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, 1999
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.)
3200 Northline Avenue
Suite 360
Greensboro, NC 27408 (336) 292-3010
(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 New York Stock Exchange
Preferred Shares, $.01 par value
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 $133,070,000 based on the closing price on the New
York Stock Exchange for such stock on March 1, 2000.
The number of Common Shares of the Registrant outstanding as of March 1, 2000
was 7,876,835.
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 16, 2000.
<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, 1999, the Company owned and operated 31
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 1,300 stores and represented over 280 brand name
companies as of such date.
The factory outlet centers and other assets of the Company's business are held
by, and all of its operations are conducted by, 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.
Prior to 1999, the Company owned the majority of the units of partnership
interest issued by the Operating Partnership (the "Units") and served as its
sole general partner. During 1999, the Company transferred its ownership of
Units into two wholly-owned subsidiaries, the Tanger GP Trust and the Tanger LP
Trust. The Tanger GP Trust controls the Operating Partnership as its sole
general partner. The Tanger LP Trust holds a limited partnership interest. The
Tanger Family Limited Partnership ("TFLP"), holds the remaining Units as a
limited partner. Stanley K. Tanger, the Company's Chairman of the Board and
Chief Executive Officer, is the sole general partner of TFLP.
As of December 31, 1999, the Company's wholly-owned subsidiaries owned 7,876,835
Units, and 85,270 Preferred Units (which are convertible into approximately
795,309 limited partnership Units) and TFLP owned 3,033,305 Units. TFLP'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. See
"Business-The Operating Partnership". Preferred Units are automatically
converted into limited partnership Units to the extent of any conversion of
preferred shares of the Company into common shares of the Company. 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 is restricted to preserve
the Company's status as a REIT for federal income tax purposes. Subject to
certain exceptions, a person may not actually or constructively own more than 4%
of the Company's common shares (including common shares which may be issued as a
result of conversion of Series A Preferred Shares) or more than 29,400 Series A
Preferred Shares (or a lesser number in certain cases). The Company also
operates in a manner intended to enable it to preserve its status as a REIT,
including, among other things, making distributions with respect to its
outstanding 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 3200 Northline Avenue, Suite 360,
Greensboro, North Carolina, 27408 and the telephone number is (336) 292-3010.
Recent Developments
At December 31, 1999, the Company owned 31 centers in 22 states totaling
5,149,000 square feet of operating GLA compared to 31 centers in 23 states
totaling 5,011,000 square feet of operating GLA as of December 31, 1998. The
138,000 net increase in GLA is comprised primarily of an increase of 176,000
square feet due to expansions in five existing centers during the year, an
increase of 165,000 square feet due the acquisition of Bass Pro Outdoor World in
Fort Lauderdale, Florida and a decrease of 198,000 square feet due to the
tornado destruction of the center in Stroud, Oklahoma. In addition, the Company
has approximately 114,000 square feet of expansion space under construction in
three centers, which are scheduled to open during the first six months of 2000.
2
<PAGE>
The center in Stroud, Oklahoma was destroyed by a tornado in May 1999. At
December 31, 1999, the Company had recorded a receivable of $4.2 million from
the Company's property insurance carrier. This amount, which was collected in
January 2000, represents the unpaid portion of an insurance settlement of $13.4
million related to the loss of the Stroud center. Approximately $1.9 million of
the settlement proceeds represented business interruption insurance. The
business interruption proceeds are being amortized to other income over a period
of fourteen months. The unrecognized portion of the business interruption
proceeds at December 31, 1999 totaled $985,200. The remaining portion of the
settlement, net of related expenses, was considered replacement proceeds for the
portion of the center that was totally destroyed. As a result, the Company
recognized a gain on disposal of $4.1 million during 1999. The remaining
carrying value for this property consists of land and related site work totaling
$1.7 million.
The Company also is in the process of developing plans for additional expansions
and new centers for completion in 2000 and beyond. Currently, the Company is in
the preleasing stage of a second phase of the Fort Lauderdale development that
will include 130,000 square feet of GLA to be developed on the 12-acre parcel
adjacent to the Bass Pro Outdoor World store. If the Company decides to develop
this project, it anticipates stores in this phase to begin opening in early
2001. Based on tenant demand, the Company also has an option to purchase the
retail portion of a site at the Bourne Bridge Rotary in Cape Cod, MA where it
plans to develop a new 300,000 square foot outlet center. The entire site will
contain more than 950,000 square feet of mixed-use entertainment, retail, office
and residential community built in the style of a Cape Cod Village. The local
and state planning authorities are currently reviewing the project and the
Company anticipates final approvals by early 2001.
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 March 1999, the Company refinanced its 8.92% notes that had a carrying
amount of $47.3 million. 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 Company's revolving lines of credit. In addition, the Company extended
the maturity of all of its revolving lines of credit by one year. The lines of
credit now have maturity dates in the years 2001 and 2002.
In January 2000, the Company entered into a $20.0 million two year unsecured
term loan with interest payable at LIBOR plus 2.25%. The proceeds were used to
reduce amounts outstanding under the existing lines of credit. Also in January
2000, the Company entered into interest rate swap agreements on notional amounts
totaling $20.0 million at a cost of $162,000. The agreements mature in January
2002. The swap agreements have the effect of fixing the interest rate on the new
$20.0 million loan at 8.75%.
The Factory Outlet Concept
Factory outlets are manufacturer-operated retail stores that sell primarily
first quality, branded products at significant discounts from regular retail
prices charged by department stores and specialty stores. Factory outlet centers
offer numerous advantages to both consumers and manufacturers. Manufacturers
selling in factory outlet stores are often able to charge customers lower prices
for brand name and designer products by eliminating the third party retailer,
and because factory outlet centers typically have lower operating costs than
other retailing formats. Factory outlet centers enable manufacturers to optimize
the size of production runs while continuing to maintain control of their
distribution channels. In addition, factory outlet centers benefit manufacturers
by permitting them to sell out-of-season, overstocked or discontinued
merchandise without alienating department stores or hampering the manufacturer's
brand name, as is often the case when merchandise is distributed via discount
chains.
The Company's factory outlet centers range in size from 11,000 to 716,529 square
feet of GLA and are typically located at least 10 miles from densely populated
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 that provide
accessibility and visibility to potential customers.
3
<PAGE>
Management believes that factory outlet centers continue to present attractive
opportunities for capital investment by the Company, particularly with respect
to strategic re-merchandising plans and 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, re-merchandising 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. In the interim, the
Company may consider the use of operational and developmental joint ventures and
other related strategies to generate additional cash funding. See
"Business-Capital Strategy" below.
The Company's Factory Outlet Centers
Each of the Company's factory outlet centers carry the Tanger brand name. The
Company believes that both national manufacturers and consumers recognize the
Tanger name as a company that provides outlet shopping centers where consumers
can trust the brand, quality and price of the merchandise they purchase directly
from the manufacturers.
As one of the original participants in this industry, the Company has developed
long-standing relationships with many national and regional manufacturers.
Because of its established relationships with many manufacturers, the Company
believes it is well positioned to capitalize on industry growth.
As of December 31, 1999, the Company had a diverse tenant base comprised of over
280 different well-known, upscale, national designer or brand name companies,
such as Liz Claiborne, Reebok International, Ltd., Tommy Hilfiger, Polo Ralph
Lauren, The Gap, Nautica and Nike. A majority of the factory outlet stores
leased by the Company are directly operated by the respective manufacturer.
No single tenant (including affiliates) accounted for 10% or more of combined
base and percentage rental revenues during 1999, 1998 and 1997. As of March 1,
2000, the Company's largest tenant, including all of its store concepts,
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 90% of the Company's total revenues in 1999. Revenues from
contingent sources, such as percentage rents, which fluctuate depending on
tenant's sales performance, accounted for approximately 6% of 1999 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 seven Centers and, together with expansions
of existing Centers net of centers disposed of, added approximately 3.6 million
square feet of GLA to its portfolio, bringing its portfolio of properties as of
December 31, 1999 to 31 Centers totaling approximately 5.1 million square feet
of GLA.
4
<PAGE>
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
original 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, Polo, Tommy Hilfiger 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 going forward.
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 frontage on a
major or interstate highway with a traffic count of at least 35,000 cars per
day. The Company will vary its minimum conditions based on the particular
characteristics of a site, especially if the site is located near or at a
tourist destination. The Company's current goal is to target sites that are
large enough to 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.
Subsequent phases are considered based on the success of the center and tenant
demand. 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. Construction of a new factory
outlet center has normally 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: (i) 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
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Funds From Operations") for such year.
The Company has successfully increased its dividend each of its first six years
as a public company. At the same time, the Company continues to have one of the
lowest payout ratios in the REIT industry. The distribution payout ratio for the
year ended December 31, 1999 was 68%. As a result, the Company retained
approximately $13.3 million of its 1999 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 and reduce debt. In addition, the Company has purchased some of its
outstanding common shares and may continue to do so when its stock price
declines to further reduce the distribution payout ratio and improve earnings
and FFO per share. The Company's Board of Directors has authorized the
repurchase of up to $6.0 million of the Company's common shares, of which $4.8
million was available for future repurchases at December 31, 1999.
5
<PAGE>
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 that provide for unsecured borrowings up to $100 million, of which $11.0
million was available for additional borrowings at December 31, 1999. In January
2000, the Company enterd into a $20.0 million two year unsecured term loan. The
proceeds were used to reduce amounts outstanding under the existing lines of
credit, the effect of which was to take the amounts available under the lines to
$31.0 million
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. The Company may also
consider selling certain properties that do not meet the Company's long-term
investment criteria as well as outparcels on existing properties to generate
capital to reinvest into other attractive investment opportunities. 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 2000.
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, 1999, the Company's wholly-owned subsidiaries owned 7,876,835 Units, and
85,270 Preferred Units (which are convertible into approximately 795,309 limited
partnership Units) and TFLP owned 3,033,305 Units. TFLP'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.
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 limited 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.
6
<PAGE>
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 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. As a result of these factors and due to the strong tenant
relationships that presently exist with the current major outlet developers, the
Company believes there are significant barriers to entry into the outlet center
industry by new developers. 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 rents space in an office building in Greensboro, North Carolina in
which its corporate headquarters is located. In addition, the Company rents a
regional office in New York City, New York under a lease agreement and sublease
agreement, respectively, to better service its principal fashion-related
tenants, many of who are based in and around that area.
The Company maintains offices and employee on-site managers at 25 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.
Employees
As of March 1, 2000, the Company had 150 full-time employees, located at the
Company's corporate headquarters in North Carolina, its regional office in New
York and its 25 business offices.
Item 2. Business and Properties
As of March 1, 2000, the Company's portfolio consisted of 31 Centers located in
22 states. The Company's Centers range in size from 11,000 to 716,529 square
feet of GLA. These Centers are typically strip shopping centers that 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, 1999 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,
1999.
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,
containing 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.
<TABLE>
<CAPTION>
Location of Centers (as of March 1, 2000)
Number of GLA %
State Centers (sq. ft.) of GLA
- ---------------------------------------------------------- ------------- -------------- ---------------
<S> <C> <C> <C>
Georgia 4 950,590 18
New York 1 716,529 14
Tennessee 2 434,350 8
Texas 2 414,830 8
Florida 2 363,956 7
Missouri 1 277,494 5
Iowa 1 277,237 5
Louisiana 1 245,325 5
Pennsylvania 1 230,063 4
Arizona 1 186,018 4
North Carolina 2 187,910 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 84,397 2
Alabama 1 80,730 1
New Hampshire 2 61,915 1
West Virginia 1 49,252 ---
Massachusetts 1 23,417 ---
- ---------------------------------------------------------- ------------- -------------- ---------------
Total 31 5,263,563 100
========================================================== ============= ============== ===============
</TABLE>
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The table set forth below summarizes certain information with respect to the
Company's existing centers as of March 1, 2000.
<TABLE>
<CAPTION>
Mortgage
Debt
GLA % Outstanding Fee or
Date Opened Location (sq. ft.) Occupied (000's) (5) Ground Lease
- ------------------- ------------------------------------------ ----------- ---- ----------- --------------- ---------------------
<S> <C> <C> <C> <C>
Jun. 1986 Kittery I, ME 59,694 100 $6,634 Fee
Mar. 1987 Clover, North Conway, NH 11,000 100 --- Fee
Nov. 1987 Martinsburg, WV 49,252 86 --- Fee
Apr. 1988 LL Bean, North Conway, NH 50,915 92 --- Fee
Jul. 1988 Pigeon Forge, TN 94,750 95 --- Ground Lease
Aug. 1988 Boaz, AL 80,730 100 --- Fee
Jun. 1988 Kittery II, ME 24,703 100 --- Fee
Jul. 1989 Commerce, GA 185,750 98 9,460 Fee
Oct. 1989 Bourne, MA 23,417 100 --- Fee
Feb. 1991 West Branch, MI 112,120 97 7,401 Fee
May 1991 Williamsburg, IA 277,237 (1) 98 20,346 Fee
Feb. 1992 Casa Grande, AZ 186,018 89 --- Fee
Dec. 1992 North Branch, MN 134,480 92 --- Fee
Feb. 1993 Gonzales, LA 245,325 99 --- Fee
May 1993 San Marcos, TX 237,395 (2) 97 19,802 Fee
Dec. 1993 Lawrence, KS 88,200 68 --- Fee
Dec. 1993 McMinnville, OR 97,749 (3) 69 --- Fee
Aug. 1994 Riverhead, NY 716,529 (7) 98 --- Ground Lease (4)
Aug. 1994 Terrell, TX 177,435 88 --- Fee
Sep. 1994 Seymour, IN 141,051 77 --- Fee
Oct. 1994 (6) Lancaster, PA 230,063 100 15,351 Fee
Nov. 1994 Branson, MO 277,494 99 --- Fee
Nov. 1994 Locust Grove, GA 248,854 95 --- Fee
Jan. 1995 Barstow, CA 105,950 80 --- Fee
Dec. 1995 Commerce II, GA 342,556 (7) 98 --- Fee
Feb. 1997 (6) Sevierville, TN 339,600 (7) 100 --- Ground Lease
Sept. 1997 (6) Blowing Rock, NC 105,448 98 --- Fee
Sep. 1997 (6) Nags Head, NC 82,462 100 --- Fee
Mar. 1998 (6) Dalton, GA 173,430 95 11,658 Fee
Jul. 1998 (6) Fort Meyers, FL 198,956 98 --- Fee
Nov. 1999 (6) Fort Lauderdale, FL 165,000 100 Fee
- ------------------- ----------------------------------------- ------------ ---- -------- --------------- ------------------------
Total 5,263,563 (7) 95 $ 90,652
=================== ========================================= ============ ==== ======== =============== ========================
</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) GLA excludes 26,030 square foot land lease to a theatre.
(4) 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.
(5) As of December 31, 1999. The weighted average interest rate for debt
outstanding at December 31, 1999 was 8.2% and the weighted average maturity
date was December 2003.
(6) Represents date acquired by the Company.
(7) GLA includes square feet of new space not yet open as of December 31, 1999,
which totaled 114,041 square feet (Riverhead - 44,929; Commerce II -
19,300; Sevierville - 49,812)
- --------------------------------
9
<PAGE>
Lease Expirations
The following table sets forth, as of March 1, 2000, scheduled lease
expirations, assuming none of the tenants exercise renewal options. Most leases
are renewable for five year terms at the tenant's option.
<TABLE>
<CAPTION>
% of Gross
Annualized
Average Base Rent
No. of Approx. Annualized Annualized Represented
Leases GLA Base Rent Base Rent by Expiring
Year Expiring(1) (sq. ft.) (1) per sq. ft. (000's) (2) Leases
- ------------------------ ----------------- ----------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
2000 116 453,000 (3) $ 12.69 $5,748 9
2001 174 629,000 13.38 8,418 13
2002 242 884,000 15.05 13,301 20
2003 200 871,000 14.04 12,225 17
2004 210 914,000 14.82 13,547 21
2005 64 294,000 15.00 4,411 7
2006 14 105,000 14.35 1,507 2
2007 11 70,000 14.67 1,027 2
2008 9 60,000 13.93 836 1
2009 8 51,000 10.92 557 3
2010 & thereafter 25 395,000 8.92 3,522 5
- ------------------------ ----------- ----------------------- ---------- -------------- ------------------
Total 1,073 4,726,000 $ 13.77 $ 65,099 100
======================== =========== ======================= ========== ============== ==================
</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 in the
aggregate approximately 491,000 square feet.
(2) Base rent is defined as the minimum payments due, excluding periodic
contractual fixed increases.
(3) Excludes 221,000 square feet scheduled to expire in 2000 that had already
renewed as of March 1, 2000.
Rental and Occupancy Rates
The following table sets forth information regarding the expiring leases during
each of the last five calendar years.
<TABLE>
<CAPTION>
Renewed by Existing Re-leased to
Total Expiring Tenants New Tenants
----------------------------------- ---------------------------- ----------------------------
% of % of % of
GLA Total Center GLA Expiring GLA Expiring
Year (sq. ft.) GLA (sq. ft.) GLA (sq. ft.) GLA
- ---------------- --------------- ---------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 715,197 14 606,450 85 22,882 3
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
</TABLE>
10
<PAGE>
The following table sets forth the average base rental rate increases per square
foot upon re-leasing stores that were turned over or renewed during each of the
last five calendar years.
<TABLE>
<CAPTION>
Renewals of Existing Leases Stores Re-leased to New Tenants (1)
---------------------------------------------------- ------------------------------------------------------
Average Annualized Base Rents Average Annualized Base Rents
($ per sq. ft.) ($ per sq. ft.)
-------------------------------------- ----------------------------------------
GLA % GLA
Year (sq. ft.) Expiring New Increase (sq. ft.) Expiring New % Change
- --------- ---------- ----------- --------- ---------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 606,450 $ 14.36 $ 14.36 -- 240,851 $ 15.51 $ 16.57 7
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 59,455 13.64 14.80 9
- ---------------------
</TABLE>
(1) The square footage released to new tenants for 1999, 1998, 1997, 1996 and
1995 contains 22,882, 38,526, 18,600, 15,050 and 2,400 square feet,
respectively, that was released to new tenants upon expiration of an
existing lease during the current year.
The following table shows certain information on rents and occupancy rates for
the Centers during each of the last five calendar years.
<TABLE>
<CAPTION>
Average GLA Open at Aggregate
% Annualized Base End of Each Number of Percentage
Year Leased(1) Rent per sq. ft. (2) Year Centers Rents (000's)
- ------------ ----------- ------------------------ ------------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C>
1999 97 $ 13.85 5,149,000 31 $ 3,141
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
- ---------------------
</TABLE>
(1) As of December 31st of each year shown.
(2) 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.
<TABLE>
<CAPTION>
Occupancy Costs as a
Year % of Tenant Sales
------------------------------ --------------------------
<S> <C> <C>
1999 7.8
1998 7.9
1997 8.2
1996 8.7
1995 8.5
</TABLE>
11
<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, 2000.
<TABLE>
<CAPTION>
Number GLA % of Total
Tenant of Stores (sq. ft.) GLA open
- -------------------------------------------------------------------- ------------- ------------- ---------------------
Liz Claiborne, Inc.:
<S> <C> <C> <C>
Liz Claiborne 28 291,368 5.7
Elizabeth 8 29,284 0.5
DKNY Jeans 4 8,820 0.2
Dana Buchman 3 6,600 0.1
Claiborne Mens 2 3,100 0.1
-------- ---------------- ----------------
45 339,172 6.6
Phillips-Van Heusen Corporation:
Bass 21 139,553 2.7
Van Heusen 20 85,156 1.7
Geoffrey Beene Co. Store 11 45,680 0.9
Izod 14 31,217 0.6
-------- ---------------- ----------------
66 301,606 5.9
Reebok International, Ltd. 24 172,161 3.3
Bass Pro Outdoor World 1 165,000 3.2
The Gap, Inc.
GAP 12 101,387 2.0
Banana Republic 4 31,323 0.6
Old Navy 2 30,000 0.5
-------- ---------------- ----------------
18 162,710 3.1
Sara Lee Corporation:
L'eggs, Hanes, Bali 25 108,809 2.1
Coach 11 26,561 0.5
Socks Galore 7 8,680 0.2
-------- ---------------- ----------------
43 144,050 2.8
Dress Barn Inc. 16 112,328 2.2
American Commercial, Inc.:
Mikasa Factory Store 12 98,000 1.9
Corning Revere 21 97,931 1.9
Brown Group Retail, Inc.:
Factory Brand Shores 15 76,880 1.5
Naturalizer 8 20,475 0.4
-------- ---------------- ----------------
23 97,355 1.9
- -------------------------------------------------------------------- -------- ---------------- ----------------
Total of all tenants listed in table 269 1,690,313 32.8
==================================================================== ======== ================ ================
</TABLE>
12
<PAGE>
Significant Property
The Center in Riverhead, New York is the Company's only Center that 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 44,929 square feet, the
Riverhead Center will total 716,529 square feet.
Tenants at the Riverhead Center principally conduct retail sales operations. The
occupancy rate as of the end of 1999, 1998 and 1997, excluding expansions under
construction, was 99%, 97% and 99%. Average annualized base rental rates during
1999, 1998, and 1997 were $19.15, $18.89, and $18.65 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,
1999, the net federal tax basis of this Center was approximately $83.3 million.
Real estate taxes assessed on this Center during 1999 amounted to $2.4 million.
Real estate taxes for 2000 are estimated to be approximately $2.5 million.
The following table sets forth, as of March 1, 2000, scheduled lease expirations
at the Riverhead Center assuming that none of the tenants exercise renewal
options:
<TABLE>
<CAPTION>
% of Gross
Annualized
Base Rent
No. of Annualized Annualized Represented
Leases GLA Base Rent Base Rent by Expiring
Year Expiring (1) (sq. ft.) (1) per sq. ft. (000) (2) Leases
- --------------------------- ----------------- ----------------- ------------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C>
2000 4 28,985 $ 18.18 $ 527 4
2001 7 36,000 18.64 671 5
2002 62 206,724 21.43 4,431 35
2003 21 86,170 18.86 1,625 13
2004 41 175,015 19.22 3,363 27
2005 6 21,410 24.71 529 4
2006 1 1,600 35.00 56 1
2007 4 22,060 17.23 380 3
2008 1 7,500 18.00 135 1
2009 1 3,000 25.00 75 1
2010 and thereafter 5 73,000 9.95 726 6
- ---------------------------- --------- --------------------- ------------------ --------------- --------------------
Total 153 661,464 $ 18.92 $ 12,518 100
============================ ========= ===================== ================== =============== ====================
</TABLE>
(1) Excludes leases that have been entered into but which tenant has not taken
possession, vacant suites and month-to-month leases.
(2) Base rent is defined as the minimum payments due, excluding periodic
contractual fixed increases.
Item 3. Legal Proceedings
The Company is subject to legal proceedings and claims that have arisen in the
ordinary course of its business and have not been finally adjudicated. In
managements' opinion, the ultimate resolution of these matters will have no
material effect on the Company's results of operations or financial condition.
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, 1999.
13
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the executive
officers of the Company:
NAME AGE POSITION
- -------------------------- --- -----------------------------------------------
Stanley K. Tanger......... 76 Founder, Chairman of the Board of Directors and
Chief Executive Officer
Steven B. Tanger.......... 51 Director, President and Chief Operating Officer
Rochelle G. Simpson ... 61 Secretary and Executive Vice President -
Administration and Finance
Willard A. Chafin, Jr.. 62 Executive Vice President - Leasing, Site
Selection, Operations and Marketing
Frank C. Marchisello, Jr.. 41 Senior Vice President - Chief Financial Officer
Joseph H. Nehmen.......... 51 Senior Vice President - Operations
Virginia R. Summerell..... 41 Treasurer and Assistant Secretary
C. Randy Warren, Jr....... 35 Senior Vice President - Leasing
Carrie A. Warren.......... 37 Vice President - Marketing
Kevin M. Dillon........... 41 Vice President - Construction
The following is a biographical summary of the experience of the executive
officers of the Company:
Stanley K. Tanger. Mr. Tanger is the founder, Chief Executive Officer and
Chairman of the Board of Directors of the Company. He also served as President
from inception of the Company to December 1994. Mr. Tanger opened one of the
country's first outlet shopping centers in Burlington, North Carolina in 1981.
Before entering the factory outlet center business, Mr. Tanger was President and
Chief Executive Officer of his family's apparel manufacturing business,
Tanger/Creighton, Inc., for 30 years.
Steven B. Tanger. Mr. Tanger is a director of the Company and was named
President and Chief Operating Officer effective January 1, 1995. Previously, Mr.
Tanger served as Executive Vice President since joining the Company in 1986. He
has been with Tanger-related companies for most of his professional career,
having served as Executive Vice President of Tanger/Creighton for 10 years. He
is responsible for all phases of project development, including site selection,
land acquisition and development, leasing, marketing and overall management of
existing outlet centers. Mr. Tanger is a graduate of the University of North
Carolina at Chapel Hill and the Stanford University School of Business Executive
Program. Mr. Tanger is the son of Stanley K. Tanger.
Rochelle G. Simpson. Ms. Simpson was named 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.
14
<PAGE>
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. 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 maintaining
banking relationships, oversight of all project and corporate finance
transactions and development of treasury management systems. 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 A. Warren.
Carrie A. Warren. Ms. 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. 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.
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.
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.
15
<PAGE>
PART II
Item 5. Market For Registrant's Common Equity and Related Shareholder 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>
<CAPTION>
Common
1999 High Low Dividends Paid
----------------------------------- -------------- ----------------- ------------------------
<S> <C> <C> <C>
First Quarter $ 22.7500 $ 18.6875 $ .600
Second Quarter 26.5000 18.8750 .605
Third Quarter 26.7500 21.9375 .605
Fourth Quarter 23.1875 18.9375 .605
----------------------------------- ---------------- ------------------ ---------------------
Year 1999 $ 26.7500 $ 18.6875 $ 2.415
----------------------------------- ---------------- ------------------ ---------------------
Common
1998 High Low Dividends Paid
----------------------------------- -------------- ----------------- ------------------------
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
----------------------------------- ---------------- ------------------ ---------------------
</TABLE>
As of March 1, 2000, there were approximately 619 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.
16
<PAGE>
<TABLE>
<CAPTION>
Item 6. Selected Financial Data
1999 1998 1997 1996 1995
- ------------------------------------------ ------------- ------------- ------------ ------------- -------------
(In thousands, except per share and center data)
OPERATING DATA
<S> <C> <C> <C> <C> <C>
Total revenues $ 104,016 $ 97,766 $ 85,271 $ 75,500 $ 68,604
Income before minority interest and
extraordinary income 21,211 16,103 17,583 16,177 15,352
Income before extraordinary item 15,837 12,159 12,827 11,752 11,218
Net income 15,588 11,827 12,827 11,191 11,218
- ------------------------------------------ ------------- ------------- ------------ ------------- -------------
SHARE DATA
Basic:
Income before extraordinary item $ 1.77 $ 1.30 $ 1.57 $ 1.46 $ 1.36
Net income $ 1.74 $ 1.26 $ 1.57 $ 1.37 $ 1.36
Weighted average common shares 7,861 7,886 7,028 6,402 6,095
Diluted:
Income before extraordinary item $ 1.74 $ 1.28 $ 1.54 $ 1.46 $ 1.36
Net income $ 1.74 $ 1.24 $ 1.54 $ 1.37 $ 1.36
Weighted average common shares 7,872 8,009 7,140 6,408 6,096
Common dividends paid $ 2.42 $ 2.35 $ 2.17 $ 2.06 $ 1.96
- ------------------------------------------ ------------- ------------- ------------ ------------- -------------
BALANCE SHEET DATA
Real estate assets, before depreciation $ 566,216 $ 529,247 $ 454,708 $ 358,361 $ 325,881
Total assets 490,069 471,795 416,014 332,138 315,130
Long term debt 329,647 302,485 229,050 178,004 156,749
Shareholders' equity 107,764 114,039 122,119 101,738 107,560
- ------------------------------------------ ------------- ------------- ------------ ------------- -------------
OTHER DATA
EBITDA (1) $ 70,274 $ 60,285 $ 52,857 $ 46,633 $ 41,058
Funds from operations (1) $ 41,673 $ 39,748 $ 35,840 $ 32,313 $ 29,597
Cash flows provided by (used in):
Operating activities $ 43,175 $ 35,787 $ 39,214 $ 38,051 $ 32,423
Investing activities $ (45,959) $ (79,236) $ (93,636) $ (36,401) $ (44,788)
Financing activities $ (3,043) $ 46,172 $ 55,444 $ (4,176) $ 13,802
Gross leasable area open at year end 5,149 5,011 4,458 3,739 3,507
Number of centers 31 31 30 27 27
- -----------------------
</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 depreciable
operating 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.
