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 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from___________ to___________
Commission File No. 1-12494
CBL & ASSOCIATES PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 62-1545718
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6148 Lee Highway, Suite 300
Chattanooga, Tennessee 37421
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423) 855-0001
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of Each Class on which Registered
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Common Stock, $.01 par New York Stock Exchange
value per share
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 the voting stock held by non-affiliates of
the Registrant was approximately $592,830,352 based on the closing price on
the New York Stock Exchange for such stock on March 20, 1998.
As of March 20, 1998, there were 24,074,329 shares of the Registrant's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates certain information by reference to the Registrant's
definitive proxy statement filed on March 27, 1998 in respect to the Annual
Meeting of Stockholders to be held on April 30, 1998.
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FORM 10-K
TABLE OF CONTENTS
Item No. Page
PART I
Item 1 Business. . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2 Properties. . . . . . . . . . . . . . . . . . . . . . . . 14
Item 3 Legal Proceedings . . . . . . . . . . . . . . . . . . . . 35
Item 4 Submission of Matters to a Vote of Security Holders . . . 35
PART II
Item 5 Market for Registrant's Common Equity and Related
Shareholder Matters . . . . . . . . . . . . . . . . . . . 35
Item 6 Selected Financial Data . . . . . . . . . . . . . . . . . 37
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 38
Item 8 Financial Statements and Supplementary Data . . . . . . . 50
Item 9 Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . 50
PART III
Item 10 Directors and Executive Officers of the Registrant . . . 50
Item 11 Executive Compensation . . . . . . . . . . . . . . . . . 50
Item 12 Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . . . 50
Item 13 Certain Relationships and Related Transactions . . . . . 50
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . 51
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CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION OR THE PURPOSE
OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements, Certain information contained in
this Annual Report on Form 10-K is forward-looking, such as information
relating to the Company's growth strategy, projects under construction,
liquidity and capital resources, compliance with environmental laws and
regulations, and the year 2000 compliance of the Company's computer systems.
Such statements are subject to certain risks and uncertainties which could
cause actual results to differ materially, including, but not limited to,
those set forth below. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof.
The Company undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances occurring after the date hereof
or to reflect the occurrence of unanticipated events.
PART I
ITEM 1. BUSINESS.
FORMATION OF THE COMPANY
The Company is a self-managed, self-administered, fully-integrated real
estate company which is engaged in the ownership, operation, marketing,
management, leasing, expansion, development, redevelopment, acquisition and
financing of regional malls and community and neighborhood centers. CBL &
Associates Properties, Inc. (the "Company") was incorporated on July 13,
1993 under the laws of the State of Delaware to acquire an interest in
substantially all of the real estate properties owned by CBL & Associates,
Inc. and its affiliates ("CBL") and to provide a public vehicle for the
expansion of CBL's shopping center business.
The Company operates through its two wholly owned subsidiaries, CBL
Holdings I, Inc., a Delaware corporation ("CBL Holdings I"), and CBL
Holdings II, Inc., a Delaware corporation ("CBL Holdings II"). By transfers
dated April 1, 1997, the Company assigned its interests in CBL & Associates
Limited Partnership, a Delaware limited partnership (the "Operating
Partnership"), to CBL Holdings I and CBL Holdings II, which resulted in CBL
Holdings I becoming the 2.8% sole general partner of the Operating
Partnership and CBL Holdings II becoming a 69% limited partner of the
Operating Partnership. The Company conducts substantially all of its
business through the Operating Partnership. To comply with certain
technical requirements of the Internal Revenue Code of 1986, as amended
(the "Code") applicable to Real Estate Investment Trusts' ("REIT's"), the
Operating Partnership carries out the Company's property management and
development activities through CBL & Associates Management, Inc. (the
"Management Company").
On November 3, 1993, the Company completed initial public offerings,
inside and outside the United States (the "Offering"), of 15,400,000 shares
of its common stock, par value $.01 per share (the "Common Stock").
