. The rights provided in this Section
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<PAGE>
8 shall be contract rights fully enforceable by each beneficiary thereof, and
shall be in addition to, and not exclusive of, any other right to
indemnification provided by contract or under applicable law.
8.5 Expenses of Enforcing Indemnification. The corporation agrees to and
shall reimburse any person for whom indemnification is provided pursuant to this
Section for all reasonable costs, expenses and attorneys' fees (including the
costs of investigation and preparation) as and when incurred by such person in
connection with the enforcement of such person's right to the indemnification
granted by this Section and shall advance such amounts to such person upon
demand therefor. Such reimbursable amounts shall be recoverable in any action
brought to enforce the right to the indemnification granted by this Section.
9. General Provisions
9.1 Corporate Seal. The corporate seal shall be in such form as shall be
required by law and as shall be approved from time to time by the Board of
Directors.
9.2 Fiscal Year. The fiscal year of the corporation shall be fixed, and
shall be subject to change, by the Board of Directors.
9.3 Statutory Notices to Shareholders. The Board of Directors may
appoint the Treasurer or other fiscal officer and/or the Secretary or any other
officer to cause to be prepared and furnished to shareholders entitled thereto
any special financial notice and/or any financial statement, which may be
required by any provision of law, and which, more specifically, may be required
by Sections 55-16-20 and 55-16-21 of the Business Corporation Act.
9.4 Waiver of Notice. Whenever any notice is required to be given to any
shareholder or director under the provisions of the North Carolina Business
Corporation Act or under the provisions of the Charter or By-Laws of this
Corporation, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be equivalent to the giving of such notice.
9.5 Meaning of Certain Terms. As used herein in respect of the right to
notice of a meeting of shareholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "shareholder" or "shareholders"
refers to an outstanding share or shares and to a holder or holders of record of
outstanding shares when the corporation is authorized to issue only one class of
shares, and said reference is also intended to include any outstanding share or
shares and any holder or holders of record of outstanding shares of any class
upon which or upon whom the articles of incorporation confer such rights where
there are two or more classes or series of shares or upon which or upon whom the
Business Corporation Act confers such rights notwithstanding that the articles
of incorporation might provide for more than one class or series of shares, one
or more of which are limited or denied such rights thereunder.
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<PAGE>
9.6 Amendments. The Board of Directors may amend or repeal these Bylaws
unless the articles of incorporation or the Business Corporation Act reserves
this power exclusively to the shareholders in whole or in part, or the
shareholders in amending or repealing a particular Bylaw provide expressly that
the Board of Directors may not amend or repeal that Bylaw. The shareholders may
amend or repeal these Bylaws even though the Bylaws may also be amended or
repealed by the Board of Directors. A Bylaw that fixes a greater quorum or
voting requirement for the Board of Directors may be amended or repealed only in
accordance with the provisions of Section.3.310-22 of the Business Corporation
Act.
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Exhibit 10.1
THE AMENDED AND RESTATED UNIT
OPTION PLAN FOR EMPLOYEES OF
TANGER PROPERTIES LIMITED PARTNERSHIP
Tanger Properties Limited Partnership, a partnership organized under the
laws of the state of North Carolina (the "Partnership") adopted the Partnership
Unit Option Plan for Executive and Key Employees of Tanger Properties Limited
Partnership (the "Plan") on May 28, 1993. The Plan has subsequently been amended
from time to time. In order to conform the Plan document to such amendments and
to further amend the Plan in certain respects, the Plan has been amended and
restated, effective as of July 29, 1998. This Amended and Restated Unit Option
Plan for Employees of Tanger Properties Limited Partnership constitutes a
complete amendment and restatement of the Plan in its entirety and a
continuation of the Plan. The purposes of this Plan are as follows:
(1) To further the growth, development and financial success of the
Partnership by providing additional incentives to certain of its Employees (as
defined below) who have been or will be given responsibility for the management
or administration of the Partnership's business affairs, by assisting them to
become owners of Units (as defined below) and thus to benefit directly from such
growth, development and financial success.
(2) To enable the Partnership to obtain and retain the services of the
types of professional, technical and managerial employees considered essential
to the long range success of the Partnership by providing and offering them an
opportunity to become owners of Units under options.
(3) To allow certain Employees the ability, at their election, upon the
simultaneous exercise of options under the Plan and of their conversion rights
under the Partnership Agreement (as defined below) to be issued and have
delivered to them directly from Tanger Factory Outlet Centers, Inc. (the
"Company") common shares of the Company.
ARTICLE I.
DEFINITIONS
Wherever the following terms are used in this Plan they shall have the
meanings specified below, unless the context clearly indicates otherwise. The
masculine pronoun shall include the feminine and neuter and the singular shall
include the plural, where the context so indicates.
Section 1.1. Award Limit
"Award Limit" shall mean 60,000 Common Shares.
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Section 1.2. Board
"Board" shall mean the Board of Directors of the Company.
Section 1.3. Change in Control
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding Common Shares (the "Outstanding Common Shares")
or (ii) the combined voting power of the then outstanding "voting securities of
the Company") entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (a), the following acquisitions shall not constitute a Change
in Control: (i) any acquisition directly from the Company, (ii) any acquisition
by the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c) of this
Section 1.3; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company or
the acquisition of assets of another corporation (a "Business Combination"), in
each case, unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Common Shares and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding Common Shares and Outstanding Company Voting Securities, as
the case may be, (ii) no Person (excluding any corporation
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resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least a
majority of he members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
For purposes of this Plan, the "Partnership Units" of the Tanger
Properties Limited Partnership shall be treated as, and aggregated with, the
Common Shares and/or the "voting securities of the Company" to the extent such
Partnership Units are convertible into Common Shares or voting securities,
respectively.
Section 1.4. Code
Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.5. Committee
"Committee" shall mean the Share and Unit Option Committee of the Board,
appointed as provided in Section 6.1.
Section 1.6. Common Shares
"Common Shares" shall mean the Common Shares of the Company, par value
$0.01 per share.
Section 1.7. Company
"Company" shall mean Tanger Factory Outlet Centers, Inc., a North
Carolina corporation.
Section 1.8. Company Plan
"Company Plan" shall mean the Amended and Restated Share Option Plan for
Directors and Executive and Key Employees of Tanger Factory Outlet Centers,
Inc., as amended from time to time.
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Section 1.9. Director
"Director" shall mean a member of the Board.
Section 1.10. Employee
"Employee" shall mean any employee (as defined in accordance with
Section 3401(c) of the Code) of the Partnership or of any entity which is a
subsidiary of the Partnership.
Section 1.11. Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.12. Fair Market Value
"Fair Market Value" of a Unit for purposes of this Plan as of a given
date shall be the fair market value of a Common Share into which it may be
converted, where the fair market value of a Common Share as of such date shall
mean (i) the closing price of the Common Shares on the principal exchange on
which Common Shares are trading on the trading day previous to such date, or, if
Common Shares were not traded on the day previous to such date, then on the next
preceding trading day during which a sale occurred; (ii) if such Common Shares
are not traded on an exchange but are quoted on NASDAQ or a successor quotation
system, (A) the last sales price (if the Common Shares are then listed as
National Market Issue under the NASD National Market System) or (B) the mean
between the closing representative bid and asked prices for the Common Shares on
the trading day previous to such date as reported by NASDAQ or such successor
quotation system; or (iii) if such Common Shares are is not publicly traded on
an exchange and not quoted on NASDAQ or a successor quotation system, the fair
market value of a Common Share as established by the Committee acting in good
faith.
Section 1.13. Option
"Option" shall mean an option to purchase a Unit and to receive cash to
be applied to such purchase, granted under Article III of this Plan. All Options
granted under this Plan shall be non-qualified options, not intended to conform
to the provisions of Section 422 of the Code.
Section 1.14. Optionee
"Optionee" shall mean an Employee granted an Option under this Plan.
Section 1.15. Partnership
"Partnership" shall mean Tanger Properties Limited Partnership, a
partnership organized under the laws of the state of North Carolina.
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Section 1.16. Partnership Agreement
"Partnership Agreement" shall mean the Amended and Restated Agreement of
Limited Partnership of Tanger Properties Limited Partnership dated as of
December 16, 1993, as amended from time to time.
Section 1.17. Partnership Unit; Unit
"Partnership Unit" shall have the meaning ascribed to such term in the
Partnership Agreement, and may be referred to herein as a "Unit."
Section 1.18. Plan
"Plan" shall mean the Amended and Restated Unit Option Plan for
Employees of Tanger Properties Limited Partnership.
Section 1.19. Rule 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act,
as such Rule may be amended from time to time.
Section 1.20. Section 162(m) Participant
"Section 162(m) Participant" shall mean any Company Employee designated
by the Committee as a Company Employee whose compensation for the fiscal year in
which the Company Employee is so designated or a future fiscal year may be
subject to the limit on deductible compensation imposed by Section 162(m) of the
Code.
Section 1.21. Termination of Employment
"Termination of Employment" shall mean the time when the
employee-employer relationship between an Optionee and the Partnership, the
Company or any subsidiary of either of them is terminated for any reason, with
or without cause, including, but not by way of limitation, a termination by
resignation, discharge, death, disability or retirement; but excluding (i) a
termination where there is a simultaneous reemployment or continuing employment
of such Optionee by the Partnership, (ii) at the discretion of the Committee,
termination which results in a temporary severance of the employee-employer
relationship, and (iii) at the discretion of the Committee, a termination which
is followed by the simultaneous establishment of a consulting relationship by
the Partnership, the Company or any subsidiary of either of them with the former
employee. The Committee, in its sole discretion, shall determine the effect of
all matters and questions relating to Termination of Employment, including, but
not by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for good cause, and all questions of whether a
particular leave of absence constitutes a Termination of Employment.
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<PAGE>
Notwithstanding any other provision of this Plan, the Partnership or the Company
or the subsidiary has an absolute and unrestricted right to terminate an
Employee's employment at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in writing.
ARTICLE II.
UNITS SUBJECT TO PLAN
Section 2.1. Units Subject to Plan
The aggregate number of Units which may be issued upon exercise of
Options under the Plan shall not exceed 1,500,000; provided, that effective as
of the date of the next succeeding annual meeting of shareholders such number
shall be increased to 1,750,000 if the shareholders approve such increase at
such annual meeting. Such aggregate number shall be reduced by one for each
Common Share that is issued pursuant to the exercise of options under the
Company's Share Option Plan.
The maximum number of Units which may be subject to Options granted
under the Plan to any individual in any calendar year shall not exceed the Award
Limit. To the extent required by Section 162(m) of the Code, Units subject to
Options which are canceled continue to be counted against the Award Limit and
if, after grant of an Option, the price of Units subject to such Option is
reduced, the transaction will be treated as a cancellation of the Option and a
grant of a new Option and both the Option deemed to be canceled and the Option
deemed to be granted will be counted against the Award Limit.
Section 2.2. Add-back of Options
If any Option expires or is canceled without having been fully
exercised, the number of Units subject to such Option but as to which such
Option was not exercised prior to its expiration, cancellation or exercise may
again be optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1. Units which are delivered by the Optionee or withheld by the
Partnership upon the exercise of any Option or other award under this Plan, in
payment of the exercise price thereof, may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 2.1. Furthermore, any Units
subject to Options which are adjusted pursuant to Section 7.3 and become
exercisable with respect to equity interests of another entity shall be
considered canceled and may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1.
ARTICLE III.
GRANTING OF OPTIONS
Section 3.1. Eligibility
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Any Employee selected by the Committee pursuant to Section 3.2(a)(i)
shall be eligible to be granted an Option.
Section 3.2. Granting of Options
(a) The Committee shall from time to time, in its sole discretion, and
subject to applicable limitations of this Plan:
(i) Select from among the Employees (including Employees who have
previously received Options) such of them as in its opinion should be
granted Options;
(ii) Subject to the Award Limit, determine the number of shares
to be subject to such Options granted to the selected Employees;
(iii) Determine whether such Options are to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of
the Code; and
(iv) Determine the terms and conditions of such Options,
consistent with this Plan; provided, however, that the terms and
conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the
Code.
(b) Upon the selection of an Employee to be granted an Option, the
Committee shall instruct the Partnership to issue the Option and may impose such
conditions on the grant of the Option as it deems appropriate. Without limiting
the generality of the preceding sentence, the Committee may, in its discretion
and on such terms as it deems appropriate, require as a condition on the grant
of an Option that the Optionee surrender for cancellation some or all of the
unexercised Options or other rights which have been previously granted to him
under this Plan or otherwise. An Option, the grant of which is conditioned upon
such surrender, may have an exercise price lower (or higher) than the exercise
price of such surrendered Option or other right, may cover the same (or a lesser
or greater) number of Units as such surrendered Option or other right, may
contain such other terms as the Committee deems appropriate, and shall be
exercisable in accordance with its terms, without regard to the number of Units,
exercise price, exercise period or any other term or condition of such
surrendered Option or other right.
ARTICLE IV.
TERMS OF OPTIONS
Section 4.1. Option Agreement
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Each Option shall be evidenced by a written Option Agreement, which
shall be executed by the Optionee and the Partnership and which shall contain
such terms and conditions as the Committee shall determine, and which may be
amended by agreement of the parties thereto, consistent with this Plan. Option
Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code, and Option Agreements evidencing Incentive Share
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
Section 4.2. Exercise Price
The exercise price per Unit subject to each Option shall be set by the
Committee in its discretion; provided, however, that such price shall be no less
than the Fair Market Value of a Unit on the date the Option is granted.
Section 4.3. Option Term
The term of an Option shall be set by the Committee in its discretion;
provided, however, that, the Committee may extend the term of any outstanding
Option in connection with any Termination of Employment, or amend any other term
or condition of such Option relating to such a termination.
Section 4.4. Option Vesting
(a) The period during which the right to exercise an Option in whole or
in part vests in the Optionee shall be set by the Committee and the Committee
may determine that an Option may not be exercised in whole or in part for a
specified period after it is granted. At any time after grant of an Option, the
Committee may, in its sole discretion and subject to whatever terms and
conditions it selects, accelerate the period during which an Option vests.
(b) no portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable, except as may be otherwise
provided by the Committee either in the Option Agreement or by action of the
Committee following the grant of the Option.
(c) In the event of a Change in Control, each Option granted to an
Independent Director or to an Employee shall be exercisable as to all shares
covered thereby immediately prior to the consummation of such Change in Control
and subject to such consummation, notwithstanding anything to the contrary in
this Section 4.4 or the vesting schedule of such Option.
Section 4.5. Consideration
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In consideration of the granting of an Option, the Optionee shall agree,
in the written Option Agreement, to remain in the employ of the Partnership, the
Company, or a subsidiary of either of them for a period of one year from the
date of Option grant. Nothing in this Plan or in any Option Agreement hereunder
shall confer upon any Optionee any right to continue in the employ of the
Partnership, the Company or a subsidiary of either of them, or shall interfere
with or restrict in any way the rights of the Partnership, the Company or such
subsidiary, which are hereby expressly reserved, to discharge any Optionee at
any time for any reason whatsoever, with or without good cause.
ARTICLE V.
EXERCISE OF OPTIONS
Section 5.1. Partial Exercise
An exercisable Option may be exercised in whole or in part. However, an
Option shall not be exercisable with respect to fractional Units and the
Committee may require that, by the terms of the Option, a partial exercise be
with respect to a minimum number of Units.
Section 5.2. Payment Upon Exercise
As part of the exercise of an Option pursuant to this Section 5.2, the
Partnership shall pay to the Optionee, as additional compensation for his
services to the Partnership, cash (the "Appreciation Consideration") equal to
the excess, if any, of the Fair Market Value of a Unit on the date of exercise
and the exercise price of the Option. In addition to the exercise price, the
Appreciation Consideration shall be applied to the purchase of a Unit pursuant
to Section 5.3(d).
Section 5.3. Manner of Exercise
All or a portion of an exercisable Option shall be deemed exercised upon
delivery of all of the following to the Partnership prior to the time when such
Option or such portion becomes unexercisable under the Plan or the applicable
Option Agreement:
(a) A written notice complying with the applicable rules established by
the Committee stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to exercise
the Option or such portion of the Option;
(b) Such representations and documents as the Committee in its sole
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee may, in its sole
discretion, also take whatever additional actions it deems appropriate to effect
such compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and registrars;
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(c) In the event that the Option shall be exercised pursuant to Section
7.1 by any person or persons other than the Optionee, appropriate proof of the
right of such person or persons to exercise the Option; and
(d) Full cash payment to the Partnership for the Units with respect to
which the Option, or portion thereof, is exercised (which payment shall consist
of the entire Appreciation Consideration and the exercise price). However, the
Committee, may in its discretion (i) allow a delay in payment up to thirty (30)
days from the date the Option, or portion thereof, is exercised; (ii) allow
payment, in whole or in part, through the delivery of Units owned by the
Optionee, duly endorsed for transfer to the Partnership with a Fair Market Value
on the date of delivery equal to the aggregate exercise price of the Option or
exercised portion thereof; (iii) allow payment, in whole or in part, through the
surrender of Units then issuable upon exercise of the Option having a Fair
Market Value on the date of Option exercise equal to the aggregate exercise
price of the Option or exercised portion thereof; (iv) allow payment, in whole
or in part, through the delivery of property of any kind which constitutes good
and valuable consideration; (v) allow payment, in whole or in part, through the
delivery of a full recourse promissory note bearing interest (at no less than
such rate as shall then preclude the imputation of interest under the Code) and
payable upon such terms as may be prescribed by the Committee; or (vi) allow
payment through any combination of the consideration provided in the foregoing
subparagraphs (ii), (iii), (iv) and (v). In the case of a promissory note, the
Committee may also prescribe the form of such note and the security to be given
for such note. The Option may not be exercised, however, by delivery of a
promissory note or by a loan from the Partnership when or where such loan or
other extension of credit is prohibited by law.
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Section 5.4. Conditions to Issuance of Unit Certificates
The Partnership shall not be required to issue or deliver any
certificate for Units purchased upon the exercise of any Option or portion
thereof prior to fulfillment of all of the following conditions:
(a) The admission of such Units to listing on all stock exchanges on
which such series or class of Units is then listed;
(b) The completion of any registration or other qualification of such
Units under any state or federal law, or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body
which the Committee or Board shall, in its sole discretion, deem necessary or
advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its sole discretion,
determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise
of the Option as the Committee may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Partnership of full payment for such Units,
including payment of any applicable withholding tax; provided that under no
circumstance may an Optionee exercise an Option and acquire a Unit, and if an
Optionee does exercise an Option, such exercise shall be null and void and of no
effect, if such exercise could, in the sole discretion of the Committee, result
in income to the Company which, when considered in light of the Company's other
income, could cause the Company to fail to satisfy the gross income limitations
set forth in Code Section 856(c) or otherwise impair the Company's status as a
REIT.
Section 5.5. Rights as Limited Partners
The holders of Options shall not be, nor have any of the rights or
privileges of, limited partners of the Partnership in respect of any Units
purchasable upon the exercise of any part of an Option unless and until
certificates representing such Units have been issued to such holders; PROVIDED,
HOWEVER, that the Partnership shall provide to Optionees, on an annual basis,
such financial and other information as the Partnership provides to its limited
partners.