17
<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, 1999
and 1998, as well as December 31, 1998 and 1997. 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 that 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 availability and cost of capital (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
At December 31, 1999, the Company owned 31 centers in 22 states totaling
5,149,000 square feet of operating GLA compared to 31 centers in 23 states
totaling 5,011,000 square feet of operating GLA as of December 31, 1998. The
138,000 net increase in GLA is comprised primarily of an increase of 176,000
square feet due to expansions in five existing centers during the year, an
increase of 165,000 square feet due the acquisition of Bass Pro Outdoor World in
Fort Lauderdale, Florida and a decrease of 198,000 square feet due to the
tornado destruction of the center in Stroud, Oklahoma. In addition, the Company
has approximately 114,000 square feet of expansion space under construction in
three centers, which are scheduled to open during the first six months of 2000.
During 1998, the Company added a total of 569,000 square feet to its portfolio
including: Dalton Factory Stores, a 173,000 square foot factory outlet center
located in Dalton, GA, acquired in March 1998; Sanibel Factory Stores, a 186,000
square foot factory outlet center located in Fort Myers, FL, acquired in July
1998; and 210,000 square feet of expansions in 5 existing centers. 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 center in Stroud, Oklahoma was destroyed by a tornado in May 1999. At
December 31, 1999, the Company had recorded a receivable of $4.2 million from
the Company's property insurance carrier. This amount, which was collected in
January 2000, represents the unpaid portion of an insurance settlement of $13.4
18
<PAGE>
million related to the loss of the Stroud center. Approximately $1.9 million of
the settlement proceeds represented business interruption insurance. The
business interruption proceeds are being amortized to other income over a period
of fourteen months. The unrecognized portion of the business interruption
proceeds at December 31, 1999 totaled $985,200. The remaining portion of the
settlement, net of related expenses, was considered replacement proceeds for the
portion of the center that was totally destroyed. As a result, the Company
recognized a gain on disposal of $4.1 million during 1999. The remaining
carrying value for this property consists of land and related site work totaling
$1.7 million.
A summary of the operating results for the years ended December 31, 1999, 1998
and 1997 is presented in the following table, expressed in amounts calculated on
a weighted average GLA basis.
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
GLA open at end of period (000's) 5,149 5,011 4,458
Weighted average GLA (000's) (1) 4,996 4,768 4,046
Outlet centers in operation 31 31 30
New centers acquired 1 2 3
Centers disposed of or sold 1 1 ---
Centers expanded 5 1 5
States operated in at end of period 22 23 23
Occupancy percentage at end of period 97 97 98
Per square foot
Revenues
Base rentals $13.85 $13.88 $14.04
Percentage rentals .63 .65 .65
Expense reimbursements 5.59 5.63 6.10
Other income .76 .34 .29
- ----------------------------------------------------------------------- -------------- --------------- ---------------
Total revenues 20.83 20.50 21.08
- ----------------------------------------------------------------------- -------------- --------------- ---------------
Expenses
Property operating 6.12 6.10 6.49
General and administrative 1.46 1.40 1.52
Interest 4.85 4.62 4.16
Depreciation and amortization 4.97 4.65 4.56
- ----------------------------------------------------------------------- -------------- --------------- ---------------
Total expenses 17.40 16.77 16.73
- ----------------------------------------------------------------------- -------------- --------------- ---------------
Income before gain on disposal or sale of real estate,
minority interest and extraordinary item $ 3.43 $ 3.73 $ 4.35
- ----------------------------------------------------------------------- -------------- --------------- ---------------
</TABLE>
(1) GLA weighted by months of operations. GLA is not adjusted for fluctuations
in occupancy that may occur subsequent to the original opening date.
Results of Operations
1999 Compared to 1998
Base rentals increased $3.0 million, or 5%, in the 1999 period when compared to
the same period in 1998. The increase is primarily due to the effect of a full
year of rent in 1999 from the centers acquired on March 31, 1998 and July 31,
1998 as well as the expansions mentioned in the Overview above, offset by the
loss of rent from the center in Stroud, Oklahoma. Base rent per weighted average
GLA decreased $.03 per foot due to the portfolio of properties having a lower
overall average occupancy rate during 1999 compared to 1998. Base rent per
square foot, however, was favorably impacted during the year due to the loss of
the Stroud center which had a lower average base rent per square foot than the
portfolio average.
Percentage rentals, which represent revenues based on a percentage of tenants'
sales volume above predetermined levels (the "breakpoint"), increased by $54,000
and on a weighted average GLA basis, decreased $.02 per square foot in 1999
compared to 1998. For the year ended December 31, 1999, reported same-store
sales, defined as the weighted average sales per square foot reported by tenants
for stores open since January 1, 1998, were down approximately 1% with that of
the previous year. However, same-space sales for the year ended December 31,
1999 actually increased 5% to $261 per square foot due to the Company's efforts
to re-merchandise selected centers by replacing low volume tenants with high
volume tenants.
19
<PAGE>
Expense reimbursements, which represent the contractual recovery from tenants of
certain common area maintenance, insurance, property tax, promotional,
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 to 91% in 1999 from 92% in 1998 primarily as a result of a lower
average occupancy rate in the 1999 period compared to the 1998 period.
Other income increased $2.1 million in 1999 as compared to 1998. The increase is
primarily due to gains on sale of out parcels of land totaling $687,000 during
1999 as well as to the recognition of $880,000 of business interruption
insurance proceeds relating to the Stroud center.
Property operating expenses increased by $1.5 million, or 5%, in 1999 as
compared to 1998. On a weighted average GLA basis, property operating expenses
increased slightly from $6.10 to $6.12 per square foot. Higher real estate taxes
per square foot were offset by decreases in advertising and promotion expenses
per square foot and lower common area maintenance expenses per square foot.
General and administrative expenses increased $629,000, or 9%, in 1999 as
compared to 1998. As a percentage of revenues, general and administrative
expenses were approximately 7.0% of revenues in 1999 and 6.8% in 1998. On a
weighted average GLA basis, general and administrative expenses increased $.06
per square foot from $1.40 in 1998 to $1.46 in 1999. The increase in general and
administrative expenses per square foot reflects the rental and related expenses
for the new corporate office space to which the Company relocated its corporate
headquarters in April 1999.
Interest expense increased $2.2 million during 1999 as compared to 1998 due to
financing the 1998 acquisitions and the 1998 and 1999 expansions. However,
interest expense was favorably impacted by the insurance proceeds received from
the loss of the Stroud center that were used to immediately reduce outstanding
amounts under the Company's lines of credit. Depreciation and amortization per
weighted average GLA increased from $4.65 per square foot in 1998 to $4.97 per
square foot in the 1999 period due to a higher mix of tenant finishing
allowances included in buildings and improvements which are depreciated over
shorter lives (i.e., over lives generally ranging from 3 to 10 years as opposed
to other construction costs which are depreciated over lives ranging from 15 to
33 years.)
The gain on disposal of real estate during 1999 represents the amount of
insurance proceeds from the loss of the Stroud center in excess of the carrying
amount for the portion of the related assets destroyed by the tornado. The gain
on sale of real estate during 1998 is due primarily to the sale of an 8,000
square foot, single tenant property in Manchester, VT.
The extraordinary losses recognized in each year represent the write-off of
unamortized deferred financing costs related to debt that was extinguished
during each period prior to its scheduled maturity.
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.
20
<PAGE>
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 to $6.10 per square foot. Higher expenses for real estate
taxes per square foot were offset by 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 to the acquisitions that
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.
Liquidity and Capital Resources
Net cash provided by operating activities was $43.2, $35.8 and $39.2 million for
the years ended December 31, 1999, 1998 and 1997, respectively. The increase in
cash provided by operating activities in 1999 compared to 1998 is primarily due
to increases in operating income from the 1998 and 1999 acquisitions and
expansions and increases in accounts payable. Net cash provided by operating
activities decreased $3.4 million in 1998 compared to 1997 as decreases in
accounts payable offset the increases in operating income associated with
acquired or expanded centers. Net cash used in investing activities amounted to
$46.0, $79.2, and $93.6 million during 1999, 1998 and 1997, respectively, and
reflects the fluctuation in construction and acquisition activity during each
year. Net cash used in investing activities also decreased in 1999 compared to
1998 due to approximately $6.5 million in net insurance proceeds received from
the loss of the Stroud center. Cash provided by (used in) financing activities
of $(3.0), $46.2, and $55.4 in 1999, 1998 and 1997, respectively, has fluctuated
consistently with the capital needed to fund the current development and
acquisition activity and reflects increases in dividends paid during both 1999
and 1998. In 1999, net cash provided by financing activities was further reduced
by $958,000 paid to purchase and retire some of the Company's common shares and
$1.0 million paid in deferred financing costs to refinance its 8.92% notes
during 1999.
During 1999, the Company added approximately 176,000 square feet of expansions
in five existing centers and acquired the 165,000 square foot Bass Pro Outdoor
World in Fort Lauderdale, Florida. In addition, the Company has approximately
114,000 square feet of expansion space under construction in three centers,
which are scheduled to open during the first six months of 2000. Commitments for
construction of these projects (which represent only those costs contractually
required to be paid by the Company) amounted to $3.0 million at December 31,
1999.
The Company also is in the process of developing plans for additional expansions
and new centers for completion in 2000 and beyond. Currently, the Company is in
the preleasing stage of a second phase of the Fort Lauderdale development that
will include 130,000 square feet of GLA to be developed on the 12-acre parcel
adjacent to the Bass Pro Outdoor World. If the Company decides to develop this
project, it anticipates stores in this phase to begin opening in early 2001.
Based on tenant demand, the Company also has an option to purchase the retail
portion of a site at the Bourne Bridge Rotary in Cape Cod, MA where it plans to
develop a new 300,000 square foot outlet center. The entire site will contain
more than 950,000 square feet of mixed-use entertainment, retail, office and
residential community built in the style of a Cape Cod Village. The local and
state planning authorities are currently reviewing the project and the Company
anticipates final approvals by early 2001.
21
<PAGE>
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.
Other assets include a receivable totaling $2.8 million from Stanley K. Tanger,
the Company's Chairman of theBoard and Chief Executive Officer. Mr. Tanger and
the Company have entered into demand note agreements whereby he may borrow up to
$3.5 million through various advances from the Company for an investment in a
separate E-commerce business venture. The notes bear interest at a rate of 8%
per annum and are collateralized by Mr. Tanger's limited partnership interest in
Tanger Investments Limited Partnership. Mr. Tanger intends to fully repay the
loans.
The Company maintains revolving lines of credit which provide for unsecured
borrowings up to $100 million, of which $11.0 million was available for
additional borrowings at December 31, 1999. 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 capital. The Company may also consider selling certain
properties that do not meet the Company's long-term investment criteria as well
as outparcels on existing properties to generate capital to reinvest into other
attractive opportunities. 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 2000.
During March 1999, the Company refinanced its 8.92% notes that had a carrying
amount of $47.3 million. 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 all of its revolving lines of credit by one year. The lines of
credit now have maturity dates in the years 2001 and 2002.
In January 2000, the Company entered into a $20.0 million two year unsecured
term loan with interest payable at LIBOR plus 2.25%. The proceeds were used to
reduce amounts outstanding under the existing lines of credit. Also in January
2000, the Company entered into interest rate swap agreements on notional amounts
totaling $20.0 million at a cost of $162,000. The agreements mature in January
2002. The swap agreements have the effect of fixing the interest rate on the new
$20.0 million loan at 8.75%.
At December 31, 1999, approximately 73% of the outstanding long-term debt
represented unsecured borrowings and approximately 81% of the Company's real
estate portfolio was unencumbered. The weighted average interest rate on debt
outstanding on December 31, 1999 was 8.2%.
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.
22
<PAGE>
The Company negotiates long-term fixed rate debt instruments and enters into
interest rate swap agreements to manage its exposure to interest rate changes on
its floating rate debt. 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. In June 1999, the Company terminated its only interest rate swap
agreement effective through October 2001 with a notional amount of $20 million.
Under this agreement, the Company received a floating interest rate based on the
30 day LIBOR index and paid a fixed interest rate of 5.47%. Upon termination of
the agreement, the Company received $146,000 in cash proceeds. The proceeds have
been recorded as deferred income and are being amortized as a reduction to
interest expense over the remaining life of the original contract term. In
January 2000, the Company entered into new interest rate swap agreements on
notional amounts totaling $20.0 million at a cost of $162,000.
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, 1999
was $324.4 million. A 1% increase from prevailing interest rates at December 31,
1999 would result in a decrease in fair value of total long-term debt by
approximately $5.0 million. Fair values were determined from quoted market
prices, where available, using current interest rates considering credit ratings
and the remaining terms to maturity.
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 depreciable operating
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,
1999, 1998 and 1997 as well as actual cash flow and other data for those
respective years (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------- ---------------- ------------- ---------------
Funds from Operations:
<S> <C> <C> <C>
Net income $ 15,588 $ 11,827 $ 12,827
Adjusted for:
Extraordinary item-loss on early extinguishment of debt 249 332 ---
Minority interest 5,374 3,944 4,756
Depreciation and amortization uniquely significant
to real estate 24,603 21,939 18,257
Gain on disposal or sale of real estate (4,141) (994) ---
Asset write-down --- 2,700 ---
- --------------------------------------------------------------- ---------------- ------------- ---------------
Funds from operations before minority interest (1) $ 41,673 $ 39,748 $ 35,840
- --------------------------------------------------------------- ---------------- ------------- ---------------
Cash flow provided by (used in):
Operating activities $ 43,175 $ 35,787 $ 39,214
Investing activities $ (45,959) $ (79,236) $ (93,636)
Financing activities $ (3,043) $ 46,172 $ 55,444
Weighted average shares outstanding (2) 11,698 11,847 11,000
- --------------------------------------------------------------- ---------------- ------------- ---------------
</TABLE>
(1) For the year ended December 31, 1999, includes $687,000 in gains on sales
of outparcels of land.
(2) 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.
23
<PAGE>
In October 1999, the National Association of Real Estate Investment Trusts
("NAREIT") issued interpretive guidance regarding the calculation of FFO.
NAREIT's leadership determined that FFO should include both recurring and
non-recurring operating results, except those results defined as extraordinary
items under generally accepted accounting principles and gains and losses from
sales of depreciable operating property. All REITS are encouraged to implement
the recommendations of this guidance effective for fiscal periods beginning in
2000 for all periods presented in financial statements or tables. The Company
intends to adopt the new NAREIT clarification beginning January 1, 2000. Below
is a calculation of FFO under the new proposed method as if the Company had
adopted the method as of January 1, 1997.
<TABLE>
<CAPTION>
New Proposed Method 1999 1998 1997
- ------------------------------------------------------------- -------------- ---------------- ---------------
Funds from Operations:
<S> <C> <C> <C>
Net income $15,588 $11,827 $12,827
Adjusted for:
Extraordinary item-loss on early extinguishment of debt 249 332 ---
Minority interest 5,374 3,944 4,756
Depreciation and amortization uniquely significant
to real estate 24,603 21,939 18,257
Gain on disposal or sale of real estate (4,141) (994) ---
- ------------------------------------------------------------- -------------- ---------------- ---------------
Funds from operations before minority interest $41,673 $37,048 $35,840
- ------------------------------------------------------------- -------------- ---------------- ---------------
</TABLE>
New Accounting Pronouncements
During 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires entities to recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at their fair value. In June 1999, the
FASB issued SFAS No. 137 "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133-an amendment
of the FASB Statement No. 133" that revises SFAS No. 133 to become effective in
the first quarter of 2001. Management of the Company anticipates that, due to
its limited use of derivative instruments, the adoption of SFAS No. 133 will not
have a significant effect on the Company's results of operations or its
financial position.
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.
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, Polo, Tommy Hilfiger 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 26% of the Company's lease portfolio is scheduled to expire during
the next two years. Approximately 721,000 square feet of space is up for renewal
during 2000 and approximately 629,000 square feet will come up for renewal in
2001. 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 its results of operations.
24
<PAGE>
Existing tenants' sales have remained stable and renewals by existing tenants
have remained strong. Approximately 221,000, or 31%, of the square feet
scheduled to expire in 2000 have already been renewed by the existing tenants.
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 7% 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 Company did not experience any systems or other Year 2000 ("Y2K") problems
during January 2000. In 1999, the Company spent approximately $220,000 to
upgrade or replace equipment or systems specifically to bring them in compliance
with Y2K. The Company is not aware of any other significant costs to be incurred
to address future Y2K problems.
There are a number of Y2K related items that may affect the Company's results of
operations. For example, the Company's spending patterns or cost relationships
may have been affected by large Y2K remediation expenditures or the postponement
of certain expenses. The Company's revenue patterns may have been affected by
unusual tenant behavior, such as delayed openings or delayed payments of rents
until after Y2K. In addition, some companies may have postponed Information
Technology projects or other capital spending in preparing for Y2K which could
impact the company's liquidity requirements. The Company has not experienced any
of these situations and does not believe that any exist which might materially
impact the Company's results of operations or liquidity.
The Company has third-party relationships with approximately 280 tenants and
over 8,000 suppliers and contractors. Many of these third party tenants are
publicly-traded corporations and subject to disclosure requirements. 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.
The Company's assessment of major third parties' Y2K readiness included sending
surveys to tenants and key suppliers of outsourced services including stock
transfer, debt servicing, banking collection and disbursement, payroll and
benefits. 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 parties who have not
already indicated that they are currently Y2K compliant. The Company received
responses to approximately 73% of the surveys sent to tenants, banks and key
suppliers. Of the companies who responded, 99% indicated they were presently, or
would be by December 31, 1999, Y2K compliant. The Company is not aware of any
significant third parties who are not currently Y2K compliant. However, there
can be no assurance that all third parties are currently Y2K compliant and that
all will be able to continue to conduct transactions with the Company
successfully. There also can be no assurance that Y2K problems of third parties
or of the Company's own systems which did not surface in January 2000 will not
be a problem sometime in the near future.
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.
25
<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:
1. Financial Statements
Report of Independent Accountants F-1
Consolidated Balance Sheets-December 31, 1999 and 1998 F-2
Consolidated Statements of Operations-
Years Ended December 31, 1999, 1998 and 1997 F-3
Consolidated Statements of Shareholders' Equity-
For the Years Ended December 31, 1999, 1998 and 1997 F-4
Consolidated Statements of Cash Flows-
Years Ended December 31, 1999, 1998 and 1997 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
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.
26
<PAGE>
3. Exhibits
Exhibit No. Description
3.1 Amended and Restated Articles of Incorporation of the
Company. (Note 6)
3.1A Amendment to Amended and Restated Articles of Incorporation
dated May 29, 1996. (Note 6)
3.1B Amendment to Amended and Restated Articles of Incorporation
dated August 20, 1998. (Note 9)
3.1C Amendment to Amended and Restated Articles of Incorporation
dated September 30, 1999.
3.2 Restated By-Laws of the Company.
3.3 Amended and Restated Agreement of Limited Partnership for
the Operating Partnership.
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 8)
10.1 Amended and Restated Unit Option Plan. (Note 9)
10.2 Amended and Restated Share Option Plan of the Company. (Note
9)
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. (Note 9)
10.6 Amended and Restated Employment Agreement for Steven B.
Tanger, as of January 1, 1998. (Note 9)
10.7 Amended and Restated Employment Agreement for Willard Albea
Chafin, Jr., as of January 1, 1999. (Note 9)
10.8 Amended and Restated Employment Agreement for Rochelle
Simpson, as of January 1, 1999. (Note 9)
10.9 Amended and Restated Employment Agreement for Joseph Nehmen,
as of January 1, 1999. (Note 9)
10.10 Amended and Restated Employment Agreement for Frank C.
Marchisello, Jr., as of January 1, 1999.
10.11 Registration Rights Agreement among the Company, the Tanger
Family Limited Partnership and Stanley K. Tanger. (Note 2)
10.11A Amendment to Registration Rights Agreement among the
Company, the Tanger Family Limited Partnership and Stanley
K. Tanger. (Note 4)
10.12 Agreement Pursuant to Item 601(b)(4)(iii)(A) of Regulation
S-K. (Note 2)
10.13 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)
27
<PAGE>
10.14 Promissory Notes by and between the Operating Partnership
and John Hancock Mutual Life Insurance Company aggregating
$66,500,000. (Note 10)
10.15 Form of Senior Indenture. (Note 5)
10.16 Form of First Supplemental Indenture (to Senior Indenture).
(Note 5)
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 7)
10.17 Promissory Notes by and between Stanley K. Tanger
and Tanger Properties Limited Partnership dated June 25,
1999 and August 27, 1999
21.1 List of Subsidiaries.
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, 1995.
5. Incorporated by reference to the exhibits to the Company's Current
Report on Form 8-K dated March 6, 1996.
6. Incorporated by reference to the exhibits to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
7. Incorporated by reference to the exhibits to the Company's Current
Report on Form 8-K dated October 24, 1997.
8. Incorporated by reference to Exhibit 1.1 to the Company's Registration
Statement on Form 8-A, filed August 24, 1998.
9. Incorporated by reference to the exhibits to the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
10. Incorporated by reference to the exhibit to the Company's Quarterly
Report on 10-Q for the quarter ended March 31, 1999.
(b) Reports on Form 8-K - none.
28
<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 28, 2000
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:
Signature Title Date
/s/ Stanley K. Tanger Chairman of the Board and Chief March 28, 2000
- ----------------------------- Executive Officer (Principal
Stanley K. Tanger Executive Officer)
/s/ Steven B. Tanger Director, President and March 28, 2000
- ----------------------------- Chief Operating Officer
Steven B. Tanger
/s/ Frank C. Marchisello, Jr. Senior Vice President and March 28, 2000
- ----------------------------- Chief Financial Officer
Frank C. Marchisello, Jr. (Principal Financial and
Accounting Officer)
/s/ Jack Africk Director March 28, 2000
- -----------------------------
Jack Africk
/s/ William G. Benton Director March 28, 2000
- -----------------------------
William G. Benton
/s/ Thomas E. Robinson Director March 28, 2000
- -----------------------------
Thomas E. Robinson
29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of Tanger
Factory Outlet Centers, Inc. and its subsidiaries at December 31, 1999 and 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. 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 of these statements in accordance with auditing standards
generally accepted in the United States, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Greensboro, NC
January 26, 2000
F - 1
<PAGE>
<TABLE>
<CAPTION>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
December 31,
1999 1998
- -------------------------------------------------------------------------------------------------------
ASSETS
Rental Property
<S> <C> <C>
Land $ 63,045 $ 53,869
Buildings, improvements and fixtures 484,277 458,546
Developments under construction 18,894 16,832
- -------------------------------------------------------------------------------------------------------
566,216 529,247
Accumulated depreciation (104,511) (84,685)
- -------------------------------------------------------------------------------------------------------
Rental property, net 461,705 444,562
Cash and cash equivalents 503 6,330
Deferred charges, net 8,176 8,218
Other assets 19,685 12,685
- -------------------------------------------------------------------------------------------------------
Total assets $490,069 $471,795
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilites
Long-term debt
Senior, unsecured notes $150,000 $150,000
Mortgages payable 90,652 72,790
Lines of credit 88,995 79,695
- -------------------------------------------------------------------------------------------------------
329,647 302,485
Construction trade payables 6,287 9,224
Accounts payable and accrued expenses 13,081 10,723
- -------------------------------------------------------------------------------------------------------
Total liabilities 349,015 322,432
- -------------------------------------------------------------------------------------------------------
Commitments
Minority interest 33,290 35,324
- -------------------------------------------------------------------------------------------------------
Shareholders' equity
Preferred shares, $.01 par value, 1,000,000 shares authorized,
85,270 and 88,270 shares issued and outstanding
at December 31, 1999 and 1998 1 1
Common shares, $.01 par value, 50,000,000 shares authorized,
7,876,835 and 7,897,606 shares issued and outstanding
at December 31, 1999 and 1998 79 79
Paid in capital 136,571 137,530
Distributions in excess of net income (28,887) (23,571)
- -------------------------------------------------------------------------------------------------------
Total shareholders' equity 107,764 114,039
- -------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $490,069 $471,795
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F - 2
<PAGE>
<TABLE>
<CAPTION>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------
REVENUES
<S> <C> <C> <C>
Base rentals $ 69,180 $ 66,187 $ 56,807
Percentage rentals 3,141 3,087 2,637
Expense reimbursements 27,910 26,852 24,665
Other income 3,785 1,640 1,162
- -----------------------------------------------------------------------------------------------------------------
Total revenues 104,016 97,766 85,271
- -----------------------------------------------------------------------------------------------------------------
EXPENSES
Property operating 30,585 29,106 26,269
General and administrative 7,298 6,669 6,145
Interest 24,239 22,028 16,835
Depreciation and amortization 24,824 22,154 18,439
Asset write-down --- 2,700 ---
- -----------------------------------------------------------------------------------------------------------------
Total expenses 86,946 82,657 67,688
- -----------------------------------------------------------------------------------------------------------------
Income before gain on disposal or sale of real estate,
minority interest and extraordinary item 17,070 15,109 17,583
Gain on disposal or sale of real estate 4,141 994 ---
- -----------------------------------------------------------------------------------------------------------------
Income before minority interest and extraordinary item 21,211 16,103 17,583
Minority interest (5,374) (3,944) (4,756)
- -----------------------------------------------------------------------------------------------------------------
Income before extraordinary item 15,837 12,159 12,827
Extraordinary item - Loss on early extinguishment of debt,
net of minority interest of $96 and $128 (249) (332) ---
- -----------------------------------------------------------------------------------------------------------------
Net income 15,588 11,827 12,827
Less applicable preferred share dividends (1,917) (1,911) (1,808)
- -----------------------------------------------------------------------------------------------------------------
Net income available to common shareholders $ 13,671 $ 9,916 $ 11,019
- -----------------------------------------------------------------------------------------------------------------
Basic earnings per common share:
Income before extraordinary item $ 1.77 $ 1.30 $ 1.57
Extraordinary item (0.03) (0.04) ---
- -----------------------------------------------------------------------------------------------------------------
Net income $ 1.74 $ 1.26 $ 1.57
- -----------------------------------------------------------------------------------------------------------------
Diluted earnings per common share:
Income before extraordinary item $ 1.77 $ 1.28 $ 1.54
Extraordinary item (0.03) (0.04) ---
- -----------------------------------------------------------------------------------------------------------------
Net income $ 1.74 $ 1.24 $ 1.54
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F - 3
<PAGE>
<TABLE>
<CAPTION>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1999, 1998, and 1997
(In thousands, except share data) Distributions Total
Preferred Common Paid in in Excess of Shareholder's
Shares Shares Capital Net Income Equity
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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 commn 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
Conversion of 3,000 preferred shares
into 27,029 common shares --- 1 (1) --- ---
Issuance of 500 common shares upon
exercise of unit options --- --- 12 --- 12
Repurchase and retirement of 48,300
common shares --- (1) (957) --- (958)
Adjustment for minority interest in
the Operating Partnership --- --- (13) --- (13)
Net income --- --- --- 15,588 15,588
Preferred dividends ($21.76 per share) --- --- --- (1,918) (1,918)
Common dividends ($2.42 per share) --- --- --- (18,986) (18,986)
- -----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 $ 1 $ 79 $ 136,571 $ (28,887) $ 107,764
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F - 4
<PAGE>
<TABLE>
<CAPTION>
TANGER FACTORY OUTLET CENTERS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 15,588 $ 11,827 $ 12,827
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 24,824 22,154 18,439
Amortization of deferred financing costs 1,005 1,076 1,094
Minority interest 5,278 3,816 4,756
Loss on early extinguishment of debt 345 460 ---
Asset write-down --- 2,700 ---
Gain on disposal or sale of real estate (4,141) (994) ---
Gain on sale of outparcels of land (687) --- ---
Straight-line base rent adjustment (214) (688) (347)
Compensation under Unit Option Plan --- 195 338
Increase (decrease) due to changes in:
Other assets (1,181) (1,956) (1,861)
Accounts payable and accrued expenses 2,358 (2,803) 3,968
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activites 43,175 35,787 39,214
- ----------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Acquisition of rental properties (15,500) (44,650) (37,500)
Additions to rental properties (34,224) (35,252) (54,795)
Additions to deferred lease costs (1,862) (1,895) (1,341)
Net proceeds from sale of real estate 1,987 2,561 ---
Net insurance proceeds from property losses 6,451 --- ---
Advances to officer (2,811) --- ---
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (45,959) (79,236) (93,636)
- ----------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net proceeds from issuance of common shares --- --- 29,241
Repurchase of common shares (958) (216) ---
Cash dividends paid (20,904) (20,418) (17,013)
Distributions to minority interest (7,325) (7,128) (6,583)
Proceeds from mortgages payable 66,500 --- 75,000
Repayments on mortgages payable (48,638) (1,260) (1,154)
Proceeds from revolving lines of credit 118,555 152,760 118,450
Repayments on revolving lines of credit (109,255) (78,065) (141,250)
Additions to deferred financing costs (1,030) (263) (1,950)
Proceeds from exercise of unit options 12 762 703
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (3,043) 46,172 55,444
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (5,827) 2,723 1,022
Cash and cash equivalents, beginning of period 6,330 3,607 2,585
- ----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 503 $ 6,330 $ 3,607
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F - 5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization 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 22 states with a total
gross leasable area of approximately 5.1 million square feet at the end of 1999.