Simultaneously with the completion of the Offering, CBL transferred to the
Operating Partnership substantially all of CBL's interests in its real estate
properties and its management and development operations in exchange for an
aggregate 35.4% limited partner interest in the Operating Partnership. CBL
also acquired an additional 4.9% limited partner interest in the Operating
Partnership for a cash payment of $24.4 million. Each of the partnership
interests in the Operating Partnership may, at the election of its respective
holder, be exchanged for shares of Common Stock of the Company, subject to
certain limitations imposed by the Code. Following the Offering, the
Company owned a 59.7% general partner interest in the Operating Partnership.
The Offering and the application of proceeds therefrom, including the
Operating Partnership's acquisition of certain property interests, and the
contribution by CBL of property interests to the Operating Partnership, are
referred to herein as the "Formation."
In December 1993, CBL exercised its right under the Operating
Partnership's partnership agreement to exchange a 4.7% limited partner
interest in the Operating Partnership for 1,221,744 shares of Common Stock.
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In October 1994, the Operating Partnership exercised its option to
acquire from CBL the former Phar-Mor space at Valley Crossing in Hickory,
North Carolina for a value of $3,575,400. The Operating Partnership issued
a .5377% limited partnership interest (190,688 share equivalents) to CBL in
return for the former Phar-Mor space.
In September 1995, the Company completed a follow-on offering of
4,163,500 shares of its Common Stock at $20.625 per share. CBL purchased
150,000 of these shares. The net proceeds of $80.7 million were used to
to repay variable rate indebtedness incurred in the Company's development
and acquisition program.
In August 1996, the Company exercised its option to acquire from CBL a
parcel of land for the recently constructed Just for Feet on the periphery
of Hamilton Place Mall in Chattanooga, Tennessee for a value of $780,053. The
Operating Partnership issued a .0798% limited partner interest (34,246 share
equivalents) to CBL in return for the parcel.
In January 1997, the Company completed a follow-on offering of
3,000,000 shares of its Common Stock at $26.125 per share. CBL purchased
55,000 of those shares as part of the offering. The net proceeds of $74.3
million, were used to repay variable rate indebtedness incurred in the
Company's development and acquisition program.
In March 1997, the Company purchased from CBL a parcel of land for
additional parking for the expansion and addition of Dillard's to Twin Peaks
Mall in Longmont, Colorado for a value of $59,994. The Operating Partnership
issued a .0057% limited partner interest (2,424 share equivalents) to CBL
in return for the parcel.
In June 1997, the Company purchased from CBL a 49% general partnership
interest in Governor's Plaza in Clarksville, Tennessee for a value of
$1,512,976. The Operating Partnership issued a .1349% limited partner
interest (65,426 share equivalents) to CBL in return for the partnership
interest.
After giving effect to the above transactions, CBL holds a 28.25%
limited partner interest in the Operating Partnership, and the Company holds
a 71.75% general partner interest in the Operating Partnership. In addition,
CBL holds approximately 1.7 million of the outstanding shares of Common Stock
for a total ownership share of 33.18%.
GENERAL
The Company owns interests in a portfolio of properties, consisting of
22 enclosed regional malls (the "Malls"), 12 associated centers (the
"Associated Centers"), each of which is part of a regional shopping mall
complex, and 81 independent community and neighborhood shopping centers (the
"Community Centers"). Except for five Malls, one Associated Center and two
Community Centers which were acquired from third parties, each of these
properties was developed by CBL or the Company.
Additionally, the Company owns one Mall, one Associated Center,
one power center and two neighborhood shopping centers currently under
construction (the "Construction Properties"). The Company also owns options
to acquire certain shopping center development sites (the "Development
Properties").
The Company also holds mortgages (the "Mortgages") on community and
neighborhood shopping centers owned by non-CBL affiliates. The Mortgages were
granted in connection with sales by CBL of certain properties previously
developed by CBL. The Company also owns an interest in a three-story office
building in Chattanooga, Tennessee, a portion of which serves as the
Company's headquarters (the "Office Building"). The Malls, Associated
Centers, Community Centers, Construction Properties, Development Properties,
Mortgages and Office Building are collectively referred to herein as the
"Properties" and individually as a "Property".