Section 5.6. Ownership and Transfer Restrictions
The Committee, in its sole discretion, may impose such restrictions on
the ownership and transferability of the Units purchasable upon the exercise of
an Option as it deems appropriate. Any such restriction shall be set forth in
the respective Option Agreement or other written agreement between the
Partnership and the Optionee and may be referred to on the certificates
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evidencing such Units. All Options and Units shall be subject to any applicable
transfer restrictions required to preserve the Company's status as a REIT under
the Code and to the restrictions on transfer set forth in the Partnership
Agreement.
ARTICLE VI.
ADMINISTRATION
Section 6.1. Share and Unit Option Committee
The Share and Unit Option Committee shall consist of two or more
Directors, appointed by and holding office at the pleasure of the Board, none of
whom shall be an employee of the Company and each of whom is both a
"non-employee director" as defined by Rule 16b-3 and an "outside director" for
purposes of Section 162(m) of the Code. Appointment of Committee members shall
be effective upon acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the Committee may
be filled by the Board.
Section 6.2. Duties and Powers of Committee
It shall be the duty of the Committee to conduct the general
administration of this Plan in accordance with its provisions. The Committee
shall have the power to interpret this Plan, the Option Agreements and to adopt
such rules for the administration, interpretation and application of this Plan
as are consistent therewith and to interpret, amend or revoke any such rules.
Any grant or Option under this Plan need not be the same with respect to each
Optionee. In its sole discretion, the Board may at any time and from time to
time exercise any and all rights and duties of the Committee under this Plan
except with respect to matters which under Rule 16b-3 or Section 162(m) of the
Code (as each may be applicable), or any regulations or rules issued thereunder,
are required to be determined in the sole discretion of the Committee.
Section 6.3. Majority Rule
The Committee shall act by a majority of its members in attendance at a
meeting where quorum is present or by a memorandum or other written instrument
signed by all members of the Committee.
Section 6.4. Compensation; Professional Assistance; Good Faith Actions
Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of this Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Partnership, the
Company and the Company's officers and Directors shall be entitled to rely upon
the advice, opinions or
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valuations of any such persons. All actions taken and all interpretations and
determinations made by the Committee or the Board in good faith shall be final
and binding upon all Optionees, the Partnership and all other interested
persons. No members of the Committee or the Board shall be personally liable for
any action, determination or interpretation made in good faith with respect to
this Plan or any Option, and all members of the Committee and the Board shall be
fully protected by the Company in respect of any such action, determination or
interpretation.
ARTICLE VII.
MISCELLANEOUS PROVISIONS
Section 7.1. Not Transferable
(a) Options under this Plan may not be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of descent and
distribution or, with the consent of the Committee, pursuant to a transfer to
the spouse and/or lineal descendants of the Optionee or to a trust, partnership
or other entity the sole beneficiaries, partners or other members of which are
members of the Optionee's spouse and/or lineal descendants, unless and until
such Options have been exercised, or the Units underlying such Options have been
issued, and all restrictions applicable to such Units have lapsed. No Option or
interest or right therein shall be liable for the debts, contracts or
engagements of the Optionee or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.
(b) During the lifetime of the Optionee, only he may exercise an Option
(or any portion thereof) granted to him under the Plan, unless it has been
disposed of pursuant to the foregoing paragraph. After the death of the Optionee
(or transferee), any exercisable portion of an Option may, prior to the time
when such portion becomes unexercisable under the Plan or the applicable Option
Agreement or other agreement, be exercised by the personal representative of, or
by any person empowered to do so under, the deceased Optionee's (or
transferee's) will or under the then applicable laws of descent and
distribution.
Section 7.2. Amendment, Suspension or Termination of this Plan
Except as otherwise provided in this Section 7.2, this Plan may be
wholly or partially amended or otherwise modified, suspended or terminated at
any time or from time to time by the Committee. However, without approval of the
Company's shareholders given within twelve months before or after the action by
the Committee, no action of the Committee may, except as provided in Section
7.3, increase the limits imposed in Section 2.1 on the maximum number of Units
which may be issued under this Plan, and no action of the Committee may be taken
that would otherwise require shareholder approval as a matter of applicable law,
regulation or rule.
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The Award Limit may be increased by the Committee at any time and from time to
time, and Options may be granted with respect to a number of Units not in excess
of such increased Award Limit; provided, however, that no such increase of the
Award Limit shall be effective unless and until such increase is approved by the
Company's shareholders and if such approval is not obtained all Options granted
with respect to a number of Units in excess of the Award Limit in effect prior
to such increase shall be canceled and shall become null and void. No amendment,
suspension or termination of this Plan shall, without the consent of the
Optionee alter or impair any rights or obligations under any Options theretofore
granted, unless the Option Agreement itself otherwise expressly so provides. No
Option may be granted during any period of suspension or after termination of
this Plan.
Section 7.3. Changes in Securities or Assets of the Company or the
Partnership, Acquisition or Liquidation of the Company or the
Partnership and Other Events
(a) in the event that the Committee determines that any dividend or
other distribution (whether in the form of cash, Units, Common Shares, other
securities, or other property), recapitalization, reclassification, share split,
reverse share split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets of the
Partnership or the Company (including, but not limited to, a Change in Control),
or exchange of Units or Common Shares or other securities of the Partnership or
the Company, issuance of warrants or other rights to purchase Units or Common
Shares or other securities of the Partnership or the Company, or other similar
transaction or event, in the Committee's sole discretion, affects the Units or
Common Shares such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to an Option, then the Committee shall, in such manner as it may deem equitable,
adjust any or all of
(i) the number and kind of Units (or other securities or
property) with respect to which Options may be granted (including, but
not limited to, adjustments of the limitations in Section 2.1 on the
maximum number and kind of Units which may be issued and adjustments to
the Award Limit),
(ii) the number and kind of Units (or other securities or
property) subject to outstanding Options, and
(iii) the grant or exercise price with respect to any Option.
(b) Subject to Section 7.3(d) the event of any Change in Control or
other transaction or event described in Section 7.3(a) or any unusual or
nonrecurring transactions or events affecting the Partnership, the Company, any
affiliate of the either of them, or the financial statements of the Partnership,
the Company or any such affiliate, or of changes in applicable laws,
regulations, or accounting principles, the Committee in its discretion is hereby
authorized
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to take any one or more of the following actions whenever the Committee
determines that such action is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to any Option, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or principles:
(i) In its sole discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide, either by the terms of
the Option Agreement or by action taken prior to the occurrence of such
transaction or event and either automatically or upon the request of the
Optionee, for either the purchase of any such Option for an amount of
cash equal to the amount that could have been attained upon the exercise
of such Option had such Option been currently exercisable or payable or
fully vested or the replacement of such Option with other rights or
property selected by the Committee in its sole discretion;
(ii) In its sole discretion, the Committee may provide, either by
the terms of such Option or by action taken prior to the occurrence of
such transaction or event that it cannot be exercised after such event;
(iii) In its sole discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide, either by the terms of
such Option or by action taken prior to the occurrence of such
transaction or event, that for a specified period of time prior to such
transaction or event, such Option shall be exercisable as to all Units
covered thereby, notwithstanding anything to the contrary in (i) Section
4.4 or (ii) the provisions of such Option;
(iv) In its sole discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide, either by the terms of
such Option or by action taken prior to the occurrence of such
transaction or event, that upon such event, such Option be assumed by
the successor or survivor corporation, or a parent or subsidiary
thereof, or shall be substituted for by similar options covering the
equity securities of the successor or survivor corporation, or a parent
or subsidiary thereof, with appropriate adjustments as to the number and
kind of securities and prices; and
(v) In its sole discretion, and on such terms and conditions as
it deems appropriate, the Committee may make adjustments in the number
and type of Units (or other securities or property) subject to
outstanding Options and/or in the terms and conditions of (including the
grant or exercise price), and the criteria included in, outstanding
Options and Options which may be granted in the future.
(c) Subject to Section 7.3(d) and 7.6, the Committee may, in its
discretion, include such further provisions and limitations in any Option
agreement or certificate, as it may deem equitable and in the best interests of
the Company.
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<PAGE>
(d) With respect to any Option granted to any Section 162(m) Participant
that is intended to qualify as performance-based compensation under Section
162(m)(4)(C), no adjustment or action described in this Section 7.3 or in any
other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Option to fail to so qualify under Section
162(m)(4)(C), or any successor provision thereto unless the Committee determines
that such Option should no longer so qualify. Furthermore, no such adjustment or
action shall be authorized to the extent such adjustment or action would result
in short-swing profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Committee determines that the Option is not
to comply with such exemptive conditions. The number of Units subject to any
Option shall always be rounded to the next whole number.
Section 7.4. Tax Withholding
The Partnership shall be entitled to require payment in cash or
deduction from other compensation payable to each Optionee of any sums required
by federal, state or local tax law to be withheld with respect to the issuance,
vesting, exercise or payment of any Option. The Committee may in its discretion
and in satisfaction of the foregoing requirement allow such Optionee to elect to
have the Partnership withhold Units otherwise issuable under such Option (or
allow the return of Units) having a Fair Market Value equal to the sums required
to be withheld.
Section 7.5. Loans
The Committee may, in its discretion, extend one or more loans to
Employees in connection with the exercise or receipt of an Option granted under
this Plan. The terms and conditions of any such loan shall be set by the
Committee.
Section 7.6. Limitations Applicable to Section 16 Persons and Performance-
Based Compensation
Notwithstanding any other provision of this Plan, this Plan, and any
Option granted to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan and Options granted hereunder shall be deemed amended to the extent
necessary to conform to such applicable exemptive rule. Furthermore,
notwithstanding any other provision of this Plan, any Option which is granted to
a Section 162(m) Participant and is intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall be subject
to any additional limitations set forth in Section 162(m) of the Code (including
any amendment to Section 162(m) of the Code) or any regulations or rulings
issued thereunder that are requirements for qualification as performance-based
compensation as described in Section
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162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the extent
necessary to conform to such requirements.
Section 7.7 Effect of Plan Upon Options and Compensation Plans
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Partnership or any subsidiary. Nothing in this
Plan shall be construed to limit the right of the Partnership or any subsidiary
(i) to establish any other forms of incentives or compensation for Employees
(ii) to grant or assume Options or other rights or awards otherwise than under
this Plan in connection with any proper purpose including but not by way of
limitation, the grant or assumption of Options in connection with the
acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, securities or assets of any corporation, partnership, limited
liability company, firm or association.
Section 7.8. Compliance with Laws
This Plan, the granting and vesting of Options under this Plan and the
issuance and delivery of Units and the payment of money under this Plan or under
Options granted hereunder are subject to compliance with all applicable federal
and state laws, rules and regulations (including but not limited to state and
federal securities law and federal margin requirements) and to such approvals by
any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Partnership, be necessary or advisable in connection therewith.
Any securities delivered under this Plan shall be subject to such restrictions,
and the person acquiring such securities shall, if requested by the Partnership,
provide such assurances and representations to the Partnership as the
Partnership may deem necessary or desirable to assure compliance with all
applicable legal requirements. To the extent permitted by applicable law, the
Plan and Options granted hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
Section 7.9. Titles
Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Plan.
Section 7.10. Governing Law.
This Plan and any agreements hereunder shall be administered,
interpreted and enforced under the internal laws of the State of North Carolina
without regard to conflicts of laws thereof.
Exhibit 10.2
THE AMENDED AND RESTATED SHARE OPTION PLAN
FOR DIRECTORS AND EXECUTIVE AND KEY EMPLOYEES OF
TANGER FACTORY OUTLET CENTERS, INC.
Tanger Factory Outlet Centers, Inc., a corporation organized under the
laws of the state of North Carolina (the "Company"), adopted the Stock Option
Plan for Directors and Executive and Key Employees of Tanger Factory Outlet
Centers, Inc., (the "Plan") on May 28, 1993. The Plan has subsequently been
amended from time to time. In order to conform the Plan document to such
amendments and to further amend the Plan in certain respects, the Plan has been
amended and restated, effective as of July 29, 1998. This Amended and Restated
Share Option Plan for Directors and Executive and Key Employees of Tanger
Factory Outlet Centers, Inc., constitutes a complete amendment and restatement
of the Plan in its entirety and a continuation of the Plan.
The purposes of this Plan are as follows:
(1) To further the growth, development and financial success of the
Company by providing additional incentives to certain of its Directors, and
executive and key Employees (as defined below) who have been or will be given
responsibility for the management or administration of the Company's business
affairs, by assisting them to become owners of the Company's Common Shares and
thus to benefit directly from such growth, development and financial success.
(2) To enable the Company to obtain and retain the services of the types
of professional, technical and managerial employees and directors considered
essential to the long range success of the Company by providing and offering
them an opportunity to become owners of the Company's Common Shares under
options, including options that are intended to qualify as "incentive stock
options" under Section 422 of the Code (as defined below).
ARTICLE I.
DEFINITIONS
Wherever the following terms are used in this Plan they shall have the
meanings specified below, unless the context clearly indicates otherwise. The
masculine pronoun shall include the feminine and neuter and the singular shall
include the plural, where the context so indicates.
Section 1.1. Award Limit
"Award Limit" shall mean 60,000 Common Shares.
Section 1.2. Board
<PAGE>
Board" shall mean the Board of Directors of the Company.
Section 1.3. Change in Control
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding Common Shares (the "Outstanding Common Shares")
or (ii) the combined voting power of the then outstanding "voting securities of
the Company") entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (a), the following acquisitions shall not constitute a Change
in Control: (i) any acquisition directly from the Company, (ii) any acquisition
by the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c) of this
Section 1.3; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company or
the acquisition of assets of another corporation (a "Business Combination"), in
each case, unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Common Shares and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding Common Shares and Outstanding Company Voting Securities, as
the case may be, (ii) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns,
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directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of he members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
For purposes of this Plan, the "Partnership Units" of the Tanger
Properties Limited Partnership shall be treated as, and aggregated with, the
Common Shares and/or the "voting securities of the Company" to the extent such
Partnership Units are convertible into Common Shares or voting securities,
respectively.
Section 1.4. Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.5. Committee
"Committee" shall mean the Share and Unit Option Committee of the Board,
appointed as provided in Section 6.1.
Section 1.6. Common Shares
"Common Shares" shall mean the Common Shares of the Company, par value
$0.01 per share.
Section 1.7. Company
"Company" shall mean Tanger Factory Outlet Centers, Inc., a North
Carolina corporation.
Section 1.8. Director
"Director" shall mean a member of the Board.
Section 1.9. Employee
"Employee" shall mean any employee (as defined in accordance with
Section 3401(c) of the Code) of the Company, or of any corporation which is a
Subsidiary.
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<PAGE>
Section 1.10. Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.11. Fair Market Value
"Fair Market Value" of a Common Share as of a given date shall be (i)
the closing price of the Common Shares on the principal exchange on which Common
Shares are trading on the trading day previous to such date, or, if Common
Shares were not traded on the day previous to such date, then on the next
preceding trading day during which a sale occurred; (ii) if such Common Shares
are not traded on an exchange but are quoted on NASDAQ or a successor quotation
system, (A) the last sales price (if the Common Shares are then listed as
National Market Issue under the NASD National Market System) or (B) the mean
between the closing representative bid and asked prices for the Common Shares on
the trading day previous to such date as reported by NASDAQ or such successor
quotation system; or (iii) if such Common Shares are is not publicly traded on
an exchange and not quoted on NASDAQ or a successor quotation system, the fair
market value of a Common Share as established by the Committee (or the Board in
the case of Options granted to Independent Directors) acting in good faith.
Section 1.12. Incentive Share Option
"Incentive Share Option" shall mean an option which conforms to the
applicable provisions of Section 422 of the Code and which is designated as an
Incentive Share Option by the Committee.
Section 1.13. Independent Director
"Independent Director" shall mean a member of the Board who is not an
Employee of the Company.
Section 1.14. Non-Qualified Share Option
"Non-Qualified Share Option" shall mean an Option which is not
designated as an Incentive Share Option by the Committee.
Section 1.15. Operating Partnership
"Operating Partnership" shall mean Tanger Properties Limited
Partnership, a partnership organized under the laws of the state of North
Carolina.
Section 1.16. Option
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"Option" shall mean an option to purchase Common Shares granted under
Article III of this Plan. An Option granted under this Plan shall, as determined
by the Committee, be either a Non-Qualified Share Option or an Incentive Share
Option; provided, however, that Options granted to Independent Directors shall
be Non-Qualified Share Options.
Section 1.17. Optionee
"Optionee" shall mean an Employee or Independent Director granted an
Option under this Plan.
Section 1.18. Plan
"Plan" shall mean The Amended and Restated Share Option Plan for
Directors and Executive and Key Employees of Tanger Factory Outlet Centers, Inc.
Section 1.19. Rule 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act,
as such Rule may be amended from time to time.
Section 1.20. Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.21. Section 162(m) Participant
"Section 162(m) Participant" shall mean any Company Employee designated
by the Committee as a Company Employee whose compensation for the fiscal year in
which the Company Employee is so designated or a future fiscal year may be
subject to the limit on deductible compensation imposed by Section 162(m) of the
Code.
Section 1.22. Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns securities possessing 50
percent or more of the total combined voting power of all classes of securities
in one of the other corporations in such chain.
Section 1.23. Termination of Directorship
"Termination of Directorship" shall mean the time when an Optionee who
is an Independent Director ceases to be a Director for any reason, including,
but not by way of limitation, a termination by resignation, failure to be
elected, death or retirement. The Board, in
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its sole discretion, shall determine the effect of all matters and questions
relating to Termination of Directorship with respect to Independent Directors.
Section 1.24. Termination of Employment
"Termination of Employment" shall mean the time when the
employee-employer relationship between an Optionee and the Company, the
Operating Partnership or any subsidiary of either of them is terminated for any
reason, with or without cause, including, but not by way of limitation, a
termination by resignation, discharge, death, disability or retirement; but
excluding (i) a termination where there is a simultaneous reemployment or
continuing employment of such Optionee by the Company, the Operating Partnership
or any subsidiary of either of them, (ii) at the discretion of the Committee,
termination which results in a temporary severance of the employee-employer
relationship, and (iii) at the discretion of the Committee, a termination which
is followed by the simultaneous establishment of a consulting relationship by
the Company, the Operating Partnership or any subsidiary of either of them with
the former employee. The Committee, in its sole discretion, shall determine the
effect of all matters and questions relating to Termination of Employment,
including, but not by way of limitation, the question of whether a Termination
of Employment resulted from a discharge for good cause, and all questions of
whether a particular leave of absence constitutes a Termination of Employment;
provided, however, that, unless otherwise determined by the Committee in its
discretion, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section. Notwithstanding any other provision of
this Plan, the Company, the Operating Partnership and any subsidiary has an
absolute and unrestricted right to terminate an Employee's employment at any
time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
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<PAGE>
ARTICLE II.
SHARES SUBJECT TO PLAN
Section 2.1. Shares Subject to Plan
(a) The aggregate number of Common Shares which may be issued upon
exercise of Options under the Plan shall not exceed 1,500,000; provided, that
effective as of the date of the next succeeding annual meeting of shareholders
such number shall be increased to 1,750,000 if the shareholders approve such
increase at such annual meeting. Such aggregate number shall be reduced by one
for each unit in the Operating Partnership that is issued pursuant to the
Operating Partnership's Unit Option Plan. The Common Shares issuable upon
exercise of Options may be either previously authorized but unissued shares or
treasury shares.