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, Tanger Properties Limited
Partnership (the "Operating Partnership"). Prior to 1999, the Company owned the
majority of the units of partnership interest issued by the Operating
Partnership (the "Units") and served as its sole general partner. During 1999,
the Company transferred its ownership of Units into two wholly-owned
subsidiaries, the Tanger GP Trust and the Tanger LP Trust. The Tanger GP Trust
controls the Operating Partnership as its sole general partner. The Tanger LP
Trust holds a limited partnership interest. The Tanger Family Limited
Partnership ("TFLP"), holds the remaining Units as a limited partner. Stanley K.
Tanger, the Company's Chairman of the Board and Chief Executive Officer, is the
sole general partner of TFLP.
As of December 31, 1999, the Company's wholly-owned subsidiaries owned 7,876,835
Units, and 85,270 Preferred Units (which are convertible into approximately
795,309 limited partnership Units) and TFLP owned 3,033,305 Units. TFLP'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 limited partnership Units to
the extent of any conversion of preferred shares of the Company into common
shares of the Company.
2. Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements include
the accounts of the Company, its wholly-owned subsidiaries and the Operating
Partnership. All significant intercompany balances and transactions have been
eliminated in consolidation.
Minority Interest - Minority interest reflects TFLP's percentage ownership
of the Operating Partnership's Units. Income is allocated to the TFLP based on
its respective ownership interest.
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 1999, 1998 and 1997 amounted to $1,242,000, $762,000, and
$1,877,000, and development costs capitalized amounted to $1,711,000,
$1,903,000, and $1,637,000, respectively. Depreciation expense for each of the
years ended December 31, 1999, 1998 and 1997 was $23,095,000, $20,873,000, and
$17,327,000, respectively.
F - 6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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 - Rental property held and used by an
entity is 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, 1999.
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
amortized on a straight-line basis over the life of the agreements. As of
December 31, 1999, the Company had no such agreements.
Revenue Recognition - Base rentals are 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. Business interruption insurance proceeds received are
recognized as other income over the estimated period of interruption.
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 $21.76, $21.17, and
$19.55 in 1999, 1998, and 1997, 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.
<TABLE>
<CAPTION>
Common dividends per share: 1999 1998 1997
------------------------------------ ---------- ------------ -----------
<S> <C> <C> <C>
Ordinary income $1.328 $ 1.340 $ 1.779
Return of capital 1.039 1.010 .391
Long-term capital gain .048 --- ---
------------------------------------ ---------- ------------ -----------
$2.415 $ 2.350 $ 2.170
------------------------------------ ---------- ------------ -----------
</TABLE>
F - 7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Concentration of Credit Risk - The Company's management performs ongoing
credit evaluations of its 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
1999, 1998 or 1997.
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, 1999, 1998 and 1997 amounted to $6,287,000,
$9,224,000, and $12,913,000, respectively. Interest paid, net of interest
capitalized, in 1999, 1998 and 1997 was $23,179,000, $20,690,000, and
$12,337,000, respectively. Other assets at December 31, 1999 include a property
loss receivable of $4.2 million from the Company's property insurance carrier.
3. Deferred Charges
Deferred charges as of December 31, 1999 and 1998 consist of the following (in
thousands):
<TABLE>
<CAPTION>
1999 1998
---------------------------- ----------- -------------
<S> <C> <C>
Deferred lease costs $11,110 $ 9,551
Deferred financing costs 5,866 5,691
---------------------------- ----------- -------------
16,976 15,242
Accumulated amortization 8,800 7,024
---------------------------- ----------- -------------
$ 8,176 $ 8,218
---------------------------- ----------- -------------
</TABLE>
Amortization of deferred lease costs for the years ended December 31, 1999, 1998
and 1997 was $1,459,000, $1,019,000, and $873,000, respectively. Amortization of
deferred financing costs, included in interest expense in the accompanying
consolidated statements of operations, for the years ended December 31, 1999,
1998 and 1997 was $1,005,000, $1,076,000, and $1,094,000 respectively. During
1999 and 1998, the Company expensed the remaining unamortized financing costs
totaling $345,000 and $460,000 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. Other Assets
Included in other assets are notes receivable totaling $2.8 million from Stanley
K. Tanger, the Company's Chairman of the Board and Chief Executive Officer. Mr.
Tanger and the Company have entered into demand note agreements whereby he may
borrow up to $3.5 million through various advances from the Company for an
investment in a separate e-commerce business venture. The notes bear interest at
a rate of 8% per annum and are collateralized by Mr. Tanger's limited
partnership interest in Tanger Investments Limited Partnership. Mr. Tanger
intends to fully repay the loan.
Also included in other assets is a receivable of $4.2 million from the Company's
property insurance carrier. This amount, which was collected in January 2000,
represents the unpaid portion of an insurance settlement of $13.4 million
related to the loss of the Company's outlet center in Stroud, Oklahoma. The
center was destroyed by a tornado in May 1999. Approximately $1.9 million of the
settlement proceeds represented business interruption insurance. The business
interruption proceeds are being amortized to other income over a period of
fourteen months. The unrecognized portion of the business interruption proceeds
at December 31, 1999 totaled $985,200. The remaining portion of the settlement,
net of related expenses, was considered replacement proceeds for the portion of
the center that was totally destroyed. As a result, the Company recognized a
gain on disposal of $4.1 million during 1999. The remaining carrying value for
this property consists of land and related site work totaling $1.7 million.
5. 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 of 1998
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.
F - 8
<PAGE>
6. Long-term Debt
Long-term debt at December 31, 1999 and 1998 consists of the following (in
thousands):
<TABLE>
<CAPTION>
1999 1998
------------------------------------------------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
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:
8.625%, maturing September 2000 9,460 9,805
8.92%, maturing January 2002 --- 47,405
9.77%, maturing April 2005 15,351 15,580
7.875%, maturing April 2009 65,841 ---
Revolving lines of credit with variable interest rates ranging from either
prime less .25% to prime or from LIBOR plus 1.55% to LIBOR plus 1.60% 88,995 79,695
------------------------------------------------------------------------ --------------- ---------------
$ 329,647 $ 302,485
------------------------------------------------------------------------ --------------- ---------------
</TABLE>
The Company maintains revolving lines of credit which provide for borrowing up
to $100 million. The agreements expire at various times through the year 2002.
Interest is payable based on alternative interest rate bases at the Company's
option. Amounts available under these facilities at December 31, 1999 totaled
$11.0 million. Certain of the Company's properties, which had a net book value
of approximately $88.9 million at December 31, 1999, 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.
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.
Maturities of the existing long-term debt are as follows (in thousands):
<TABLE>
<CAPTION>
Year Amount %
---------------------------------- ------------- ------------
<S> <C> <C>
2000 $ 10,654 3
2001 117,291 36
2002 49,381 15
2003 1,497 ---
2004 76,618 23
Thereafter 74,206 23
---------------------------------- ------------- ------------
$ 329,647 100
---------------------------------- ------------- ------------
</TABLE>
In January 2000, the Company entered into a $20.0 million two year unsecured
term loan with interest payable at LIBOR plus 2.25%. The proceeds were used to
reduce amounts outstanding under the existing lines of credit. Also in January
2000, the Company entered into interest rate swap agreements on notional amounts
totaling $20.0 million at a cost of $162,000. The agreements mature in January
2002. The swap agreements have the effect of fixing the interest rate on the new
$20.0 million loan at 8.75%.
F - 9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. 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 that fixed
the 30 day LIBOR index at 5.47%. The Company terminated this agreement in June
1999. The Company had a similar agreement with a notional amount of $10 million
at a fixed 30 day LIBOR index of 5.99% that expired during 1998. The impact of
these agreements had an insignificant effect on interest expense during 1999,
1998 and 1997.
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.
The overall effective interest rate on the notes, after giving consideration to
these proceeds, is 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, 1999, 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 $324.4
million.
8. Shareholders' 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 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, 1999, 768,269 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.
The Company's Board of Directors has authorized the repurchase of up to $6
million of the Company's common shares. The timing and amount of purchases will
be at the discretion of management. During 1999 and 1998, the Company purchased
and retired 48,300 and 10,000 common shares at a price of $958,000 and $216,000,
respectively. The amount authorized for future repurchases remaining at December
31, 1999 totaled $4.8 million.
9. 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.
F - 10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
10. 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, 1999, 1998 and 1997 is set
forth as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------
Numerator:
<S> <C> <C> <C>
Income before extraordinary item $ 15,837 $ 12,159 $ 12,827
Less applicable preferred share dividends (1,917) (1,911) (1,808)
- -----------------------------------------------------------------------------------------------------
Income available to common shareholders -
numerator for basic and diluted earnings per share 13,920 10,248 11,019
- -----------------------------------------------------------------------------------------------------
Denominator:
Basic weighted average common shares 7,861 7,886 7,028
Effect of outstanding share and unit options 11 123 112
- -----------------------------------------------------------------------------------------------------
Diluted weighted average common shares 7,872 8,009 7,140
- -----------------------------------------------------------------------------------------------------
Basic earnings per share before extraordinary item $ 1.77 $ 1.30 $ 1.57
- -----------------------------------------------------------------------------------------------------
Diluted earnings per share before extaordinary item $ 1.77 $ 1.28 $ 1.54
- -----------------------------------------------------------------------------------------------------
</TABLE>
Options to purchase common shares excluded from the computation of diluted
earnings per share during 1999, 1998 and 1997 because the exercise price was
greater than the average market price of the common shares totaled 683,218,
268,569, and 9,000 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 TFLP 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.
11. Employee Benefit Plans
The Company has a non-qualified and incentive share option plan ("The Share
Option Plan") and the Operating Partnership has a non-qualified Unit option plan
("The 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.
F - 11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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):
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------ ---------------- ------------ ----------------- ----------------
<S> <C> <C> <C>
Net income: As reported $ 15,588 $ 11,827 $ 12,827
Pro forma 15,387 $ 11,651 $ 12,696
Basic EPS: As reported $ 1.74 $ 1.26 $ 1.57
Pro forma $ 1.71 $ 1.24 $ 1.55
Diluted EPS: As reported $ 1.74 $ 1.24 $ 1.54
Pro forma $ 1.71 $ 1.22 $ 1.53
</TABLE>
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 1999 and 1998, respectively: expected dividend yields of 10%; expected
lives ranging from 5 years to 7 years; expected volatility 20%; and risk-free
interest rates ranging from 4.72% to 5.50%.
The Company may issue up to 1,750,000 shares under The Share Option Plan and The
Unit Option Plan. The Company has granted 1,343,070 options, net of options
forfeited, through December 31, 1999. Under both plans, the option exercise
price is determined by the Share and Unit Option Committee of the Board of
Directors. Non-qualified share 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, 1999 have exercise prices between $22.125
and $31.25, with a weighted average exercise price of $24.63 and a weighted
average remaining contractual life of 6.2 years.
Unamortized share 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. Compensation expense recognized during 1998 and 1997 was
$195,000, and $338,000, respectively.
A summary of the status of the Company's two plans at December 31, 1999, 1998
and 1997 and changes during the years then ended is presented in the table and
narrative below:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------- --------------------------- -----------------------
Wtd Avg Wtd Avg Wtd Avg
Shares Ex Price Shares Ex Price Shares Ex Price
- -------------------------------------- ------------ -------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,069,060 25.27 874,230 $23.76 915,950 $23.77
Granted 241,800 22.13 277,600 30.15 --- ---
Exercised (500) 23.80 (31,880) 23.91 (29,700) 23.68
Forfeited (29,470) 26.94 (50,890) 26.94 (12,020) 24.41
- -------------------------------------- ------------ -------------- ------------- ------------- ----------- -----------
Outstanding at end of year 1,280,890 24.63 1,069,060 $25.27 874,230 $23.76
- -------------------------------------- ------------ -------------- ------------- ------------- ----------- -----------
Exercisable at end of year 742,030 24.08 608,520 $23.51 470,750 $23.46
Weighted average fair value of
options granted $1.05 $1.59 ---
</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
F - 12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
fully vested and are matched by the Company at a rate of compensation deferred
to be determined annually at the Company's discretion. The matching contribution
is subject to vesting under a schedule providing for 20% annual vesting starting
with the third year of employment and 100% vesting after seven years of
employment. The employer matching contribution expense for the years 1999, 1998
and 1997 was immaterial.
12. Supplementary Income Statement Information
The following amounts are included in property operating expenses for the years
ended December 31, 1999, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------ ----------- ----------- ------------
<S> <C> <C> <C>
Advertising and promotion $ 8,579 $ 9,069 $ 8,452
Common area maintenance 12,296 11,929 11,113
Real estate taxes 7,396 6,202 5,004
Other operating expenses 2,314 1,906 1,700
------------------------------ ----------- ----------- ------------
$ 30,585 $ 29,106 $ 26,269
------------------------------ ----------- ----------- ------------
</TABLE>
13. Lease Agreements
The Company is the lessor of a total of 1,310 stores in 31 factory outlet
centers, under operating leases with initial terms that expire from 2000 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,
1999 are as follows (in thousands):
2000 $ 63,730
2001 56,549
2002 46,886
2003 32,125
2004 20,449
Thereafter 44,106
-------------------- --------------------
$ 263,845
-------------------- --------------------
14. Commitments and Contingencies
At December 31, 1999, commitments for construction of new developments and
additions to existing properties amounted to $3.0 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 $566,000 and $517,000 at December 31, 1999 and 1998, respectively.
The Company's 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 $1,481,000, 1,090,000, and $778,000, for the years ended
December 31, 1999, 1998 and 1997, respectively. Minimum lease payments for the
next five years and thereafter are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
2000 $1,821
2001 1,759
2002 1,705
2003 1,550
2004 1,507
Thereafter 55,164
------------------ ---------------------
$63,506
------------------ ---------------------
</TABLE>
The Company is also subject to legal proceedings and claims which have arisen in
the ordinary course of its business and have not been finally adjudicated. In
management's opinion, the ultimate resolution of these matters will have no
material effect on the Company's results of operations or financial condition.
F - 13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Quarterly Financial Information
The following table sets forth summary quarterly financial information for the
years ended December 31, 1999 and 1998 (unaudited and in thousands, except per
share data).
<TABLE>
<CAPTION>
1999 by Quarter First Second Third Fourth
-------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total revenues $24,163 $25,139 $26,905 $27,809
Income before minority interest and
extraordinary item 3,452 3,757 6,188 7,814
Income before extraordinary item 2,626 2,844 4,597 5,770
Net income 2,377 2,844 4,597 5,770
Basic earnings per common share:
Income before extraordinary item (1) .27 .30 .52 .67
Net income (1) .24 .30 .52 .67
Diluted earnings per common share:
Income before extraordinary item (1) .27 .30 .52 .67
Net income (1) .24 .30 .52 .67
-------------------------------------------- ----------- ----------- ----------- -----------
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 (1) .46 .35 .31 .17
Net income (1) .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
-------------------------------------------- ----------- ----------- ----------- -----------
</TABLE>
(1) Quarterly amounts do not add to annual amounts due to the effect of rounding
on a quarterly basis.
16. 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 that aggregated $44.7 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, 1998 (unaudited and in thousands, except per share
data).
<TABLE>
<CAPTION>
1998
------------------------------------------- ------------
<S> <C>
Total revenues $100,840
Income before extraordinary item 12,349
Net income 12,017
Basic net income per common share:
Income before extraordinary item 1.32
Net income 1.28
Diluted net income per common share:
Income before extraordinary item 1.30
Net income 1.26
------------------------------------------- ------------
</TABLE>
F - 14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of Tanger Factory
Outlet Centers, Inc. and Subsidiaries 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 26 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.
PricewaterhouseCoopers LLP
Greensboro, North Carolina
January 26, 2000
F - 15
<PAGE>
<TABLE>
<CAPTION>
TANGER FACTORY OUTLET CENTERS, INC. and SUBSIDIARY
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
For the Year Ended December 31, 1999
(In thousands)
- ------------------------------------- -------------- ------------------------ ----------------------- ----------------------------
Costs Capitalized Gross Amount
Subsequent to Carried at
Acquisition Close of Period
Description Initial cost to Company (Improvements) 12/31/99 (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>
Barstow Barstow, CA $ -- $3,941 $ 12,533 $ --- $1,110 $3,941 $13,643 $17,584
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- ---------- ---------- ----------
Blowing Rock Blowing Rock, NC --- 1,963 9,424 --- 2,032 1,963 11,456 13,419
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Boaz Boaz, AL --- 616 2,195 --- 1,673 616 3,868 4,484
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Bourne Bourne, MA --- 899 1,361 --- 255 899 1,616 2,515
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Branch North Branch, MN --- 304 5,644 249 2,514 553 8,158 8,711
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Branson Branson, MO --- 4,557 25,040 --- 6,146 4,557 31,186 35,743
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Casa Grande Casa Grande, AZ --- 753 9,091 --- 1,233 753 10,324 11,077
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Clover North Conway, NH --- 393 672 --- 246 393 918 1,311
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Commerce I Commerce, GA 9,460 755 3,511 492 8,318 1,247 11,829 13,076
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Commerce II Commerce, GA --- 1,262 14,046 541 16,986 1,803 31,032 32,835
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Dalton Dalton, GA 11,658 1,641 15,596 --- 54 1,641 15,650 17,291
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Ft. Lauderdale Ft. Lauderdale, FL 9,412 6,986 --- --- 9,412 6,986 16,398
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Gonzales Gonzales, LA --- 947 15,895 17 3,908 964 19,803 20,767
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Kittery-I Kittery, ME 6,634 1,242 2,961 229 1,288 1,471 4,249 5,720
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Kittery-II Kittery, ME --- 921 1,835 529 236 1,450 2,071 3,521
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Lancaster Lancaster, PA 15,351 3,691 19,907 --- 6,341 3,691 26,248 29,939
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Lawrence Lawrence, KS --- 1,013 5,542 429 865 1,442 6,407 7,849
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
LL Bean North Conway, NH --- 1,894 3,351 --- 1,026 1,894 4,377 6,271
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Locust Grove Locust Grove, GA --- 2,558 11,801 --- 7,304 2,558 19,105 21,663
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Martinsburg Martinsburg, WV --- 800 2,812 --- 1,256 800 4,068 4,868
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
McMinnville McMinnville, OR --- 1,071 8,162 6 748 1,077 8,910 9,987
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Nags Head Nags Head, NC --- 1,853 6,679 --- 1,016 1,853 7,695 9,548
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Pigeon Forge Pigeon Forge, TN --- 299 2,508 --- 1,639 299 4,147 4,446
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Riverhead Riverhead, NY --- --- 36,374 6,152 66,736 6,152 103,110 109,262
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
San Marcos San Marcos, TX 19,802 1,895 9,440 17 11,006 1,912 20,446 22,358
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Sanibel Sanibel, FL --- 4,916 23,196 --- 2,121 4,916 25,317 30,233
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Sevierville Sevierville, TN --- --- 18,495 --- 22,242 --- 40,737 40,737
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Seymour Seymour, IN --- 1,671 13,249 --- 693 1,671 13,942 15,613
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Stroud Stroud, OK --- 446 2,242 --- --- 446 2,242 2,688
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Terrell Terrell, TX --- 778 13,432 --- 4,387 778 17,819 18,597
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
West Branch West Branch, MI 7,401 350 3,428 121 4,382 471 7,810 8,281
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
Williamsburg Williamsburg, IA 20,346 706 6,781 716 11,221 1,422 18,002 19,424
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
$90,652 $ 53,547 $314,189 $9,498 $188,982 $63,045 $503,171 $566,216
- ----------------- ------------------- -------------- --------- -------------- -------- ----------- --------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
TANGER FACTORY OUTLET CENTERS, INC. and SUBSIDIARY
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
For the Year Ended December 31, 1999
(In thousands)
Description
- ----------------- ------------- ------------- --------------
Life Used to
Compute
Depreciation
Outlet Center Accumulated Date of in Income
Name Depreciation Construction Statement
- ----------------- ------------- ------------- --------------
<S> <C> <C> <C>
Barstow $3,647 1995 (2)
- ----------------- ------------- ------------- --------------
Blowing Rock 786 1997 (3) (2)
- ----------------- ------------- ------------- --------------
Boaz 1,600 1988 (2)
- ----------------- ------------- ------------- --------------
Bourne 757 1989 (2)
- ----------------- ------------- ------------- --------------
Branch 2,966 1992 (2)
- ----------------- ------------- ------------- --------------
Branson 7,739 1994 (2)
- ----------------- ------------- ------------- --------------
Casa Grande 4,133 1992 (2)
- ----------------- ------------- ------------- --------------
Clover 419 1987 (2)
- ----------------- ------------- ------------- --------------
Commerce I 3,923 1989 (2)
- ----------------- ------------- ------------- --------------
Commerce II 4,454 1995 (2)
- ----------------- ------------- ------------- --------------
Dalton 930 1998 (3) (2)
- ----------------- ------------- ------------- --------------
Ft. Lauderdale 44 1999 (3) (2)
- ----------------- ------------- ------------- --------------
Gonzales 6,578 1992 (2)
- ----------------- ------------- ------------- --------------
Kittery-I 2,175 1986 (2)
- ----------------- ------------- ------------- --------------
Kittery-II 923 1989 (2)
- ----------------- ------------- ------------- --------------
Lancaster 5,913 1994 (3) (2)
- ----------------- ------------- ------------- --------------
Lawrence 1,839 1993 (2)
- ----------------- ------------- ------------- --------------
LL Bean 1,786 1988 (2)
- ----------------- ------------- ------------- --------------
Locust Grove 4,547 1994 (2)
- ----------------- ------------- ------------- --------------
Martinsburg 1,876 1987 (2)
- ----------------- ------------- ------------- --------------
McMinnville 3,021 1993 (2)
- ----------------- ------------- ------------- --------------
Nags Head 685 1997 (3) (2)
- ----------------- ------------- ------------- --------------
Pigeon Forge 1,754 1988 (2)
- ----------------- ------------- ------------- --------------
Riverhead 14,376 1993 (2)
- ----------------- ------------- ------------- --------------
San Marcos 4,984 1993 (2)
- ----------------- ------------- ------------- --------------
Sanibel 1,112 1998 (3) (2)
- ----------------- ------------- ------------- --------------
Sevierville 2,878 1997 (3) (2)
- ----------------- ------------- ------------- --------------
Seymour 3,920 1994 (2)
- ----------------- ------------- ------------- --------------
Stroud 948 1992 (2)
- ----------------- ------------- ------------- --------------
Terrell 4,738 1994 (2)
- ----------------- ------------- ------------- --------------
West Branch 2,672 1991 (2)
- ----------------- ------------- ------------- --------------
Williamsburg 6,568 1991 (2)
- ----------------- ------------- ------------- --------------
$104,511
- ----------------- ------------- ------------- --------------
</TABLE>
(1) Aggregate cost for federal income tax purposes is approximately $559,611,000
(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, 1999
(In Thousands)
The changes in total real estate for the three years ended December 31, 1999 are
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- ---------------- ----------------
<S> <C> <C> <C>
Balance, beginning of year $529,247 $ 454,708 $ 358,361
Acquisition of real estate 15,500 44,650 37,500
Improvements 31,343 31,599 59,519
Dispositions and other (9,874) (1,710) (672)
-------------- ---------------- ----------------
Balance, end of year $566,216 $ 529,247 $ 454,708
============== ================ ================
</TABLE>
The changes in accumulated depreciation for the three years ended December 31,
1999 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- ---------------- ----------------
<S> <C> <C> <C>
Balance, beginning of year $84,685 $ 64,177 $ 46,907
Depreciation for the period 23,095 20,873 17,327
Dispositions and other (3,269) (365) (57)
-------------- ---------------- ----------------
Balance, end of year $104,511 $ 84,685 $ 64,177
============== ================ ================
</TABLE>
F -17
ARTICLES OF AMENDMENT
OF
TANGER FACTORY OUTLET CENTERS, INC.
The undersigned corporation hereby submits these Articles of Amendment for
the purpose of amending its Amended and Restated Articles of Incorporation.
1. The name of the corporation is Tanger Factory Outlet Centers, Inc.
2. The following amendment to the Amended and Restated Articles of
Incorporation of the corporation was adopted by its shareholders on May 7,
1999 in the manner prescribed by law:
Section "E" of Article II of the Corporation's Amended and Restated
Articles of Incorporation shall be amended to read as follows:
E. The Board of Directors of the corporation is
hereby expressly vested with authority to issue, and shall
issue, to the extent that such issuance will not result in
violation of subparagraph B(4)(b) of Article4 II hereunder,
Common Shares in exchange for Units, pursuant to the
Partnership Agreement, so long as the corporation or an entity
all of whose equity interest is owned by the corporation
remains the general partner of Tanger Properties Limited
Partnership.
This the 30 day of September, 1999.
Tanger Factory Outlet Centers, Inc.
BY:
STANLEY K. TANGER,
Chairman of the Board and Chief
Executive Officer
BY-LAWS OF
TANGER FACTORY OUTLET CENTERS, INC.
[RESTATED TO REFLECT AMENDMENTS MADE APRIL 27, 1999]
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 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.
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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
articles of incorporation, a Bylaw adopted by the shareholders, or the Business
Corporation Act requires a greater number of affirmative votes.
<PAGE>
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 By-Law, 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 announcement of an
<PAGE>
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
<PAGE>
corporation not earlier than the close of 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
according to the best of his or her ability. The inspectors shall have the
duties prescribed by law.
<PAGE>
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.
<PAGE>
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 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.
<PAGE>
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.
<PAGE>
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, 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 each other during the meeting. A director participating in a meeting by
this means is deemed to be present in person at the meeting.
<PAGE>
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 office
until the effective date. An officer's resignation does not affect the
corporation's contract rights, if any, with the officer.
<PAGE>
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.
5.7 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.
5.8 Chairman of the Board; President. The Chairman of the Board 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 Chairman of the Board, when
present, shall preside at all meetings of the shareholders and of the Board of
Directors.
The President shall be the Chief Operating Officer of the Corporation
and, subject to the control of the Board of Directors, shall be responsible for
the conduct of the business and affairs of the Corporation. 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.
The Chief Executive Officer, or 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. The Chief Executive Officer or the President shall
sign 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 or additional officer or agent of the Corporation,
or shall be required by law to be otherwise signed or executed.
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.
<PAGE>
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
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.
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 either the Chief Executive Officer, the President or the Executive Vice
President or by any proxy appointed in writing by the Chief Executive Officer,
the President or the Executive Vice President.
Either of the Chief Executive Officer or 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, either the Chief Executive Officer or
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.
<PAGE>
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 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
<PAGE>
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 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 maybe 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.
<PAGE>
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 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.
<PAGE>
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.
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.