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The Company has also entered into standby purchase agreements with
third-party developers for the construction, development and potential
ownership of two community and neighborhood centers in Georgia and Texas
(the "Co-Development Projects"). The developers have utilized these standby
purchase agreements as additional security for their lenders to fund the
construction of the Co-Development Projects. The standby purchase agreements
for each of the Co-Development Projects require the Company to purchase the
related Co-Development Project upon such Co-Development Project meeting
certain completion requirements and rental levels. In return for its
commitment to purchase a Co-Development Project pursuant to a standby
purchase agreement, the Company receives a fee as well as a participation
interest in each Co-Development Project. In addition to the standby purchase
agreements, the Company has extended secured credit to two of these
developers to cover pre-development costs.
The Company and the Operating Partnership generally own a 100% interest
in the Properties. With two exceptions, where the Company and the Operating
Partnership own less than a 100% interest in a Property, the Operating
Partnership is the sole general partner, managing general partner or managing
member of the property partnership or limited liability company which owns
such Property (each, a "Property Partnership"). For one Mall and its
Associated Center, affiliates of the Operating Partnership are non-managing
general partners in the two Property Partnerships owning those Properties.
For a full description of the Properties, see Item 2 -- "Properties."
The Company's executive offices are located at 6148 Lee Highway, Suite
300, Chattanooga, Tennessee 37421-6511. The telephone number at this
address is (423) 855-0001.
MANAGEMENT AND OPERATION OF PROPERTIES
MANAGEMENT COMPANY
The Company is self-managed and self-administered. To comply with
certain technical requirements of the Code, the Operating Partnership
carries out the Company's property management and development activities
through the Management Company.
The Operating Partnership holds 100% of the preferred stock and 5% of
the common stock of the Management Company. The remaining 95% of the common
stock is held by Charles Lebovitz, his family and his associates.
Substantially all of CBL's asset management, property management and leasing
and development operations, including CBL's executive, property, financial,
legal and administrative personnel, were transferred to the Management
Company as part of the Formation. The Management Company manages all of the
Properties (except for Governor's Square and Governor's Plaza -- see below)
pursuant to a management agreement that may be terminated at any time by the
Operating Partnership upon 30 days written notice. In addition, the
Management Company manages certain properties owned by CBL that were not
transferred to the Company in the Formation as well as certain shopping
centers owned by non-CBL affiliates. Through its ownership of the Management
Company's preferred stock, the Operating Partnership enjoys substantially all
of the economic benefits of the Management Company's business. Pursuant to
requirements set forth in the Management Company's Amended and Restated
Certificate of Incorporation, a majority of the Management Company's board of
directors are required to be independent of CBL. From November 1993 to the
current date, the board of directors of the Management Company has consisted
of the same individuals as the Company's board of directors, including the
four independent directors.
ON-SITE MANAGEMENT
The on-site property management functions at the Malls include leasing,
management, data processing, rent collection, project bookkeeping, budgeting,
marketing, and promotion. Each Mall, for itself and its Associated Centers,
has an on-site property manager who oversees the on-site staff and an on-
site marketing director who oversees the marketing program for that mall.
District managers, most of whom are located at the Company's headquarters,
oversee the leasing and operations at a majority of the Community Centers.
The on-site Mall managers are experienced managers with training in
mall management.
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Virtually all operating activities of the Company are supported by a
computer software system which is designed to provide management with
operating data necessary to make informed business decisions on a timely
basis. During 1994, the Company implemented a new management information
system which included hardware and software. During 1997, the Company
implemented a wide area network enabling instantaneous company-wide e-mail
and enhanced data communications on its accounting system. The accounting
software was also upgraded during 1997 to enhance support and dependability.
In the first quarter of 1998, the Company completed a hardware upgrade to
the accounting system and is developing a web site to publish integrated
information on the world wide web. These systems were developed to more
efficiently assist management in efforts to maintain management quality,
enhance investor relations and communications, and enhance tenant relations
while minimizing operating expenses. Retail sales analysis, leasing
information, budget controls, accounts receivable/payable, operating expense
variance reports and income analysis are continually available to management.
Through these systems management also has available information that
facilitates the development and monitoring of budgets and other relevant
information. See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Year 2000 Issues.