(b) The maximum number of Common Shares which may be subject to Options
granted under the Plan to any individual in any calendar year shall not exceed
the Award Limit. To the extent required by Section 162(m) of the Code, shares
subject to Options which are canceled continue to be counted against the Award
Limit and if, after grant of an Option, the price of shares subject to such
Option is reduced, the transaction will be treated as a cancellation of the
Option and a grant of a new Option and both the Option deemed to be canceled and
the Option deemed to be granted will be counted against the Award Limit.
Section 2.2. Add-back of Options
If any Option expires or is canceled without having been fully
exercised, the number of shares subject to such Option but as to which such
Option was not exercised prior to its expiration, cancellation or exercise may
again be optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1. Common Shares which are delivered by the Optionee or withheld by
the Company upon the exercise of any Option or other award under this Plan, in
payment of the exercise price thereof, may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 2.1. Furthermore, any Common
Shares subject to Options which are adjusted pursuant to Section 7.3 and become
exercisable with respect to equity interests of another entity shall be
considered canceled and may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1.
ARTICLE III.
GRANTING OF OPTIONS
Section 3.1. Eligibility
Any Employee selected by the Committee pursuant to Section 3.3(a)(i)
shall be eligible to be granted an Option. Any Independent Director selected by
the Board pursuant to Section 3.3(b)(i) shall be eligible to be granted an
Option.
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<PAGE>
Section 3.2. Qualification of Incentive Share Options
No Incentive Share Option shall be granted to any person who is not an
Employee.
Section 3.3. Granting of Options
(a) The Committee shall from time to time, in its sole discretion, and
subject to applicable limitations of this Plan:
(i) Determine which Employees are executive or other key
Employees and select from among them (including Employees who have
previously received Options) such of them as in its opinion should be
granted Options;
(ii) Subject to the Award Limit, determine the number of shares
to be subject to such Options granted to the selected Employees;
(iii) Subject to Section 3.2, determine whether such Options are
to be Incentive Share Options or Non-Qualified Share Options and whether
such Options are to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options,
consistent with this Plan; provided, however, that the terms and
conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the
Code.
(b) The Board shall from time to time, in its sole discretion, and
subject to applicable limitations of this Plan:
(i) Determine which Independent Directors (including Independent
Directors who have previously received Options) such of them as in its
opinion should be granted Options; and
(ii) Determine the terms and conditions of such Options,
consistent with this Plan.
(c) Upon the selection of an Employee or Independent Director to be
granted an Option, the Committee (or Board, as applicable) shall instruct the
Secretary to issue the Option and may impose such conditions on the grant of the
Option as it deems appropriate. Without
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<PAGE>
limiting the generality of the preceding sentence, the Committee (or Board, as
applicable) may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of an Option that the Optionee surrender for
cancellation some or all of the unexercised Options or other rights which have
been previously granted to him under this Plan or otherwise. An Option, the
grant of which is conditioned upon such surrender, may have an exercise price
lower (or higher) than the exercise price of such surrendered Option or other
right, may cover the same (or a lesser or greater) number of shares as such
surrendered Option or other right, may contain such other terms as the Committee
deems appropriate, and shall be exercisable in accordance with its terms,
without regard to the number of shares, exercise price, exercise period or any
other term or condition of such surrendered Option or other right.
ARTICLE IV.
TERMS OF OPTIONS
Section 4.1. Option Agreement
Each Option shall be evidenced by a written Option Agreement, which
shall be executed by the Optionee and an authorized officer of the Company and
which shall contain such terms and conditions as the Committee (the Board in the
case of Options granted to Independent Directors) shall determine, and which may
be amended by agreement of the parties thereto, consistent with this Plan.
Option Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code, and Option Agreements evidencing Incentive Share
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
Section 4.2. Exercise Price
The exercise price per share of the shares subject to each Option shall
be set by the Committee in its discretion (the Board with respect to Options
granted to Independent Directors); provided, however, that such price shall be
no less than the Fair Market Value of a Common Share on the date the Option is
granted, and, in the case of Incentive Share Options granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of shares of the Company or any
Subsidiary or parent corporation thereof (within the meaning of Section 422 of
the Code) such price shall not be less than 110% of the Fair Market Value of a
Common Share on the date the Option is granted.
Section 4.3. Option Term
The term of an Option shall be set by the Committee (the Board in the
case of Options granted to Independent Directors) in its discretion; provided,
however, that (i) in the case of Incentive Share Options, the term shall not be
more than ten (10) years from the date the
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<PAGE>
Incentive Share Option is granted, or five (5) years from such date if the
Incentive Share Option is granted to an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of shares of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 422 of the Code). Except as
limited by requirements of Section 422 of the Code and regulations and rulings
thereunder applicable to Incentive Share Options, the Committee (the Board in
the case of Options granted to Independent Directors) may extend the term of any
outstanding Option in connection with any Termination of Employment or
Termination of Directorship, or amend any other term or condition of such Option
relating to such a termination.
Section 4.4. Option Vesting
(a) The period during which the right to exercise an Option in whole or
in part vests in the Optionee shall be set by the Committee (the Board with
respect to Options granted to Independent Directors) and the Committee (or
Board, as applicable) may determine that an Option may not be exercised in whole
or in part for a specified period after it is granted. At any time after grant
of an Option, the Committee (the Board with respect to Options granted to an
Independent Directors) may, in its sole discretion and subject to whatever terms
and conditions it selects, accelerate the period during which an Option vests.
(b) No portion of an Option which is unexercisable at Termination of
Employment or Termination of Directorship shall thereafter become exercisable,
except as may be otherwise provided by the Committee (other than with respect to
Options granted to Independent Directors) either in the Option Agreement or by
action of the Committee following the grant of the Option.
(c) To the extent that the aggregate fair market value of shares with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any Subsidiary) exceeds
$100,000, such options shall be treated as non-qualified stock options to the
extent required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking options into account in the order in which
they were granted. For purposes of this Section 4.4(c), the fair market value of
shares shall be determined as of the time the option with respect to such shares
is granted.
(d) In the event of a Change in Control, each Option granted to an
Independent Director or to an Employee shall be exercisable as to all shares
covered thereby immediately prior to the consummation of such Change in Control
and subject to such consummation, notwithstanding anything to the contrary in
this Section 4.4 or the vesting schedule of such Option.
Section 4.5. Consideration
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<PAGE>
In consideration of the granting of an Option, the Optionee shall agree,
in the written Option Agreement, to remain in the employ of the Company, the
Operating Partnership or a subsidiary of either of them for a period of one year
from the date of Option grant. Nothing in this Plan or in any Option Agreement
hereunder shall confer upon any Optionee any right to continue in the employ of
or as a director of the Company, the Operating Partnership or any subsidiary of
either of them, or shall interfere with or restrict in any way the rights of the
Company, the Partnership or any such subsidiary, which are hereby expressly
reserved, to discharge any Optionee at any time for any reason whatsoever, with
or without good cause.
ARTICLE V.
EXERCISE OF OPTIONS
Section 5.1. Partial Exercise
An exercisable Option may be exercised in whole or in part. However, an
Option shall not be exercisable with respect to fractional shares and the
Committee (or the Board, in the case of Options granted to Independent
Directors) may require that, by the terms of the Option, a partial exercise be
with respect to a minimum number of shares.
Section 5.2. Manner of Exercise
All or a portion of an exercisable Option shall be deemed exercised upon
delivery of all of the following to the Secretary or his office prior to the
time when such Option or such portion becomes unexercisable under the Plan or
the applicable Option Agreement:
(a) A written notice complying with the applicable rules established by
the Committee (or the Board, in the case of Options granted to Independent
Directors) stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to exercise
the Option or such portion of the Option;
(b) Such representations and documents as the Committee (or the Board,
in the case of Options granted to Independent Directors), in its sole
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee or Board may, in
its sole discretion, also take whatever additional actions it deems appropriate
to effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant to Section
7.1 by any person or persons other than the Optionee, appropriate proof of the
right of such person or persons to exercise the Option; and
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(d) Full cash payment to the Secretary for the shares with respect to
which the Option, or portion thereof, is exercised. However, the Committee (or
the Board, in the case of Options granted to Independent Directors), may in its
discretion (i) allow a delay in payment up to thirty (30) days from the date the
Option, or portion thereof, is exercised; (ii) allow payment, in whole or in
part, through the delivery of Common Shares owned by the Optionee, duly endorsed
for transfer to the Company with a Fair Market Value on the date of delivery
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iii) allow payment, in whole or in part, through the surrender of
Common Shares then issuable upon exercise of the Option having a Fair Market
Value on the date of Option exercise equal to the aggregate exercise price of
the Option or exercised portion thereof; (iv) allow payment, in whole or in
part, through the delivery of property of any kind which constitutes good and
valuable consideration; (v) allow payment, in whole or in part, through the
delivery of a full recourse promissory note bearing interest (at no less than
such rate as shall then preclude the imputation of interest under the Code) and
payable upon such terms as may be prescribed by the Committee or the Board; (vi)
allow payment, in whole or in part, through the delivery of a notice that the
Optionee has placed a market sell order with a broker with respect to Common
Shares then issuable upon exercise of the Option, and that the broker has been
directed to pay a sufficient portion of the net proceeds of the sale to the
Company in satisfaction of the Option exercise price; or (vii) allow payment
through any combination of the consideration provided in the foregoing
subparagraphs (ii), (iii), (iv), (v) and (vi). In the case of a promissory note,
the Committee (or the Board, in the case of Options granted to Independent
Directors) may also prescribe the form of such note and the security to be given
for such note. The Option may not be exercised, however, by delivery of a
promissory note or by a loan from the Company when or where such loan or other
extension of credit is prohibited by law.
Section 5.3. Conditions to Issuance of Share Certificates
The Company shall not be required to issue or deliver any certificate
for Common Shares purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such series or class of shares is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory body
which the Committee or Board shall, in its sole discretion, deem necessary or
advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee (or Board, in the case of
Options granted to Independent Directors) shall, in its sole discretion,
determine to be necessary or advisable;
- -12-
<PAGE>
(d) The lapse of such reasonable period of time following the exercise
of the Option as the Committee (or Board, in the case of Options granted to
Independent Directors) may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax;
provided that under no circumstance may an Optionee exercise an Option and
acquire a Common Share, and if an Optionee does exercise an Option, such
exercise shall be null and void and of no effect, if such exercise could, in the
sole discretion of the Committee, result in income to the Company which, when
considered in light of the Company's other income, could cause the Company to
fail to satisfy the gross income limitations set forth in Code Section 856(c) or
otherwise impair the Company's status as a REIT.
Section 5.4. Rights as Shareholders
The holders of Options shall not be, nor have any of the rights or
privileges of, shareholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.
Section 5.5. Ownership and Transfer Restrictions
The Committee (or Board, in the case of Options granted to Independent
Directors), in its sole discretion, may impose such restrictions on the
ownership and transferability of the shares purchasable upon the exercise of an
Option as it deems appropriate. Any such restriction shall be set forth in the
respective Option Agreement or other written agreement between the Company and
the Optionee and may be referred to on the certificates evidencing such shares.
ARTICLE VI.
ADMINISTRATION
Section 6.1. Share and Unit Option Committee
The Share and Unit Option Committee shall consist of two or more
Directors, appointed by and holding office at the pleasure of the Board, none of
whom shall be an Employee and each of whom is both a "non-employee director" as
defined by Rule 16b-3 and an "outside director" for purposes of Section 162(m)
of the Code. Appointment of Committee members shall be effective upon acceptance
of appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.
Section 6.2. Duties and Powers of Committee
- -13-
<PAGE>
It shall be the duty of the Committee to conduct the general
administration of this Plan in accordance with its provisions. The Committee
shall have the power to interpret this Plan, the Option Agreements and to adopt
such rules for the administration, interpretation and application of this Plan
as are consistent therewith and to interpret, amend or revoke any such rules.
Any such interpretations and rules with respect to Incentive Share Options shall
be consistent with the provisions of Section 422 of the Code. Notwithstanding
the foregoing, the full Board, acting by a majority of its members in office,
shall conduct the general administration of the Plan with respect to Options
granted to Independent Directors. Any grant or award under this Plan need not be
the same with respect to each Optionee. In its sole discretion, the Board may at
any time and from time to time exercise any and all rights and duties of the
Committee under this Plan except with respect to matters which under Rule 16b-3
or Section 162(m) of the Code (as each may be applicable), or any regulations or
rules issued thereunder, are required to be determined in the sole discretion of
the Committee.
Section 6.3. Majority Rule
The Committee shall act by a majority of its members in attendance at a
meeting where quorum is present or by a memorandum or other written instrument
signed by all members of the Committee.
Section 6.4. Compensation; Professional Assistance; Good Faith Actions
Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of this Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Optionees, the Company and all other
interested persons. No members of the Committee or the Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to this Plan or any Option, and all members of the Committee and the
Board shall be fully protected by the Company in respect of any such action,
determination or interpretation.
ARTICLE VII.
MISCELLANEOUS PROVISIONS
Section 7.1. Not Transferable
(a) Options under this Plan may not be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of descent and
distribution or, with the consent of the Committee, pursuant to a transfer to
the spouse and/or lineal descendants of the Optionee and/or
- -14-
<PAGE>
to a trust, partnership or other entity the sole beneficiaries, partners or
other members of which are such Optionee's spouse and/or lineal descendants,
unless and until such Options have been exercised, or the shares underlying such
Options have been issued, and all restrictions applicable to such shares have
lapsed. No Option or interest or right therein shall be liable for the debts,
contracts or engagements of the Optionee or his successors in interest or shall
be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.
(b) During the lifetime of the Optionee, only he may exercise an Option
(or any portion thereof) granted to him under the Plan, unless it has been
disposed of pursuant to the foregoing paragraph. After the death of the Optionee
(or transferee), any exercisable portion of an Option may, prior to the time
when such portion becomes unexercisable under the Plan or the applicable Option
Agreement or other agreement, be exercised by the personal representative of, or
by any person empowered to do so under, the deceased Optionee's (or
transferee's) will or under the then applicable laws of descent and
distribution.
Section 7.2. Amendment, Suspension or Termination of this Plan
Except as otherwise provided in this Section 7.2, this Plan may be
wholly or partially amended or otherwise modified, suspended or terminated at
any time or from time to time by the Board or the Committee. However, without
approval of the Company's shareholders given within twelve months before or
after the action by the Board or the Committee, no action of the Board or the
Committee may, except as provided in Section 7.3, increase the limits imposed in
Section 2.1 on the maximum number of shares which may be issued under this Plan,
and no action of the Board or the Committee may be taken that would otherwise
require shareholder approval as a matter of applicable law, regulation or rule.
The Award Limit may be increased by the Board or the Committee at any time and
from time to time, and Options may be granted with respect to a number of shares
not in excess of such increased Award Limit; provided, however, that no such
increase of the Award Limit shall be effective unless and until such increase is
approved by the Company's shareholders and if such approval is not obtained all
Options granted with respect to a number of shares in excess of the Award Limit
in effect prior to such increase shall be canceled and shall become null and
void. No amendment, suspension or termination of this Plan shall, without the
consent of the Optionee alter or impair any rights or obligations under any
Options theretofore granted, unless the Option Agreement itself otherwise
expressly so provides. No Option may be granted during any period of suspension
or after termination of this Plan, and in no event may any Incentive Share
Option be granted under this Plan after May 28, 2003.
- -15-
<PAGE>
Section 7.3. Changes in Common Shares or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events
(a) Subject to Section 7.3(d), in the event that the Committee (or the
Board, in the case of Options granted to Independent Directors) determines that
any dividend or other distribution (whether in the form of cash, Common Shares,
other securities, or other property), recapitalization, reclassification, share
split, reverse share split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer,
exchange or other disposition of all or substantially all of the assets of the
Company (including, but not limited to, a Change in Control), or exchange of
Common Shares or other securities of the Company, issuance of warrants or other
rights to purchase Common Shares or other securities of the Company, or other
similar corporate transaction or event, in the Committee's sole discretion (or
in the case of Options granted to Independent Directors, the Board's sole
discretion), affects the Common Shares such that an adjustment is determined by
the Committee to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan
or with respect to an Option, then the Committee (or the Board, in the case of
Options granted to Independent Directors) shall, in such manner as it may deem
equitable, adjust any or all of
(i) the number and kind of Common Shares (or other securities or
property) with respect to which Options may be granted
(including, but not limited to, adjustments of the
limitations in Section 2.1 on the maximum number and kind of
shares which may be issued and adjustments of the Award
Limit),
(ii) the number and kind of Common Shares (or other securities or
property) subject to outstanding Options, and
(iii) the grant or exercise price with respect to any Option.
(b) Subject to Sections 7.3(b)(vi) or Section 7.3(d), in the event of
any Change in Control or other transaction or event described in Section 7.3(a)
or any unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee (or the Board, in the case of Options granted to
Independent Directors) in its discretion is hereby authorized to take any one or
more of the following actions whenever the Committee (or the Board, in the case
of Options granted to Independent Directors) determines that such action is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to any Option, to facilitate such transactions or events or to give effect to
such changes in laws, regulations or principles:
- -16-
<PAGE>
(i) In its sole discretion, and on such terms and conditions as
it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may
provide, either by the terms of the Option Agreement or by
action taken prior to the occurrence of such transaction or
event and either automatically or upon the request of the
Optionee, for either the purchase of any such Option for an
amount of cash equal to the amount that could have been
attained upon the exercise of such Option had such Option
been currently exercisable or payable or fully vested or the
replacement of such Option with other rights or property
selected by the Committee (or the Board, in the case of
Options granted to Independent Directors) in its sole
discretion;
(ii) In its sole discretion, the Committee (or the Board, in the
case of Options granted to Independent Directors) may
provide, either by the terms of such Option or by action
taken prior to the occurrence of such transaction or event
that it cannot be exercised after such event;
(iii) In its sole discretion, and on such terms and conditions as
it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may
provide, either by the terms of such Option or by action
taken prior to the occurrence of such transaction or event,
that for a specified period of time prior to such
transaction or event, such Option shall be exercisable as to
all shares covered thereby, notwithstanding anything to the
contrary in (i) Section 4.4 or (ii) the provisions of such
Option;
(iv) In its sole discretion, and on such terms and conditions as
it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may
provide, either by the terms of such Option or by action
taken prior to the occurrence of such transaction or event,
that upon such event, such Option be assumed by the
successor or survivor corporation, or a parent or subsidiary
thereof, or shall be substituted for by similar options
covering the shares of the successor or survivor
corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares
and prices; and
(v) In its sole discretion, and on such terms and conditions as
it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may make
adjustments in the number and type of Common Shares (or
other securities or
- -17-
<PAGE>
property) subject to outstanding Options and/or in the terms
and conditions of (including the grant or exercise price),
and the criteria included in, outstanding Options and
Options which may be granted in the future.
(vi) None of the foregoing discretionary actions taken under this
Section 7.3(b) shall be permitted with respect to Options
granted under Section 3.3(b) to Independent Directors to the
extent that such discretion would be inconsistent with the
applicable exemptive conditions of Rule 16b-3. In the event
of a Change in Control, each Option granted to an
Independent Director shall be exercisable as to all shares
covered thereby immediately prior to the consummation of
such Change in Control and subject to such consummation,
notwithstanding anything to the contrary in Section 4.4 or
the vesting schedule of such Options.