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
TANGER PROPERTIES LIMITED PARTNERSHIP
<PAGE>
TABLE OF CONTECTS
Page
ARTICLE 1 DEFINED TERMS.......................................................1
Section 1.1 Definitions.....................................................1
ARTICLE 2 ORGANIZATIONAL MATTERS.............................................16
Section 2.1 Organization...................................................16
Section 2.2 Name...........................................................16
Section 2.3 Registered Office and Agent; Principal Office..................16
Section 2.4 Power of Attorney..............................................17
Section 2.5 Term...........................................................18
ARTICLE 3 PURPOSE............................................................18
Section 3.1 Purpose and Business...........................................18
Section 3.2 Powers.........................................................18
ARTICLE 4 CAPITAL CONTRIBUTIONS..............................................19
Section 4.1 Capital Contributions of the Partners..........................19
Section 4.2 Additional Capital Contributions Generally.....................19
Section 4.3 Loans by Partners..............................................19
Section 4.4 Loans by Third Parties.........................................19
Section 4.5 Additional Funding and Capital Contributions...................19
Section 4.6 Unit Option Plan...............................................21
Section 4.7 Preferred Contributions........................................22
ARTICLE 5 DISTRIBUTIONS......................................................22
Section 5.1 Requirement, Characterization, and Priority of Distributions...22
Section 5.2 Distributions in Kind..........................................23
Section 5.3 Amounts Withheld...............................................23
Section 5.4 Distributions Upon Liquidation.................................24
ARTICLE 6 ALLOCATIONS........................................................24
Section 6.1 Timing and Amount of Allocations of Net Income and Net Loss....24
Section 6.2 General Allocations............................................24
Section 6.3 Additional Allocation Provisions...............................25
Section 6.4 Tax Allocations................................................27
<PAGE>
ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS..............................28
Section 7.1 Management.....................................................28
Section 7.2 Certificate of Limited Partnership.............................30
Section 7.3 Restrictions on General Partner's Authority....................31
Section 7.4 Reimbursement of the General Partner...........................33
Section 7.5 Outside Activities of the General Partner and the Initial
General Partner................................................33
Section 7.6 Contracts with Affiliates......................................34
Section 7.7 Indemnification................................................34
Section 7.8 Liability of the General Partner...............................36
Section 7.9 Other Matters Concerning the General Partner...................36
Section 7.10 Title to Partnership Assets....................................37
Section 7.11 Reliance by Third Parties......................................37
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.........................38
Section 8.1 Limitation of Liability........................................38
Section 8.2 Management of Business.........................................38
Section 8.3 Outside Activities of Limited Partners.........................38
Section 8.4 Return of Capital..............................................39
Section 8.5 Rights of Limited Partners Relating to the Partnership.........39
Section 8.6 Exchange Rights................................................40
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS.............................41
Section 9.1 Records and Accounting.........................................41
Section 9.2 Fiscal Year....................................................42
Section 9.3 Reports........................................................42
ARTICLE 10 TAX MATTERS.......................................................42
Section 10. Preparation of Tax Returns.....................................42
Section 10.2 Tax Elections..................................................42
Section 10.3 Tax Matters Partner............................................43
Section 10.4 Organizational Expenses........................................44
Section 10.5 Withholding....................................................44
ARTICLE 11 TRANSFERS AND WITHDRAWALS.........................................45
Section 11.1 Transfer.......................................................45
Section 11.2 Transfer of General Partner's Partnership Interest.............45
Section 11.3 Limited Partners' Rights to Transfer...........................46
Section 11.4 Substituted Limited Partners...................................47
Section 11.5 Assignees......................................................48
Section 11.6 General Provisions.............................................48
<PAGE>
ARTICLE 12 ADMISSION OF PARTNERS.............................................49
Section 12.1 Admission of Successor General Partner.........................49
Section 12.2 Admission of Additional Limited Partners.......................49
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership..50
Section 12.4 Limit on Number of Partners....................................50
ARTICLE 13 DISSOLUTION AND LIQUiDATION.......................................50
Section 13.1 Dissolution....................................................50
Section 13.2 Winding Up.....................................................51
Section 13.3 Compliance with Timing Requirements of Regulations.............52
Section 13.4 Deemed Distribution and Recontribution.........................53
Section 13.5 Rights of Limited Partners.....................................53
Section 13.6 Notice of Dissolution..........................................53
Section 13.7 Cancellation of Certificate of Limited Partnership.............53
Section 13.8 Reasonable Time for Winding-Up.................................53
Section 13.9 Waiver of Partition............................................54
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS......................54
Section 14.1 Amendments.....................................................54
Section 14.2 Action by the Partners.........................................54
.
ARTICLE 15 GENERAL PROVISIONS................................................55
Section 15.1 Addresses and Notice...........................................55
Section 15.2 Titles and Captions............................................55
Section 15.3 Pronouns and Plurals...........................................55
Section 15.4 Further Action.................................................55
Section 15.5 Binding Effect.................................................55
Section 15.6 Creditors......................................................55
Section 15.7 Waiver.........................................................56
Section 15.8 Counterparts...................................................56
Section 15.9 Applicable Law.................................................56
Section 15.10 Invalidity of Provisions.......................................56
Section 15.11 Limitation to Preserve REIT Status.............................56
ARTICLE 1 DEFINED TERMS.......................................................1
Section 1.1 Definitions......................................................1
ARTICLE 2 ORGANIZATIONAL MATTERS.............................................16
Section 2.1 Organization....................................................16
Section 2.2 Name............................................................16
Section 2.3 Registered Office and Agent; Principal Office...................16
Section 2.4 Power of Attorney...............................................17
Section 2.5 Term............................................................18
<PAGE>
ARTICLE 3 PURPOSE............................................................18
Section 3.1 Purpose and Business............................................18
Section 3.2 Powers..........................................................18
ARTICLE 4 CAPITAL CONTRIBUTIONS..............................................19
Section 4.1 Capital Contributions of the Partners...........................19
Section 4.2 Additional Capital Contributions Generally......................19
Section 4.3 Loans by Partners...............................................19
Section 4.4 Loans by Third Parties..........................................19
Section 4.5 Additional Funding and Capital Contributions....................19
Section 4.6 Unit Option Plan................................................21
Section 4.7 Preferred Contributions.........................................22
ARTICLE 5 DISTRIBUTIONS......................................................22
Section 5.1 Requirement, Characterization, and Priority of Distributions....22
Section 5.2 Distributions in Kind...........................................23
Section 5.3 Amounts Withheld................................................23
Section 5.4 Distributions Upon Liquidation..................................24
ARTICLE 6 ALLOCATIONS........................................................24
Section 6.1 Timing and Amount of Allocations of Net Income and Net Loss.....24
Section 6.2 General Allocations.............................................24
Section 6.3 Additional Allocation Provisions................................25
Section 6.4 Tax Allocations.................................................27
ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS..............................28
Section 7.1 Management......................................................28
Section 7.2 Certificate of Limited Partnership..............................30
Section 7.3 Restrictions on General Partner's Authority.....................31
Section 7.4 Reimbursement of the General Partner............................33
Section 7.5 Outside Activities of the General Partner and the Initial
General Partner................................................33
Section 7.6 Contracts with Affiliates.......................................34
Section 7.7 Indemnification.................................................34
Section 7.8 Liability of the General Partner................................36
Section 7.9 Other Matters Concerning the General Partner....................36
Section 7.10 Title to Partnership Assets.....................................37
Section 7.11 Reliance by Third Parties.......................................37
<PAGE>
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.........................38
Section 8.1 Limitation of Liability.........................................38
Section 8.2 Management of Business..........................................38
Section 8.3 Outside Activities of Limited Partners..........................38
Section 8.4 Return of Capital...............................................39
Section 8.5 Rights of Limited Partners Relating to the Partnership..........39
Section 8.6 Exchange Rights.................................................40
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS.............................41
Section 9.1 Records and Accounting..........................................41
Section 9.2 Fiscal Year.....................................................42
Section 9.3 Reports.........................................................42
ARTICLE 10 TAX MATTERS.......................................................42
Section 10.1 Preparation of Tax Returns......................................42
Section 10.2 Tax Elections...................................................42
Section 10.3 Tax Matters Partner.............................................43
Section 10.4 Organizational Expenses.........................................44
Section 10.5 Withholding.....................................................44
ARTICLE 11 TRANSFERS AND WITHDRAWALS.........................................45
Section 11.1 Transfer........................................................45
Section 11.2 Transfer of General Partner's Partnership Interest..............45
Section 11.3 Limited Partners' Rights to Transfer............................46
Section 11.4 Substituted Limited Partners....................................47
Section 11.5 Assignees.......................................................48
Section 11.6 General Provisions..............................................48
ARTICLE 12 ADMISSION OF PARTNERS.............................................49
Section 12.1 Admission of Successor General Partner.........................49
Section 12.2 Admission of Additional Limited Partners.......................49
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership..50
Section 12.4 Limit on Number of Partners....................................50
ARTICLE 13 DISSOLUTION AND LIQUiDATION.......................................50
Section 13.1 Dissolution....................................................50
Section 13.2 Winding Up.....................................................51
Section 13.3 Compliance with Timing Requirements of Regulations.............52
Section 13.4 Deemed Distribution and Recontribution.........................53
Section 13.5 Rights of Limited Partners.....................................53
Section 13.6 Notice of Dissolution..........................................53
Section 13.7 Cancellation of Certificate of Limited Partnership.............53
Section 13.8 Reasonable Time for Winding-Up.................................53
Section 13.9 Waiver of Partition............................................54
<PAGE>
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS......................54
Section 14.1 Amendments......................................................54
Section 14.2 Action by the Partners..........................................54
ARTICLE 15 GENERAL PROVISIONS................................................55
Section 15.1 Addresses and Notice...........................................55
Section 15.2 Titles and Captions............................................55
Section 15.3 Pronouns and Plurals...........................................55
Section 15.4 Further Action.................................................55
Section 15.5 Binding Effect.................................................55
Section 15.6 Creditors......................................................55
Section 15.7 Waiver.........................................................56
Section 15.8 Counterparts...................................................56
Section 15.9 Applicable Law.................................................56
Section 15.10 Invalidity of Provisions.......................................56
Section 15.11 Limitation to Preserve REIT Status.............................56
EXHIBIT A PARTNERS, CONTRIBUTIONS AND PARTNERSHIP INTERESTS...................1
EXHIBIT A-1 PREFERRED CONTRIBUTIONS...........................................4
EXHIBIT B NOTICE OF EXCHANGE..................................................1
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
TANGER PROPERTIES LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP,
dated as of December 30, 1999 and effective on the Transfer Date (as defined
below), is entered into by and among Tanger GP Trust, a Maryland business trust,
as the General Partner; Tanger LP Trust, a Maryland business trust, as a Limited
Partner; Tanger Family Limited Partnership, a North Carolina limited
partnership, as a Limited Partner; and Tanger Factory Outlet Centers, Inc., a
North Carolina corporation (the "Initial General Partner") that will not be a
partner hereto after the Transfer Date; together with any other Persons who
become Partners in the Partnership as provided herein.
ARTICLE 1
DEFINED TERMS
Section 1.1 Definitions.
The following definitions shall be for all purposes, unless
otherwise clearly indicated to the contrary, applied to the terms used in this
Agreement.
"Act" means the North Carolina Revised Uniform Limited
Partnership Act, as it may be amended from time to time, and any successor to
such statute.
"Additional Funds" shall have the meaning set forth in Section
4.5.A.
"Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 12.2 hereof and who is
shown as such on the books and records of the Partnership.
"Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Capital Account as of
the end of the relevant fiscal year, after giving effect to the following
adjustments:
(i) decrease such deficit by any amounts which such Partner is obligated to
restore pursuant to this Agreement or is deemed to be obligated to restore
pursuant to the penultimate sentence of each of Treasury Regulation
Sections 1.704-2(i)(5) and 1.704-2(g); and
(ii) increase such deficit by the items described in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
"Adjustment Date" means, with respect to any Capital
Contribution, the close of business on the Business Day last preceding the date
1
<PAGE>
of the Capital Contribution, provided, that if such Capital Contribution is
being made by the General Partner in respect of the proceeds from the issuance
of REIT Shares (or the issuance of other securities of the Initial General
Partner exercisable for, convertible into or exchangeable for REIT Shares), then
the Adjustment Date shall be as of the close of business on the Business Day
last preceding the date of the issuance of such securities.
"Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under common control with
such Person.
"Agreed Value" means (i) in the case of any Contributed
Property set forth in Exhibit A and as of the time of its contribution to the
Partnership, the Agreed Value of such property as set forth in Exhibit A; (ii)
in the case of any Contributed Property not set forth in Exhibit A and as of the
time of its contribution to the Partnership, the fair market value of such
property or other consideration as determined by the General Partner, reduced by
any liabilities either assumed by the Partnership upon such contribution or to
which such property is subject when contributed; and (iii) in the case of any
property distributed to a Partner by the Partnership, the fair market value of
such property as determined by the General Partner at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of the
distribution as determined under Section 752 of the Code and the regulations
thereunder.
"Agreement" means this Amended and Restated Agreement of
Limited Partnership, as it may be amended, supplemented or restated from time to
time.
"Appraisal" means with respect to any assets, the opinion of
an independent third party experienced in the valuation of similar assets,
selected by the General Partner in good faith, such opinion may be in the form
of an opinion by such independent third party that the value for such property
or asset as set by the General Partner is fair, from a financial point of view,
to the Partnership.
"Articles of Incorporation" means the Articles of
Incorporation of the Initial General Partner filed in the state of North
Carolina on March 3, 1993 as amended or restated from time to time.
"Assignee" means a Person to whom one or more Partnership
Units have been transferred in a manner permitted under this Agreement, but who
has not become a Substituted Limited Partner, and who has the rights set forth
in Section 11.5.
"Available Cash" means, with respect to any period for which
such calculation is being made, (i) the sum of:
a. the Partnership's Net Income or Net Loss (as the case may be) for such
period,
b. Depreciation and all other noncash charges deducted in determining Net
Income or Net Loss for such period,
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c. the amount of any reduction in reserves of the Partnership referred to
in clause (ii)(f) below (including, without limitation, reductions
resulting because the General Partner determines such amounts are no longer
necessary),
d. the excess of the net proceeds from the sale, exchange, disposition, or
refinancing of Partnership property for such period over the gain (or loss,
as the case may be) recognized from any such sale, exchange, disposition,
or refinancing during such period (excluding Terminating Capital
Transactions), and
e. all other cash received by the Partnership for such period that was not
included in determining Net Income or Net Loss for such period;
(ii) less the sum of:
a. all principal debt payments made during such period by the Partnership,
b. capital expenditures made by the Partnership during such period,
c. investments in any entity (including loans made thereto) to the extent
that such investments are not otherwise described in clauses (ii)(a) or
(b),
d. all other expenditures and payments not deducted in determining Net
Income or Net Loss for such period,
e. any amount included in determining Net Income or Net Loss for such
period that was not received by the Partnership during such period, and
f. the amount of any increase in reserves established during such period
which the General Partner determines are necessary or appropriate in its
sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not
include any cash received or reductions in reserves, or take into account any
disbursements made or reserves, established, after commencement of the
dissolution and liquidation of the Partnership.
"Bankruptcy" means any event where the General Partner, or the
Partnership, as the case may be, makes an assignment for the benefit of
creditors, files a voluntary petition in bankruptcy, is adjudicated a bankrupt
or insolvent, files a petition or answer seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation, files an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against him in any proceeding of this nature, or seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for all or
any substantial part of its properties, in each case, if it is a Bankruptcy of
the General Partner, within the meaning of Section 59-402 of the Act (or any
successor provision). In addition, the term "Bankruptcy" shall include any act
under Section 59-402(5) of the Act.
"Board of Directors" means the Board of Directors of the Initial General
Partner.
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"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York, New York are authorized or
required by law to be closed.
"Capital Account" means, with respect to any Partner, the
Capital Account maintained for such Partner in accordance with the following
provisions:
(a) To each Partner's Capital Account there shall be added
such Partner's Capital Contributions, such Partner's share of Net Income and any
items in the nature of income or gain which are specially allocated pursuant to
Section 6.3 hereof, and the amount of any Partnership liabilities assumed by
such Partner or which are secured by any property distributed to such Partner.
(b) From each Partner's Capital Account there shall be
subtracted the amount of cash and the Gross Asset Value of any property
distributed to such Partner pursuant to any provision of this Agreement, such
Partner's distributive share of Net Losses and any items in the nature of
expenses or losses which are specially allocated pursuant to Section 6.3 hereof,
and the amount of any liabilities of such Partner assumed by the Partnership or
which are secured by any property contributed by such Partner to the
Partnership.
(c) In the event any interest in the Partnership is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred interest.
(d) In determining the amount of any liability for purposes of
subsections (a) and (b) hereof, there shall be taken into account Code section
752(c) and any other applicable provisions of the Code and Regulations.
(e) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Regulations Section 1.704-1(b) and Section 1.704-2, and shall be
interpreted and applied in a manner consistent with such Regulations. In the
event the General Partner shall determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities which
are secured by contributed or distributed property or which are assumed by the
Partnership, the General Partner, or the Limited Partners) are computed in order
to comply with such Regulations, the General Partner may make such modification,
provided that it is not likely to have a material effect on the amounts
distributable to any Person pursuant to Article 13 of the Agreement upon the
dissolution of the Partnership. The General Partner also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Partners and the amount of Partnership capital reflected
on the Partnership's balance sheet, as computed for book purposes, in accordance
with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b) or Section 1.704-2.
"Capital Contribution" means, with respect to any Partner, the
amount of money and the initial Gross Asset Value of any property (other than
money) contributed to the Partnership by such Partner.
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"Certificate" means the Certificate of Limited Partnership
relating to the Partnership filed in the office of the North Carolina Secretary
of State, as amended from time to time in accordance with the terms hereof and
the Act.
"Class A Common Limited Partnership Interest" means a
Partnership Interest consisting of Class A Common Limited Partnership Units.
"Class A Common Limited Partnership Unit" means: (i) any
Partnership Unit that was held by Tanger Family Partnership on the Transfer
Date, without regard to any subsequent transfer of such Partnership Unit; (ii)
any Partnership Unit issued pursuant to Section 4.6 of this Agreement in
connection with the exercise of an option granted under the Unit Option Plan;
and (iii) any Partnership Unit issued after the Transfer Date to a Limited
Partner, excluding the Wholly-Owned LP Trust, or to an Additional Limited
Partner pursuant to Section 4.5 of this Agreement in exchange for a Capital
Contribution.
"Class B Common Limited Partnership Interest" means a
Partnership Interest consisting of Class B Common Limited Partnership Units.
"Class B Common Limited Partnership Unit" means: (i) any
Partnership Unit that was transferred from the Initial General Partner to the
Wholly-Owned LP Trust on the Transfer Date, without regard to any subsequent
transfer of such Partnership Unit; (ii) any Partnership Unit converted after the
Transfer Date from a Preferred Unit pursuant to Section 4.7 of this Agreement;
and (iii) any Partnership Unit issued after the Transfer Date to the
Wholly-Owned LP Trust pursuant to Section 4.5 of this Agreement in exchange for
a Capital Contribution.
"Class C Preferred Limited Partnership Interest" means a
Partnership Interest consisting of Class C Preferred Limited Partnership Units.
"Class C Preferred Limited Partnership Unit" means any
Preferred Unit that was transferred from the Initial General Partner to the
Wholly-Owned LP Trust on the Transfer Date, without regard to any subsequent
transfer of such Partnership Unit, the total number of which at all times shall
correspond to the number of shares of Preferred Stock as provided in Section 4.7
of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time or any successor statute thereto, as interpreted by the
applicable regulations thereunder. Any reference herein to a specific section or
sections of the Code shall be deemed to include a reference to any corresponding
provision of future law.
"Consent" means the consent to, approval of, or vote on a
proposed action by a Partner given in accordance with Article 14 hereof.
"Consent of the Class A Limited Partners" means the Consent of
a Majority in Interest of the Class A Limited Partners, which Consent shall be
obtained prior to the taking of any action for which it is required by this
Agreement and may be given or withheld by a Majority in Interest of the Class A
Limited Partners, unless otherwise expressly provided herein, in their sole and
absolute discretion.
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"Contributed Property" means each property or other asset, in
such form as may be permitted by the Act, but excluding cash, contributed or
deemed contributed to the Partnership (or deemed contributed to the Partnership
on termination and reconstitution thereof pursuant to Section 708 of the Code).
"Debt" means, as to any Person, as of any date of
determination, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services; (ii) all amounts owed by such
Person to banks or other Persons in respect to reimbursement obligations under
letters of credit, surety bonds and other similar instruments guaranteeing
payment or other performance of obligations by such Person; (iii) all
indebtedness for borrowed money or for the deferred purchase price of property
or services secured by any lien on any property owned by such Person, to the
extent attributable to such Person's interest in such property, even though such
Person has not assumed or become liable for the payment thereof; and (iv) lease
obligations of such Person which, in accordance with generally accepted
accounting principles, should be capitalized.
"Depreciation" means, for each fiscal year or other period, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset
Value as the federal income tax depreciation, amortization or other cost
recovery deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the General Partner.
"Deemed Partnership Interest Value" means, as of any date, the
Deemed Value of the Partnership multiplied by the applicable Partner's
Percentage Interest.
"Deemed Value of the Partnership" means, as of any date, the
total number of REIT Shares issued and outstanding as of the close of business
on such date (excluding any treasury shares) multiplied by the Value of a REIT
Share on such date, (i) minus the net fair market value of the REIT Properties
determined by the Board of Directors of the Initial General Partner in good
faith and (ii) divided by the combined Percentage Interests of the Wholly-Owned
Trusts on such date;
"Effective Date" means June 4, 1993.
"Election Notice" is defined in Section 4.5.E.
"Exchange" shall have the meaning set forth in Section 8.6.
"Exchange Factor" initially means 1.0, provided that:
(a) in the event that the Initial General Partner
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(i) declares or pays a dividend on its outstanding REIT
Shares in REIT Shares to all holders of its outstanding
REIT Shares or makes a distribution to all holders of
its outstanding REIT Shares in REIT Shares,
(ii) splits or subdivides its REIT Shares into a larger
number of REIT Shares or
(iii)affects a reverse split combines its outstanding REIT
Shares into a smaller number of REIT Shares,
the Exchange Factor shall be adjusted by multiplying the Exchange
Factor previously in effect by a fraction, the numerator of which shall
be the number of REIT Shares issued and outstanding on the record date
for such dividend, distribution, split, subdivision, reverse split or
combination (assuming for such purposes that such dividend,
distribution, split, subdivision, reverse split or combination has
occurred as of such time), and the denominator of which shall be the
actual number of REIT Shares (determined without the above assumption)
issued and outstanding on the record date for such dividend,
distribution, split, subdivision, reverse split or combination;
(b) in the event that the Initial General Partner distributes
any rights, options or warrants to all holders of its REIT Shares to subscribe
for or to purchase or to otherwise acquire REIT Shares (or other securities or
rights convertible into, exchangeable for or exercisable for REIT Shares) at a
price per share less than Value of a REIT Share on the record date for such
distribution (each a "Distributed Right"), then the Exchange Factor shall be
adjusted by multiplying the Exchange Factor previously in effect by a fraction,
the numerator of which shall be the number of REIT Shares issued and outstanding
on the record date plus the maximum number of REIT Shares purchasable under such
Distributed Rights, and the denominator of which shall be the number of REIT
Shares issued and outstanding on the record date plus a fraction, the numerator
of which is the maximum number of REIT Shares purchasable under such Distributed
Rights times the minimum purchase price per REIT Share under such Distributed
Rights, and the denominator of which is the Value of a REIT Share as of the
record date; provided, that if any such Distributed Rights expire or become no
longer exercisable, then the Exchange Factor shall be adjusted, effective
retroactive to the date of distribution of the Distributed Rights, to reflect a
reduced maximum number of REIT Shares or any change in the minimum purchase
price for the purposes of the above fractions; and
(c) in the event the Initial General Partner shall, by
dividend or otherwise, distribute to all holders of its REIT Shares evidences of
its indebtedness or assets (including securities, but excluding any dividend or
distribution referred to in clause (i) above), which evidences of indebtedness
or assets relate to assets not received by the Initial General Partner or
through either Wholly-Owned Trust pursuant to a pro rata distribution by the
Partnership, then the Exchange Factor shall be adjusted to equal the amount
determined by multiplying the Exchange Factor in effect immediately prior to the
close of business on the date fixed for determination of stockholders entitled
to receive such distribution by a fraction of which the numerator shall be such
Value of each REIT Share on the date fixed for such determination, and the
denominator shall be the Value of each REIT Share on the dated fixed for such
determination less the then fair market value (as determined by the Board of
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<PAGE>
Directors, whose determination shall be conclusive) of the portion of the
evidences of indebtedness or assets so distributed applicable to one REIT Share.
Any adjustment to the Exchange Factor shall become effective immediately after
the effective date of such event retroactive to the record date, if any, for
such event; provided that any Limited Partner may waive, by written notice to
the General Partner, the effect of any adjustment to the Exchange Factor
applicable to the Units held by such Limited Partner, and thereafter, such
adjustment will not be effective as to such Units.
"Exchange Right" shall have the meaning set forth in Section
8.6 hereof.
"Funding Debt" means the incurrence of any Debt by or on
behalf of the General Partner for the purpose of providing funds to the
Partnership.
"Funding Notice" is defined in Section 4.5.B.
"General Partner" means the Initial General Partner until the
Transfer Date and thereafter, Tanger GP Trust or its successors as general
partner of the Partnership.
"General Partner Interest" means a Partnership Interest held
by the General Partner that is a general partnership interest. A General Partner
Interest may be expressed as a number of Partnership Units.
"General Partner Loan" is defined in Section 4.5.C.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by
a Partner to the Partnership shall be the gross fair market value of such asset,
as determined by the contributing Partner and the General Partner (as set forth
on Exhibit C attached hereto, as such Exhibit may be amended from time to time)
provided that, if the contributing Partner is the General Partner then, except
with respect to the General Partner's initial Capital Contribution which shall
be determined as set forth on Exhibit C, or capital contributions of cash, the
determination of the fair market value of the contributed asset shall be
determined by Appraisal.
(b) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined by
the General Partner using such reasonable method of valuation as it may adopt,
provided however, that for this purpose the net value of all of the Partnership
assets, in the aggregate, shall be equal to the Deemed Value of the Partnership,
regardless of the method of valuation adopted by the General Partner, as of the
following times:
(i) the acquisition of an additional interest in the
Partnership by a new or existing Partner in exchange
for more than a de minimis Capital Contribution, if the
General Partner reasonably determines that such
adjustment is necessary or appropriate to reflect the
relative economic interests of the Partners in the
Partnership;
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(ii) the distribution by the Partnership to a Partner of
more than a de minimis amount of Partnership property
as consideration for an interest in the Partnership if
the General Partner reasonably determines that such
adjustment is necessary or appropriate to reflect the
relative economic interests of the Partners in the
Partnership;
(iii)the liquidation of the Partnership within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g); and
(iv) at such other times as the General Partner shall
reasonably determine necessary or advisable in order
to comply with Regulations Sections 1.704-1(b) and
1.704-2.
(c) The Gross Asset Value of any Partnership asset distributed
to a Partner shall be the gross fair market value of such asset on the date of
distribution as determined by the distributee and the General Partner, or if the
distributee and the General Partner cannot agree on such a determination, by
Appraisal.
(d) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided,
however, that Gross Asset Values shall not be adjusted pursuant to this
subparagraph (d) to the extent that the General Partner reasonably determines
that an adjustment pursuant to subparagraph (b) is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment
pursuant to this subparagraph (d).
(e) If the Gross Asset Value of a Partnership asset has been
determined or adjusted pursuant to subparagraph (a), (b) or (c), such Gross
Asset Value shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing Net Income and Net Losses.
"Holder" means either the Partner or Assignee owning a Unit.
"IRS" means the Internal Revenue Service, which administers
the internal revenue laws of the United States.
"Immediate Family" means, with respect to any natural Person,
such natural Person's estate or heirs or current spouse, parents,
parents-in-law, children, siblings and grandchildren and any trust or estate,
all of the beneficiaries of which consist of such Person or such Person's
spouse, parents, parents-in-law, children, siblings or grandchildren.
"Incapacity" or "Incapacitated" means, (i) as to any
individual Partner, death, total physical disability or entry by a court of
competent jurisdiction adjudicating him incompetent to manage his Person or his
estate; (ii) as to any corporation which is a Partner, the filing of a
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certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; (iii) as to any partnership which is a Partner, the
dissolution and commencement of winding up of the partnership; (iv) as to any
estate which is a Partner, the distribution by the fiduciary of the estate's
entire interest in the Partnership; (v) as to any trustee of a trust which is a
Partner, the termination of the trust (but not the substitution of a new
trustee); or (vi) as to any Partner, the bankruptcy of such Partner. For
purposes of this definition, bankruptcy of a Partner shall be deemed to have
occurred when (a) the Partner commences a voluntary proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect, (b) the Partner is adjudged as
bankrupt or insolvent, or a final and nonappealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Partner, (c) the Partner executes and delivers a general
assignment for the benefit of the Partner's creditors, (d) the Partner files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Partner in any proceeding of the
nature described in clause (b) above, (e) the Partner seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Partner or for all or any substantial part of the Partner's properties, (f) any
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within 120 days after the commencement thereof, (g) the
appointment without the Partner's consent or acquiescence of a trustee, receiver
of liquidator has not been vacated or stayed within 90 days of such appointment,
or (h) an appointment referred to in clause (g) is not vacated within 90 days
after the expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding
by reason of his status as (A) the General Partner or (B) a director, trustee or
officer of the Partnership or the General Partner or any of the Wholly-Owned
Trusts, and (ii) such other Persons (including Affiliates of the General Partner
or the Partnership) as the General Partner may designate from time to time, in
its sole and absolute discretion.