An affiliate of the Management Company also leases certain equipment,
such as furniture, computers and vehicles, to Property Partnerships
for use at the Malls. During a portion of 1997, security, maintenance and
cleaning services at most of the Malls were provided by a company
(ERMC, L.P.) in which certain executive officers of the Company had an
interest. In February 1997, substantially all of the assets of ERMC, L.P.
were sold to a third party MManTec, Inc. ("MManTec") not affiliated with CBL
or any of the Company's executive officers. MManTec continues to operate
security services under the name of ERMC, L.P. and owes a note payable to
ERMC, L.P.
Management pursues periodic preventative maintenance programs, which
encompass paving, roofing, HVAC and general improvements to the Properties'
common areas. The on-site property managers oversee all such work in
accordance with approved budgets with the cordination of and reporting
to management.
GOVERNOR'S SQUARE
Governor's Square and Governor's Plaza are the only Properties in the
Company's portfolio in which the Company is not the sole general partner or
managing general partner. Governor's Square is owned by a Property
Partnership, the managing general partner of which is a non-CBL affiliate
which owns a 47.5% interest in the Mall. The Company is a non-managing
general partner of Governor's Plaza. Although the managing general partner
of this partnership controls the timing of distributions of cash flow, the
Company's approval is required for certain major decisions, including
permanent financing, refinancing and sale of all or substantially all of
the partnership's assets. Property management services, including
accounting, auditing, maintenance, promotional programs, leasing, collection
and insurance, are performed by a property manager affiliated with the non-
CBL managing general partner for which such property manager receives a fee.
EMPLOYEES
The Company, through the Management Company, currently employs
approximately 286 full time and 106 part time persons. None of these
employees is currently represented by any union. The Company does not have
any employees other than its statutory officers.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations,
a current or previous owner or operator of real estate may be liable for the
costs of removal or remediation of petroleum, certain hazardous or toxic
substances on, under or in such real estate. Such laws typically impose such
liability without regard to whether the owner or operator knew of, or was
responsible for, the presence of such substances. The costs of remediation
or removal of such substances may be substantial, and the presence of such
substances, or the failure to promptly remediate such substances, may
adversely affect the owner's or operator's ability to sell such real estate
or to borrow using such real estate as collateral. Persons who arrange for
the disposal or treatment of hazardous or toxic substances
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may also be liable for the costs of removal or remediation of such substances
at the disposal or treatment facility, regardless of whether such facility is
owned or operated by such person. Certain laws also impose requirements on
conditions and activities that may affect the environment or the impact of
the environment on human health. Failure to comply with such requirements
could result in the imposition of monetary penalties (in addition to the
costs to achieve compliance) and potential liabilities to third parties.
Among other things, certain laws require abatement or removal of friable and
certain non-friable asbestos-containing materials ("ACMs") in the event of
demolition or certain renovations or remodeling. Certain laws regarding ACMs
require building owners and lessees, among other things, to notify and train
certain employees working in areas known or presumed to contain ACMs. Certain
laws also impose liability for release of ACMs into the air and third parties
may seek recovery from owners or operators of real properties for personal
injury or property damage associated with ACMs. In connection with its
ownership and operation of the Properties, the Company, the Operating
Partnership or the relevant Property Partnership, as the case may be, may be
potentially liable for such costs or claims.
All of the Properties (but not properties for which the Company holds an
option to purchase but does not yet own) have been subject to Phase I
environmental assessments or updates of existing Phase I environmental
assessments within approximately the last six years. Such assessments
generally consisted of a visual inspection of the Properties, review of
federal and state environmental databases and certain information regarding
historic uses of the Property and adjacent areas and the preparation and
issuance of written reports. Some of the Properties contain, or contained,
underground storage tanks used for storing petroleum products or wastes
typically associated with automobile service or other operations conducted
at the Properties. Certain Properties contain, or contained, dry-cleaning
establishments utilizing solvents. Where believed to be warranted, samplings
of building materials or subsurface investigations were, or, with respect to
one Property, will be undertaken. At certain Properties, where warranted by
the conditions, the Company has developed and implemented an operations and
maintenance program that establishes operating procedures with respect to
ACMs. The costs associated with the development and implementation for such
programs were not material.