(c) Subject to Section 7.3(d) and 7.6, the Committee (or the Board, in
the case of Options granted to Independent Directors) may, in its discretion,
include such further provisions and limitations in any Option agreement or
certificate, as it may deem equitable and in the best interests of the Company.
(d) With respect to any Option granted to any Section 162(m) Participant
that is intended to qualify as performance-based compensation under Section
162(m)(4)(C), no adjustment or action described in this Section 7.3 or in any
other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Option to fail to so qualify under Section
162(m)(4)(C), or any successor provision thereto unless the Committee determines
that such Option should no longer so qualify. Furthermore, no such adjustment or
action shall be authorized to the extent such adjustment or action would result
in short-swing profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Committee (or the Board, in the case of
Options granted to Independent Directors) determines that the Option is not to
comply with such exemptive conditions. The number of Common Shares subject to
any Option shall always be rounded to the next whole number.
Section 7.4. Tax Withholding
The Company shall be entitled to require payment in cash or deduction
from other compensation payable to each Optionee of any sums required by
federal, state or local tax law to be withheld with respect to the issuance,
vesting, exercise or payment of any Option. The Committee (or the Board, in the
case of Options granted to Independent Directors) may in its discretion and in
satisfaction of the foregoing requirement allow such Optionee to elect to have
the Company withhold Common Shares otherwise issuable under such Option (or
allow the return of Common Shares) having a Fair Market Value equal to the sums
required to be withheld.
- -18-
<PAGE>
Section 7.5. Loans
The Committee may, in its discretion, extend one or more loans to
Employees in connection with the exercise or receipt of an Option granted under
this Plan. The terms and conditions of any such loan shall be set by the
Committee.
Section 7.6. Limitations Applicable to Section 16 Persons and Performance-
Based Compensation
Notwithstanding any other provision of this Plan, this Plan, and any
Option granted to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan and Options granted hereunder shall be deemed amended to the extent
necessary to conform to such applicable exemptive rule. Furthermore,
notwithstanding any other provision of this Plan, any Option which is granted to
a Section 162(m) Participant and is intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall be subject
to any additional limitations set forth in Section 162(m) of the Code (including
any amendment to Section 162(m) of the Code) or any regulations or rulings
issued thereunder that are requirements for qualification as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and this Plan
shall be deemed amended to the extent necessary to conform to such requirements.
Section 7.7. Effect of Plan Upon Options and Compensation Plans
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary. Nothing in this
Plan shall be construed to limit the right of the Company (i) to establish any
other forms of incentives or compensation for Employees or Directors of the
Company or any Subsidiary or (ii) to grant or assume Options or other rights or
awards otherwise than under this Plan in connection with any proper corporate
purpose including but not by way of limitation, the grant or assumption of
Options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, securities or assets of any
corporation, partnership, limited liability company, firm or association.
Section 7.8. Compliance with Laws
This Plan, the granting and vesting of Options under this Plan and the
issuance and delivery of Common Shares and the payment of money under this Plan
or under Options granted hereunder are subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to
state and federal securities law and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection
therewith.
- -19-
<PAGE>
Any securities delivered under this Plan shall be subject to such restrictions,
and the person acquiring such securities shall, if requested by the Company,
provide such assurances and representations to the Company as the Company may
deem necessary or desirable to assure compliance with all applicable legal
requirements. To the extent permitted by applicable law, the Plan, or Options
granted hereunder shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.
Section 7.9. Titles
Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Plan.
Section 7.10. Governing Law
This Plan and any agreements hereunder shall be administered,
interpreted and enforced under the internal laws of the State of North Carolina
without regard to conflicts of laws thereof.
- -20-
Exhibit 10.5
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is entered into
and made effective as of January 1, 1998 by and among Tanger Properties Limited
Partnership a North Carolina limited partnership (the "Partnership"), Tanger
Factory Outlet Centers, Inc. (the "Company"), a North Carolina corporation and
Stanley K. Tanger (the "Executive").
RECITALS:
A. The Executive is the Chief Executive Officer of the Partnership, an
officer of the Company and Chairman of the Board of Directors of the Company
under the terms of an Amended and Restated Employment Agreement dated as of
January 1, 1996 between the Executive, the Partnership and the Company (the
"Existing Employment Contract"). The term of the Existing Employment Contract
has been extended by its terms to end on December 31, 2000.
B. The Company, the Partnership and the Executive intend to modify and
amend the Existing Employment Contract and to extend its term as provided
herein.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below the parties hereto agree as follows:
1. Certain Definitions.
(a) "Annual Base Salary" is defined in Section 7(a).
(b) "Annual Bonus" is defined in Section 7(d).
(c) "Benefits" is defined in Section 7(b)(iii).
(d) "Cause": For purposes of this Agreement, the Partnership or
the Company shall have "Cause" to terminate the Executive's employment hereunder
upon (i) the Executive causing material harm to the Company through a material
act of dishonesty in the performance of his duties hereunder, (ii) his
conviction of a felony involving moral turpitude, fraud or embezzlement, or
(iii) his willful failure to perform his material duties under this Agreement
(other than a failure due to disability) after written notice specifying the
failure and a reasonable opportunity to cure (it being understood that if his
failure to perform is not of a type requiring a single action to cure fully,
that he may commence the cure promptly after such written notice and thereafter
diligently prosecute such cure to completion).
(e) "Change of Control" shall mean (A) the sale, lease, exchange
or other transfer (other than pursuant to internal reorganization) by the
Company or the Partnership of more than 50% of its assets to a single purchaser
or to a group of associated purchasers; (B) a merger, consolidation
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<PAGE>
or similar transaction in which the Company or the Partnership does not survive
as an independent, publicly owned corporation or the Company ceases to be the
sole general partner of the Partnership; or (C) the acquisition of securities of
the Company or the Partnership in one or a related series of transactions (other
than pursuant to an internal reorganization) by a single purchaser or a group of
associated purchasers (other than the Executive or any of his lineal
descendants, lineal ancestors or siblings) which results in their ownership of
twenty-five (25%) percent or more of the number of Common Shares of the Company
(treating any Partnership Units or Preferred Shares acquired by such purchaser
or purchasers as if they had been converted to Common Shares) that would be
outstanding if all of the Partnership Units and Preferred Shares were converted
into Common Shares; (E) a merger involving the Company if, immediately following
the merger, the holders of the Company's shares immediately prior to the merger
own less than fifty (50%) of the surviving company's outstanding shares having
unlimited voting rights or less than fifty percent (50%) of the value of all of
the surviving company's outstanding shares; or (F) a majority of the members of
the Company's Board of Directors are replaced during any twelve month period by
directors whose appointment or election is not endorsed by a majority of the
members of the Board prior to the date of the appointment or election.
(f) "Disability" shall mean the absence of the Executive from the
Executive's duties to the Partnership and/or the Company on a full-time basis
for a total of 16 consecutive weeks during any 12 month period as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Partnership or the Company and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(g) A "Contract Year" shall be a calendar year.
(h) "Funds From Operations" or "FFO", with respect to a Contract
Year or a calendar quarter, shall be equal to the Company's consolidated Funds
From Operations before the minority interest of the limited partners of the
Partnership as reported in the Company's relevant filings with the Securities
and Exchange Commission, or if not so reported, as determined by the Company's
Board of Directors in good faith, after deduction of any Annual Bonus paid to
the Executive or Stanley K. Tanger under similar provisions of his employment
agreement for such period.
(i) "Funds From Operations Per Share" or "FFO Per Share" for any
Contract Year or for any calendar quarter shall equal the amount of the Funds
From Operations for such period, divided by the Weighted Average Number of
Shares Outstanding for such period.
(j) "Good Reason": The Executive shall have Good Reason to
terminate his employment upon the occurrence of any of the following
events:
(1) any material adverse change in his job titles, duties,
responsibilities, perquisites granted hereunder, or authority without
his consent;
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<PAGE>
(2) if, after a Change of Control, either (i) the
principal duties of the Executive are required to be performed at a
location other than the Greensboro, North Carolina metropolitan area
without his consent or (ii) the Executive no longer reports directly to
the Board of Directors;
(3) the relocation of the Company and/or the Partnership
headquarters outside of the Greensboro, North Carolina metropolitan area
without his consent;
(4) a material breach of this Employment Agreement by the
Partnership or Company, including without limitation, the failure to pay
compensation or benefits when due hereunder if such failure is not cured
within 30 days after delivery to the Company and the Partnership of the
Executive's written demand for payment thereof;
(5) if the Executive elects to terminate his employment by
written notice to the Company and the Partnership within the 180 day
period following a Change of Control; or
(6) if the Executive is removed, or is not re-elected as a
Director of the Company.
(k) Target FFO Per Share.
(1) The "Target FFO Per Share" or "Target" for any
Contract Year beginning prior to December 31, 1996 shall be the average
FFO Per Share for the calendar quarters beginning with the calendar
quarter beginning on July 1, 1993 and ending with the last calendar
quarter in the immediately preceding Contract Year multiplied by 4;
provided however the Target FFO Per Share shall not be less than
$1.5520.
(2) The "Target FFO Per Share" or "Target" for any
Contract Year beginning after December 31, 1996 shall be the average FFO
Per Share for the previous three Contract Years; provided however the
Target FFO Per Share shall not be less than $1.5520.
(l) "Contract Term " is defined in Section 2(b).
(m) The "Weighted Average Number of Shares Outstanding" for a
Contract Year or for a calendar quarter shall be the weighted average number of
the Company's total shares of common stock outstanding during such period as
determined by the Company's outside auditors pursuant to generally accepted
accounting principles; provided that for the purposes of this calculation, the
conversion features of the Company's preferred stock and the Partnership's units
shall both be deemed exercised.
2. Employment.
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(a) The Partnership and the Company shall continue to employ the
Executive and the Executive shall remain in the employ of the Partnership and
the Company during the Contract Term (as defined in this Section 2) in the
positions set forth in Section 3 and upon the other terms and conditions herein
provided, unless the Executive's employment is terminated earlier as provided in
Section 8 hereof.
(b) The initial Contract Term of this Amended and Restated
Employment Agreement shall begin as of January 1, 1998 (the "Commencement Date")
and shall end on December 31, 2000 (the "Initial Contract Term"). On January 1,
1999 and on the first day of January of each calendar year thereafter (an
"Extension Date"), the Contract Term shall be automatically extended by one year
unless (i) the Executive's employment has been earlier terminated as provided in
Section 8 or (ii) either the Partnership or the Company gives written notice to
the Executive one hundred eighty (180) days prior to the Extension Date that the
Contract Term shall not be automatically extended. For purposes of illustration,
if the Executive's employment has not been terminated as provided in Section 8
and if neither the Company nor the Partnership has given written notice to the
Executive at least 180 days prior to January 1, 1999 that the Contract Term will
not be extended, on January 1, 1999, the Contract Term will be extended to and
including December 31, 2001.
If the Contract Term is extended as provided herein, the Executive's employment
may be terminated (other than upon expiration) only as provided in Section 8.
References herein to the "Contract Term" shall refer to the Initial Contract
Term as extended pursuant to this Section 2.
3. Position and Duties. The Executive shall serve in the following manner:
(a) During the Executive's employment hereunder, he shall serve
as:
(1) an executive employee of the Partnership and shall
have such duties, functions, responsibilities and authority as are
consistent with the Executive's position,
(2) the Chief Executive Officer and Chairman of the Board
of Directors of the Company and shall have such duties, functions,
responsibilities and authority as are consistent with the Executive's
position as the senior executive officer in charge of the general
management, business and affairs of the Company (and the Partnership,
through the Company's capacity as general partner of the Partnership),
and
(3) if elected or appointed thereto, as a Director and
Chairman of the Board of directors of the Company.
(b) The Executive shall serve as manager of the Factory Outlet
Center in Commerce, Georgia and shall have such duties, functions,
responsibilities and authority as are consistent with the Executive's position
thereas and the Executive's activities as manager of such
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<PAGE>
property prior to the date of this Agreement. Notwithstanding any other
provision of the Employment Agreement, the Executive's obligations under this
subsection 3(b) shall not be terminated without the prior consent of New York
Life Insurance Annuity Corporation ("New York Life") but, in any event, shall
terminate on the later of (i) the payment of the Liabilities and (ii) the
satisfaction of all the Partnership's obligations under the terms of the Loan
Documents under the Guaranty of Payment and Performance by Stanley K. Tanger,
dated May , 1993 (the "Guaranty"), pursuant to which, in consideration for
certain consent by New York Life, Executive agrees to guarantee certain
obligations of the Partnership.
If the Executive's employment is otherwise terminated under the
Employment Agreement, the Partnership and the Company shall allow the Executive
to continue his duties under this subsection 3(b) until they are terminated in
accordance with this subsection 3(b) or until the death or Disability of the
Executive, provided that no additional compensation shall be paid to the
Executive.
For purposes of this subsection 3(b), the terms "Liabilities",
"Property" and "Loan Documents" shall be defined as in the Guaranty.
The Executive's position, duties and responsibilities may not be changed
and the Executive's Annual Base Salary may not be reduced during his employment
hereunder.
4. Competition.
(a) The Executive shall be permanently prohibited from engaging
in Competition (as defined in subsection 4(b) below) with the Partnership or the
Company.
(b) The term "Competition" for purposes of this Agreement shall
mean the engagement outside the Partnership and the Company
(1) in any material commercial real estate activities,
with the exception of
(i) the development or ownership of properties (or
replacement properties) which were owned collectively or individually by
the Executive, by members of his family or by any entity in which any of
them owned an interest or which was for the benefit of any of them prior
to June 30, 1993 (including the three factory outlet centers in which
the Executive is a 50% partner, the shopping center on West Market
Street in Greensboro, North Carolina (such four properties defined
herein as the "Excluded Properties") and the interests of the Tanger
Family Limited Partnership),
(ii) the direct or indirect passive investment in
commercial real estate, and
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(iii) service on the board of directors of any
publicly traded company, whether or not such company engages in
Competition as defined in this subsection 4(b); provided however that,
(2) "Competition" shall include management, development or
construction of any factory outlet centers or competing retail
commercial property or any other active or passive investment in
property connected with a factory outlet center or a competing retail
commercial property, with the exception of
(i) the activities permitted in subparagraph
4(b)(i)(A) with respect to the Excluded Properties,
(ii) the ownership of up to 1% of any class of
securities of any publicly traded company, and
(iii) the employment under this Agreement.
(c) The Executive covenants that a breach of subsection 4 (a)
above would immediately and irreparably harm the Partnership and the Company and
that a remedy at law would be inadequate to compensate the Partnership and the
Company for their losses by reason of such breach and therefore that the
Partnership and/or the Company shall, in addition to any other rights and
remedies available under this Agreement, at law or otherwise, be entitled to an
injunction to be issued by any court of competent jurisdiction enjoining and
restraining the Executive from committing any violation of subsection 4(a)
above, and the Executive hereby consents to the issuance of such injunction.
5. Registration Rights. The Executive shall have registration rights pursuant to
the Registration Rights Agreement attached hereto as Exhibit A.
6. Place of Performance. During his employment hereunder, the Executive shall be
based at the Partnership's principal executive offices and the Company's
principal executive offices located in Greensboro, North Carolina.
7. Compensation and Related Matters. During the Executive's employment
hereunder, the Executive shall be paid the compensation and shall be provided
with the benefits described below:
(a) Annual Base Salary. The Executive's annual base compensation
("Annual Base Salary") payable with respect to the Contract Year ending December
31, 1998 shall be $330,000. The amount of Annual Base Salary payable to the
Executive with respect to each Contract Year thereafter shall be an amount
negotiated between and agreed upon by the Executive and the Board of Directors
of the Company (in its capacity as general partner and in its own behalf) but in
no event less than the Executive's Annual Base Salary for the prior Contract
Year increased by the Consumer Price Index adjustment described in the following
paragraph.
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If the FFO Per Share for the Contract Year ending December 31, 1998 or
for any succeeding Contract Year equals or exceeds the Target for that Contract
Year, the Executive's Annual Base Salary for the next Contract Year shall be
increased to reflect any increase in the Consumer Price Index for All Urban
Consumers (CPI-U), U.S. City Average for All Items as determined by the United
States Department of Labor, Bureau of Labor Statistics using 1982-84=100 as the
standard reference base or, if there be no such Consumer Price Index, then by
the successor or the most nearly comparable successor index thereto
(appropriately adjusted to the 1982-84=100 standard reference base). For the
purpose of determining such increased Annual Base Salary for a Contract Year,
the Basic Index Figure ("BIF") shall be such Consumer Price Index for the month
of October in the second preceding Contract Year. The Current Index Figure
("CIF") shall be the corresponding Consumer Price Index for the month of October
in the immediately preceding Contract Year. The Annual Base Salary payable for a
Contract Year beginning after December 31, 1998 shall be no less than an amount
arrived at by multiplying the Annual Base Salary for the preceding Contract Year
by a fraction, of which the numerator shall be the Current Index Figure ("CIF")
and the denominator shall be the Basic Index Figure ("BIF"):
ABS for preceding Contract Year X CIF = ABS for the Contract Year
---
BIF
(b) Benefits. The Executive shall be entitled to
(1) receive stock options (incentive or nonqualified)
under the Company's Stock Option Plan and the Partnership's Unit Option
Plan;
(2) participate in the Partnership's 401(k) Savings Plan,
and
(3) participate in or receive benefits under any employee
benefit plan or other arrangement made available by the Partnership or
the Company to any of its employees (collectively "Benefits"),on terms
at least as favorable as those on which any other employee of the
Partnership or the Company shall participate; provided, however, that
the Executive shall be entitled to four weeks of paid vacation during
each Contract Year, exclusive of Partnership holidays.
Without the Executive's prior written consent, the Company and/or
the Partnership will not terminate or reduce any benefits paid to the
Executive under this Section 7(b) unless the Executive is furnished with
a benefit that is substantially equivalent.
(c) Automobile. In addition to the other compensation and
benefits described in this Section 7, the Executive shall be entitled to receive
a monthly automobile allowance of $800, payable at the same times Base Salary is
payable hereunder. The Executive may apply such allowance in any manner, and
shall be entitled to retain any portion of such allowance not applied towards
his automobile expense. The Executive shall be responsible for all automobile
costs and expenses in excess of the allowance provided hereunder.
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(d) Annual Bonus. As additional compensation for services
rendered, for each Contract Year in which the FFO Per Share shall equal or
exceed the Target, the Executive shall receive an annual bonus ("Annual Bonus)
equal to the sum of (A) $100,000 and (B) the product of (x) the Executive's
Annual Base Salary for such Contract Year and (y) a fraction (which shall not
exceed 1.0) the numerator of which shall be the percentage by which the FFO Per
Share shall exceed the Target for such Contract Year, and the denominator of
which shall be ten percent (10%).
Each Annual Bonus shall be paid no later than 30 days after the
information sufficient to calculate it has been delivered to the Company and the
Partnership by the Company's outside auditors, unless the Executive shall elect
to defer the receipt of such Annual Bonus pursuant to the Executive Deferred
Compensation Plan.
(e) Expenses. The Partnership and the Company shall promptly
reimburse the Executive for all reasonable travel and other business expenses
incurred by the Executive in the performance of his duties to the Partnership
and the Company, respectively, hereunder.
(f) Payment of Compensation. For each Contract Year or portion
thereof covered by this Agreement, the Company shall be liable for the
percentage described below (the "Company Percentage") of the cost of the
Executive's Annual Base Salary, and for any options granted to the Executive
pursuant to the Company's Stock Option Plan, and the Partnership shall be liable
for the remainder of the cost of the Executive's total compensation (including
options granted to the Executive pursuant to the Partnership's Unit Option
Plan).