"Initial General Partner" means Tanger Factory Outlet Centers,
Inc., a North Carolina corporation that qualifies as a REIT, which has been the
general partner of the Partnership at all times prior to the Transfer Date and
which is withdrawing as the general partner of the Partnership on the Transfer
Date. The term "Initial General Partner" will continue to refer to Tanger
Factory Outlet Centers, Inc. after the Transfer Date.
"Limited Partner" means: (i) any Person named as a Limited
Partner in Exhibit A attached hereto, as such Exhibit may be amended from time
to time, and without regard to any classification of the Partnership Interests
held by such Person named as a Limited Partner in Exhibit A; and (ii) any
Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a Limited Partner in the Partnership.
"Limited Partnership Interest" means a Partnership Interest of
a Limited Partner in the Partnership representing a fractional part of the
Partnership Interests of all Limited Partners and includes any and all benefits
to which the holder of such a Partnership Interest may be entitled as provided
in this Agreement, together with all obligations of such Person to comply with
the terms and provisions of this Agreement. A Limited Partnership Interest may
be expressed as a number of Partnership Units and/or Preferred Units.
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"Liquidator" has the meaning set forth in Section 13.2.A.
"Majority in Interest of the Class A Limited Partners" means
those Limited Partners (other than any Limited Partner 50% or more of whose
equity is owned, directly or indirectly, by the General Partner) collectively
holding a number of Class A Common Limited Partnership Units that is greater
than fifty percent (50%) of the aggregate number of Class A Common Limited
Partnership Units of all Limited Partners (other than any Limited Partner 50% or
more whose equity is owned, directly or indirectly, by the General Partner).
"Net Income" or "Net Loss" means for each fiscal year of the
Partnership, an amount equal to the Partnership's taxable income or loss for
such fiscal year, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Net Income or Net
Loss pursuant to this definition of Net Income or Net Loss shall be added to
such taxable income or loss;
(b) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing Net Income or Net Loss pursuant to this definition of
Net Income or Net Loss shall be subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any Partnership
asset is adjusted pursuant to subparagraph (b) or subparagraph (c) of the
definition of Gross Asset Value, the amount of such adjustment shall be taken
into account as gain or loss from the disposition of such asset for purposes of
computing Net Income or Net Loss;
(d) Gain or loss resulting from any disposition of property
with respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year;
(f) To the extent an adjustment to the adjusted tax basis of
any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining Capital Accounts as a result of a distribution other
than in liquidation of a Partner's interest in the Partnership, the amount of
such adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken into account for
purposes of computing Net Income or Net Loss; and
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(g) Notwithstanding any other provision of this definition of
Net Income or Net Loss, any items which are specially allocated pursuant to
Section 6.3 hereof shall not be taken into account in computing Net Income or
Net Loss. The amounts of the items of Partnership income, gain, loss, or
deduction available to be specially allocated pursuant to Section 6.3 hereof
shall be determined by applying rules analogous to those set forth in this
definition of Net Income or Net Loss.
"Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for
a Partnership Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.752-1(a)(2).
"Notice of Exchange" means the Notice of Exchange
substantially in the form of Exhibit B to this Agreement.
"Partner" means a General Partner or a Limited Partner, and
"Partners" means the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
"Partnership" means the limited partnership formed under the
Act and pursuant to this Agreement, and any successor thereto.
"Partnership Interest" means an ownership interest in the
Partnership of either a Limited Partner or the General Partner and includes any
and all benefits to which the holder of such a Partnership Interest may be
entitled as provided in this Agreement, together with all obligations of such
Person to comply with the terms and provisions of this Agreement. A Partnership
Interest may be expressed as a number of Partnership Units and/or Preferred
Units.
"Partnership Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in Partnership Minimum Gain, for a
Partnership Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
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"Partnership Record Date" means the record date established by
the General Partner for the distribution of Available Cash pursuant to Section
5.1 hereof which record date shall be the same as the record date established by
the Initial General Partner for a distribution to its shareholders of some or
all of the portion of such distribution made to the Wholly-Owned Trusts.
"Partnership Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2,
but does not include Preferred Units issued pursuant to Section 4.7.
"Partnership Year" means the fiscal year of the Partnership,
which shall be the calendar year.
"Percentage Interest" means, as to a Partner, its interest in
the Partnership as determined by dividing the Partnership Units owned by such
Partner by the total number of Partnership Units then outstanding and as
specified in Exhibit A attached hereto, as such Exhibit may be amended from time
to time. Preferred Units are not included in any aspect of this calculation.
"Person" means an individual or a corporation, partnership,
trust, unincorporated organization, association or other entity.
"Preemptive Contribution" is defined in Section 4.5.E.
"Preferred Distribution" means an amount per Unit equal to the
greater of $3.9375 or the amount described in subparagraph H(2)(a)(ii) of
Article II of the Articles of Incorporation (calculated in the manner set forth
in such subparagraph H(2)(a)(ii)).
"Preferred Distribution Shortfall" is defined in Section
5.1(B).
"Preferred Offering" means the public offering of the
Preferred Stock pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, initially filed with the Securities and
Exchange Commission on October 6, 1993, as thereafter amended.
"Preferred Stock" means the Series A Cumulative Convertible
Redeemable Preferred Shares of the Initial General Partner.
"Preferred Units" means the interests in the Partnership
received by the Initial General Partner in exchange for the additional capital
contribution described in Section 4.7 of this Agreement and shall include the
Class C Preferred Limited Partnership Units after the Transfer Date.
"Properties" means such interests in real property and
personal property including without limitation, fee interests, interests, in
ground leases, interests in joint ventures, interests in mortgages, and Debt
instruments as the Partnership may hold from time to time.
"Pro Rata Contribution" is defined in Section 4.5.E.
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"Public Offering Funding Amount" is defined in Section 8.6.D.
"Public Offering Funding" is defined in Section 8.6.D.
"Qualified Transferee" means an "Accredited Investor" as
defined in Rule 501 promulgated under the Securities Act.
"Redemption Amount" means, with respect to any Preferred Unit,
the sum of (a) the amount of any accumulated Preferred Distribution Shortfall
with respect to such Preferred Unit, plus (b) $250.00, provided, however, that
in the case of any Preferred Unit (or fraction thereof) redeemed as a result of
a redemption of Preferred Stock pursuant to subparagraph H(8) or (10) of Article
II of the Articles of Incorporation of the Initial General Partner, the
Redemption Amount shall be equal to the amount paid by the Initial General
Partner on account of the redemption of the equivalent amount of such Preferred
Stock (including fractions thereof) pursuant to such subparagraph H(8) or (10),
as applicable.
"Regulations" means the Income Tax Regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section
6.3(A)(viii) of this Agreement.
"REIT" means a real estate investment trust under Section 856
of the Code.
"REIT Properties" means any property or assets owned by the
Initial General Partner directly or by any of the Wholly-Owned Trusts, excluding
the Initial General Partner's interests in the Wholly-Owned Trusts, the
Wholly-Owned Trusts' interests in the Partnership and any property or assets
owned by the Partnership.
"REIT Requirements" has the meaning set forth in Section 5.1.
"REIT Share" shall mean a share of common stock of the Initial
General Partner, but shall not, for purposes of the definition of "Exchange
Factor," include any Excess Shares (as defined in the Articles of Incorporation
of the Initial General Partner).
"REIT Shares Amount" shall mean a number of REIT Shares equal
to the product of the number of Partnership Units made subject to an Exchange by
a Limited Partner, multiplied by the Exchange Factor.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
"Specified Exchange Date" means the date of receipt by the
Initial General Partner of a Notice of Exchange.
"Stock Option Plan" means the non-qualified and incentive
stock option plan of the Initial General Partner.
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"Subsidiary" means, with respect to any Person, any
corporation or other entity of which a majority of (i) the voting power of the
voting equity securities or (ii) the outstanding equity interests is owned,
directly or indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted
as a Limited Partner to the Partnership pursuant to Section 11.4.
"Tanger Family Partnership" means Tanger Family Limited
Partnership, a North Carolina limited partnership.
"Terminating Capital Transaction" means any sale or other
disposition of all or substantially all of the assets of the Partnership or a
related series of transactions that, taken together, result in the sale or other
disposition of all or substantially all of the assets of the Partnership.
"Transfer Date" means the effective date of the transfer of
the entire Partnership Interest of the Initial General Partner to the
Wholly-Owned Trusts, as provided in the Partnership Interest Transfer Agreement
among the Initial General Partner, Tanger Family Partnership, Tanger LP Trust
and Tanger GP Trust, which the parties thereto are executing concurrently with
this Agreement.
"Unit Option Plan" means the Non-Qualified Unit Option Plan of
the Partnership described in Section 4.6.
"Valuation Date" means the date of receipt by the Initial
General Partner of a Notice of Exchange or, if such date is not a Business Day,
the immediately preceding Business Day.
"Value" means, with respect to a REIT Share, the average of
the daily market price for the ten (10) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be: (i) if the REIT Shares are listed or admitted to trading on any securities
exchange or the NASDAQ-National Market System, the closing price, regular way,
on such day, or if no such sale takes place on such day, the average of the
closing bid and asked prices on such day, (ii) if the REIT Shares are not listed
or admitted to trading on any securities exchange or the NASDAQ-National Market
System, the last reported sale price on such day or, if no sale takes place on
such day, the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the General Partner, or
(iii) if the REIT Shares are not listed or admitted to trading on any securities
exchange or the NASDAQ-National Market System and no such last reported sale
price or closing bid and asked prices are available, the average of the reported
high bid and low asked prices on such day, as reported by a reliable quotation
source designated by the General Partner, or if there shall be no bid and asked
prices on such day, the average of the high bid and low asked prices, as so
reported, on the most recent day (not more than 10 days prior to the date in
question) for which prices have been so reported; provided that if there are no
bid and asked prices reported during the 10 days prior to the date in question,
the Value of the REIT Shares shall be determined by the General Partner acting
in good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate. In the event the REIT Shares
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Amount includes rights that a holder of REIT Shares would be entitled to
receive, then the Value of such rights shall be determined by the General
Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate; and
provided further that, in connection with determining the Deemed Value of the
Partnership for purposes of determining the number of additional Partnership
Units issuable upon a Capital Contribution funded by an underwritten public
offering of REIT Shares, then the Value of the REIT Shares shall be the public
offering price per share of the REIT Shares sold.
"Wholly-Owned LP Trust" means Tanger LP Trust.
"Wholly-Owned Trust" means Tanger GP Trust or Tanger LP Trust.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Organization
The Partnership is a limited partnership pursuant to the
provisions of the Act and upon the terms and conditions set forth in this
Agreement. Except as expressly provided herein to the contrary, the rights and
obligations of the Partners and the administration and termination of the
Partnership shall be governed by the Act. The Partnership Interest of each
Partner shall be personal property for all purposes.
The Partnership was initially formed with an initial
contribution of $1.00 by the Initial General Partner for one Partnership Unit of
general partnership interest, and an initial contribution of $1.00 by Tanger
Family Limited Partnership, a North Carolina limited partnership, for one
Partnership Unit of limited partnership interest. Upon the Effective Date, the
contributions specified on Exhibit A as being made on the Effective Date were
made and the Partnership Units specified therein have been issued. Upon such
issuance, the initial Partnership Unit issued to the Initial General Partner and
the initial Partnership Unit issued to Tanger Family Limited Partnership were
redeemed for the price of $1.00 each.
Section 2.2 Name
The name of the Partnership is Tanger Properties Limited
Partnership. The Partnership's business may be conducted under any other name or
names deemed advisable by the General Partner, including the name of the General
Partner or any Affiliate thereof. The words "Limited Partnership," "LP.," "Ltd."
or similar words or letters shall be included in the Partnership's name where
necessary for the purposes of complying with the laws of any jurisdiction that
so requires. The General Partner in its sole and absolute discretion may change
the name of the Partnership at any time and from time to time and shall notify
the Limited Partners of such change in the next regular communication to the
Limited Partners.
Section 2.3 Registered Office and Agent; Principal Office
The address of the registered office of the Partnership in the
State of North Carolina is located at 1400 West Northwood Street, Greensboro,
North Carolina, and the registered agent for service of process on the
Partnership in the State of North Carolina at such registered office shall be as
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set forth in the Certificate, as it may be amended from time to time. The
principal office of the Partnership is 3200 Northline Avenue, Suite 360,
Greensboro, North Carolina 27408 or such other place as the General Partner may
from time to time designate by notice to the Limited Partners. The Partnership
may maintain offices at such other place or places within or outside the State
of North Carolina as the General Partner deems advisable.
Section 2.4 Power of Attorney
A. Each Limited Partner and each Assignee constitutes and
appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record
in the appropriate public offices (a) all certificates,
documents and other instruments (including, without
limitation, this Agreement and the Certificate and all
amendments or restatements thereof) that the General Partner
or the Liquidator deems appropriate or necessary to form,
qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in
which the limited partners have limited liability) in the
State of North Carolina and in all other jurisdictions in
which the Partnership may conduct business or own property;
(b) all instruments that the General Partner deems
appropriate or necessary to reflect any amendment, change,
modification or restatement of this Agreement in accordance
with its terms; (c) all conveyances and other instruments or
documents that the General Partner deems appropriate or
necessary to reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement,
including, without limitation, a certificate of
cancellation; (d) all instruments relating to the admission,
withdrawal, removal or substitution of any Partner pursuant
to, or other events described in, Article 11, 12 or 13
hereof or the Capital Contribution of any Partner; and (e)
all certificates, documents and other instruments relating
to the determination of the rights, preferences and
privileges of Partnership Interests; and
(2) execute, swear to, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and
absolute discretion of the General Partner, to make,
evidence, give, confirm or ratify any vote, consent,
approval, agreement or other action which is made or given
by the Partners hereunder or is consistent with the terms of
this Agreement or appropriate or necessary, in the sole
discretion of the General Partner, to effectuate the terms
or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
to amend this Agreement except in accordance with Article 14 hereof or as may be
otherwise expressly provided for in this Agreement.
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B. The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, in recognition of the fact
that each of the Partners will be relying upon the power of the General Partner
to act as contemplated by this Agreement in any filing or other action by it on
behalf of the Partnership, and it shall survive and not be affected by the
subsequent Incapacity of any Limited Partner or Assignee and the transfer of all
or any portion of such Limited Partner's or Assignee's Partnership Units and
shall extend to such Limited Partner's or Assignee's heirs, successors, assigns
and personal representatives. Each such Limited Partner or Assignee hereby
agrees to be bound by any representation made by the General Partner, acting in
good faith pursuant to such power of attorney; and each such Limited Partner or
Assignee hereby waives any and all defenses which may be available to contest,
engage or disaffirm the action of the General Partner, taken in good faith under
such power of attorney. Each Limited Partner or Assignee shall execute and
deliver to the General Partner or the Liquidator, within 15 days after receipt
of the General Partner's request therefor, such further designation, powers of
attorney and other instruments as the General Partner or the Liquidator, as the
case may be, deems necessary to effectuate this Agreement and the purposes of
the Partnership.
Section 2.5 Term
The term of the Partnership commenced on May 24, 1993 and
shall continue until December 31, 2093 unless it is dissolved sooner pursuant to
the provisions of Article 13 or as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business
The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act, provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
Initial General Partner at all times to be classified as a REIT for federal
income tax purposes, unless the Initial General Partner has determined to cease
to qualify as a REIT, (ii) to enter into any partnership, joint venture or other
similar arrangement to engage in any of the foregoing or the ownership of
interests in any entity engaged in any of the foregoing and (iii) to do anything
necessary or incidental to the foregoing.
Section 3.2 Powers
The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership, provided that the Partnership
shall not take, or refrain from taking, any action which, in the judgment of the
General Partner, in its sole and absolute discretion, (i) could adversely affect
the ability of the Initial General Partner to continue to qualify as a REIT,
(ii) could subject the Initial General Partner to any additional taxes under
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Section 857 or Section 4981 of the Code, or (iii) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
Initial General Partner or its securities, unless any such action (or inaction)
under (i), (ii) or (iii) shall have been specifically consented to by the
General Partner in writing.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
Upon the Effective Date, the Partners made Capital
Contributions as set forth in Exhibit A to this Agreement. To the extent the
Partnership acquires after the date of this Agreement any property by the merger
of any other Person into the Partnership, Persons who receive Partnership
Interests in exchange for their interests in the Person merging into the
Partnership shall become Partners and shall be deemed to have made Capital
Contributions as provided in the applicable merger agreement and as set forth in
Exhibit A as amended. The Partners shall own Partnership Units in the amounts
set forth in Exhibit A and shall have a Percentage Interest in the Partnership
as set forth in Exhibit A, which Percentage Interest shall be adjusted in
Exhibit A from time to time by the General Partner to the extent necessary to
reflect accurately exchanges, redemptions, Capital Contributions, the issuance
of additional Partnership Units, or similar events having an effect on a
Partner's Percentage Interest. Except as provided in Sections 4.5 and 10.5, the
Partners shall have no obligation to make any additional Capital Contributions
or loans to the Partnership.
Section 4.2 Additional Capital Contributions Generally
Except as otherwise required by law or pursuant to this
Article 4, no Partner shall be required or permitted to make any additional
Capital Contributions to the Partnership.
Section 4.3 Loans by Partners
Except as otherwise provided in Section 4.5, no Partner shall
be required or permitted to make any loans to the Partnership.
Section 4.4 Loans by Third Parties
The Partnership may incur Debt, or enter into other similar
credit, guarantee, financing or refinancing arrangements for any purpose
(including, without limitation, in connection with any further acquisition of
Properties) upon such terms as the General Partner determines appropriate;
provided that loans from the General Partner shall be subject to Section 4.5.C.
Section 4.5 Additional Funding and Capital Contributions
A. General. The General Partner may, at any time and from
time to time, determine that the Partnership requires additional funds
("Additional Funds") for the acquisition or development of additional Properties
or for such other purposes as the General Partner may determine. Additional
Funds may be raised by the Partnership, at the election of the General Partner,
in any manner provided in, and in accordance with, the terms of this Section
4.5. No Person shall have any preemptive rights or rights to subscribe for or
acquire any Partnership Interest, except as set forth in this Section 4.5.
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B. Additional General Partner Capital Contributions. Upon
written notice (the"Funding Notice") to the Partners of the need for Additional
Funds and theanticipated source(s) thereof, the General Partner may contribute
Additional Funds to the capital of the Partnership in exchange for Partnership
Units. Notwithstanding the foregoing in this Section 4.5.B, to the extent the
Initial General Partner raises all or any portion of the Additional Funds
through the sale or other issuance of REIT Shares or other equity interests in
the Initial General Partner, the Initial General Partner shall contribute the
Additional Funds to the General Partner and the General Partner shall contribute
the Additional Funds to the capital of the Partnership in exchange for
Partnership Units. No notice to the Partners will be given in respect of Capital
Contributions under Section 4.6 or Section 4.7.
C. General Partner Loans. Upon delivery of a Funding Notice
to the Partners, the General Partner may, or, to the extent the General Partner
enters into a Funding Debt, the General Partner shall, lend the Additional Funds
to the Partnership (a "General Partner Loan"). If the General Partner enters
into such a Funding Debt, the General Partner Loan will consist of the net
proceeds from such Funding Debt and will be on the same terms and conditions,
including interest rate, repayment schedule and costs and expenses, as shall be
applicable with respect to or incurred in connection with such Funding Debt.
Otherwise, all General Partner Loans made pursuant to this Section 4.5 shall be
on terms and conditions no less favorable to the Partnership than would be
available to the Partnership from any third party.
D. Additional Limited Partners. Upon delivery of a Funding
Notice to the Partners, the General Partner on behalf of the Partnership may
raise all or any portion of the Additional Funds by accepting additional Capital
Contributions, (i) in the case of cash, from the General Partner or, pursuant to
Section 4.5.E hereof, any Limited Partner, or, (ii) in the case of property
other than cash, from any Partner and/or third parties, and either (a) in the
case of a Partner, issuing additional Units, or (b) in the case of a third
party, admitting such third party as an Additional Limited Partner. Subject to
the terms of this Section 4.5, the General Partner shall determine the amount,
terms and conditions of such additional Capital Contributions.
E. Preemptive Rights of Partners. The Funding Notice
delivered by the General Partner prior to its making or accepting (on behalf of
the Partnership) any additional cash Capital Contributions pursuant to either
Section 4.5.B or 4.5.D herein shall contain the total amount of additional
Capital Contributions sought to be made to the Partnership, and the terms and
conditions pertaining thereto. Each Partner may elect to make an additional
Capital Contribution not to exceed the product of (i) the total amount of
additional Capital Contributions being sought, multiplied by (ii) such Partner's
Percentage Interest (with such product deemed the "Pro Rata Contribution"). Such
election shall be made, if at all, by providing written notice thereof (the
"Election Notice") to the General Partner within ten (10) days after delivery of
the Funding Notice. Such Election Notice shall contain the amount of the
additional Capital Contribution, if any, the Partner is to make (such additional
Capital Contribution not to exceed the respective Pro Rata Contribution of such
Partner) equal to all or any portion of its Pro Rata Contribution (with all or
such portion thereof that such partner elects to make hereinafter referred to as
the "Preemptive Contribution"). Notwithstanding the foregoing, no Partner shall
have any preemptive rights with respect to a capital contribution under Section
4.6 or Section 4.7.
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F. Additional Units. Except as provided in Section 4.6 or
Section 4.7, upon the acceptance of a Capital Contribution, the
contributing Partner shall receive the following number of additional whole
Partnership Units (rounded down to the nearest whole Partnership Unit):
U1 = CC/DV x TU
where
U1 = number of additional Partnership Units to be issued
CC = In the case of a contribution of Property other
than cash, the Agreed Value of the Capital
Contribution; in the case of a contribution of cash,
the amount of such cash, provided, however, that in
the case of a contribution by the General Partner of
cash proceeds from a public stock offering by the
Initial General Partner, the amount of cash for this
purpose shall be determined without reduction for the
expenses of such offering
DV = Deemed Value of the Partnership as of the
Adjustment Date for such Capital Contribution
TU = total number of Partnership Units outstanding
immediately prior to the Capital Contribution
G. Required General Partner Capital Contributions. In the
event that additional Partnership Units are issued to any Limited Partner for
any reason, including without limitation on account of: (i) a capital
contribution under this Section 4.5; (ii) the exercise of options granted under
Section 4.6; or (iii) the conversion of Preferred Units under Section 4.7; the
General Partner shall make a Capital Contribution to the Partnership in an
amount such that the General Partner receives the number of additional
Partnership Units pursuant to Section 4.5.F that is necessary to maintain the
Percentage Interest held by the General Partner at not less than one percent.
Any Partnership Units received by the General Partner pursuant to this Section
4.5.G shall be deemed to be a general partnership interest.
Section 4.6 Unit Option Plan
The Partnership is expressly authorized hereby to adopt a
Non-Qualified Unit Option Plan (the "Unit Option Plan"), substantially in the
form of Exhibit D hereto, that may grant to employees of the Partnership options
to acquire Class A Common Limited Partnership Units. The number of Partnership
Units authorized to be issued under the Unit Option Plan was limited initially
to 600,000 Partnership Units. By an amendment to the Unit Option Plan dated
January 6, 1998, the number of Partnership Units authorized to be issued under
the Unit Option Plan has been increased to 1,750,000 Partnership Units. If at
any time or from time to time options to acquire Units of Limited Partnership
granted in connection with the Unit Option Plan are properly exercised:
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(a) the consideration paid upon exercise of such options
shall, as soon as practicable after such exercise,
be contributed to the capital of the Partnership;
and
(b) The number of Partnership Units issued in respect of
exercise shall be issued to the exercising party;
provided that if such party is not then a Limited
Partner, that such party become an additional Limited
Partner hereunder pursuant to Section 12.2 hereof.
Section 4.7 Preferred Contributions
A. General. Upon the closing of the Preferred Offering, the
Initial General Partner contributed to the Partnership proceeds of such
Preferred Offering in the amount set forth in Exhibit A-1 to this Agreement. The
Initial General Partner received Preferred Units of the Partnership in an amount
equal to the number of shares of Preferred Stock sold in such Preferred
Offering, which Preferred Units are entitled to receive distributions and to
such other rights as are set forth in this Agreement.
B. Conversion of Preferred Units. If, at any time, holders of
Preferred Stock shall convert such Preferred Stock, in whole or in part
(including fractions thereof), into REIT Shares, then a number of Preferred
Units equal to the number of shares of Preferred Stock (including fractions
thereof) so converted shall automatically be converted into Class B Common
Limited Partnership Units, and the Partners' Percentage Interests shall be
adjusted to reflect such conversion.
C. Redemption of Preferred Units. If, at any time, shares of
Preferred Stock are redeemed (whether automatically or at the option of the
Initial General Partner), the Partnership shall redeem an equal number of
Preferred Units upon the terms set forth in Section 5.1(C).
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement, Characterization, and Priority of
Distributions
(A) Requirement and Characterization of Distributions. The
General Partner shall cause the Partnership to distribute quarterly all, or such
portion as the General Partner may in its discretion determine, of the Available
Cash generated by the Partnership during such quarter in the priority set forth
in subparagraphs (B) and (C) of this Section 5.1. The General Partner shall take
such reasonable efforts, as determined by it in its sole and absolute discretion
and consistent with the Initial General Partner's qualification as a REIT, (i)
to cause the Partnership to distribute sufficient amounts to the Wholly-Owned
Trusts, pro rata, which amounts shall be transferred to the Initial General
Partner, to enable the Initial General Partner to pay shareholder dividends that
will (a) satisfy the requirements for qualifying as a REIT under the Code and
Regulations ("REIT Requirements"), and (b) avoid any federal income or excise
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tax liability of the Initial General Partner, and (ii) to distribute Available
Cash to the Limited Partners so as to preclude any such distribution or portion
thereof from being treated as part of a sale of property to the Partnership by a
Limited Partner under Section 707 of the Code or the Regulations thereunder;
provided that the General Partner and the Partnership shall not have liability
to a Limited Partner under any circumstances as a result of any distribution to
a Limited Partner being so treated.
(B) Priority of Distributions. To the extent Available Cash
is distributed pursuant to subsection (A) of this Section 5.1, such
distributions shall be made each quarter in the following order of priority:
(2) First, to the extent that the amount of cash
distributed to the Holders of Preferred Units for
any prior quarter was less than the Preferred
Distribution for each of the outstanding Preferred
Units for such quarter, and has not been
subsequently distributed pursuant to this subsection
(B)(1) or pursuant to subsection (C) (a "Preferred
Distribution Shortfall"), Available Cash shall be
distributed to the Holders of Preferred Units in an
amount necessary to satisfy such Preferred
Distribution Shortfall for the current and all prior
Partnership Years;
(3) Second, Available Cash shall be distributed to the
Holders of Preferred Units on the Partnership Record
Date in an amount equal to the Preferred
Distribution for each outstanding Preferred Unit;
and
(4) The balance of the Available Cash to be distributed,
if any, shall be distributed to the Holders of
Partnership Units on the Partnership Record Date
with respect to such quarter, pro rata in accordance
with the respective number of Partnership Units so
held on such Partnership Record Date.
(C) Notwithstanding subparagraph (B) of this Section 5.1, in
any quarter during which the Partnership redeems any outstanding Preferred
Units, Available Cash shall first be distributed to the Wholly-Owned LP Trust in
an amount equal to the sum of the Redemption Amounts for each such Preferred
Unit redeemed.
Section 5.2 Distributions in Kind
No right is given to any Partner to demand and receive
property or cash. The General Partner may determine, in its sole and absolute
discretion, to make a distribution in kind to the Partners of Partnership
assets, and such assets shall be distributed in such a fashion as to ensure that
the fair market value is distributed and allocated in accordance with Articles
5, 6 and 13.
Section 5.3 Amounts Withheld
All amounts withheld pursuant to the Code or any provisions of
any state or local tax law and Section 10.5 hereof with respect to any
allocation, payment or distribution to the General Partner, the Limited Partners
or Assignees shall be treated as amounts distributed to the General Partner,
Limited Partners or Assignees, as the case may be, pursuant to Section 5.1 for
all purposes under this Agreement.
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Section 5.4 Distributions Upon Liquidation
Notwithstanding the foregoing, proceeds from a Terminating
Capital Transaction shall be distributed to the Partners in accordance with
Section 13.2.