Although there can be no assurances that such environmental liability
does not exist, none of the environmental assessments have identified and
the Company is not aware of any environmental liability with respect to the
properties in which the Company or the Operating Partnership has or had
an interest (whether as an owner or operator) that the Company believes
would have a material adverse effect on the Company's financial condition,
results of operations or cash flows. Nevertheless, it is possible that the
environmental assessments available to the Company do not reveal all
potential environmental liabilities, that subsequent investigations will
identify material contamination, that adverse environmental conditions have
arisen subsequent to the performance of the environmental assessments, or
that there are material environmental liabilities of which management is
unaware. Moreover, no assurances can be given that (i) future laws,
ordinances or regulations will not impose any material environmental
liability or (ii) the current environmental condition of the Properties has
not been or will not be affected by tenants and occupants of the Properties,
by the condition of properties in the vicinity of the Properties or by third
parties unrelated to the Company, the Operating Partnership or the relevant
Property Partnership. The existence of any such environmental liability could
have an adverse effect on the Company's results of operations, cash flow and
the funds available to the Company to pay dividends.
The Company has not recorded in its financial statements any material
liability in connection with environmental matters.
GENERAL RISKS OF THE COMPANY'S BUSINESS
General Factors Affecting Investments in Shopping Center Properties
and Effect of Economic and Real Estate Conditions
A shopping center's revenues and value may be adversely affected by a
number of factors, including: the national and regional economic climates;
local real estate conditions (such as an oversupply of retail space);
perceptions by retailers or shoppers of the safety, convenience and
attractiveness of the shopping center; and the willingness and ability of
the shopping center's owner to provide capable management and maintenance
services. In
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addition, other factors may adversely affect a shopping center's value
without affecting its current revenues, including: changes in governmental
regulations, zoning or tax laws; potential environmental or other legal
liabilities; availability of financing; and changes in interest rate levels.
There are numerous shopping facilities that compete with the Properties in
attracting retailers to lease space. In addition, retailers at the
Properties face continued competition from discount shopping centers,
outlet malls, wholesale clubs, direct mail, telemarketing, television
shopping networks and, most recently, shopping via the Internet.
Competition could adversely affect the Operating Partnership's revenues
and funds available for distribution to partners, which in turn will affect
the Company's revenues and funds available for distribution to stockholders.
Geographic Concentration
The Properties are located principally in the southeastern United States
in Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South
Carolina, Tennessee and Virginia. Seventeen Malls, eleven Associated Centers,
sixty-four Community Centers and the Office Building are located in these
states. The Company's results of operations and funds available for
distribution to stockholders therefore will be subject generally to economic
conditions in the southeastern United States. As of December 31, 1997,
the Properties located in the southeastern United States accounted for
54.7% of the Company's total assets, and provided 71.3% of the Company's
total revenues for the year ended December 31, 1997.
Third Party Interests In Certain Properties
The Operating Partnership owns partial interests in six Malls, five
Associated Centers, one Community Center and the Office Building. The
Operating Partnership or an affiliate of the Company is the managing general
partner of the Property Partnerships that own such Properties, except for
the Governor's Square Mall and its Associated Center, Governor's Plaza, in
which affiliates of the Operating Partnership are non-managing general
partners.
Where the Operating Partnership serves as managing general partner of
Property Partnerships, it may have certain fiduciary responsibilities to the
other partners in those partnerships. In certain cases, the approval or
consent of the other partners is required before the Operating Partnership
may sell, finance, expand or make other significant changes in the operations
of such Properties. To the extent such approvals or consents are required,
the Operating Partnership may experience difficulty in, or may be prevented
from implementing its plans with respect to expansion, development, financing
or other similar transactions with respect to such Properties.
With respect to Governor's Square and Governor's Plaza, the Operating
Partnership does not have day-to-day operational control or control over
certain major decisions, including the timing and amount of distributions
and decisions relating to sales, expansions and financings, which could
result in decisions by the managing general partner that do not fully
reflect the interests of the Company, including decisions relating to the
standards that the Company is required to satisfy in order to maintain its
status as a real estate investment trust for tax purposes.
Dependence on Significant Properties
Hamilton Place and Coolsprings Galleria accounted for approximately 8.0%
and 8.0%, respectively, of total
revenues of the Company for the period ended December 31, 1997. The Company's
financial position and results of
operations will therefore be disproportionately affected by the results
experienced at these Properties.