The Company Percentage for each Contract Year shall be determined by the Board
of Directors of the Company (in its capacity as general partner and in its own
behalf), excluding the Executive, as the reasonable allocation of the benefits
for the Executive's services.
8. Termination. The Executive's employment hereunder may be terminated prior to
the end of the Contract Term by the Partnership, the Company or the Executive,
as applicable, without any breach of this Agreement only under the following
circumstances:
(a) Death. The Executive's employment hereunder shall terminate
upon his death.
(b) Disability. If the Disability of the Executive has occurred
during the Contract Term, the Partnership or the Company, respectively, may give
the Executive written notice in accordance with Section 15(c) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Partnership and the Company shall terminate effective on the
30th day after receipt of such notice by the Executive, provided that within the
30 days after such receipt, the Executive shall not have returned to full-time
performance of his duties.
(c) Cause. The Partnership or the Company may terminate the
Executive's employment hereunder for Cause.
8
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(d) Good Reason. The Executive may terminate his employment for
Good Reason.
(e) Without Cause. The Partnership or the Company may terminate
the Executive's employment hereunder without Cause upon 30 days notice.
(f) Resignation without Good Reason. The Executive may resign his
employment without Good Reason upon 90 days written notice to the Partnership
and the Company.
(g) Notice of Termination. Any termination of the Executive's
employment hereunder by the Partnership, the Company or the Executive (other
than by reason of the Executive's death) shall be communicated by a notice of
termination to the other parties hereto. For purposes of this Agreement, a
"notice of termination" shall mean a written notice which (i) indicates the
specific termination provision in the Agreement relied upon, (ii) sets forth in
reasonable detail any facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision indicated and
(iii) specifies the effective date of the termination.
9. Severance Benefits.
(a) Termination without Cause or for Good Reason: If the
Executive's employment shall be terminated (i) by the Company or the Partnership
other than for Cause (as defined above) or (ii) by the Executive for Good Reason
(as defined above), the Partnership and the Company shall pay a lump sum cash
payment (the "Severance Payment") to the Executive within thirty (30) days after
such termination of the Executive's employment in an amount equal to 300% of the
sum of (A) his Annual Base Salary, (B) his Deemed Annual Bonus for the Contract
Year in which the termination occurs and (C) his annual automobile allowance
under Section 7(c) hereof. In addition, the Partnership and the Company shall
continue to provide all Benefits to the Executive under this Agreement for each
Contract Year through the end of the Contract Term. For these purposes, the
Executive's Deemed Annual Bonus for any Contract Year shall be the greater of
(i) the Executive's Average Annual Bonus for that Contract Year and (ii)
Executive's Annual Bonus for the prior Contract Year. The Executive's Average
Annual Bonus for a Contract Year shall be an amount equal to the sum of all
Annual Bonuses earned by the Executive for the Contract Years immediately
preceding the Contract Year for which the calculation is being made (not
exceeding three (3) Contract Years) divided by the number of such Annual
Bonuses.
(b) Termination by Death or Disability. Upon the termination of
the Executive's employment by reason of his death or Disability, the Company
shall pay to the Executive or to the personal representatives of his estate (i)
within thirty (30) days after the termination, a lump-sum amount equal to the
amount of Annual Base Salary that would have been due through the end of the
Contract Term assuming no early termination had occurred and assuming no
increases or decreases in Annual Base Salary and (ii) on or before the day on
which the Executive's Annual Bonus for the
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Contract Year in which the termination occurs would have been payable if the
termination had not occurred, an amount equal to the Annual Bonus the Executive
would have received for that Contract Year if the termination had not occurred
multiplied by a fraction the numerator of which is the number of days in that
Contract Year before the date of termination and the denominator of which is
365. This subsection 9(b) shall not limit the entitlement of the Executive, his
estate or beneficiaries to any disability or other benefits then available to
the Executive under any life, disability insurance or other benefit plan or
policy which is maintained by the Partnership or the Company for the Executive's
benefit.
(c) Termination for Cause or Without Good Reason. If the
Executive's employment is terminated by the Company for Cause or by the
Executive without Good Reason, the Executive shall be entitled to all Annual
Base Salary and all Benefits accrued through the date of termination and to any
accrued but unpaid Annual Bonus for a Contract Year prior to the Contract Year
in which the Executive's employment was terminated.
(d) Assignment of Life Insurance. Upon any termination of the
Executive's employment hereunder, the Partnership and the Company shall, at
Executive's option (exercisable at any time during the period commencing upon
the termination of his employment and ending 90 days thereafter), transfer the
life insurance policy described in such Section 11(b) to Executive, for no
consideration. In addition, notwithstanding any provision of the Partnership's
Executive Deferred Compensation Plan to the contrary, all amounts in the
Executive's account under such Plan (if there is such a Plan) shall be
immediately payable to him.
(e) Survival. Neither the termination of the Executive's
employment hereunder nor the expiration of the Contract Term shall impair the
rights or obligations of any party hereto which shall have accrued hereunder
prior to such termination or expiration.
(f) Mitigation of Damages. In the event of any termination of the
Executive's employment by the Partnership or the Company, the Executive shall
not be required to seek other employment to mitigate damages, and any income
earned by the Executive from other employment or self-employment shall not be
offset against any obligations of the Partnership or the Company to the
Executive under this Agreement.
10. Limitation on Severance Benefits.
(a) Notwithstanding any other provision of this Agreement, and
except as provided in paragraph 10(b) below, payments and benefits to which
Executive would otherwise be entitled under the provisions of this Agreement
will be reduced (or the Executive shall make reimbursement of amounts previously
paid) to the extent necessary to prevent the Executive from having any liability
for the federal excise tax levied on certain "excess parachute payments" under
section 4999 of the Internal Revenue Code as it exists as of the date of this
Agreement.
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(b) The Executive may determine the amount (if any) of reduction
for each payment or benefit that he would otherwise be entitled to receive. The
extent to which the payments or benefits to the Executive are to be reduced
pursuant to paragraph 10(a) will be determined by the accounting firm servicing
the Company on the date that the Executive's employment is terminated. The
Company shall pay the cost of such determination.
(c) If the final determination of any reduction in any benefit or
payment pursuant to this Section has not been made at the time that the
Executive is entitled to receive such benefit or payment, the Company shall pay
or provide an estimated amount based on a recommendation by the accounting firm
making the determination under subparagraph 10(b). When the final determination
is made, the Company shall pay the Executive any additional amounts that may be
due or the Executive shall reimburse the Company for any estimated amounts paid
to the Executive that were in excess of the amount payable hereunder.
11. Insurance.
(a) Officers and Directors Fiduciary Liability Insurance: During
the Executive's employment hereunder, the Company shall maintain, at its
expense, officers and directors fiduciary liability insurance that would cover
the Executive in an amount of no less than $3 million per year.
(b) Term Life Insurance or Other Employee Benefit: During the
Executive's employment hereunder, the Company shall maintain in force a term
life insurance policy on the Executive or shall provide Executive with another
employee benefit selected by the Executive at an annual cost to the Company of
no more than $17,150. If the Executive's employment is terminated prior to the
expiration of the Contract Term (other than by reason of the Executive's death,
a termination by the Company for Cause or a termination by the Executive without
Good Reason), the Company shall pay, prior to the expiration of the ninety (90)
period described in the preceding sentence, either to the Executive or, on
behalf of the Executive, to the issuer(s) of such life insurance policy(ies) (if
any), an amount sufficient to pay the premiums to maintain such policy(ies) in
force for the remainder of the Contract Term but in no event more than $17,150
each Contract Year.
The Company shall be liable for the Company Percentage (as
described in Section 7(f)) of the annual premium for any such term life
insurance policy and the Partnership shall be liable for the remainder of such
premium. The beneficiary of any such insurance shall be designated, from time to
time, by the Executive in his sole and absolute discretion.
12. Disputes and Indemnification.
(a) Any dispute or controversy arising under, out of, in
connection with or in relation to this Agreement shall, at the election and upon
written demand of any party to this Agreement, be finally determined and settled
by arbitration in the City of Greensboro, North Carolina in accordance with the
rules and procedures of the American Arbitration Association, and judgment upon
the award may be entered in any court having jurisdiction thereof.
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(b) The Partnership and/or the Company shall promptly pay
pursuant to Section 7(e) as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Partnership, the Company,
the Executive or others of the validity or enforceability of, or liability
under, any provision of this Agreement.
(c) The Company and the Partnership agree that if the Executive
is made a party, or is threatened to be made a party, to any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was a director, officer or
employee of the Company or the Partnership or is or was serving at the request
of the Company or the Partnership as a director, officer, member, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether or
not the basis of such Proceeding is the Executive's alleged action in an
official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company and
the Partnership to the fullest extent legally permitted, against all cost,
expense, liability and loss (including, without limitation, attorney's fees,
judgements, fines, ERISA excise taxes or penalties and amounts paid or to be
paid in settlement) reasonably incurred or suffered by the Executive in
connection therewith, and such indemnification shall continue as to the
Executive even if he has ceased to be a director, officer, member, employee or
agent of the Company or the Partnership or other entity and shall inure to the
benefit of Executive's heirs, executors and administrators. The Company and/or
the Partnership shall advance to the Executive all reasonable costs and expenses
incurred by him in connection with a Proceeding within 20 days after receipt by
them of a written request for such advance. Such request shall include an
undertaking by the Executive to repay the amount of such advance, without
interest, if it shall ultimately be determined that he is not entitled to be
indemnified against such costs and expenses.
13. Binding on Successors. This Agreement shall be binding upon and inure to the
benefit of the Partnership, the Company, the Executive and their respective
successors, assigns, personal and legal representatives, executors,
administrators, heirs, distributees, devisees, and legatees, as applicable.
14. Governing Law. This Agreement is being made and executed in and is intended
to be performed in the State of North Carolina, and shall be governed,
construed, interpreted and enforced in accordance with the substantive laws of
the State of North Carolina without any reference to principles of conflicts or
choice of law under which the law of any other jurisdiction would apply.
15. Validity. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
12
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16. Notices. Any notice, request, claim, demand, document and other
communication hereunder to any party shall be effective upon receipt (or refusal
of receipt) and shall be in writing and delivered personally or sent by telex,
telecopy, or certified or registered mail, postage prepaid, as follows:
(a) If to the Partnership, to:
Ms. Rochelle Simpson
Tanger Properties Limited Partnership
P.O. Box 29168
1400 West Northwood Street
Greensboro, NC 27408
(b) If to the Company, to:
Ms. Rochelle Simpson
Tanger Factory Outlets Centers, Inc.
P.O. Box 29168
1400 West Northwood Street
Greensboro, NC 27408
(c) If to the Executive, to:
Mr. Stanley K. Tanger
P.O. Box 29168
1400 West Northwood Street
Greensboro, NC 27408
or at any other address as any party shall have specified by notice in writing
to the other parties.
17. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original, but all of which together will
constitute one and the same Agreement.
18. Entire Agreement. The terms of this Agreement are intended by the parties to
be the final expression of their agreement with respect to the employment of the
Executive by the Partnership and the Company and may not be contradicted by
evidence of any prior or contemporaneous agreement. The parties further intend
that this Agreement shall constitute the complete and exclusive statement of its
terms and that no extrinsic evidence whatsoever may be introduced in any
judicial, administrative, or other legal proceeding to vary the terms of this
Agreement.
19. Amendments; Waivers. This Agreement may not be modified, amended, or
terminated except by an instrument in writing, signed by the Executive, a member
of the Partnership and
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a disinterested director of the Company. By an instrument in writing similarly
executed, the Executive or the Company and the Partnership may waive compliance
by the other party or parties with any provision of this Agreement that such
other party was or is obligated to comply with or perform, provided, however,
that such waiver shall not operate as a waiver of , or estoppel with respect to,
any other or subsequent failure. No failure to exercise and no delay in
exercising any right, remedy, or power hereunder preclude any other or further
exercise of any other right , remedy, or power provided herein or by law or in
equity.
20. No Effect on Other Contractual Rights. Notwithstanding Section 8, the
provisions of this Agreement, and any other payment provided for hereunder,
shall not reduce any amounts otherwise payable to the Executive under any other
agreement between the Executive and the Partnership and the Company, or in any
way diminish the Executive's rights under any employee benefit plan, program or
arrangement of the Partnership or the Company to which he may be entitled as an
employee of the Partnership or the Company.
21. No Inconsistent Actions. The parties hereto shall not voluntarily undertake
or fail to undertake any action or course of action inconsistent with the
provisions or essential intent of this Agreement. Furthermore, it is the intent
of the parties hereto to act in a fair and reasonable manner with respect to the
interpretation and application of the provisions of this Agreement.
22. Legal Fees. The Company and/or the Partnership agree to pay all legal fees
and expenses incurred by the Executive in negotiating this Agreement promptly
upon receipt of appropriate statements therefor.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
EXECUTIVE
---------------------------------------------
Stanley K. Tanger
TANGER FACTORY OUTLET CENTERS, INC.,
a North Carolina corporation
By:
-----------------------------------------
ROCHELLE SIMPSON, Sr. Vice President
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TANGER PROPERTIES LIMITED PARTNERSHIP
By: Tanger Factory Outlet Centers, Inc.
its general partner
By:
-----------------------------------------
ROCHELLE SIMPSON, Sr. Vice President
The Partnership and the Company hereby jointly and severally guarantee to the
Executive the prompt payment in full of the compensation owed hereunder by the
other.
TANGER PROPERTIES LIMITED PARTNERSHIP
By: Tanger Factory Outlet Centers, Inc.,
its general partner
By:
-----------------------------------------
ROCHELLE SIMPSON, Sr. Vice President
TANGER FACTORY OUTLET CENTERS, INC.,
a North Carolina corporation
By:
-----------------------------------------
ROCHELLE SIMPSON, Sr. Vice President
15
Exhibit 10.6
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is entered into
and made effective as of January 1, 1998 by and among Tanger Properties Limited
Partnership, a North Carolina limited partnership (the "Partnership"), Tanger
Factory Outlet Centers, Inc. (the "Company"), a North Carolina corporation and
Steven B. Tanger (the "Executive").
RECITALS:
A. The Executive is the Chief Operating Officer of the Partnership and
an officer and director of the Company under the terms of an Amended and
Restated Employment Agreement dated as of January 1, 1996 between the Executive,
the Partnership and the Company (the "Existing Employment Contract"). The term
of the Existing Employment Contract has been extended by its terms to end on
December 31, 2000.
B. The Company, the Partnership and the Executive intend modify and
amend the Existing Employment Contract and to extend its term as provided
herein.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below the parties hereto agree as follows:
1. Certain Definitions.
(a) "Annual Base Salary" is defined in Section 7(a).
(b) "Annual Bonus" is defined in Section 7(d).
(c) "Benefits" is defined in Section 7(b)(iii).
(d) "Cause": For purposes of this Agreement, the Partnership or
the Company shall have "Cause" to terminate the Executive's employment hereunder
upon (i) the Executive causing material harm to the Company through a material
act of dishonesty in the performance of his duties hereunder, (ii) his
conviction of a felony involving moral turpitude, fraud or embezzlement, or
(iii) his willful failure to perform his material duties under this Agreement
(other than a failure due to disability) after written notice specifying the
failure and a reasonable opportunity to cure (it being understood that if his
failure to perform is not of a type requiring a single action to cure fully,
that he may commence the cure promptly after such written notice and thereafter
diligently prosecute such cure to completion).
(e) "Change of Control" shall mean (A) the sale, lease, exchange
or other transfer (other than pursuant to internal reorganization) by the
Company or the Partnership of more than 50% of its assets to a single purchaser
or to a group of associated purchasers; (B) a merger, consolidation or similar
transaction in which the Company or the Partnership does not
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survive as an independent, publicly owned corporation or the Company ceases to
be the sole general partner of the Partnership; or (C) the acquisition of
securities of the Company or the Partnership in one or a related series of
transactions (other than pursuant to an internal reorganization) by a single
purchaser or a group of associated purchasers (other than the Executive or any
of his lineal descendants, lineal ancestors or siblings) which results in their
ownership of twenty-five (25%) percent or more of the number of Common Shares of
the Company (treating any Partnership Units or Preferred Shares acquired by such
purchaser or purchasers as if they had been converted to Common Shares) that
would be outstanding if all of the Partnership Units and Preferred Shares were
converted into Common Shares; (E) a merger involving the Company if, immediately
following the merger, the holders of the Company's shares immediately prior to
the merger own less than fifty (50%) of the surviving company's outstanding
shares having unlimited voting rights or less than fifty percent (50%) of the
value of all of the surviving company's outstanding shares; or (F) a majority of
the members of the Company's Board of Directors are replaced during any twelve
month period by directors whose appointment or election is not endorsed by a
majority of the members of the Board prior to the date of the appointment or
election.
(f) "Disability" shall mean the absence of the Executive from the
Executive's duties to the Partnership and/or the Company on a full-time basis
for a total of 16 consecutive weeks during any 12 month period as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Partnership or the Company and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(g) A "Contract Year" shall be a calendar year.
(h) "Funds From Operations" or "FFO", with respect to a Contract
Year or a calendar quarter, shall be equal to the Company's consolidated Funds
From Operations before the minority interest of the limited partners of the
Partnership as reported in the Company's relevant filings with the Securities
and Exchange Commission, or if not so reported, as determined by the Company's
Board of Directors in good faith, after deduction of any Annual Bonus paid to
the Executive or Stanley K. Tanger under similar provisions of his employment
agreement for such period.
(i) "Funds From Operations Per Share" or "FFO Per Share" for any
Contract Year or for any calendar quarter shall equal the amount of the Funds
From Operations for such period, divided by the Weighted Average Number of
Shares Outstanding for such period.
(j) "Good Reason": The Executive shall have Good Reason to
terminate his employment upon the occurrence of any of the following events:
(1) any material adverse change in his job titles, duties,
responsibilities, perquisites granted hereunder, or authority without
his consent;
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<PAGE>
(2) if, after a Change of Control, either (i) the
principal duties of the Executive are required to be performed at a
location other than New York, New York without his consent or (ii) the
Executive no longer reports directly to the Board of Directors;
(3) a material breach of this Employment Agreement by the
Partnership or Company, including without limitation, the failure to pay
compensation or benefits when due hereunder if such failure is not cured
within 30 days after delivery to the Company and the Partnership of the
Executive's written demand for payment thereof;
(4) if the Executive elects to terminate his employment by
written notice to the Company and the Partnership within the 180 day
period following a Change of Control; or
(5) if the Executive is removed, or is not re-elected as a
Director of the Company.
(k) Target FFO Per Share.
(1) The "Target FFO Per Share" or "Target" for any
Contract Year beginning prior to December 31, 1996 shall be the average
FFO Per Share for the calendar quarters beginning with the calendar
quarter beginning on July 1, 1993 and ending with the last calendar
quarter in the immediately preceding Contract Year multiplied by 4;
provided however the Target FFO Per Share shall not be less than
$1.5520.
(2) The "Target FFO Per Share" or "Target" for any
Contract Year beginning after December 31, 1996 shall be the average FFO
Per Share for the previous three Contract Years; provided however the
Target FFO Per Share shall not be less than $1.5520.