ARTICLE 6
ALLOCATIONS
Section 6.1 Timing and Amount of Allocations of Net
Income and Net Loss
Net Income and Net Loss of the Partnership shall be determined
and allocated with respect to each fiscal year of the Partnership as of the end
of each such year. Subject to the other provisions of this Article 6, an
allocation to a Partner of a share of Net Income or Net Loss shall be treated as
an allocation of the same share of each item of income, gain, loss or deduction
that is taken into account in computing Net Income or Net Loss.
Section 6.2 General Allocations
Except as otherwise provided in this Article 6, Net Income and
Net Loss shall be allocated to the Holders of Partnership Units and Preferred
Units in the following order of priority:
(A) First, subject to subparagraph (D) of this Section 6.2,
Net Income (or, ifnecessary, items of income or gain) shall be allocated to the
Holders of Preferred Units in an amount equal to the excess of (1) the amount of
Available Cash distributed to such Holders pursuant to subparagraphs (B)(1) and
(B)(2) and (C) (to the extent attributable to Preferred Distribution Shortfalls)
of Section 5.1 for the current and all prior Partnership Years over (2) the
amount of Net Income (or items of income or gain) previously allocated to such
Holders pursuant to this subparagraph (A) of this Section 6.2.
(B) Second, subject to subparagraph (D) of this Section 6.2,
for any Partnership Year ending on or after a date in which Preferred Units are
redeemed, Net Income (or Net Loss) (or items thereof) shall be allocated to the
Wholly-Owned LP Trust in an amount equal to the excess (or deficit) of (1) the
sum of the Redemption Amounts for Preferred Units that have been or are being
redeemed during the Partnership Year over (2) the product of $250.00 times the
number of such Preferred Units. In addition, in the event that the partnership
is liquidated pursuant to Article 13, the allocation described above shall be
made to the Wholly-Owned LP Trust with respect to all Preferred Units then
outstanding.
(C) Third, subject to subparagraphs (D) and (E) of this
Section 6.2, any remaining Net Income and Net Loss (and each item thereof) shall
be allocated to each of the Holders of Partnership Units in accordance with
their respective Percentage Interest.
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(D) Notwithstanding subparagraphs (A), (B), and (C) of this
Section 6.2, the General Partner in its sole discretion shall allocate Net
Income or Net Loss (or items thereof) ("Reallocated Income or Reallocated Loss")
to the Partners to the extent necessary such that, after giving effect to all
allocations for the Partnership Year, the combined Capital Account balance of
the Wholly-Owned Trusts will have a balance that is not less than the product of
(1) the number of Preferred Units held by the Wholly-Owned LP Trust multiplied
by (2) $250.00.
(E) Notwithstanding subparagraph (C) of this Section 6.2 (but
subject to subparagraphs (A), (B), and (D) of this Section 6.2), allocations of
Reallocated Income and Reallocated Loss shall be taken into account in
allocating other items of income, gain, loss and deduction among the Partners
pursuant to this Section 6.2 so that, to the extent possible, the net amount of
such allocations of other items and the allocations of Reallocated Income and
Reallocated Loss to each Partner shall be equal to the net amount that would
have been allocated to each such Partner if the allocations of Reallocated
Income and Reallocated Loss had not occurred.
Section 6.3 Additional Allocation Provisions
Notwithstanding the foregoing provisions of this Article 6:
(A) Regulatory Allocations.
(i) Minimum Gain Chargeback. Except as otherwise provided in
Regulations Section 1.704-2(f), notwithstanding the provisions of
Section 6.2 of the Agreement, or any other provision of this Article
6, if there is a net decrease in Partnership Minimum Gain during any
fiscal year, each Partner shall be specially allocated items of
Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Partner's share of the
net decrease in Partnership Minimum Gain, as determined under
Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items
to be allocated shall be determined in accordance with Regulations
Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3(A)(i) is
intended to qualify as a "minimum gain chargeback" within the meaning
of Regulation Section 1.704-2(f) which shall be controlling in the
event of a conflict between such Regulation and this Section
6.3(A)(i).
(ii) Partner Minimum Gain Chargeback. Except as otherwise
provided in Regulations Section 1.704-2(i)(4), and notwithstanding the
provisions of Section 6.2 of the Agreement, or any other provision of
this Article 6 (except Section 6.3(A)(i)), if there is a net decrease
in Partner Minimum Gain attributable to a Partner Nonrecourse Debt
during any fiscal year, each Partner who has a share of the Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, determined
in accordance with Regulations Section 1.704-2(i)(5), shall be
specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each General Partner
and Limited Partner pursuant thereto. The items to be so allocated
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shall be determined in accordance with Regulations Sections
1.704-2(i)(4) and 1.704-2(j)(2). This Section 63(A)(ii) is intended to
qualify as a "chargeback of partner nonrecourse debt minimum gain"
within the meaning of Regulation Section 1.704-2(i) which shall be
controlling in the event of a conflict between such Regulation and
this Section 6.3(A)(ii).
(iii) Nonrecourse Deductions and Partner Nonrecourse
Deductions. Any Nonrecourse Deductions for any fiscal year shall be
specially allocated to the Partners in accordance with their
Percentage Interests. Any Partner Nonrecourse Deductions for any
fiscal year shall be specially allocated to the Partner(s) who bears
the economic risk of loss with respect to the Partner Nonrecourse Debt
to which such Partner Nonrecourse Deductions are attributable, in
accordance with Regulations Section 1.704-2(i).
(iv) Qualified Income Offset. If any Partner unexpectedly
receives an adjustment, allocation or distribution described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of
Partnership income and gain shall be allocated, in accordance with
Regulations Section 1.704-1(b)(2)(ii)(d), to the Partner in an amount
and manner sufficient to eliminate, to the extent required by such
Regulations, the Adjusted Capital Account Deficit of the Partner as
quickly as possible provided that an allocation pursuant to this
Section 6.3(A)(iv) shall be made if and only to the extent that such
Partner would have an Adjusted Capital Account Deficit after all other
allocations provided in this Article 6 have been tentatively made as
if this Section 6.3(A)(iv) were not in the Agreement. It is intended
that this Paragraph 6.3(A)(iv) qualify and be construed as a
"qualified income offset" within the meaning of Regulations
1.704-1(b)(2)(ii)(d), which shall be controlling in the event of a
conflict between such Regulations and this Paragraph 6.3(A)(iv).
(v) Gross Income Allocation. In the event any Partner has a
deficit Capital Account at the end of any fiscal year which is in
excess of the sum of (1) the amount (if any) such Partner is obligated
to restore to the Partnership, and (2) the amount such Partner is
deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5),
each such Partner shall be specially allocated items of Partnership
income and gain in the amount of such excess as quickly as possible,
provided that an allocation pursuant to this Section 6.3(A)(v) shall
be made if and only to the extent that such Partner would have a
deficit Capital Account in excess of such sum after all other
allocations provided in this Article 6 have been tentatively made as
if this Section 6.3(A)(v) and Section 6.3(A)(iv) were not in the
Agreement.
(vi) Limitation on Allocation of Net Loss. To the extent any
allocation of Net Loss would cause or increase an Adjusted Capital
Account Deficit as to any Partner, such allocation of Net Loss shall
be reallocated among the other Partners in accordance with their
respective Percentage Interests, subject to the limitations of this
Paragraph 6.3(A)(vi).
(vii) Section 754 Adjustment. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Code
Section 734(b) or Code Section 743(b) is required, pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations Section
1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining
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Capital Accounts as the result of a distribution to a Partner in
complete liquidation of his interest in the Partnership, the amount of
such adjustment to the Capital Accounts shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be
specially allocated to the Partners in accordance with their interests
in the Partnership in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Partners to whom such
distribution was made in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(viii) Curative Allocation. The allocations set forth in
Sections 6.3.(A)(i), (ii), (iii), (iv), (v), (vi), and (vii) (the
"Regulatory Allocations") are intended to comply with certain
regulatory requirements, including the requirements of Regulations
Sections 1.704-1(b) and 1.704-2. Notwithstanding the provisions of
Section 6.2, the Regulatory Allocations shall be taken into account in
allocating other items of income, gain, loss and deduction among the
Partners so that, to the extent possible, the net amount of such
allocations of other items and the Regulatory Allocations to each
Partner shall be equal to the net amount that would have been
allocated to each such Partner if the Regulatory Allocations had not
occurred.
(B) For purposes of determining a Partner's proportional
share of the "excess nonrecourse liabilities" of the Partnership within the
meaning of Regulations Section 1.752-3(a)(3), each Partner's interest in
Partnership profits shall be such Partner's Percentage Interest.
Section 6.4 Tax Allocations
A. In General. Except as otherwise provided in this Section
6.4, for income tax purposes each item of income, gain, loss and deduction
(collectively, "Tax Items") shall be allocated among the Partners in the same
manner as its correlative item of "book" income, gain, loss or deduction is
allocated pursuant to Section 6.2 and 6.3.
B. Allocations Respecting Section 704(c) Revaluations.
Notwithstanding Section 6.4(A), Tax Items with respect to Partnership property
that is contributed to the Partnership by a Partner shall be shared among the
Partners for income tax purposes pursuant to Regulations promulgated under
Section 704(c) of the Code, so as to take into account the variation, if any,
between the basis of the property to the Partnership and its initial Gross Asset
Value. With respect to Partnership property that is initially contributed to the
Partnership upon its formation, such variation between basis and initial Gross
Asset Value shall be taken into account under the "traditional method" as
described in Proposed Treasury Regulation ss. 1.704-3(b) and Treasury Regulation
ss. 1.704-1(c)(2). With respect to properties subsequently contributed to the
Partnership, the Partnership shall account for such variation under any method
approved under Section 704(c) of the Code and the applicable regulations as
chosen by the General Partner. In the event the Gross Asset Value of any
Partnership asset is adjusted pursuant to subparagraph (b) of the definition of
Gross Asset Value (provided in Article 1 of the Agreement), subsequent
allocations of Tax Items with respect to such asset shall take account of the
variation, if any, between the adjusted basis of such asset and its Gross Asset
Value in the same manner as under Section 704(c) of the Code and the applicable
regulations.
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ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
A. Except as otherwise expressly provided in this Agreement,
all management powers over the business and affairs of the Partnership are
exclusively vested in the General Partner, and no Limited Partner shall have any
right to participate in or exercise control or management power over the
business and affairs of the Partnership. Except as provided in Section 8.5 with
respect to the Holders of Class B Common Limited Partnership Interests, the
General Partner may not be removed by the Limited Partners with or without
cause, except with the consent of the General Partner. In addition to the powers
now or hereafter granted a general partner of a limited partnership under
applicable law or which are granted to the General Partner under any other
provision of this Agreement, the General Partner, subject to the other
provisions hereof including Section 7.3, shall have full power and authority to
do all things deemed necessary or desirable by it to conduct the business of the
Partnership, to exercise all powers set forth in Section 3.2 hereof and to
effectuate the purposes set forth in Section 3.1 hereof, including, without
limitation:
(1) the making of any expenditures, the lending or
borrowing of money (including, without limitation,
making prepayments on loans and borrowing money to
permit the Partnership to make distributions to its
Partners in such amounts as will permit the Initial
General Partner (so long as the Initial General
Partner has determined to qualify as a REIT) to
avoid the payment of any federal income tax
(including, for this purpose, any excise tax
pursuant to Section 4981 of the Code) and to make
distributions to its shareholders sufficient to
permit the Initial General Partner to maintain REIT
status), the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities,
the issuance of evidences of indebtedness (including
the securing of same by mortgage, deed of trust or
other lien or encumbrance on the Partnership's
assets) and the incurring of any obligations it
deems necessary for the conduct of the activities of
the Partnership;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to
governmental or other agencies having jurisdiction
over the business or assets of the Partnership;
(3) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any assets
of the Partnership or the merger or other
combination of the Partnership with or into another
entity provided, that, in the event of any sale,
exchange, disposition or other transfer of any
property of the Partnership, the Partnership shall
no later than 15 days after the end of the calendar
quarter in which such sale, exchange, disposition or
other transfer becomes a taxable event to Partners,
to the extent of the net cash proceeds of such sale,
exchange, disposition or other transfer, effect a
distribution of cash, less its then regular
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quarterly distribution, in an amount such that the
pro rata share thereof received by each Partner
shall equal or exceed the total liability of such
Partner for federal, state and local income and
franchise taxes resulting from such sale, exchange,
disposition or other transfer and from such
distribution; provided, further, that any Partner
may elect not to receive all or any part of such
additional distribution and in such event, although
such Partner's Capital Account will not be reduced
to the extent that no distribution is received by
such Partner, the Partner's Percentage Interest and
the number of Partnership Units considered owned by
such Partner shall not be adjusted, it being the
intent that the sole effect of the election not to
receive a distribution will be to increase the
amount of cash or other property to be received by
such Partner upon a dissolution of the Partnership;
(4) the mortgage, pledge, encumbrance or hypothecation
of any assets of the Partnership, and the use of the
assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent
with the terms of this Agreement and on any terms it
sees fit, including, without limitation, the
financing of the conduct or the operations of the
General Partner, the Partnership the lending of
funds to other Persons and the repayment of
obligations of the Partnership and any other Person
in which it has an equity investment;
(5) the negotiation, execution, and performance of any
contracts, leases, conveyances or other instruments
that the General Partner considers useful or
necessary to the conduct of the Partnership's
operations or the implementation of the General
Partner's powers under this Agreement;
(6) the distribution of Partnership cash or other
Partnership assets in accordance with this
Agreement;
(7) the selection and dismissal of employees of the
Partnership or the General Partner (including,
without limitation, employees having titles such as
"president," "vice president," "secretary" and
"treasurer"), and agents, outside attorneys,
accountants, consultants and contractors of the
General Partner or the Partnership and the
determination of their compensation and other terms
of employment or hiring and the granting to any of
such employees of Partnership options to acquire
Units under the Unit Option Plan;
(8) the maintenance of such insurance for the benefit of
the Partnership and the Partners as it deems
necessary or appropriate;
(9) the formation of, or acquisition of an interest in,
and the contribution of property to, any further
limited or general partnerships, joint ventures or
other relationships that it deems desirable
(including, without limitation, the acquisition of
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interests in, and the contributions of property to
any Subsidiary and any other Person in which it has
an equity investment from time to time); provided
that as long as the Initial General Partner has
determined to continue to qualify as a REIT, the
General Partner may not engage in any such
formation, acquisition or contribution that would
cause the Initial General Partner to fail to qualify
as a REIT;
(10) the control of any matters affecting the rights and
obligations of the Partnership, including the
conduct of litigation and the incurring of legal
expense and the settlement of claims and litigation,
and the indemnification of any Person against
liabilities and contingencies to the extent
permitted by law;
(11) the undertaking of any action in connection with the
Partnership's direct or indirect investment in any
Person (including, without limitation, the
contribution or loan of funds by the Partnership to
such Persons); and
(12) subject to the other provisions in this Agreement,
the determination of the fair market value of any
Partnership property distributed in kind using such
reasonable method of valuation as it may adopt,
provided that such methods are otherwise consistent
with requirements of this Agreement.
B. Each of the Limited Partners agrees that the General
Partner is authorized to execute, deliver and perform the above-mentioned
agreements and transactions on behalf of the Partnership without any further
act, approval or vote of the partners, notwithstanding any other provisions of
this Agreement (except as provided in Section 7.3), the Act or any applicable
law, rule or regulation. The execution, delivery or performance by the General
Partner or the Partnership of any agreement authorized or permitted under this
Agreement shall not constitute a breach by the General Partner of any duty that
the General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General
Partner may cause the Partnership to obtain and maintain (i) casualty, liability
and other insurance on the properties of the Partnership and (ii) liability
insurance for the Indemnities hereunder.
D. At all times from and after the date hereof, the General
Partner may cause the Partnership to establish and maintain working capital
reserves in such amounts as the General Partner, in it sole and absolute
discretion, deems appropriate and reasonable from time to time.
E. In exercising its authority under this Agreement, the
General Partner may, but shall be under no obligation to, take into account the
tax consequences to any Partner (including the General Partner) and to the
Initial General Partner of any action taken by it. The General Partner and the
Partnership shall not have liability to the Initial General Partner or to a
Partner under any circumstances as a result of an income tax liability incurred
by the Initial General Partner or such Limited Partner as a result of an action
(or inaction) by the General Partner pursuant to its authority under this
Agreement.
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Section 7.2 Certificate of Limited Partnership
To the extent that such action is determined by the General
Partner to be reasonable and necessary or appropriate, the General Partner shall
file amendments to and restatements of the Certificate and do all the things to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of North
Carolina and each other state, the District of Columbia or other jurisdiction,
in which the Partnership may elect to do business or own property. Subject to
the terms of Section 8.5.A(4) hereof, the General Partner shall not be required,
before or after filing, to deliver or mail a copy of the Certificate or any
amendment thereto to any Limited Partner. The General Partner shall use all
reasonable efforts to cause to be filed such other certificates or documents as
may be reasonable and necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership (or a partnership in which
the limited partners limited liability) in the State of North Carolina, any
other state, or the District of Columbia or other jurisdiction, in which the
Partnership may elect to do business or own property.
Section 7.3 Restrictions on General Partner's Authority
A. The General Partner may not take any action in
contravention of this Agreement, including, without limitation:
(1) take any action that would make it impossible to
carry on the ordinary business of the Partnership,
except as otherwise provided in this Agreement;
(2) possess Partnership property, or assign any rights
in specific Partnership property, for other than a
Partnership purpose except as otherwise provided in
this Agreement;
(3) admit a Person as a Partner, except as otherwise
provided in this Agreement;
(4) perform any act that would subject a Limited Partner
to liability as a general partner in any
jurisdiction or any other liability except as
provided herein or under the Act; or
(5) enter into any contract, mortgage, loan or other
agreement that prohibits or restricts, or has the
effect of prohibiting, the ability of a Limited
Partner to exercise its rights to an Exchange in
full, except with the written consent of such
Limited Partner.
B. The General Partner shall not, without the prior Consent
of the Class A Limited Partners, undertake, on behalf of the Partnership, any of
the following actions or enter into any transaction which would have the effect
of such transactions:
(1) Except as provided in Section 7.3.C., amend, modify
or terminate this Agreement other than to reflect
the admission, substitution, termination or
withdrawal of partners pursuant to Article 12
hereof.
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(2) Make a general assignment for the benefit of
creditors or appoint or acquiesce in the appointment
of a custodian, receiver or trustee for all or any
part of the assets of the Partnership.
(3) Institute any proceeding for Bankruptcy on behalf of
the Partnership.
(4) Approve or acquiesce to the transfer of the
Partnership Interest of the General Partner to any
Person other than the Partnership.
(5) Admit into the Partnership any Additional or
Substitute General Partners.
C. Notwithstanding Section 7.3.B, the General Partner shall
have the power, without any consent of any Limited Partners, to amend this
Agreement as may be required to facilitate or implement any of the following
purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General
Partner or any Affiliate of the General Partner for
the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination,
or withdrawal of Partners in accordance with this
Agreement;
(3) to reflect a change that is of an inconsequential
nature and does not adversely affect the Limited
Partners in any material respect, or to cure any
ambiguity, correct or supplement any provision in
this Agreement not inconsistent with law or with
other provisions, or make other changes with respect
to matters arising under this Agreement that will
not be inconsistent with law or with the provisions
of this Agreement;
(4) to satisfy any requirements, conditions, or
guidelines contained in any order, directive,
opinion, ruling or regulation of a federal or state
agency or contained in federal or state law;
(5) to amend the provisions of this Agreement to protect
the qualification of the Initial General Partner as
a REIT because of a change in applicable law (or an
authoritative interpretation thereof), a ruling of
the Internal Revenue Service or if the Initial
General Partner has determined to cease qualifying
as a REIT; and
(6) to modify, as set forth in the definition of
"Capital Account," the manner in which Capital
Accounts are computed.
The General Partner will provide notice to the Limited Partners when any action
under this Section 7.3.C is taken.
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D. Notwithstanding Section 7.3.B and 7.3.C hereof, this
Agreement shall not be amended, and no action may be taken by the General
Partner, without the Consent of each Partner adversely affected if such
amendment or action would (i) convert a Limited Partner's interest in the
Partnership into a general partner's interest (except as the result of the
General Partner acquiring such interest), (ii) modify the limited liability of a
Limited Partner, (iii) alter rights of the Partner to receive distributions
pursuant to Article 5 or Section 7.1.A(3), or the allocations specified in
Article 6 (except as permitted pursuant to Section 4.5, 4.6, 4.7 and Section
7.3.C(3) hereof), (iv) alter or modify the rights to an Exchange or REIT Shares
Amount as set forth in Section 8.6, and related definitions hereof or (v) amend
this Section 7.3.D. Further, no amendment may alter the restrictions on the
General Partner's authority set forth elsewhere in this Section 7.3 without the
Consent specified in such section.
E. The General Partner shall not, without the prior Consent
of the Holders of Class A Limited Partnership Units, so long as the Holders of
the Class A Common Limited Partnership Units have at least 10% of the aggregate
Percentage Interests of the Partnership, on behalf of the Partnership, take any
of the following actions:
(1) Dissolve the Partnership.
(2) Agree to or consummate any merger, consolidation,
reorganization or other business combination to
which the Partnership is a party.
(3) Sell, dispose, convey or otherwise transfer all or
substantially all of the assets of the Partnership,
in one or a series of transactions.
Section 7.4 Reimbursement of the General Partner
A. Except as provided in this Section 7.4 and elsewhere in
this Agreement (including the provisions of Articles 5 and 6 regarding
distributions, payments and allocations to which it may be entitled), the
General Partner shall not be compensated for its services as general partner of
the Partnership.
B. Subject to Section 15.11, the General Partner shall be
reimbursed on a monthly basis, or such other basis as the General Partner may
determine in its sole and absolute discretion, for all expenses it incurs
relating to the ownership of interests in and operation of, or for the benefit
of, the Partnership. The Limited Partners acknowledge that the General Partner's
sole business is the ownership of interests in and operation of the Partnership
and that such expenses are incurred for the benefit of the Partnership; provided
that, the General Partner shall not be reimbursed for expenses it incurs
relating to the organization of the Partnership and the General Partner and the
initial public offering of REIT Shares by the Initial General Partner or
subsequent offerings of securities of the Initial General Partner. Such
reimbursements shall be in addition to any reimbursement to the General Partner
as a result of indemnification pursuant to Section 7.7 hereof.
C. It is the intent of the Partners that any amounts paid by
the Partnership to the General Partner pursuant to this Section 7.4 be treated
as a "guaranteed payment" within the meaning of Section 707(c) of the Code.
Section 7.5 Outside Activities of the General Partner
and the Initial General Partner
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A. The General Partner shall not directly or indirectly enter
into or conduct any business, other than in connection with the ownership,
acquisition and disposition of Partnership Interests as a General Partner and
the management of the business of the Partnership and such activities as are
incidental to same. Without the Consent of the Class A Limited Partners, the
General Partner shall not, directly or indirectly, participate in or otherwise
acquire any interest in any real or personal property, except its General
Partner Interest, and other than such short-term liquid investments, bank
accounts or similar instruments as it deems necessary to carry out its
responsibilities contemplated under this Agreement and the Certificate of
Incorporation. Any Limited Partner Interests acquired by the General Partner,
whether pursuant to exercise by a Limited Partner of its right to an Exchange or
otherwise, shall be automatically converted into a General Partner Interest
comprised of an identical number of Partnership Units.
B. The Initial General Partner shall not directly or
indirectly enter into or conduct any business, other than in connection with the
ownership, acquisition and disposition of its interests in the Wholly-Owned
Trusts, its operation as a public reporting company with a class (or classes) of
securities registered under the Securities Exchange Act of 1943, as amended, its
operation as a REIT and such activities as are incidental to the same. In the
event the Initial General Partner exercises its rights under Article II of the
Articles of Incorporation to purchase REIT Shares, then the General Partner
shall cause the Partnership to purchase from the Wholly-Owned LP Trust a number
of Partnership Units as determined based on the application of the Exchange
Factor on the same terms that the Initial General Partner purchased such REIT
Shares.
Section 7.6 Contracts with Affiliates
A. The Partnership may lend or contribute to Persons in which
it has an equity investment, and such Persons may borrow funds from the
Partnership, on terms and conditions established in the sole and absolute
discretion of the General Partner. The foregoing authority shall not create any
right or benefit in favor of any Person.
B. Except as provided in Section 7.5.A, the Partnership may
transfer assets to joint ventures, other partnerships, corporations or other
business entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions consistent with this Agreement and
applicable law.
C. The General Partner, in its sole and absolute discretion
and without the approval of the Limited Partners, may propose and adopt on
behalf of the Partnership employee benefit plans funded by the Partnership for
the benefit of employees of the General Partner the Initial General Partner, the
Partnership, Subsidiaries of the Partnership or any Affiliate of any of them in
respect of services performed, directly or indirectly, for the benefit of the
Partnership, the General Partner, the Initial General Partner or any of the
Partnership's Subsidiaries.
D. The General Partner is expressly authorized to enter into,
in the name and on behalf of the Partnership, a right of first opportunity
arrangement and other conflict avoidance agreements with various Affiliates of
the Partnership and the General Partner, on such terms as the General Partner,
in its sole and absolute discretion, believes are advisable.
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Section 7.7 Indemnification
A. The Partnership shall indemnify an Indemnitee from and
against any and all losses, claims, damages, liabilities, joint or several,
expenses (including legal fees and expenses), judgments, fines, settlements, and
other amounts arising from any and all claims, demands, actions, suits or
proceedings, civil, criminal, administrative or investigative, that relate to
the operations of the Partnership as set forth in this Agreement in which any
Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, unless it is established that: (i) the act or omission of the
Indemnitee was material to the matter giving rise to the proceeding and either
was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the Indemnitee actually received an improper personal benefit
in money, property or services; or (iii) in the case of any criminal proceeding,
the Indemnitee had reasonable cause to believe that the act or omission was
unlawful. The termination of any proceeding by judgment, order or settlement
does not create a presumption that the Indemnitee did not meet the requisite
standard of conduct set forth in this Section 7.7.A. The termination of any
proceeding by conviction or upon a plea of nolo contendere or its equivalent, or
any entry of an order of probation prior to judgment, creates a rebuttable
presumption that the Indemnitee acted in a manner contrary to that specified in
this Section 7.7.A. Any indemnification pursuant to this Section 7.7 shall be
made only out of the assets of the Partnership.
B. Reasonable expenses incurred by an Indemnitee who is a
party to a proceeding may be paid or reimbursed by the Partnership in advance of
the final disposition of the proceeding upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee's good faith belief that
the standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 7.7.A has been met, and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7 shall be
in addition to any other rights to which an Indemnitee or any other Person may
be entitled under any agreement, pursuant to any vote of the Partners, as a
matter of law or otherwise, and shall continue as to an Indemnitee who has
ceased to serve in such capacity.
D. The Partnership may purchase and maintain insurance, on
behalf of the Indemnities and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expenses that
may be incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement.
E. For purposes of this Section 7.7, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise involves services by, it to the plan or
participates or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute fines within the meaning of Section 7.7; and actions taken or
omitted by the Indemnitee with respect to an employee benefit plan in the
performance of its duties for a purpose reasonably believed by it to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be
for a purpose which is not opposed to the best interests of the Partnership.
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F. In no event may an Indemnitee subject the Limited Partners
to personal liability by reason of the indemnification provisions set forth in
this Agreement.
G. An Indemnitee shall not be denied indemnification in whole
or in part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of
the Indemnities, their heirs, successors,assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons.
I. It is the intent of the Partners that any amounts paid by
the Partnership to the General Partner pursuant to this Section 7.7 be treated
as a "guaranteed payment" within the meaning of Section 707(c) of the Code.
Section 7.8 Liability of the General Partner
A. Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable or accountable in damages or
otherwise to the Partnership, any Partners or any Assignees for losses
sustained, liabilities incurred or benefits not derived as a result of errors in
judgment or mistakes of fact or law of any act or omission if the General
Partner acted in good faith.
B. The Limited Partners expressly acknowledge that the
General Partner is acting for the benefit of the Partnership, the Limited
Partners and the Initial General Partner and its shareholders collectively, that
the General Partner is under no obligation to give priority to the separate
interests of the Limited Partners or the Initial General Partner or its
shareholders (including, without limitation, the tax consequences to Limited
Partners or Assignees or to the Initial General Partner or its shareholders) in
deciding whether to cause the Partnership to take (or decline to take) any
actions, except as expressly provided herein.
C. Subject to its obligations and duties as General Partner
set forth in Section 7.1.A hereof, the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its agents. The General
Partner shall not be responsible for any misconduct or negligence on the part of
any such agent appointed by it in good faith.