Dependence on Key Tenants
The Limited Inc. stores (including Intimate Brands) maintains 77 Mall
stores and in the year ended December 31, 1997 accounted for approximately
8.0% of total revenues of the Company. Food Lion serves as an anchor tenant
in 37 of the Community Centers and in one Associated Center. In the year
ended December 31, 1997, Food Lion accounted for approximately 4.4% of total
revenues of the Company, Food Lion is a publicly traded North Carolina-
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based operator of supermarkets. The loss or bankruptcy of any of these or
other key tenants could negatively affect the Company's financial position
and results from operations.
THE COMPANY'S STRATEGY FOR GROWTH
Management believes that per share growth in the Company's Funds from
Operations, as defined below, is one of the key factors in enhancing
shareholder value. Management also believes that Funds from Operations is
a widely used measure of the operating performance of REITs, and its
consistent determination in accordance with generally accepted accounting
principles ("GAAP") provides a relevant basis for comparison among REITs.
It is the objective of the Company's management to achieve growth in Funds
from Operations through the aggressive management of the Company's existing
Properties, the expansion and renovation of existing Properties, the
development of new properties, and select acquisitions. Funds from
Operations can also be affected by external factors, such as inflation,
fluctuations in interest rates or changes in general economic conditions,
which are beyond the control of the Company's management.
"Funds from Operations" is defined by the Company as GAAP net income
(loss) before property depreciation, other non-cash items (consisting of the
effect of straight-lining of rents), gains or losses on sales of real estate
and gains or losses on investments in marketable securities. Funds from
Operations also includes the Company's share of Funds from Operations from
unconsolidated affiliates but minority investors' interests are excluded
from Funds from Operations. The Company complies with the National
Association of Real Estate Investment Trust's ("NAREIT") revised definition
of Funds from Operations by not adding back to income from operations
depreciation and amortization of finance costs and non-real estate assets.
The Company continues to exclude outparcel sales and the effect of straight-
line rents from its Funds from Operations calculation, even though the
revised definition allows the inclusion of such items. Funds from
Operations is a non-GAAP statement and does not represent cash flow from
operations as defined by GAAP and is not necessarily indicative of cash
available to fund all cash flow needs and should not be considered an
alternative to net income (loss) for purposes of evaluating the Company's
operating performance or to cash flows as a measure of liquidity.
The Company classifies its regional malls into two categories - stabilized
malls ("Stabilized Malls") which have completed their initial lease-up and
new malls ("New Malls") which are in their initial lease-up phase. At year
end the New Mall category was comprised of WestGate Mall in Spartanburg,
South Carolina which was renovated and expanded and reopened
in October 1996; Turtle Creek Mall in Hattiesburg, Mississippi which opened
partially in October 1994 and the remainder in March 1995 ("Phase II"); Oak
Hollow Mall in High Point, North Carolina which opened in August 1995;
Springdale Mall in Mobile, Alabama which was acquired in September 1997 and
which is being redeveloped and retenanted; and Bonita Lakes Mall in Meridian,
Mississippi which opened in October 1997.
Specifically, the Company has implemented its objective of growing its
Funds from Operations and will continue to do so by:
bullet Maximizing the cash flow from its existing portfolio of Malls,
Associated Centers and Community Centers, and other retail
complexes through aggressive leasing, management, and
marketing, including:
- an active leasing strategy which seeks to increase
occupancy. At December 31, 1997, the occupancy at the
Stabilized Malls, New Malls, Associated Centers, and
Community Centers was 91.7%, 89.2%, 83.3%, and 97.6%,
respectively, as compared to occupancies of 89.0%, 87.7%,
99.6%, and 97.2%, respectively, at December 31, 1996;
- expanded merchandising, marketing and promotional
activities, with the goal of enhancing tenant sales and
thereby increasing percentage rents. Mall store sales
per square foot for the year ended December 31, 1997 were
4.7% higher at the Stabilized Malls than for the year
ended December 31, 1996;
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- increased base rents as tenant leases expire,
renegotiation of leases and negotiation of terminations
of leases of under performing retailers. At December 31,
1997 average base rents per square foot at the Malls,
Associated Centers, and Community Centers was $19.33,
$9.43, and $7.42, respectively, as compared to average
base rents per square foot of $19.64, $8.59, and $6.94,
respectively, at December 31, 1996;
- control of operating costs. Occupancy costs as a
percentage of sales at the Stabilized Malls decreased
to 11.2% for the year ended December 31, 1997 as compared
to 11.5% for the year ended December 31, 1996 (excluding
St. Clair Square and Foothills Mall from 1996).
bullet Expanding and renovating existing properties to maintain their
competitive position.