(l) "Contract Term" is defined in Section 2(b).
(m) The "Weighted Average Number of Shares Outstanding" for a
Contract Year or for a calendar quarter shall be the weighted average
number of the Company's total shares of common stock outstanding during
such period as determined by the Company's outside auditors pursuant to
generally accepted accounting principles; provided that for the purposes
of this calculation, the conversion features of the Company's preferred
stock and the Partnership's units shall both be deemed exercised.
2. Employment.
(a) The Partnership and the Company shall continue to employ the
Executive and the Executive shall remain in the employ of the Partnership and
the Company during the
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<PAGE>
Contract Term (as defined in this Section 2) in the positions set forth in
Section 3 and upon the other terms and conditions herein provided, unless the
Executive's employment is terminated earlier as provided in Section 8 hereof.
(b) The initial Contract Term of this Amended and Restated
Employment Agreement shall begin as of January 1, 1998 (the "Commencement Date")
and shall end on December 31, 2000 (the "Initial Contract Term"). On January 1,
1999 and on the first day of January of each calendar year thereafter (an
"Extension Date"), the Contract Term shall be automatically extended by one year
unless (i) the Executive's employment has been earlier terminated as provided in
Section 8 or (ii) either the Partnership or the Company gives written notice to
the Executive one hundred eighty (180) days prior to the Extension Date that the
Contract Term shall not be automatically extended. For purposes of illustration,
if the Executive's employment has not been terminated as provided in Section 8
and if neither the Company nor the Partnership has given written notice to the
Executive at least 180 days prior to January 1, 1999 that the Contract Term will
not be extended, on January 1, 1999, the Contract Term will be extended to and
including December 31, 2001.
If the Contract Term is extended as provided herein, the Executive's employment
may be terminated (other than upon expiration) only as provided in Section 8.
References herein to the "Contract Term" shall refer to the Initial Contract
Term as extended pursuant to this Section 2.
3. Position and Duties. During the Executive's employment hereunder, he shall
serve as:
(a) an executive employee of the Partnership and shall have such
duties, functions, responsibilities and authority as are consistent with the
Executive's position,
(b) the President and Chief Operating Officer of the Company and
shall have such duties, functions, responsibilities and authority as are
consistent with the Executive's position as an executive officer with respect to
the general management, business and affairs of the Company (and the
Partnership, through the Company's capacity as general partner of the
Partnership), and
(c) if elected or appointed thereto, as a Director of the
Company.
The Executive's position, duties and responsibilities may not be changed
and the Executive's Annual Base Salary may not be reduced during the his
employment hereunder.
4. Competition.
(a) Subject to the limitations and conditions in Section 4(e)
hereof, the Executive shall be prohibited from engaging in Competition (as
defined in subsection 4(b) below) with the Partnership or the Company during the
following described periods: (i) during the period beginning on the date hereof
and extending through the date on which the Executive's employment hereunder is
terminated; (ii) if the Executive's employment is terminated by the
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<PAGE>
Company for Cause or by the Executive without Good Reason, from the date of such
termination through the date of the first anniversary of such termination date
and (iii) if the Executive receives the Severance Payment described in Section
9(a) because of a termination of his employment by the Company without Cause or
by the Executive for Good Reason, from the date of such termination through the
date of the third anniversary of such termination date.
(b) During the period prior to the termination of the Executive's
employment hereunder, the term "Competition" for purposes of this Agreement
shall mean the Executive's management, development or construction of any
factory outlet centers or competing retail commercial property outside the
Partnership and the Company or any other active or passive investment in
property connected with a factory outlet center or a competing retail commercial
property outside the Partnership and Company, with the exception of
(1) the development or ownership of properties (or
replacement properties) which were owned collectively or individually by
the Executive, by members of his family or by any entity in which any of
them owned an interest or which was for the benefit of any of them prior
to June 30, 1993 (including the three factory outlet centers in which
Stanley K. Tanger is a 50% partner, the shopping center on West Market
Street in Greensboro, North Carolina (such four properties defined
herein as the "Excluded Properties") and the interests of the Tanger
Family Limited Partnership),
(2) the ownership of up to 1% of any class of securities
of any publicly traded company, and
(3) service on the board of directors of any publicly
traded company, whether or not such company engages in Competition as
defined in this subsection 4(b).
Provided however, for any period following the termination of the Executive's
employment, the Executive shall be considered as engaging in "Competition"
prohibited by this Section only if the Executive engages in the prohibited
activities with respect to a property that is within a fifty (50) mile radius of
the site of any commercial property owned, leased or operated by the Company
and/or the Partnership on the date the Executive's employment terminated or with
respect to a property that is within a fifty (50) mile radius of any commercial
property which the Company and/or Partnership actively negotiated to acquire,
lease or operate within the six (6) month period ending on the date of the
termination of the Executive's employment.
(c) The Executive covenants that a breach of subsection 4(a)
above would immediately and irreparably harm the Partnership and the Company and
that a remedy at law would be inadequate to compensate the Partnership and the
Company for their losses by reason of such breach and therefore that the
Partnership and/or the Company shall, in addition to any other rights and
remedies available under this Agreement, at law or otherwise, be entitled to an
injunction to be issued by any court of competent jurisdiction enjoining and
restraining the Executive from committing any violation of subsection 4(a)
above, and the Executive hereby consents to the issuance of such injunction.
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<PAGE>
5. Registration Rights. The Executive shall have registration rights pursuant to
the Registration Rights Agreement attached hereto as Exhibit A.
6. Place of Performance. During his employment hereunder, the Executive shall be
based at the Partnership's principal executive offices and the Company's
principal executive offices located in Greensboro, North Carolina or New York
City, at the Executive's choice.
7. Compensation and Related Matters. During the Executive's employment
hereunder, the Executive shall be paid the compensation and shall be provided
with the benefits described below:
(a) Annual Base Salary. The Executive's annual base compensation
("Annual Base Salary") payable with respect to the Contract Year ending December
31, 1998 shall be $275,000. The amount of Annual Base Salary payable to the
Executive with respect to each Contract Year thereafter shall be an amount
negotiated between and agreed upon by the Executive and the Board of Directors
of the Company (in its capacity as general partner and in its own behalf) but in
no event less than the Executive's Annual Base Salary for the prior Contract
Year increased by the Consumer Price Index adjustment described in the following
paragraph.
If the FFO Per Share for the Contract Year ending December 31, 1998 or
for any succeeding Contract Year equals or exceeds the Target for that Contract
Year, the Executive's Annual Base Salary for the next Contract Year shall be
increased to reflect any increase in the Consumer Price Index for All Urban
Consumers (CPI-U), U.S. City Average for All Items as determined by the United
States Department of Labor, Bureau of Labor Statistics using 1982-84=100 as the
standard reference base or, if there be no such Consumer Price Index, then by
the successor or the most nearly comparable successor index thereto
(appropriately adjusted to the 1982-84=100 standard reference base). For the
purpose of determining such increased Annual Base Salary for a Contract Year,
the Basic Index Figure ("BIF") shall be such Consumer Price Index for the month
of October in the second preceding Contract Year. The Current Index Figure
("CIF") shall be the corresponding Consumer Price Index for the month of October
in the immediately preceding Contract Year. The Annual Base Salary payable for a
Contract Year beginning after December 31, 1998 shall be no less than an amount
arrived at by multiplying the Annual Base Salary for the preceding Contract Year
by a fraction, of which the numerator shall be the Current Index Figure ("CIF")
and the denominator shall be the Basic Index Figure ("BIF"):
ABS for preceding Contract Year X CIF = ABS for the Contract Year
---
BIF
(b) Benefits. The Executive shall be entitled to
(1) receive stock options (incentive or nonqualified)
under the Company's Stock Option Plan and the Partnership's Unit Option
Plan;
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<PAGE>
(2) participate in the Partnership's 401(k) Savings Plan,
and
(3) participate in or receive benefits under any employee
benefit plan or other arrangement made available by the Partnership or
the Company to any of its employees (collectively "Benefits"),on terms
at least as favorable as those on which any other employee of the
Partnership or the Company shall participate; provided, however, that
the Executive shall be entitled to four weeks of paid vacation during
each Contract Year, exclusive of Partnership holidays.
Without the Executive's prior written consent, the Company and/or the
Partnership will not terminate or reduce any benefits paid to the Executive
under this Section 7(b) unless the Executive is furnished with a benefit that is
substantially equivalent.
(c) Automobile. In addition to the other compensation and
benefits described in this Section 7, the Executive shall be entitled to receive
a fixed monthly automobile allowance of $800, payable at the same times that
Base Salary is payable hereunder. The allowance shall be in lieu of
reimbursement by the Company of any expense incurred by Executive to purchase or
lease a vehicle that will be available for use by the Executive on Company
business. The Executive shall not be required to provide the Company with
supporting documentation to substantiate any such expenses and the allowance
shall be payable whether or not the Executive actually incurs such automobile
expenses in the amount of the allowance. The Executive shall be responsible for
the expenses of leasing or purchasing an automobile which are in excess of the
allowance provided hereunder.
(d) Annual Bonus. As additional compensation for services
rendered, for each Contract Year in which the FFO Per Share shall equal or
exceed the Target, the Executive shall receive an annual bonus ("Annual Bonus)
equal to the sum of (A) $100,000 and (B) the product of (x) the Executive's
Annual Base Salary for such Contract Year and (y) a fraction (which shall not
exceed 1.0) the numerator of which shall be the percentage by which the FFO Per
Share shall exceed the Target for such Contract Year, and the denominator of
which shall be ten percent (10%).
Each Annual Bonus shall be paid no later than 30 days after the
information sufficient to calculate it has been delivered to the Company and the
Partnership by the Company's outside auditors, unless the Executive shall elect
to defer the receipt of such Annual Bonus pursuant to the Executive Deferred
Compensation Plan.
(e) Expenses. The Partnership and the Company shall promptly
reimburse the Executive for all reasonable travel and other business expenses
incurred by the Executive in the performance of his duties to the Partnership
and the Company, respectively hereunder.
(f) Payment of Compensation. For each Contract Year or portion
thereof covered by this Agreement, the Company shall be liable for the
percentage described below (the
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<PAGE>
"Company Percentage") of the cost of the Executive's Annual Base Salary, and for
any options granted to the Executive pursuant to the Company's Stock Option
Plan, and the Partnership shall be liable for the remainder of the cost of the
Executive's total compensation (including options granted to the Executive
pursuant to the Partnership's Unit Option Plan).
The Company Percentage for each Contract Year shall be determined by the
Board of Directors of the Company (in its capacity as general partner and in its
own behalf), excluding the Executive, as the reasonable allocation of the
benefits for the Executive's services.
8. Termination. The Executive's employment hereunder may be terminated prior to
the end of the Contract Term by the Partnership, the Company or the Executive,
as applicable, without any breach of this Agreement only under the following
circumstances:
(a) Death. The Executive's employment hereunder shall terminate
upon his death.
(b) Disability. If the Disability of the Executive has occurred
during the Contract Term, the Partnership or the Company, respectively, may give
the Executive written notice in accordance with Section 15(c) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Partnership and the Company shall terminate effective on the
30th day after receipt of such notice by the Executive, provided that within the
30 days after such receipt, the Executive shall not have returned to full-time
performance of his duties.
(c) Cause. The Partnership or the Company may terminate the
Executive's employment hereunder for Cause.
(d) Good Reason. The Executive may terminate his employment for
Good Reason.
(e) Without Cause. The Partnership or the Company may terminate
the Executive's employment hereunder without Cause upon 30 days notice.
(f) Resignation without Good Reason. The Executive may resign his
employment without Good Reason upon 90 days written notice to the Partnership
and the Company.
(g) Notice of Termination. Any termination of the Executive's
employment hereunder by the Partnership, the Company or the Executive (other
than by reason of the Executive's death) shall be communicated by a notice of
termination to the other parties hereto. For purposes of this Agreement, a
"notice of termination" shall mean a written notice which (i) indicates the
specific termination provision in the Agreement relied upon, (ii) sets forth in
reasonable detail any facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision indicated and
(iii) specifies the effective date of the
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<PAGE>
termination.
9. Severance Benefits.
(a) Termination without Cause or for Good Reason: If the
Executive's employment shall be terminated (i) by the Company or the Partnership
other than for Cause (as defined above) or (ii) by the Executive for Good Reason
(as defined above), the Partnership and the Company shall pay a lump sum cash
payment (the "Severance Payment") to the Executive within thirty (30) days after
such termination of the Executive's employment in an amount equal to 300% of the
sum of (A) his Annual Base Salary, (B) his Deemed Annual Bonus for the Contract
Year in which the termination occurs and (C) his annual automobile allowance
under Section 7(c) hereof. In addition, the Partnership and the Company shall
continue to provide all Benefits to the Executive under this Agreement for each
Contract Year through the end of the Contract Term. For these purposes, the
Executive's Deemed Annual Bonus for any Contract Year shall be the greater of
(i) the Executive's Average Annual Bonus for that Contract Year and (ii)
Executive's Annual Bonus for the prior Contract Year. The Executive's Average
Annual Bonus for a Contract Year shall be an amount equal to the sum of all
Annual Bonuses earned by the Executive for the Contract Years immediately
preceding the Contract Year for which the calculation is being made (not
exceeding three (3) Contract Years) divided by the number of such Annual
Bonuses.
(b) Termination by Death or Disability. Upon the termination of
the Executive's employment by reason of his death or Disability, the Company
shall pay to the Executive or to the personal representatives of his estate (i)
within thirty (30) days after the termination, a lump-sum amount equal to the
amount of Annual Base Salary that would have been due through the end of the
Contract Term assuming no early termination had occurred and assuming no
increases or decreases in Annual Base Salary and (ii) on or before the day on
which the Executive's Annual Bonus for the Contract Year in which the
termination occurs would have been payable if the termination had not occurred,
an amount equal to the Annual Bonus the Executive would have received for that
Contract Year if the termination had not occurred multiplied by a fraction the
numerator of which is the number of days in that Contract Year before the date
of termination and the denominator of which is 365. This subsection 9(b) shall
not limit the entitlement of the Executive, his estate or beneficiaries to any
disability or other benefits then available to the Executive under any life,
disability insurance or other benefit plan or policy which is maintained by the
Partnership or the Company for the Executive's benefit.
(c) Termination for Cause or Without Good Reason. If the
Executive's employment is terminated by the Company for Cause or by the
Executive without Good Reason, the Executive shall be entitled to all Annual
Base Salary and all Benefits accrued through the date of termination and to any
accrued but unpaid Annual Bonus for a Contract Year prior to the Contract Year
in which the Executive's employment was terminated.
(d) Assignment of Life Insurance. Upon any termination of the
Executive's employment hereunder, the Partnership and the Company shall, at
Executive's option
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<PAGE>
(exercisable at any time during the period commencing upon the termination of
his employment and ending 90 days thereafter), transfer the life insurance
policy described in such Section 11(b) to Executive, for no consideration. In
addition, notwithstanding any provision of the Partnership's Executive Deferred
Compensation Plan to the contrary, all amounts in the Executive's account under
such Plan (if there is such a Plan) shall be immediately payable to him.
(e) Survival. Neither the termination of the Executive's
employment hereunder nor the expiration of the Contract Term shall impair the
rights or obligations of any party hereto which shall have accrued hereunder
prior to such termination or expiration.
(f) Mitigation of Damages. In the event of any termination of the
Executive's employment by the Partnership or the Company, the Executive shall
not be required to seek other employment to mitigate damages, and any income
earned by the Executive from other employment or self-employment shall not be
offset against any obligations of the Partnership or the Company to the
Executive under this Agreement.
10. Limitation on Severance Benefits.
(a) Notwithstanding any other provision of this Agreement, and
except as provided in paragraph 10(b) below, payments and benefits to which
Executive would otherwise be entitled under the provisions of this Agreement
will be reduced (or the Executive shall make reimbursement of amounts previously
paid) to the extent necessary to prevent the Executive from having any liability
for the federal excise tax levied on certain "excess parachute payments" under
section 4999 of the Internal Revenue Code as it exists as of the date of this
Agreement.
(b) The Executive may determine the amount (if any) of reduction
for each payment or benefit that he would otherwise be entitled to receive. The
extent to which the payments or benefits to the Executive are to be reduced
pursuant to paragraph 10(a) will be determined by the accounting firm servicing
the Company on the date that the Executive's employment is terminated. The
Company shall pay the cost of such determination.
(c) If the final determination of any reduction in any benefit or
payment pursuant to this Section has not been made at the time that the
Executive is entitled to receive such benefit or payment, the Company shall pay
or provide an estimated amount based on a recommendation by the accounting firm
making the determination under subparagraph 10(b). When the final determination
is made, the Company shall pay the Executive any additional amounts that may be
due or the Executive shall reimburse the Company for any estimated amounts paid
to the Executive that were in excess of the amount payable hereunder.
11. Insurance.
(a) Officers and Directors Fiduciary Liability Insurance: During
the Executive's employment hereunder, the Company shall maintain, at its
expense, officers and
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<PAGE>
directors fiduciary liability insurance that would cover the Executive in an
amount of no less than $3 million per year.
(b) Term Life Insurance: During the Executive's employment
hereunder and for a period of ninety (90) days thereafter, the Company shall
maintain in force a term life insurance policy on the Executive in the face
amount of $10 million. If the Executive's employment is terminated prior to the
expiration of the Contract Term (other than by reason of the Executive's death,
a termination by the Company for Cause or a termination by the Executive without
Good Reason), the Company shall pay, prior to the expiration of the ninety (90)
period described in the preceding sentence, either to the Executive or, on
behalf of the Executive, to the issuer(s) of such life insurance policy(ies), an
amount sufficient to pay the premiums to maintain such policy(ies) in force for
the remainder of the Contract Term.
The Company shall be liable for the Company Percentage (as
described in Section 7(f)) of the annual premium for such term life insurance
policy and the Partnership shall be liable for the remainder of such premium.
The beneficiary of such insurance shall be designated, from time to time, by the
Executive in his sole and absolute discretion.
12. Disputes and Indemnification.
(a) Any dispute or controversy arising under, out of, in
connection with or in relation to this Agreement shall, at the election and upon
written demand of any party to this Agreement, be finally determined and settled
by arbitration in the City of New York, New York in accordance with the rules
and procedures of the American Arbitration Association, and judgment upon the
award may be entered in any court having jurisdiction thereof.
(b) The Partnership and/or the Company shall promptly pay
pursuant to Section 7(e) as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Partnership, the Company,
the Executive or others of the validity or enforceability of, or liability
under, any provision of this Agreement.
(c) The Company and the Partnership agree that if the Executive
is made a party, or is threatened to be made a party, to any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was a director, officer or
employee of the Company or the Partnership or is or was serving at the request
of the Company or the Partnership as a director, officer, member, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether or
not the basis of such Proceeding is the Executive's alleged action in an
official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company and
the Partnership to the fullest extent legally permitted, against all cost,
expense, liability and loss (including, without limitation, attorney's fees,
judgements, fines, ERISA excise taxes or penalties and amounts paid or to be
paid in settlement) reasonably incurred or suffered by the Executive in
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<PAGE>
connection therewith, and such indemnification shall continue as to the
Executive even if he has ceased to be a director, officer, member, employee or
agent of the Company or the Partnership or other entity and shall inure to the
benefit of Executive's heirs, executors and administrators. The Company and/or
the Partnership shall advance to the Executive all reasonable costs and expenses
incurred by him in connection with a Proceeding within 20 days after receipt by
them of a written request for such advance. Such request shall include an
undertaking by the Executive to repay the amount of such advance, without
interest, if it shall ultimately be determined that he is not entitled to be
indemnified against such costs and expenses.