D. Any amendment, modification or repeal of this Section 7.8
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's liability to the Partnership and
the Limited Partners under this Section 7.8 as in effect immediately prior to
such amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
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Section 7.9 Other Matters Concerning the General Partner
A. The General Partner may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
or other paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties.
B. The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it, and any act taken or omitted to be
taken in reliance upon the opinion of such Persons as to matters which such
General Partner reasonably believes to be within such Person's professional or
expert competence shall be conclusively presumed to have been done or omitted in
good faith and in accordance with such opinion.
C. The General Partner shall have the right, in respect of
any of its powers or obligations hereunder, to act through any of its duly
authorized officers and a duly appointed attorney or attorneys-in-fact. Each
such attorney shall, to the extent provided by the General Partner in the power
of attorney, have full power and authority to do and perform all and every act
and duty which is permitted or required to be done by the General Partner
hereunder.
D. Notwithstanding any other provisions of this Agreement or
the Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to protect the ability of the Initial
General Partner to continue to qualify as a REIT or (ii) to avoid the Initial
General Partner incurring any taxes under Section 857 or Section 4981 of the
Code, is expressly authorized under this Agreement and is deemed approved by all
of the Limited Partners.
Section 7.10 Title to Partnership Assets
Title to Partnership assets, whether real, personal or mixed
and whether tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and no Partners, individually or collectively, shall
have any ownership interest in such Partnership assets or any portion thereof.
Title to any or all of the Partnership assets may be held in the name of the
Partnership, the General Partner or one or more nominees, as the General Partner
may determine, including Affiliates of the General Partner. The General Partner
hereby declares and warrants that any Partnership assets for which legal title
is held in the name of the General Partner or any nominee or Affiliate of the
General Partner shall be held by the General Partner for the use and benefit of
the Partnership in accordance with the provisions of this Agreement; provided,
however, that the General Partner shall use its best efforts to cause beneficial
and record title to such assets to be vested in the Partnership as soon as
reasonably practicable. All Partnership assets shall be recorded as the property
of the Partnership in its books and records, irrespective of the name in which
legal title to such Partnership assets is held.
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Section 7.11 Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement,
any Person dealing with the Partnership shall be entitled to assume that the
General Partner has full power and authority to encumber, sell or otherwise use
in any manner any and all assets of the Partnership and to enter into any
contracts on behalf of the Partnership, and such Person shall be entitled to
deal with the General Partner as if it were the Partnership's sole party in
interest, both legally and beneficially. Each Limited Partner hereby waives any
and all defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and (iii)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
The Limited Partners shall have no liability under this
Agreement except as expressly provided in this Agreement or under the Act.
Section 8.2 Management of Business
No Limited Partner or Assignee (other than the General
Partner, any of its Affiliates or any officer, director, employee, partner,
agent or trustee of the General Partner, the Partnership or any of their
Affiliates, in their capacity as such) shall take part in the operations,
management or control (within the meaning of the Act) of the Partnership's
business transact any business in the Partnership's name or have the power to
sign documents for or otherwise bind the Partnership. The transaction of any
such business by the General Partner, any of its Affiliates or any officer,
director, employee, partner, agent or trustee of the General Partner, the
Partnership or any of their Affiliates, in their capacity as such, shall not
affect, impair or eliminate the limitations on the liability of the Limited
Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners
Subject to any agreements entered into by a Limited Partner or
its Affiliates with the General Partner, the Initial General Partner, the
Partnership or a Subsidiary, any Limited Partner and any officer, director,
employee, agent, trustee, Affiliate or shareholder of any Limited Partner shall
be entitled to and may have business interests and engage in business activities
in addition to those relating to the Partnership, including business interests
and activities in direct competition with the Partnership. Neither the
Partnership nor any Partners shall have any rights by virtue of this Agreement
in any business ventures of any Limited Partner or Assignee. Subject to such
agreements, none of the Limited Partners nor any other Person shall have any
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rights by virtue of this Agreement or the partnership relationship established
hereby in any business ventures of any other Person, other than the General
Partner, and such Person shall have no obligation pursuant to this Agreement to
offer any interest in any such business ventures to the Partnership, any Limited
Partner or any such other Person, even if such opportunity is of a character
which, if presented to the Partnership, any Limited Partner or such other
Person, could be taken by such Person.
Section 8.4 Return of Capital
Except pursuant to the rights of Exchange set forth in Section
8.6, no Limited Partner shall be entitled to the withdrawal or return of his
Capital Contribution, except to the extent of distributions made pursuant to
this Agreement or upon termination of the Partnership as provided herein. No
Limited Partner or Assignee shall have priority over any other Limited Partner
or Assignee either as to the return of Capital Contributions, or as otherwise
expressly provided in this Agreement, as to profits, losses, distributions or
credits.
Section 8.5 Rights of Limited Partners Relating to the
Partnership
A. In addition to other rights provided by this Agreement or
by the Act, and except as limited by Section 8.5.D hereof, each Limited Partner
shall have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at the Partnership's expense:
(1) to obtain a copy of the most recent annual and
quarterly reports filed with the Securities and
Exchange Commission by the Initial General Partner
pursuant to the Securities Exchange Act of 1934, as
amended, and each communication sent to the
shareholders of the Initial General Partner;
(2) to obtain a copy of the Partnership's federal, state
and local income tax returns for each Partnership
Year;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each
Partner;
(4) to obtain a copy of this Agreement and the
Certificate and all amendments thereto, together
with executed copies of all powers of attorney
pursuant to which this Agreement, the Certificate
and all amendments thereto have been executed; and
(5) to obtain true and full information regarding the
amount of cash and a description and statement of
any other property or services contributed by each
Partner and which each Partner has agreed to
contribute in the future, and the date on which each
became a Partner.
B. The Partnership shall notify each Limited Partner in
writing of any change made to the Exchange Factor within 10 Business Days of the
date such change becomes effective.
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C. In addition to the foregoing rights, and notwithstanding
anything to the contrary in this Agreement, the Holders of the Class B Common
Limited Partnership Units shall have the right at any time to remove the General
Partner, with or without cause upon written notice. A substitute General Partner
shall be named by the holders of a majority in interest of all of the Class A
Common Limited Partnership Units. Upon such removal, the General Partner's
Partnership Units shall become Class B Common Limited Partnership Units.
D. Notwithstanding any other provision of this Section 8.5,
the General Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that (i) the General Partner
believes to be in the nature of trade secrets or other information the
disclosure of which the General Partner in good faith believes is not in the
best interests of the Partnership or (ii) the Partnership or the General Partner
is required by law or by agreements with unaffiliated third parties to keep
confidential.
Section 8.6 Exchange Rights
A. Each Limited Partner shall have the right to require the
Initial General Partner to acquire all or a portion of any Class A Common
Limited Partnership Units held by such Limited Partner (such Class A Common
Limited Partnership Units being hereafter "Tendered Units") in exchange for REIT
Shares (an "Exchange"). By execution of this Agreement, the Initial General
Partner expressly agrees to reserve for future issue, and to issue in exchange
for Tendered Units, a sufficient number of its authorized but unissued REIT
Shares to acquire Tendered Units pursuant to the provisions of this Section 8.6.
Such Exchange shall be exercised pursuant to a Notice of Exchange delivered to
the Initial General Partner by the Limited Partner who is exercising the
relevant right (the "Tendering Partner"). Such Limited Partner shall have no
right, with respect to any Class A Common Limited Partnership Units so
transferred, to receive any distributions paid after the Specified Exchange
Date.
B. The Tendering Partner effecting an Exchange shall have the
right to receive, as of Specified Exchange Date, the REIT Shares Amount. The
REIT Shares Amount shall be delivered as duly authorized, validly issued, fully
paid and nonassessable REIT Shares, free of any pledge, lien, encumbrance or
restriction, other than those provided in the Articles of Incorporation, the
Securities Act of 1933, as amended (the "Securities Act") and relevant state
securities or blue sky laws. Notwithstanding any delay in such delivery (but
subject to Section 8.6.C, the Tendering Partner shall be deemed the owner of
such REIT Shares and rights for all purposes, including with limitation, rights
to vote or consent, receive dividends, and exercise rights, as of the Specified
Exchange Date.
C. Notwithstanding the provisions of Section 8.6.A, 8.6.B or
any other provision of this Agreement, a Limited Partner (i) shall not be
entitled to effect an Exchange to the extent the ownership or right to acquire
REIT Shares pursuant to such Exchange by such Partner on the Specified Exchange
Date would cause such Partner or any other Person to violate the restrictions on
ownership and transfer of shares set forth in the Articles of Incorporation and
(ii) shall have no rights under this Agreement which would otherwise be
prohibited under the Articles of Incorporation. To the extent any attempted
Exchange would be in violation of this Section 8.6.C, it shall be void ab initio
to such extent and such Limited Partner shall not require any rights or economic
interest in REIT Shares otherwise issuable upon such Exchange.
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D. With respect to any Exchange pursuant to this Section 8.6:
(1) Concurrently with any Exchange under this Section
8.6, the Initial General Partner shall transfer all
Tendered Units to the Wholly-Owned Trusts and shall
allocate the Tendered Units between the Wholly-Owned
Trusts in such amounts as is necessary to maintain
the Percentage Interest held by the General Partner
at not less than one percent. In exchange for such
Tendered Units, each Wholly-Owned Trust shall issue
a number of its common shares to the Initial General
Partner that is equal to the number of Tendered
Units transferred pursuant to such Exchange from the
Initial General Partner to such Wholly-Owned Trust.
All Partnership Units acquired by the General
Partner pursuant to this Section 8.6 shall
automatically, and without further action required,
be converted into and deemed to be General Partner
interests comprised of the same number of
Partnership Units. Notwithstanding anything to the
contrary in this Agreement, all Partnership Units
acquired by the Wholly-Owned LP Trust pursuant to
this Section 8.6 shall automatically, and without
further action required, be converted into and
deemed to be Class B Common Limited Partnership
Units.
(2) The consummation of such Exchange shall be subject
to the expiration or termination of the applicable
waiting period, if any, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
(3) Each Tendering Partner shall continue to own all
Partnership Units subject to any Exchange and be
treated as a Limited Partner with respect to such
Partnership Units for all purposes of this
Agreement, until such Partnership Units are
transferred to the Wholly-Owned Trusts and paid for
on the Specified Exchange Date.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
The General Partner shall keep or cause to be kept at the
principal office of the Partnership appropriate books and records with respect
to the Partnership's business, including without limitation, all books and
records necessary to provide to the Limited Partners any information, lists and
copies of documents required to be provided pursuant to Section 9.3 hereof. Any
records maintained by or on behalf of the Partnership in the regular course of
its business may be kept on, or be in the form of, punch cards, magnetic tape,
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photographs, micrographics or any other information storage device, provided
that the records so maintained are convertible into clearly legible written form
within a reasonable period of time. The books of the Partnership shall be
maintained, for financial and tax reporting purposes, on an accrual basis in
accordance with generally accepted accounting principles.
Section 9.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
A. As soon as practicable, but in no event later than 105
days after the close of each Partnership Year, or such earlier date as they are
filed with Securities and Exchange Commission, the General Partner shall cause
to be mailed to each Limited Partner as of the close of the Partnership Year, an
annual report containing financial statements of the Partnership, or of the
Initial General Partner if such statements are prepared solely on a consolidated
basis with the Initial General Partner, for such Partnership Year, presented in
accordance with generally accepted accounting principles, such statements to be
audited by a nationally recognized firm of independent public accountants
selected by the General Partner.
B. As soon as practicable, but in no event later than 105
days after the close of each calendar quarter (except the last calendar quarter
of each year) the General Partner shall cause to be mailed to each Limited
Partner as of the last day of the calendar quarter, a report containing
unaudited financial statements of the Partnership, or of the Initial General
Partner, if such statements are prepared solely on a consolidated basis with the
applicable law or regulation, or as the General Partner determines to be
appropriate.
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns
The General Partner shall arrange for the preparation and
timely filing of all returns of Partnership income, gains, deductions, losses
and other items required of the Partnership for federal and state income tax
purposes and shall use all reasonable efforts to furnish, within 90 days of the
close of each taxable year, the tax information reasonably required by Limited
Partners for federal and state income tax reporting purposes.
Section 10.2 Tax Elections
Except as otherwise provided herein, the General Partner
shall, in its sole and absolute discretion, determine whether to make any
available election pursuant to the Code, including the election under Section
754 of the Code. The General Partner shall have the right to seek to revoke any
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such election (including without limitation, any election under Section 754 of
the Code) upon the General Partner's determination in its sole and absolute
discretion that such revocation is the best interests of the Partners.
Section 10.3 Tax Matters Partner
A. The General Partner shall be the "tax matters partner" of
the Partnership for federal income tax purposes. Pursuant to Section 6223(c)(3)
of the Code, upon receipt of notice from the IRS of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address and profit interest of each
of the Limited Partners; provided, however, that such information is provided to
the Partnership by the Limited Partners.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with
respect to any administrative or judicial
proceedings for the adjustment of Partnership items
required to be taken into account by a Partner for
income tax purposes (such administrative proceedings
being referred to as a "tax audit" and such judicial
proceedings being referred to as "judicial review"),
and in the settlement agreement the tax matters
partner may expressly state that such agreement
shall bind all Partners, except that such settlement
agreement shall not bind any Partner (i) who (within
the time prescribed pursuant to the Code and
Regulations) files a statement with the IRS
providing that the tax matters partner shall not
have the authority to enter into a settlement
agreement on behalf of such Partner or (ii) who is a
"notice partner" (as defined in Section 6231 of the
Code) or a member of a "notice group" (as defined in
Section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item
required to be taken into account by a Partner for
tax purposes (a "final adjustment") is mailed to the
tax matters partner, to seek judicial review of such
final adjustment, including the filing of a petition
for readjustment with the Tax Court or the United
States Claims Court, or the filing of a complaint
for refund with the District Court of the United
States for the district in which the Partnership's
principal place of business is located;
(3) to intervene in any action brought by any other
Partner for judicial review of a final adjustment;
(4) to file a request for an administrative adjustment
with the IRS at any time and, if any part of such
request is not allowed by the IRS, to file an
appropriate pleading (petition or complaint) for
judicial review with respect to such request;
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(5) to enter into an agreement with the IRS to extend
the period for assessing any tax which is
attributable to any item required to be taken into
account by a Partner for tax purposes, or an item
affected by such item; and
(6) to take any other action on behalf of the Partners
of the Partnership in connection with any tax audit
or judicial review proceeding to the extent
permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by
the tax matters partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole and absolute discretion of the
tax matters partner and the provisions relating to indemnification of the
General Partner set forth in Section 7.7 of this Agreement shall be fully
applicable to the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for
its services. All third party costs and expenses incurred by the tax matters
partner in performing his duties as such (including legal and accounting fees)
shall be borne by the Partnership. Nothing herein shall be construed to restrict
the Partnership from engaging an accounting firm to assist the tax matters
partner in discharging his duties hereunder, so long as the compensation paid by
the Partnership for such services is reasonable.
Section 10.4 Organizational Expenses
The Partnership shall elect to deduct expenses, if any,
incurred by it in organizing the Partnership ratably over a 60-month period as
provided in Section 709 of the Code.
Section 10.5 Withholding
Each Limited Partner hereby authorizes the Partnership to
withhold from or pay on behalf of or with respect to such Limited Partner any
amount of federal, state, local, or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Sections 1441, 1442, 1445 or 1446 of the
Code. Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a loan by the Partnership to such Limited Partner, which loan shall
be repaid by such Limited Partner within 15 days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited Partner
or (ii) the General Partner determines, in its sole and absolute discretion,
that such payment may be satisfied out of the available funds of the Partnership
which would, but for such payment, be distributed to the Limited Partner. Any
amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated
as having been distributed to such Limited Partner.
Each Limited Partner hereby unconditionally and irrevocably
grants to the Partnership a security interest in such Limited Partner's
Partnership Interest to secure such Limited Partner's obligation to pay to the
Partnership any amounts required to be paid pursuant to this Section 10.5. In
the event that a Limited Partner fails to pay any amounts owed to the
Partnership pursuant to this Section 10.5 when due, the General Partner may, in
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its sole and absolute discretion, elect to make the payment to the Partnership
on behalf of such defaulting Limited Partner, and in such event shall be deemed
to have loaned such amount to such defaulting Limited Partner and shall succeed
to all rights and remedies of the Partnership as against such defaulting Limited
Partner (including, without limitation, the right to receive distributions). Any
amounts payable by a Limited Partner hereunder shall bear interest at the base
rate on corporate loans at large United States money center commercial banks, as
published from time to time in the Wall Street Journal, plus four percentage
points (but not higher than the maximum lawful rate) from the date such amount
is due (i.e., 15 days after demand) until such amount is paid in full. Each
Limited Partner shall take such actions as the Partnership or the General
Partner shall request in order to perfect or enforce the security interest
created hereunder.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
A. The term "transfer," when used in this Article 11 with
respect to a Partnership Unit, shall be deemed to refer to a transaction by
which the General Partner purports to assign its General Partner Interest to
another Person or by which a Limited Partner purports to assign its Limited
Partnership Interest to another Person, and includes a sale, assignment, gift,
(outright or in trust), pledge, encumbrance, hypothecation, mortgage, exchange
or any other disposition by law or otherwise. The term "transfer" when used in
this Article 11 does not include an Exchange pursuant to Section 8.6. No part of
the interest of a Limited Partner shall be subject to the claims of any
creditor, any spouse for alimony or support, or to legal process, and may not be
voluntarily or involuntarily alienated or encumbered except as may be
specifically provided for in this Agreement.
B. No Partnership Interest shall be transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this
Article 11. Any transfer or purported transfer of a Partnership Interest not
made in accordance with this Article 11 shall be null and void.
Section 11.2 Transfer of General Partner's Partnership
Interest
The General Partner shall not withdraw from the Partnership
and shall not transfer all or any portion of its interest in the Partnership
(whether by sale, statutory merger or consolidation, liquidation or otherwise)
without the consent of all of the Holders of Class A Common Limited Partnership
Units, which may be withheld by each Holder of Class A Common Limited
Partnership Units in its sole and absolute discretion, and only upon the
admission of a successor General Partner pursuant to Section 12.1. Upon any
transfer of a Partnership Interest in accordance with the provisions of this
Section 11.2, the transferee shall become a Substitute General Partner for all
purposes herein, and shall be vested with the powers and rights of the
transferor General Partner, and shall be liable for all obligations and
responsible for all duties of the General Partner, once such transferee has
executed such instruments as may be necessary to effectuate such admission and
to confirm the agreement of such transferee to be bound by all the terms and
provisions of this Agreement with respect to the Partnership Interest so
acquired. It is a condition to any transfer otherwise permitted hereunder that
the transferee assumes, by operation of law or express agreement, all of the
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obligations of the transferor General Partner under this Agreement with respect
to such transferred Partnership interest, and no such transfer (other than
pursuant to a statutory merger or consolidation wherein all obligations and
liabilities of the transferor General Partner are assumed by a successor
corporation by operation of law) shall relieve the transferor General Partner of
its obligations under this Agreement without the Consent of the Class A Limited
Partners, in their reasonable discretion. In the event the General Partner
withdraws from the Partnership, in violation of this Agreement or otherwise, or
otherwise dissolves or terminates, or upon the Bankruptcy of the General
Partner, a Majority in Interest of the Class A Limited Partners may elect to
continue the Partnership business by selecting a Substitute General Partner in
accordance with the Act.
Section 11.3 Limited Partners' Rights to Transfer
A. Prior to June 4, 1994, no Limited Partner shall transfer
all or any portion of its Partnership Interest to any transferee without the
consent of the General Partner, which consent may be withheld in its sole and
absolute discretion; provided, however, that any Limited Partner may, at any
time, without the consent of the General Partner, (i) transfer all or any
portion of its Partnership Interest to the General Partner, to the Wholly-Owned
LP Trust, or to an Affiliate of Stanley K. Tanger or the Tanger Family
Partnership or to the Immediate Family of Stanley K. Tanger, subject to the
provisions of Section 11.6, (ii) transfer its Partnership Interest pursuant to
its right of Exchange as provided in Section 8.6 hereof, or (iii) pledge (a
"Pledge") all or any portion of its Partnership Interest to a lending
institution, which is not an Affiliate of such Limited Partner, as collateral or
security for a bona fide loan or other extension of credit, and transfer such
pledged Partnership Interest to such lending institution in connection with the
exercise of remedies under such loan or extension or credit. After June 4, 1994,
each Limited Partner or Assignee pursuant to the proviso of the preceding
sentence shall have the right to transfer all or any portion of its Partnership
Interest, or subject to the provisions of Section 11.6 and the satisfaction of
each of the following conditions, transfer all or any portion of its Partnership
Interests to any other Person:
(a) General Partner Right of First Refusal. The
transferring Partner shall give written notice of
the proposed transfer to the General Partner, which
notice shall state (i) the identity of the proposed
transferee, and (ii) the amount and type of
consideration proposed to be received for the
transferred Partnership Units. The General Partner
shall have ten (10) days upon which to give the
transferring Partner notice of its election to
acquire the Partnership Units on the proposed terms.
If it so elects, it shall purchase the Partnership
Units on such terms within ten (10) days after
giving notice of such election. If it does not so
elect, the transferring Partner may transfer such
Partnership Units to a third party, on economic
terms no more favorable to the transferee than the
proposed terms, subject to the other conditions of
this Section 11.3.
(b) Qualified Transferee. Any transfer of a Partnership
Interest shall be made only to Qualified
Transferees.
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It is a condition to any transfer otherwise permitted
hereunder that the transferee assumes by operation of law or express agreement
all of the obligations of the transferor Limited Partner under this Agreement
with respect to such transferred Partnership Interest and no such transfer
(other than pursuant to a statutory merger or consolidation wherein all
obligations and liabilities of the transferor Partner are assumed by a successor
corporation by operation of law) shall relieve the transferor Partner of its
obligations under this Agreement without the approval of the General Partner, in
its reasonable discretion. Notwithstanding the foregoing, any transferee of any
transferred Partnership Interest shall be subject to any and all ownership
limitations contained in the Articles of Incorporation. Any transferee, whether
or not admitted as a Substituted Limited Partner, shall take subject to the
obligations of the transferor hereunder. Unless admitted as a Substitute Limited
Partner, no transferee, whether by a voluntary transfer, by operation of law or
otherwise, shall have rights hereunder, other than the rights of an Assignee as
provided in Section 11.5.
B. If a Limited Partner is subject to Incapacity, the
executor, administrator, trustee, committee, guardian, conservator, or receiver
of such Limited Partner's estate shall have all the rights of a Limited Partner,
but not more rights than those enjoyed by other Limited Partners, for the
purpose of settling or managing the estate, and such power as the Incapacitated
Limited Partner possessed to transfer all or any part of his or its interest in
the Partnership. The Incapacity of a Limited Partner, in and of itself, shall
not dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer otherwise
permitted under Section 11.3 by a Limited Partner of his Partnership Units if,
in the opinion of legal counsel to the Partnership, such transfer would require
the filing of a registration statement under the Securities Act by the
Partnership or would otherwise violate any federal or state securities laws or
regulations applicable to the Partnership or the Partnership Unit.
D. No transfer by a Limited Partner of his Partnership Units
(including any Exchange) may be made to any person if (i) in the opinion of
legal counsel for the Partnership, it would result in the Partnership being
treated as an association taxable as a corporation, or (ii) such transfer is
effectuated through an "established securities market" or a "secondary market
(or the substantial equivalent thereof)" within the meaning of Section 7704 of
the Code.
Section 11.4 Substituted Limited Partners
A. No Limited Partner shall have the right to substitute a
transferee as a Limited Partner in his place (including any transferee permitted
by Section 11.3). The General Partner shall, however, have the right to consent
to the admission of a transferee of the interest of a Limited Partner pursuant
to this Section 11.4 as a Substituted Limited Partner, which consent may be
given or withheld by the General Partner in its sole and absolute discretion.
The General Partner's failure or refusal to permit a transferee of any such
interests to become a Substituted Limited Partner shall not give rise to any
cause of action against the Partnership or any Partner.
B. A transferee who has been admitted as a Substituted
Limited Partner in accordance with this Article 11 shall have all the rights and
powers and be subject to all the restrictions and liabilities of a Limited
Partner under this Agreement.
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<PAGE>
C. Upon the admission of a Substituted Limited Partner, the
General Partner shall amend Exhibit A to reflect the name, address, number of
Partnership Units, and Percentage Interest of such Substituted Limited Partner
and to eliminate or adjust, if necessary, the name, address and interest of the
predecessor of such Substituted Limited Partner.
Section 11.5 Assignees
If the General Partner, in its sole and absolute discretion,
does not consent to the admission of any permitted transferee under Section 11.3
as a Substituted Limited Partner, as described in Section 11.4, such transferee
shall be considered an Assignee for purposes of this Agreement. An Assignee
shall be entitled to all the rights of an assignee of a limited partnership
interest under the Act, including the right to receive distributions from the
Partnership and the share of Net Income, Net Losses, gain and loss attributable
to the Partnership Units assigned to such transferee, the rights to transfer the
Partnership Units provided in this Article 11, and the right of Exchange
provided in Section 8.6, but shall not be deemed to be a holder of Partnership
Units for any other purpose under this Agreement, and shall not be entitled to
effect a Consent with respect to such Partnership Units on any matter presented
to the Limited Partners for approval (such Consent remaining with the transferor
Limited Partner). In the event any such transferee desires to make a further
assignment of any such Partnership Units, such transferee shall be subject to
all the provisions of this Article 11 to the same extent and in the same manner
as any Limited Partner desiring to make an assignment of Partnership Units.
Section 11.6 General Provisions
A. No Limited Partner may withdraw from the Partnership other
than as a result of a permitted transfer of all of such Limited Partner's
Partnership Units in accordance with this Article 11 or pursuant to the exercise
of its right of Exchange of all of its Partnership Units under Section 8.6.
B. Any Limited Partner who shall transfer all of his
Partnership Units in a transfer permitted pursuant to this Article 11 where such
transferee was admitted as a Limited Partner or pursuant to the exercise of its
right of Exchange of all of its Partnership Units under Section 8.6 shall cease
to be a Limited Partner.
C. Transfers pursuant to this Article 11 may only be made on
the first day of a fiscal quarter of the Partnership, unless the General Partner
otherwise agrees.
D. If any Partnership Interest is transferred during any
quarterly segment of the Partnership's fiscal year in compliance with the
provisions of this Article 11 or transferred pursuant to Section 8.6, Net
Income, Net Losses, each item thereof and all other items attributable to such
interest for such fiscal year shall be divided and allocated between the
transferor Partner and the transferee Partner by taking into account their
varying interests during the fiscal year in accordance with Section 706(d) of
the Code, using the interim closing of the books method. Solely for purposes of
making such allocations, each of such items for the calendar month in which the
transfer or redemption occurs shall be allocated to the Person who is a Partner
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<PAGE>
as of midnight on the last day of said month. All distributions of Available
Cash with respect to which the Partnership Record Date is before the date of
such transfer or redemption shall be made to the transferor Partner, and all
distributions of Available Cash thereafter shall be made to the transferee
Partner.
E. In addition to any other restrictions on transfer herein
contained, in no event may any transfer or assignment of a Partnership Interest
by any Partner (including by way of an Exchange) be made (i) to any person or
entity who lacks the legal right, power or capacity to own a Partnership
Interest; (ii) in violation of applicable law; (iii) of any component portion of
a Partnership Interest, such as the Capital Account, or rights to distributions,
separate and apart from all other components of a Partnership Interest; (iv) in
the event such transfer would cause the Initial General Partner to cease to
comply with the REIT Requirements, if the Initial General Partner at such time
has determined to continue meet the REIT Requirements; (v) if such transfer
would cause a termination of the Partnership for federal or state income tax
purposes (except as a result of the Exchange of all Partnership Units held by
all Limited Partners); (vi) if such transfer would, in the opinion of counsel to
the Partnership, cause the Partnership to cease to be classified as a
partnership for Federal income tax purposes (except as a result of the Exchange
of all Partnership Units held by all Limited Partners); (vii) if such transfer
would cause the Partnership to become, with respect to any employee benefit plan
subject to Title I of ERISA, a "party-in-interest" (as defined in Section 3(14)
of ERISA) or a "disqualified person" (as defined in Section 4975(c) of the
Code); (viii) if such transfer would, in the opinion of counsel to the
Partnership, cause any portion of the assets of the Partnership to constitute
assets of any employee benefit plan pursuant to Department of Labor Regulations
Section 2510.2-101; (ix) if such transfer requires the registration of such
Partnership Interest pursuant to any applicable federal or state securities
laws; (x) if such transfer causes the Partnership to become a "Publicly Traded
Partnership," as such term is defined in Sections 469(k)(2) or 7704(b) of the
Code or if such transfer would cause the Partnership to have more than 500
Partners (including, as Partners, those persons indirectly owning an Interest in
the Partnership through a partnership, subchapter S corporation or grantor
trust); or (xi) if such transfer subjects the Partnership to be regulated under
the Investment Company Act of 1940, the Investment Advisors Act of 1940 or the
Employee Retirement Income Security Act of 1974, each as amended.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
A successor to all of the General Partner's General Partner
Interest pursuant to Section 11.2 hereof who is proposed to be admitted as a
successor General Partner shall be admitted to the Partnership as the General
Partner, effective upon such transfer. Any such transferee shall carry on the
business of the Partnership without dissolution. In each case, the admission
shall be subject to the successor General Partner executing and delivering to
the Partnership an acceptance of all of the terms and conditions of this
Agreement and such other documents or instruments as may be required to effect
the admission.