Most of the Malls were designed to allow for expansion and
growth through the addition of new department stores or other
large retail stores as anchors ("Anchors"). Seventeen of the
twenty-two Malls have undergone expansion or renovation since
their opening, and all of the Malls have been either built or
renovated in the last 10 years or are in the process of being
renovated. Two of the Malls had available Anchor pads at
December 31, 1997. Eighteen existing Anchors at ten Malls
have expansion potential at their existing stores. During
1997, the Company completed the renovation and expansion of
Foothills Mall in Maryville, Tennessee and the addition of a
Dillard's department store to both Twin Peaks Mall in
Longmont, Colorado and Frontier Mall in Cheyenne, Wyoming.
The Company is presently renovating Hamilton Place Mall in
Chattanooga, Tennessee to be completed in 1998 and plans to
renovate Governor's Square in Clarksville, Tennessee beginning
later in 1998. The Company also plans to expand Lakeshore Mall
in Sebring, Flordia in 1999 by adding a fifth department store.
In the Community Center and Associated Center portfolios, the
Company renovated four Community Centers and expanded one
Community Center and one Associated center in 1997. In 1998,
the Company plans to renovate for seven Community Centers and
expand one Mall, one Associated Center and one Community
Center.
bullet Developing new retail properties with profitable returns on
capital, leading to growth for the future.
-10-
<PAGE>
In 1997, the Company opened one Mall, two Associated Centers,
two power centers, and four Community Centers. Summary information
concerning these properties is set forth below.
SUMMARY INFORMATION CONCERNING PROPERTIES
OPENED DURING THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Anchor Non-
Name of Center/ Total GLA Anchor Percentage Opening
Location GLA(1) (2) GLA Leased(3) Date Anchors
________________________ _________ _________ _________ __________ _____________ _________________________
MALLS
Bonita Lakes Mall 631,555 449,447 182,108 86% October 1997 Dillards(4), McRae's(4)
Meridian, MS JCPenney, Sears(4),
Goody's
POWER CENTERS
Springhurst Towne Center 798,736 649,317 149,419 86% July 1997/July Meijer(4), Books-A-Million,
Louisville, KY 1998 Target(4), Kohls', Party
Source, Cinemark, Gap,
Old Navy, TJ Maxx, Kitchen
& Company
Cortlandt Town Center 772,451 575,749 196,702 94% October 1997/ Home Depot(4), HomePlace,
Cortland, NY Sept. 1998 Wal*Mart, Barnes & Noble,
Marshals, A & P, United
Artist, Office Max, PetsMart
ASSOCIATED CENTERS
Bonita Lakes Crossing 110,524 96,811 13,713 29% October 1997 Books-A-Million
Meridian, MS
The Terrace 156,317 156,317 0 100% March 1997/ Circuit City(4), HomePlace,
Chattanooga, TN April 1997 Barns & Noble, Gap Old Navy,
Staples
COMMUNITY CENTERS
Massard Crossing 290,717 260,057 30,660 100% March 1997 Wal*Mart(4), Goody's,
Fort Smith, AR TJ Maxx
Salem Crossing 289,305 251,892 37,413 98% April 1997/ Hannaford Bros., Wal*Mart
Virginia Beach, VA May 1997
Northpark Center 62,500 62,500 0 100% March 1997 Hannaford Bros.
Richmond, VA
Strabridge Market Place 43,570 43,570 0 100% August 1997 Regal Cinemas
Virginia Beach, VA
_________ _________ _________
TOTAL PROPERTIES OPENED 3,155,675 2,545,660 610,015
========= ========= =========
- ---------------------------
(1) Gross Leasable Area ("GLA") includes total square footage of Anchors (whether owned or leased by Anchor)
and Mall stores or shops.
(2) Includes total square footage of Anchors (whether owned or leased by the Anchor).