13. Binding on Successors. This Agreement shall be binding upon and inure to the
benefit of the Partnership, the Company, the Executive and their respective
successors, assigns, personal and legal representatives, executors,
administrators, heirs, distributees, devisees, and legatees, as applicable.
14. Governing Law. This Agreement shall be governed, construed, interpreted and
enforced in accordance with the substantive laws of the State of North Carolina,
without reference to principles of conflicts or choice of law under which the
law of any other jurisdiction would apply.
15. Validity. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
16. Notices. Any notice, request, claim, demand, document and other
communication hereunder to any party shall be effective upon receipt (or refusal
of receipt) and shall be in writing and delivered personally or sent by telex,
telecopy, or certified or registered mail, postage prepaid, as follows:
(a) If to the Partnership, to:
Ms. Rochelle Simpson
Tanger Properties Limited Partnership
P.O. Box 29168
1400 West Northwood Street
Greensboro, NC 27408
(b) If to the Company, to:
Ms. Rochelle Simpson
Tanger Factory Outlets Centers, Inc.
P.O. Box 29168
1400 West Northwood Street
Greensboro, NC 27408
(c) If to the Executive, to:
Mr. Steven B. Tanger
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<PAGE>
158 East 58th Street
New York, NY 10022
or at any other address as any party shall have specified by notice in writing
to the other parties.
17. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original, but all of which together will
constitute one and the same Agreement.
18. Entire Agreement. The terms of this Agreement are intended by the parties to
be the final expression of their agreement with respect to the employment of the
Executive by the Partnership and the Company and may not be contradicted by
evidence of any prior or contemporaneous agreement. The parties further intend
that this Agreement shall constitute the complete and exclusive statement of its
terms and that no extrinsic evidence whatsoever may be introduced in any
judicial, administrative, or other legal proceeding to vary the terms of this
Agreement.
19. Amendments; Waivers. This Agreement may not be modified, amended, or
terminated except by an instrument in writing, signed by the Executive, a member
of the Partnership and a disinterested director of the Company. By an instrument
in writing similarly executed, the Executive or the Company and the Partnership
may waive compliance by the other party or parties with any provision of this
Agreement that such other party was or is obligated to comply with or perform,
provided, however, that such waiver shall not operate as a waiver of, or
estoppel with respect to, any other or subsequent failure. No failure to
exercise and no delay in exercising any right, remedy, or power hereunder
preclude any other or further exercise of any other right, remedy, or power
provided herein or by law or in equity.
20. No Effect on Other Contractual Rights. Notwithstanding Section 8, the
provisions of this Agreement, and any other payment provided for hereunder,
shall not reduce any amounts otherwise payable to the Executive under any other
agreement between the Executive and the Partnership and the Company, or in any
way diminish the Executive's rights under any employee benefit plan, program or
arrangement of the Partnership or the Company to which he may be entitled as an
employee of the Partnership or the Company.
21. No Inconsistent Actions. The parties hereto shall not voluntarily undertake
or fail to undertake any action or course of action inconsistent with the
provisions or essential intent of this Agreement. Furthermore, it is the intent
of the parties hereto to act in a fair and reasonable manner with respect to the
interpretation and application of the provisions of this Agreement.
22. Legal Fees. The Company and/or the Partnership agree to pay all legal fees
and expenses
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<PAGE>
incurred by the Executive in negotiating this Agreement promptly upon receipt of
appropriate statements therefor.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
EXECUTIVE
Steven B. Tanger
TANGER FACTORY OUTLET CENTERS, INC.,
a North Carolina corporation
By:__________________________________________________
TANGER PROPERTIES LIMITED PARTNERSHIP
By: Tanger Factory Outlet Centers, Inc.
its general partner
By:__________________________________________________
The Partnership and the Company hereby jointly and severally guarantee to the
Executive the prompt payment in full of the compensation owed hereunder by the
other.
TANGER PROPERTIES LIMITED PARTNERSHIP
By: Tanger Factory Outlet Centers, Inc.,
its general partner
By:__________________________________________________
TANGER FACTORY OUTLET CENTERS, INC.,
a North Carolina corporation
By:__________________________________________________
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Exhibit 10.7
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT is executed and made effective as of
January 1, 1999 between TANGER PROPERTIES LIMITED PARTNERSHIP, a North Carolina
Limited Partnership, whose address is P.O. Box 29168, Greensboro, N.C. 27408
(the "Employer") and WILLARD ALBEA CHAFIN, JR., a resident of North Carolina,
whose address is 8301 Case Ridge Drive, Oak Ridge, North Carolina 27310 (the
"Employee").
RECITALS
A. Employer and Employee entered into an Employment Agreement dated March 7,
1990 which was amended and restated as of October 11, 1993 and January 1, 1996.
B. The parties intend to modify, amend and restate their Agreement upon the
terms and conditions set forth herein
Now therefore, in consideration of the promises contained herein and
other valuable consideration the parties agree as follows:
1. EMPLOYMENT. Employer agrees to employ Employee during the term of this
Agreement. Employee agrees to devote substantial time and attention and his best
efforts to the business affairs of the Employer. During the term of his
employment hereunder, Employee shall not perform services for others as a
consultant, employee or otherwise and shall not engage in the conduct of any
other trade or business.
Employer is engaged in the development and operation of retail shopping
centers. The Employee will serve as a Senior Vice President of the Employer and
will perform duties assigned to him by the Employer in all phases of the
Employer's business. Employee's major responsibilities will include site
selection for new shopping centers to be developed and leasing space in new and
existing shopping centers as manufacturer's outlets. Employee will be directly
involved in the management of existing and new centers. Other responsibilities
will include assisting in the promotion, advertising and marketing of all
Employer's shopping centers and the development of a good communications program
between Employer and its tenants. Employee will be required to engage in
extensive travel and Employee will work out of Employer's Greensboro, North
Carolina office.
2. TERM. The term of this Agreement as herein amended and restated shall begin
on January 1, 1999 and shall end on December 31, 2001 (the "Contract Term")
unless sooner terminated as herein provided. The twelve calendar month period
beginning on January 1, 1999 and ending December 31, 1999 and each calendar year
thereafter during the Contract Term is sometimes herein referred to as a
"Contract Year".
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<PAGE>
By mutual written agreement, the parties may extend the term of
employment for an additional period of three years (an "Extended Term") upon
such terms and conditions as the parties may agree.
This Agreement shall survive any merger, acquisition or cessation of
business by the Employer and shall remain binding upon any successor of the
Employer or transferee of the Employer's business.
3. COMPENSATION. For each Contract Year beginning on or after January 1, 1999,
Employer will pay Employee for services performed pursuant to this Agreement an
"Annual Base Salary" as follows:
CONTRACT YEAR ANNUAL BASE SALARY
1999 $210,000.00
2000 $220,000.00
2001 $230,000.00
The Annual Base Salary shall be paid in equal installments in arrears in
accordance with Employer's regular pay schedule.
The Employer will provide the Employee with any medical, disability or
life insurance benefits in accordance with any such plans provided by the
Employer for other employees and for which Employee is eligible.
Employee will be reimbursed for any necessary and reasonable expense
incurred by the Employee in performing the services requested of him by the
Employer during the term of employment. At least monthly, the Employee will
submit such records and paid bills supporting the amount of the expenses
incurred and to be reimbursed as the Employer shall reasonably require.
Employer will pay and/or withhold for FICA, income and other employee
taxes on compensation payable to Employee hereunder as required by law.
4. VACATION. Employee shall be entitled to four (4) weeks of vacation during
each Contract Year for the term of employment hereunder.
5. TERMINATION. The Employee's employment by the Employer hereunder shall be
terminated upon the occurrence of any of the following events:
A. If the Employer and Employee mutually agree to terminate the
employment;
B. Upon the disability of the Employee. "Disability" for these purposes
shall mean
Page -2-
<PAGE>
the Employee's inability through physical or mental illness or other cause to
perform any of the material duties assigned to him by the Employer for a period
of one hundred and eighty (180) days or more within any twelve consecutive
calendar months. Employee will be paid during any sickness or disability period;
C. By either party in the event of a material breach by the other party
of any of that other party's obligations under this Agreement;
D. By Employer, if Employee is convicted of a felony or engages in
conduct or activity that has, or in the Employer's reasonably held belief, will
have a material adverse effect upon Employer's business or future prospects;
E. Upon the Employee's death.
Upon termination of Employee's employment, Employee shall be entitled to
receive only the compensation accrued but unpaid for the period of employment
prior to the date of such termination and shall not be entitled to additional
compensation except as follows:
(1) If Employee's employment is terminated by reason of his death
or disability during the Contract Term, the Employer will pay Employee
(or the personal representatives of his estate, in the event of his
death) as a death or disability benefit, an amount equal to the Annul
Base Salary payable hereunder for the Contract Year within which such
termination occurs. Such amount shall be paid in 12 equal monthly
installments, with the first installment payable on the last day of the
first calendar month following the calendar month in which Employee's
employment is terminated;
(2) If Employer materially breaches this Agreement and this
Agreement is terminated or rescinded by Employee, in addition to the
compensation due Employee under Section 3 hereinabove, Employer shall
pay Employee as additional compensation an amount equal to the Annual
Base Salary payable hereunder in the Contract Year within which
Employee's employment is terminated. Such amount shall be paid in twelve
(12) equal monthly installments on the first of each month beginning the
first day of the first month after Employee shall terminate or rescind
this Agreement in writing;
(3) If the Employee's employment is not terminated prior to the
end of the Contract Term and if Employee offers to extend the term of
his employment by the Employer beyond the Contract Term for one year or
more upon substantially the same terms as the last Contract Year of the
Contract Term but the Employer elects not to continue Employee's
employment, the Employer shall pay Employee as a severance benefit an
amount equal to the greater of (i) $125,000.00 or (ii) one half (1/2) of
the Annual Base Salary payable to him for the last Contract Year of the
Contract Term.
6. COVENANT AGAINST COMPETITION AND NON-DISCLOSURE.
Page -3-
<PAGE>
A. Covenant Against Competition. Employee covenants and agrees that
during Employee's employment and for a period of one year after he ceases to be
employed by Employer, Employee shall not, directly or indirectly, as an
employee, employer, shareholder, proprietor, partner, principal, agent,
consultant, advisor, director, officer, or in any other capacity, engage in the
development or operation of a retail shopping facility within a radius of one
hundred (100) miles of any retail shopping facility owned or operated by the
Employer at any time during the Employee's employment hereunder or in any state
in which the Employer owns or operates a retail shopping facility or within the
radius of one hundred (100) miles of any site for which Employer has made an
offer to purchase for the development of a retail shopping facility by the
Employer prior to the date of the termination of the Employee's employment.
B. Disclosure of Information. Employee acknowledges that in and as a
result of his employment hereunder, he will be making use of, acquiring and/or
adding to confidential information of a special and unique nature and value
relating to such matters as financial information, terms of leases, terms of
financing, financial condition of tenants and potential tenants, sales and
rental income of shopping centers and other specifics about Employer's
development, financing, construction and operation of retail shopping
facilities. Employee covenants and agrees that he shall not, at any time during
or following the term of his employment, directly or indirectly, divulge or
disclose for any purpose whatsoever any such confidential information that has
been obtained by, or disclosed to, him as a result of his employment by
Employer.
C. Reasonableness of Restrictions.
1. Employee has carefully read and considered the foregoing
provision of this Item, and, having done so, agrees that the
restrictions set forth in these paragraphs, including but not limited to
the time period of restriction set forth in the covenant against
competition are fair and reasonable and are reasonably required for the
protection of the interests of Employer and its officers, directors and
other employees.
2. In the event that, notwithstanding the foregoing, any of the
provisions of this Item shall be held invalid or unenforceable, the
remaining provisions thereof shall nevertheless continue to be valid and
enforceable as though the invalid or unenforceable parts had not been
included herein. In the event that any provision of this Item relating
to the time period and/or the areas of restriction shall be declared by
a court of competent jurisdiction to exceed the maximum time period or
areas such court deems reasonable and enforceable, the time period
and/or areas of restriction deemed reasonable and enforceable by the
court shall become and thereafter be the maximum time period and/or
areas.
D. Consideration. The covenants against competition and non-disclosure
by the Employee in this Item are made in consideration of the Employer's
agreement to employ the Employee upon the terms and conditions set forth herein.
Such covenants against competition
Page -4-
<PAGE>
and of non-disclosure by the Employee in this Item constitute the material
inducement to Employer to enter into this Agreement, to make confidential
information developed by Employer available to Employee and to pay the salary
and bonuses provided for Employee herein.
E. Employer's Remedies. Employee covenants and agrees that if he shall
violate any of his covenants or agreements contained in this Item, then Employer
shall, in addition to any other rights and remedies available to it at law or in
equity, have the following rights and remedies against Employee:
1. Employer shall be relieved of any further obligation to
Employee under the terms of this agreement; and
2. Employer shall be entitled to an accounting and repayment of
all profits, compensation, commissions, remunerations or other benefits
that Employee, directly or indirectly, has realized and/or may realize
as a result of, growing out of or in connection with, any such
violation.
The foregoing rights and remedies of the Employer shall be cumulative
and the election by the Employer to exercise any one or more of them shall not
preclude the Employer's exercise of any other rights described above or
otherwise available under applicable principals of law or equity.
7. NOTICES.
Any notice required or permitted to be given pursuant to this Agreement
shall be hand delivered or sent by certified mail, return receipt requested, to
the address of the party to whom it is directed as set forth below:
Employer: Tanger Properties Limited Partnership
c/o Stanley K. Tanger
P.O. Box 29168
Greensboro, N.C. 27402
Employee: Willard Albea Chafin, Jr.
8301 Case Ridge Drive
Oak Ridge, North Carolina 27310
Page -5-
<PAGE>
IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the day and year first above written.
EMPLOYER:
TANGER PROPERTIES LIMITED PARTNERSHIP, a
North Carolina Limited Partnership
By: TANGER FACTORY OUTLET CENTERS, INC.,
it's sole general partner
By:
--------------------------------------
STANLEY K. TANGER
Chairman of the Board
Chief Executive Officer
EMPLOYEE:
--------------------------------------
WILLARD ALBEA CHAFIN, JR.
Page -6-
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT is executed and made effective as of
January 1, 1999 between TANGER PROPERTIES LIMITED PARTNERSHIP, a North Carolina
Limited Partnership, whose address is P.O. Box 29168, Greensboro, N.C. 27408
(the "Company") and ROCHELLE SIMPSON, a resident of North Carolina, whose
address is 4800 Archwood Drive, Greensboro, North Carolina 27406 (the
"Simpson").
RECITALS
--------
A. The Company and Simpson entered into an employment agreement dated
February 28, 1994 and amended and restated as of January 1, 1996.
B. The Parties intend to modify, amend and restate the employment contract
as provided herein.
Now therefore, in consideration of the promises contained herein and
other valuable consideration, the parties agree as follows:
1. EMPLOYMENT. Company agrees to employ Simpson during the term of this
Agreement. Simpson agrees to devote substantial time and attention and her best
efforts to the business affairs of the Company. During the term of her
employment hereunder, Simpson shall not perform services for others as a
consultant, employee or otherwise and shall not engage in the conduct of any
other trade or business.
Company is engaged in the development and operation of retail shopping
centers. Simpson will serve as a Senior Vice-President of the Company and will
perform duties assigned to her by the Company in all phases of the Company's
business. Simpson will have overall responsibility for the administration of the
Company's day to day operations and such other duties as the Chief Executive
Officer shall assign to her from time to time. Simpson will report directly to
the Chief Executive Officer of the Company.
2. TERM. The term of this Agreement as herein amended and restated shall begin
on January 1, 1999 and shall end December 31, 2001 (the "Contract Term") unless
sooner terminated as herein provided. The twelve calendar month period beginning
on January 1, 1999 and ending December 31, 1999 and each calendar year
thereafter through the end of the Contract Term is sometimes herein referred to
as a "Contract Year".
By mutual written agreement, the parties may extend the term of
employment for an additional period of three years (sometimes herein referred to
as the "Extended Term") upon such terms and conditions as the parties may agree.
This Agreement shall survive any merger, acquisition or cessation of
business by the Company and shall remain binding upon any successor of the
Company or transferee of the Company's business.
<PAGE>
3. COMPENSATION. For each Contract Year beginning on or after January 1, 1999,
Company will pay Simpson for services performed pursuant to this Agreement an
"Annual Base Salary" as follows:
CONTRACT YEAR ANNUAL BASE SALARY
------------- ------------------
1999 $200,000.00
2000 $210,000.00
2001 $220,000.00
The Annual Base Salary shall be paid in equal monthly or bi-weekly
installments in arrears in accordance with Company's regular pay schedule.
The Company will provide Simpson with any medical, disability or life
insurance benefits in accordance with any such plans provided by the Company for
other employees and for which Simpson is eligible.
Simpson will be reimbursed for any necessary and reasonable expense
incurred by Simpson in performing the services requested of her by the Company
during the term of employment. At least monthly, Simpson will submit such
records and paid bills supporting the amount of the expenses incurred and to be
reimbursed as the Company shall reasonably require.
Company will pay and/or withhold for FICA, income and other employee
taxes on compensation payable to Simpson hereunder as required by law.
If Simpson's employment is not terminated prior to the end of the
Contract Term and if Simpson offers to extend the term of her employment by the
Company beyond the Contract Term for one year or more upon substantially the
same terms as the last Contract Year of the Contract Term but the Company elects
not to continue Simpson's employment, the Company shall pay Simpson as a
severance benefit an amount equal to the greater of (i) $125,000.00 or (ii) one
half (1/2) of the Annual Base Salary payable to her for the last Contract Year
of the Contract Term.
4. VACATION. Simpson shall be entitled to four (4) weeks of vacation during
each Contract Year for the term of employment hereunder.
5. TERMINATION. Simpson's employment by the Company hereunder shall be
terminated upon the occurrence of any of the following events:
A. If the Company and Simpson mutually agree to terminate the employment;
B. Upon the disability of Simpson. "Disability" for these purposes shall
mean Simpson's inability through physical or mental illness or other cause to
perform any of the material duties assigned to her by the Company for a period
of one hundred and eighty (180) days or more within
Page-2-
<PAGE>
any twelve consecutive calendar months. Simpson will be paid during any
sickness or disability period;
C. By either party in the event of a material breach by the other party of
any of that other party's obligations under this Agreement;
D. By Company, if Simpson is convicted of a felony or engages in conduct or
activity that has, or in the Company's reasonably held belief, will have a
material adverse effect upon Company's business or future prospects;
E. Upon Simpson's death.
Upon termination of Simpson's employment, Simpson shall be entitled to
receive only the compensation accrued but unpaid for the period of employment
prior to the date of such termination and shall not be entitled to additional
compensation except as follows:
(1) If Simpson's employment is terminated by reason of her death
or disability during the Contract Term, the Employer will pay Simpson
(or the personal representatives of her estate, in the event of her
death) as a death or disability benefit, an amount equal to the Annul
Base Salary payable hereunder for the Contract Year within which such
termination occurs. Such amount shall be paid in 12 equal monthly
installments, with the first installment payable on the last day of the
first calendar month following the calendar month in which Simpson's
employment is terminated;
(2) If Employer materially breaches this Agreement and this
Agreement is terminated or rescinded by Simpson, in addition to the
compensation due Simpson under Section 3 hereinabove, Employer shall pay
Simpson as additional compensation an amount equal to the Annual Base
Salary payable hereunder in the Contract Year within which Simpson's
employment is terminated. Such amount shall be paid in twelve (12) equal
monthly installments on the first of each month beginning the first day
of the first month after Simpson shall terminate or rescind this
Agreement in writing;
(3) If the Simpson's employment is not terminated prior to the
end of the Contract Term and if Simpson offers to extend the term of her
employment by the Employer beyond the Contract Term for one year or more
upon substantially the same terms as the last Contract Year of the
Contract Term but the Employer elects not to continue Simpson's
employment, the Employer shall pay Simpson as a severance benefit an
amount equal to the greater of (i) $125,000.00 or (ii) one half (1/2) of
the Annual Base Salary payable to her for the last Contract Year of the
Contract Term.