Section 12.2 Admission of Additional Limited Partners
A. After the admission to the Partnership of the initial
Limited Partners on the date hereof, a Person who makes a Capital Contribution
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to the Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the General
Partner (i) evidence of acceptance in form satisfactory to the General Partner
of all of the terms and conditions of this Agreement, including, without
limitation, the power of attorney granted in Section 2.4 hereof and (ii) such
other documents or instruments as may be required in the discretion of the
General Partner in order to effect such Person's admission as an Additional
Limited Partner.
B. Notwithstanding anything to the contrary in this Section
12.2, no Person shall be admitted as an Additional Limited Partner without the
consent of the General Partner, which consent may be given or withheld in the
General Partner's sole and absolute discretion. The grant of an option to
acquire Units under the Unit Option Plan, which grant is in the sole and
absolute discretion of the General Partner, to any Person shall constitute the
consent of the General Partner to such Person (but not any Assignee) to becoming
a Limited Partner upon exercise of such option to acquire Units. The admission
of any Person as an Additional Limited Partner shall become effective on the
date upon which the name of such Person is recorded on the books and records of
the Partnership, following the receipt of the Capital Contribution in respect of
such Limited Partner and the consent of the General Partner to such admission.
Section 12.3 Amendment of Agreement and Certificate of
Limited Partnership
For the admission to the Partnership of any Partner, the
General Partner shall take all steps necessary and appropriate under the Act to
amend the records of the Partnership and, if necessary, to prepare as soon as
practical an amendment of this Agreement (including an amendment of Exhibit A)
and, if required by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power of attorney granted pursuant to
Section 2.4 hereof.
Section 12.4 Limit on Number of Partners
No Person shall be admitted to the Partnership as an
Additional Partner if the effect of such admission would be to cause the
Partnership to have more than 500 Partners, including as Partners for this
purpose those Persons indirectly owning an Interest in the Partnership through
another partnership, subchapter S corporation or a grantor trust.
ARTICLE 13
DISSOLUTION AND LIQUiDATION
Section 13.1 Dissolution
The Partnership shall not be dissolved by the admission of
Substituted Limited Partners or Additional Limited Partners or by the admission
of a successor General Partner in accordance with the terms of this Agreement.
Upon the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs shall be wound up, upon the first to occur of any of the following
("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5
hereof;
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B. an event of withdrawal of the General Partner, as defined
in the Act, unless, within 90 days after the withdrawal, all of the Holders of
the Class A Common Limited Partnership Units, and at least a majority in
interest of all the remaining Partners, agree in writing, in their sole and
absolute discretion, to continue the business of the Partnership and to the
appointment, effective as of the date of withdrawal, of a substitute General
Partner;
C. an election to dissolve the Partnership made by the
General Partner, approved by the Consent of the Holders of the Class A Common
Limited Partnership Units;
D. entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act;
E. the sale of all or substantially all of the assets and
properties of the Partnership;
F. a Bankruptcy of the General Partner, unless all of the
remaining Partners agree in writing to continue the business of the Partnership
and to the appointment, effective as of a date prior to the date of such
Bankruptcy, of a substitute General Partner; or
G. the Exchange by all Partners (other than the General
Partner) of all Class A Common Limited Partnership Units into REIT Shares.
Section 13.2 Winding Up
A. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners. No Partner shall take any action that is inconsistent
with, or not necessary to or appropriate for, the winding up of the
Partnership's business and affairs. The General Partner (or, in the event there
is no remaining General Partner, any Person elected by a Majority in Interest of
the Class A Limited Partners (the "Liquidator")) shall be responsible for
overseeing the winding up and dissolution of the Partnership and shall take full
account of the Partnership's liabilities and property and the Partnership
property shall be liquidated as promptly as is consistent with obtaining the
fair value thereof, and the proceeds therefrom (which may, to the extent
determined by the General Partner, include shares of stock in the General
Partner) shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors
other than the Partners;
(2) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the General
Partner;
(3) Third, to the payment and discharge of all of the
Partnership's debts and liabilities to the other
Partners; and
(4) The balance, if any, to the General Partner and
Limited Partners in accordance with their positive
Capital Account balances, determined after taking
into account all Capital Account adjustments for the
Partnership taxable year during which the
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liquidation occurs (other than those made as a
result of the liquidating distribution set forth in
this Section 13.2.A(4)).
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13 other than reimbursement of its
expenses as provided in Section 7.4.
B. Notwithstanding the provisions of Section 13.2.A hereof
which require liquidation of the assets of the Partnership, but subject to the
order of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2.A hereof, undivided interests in
such Partnership assets as the Liquidator deems not suitable for liquidation.
Any such distributions in kind shall be made only if, in the good faith judgment
of the Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
Section 13.3 Compliance with Timing Requirements of
Regulations
In the event the Partnership is "liquidated" within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made
pursuant to this Article 13 to the General Partner and Limited Partners who have
positive Capital Accounts in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(2). If any Partner has a deficit balance in his Capital
Account (after giving effect to all contributions, distributions and allocations
for the taxable years, including the year during which such liquidation occurs),
such Partner shall have no obligation to make any contribution to the capital of
the Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or to any other Person for any purpose
whatsoever. In the discretion of the General Partner, a pro rata portion of the
distributions that would otherwise be made to the General Partner and Limited
Partners pursuant to this Article 13 may be:
(A) distributed to a trust established for the benefit of the
General Partner and Limited Partners for the purposes of liquidating Partnership
assets, collecting amounts owed to the Partnership, and paying any contingent or
unforeseen liabilities or obligations of the Partnership or of the General
Partner arising out of or in connection with the Partnership. The assets of any
such trust shall be distributed to the General Partner and Limited Partners from
time to time, in the reasonable discretion of the General Partner, in the same
proportions and the amount distributed to such trust by the Partnership would
otherwise have been distributed to the General Partner and Limited Partners
pursuant to this Agreement; or
(B) withheld to provide a reasonable reserve for partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, provided that such withhold
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amounts shall be distributed to the General Partner and Limited Partners as soon
as practicable.
Section 13.4 Deemed Distribution and Recontribution
Notwithstanding any other provision of this Article 13, in the
event the Partnership is liquidated within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged, and the Partnership's affairs shall not be wound up.
Instead, the Partnership shall be deemed to have distributed the Property in
kind to the General Partner and Limited Partners, who shall be deemed to have
assumed and taken such property subject to all Partnership liabilities, all in
accordance with their respective Capital Accounts. Immediately thereafter, the
General Partner and Limited Partners shall be deemed to have recontributed the
Partnership property in kind to the Partnership, which shall be deemed to have
assumed and taken such property subject to all such liabilities.
Section 13.5 Rights of Limited Partners
Except as otherwise provided in this Agreement, each Limited
Partner shall look solely to the assets of the Partnership for the return of his
Capital Contribution and shall have no right or power to demand or receive
property from the General Partner. No Limited Partner shall have priority over
any other Limited Partner as to the return of his Capital Contributions,
distributions or allocations.
Section 13.6 Notice of Dissolution
In the event a Liquidating Event occurs or an event occurs
that would, but for provisions of Section 13.1, result in a dissolution of the
Partnership, the General Partner shall, within 30 days thereafter, provide
written notice thereof to each of the Partners and to all other parties with
whom the Partnership regularly conducts business (as determined in the
discretion of the General Partner) and shall publish notice thereof in a
newspaper of general circulation in each place in which the Partnership
regularly conduct business (as determined in the discretion of the General
Partner).
Section 13.7 Cancellation of Certificate of Limited
Partnership
Upon the completion of the liquidation of the Partnership cash
and property as provided in Section 13.2 hereof, the Partnership shall be
terminated and the Certificate and all qualifications of the Partnership as a
foreign limited partnership in jurisdictions other than the State of North
Carolina shall be cancelled and such other actions as may be necessary to
terminate the Partnership shall be taken.
Section 13.8 Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly winding-up
of the business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect between the Partners during the period of liquidation.
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Section 13.9 Waiver of Partition
Each Partner hereby waives any right to partition of the
Partnership property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS
Section 14.1 Amendments
A. The actions requiring consent or approval of Limited
Partners pursuant to this Agreement, including Section 7.3, or otherwise
pursuant to applicable law, are subject to the procedures in this Article 14.
B. Amendments to this Agreement may be proposed by the
General Partner or by any Limited Partner. Following such proposal, the General
Partner shall submit any proposed amendment to the Limited Partners. The General
Partner shall seek the written consent of the Partners on the proposed amendment
or shall call a meeting to vote thereon and to transact any other business that
it may deem appropriate. For purposes of obtaining a written consent, the
General Partner may require a response within a reasonable specified time, but
not less than 15 days, and failure to respond in such time period shall
constitute a consent which is consistent with the General Partner's
recommendation (if so recommended) with respect to the proposal; provided, that,
an action shall become effective at such time as requisite consents are received
even if prior to such specified time.
Section 14.2 Action by the Partners
A. Meetings of the Partners may be called by the General
Partner and shall be called upon the receipt by the General Partner of a written
request by Limited Partners holding 25 percent or more of any class of Limited
Partnership Interests. The call shall state the nature of the business to be
transacted. Notice of any such meeting shall be given to all Partners not less
than seven days nor more than 30 days prior to the date of such meeting.
Partners may vote in person or by proxy at such meeting. Whenever the vote or
Consent of Partners is permitted or required under this Agreement, such vote or
Consent may be given at a meeting of Partners or may be given in accordance with
the procedure prescribed in Section 14.1 hereof.
B. Any action required or permitted to be taken at a meeting
of the Partners may be taken without a meeting if a written consent setting
forth the action so taken is signed by the percentage as is expressly required
by this Agreement for the action in question. Such consent may be in one
instrument or in several instruments, and shall have the same force and effect
as a vote of the Percentage Interests of the Partners (expressly required by
this Agreement). Such consent shall be filed with the General Partner. An action
so taken shall be deemed to have been taken at a meeting held on the effective
date so certified.
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C. Each Limited Partner may authorize any Person or Persons
to act for him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Limited Partner executing it.
D. Each meeting of Partners shall be conducted by the General
Partner or such other Person as the General Partner may appoint pursuant to such
rules for the conduct of the meeting as the General Partner or such other Person
deems appropriate.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice
Any notice, demand, request or report required or permitted to
be given or made to a Partner or Assignee under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when sent
by first class United States mail or by other means of written communication to
the Partner or Assignee at the address set forth in Exhibit A or such other
address as the Partners shall notify the General Partner in writing.
Section 15.2 Titles and Captions
All article or section titles or captions in this Agreement
are for convenience only. They shall not be deemed part of this Agreement and in
no way define, limit, extend or describe the scope or intent of any provisions
hereof. Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
Section 15.3 Pronouns and Plurals
Whenever the context may require, any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa.
Section 15.4 Further Action
The parties shall execute and deliver all documents, provide
all information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5 Binding Effect
This Agreement shall be binding upon an inure to the benefit
of the parties hereto and their heirs, executors, administrators, successors,
legal representatives and permitted assigns.
Section 15.6 Creditors
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None of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.
Section 15.7 Waiver
No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon any breach thereof shall constitute waiver
of any such breach or any other covenant, duty, agreement or condition.
Section 15.8 Counterparts
This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.
Section 15.9 Applicable Law
This Agreement shall be construed in accordance with and
governed by the laws of the State of North Carolina, without regard to the
principles of conflicts of law.
Section 15.10 Invalidity of Provisions
If any provision of this Agreement is or becomes invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not be
affected thereby.
Section 15.11 Limitation to Preserve REIT Status
To the extent that the amount paid or credited to the General
Partner or its officers, directors, employees or agents pursuant to Section 7.4
or Section 7.7 would constitute gross income to the Initial General Partner for
purposes of Sections 856(c)(2) or 856(c)(3) of the Code (a "GP Payment") then,
notwithstanding any other provision of this Agreement, the amount of such GP
Payments for any fiscal year shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of (a) 4.17%
of the Initial General Partner's total gross income
(but not including the amount of any GP Payments)
for the fiscal year which is described in
subsections (A) through (H) of Section 856(c)(2) of
the Code over (b) the amount of gross income (within
the meaning of Section 856(c)(2) of the Code)
derived by the Initial General Partner from sources
other than those described in subsections (A)
through (H) of Section 856(c)(2) of the Code (but
not including the amount of any GP Payments); or
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(ii) an amount equal to the excess, if any, of (a) 25% of
the Initial General Partner's total gross income
(but not including the amount of any GP Payments)
for the fiscal year which is described in
subsections (A) through (I) of Section 856(c)(3) of
the Code over (b) the amount of gross income (within
the meaning of Section 856(c)(3) of the Code)
derived by the Initial General Partner from sources
other than those described in subsections (A)
through (I) of Section 856(c)(3) of the Code (but
not including the amount of any GP Payments);
provided, however, that GP Payments in excess of the amounts set forth in
subparagraphs (i) and (ii) above may be made if the General Partner, as a
condition precedent, obtains an opinion of tax counsel that the receipt of such
excess amounts would not adversely affect the Initial General Partner's ability
to qualify as a REIT. To the extent GP Payments may not be made in a year due to
the foregoing limitations, such GP Payments shall carry over and be treated as
arising in the following year.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
TANGER GP TRUST
as General Partner
By
Stanley K. Tanger, Chairman of the Board
TANGER LP TRUST
as Limited Partner
By
Stanley K. Tanger, Chairman of the Board
TANGER FAMILY LIMITED PARTNERSHIP
as Limited Partner
By
Stanley K. Tanger, General Partner
TANGER FACTORY OUTLET CENTERS, INC.
By
Stanley K. Tanger, Chief Executive Officer
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<PAGE>
<TABLE>
<CAPTION>
A-4
EXHIBIT A
PARTNERS, CONTRIBUTIONS AND PARTNERSHIP INTERESTS
I. Initial Contributions
Name and Address Cash Agreed Value of Total Partnership
of Partner Contributions Contributed Property* Contributions Units
General Partner
Tanger Factory Outlet
<S> <C> <C> <C>
Centers, Inc. $1.00 -- $1.00 1
1400 West Northwood
Greensboro, NC
27408
Limited Partners
Tanger Family Limited
Partnership $1.00 -- $1.00 1
1400 West Northwood
Greensboro, NC
27408
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A (CONTINUED)
II. Contributions Made On Effective Date
Name and Address Cash Agreed Value of Total Partnership
of Partner Contributions Contributed Property* Contributions Units
General Partner
Tanger Factory Outlet
<S> <C> <C> <C> <C>
Centers, Inc. $92,315,000 $7,008,807 $99,323,807 4,857,796
1400 West Northwood
Greensboro, NC
27408
Limited Partners
Tanger Family Limited
Partnership -- $62,019,954 $62,019,954 3,033,305
1400 West Northwood
Greensboro, NC
27408
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A (CONTINUED)
III. Partnership Holdings Immediately Following The Transfer Date
Name and Address Cash Agreed Value of Total Partnership
of Partner Contributions Contributed Property* Contributions Units
General Partner
<S> <C>
Tanger GP Trust -- -- -- 150,000
3200 Northline Avenue
Greensboro, NC
27408
- ---------------------------
Limited Partners
Class A Common
Tanger Family Limited
Partnership -- $62,019,954 $62,019,954 3,033,305
3200 Northline Avenue
Greensboro, NC
27408
Class B Common
Tanger LP Trust
3200 Northline Avenue -- -- -- 7,700,256
Greensboro, NC
27408
Class C Preferred
Tanger LP Trust
3200 Northline Avenue
Greensboro, NC
27408 -- -- -- 88,219.7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A-1
PREFERRED CONTRIBUTIONS
Name of Partner Amount of Cash Contribution Preferred Units
<S> <C> <C>
Tanger Factory $75,000,000* 300,000
Outlet Centers,
Inc.
- -----------------------
*Less expenses of the Preferred Offering
</TABLE>
<PAGE>
B-1
EXHIBIT B
NOTICE OF EXCHANGE
The undersigned hereby irrevocably (i) exchanges ___________ Limited Partnership
Units in Tanger Properties Limited Partnership in accordance with the terms of
the Limited Partnership Agreement of Tanger Properties Limited Partnership and
the rights of Exchange referred to therein, (ii) surrenders such Limited
Partnership Units and all right, title and interest therein, and (iii) directs
that the REIT Shares deliverable upon Exchange be delivered to the address
specified below, and such REIT Shares be registered or placed in the name(s) and
at the address(es) specified below.
Dated:
Name of Limited Partner:
(Signature of Limited Partner)
(Street Address)
(City) (State) (Zip Code)
Signature Guaranteed by:
Issue REIT Shares to:
Please insert social security or identifying number:
Name:
Exhibit 10.10
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 FRANK C. MARCHISELLO, Jr, a resident of North
Carolina, whose address is 600 Brookfield Drive, Gibsonville, NC 27249
("Marchisello").
RECITALS
A. Company and Marchisello entered into an employment agreement dated as
of January 1, 1996.
B. Company has agreed to increase Marchisello's Annualized Base Salary
under the existing employment agreement for the period from July 1, 1998 through
December 31, 1998 from $170,000.00 to $175,000.00.
C. The Parties intend to extend the term of Marchisello's employment and
to modify, amend and restate the Employment Agreement as provided herein.
Now therefore, in consideration of the promises contained herein and
othervaluable consideration, the parties agree as follows:
1. EMPLOYMENT. Company agrees to employ Marchisello during the term of this
Agreement. Marchisello agrees to devote substantial time and attention and his
best efforts to the business affairs of the Company. During the term of his
employment hereunder, Marchisello 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.
The Company is engaged in the development and operation of retail
shopping centers. Marchisello will serve as vice-president/chief financial
officer of the Company and will perform such duties as are assigned to him by
the Company from time to time in all phases of the Company's business.
Marchisello will report to a designated senior 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 2001 is sometimes herein referred to as a "Contract Year".
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.
<PAGE>
3.1 Annual Base Salary. For each Contract Year beginning on or after
January 1, 1999, Company will pay Marchisello 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
The Annual Base Salary shall be paid in equal monthly or bi-weekly
installments in arrears in accordance with Company's regular pay schedule.
Company will pay and/or withhold for FICA, income and other employee taxes on
compensation payable to Marchisello hereunder as required by law.
3.2 Employee Benefits. Marchisello shall participate in all employee
benefit plans (including plans providing medical, life and disability insurance)
which the Company makes available to its employees generally and for which
Marchisello is eligible, as such Plans may be in effect from time to time.
3.3 Expense Reimbursement. Marchisello will be reimbursed for any
necessary and reasonable expense incurred by Marchisello in performing the
services requested of him by the Company during the term of employment. At least
monthly, Marchisello will submit such records and paid bills supporting the
amount of the expenses incurred and to be reimbursed as the Company shall
reasonably require.
3.4 Severance Pay If Term Not Extended. If Marchisello's employment is
not terminated prior to the end of the Contract Term and if Marchisello offers
to extend the term of his 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 Marchisello's
employment, the Company shall pay Marchisello as a severance benefit an amount
equal to one half (1/2) of the Annual Base Salary payable to him for the last
Contract Year of the Contract Term.
4. VACATION. Marchisello shall be entitled to vacation during each Contract
Year for the term of employment hereunder in accordance with Company
policy.
5. TERMINATION. Marchisello's employment by the Company hereunder shall be
terminated upon the occurrence of any of the following events:
(a) If the Company and Marchisello mutually agree to terminate
the employment;
(b) By the Company, in its discretion, in the event of
Marchisello's disability. "Disability" for these purposes shall mean
Marchisello's inability through physical or mental illness or other cause to
<PAGE>
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. Marchisello will continue to receive compensation hereunder
during such period of disability up to 180 days during any twelve consecutive
calendar months.
(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 Marchisello 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 Marchisello's death;
(f) By the Company for no reason and/or without good cause by
payment of the severance benefit described below.
Upon termination of Marchisello's employment Marchisello 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:
(i) if Marchisello's employment is terminated by reason of
his death or disability during the Contract Term, the Company will pay
Marchisello (or the personal representatives of his estate, in the event
of his death) as a death or disability benefit, an amount equal to the
Annual 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 Marchisello's
employment is terminated;
(ii) if Company terminates Marchisello's employment for no
reason and/or without good cause pursuant to subparagraph 5(f) or if
Marchisello terminates his employment pursuant to subparagraph 5(c)
because of the Company's material breach of this Agreement, Company
shall pay Marchisello as severance pay an amount equal to the Annual
Base Salary payable hereunder in the Contract Year within which
Marchisello's employment is terminated. Such payment will be made within
thirty (30) days after the date of the termination of Marchisello's
employment.
6. COVENANT AGAINST COMPETITION AND NON-DISCLOSURE.
6.1 Covenant Against Competition. Marchisello covenants and agrees that
during Marchisello's employment and for a period of six (6) months after he
ceases to be employed by Company, Marchisello 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 Marchisello's employment hereunder 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 Marchisello's employment.
<PAGE>
6.2 Disclosure of Information. Marchisello 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. Marchisello 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.
6.3 Reasonableness of Restrictions.
(a) Marchisello 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.
(b) 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.
6.4 Consideration. The covenants against competition and non-disclosure
by Marchisello in this Item are made in consideration of the Company's agreement
to employ Marchisello upon the terms and conditions set forth herein, expressly
including, without limitation, the Company's agreement to pay the severance
amount under the circumstances described in Section . Such covenants against
competition and of non-disclosure by Marchisello in this Item constitute the
material inducement to Company to enter into this Agreement, to make
confidential information developed by Company available to Marchisello and to
pay the salary and bonuses provided for Marchisello herein.
6.5 Company's Remedies. Marchisello 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 Marchisello:
<PAGE>
(a) The Company shall be relieved of any further obligation to
Marchisello under the terms of this agreement; and
(b) The Company shall be entitled to an accounting and
repayment of all profits, compensation, commissions, remunerations or other
benefits that Marchisello, 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
Marchisello: Frank C. Marchisello, Jr.
600 Brookfield Drive
Gibsonville, N.C. 27249
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:
STANLEY K. TANGER
Chairman of the Board
Chief Executive Officer
FRANK C. MARCHISELLO, JR.
<PAGE>
PROMISSORY NOTE
June 25 1999
FOR VALUE RECEIVED, Stanley K. Tanger (the "Maker" promises to pay to
the order of Tanger Properties Limited Partnership (the "(Payee") the principal
sum of Two Million Dollars ($2,000,000.00) or such lesser amount as shall have
been advanced by the Payee to the Maker from time to time and shall remain
unpaid plus interest upon unpaid principal from the date hereof at the rate of
eight percent (8%) per annum, said principal and interest being payable on
demand
Any payment on the indebtedness evidenced by this Note shall be applied
first to interest on the principal sum from time to time remaining unpaid and
the balance shall be applied in payment and reduction of the principal. Any past
due installment of principal shall bear interest at the rate above set out until
paid. After the indebtedness evidenced by this Note shall become due, whether by
acceleration or otherwise, such indebtedness shall bear interest at the highest
contract rate permitted by applicable law not to exceed 8% per annum.
The indebtedness evidenced by this Note is secured by the Collateral
Assignment of Limited Partnership Interest dated as of the same date as this
Note executed by the Maker and the Payee.
In the event any installment of principal and interest is not paid when
due, the remaining unpaid principal of this Note and all accrued but unpaid
interest thereon shall immediately become due and payable, at the option of the
holder hereof. In the event this Note is placed with an attorney at law for
collection or enforcement, the undersigned agree to pay all costs of collection
or enforcement, including, without limitation, court costs and reasonable
attorneys' fees.
If any partial prepayments of the principal of this Note shall be
permitted by the holder, such prepayments shall be applied to the installments
of principal last maturing hereon.
All parties to this Note, including endorsers, sureties and guarantors,
if any, hereby waive presentment for payment, demand, protest, notice of
non-payment or of dishonor or of protest, and any and all other notices and
demands whatsoever, and agree to remain bound until the principal and interest
are paid in full notwithstanding any extensions of time for payment which may be
granted, even though the period of extension be indefinite, and not withstanding
any inaction by, or failure to assert any legal right available to the holder of
this Note.
IN TESTIMONY WHEREOF, each maker has executed this instrument under
seal as of the day and year first above written.
_________________________(SEAL)
Stanley K. Tanger
<PAGE>
PROMISSORY NOTE
August 27, 1999
FOR VALUE RECEIVED, Stanley K. Tanger (the "Maker" promises to pay to
the order of Tanger Properties Limited Partnership (the "(Payee") the principal
sum of One Million Dollars ($1,000,000.00) or such lesser amount as shall have
been advanced by the Payee to the Maker from time to time and shall remain
unpaid plus interest upon unpaid principal from the date hereof at the rate of
eight percent (8%) per annum, said principal and interest being payable on
demand
Any payment on the indebtedness evidenced by this Note shall be applied
first to interest on the principal sum from time to time remaining unpaid and
the balance shall be applied in payment and reduction of the principal. Any past
due installment of principal shall bear interest at the rate above set out until
paid. After the indebtedness evidenced by this Note shall become due, whether by
acceleration or otherwise, such indebtedness shall bear interest at the highest
contract rate permitted by applicable law not to exceed 8% per annum.
The indebtedness evidenced by this Note is secured by the Collateral
Assignment of Limited Partnership Interest dated as of the same date as this
Note executed by the Maker and the Payee.
In the event any installment of principal and interest is not paid when
due, the remaining unpaid principal of this Note and all accrued but unpaid
interest thereon shall immediately become due and payable, at the option of the
holder hereof. In the event this Note is placed with an attorney at law for
collection or enforcement, the undersigned agree to pay all costs of collection
or enforcement, including, without limitation, court costs and reasonable
attorneys' fees.
If any partial prepayments of the principal of this Note shall be
permitted by the holder, such prepayments shall be applied to the installments
of principal last maturing hereon.
All parties to this Note, including endorsers, sureties and guarantors,
if any, hereby waive presentment for payment, demand, protest, notice of
non-payment or of dishonor or of protest, and any and all other notices and
demands whatsoever, and agree to remain bound until the principal and interest
are paid in full notwithstanding any extensions of time for payment which may be
granted, even though the period of extension be indefinite, and not withstanding
any inaction by, or failure to assert any legal right available to the holder of
this Note.
IN TESTIMONY WHEREOF, each maker has executed this instrument under
seal as of the day and year first above written.
__________________________(SEAL)
Stanley K. Tanger
EXHIBIT 21.1
List of Subsidiaries
Tanger Properties Limited Partnership
Tanger GP Trust
Tanger LP Trust
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-80450 and 333-91863) and Form S-3 (File Nos.
33-99736, 333-3526 and 333-39365) of Tanger Factory Outlet Centers, Inc. of our
reports dated January 26, 2000 relating to the financial statements and
financial statement schedule, which appears in this Form 10-K.
March 28, 2000
<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, 1999 included herein and is
qualified in its entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Dec-31-1999
<CASH> 503
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 566,216
<DEPRECIATION> 104,511
<TOTAL-ASSETS> 490,069
<CURRENT-LIABILITIES> 0
<BONDS> 329,647
0
1
<COMMON> 79
<OTHER-SE> 107,684
<TOTAL-LIABILITY-AND-EQUITY> 490,069
<SALES> 0
<TOTAL-REVENUES> 104,016
<CGS> 0
<TOTAL-COSTS> 30,585
<OTHER-EXPENSES> 24,824 <F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,239
<INCOME-PRETAX> 21,211
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,837
<DISCONTINUED> 0
<EXTRAORDINARY> (249)
<CHANGES> 0
<NET-INCOME> 15,588
<EPS-BASIC> 1.74
<EPS-DILUTED> 1.74
<FN>
<F1> Depreciation and amortization
</FN>
</TABLE>