6. COVENANT AGAINST COMPETITION AND NON-DISCLOSURE.
A. Covenant Against Competition. Simpson covenants and agrees that during
Simpson's employment and for a period of one year after she ceases to be
employed by Company, Simpson
Page-3-
<PAGE>
shall not, directly or indirectly, as an employee, employer, shareholder,
proprietor, partner, principal, agent, consultant, advisor, director, officer,
or in any other capacity, engage in the development or operation of a retail
shopping facility within a radius of one hundred (100) miles of any retail
shopping facility owned or operated by the Company at any time during Simpson's
employment hereunder or in any state in which the Company owns or operates a
retail shopping facility or within a radius of one hundred (100) miles of any
site for which Company has made an offer to purchase for the development of a
retail shopping facility by the Company prior to the date of the termination of
Simpson's employment.
B. Disclosure of Information. Simpson acknowledges that in and as a result
of her employment hereunder, she will be making use of, acquiring and/or adding
to confidential information of a special and unique nature and value relating to
such matters as financial information, terms of leases, terms of financing,
financial condition of tenants and potential tenants, sales and rental income of
shopping centers and other specifics about Company's development, financing,
construction and operation of retail shopping facilities. Simpson covenants and
agrees that she shall not, at any time during or following the term of her
employment, directly or indirectly, divulge or disclose for any purpose
whatsoever any such confidential information that has been obtained by, or
disclosed to, her as a result of her employment by Company.
C. Reasonableness of Restrictions.
1. Simpson has carefully read and considered the foregoing provision of
this Item, and, having done so, agrees that the restrictions set forth in
these paragraphs, including but not limited to the time period of
restriction set forth in the covenant against competition are fair and
reasonable and are reasonably required for the protection of the interests
of Company and its officers, directors and other employees.
2. In the event that, notwithstanding the foregoing, any of the
provisions of this Item shall be held invalid or unenforceable, the
remaining provisions thereof shall nevertheless continue to be valid and
enforceable as though the invalid or unenforceable parts had not been
included herein. In the event that any provision of this Item relating to
the time period and/or the areas of restriction shall be declared by a court
of competent jurisdiction to exceed the maximum time period or areas such
court deems reasonable and enforceable, the time period and/or areas of
restriction deemed reasonable and enforceable by the court shall become and
thereafter be the maximum time period and/or areas.
D. Consideration. The covenants against competition and non-disclosure by
Simpson in this Item are made in consideration of the Company's agreement to
employ Simpson upon the terms and conditions set forth herein. Such covenants
against competition and of non-disclosure by Simpson in this Item constitute the
material inducement to Company to enter into this Agreement, to make
confidential information developed by Company available to Simpson and to pay
the salary and bonuses provided for Simpson herein.
Page-4-
<PAGE>
E. Company's Remedies. Simpson covenants and agrees that if she shall
violate any of her covenants or agreements contained in this Item 6, then the
Company shall, in addition to any other rights and remedies available to it at
law or in equity, have the following rights and remedies against Simpson:
1. The Company shall be relieved of any further obligation to Simpson
under the terms of this agreement; and
2. The Company shall be entitled to an accounting and repayment of all
profits, compensation, commissions, remunerations or other benefits that
Simpson, directly or indirectly, has realized and/or may realize as a result
of, growing out of or in connection with, any such violation.
The foregoing rights and remedies of the Company shall be cumulative and
the election by the Company to exercise any one or more of them shall not
preclude the Company's exercise of any other rights described above or otherwise
available under applicable principals of law or equity.
7. NOTICES.
Any notice required or permitted to be given pursuant to this Agreement
shall be hand delivered or sent by certified mail, return receipt requested, to
the address of the party to whom it is directed as set forth below:
Company: Tanger Properties Limited Partnership
c/o Stanley K. Tanger
P.O. Box 29168
Greensboro, N.C. 27402
Simpson: Rochelle Simpson
4800 Archwood Drive
Greensboro, N.C. 27406
IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the day and year first above written.
COMPANY:
TANGER PROPERTIES LIMITED PARTNERSHIP, a
North Carolina Limited Partnership
By: TANGER FACTORY OUTLET CENTERS, INC.,
it's sole general partner
By: _________________________________
Page-5-
<PAGE>
STANLEY K. TANGER
Chairman of the Board
Chief Executive Officer
_______________________________ (SEAL)
ROCHELLE SIMPSON
Page-6-
Exhibit 10.9
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is executed and made
effective as of January 1, 1999 between TANGER PROPERTIES LIMITED PARTNERSHIP, a
North Carolina Limited Partnership, whose address is P.O. Box 29168, Greensboro,
N.C. 27408 (the "Company") and JOSEPH NEHMEN, ("Nehmen") a resident of North
Carolina, whose address is 402 Waycross Drive, Greensboro, NC. 27410.
RECITALS
A. Company and Nehmen entered into an Employment Agreement dated January 1,
1995.
B. The parties intend to extend the term of Nehmen's employment and to modify,
amend and restate the Employment Agreement upon the terms and conditions set
forth herein
Now therefore, in consideration of the promises contained herein and
other valuable consideration, the parties agree as follows:
1. EMPLOYMENT. Company agrees to employ Nehmen during the term of this
Agreement. Nehmen agrees to devote full time and attention and his best efforts
to the business affairs of the Company. Except as provided in the last paragraph
of this Section, during the term of his employment hereunder, Nehmen shall not
perform services for others as a consultant, employee or otherwise and shall not
engage in the conduct of any other trade or business.
Company is engaged in the development and operation of retail shopping
centers. Nehmen will serve as the Company's Vice President of Operations and
will perform duties assigned to him by the Company in all phases of the
Company's business which are generally performed by executives holding similar
positions.
Notwithstanding the foregoing provisions of this Section, Nehmen may
perform consulting or employment services which do not materially interfere with
the performance of his duties as a full time employee of the Company as follows:
A. For a purchaser of any of the assets or capital stock of Merchants
Wholesalers of Missouri, Inc. (the company in which he was formerly a part owner
and with whom he was employed) in connection with the purchaser's conduct of a
business for the wholesale and retail sale of cigarettes, candy, tobacco and
similar items and so long as the purchaser is not engaged in activities which
are in competition with the business currently conducted by the Company; and
Page -1-
<PAGE>
B. For Dolgin & Associates (a firm in which Nehmen owns an interest) in
connection with that firm's conduct of the business of providing tax
consultation and advice and so long as that firm is not engaged in activities
which are in competition with the business currently conducted by the Company.
2. TERM. The term of Nehmen's employment pursuant to this Agreement as herein
amended and restated shall begin on January 1, 1999 (the "Commencement Date")
and shall end on December 31, 2001 (the "Contract Term") unless sooner
terminated or extended as herein provided. The twelve calendar month period
beginning on the Commencement Date and on each anniversary of the Commencement
Date during the Contract Term, including any extension thereof, is sometimes
herein referred to as a "Contract Year".
On each anniversary of the Commencement Date, the term of the Agreement
shall be automatically extended by one year (but not beyond December 31, 2004)
unless Nehmen's employment has been terminated on or prior to that Anniversary
Date as herein provided. For purposes of illustration, on January 1, 2000, the
Contract Term will be automatically extended to December 31, 2002. On January 1,
2001, the Contract Term shall be automatically extended until December 31, 2003.
This Agreement shall survive any merger, acquisition or cessation of
business by the Company and shall remain binding upon any successor of the
Company or transferee of the Company's business.
3. COMPENSATION. For each Contract Year beginning on or after January 1, 1999,
Employer will pay Employee for services performed pursuant to this Agreement an
"Annual Base Salary" as follows:
CONTRACT YEAR ANNUAL BASE SALARY
1999 $190,000.00
2000 $200,000.00
2001 $210,000.00
2002 not less than $210,000.00
2003 not less than $210,000.00
2004 not less than $210,000.00
The Annual Base Salary shall be paid in equal installments in arrears in
accordance with Company's regular pay schedule.
Page -2-
<PAGE>
The Company will provide Nehmen with any medical, disability or life
insurance benefits in accordance with any such plans provided by the Company for
other employees and for which Nehmen is eligible.
Nehmen will be reimbursed for any necessary and reasonable expense
incurred by him in performing the services requested of him by the Company
during the term of employment. At least monthly, Nehmen will submit such records
and paid bills supporting the amount of the expenses incurred and to be
reimbursed as the Company shall reasonably require.
Company will pay and/or withhold for FICA, income and other employee
taxes on compensation payable to Nehmen hereunder as required by law.
4. VACATION. Nehmen shall be entitled to a vacation during each Contract Year
for the term of employment hereunder of similar length and taken under similar
circumstances as the vacation taken by other members of the Company's senior
management team.
5. TERMINATION; SEVERANCE BENEFITS.
A. Termination. Nehmen's employment by the Company hereunder shall be
terminated as follows:
1. Death. Nehmen's employment hereunder shall terminate upon his
death.
2. Disability. Nehmen's employment hereunder shall terminate upon
his "Disability". "Disability" for these purposes shall mean Nehmen's inability
through physical or mental illness or other cause to perform any of the material
duties assigned to him by the Company for a period of one hundred and eighty
(180) days or more within any twelve consecutive calendar months. Nehmen will
receive the compensation provided for hereunder during any period of sickness or
disability prior to the termination of his employment;
3. For Cause. The Company may terminate Nehmen's employment
hereunder for "Cause". For purposes of this Agreement, the Company shall have
"Cause" to terminate Nehmen's employment hereunder upon (i) a finding by the
Board that he has materially harmed the Company through a material act of
dishonesty in the performance of his duties hereunder, (ii) his conviction of a
felony involving moral turpitude, fraud or embezzlement, or (iii) a finding by
the Board of Directors that Nehmen has failed to perform his material duties
under this Agreement (other than a failure due to disability) after written
notice specifying the failure and a reasonable opportunity to cure (it being
understood that if his failure to perform is not of a type requiring a single
action to cure fully, that he may commence the cure promptly after such written
notice and thereafter diligently prosecute such cure to completion).
4. Good Reason. Nehmen may terminate his employment hereunder for
"Good Reason". Nehmen shall have "Good Reason" to terminate his employment in
the event of any
Page -3-
<PAGE>
material adverse change in his job title, duties, responsibilities, perquisites
granted hereunder, or authority without his consent, the relocation of the
Company headquarters outside of the Greensboro, North Carolina metropolitan area
without his consent, or a material breach of this Employment Agreement by the
Company.
5. Without Cause. With Board approval, the Company may terminate
Nehmen's employment hereunder without Cause upon 30 days notice.
6. Resignation without Good Reason. Nehmen may terminate his
employment without Good Reason upon 90 days written notice to the Company.
B. Notice of Termination. Any termination of Nehmen's employment
hereunder by the Company or Nehmen (other than by reason of Nehmen's death)
shall be communicated by a notice of termination to the other party hereto. For
purposes of this Agreement, a "notice of termination" shall mean a written
notice which (i) indicates the specific termination provision in the Agreement
relied upon, (ii) sets forth in reasonable detail any facts and circumstances
claimed to provide a basis for termination of Nehmen's employment under the
provision indicated and (iii) specifies the effective date of the termination.
C. Severance Benefits. Upon termination of Nehmen's employment, Nehmen
shall be entitled to receive only the compensation accrued but unpaid for the
period of employment prior to the date of such termination of employment and
shall not be entitled to additional compensation except as follows:
1. Termination Without Cause or For Good Reason. If Nehmen's
employment shall be terminated by the Company without Cause (pursuant to Section
5.A.5) or by Nehmen for Good Reason (pursuant to Section 5.A.4), the Company
shall continue to pay Nehmen his Annual Base Salary and to provide all Benefits
to Nehmen provided for under this Agreement until the date that his employment
is terminated. In addition, the Company shall pay Nehmen as liquidated damages
an amount equal to three (3) times the Annual Base Salary payable to him for the
Contract Year in which his employment is terminated. Such amount shall be paid
at the same time and in the same manner as the Annual Base Salary would have
been paid if Nehmen's employment had not terminated.
2. Termination by Death or Disability. If Nehmen's employment is
terminated by reason of his death or Disability, the Company will pay Nehmen
(or, in the event of his death, his wife, Susan Nehmen or, if she is not living,
his estate) as severance pay, an amount equal to his Base Annual Salary that he
was receiving when his employment was terminated. Such amount shall be paid in
12 equal monthly installments beginning with the first calendar month after the
month in which the employment is terminated. If Nehmen's employment is
terminated after the tenth anniversary of the Commencement Date because of his
death or disability during any extension of the term, the death or disability
severance benefit provided in this paragraph shall not be paid.
Page -4-
<PAGE>
3. Termination For Cause of Without Good Reason. If Nehmen's
employment hereunder is terminated by the Company for Cause or by Nehmen without
Good Reason, Nehmen shall not be paid any severance compensation.
6. COVENANT AGAINST COMPETITION AND NON-DISCLOSURE.
A. Covenant Against Competition. Nehmen covenants and agrees that during
Nehmen's employment and for a period of one year after he ceases to be employed
by Company, Nehmen shall not, directly or indirectly, as an employee, employer,
shareholder, proprietor, partner, principal, Agent, consultant, advisor,
director, officer, or in any other capacity, engage in the development or
operation of a retail shopping facility within a radius of one hundred (100)
miles of any retail shopping facility owned or operated by the Company at any
time during Nehmen's employment hereunder or in any state in which the Company
owns or operates a retail shopping facility or within a radius of one hundred
(100) miles of any site for which Company has made an offer to purchase for the
development of a retail shopping facility by the Company prior to the date of
the termination of Nehmen's employment. Notwithstanding the foregoing, Nehmen
may continue to perform the consulting services permitted by the third paragraph
of Section 1 of this Agreement.
B. Disclosure of Information. Nehmen acknowledges that in and as a
result of his employment hereunder, he will be making use of, acquiring and/or
adding to confidential information of a special and unique nature and value
relating to such matters as financial information, terms of leases, terms of
financing, financial condition of tenants and potential tenants, sales and
rental income of shopping centers and other specifics about Company's
development, financing, construction and operation of retail shopping
facilities. Nehmen covenants and agrees that he shall not, at any time during or
following the term of his employment, directly or indirectly, divulge or
disclose for any purpose whatsoever any such confidential information that has
been obtained by, or disclosed to, him as a result of his employment by Company.
C. Reasonableness of Restrictions.
1. Nehmen has carefully read and considered the foregoing
provision of this Item, and, having done so, agrees that the
restrictions set forth in these paragraphs, including but not limited to
the time period of restriction set forth in the covenant against
competition are fair and reasonable and are reasonably required for the
protection of the interests of Company and its officers, directors and
other employees.
2. In the event that, notwithstanding the foregoing, any of the
provisions of this Item shall be held invalid or unenforceable, the
remaining provisions thereof shall nevertheless continue to be valid and
enforceable as though the invalid or unenforceable parts had not been
included herein. In the event that any provision of this Item relating
to the time period and/or the areas of restriction shall be declared by
a court of competent jurisdiction to exceed the maximum time period or
areas
Page -5-
<PAGE>
such court deems reasonable and enforceable, the time period and/or
areas of restriction deemed reasonable and enforceable by the court
shall become and thereafter be the maximum time period and/or areas.
D. Consideration. The covenants against competition and non-disclosure
by Nehmen in this Item are made in consideration of the Company's agreement to
employ Nehmen upon the terms and conditions set forth herein. Such covenants
against competition and of non-disclosure by Nehmen in this Item constitute the
material inducement to Company to enter into this Agreement, to make
confidential information developed by Company available to Nehmen and to pay the
salary and bonuses provided for Nehmen herein.
E. Company's Remedies. Nehmen covenants and agrees that if he shall
violate any of his covenants or agreements contained in this Item 6, then the
Company shall, in addition to any other rights and remedies available to it at
law or in equity, have the following rights and remedies against Nehmen:
1. The Company shall be relieved of any further obligation to
Nehmen under the terms of this agreement; and
2. The Company shall be entitled to an accounting and repayment
of all profits, compensation, commissions, remunerations or other
benefits that Nehmen, directly or indirectly, has realized and/or may
realize as a result of, growing out of or in connection with, any such
violation.
The foregoing rights and remedies of the Company shall be cumulative and
the election by the Company to exercise any one or more of them shall not
preclude the Company's exercise of any other rights described above or otherwise
available under applicable principals of law or equity.
7. NOTICES.
Any notice required or permitted to be given pursuant to this Agreement
shall be hand delivered or sent by certified mail, return receipt requested, to
the address of the party to whom it is directed as set forth below:
Company: Tanger Properties Limited Partnership
c/o Stanley K. Tanger
P.O. Box 29168
Greensboro, N.C. 27402
Nehmen: Joe Nehmen
402 Waycross Drive
Greensboro, NC 27410
Page -6-
<PAGE>
IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the day and year first above written.
TANGER PROPERTIES LIMITED PARTNERSHIP, a
North Carolina Limited Partnership
By: TANGER FACTORY OUTLET CENTERS, INC.,
it's sole general partner
By: _________________________________
STANLEY K. TANGER,
Chairman of the Board
Chief Executive officer
_______________________________ (SEAL)
JOSEPH NEHMEN
Page -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 18, 1999 on our audits of the consolidated financial
statements and financial statement schedule of Tanger Factory Outlet Centers,
Inc. and Subsidiary as of December 31, 1998 and 1997, and for the years ended
December 31, 1998, 1997 and 1996, which reports are included in this Annual
Report on Form 10-K.
PricewaterhouseCoopers LLP
Greensboro, North Carolina
March 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the financial
statements as of and for the year ended December 31, 1998 included herein and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000899715
<NAME> TANGER FACTORY OUTLET, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 6,330
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 529,247
<DEPRECIATION> 84,685
<TOTAL-ASSETS> 471,795
<CURRENT-LIABILITIES> 0
<BONDS> 302,485
0
1
<COMMON> 79
<OTHER-SE> 113,959
<TOTAL-LIABILITY-AND-EQUITY> 471,795
<SALES> 0
<TOTAL-REVENUES> 97,766
<CGS> 0
<TOTAL-COSTS> 29,106
<OTHER-EXPENSES> 24,854
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,028
<INCOME-PRETAX> 16,103
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,159
<DISCONTINUED> 0
<EXTRAORDINARY> (332)
<CHANGES> 0
<NET-INCOME> 11,827
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.24
</TABLE>