(3) Percentage leased for malls does not include Anchors GLA. For the Community Centers , Associated Centers,
and power centers, percentage leased includes non-Anchor GLA and leased Anchor GLA.
(4) Owned by Anchor.
</TABLE>
-11-
<PAGE>
The Company currently has one Mall, one Associated Centers,
one power centers, and two Community Centers under construction.
These properties will add approximately 1,900,000 square feet
to the Company's portfolio at opening and are all scheduled to
open during 1998 or 1999.
SUMMARY INFORMATION CONCERNING CONSTRUCTION PROPERTIES
AS OF MARCH 15, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Ownership
by Company
Anchor Non- and Percentage
Name of Center/ Total GLA Anchor Operating Pre-Leased and Projected
Location GLA(1) (2) GLA Partnership Committed(3) Openings Anchors
- ------------------- ---------- ---------- ---------- ----------- -------------- ----------- ----------------------
MALLS
Arbor Place Mall 1,184,279 744,138 440,141 100% 63% Fall 1999 Dillard's(4), Uptons(4),
Douglasville, GA Sears(4), Regal Cinemas
ASSOCIATED CENTERS
The Landing 163,126 111,976 51,150 100% 0% Fall 1999 Circuit City(4)
Douglasville, GA
POWER CENTERS
Sand Lake Corners 594,223 491,133 103,090 100% 27% April 1999 Lowe's(4), Wal*Mart(4),
Orlando, FL Bealls, PestMart
COMMUNITY CENTERS
Sterling Creek Commons 65,500 55,500 10,000 100% 85% June 1998 Hannaford Bros.
Portsmouth, VA
Fiddler's Run 203,926 170,769 33,157 100% 61% March 1999 Goody's, JCPenney, Belk,
Morganton, NC Food Lion
---------- --------- ---------
TOTAL CONSTRUCTION
PROPERTIES 2,211,054 1,573,516 637,538
========== ========== ==========
</TABLE>
(1) Includes total square footage of Anchors (whether owned or leased
by the Anchor) and mall stores or shops after each projects final
phase is complete.
(2) Includes total square footage of Anchors (whether owned or leased
by the Anchor).
(3) Percentage leased and committed for Malls does not include Anchor
GLA. For the Community Centers, Associated Centers, and power
centers, percentage leased and committed includes non-Anchor GLA
and leased Anchor GLA.
(4) Owned by Anchor.
In addition to the Construction Properties, the Company is pursuing
the development of a number of sites which the Company believes are
viable for future development as malls and community and
neighborhood shopping centers. Regional mall development sites are
being pursued in Alabama, Georgia and South Carolina and community
shopping center sites are being pursued in Connecticut, Florida,
Kentucky, Missouri, New York, Tennessee and Virginia.
In general, the Company seeks out development opportunities in
middle-market trade areas that it believes are under-serviced by
existing retail facilities, have demonstrated improving demographic
trends or otherwise afford an opportunity for effective market
penetration and competitive presence.
bullet Acquiring existing retail properties where cash flow can be
enhanced by improved management, leasing, redevelopment and
expansion.
-12-
<PAGE>
Management believes that an opportunity for growth exists through
the acquisition of shopping centers that meet the Company's
investment criteria and targeted returns. In general, the Company
seeks to acquire well-located shopping centers in middle-market
geographic areas consistent with management's experience where
management believes significant value can be created through its
development, leasing and management expertise.
In January 1997, the Company purchased Sutton Plaza, a community
center located in Mount Olive, New Jersey for $5.7 million, which
was funded from the Company's credit lines. This
122,000 square foot community center is 100% leased and is
anchored by A&P and Ames. The Company plans to expand the center
during 1998.
In August 1997, the Company acquired Spartan Plaza in Spartanburg,
South Carolina, a 151,000 square foot Associated Center adjacent
to the Company's WestGate Mall. The purchase price
of this property was $4.5 million, which was funded from the
Company's credit lines. It was renamed WestGate Crossing and it
is currently being redeveloped and retenanted.
In September 1997, the Company acquired Springdale Mall in Mobile,
Alabama. The 926,000 square foot mall is anchored by Gayfers,
McRae's, and Montgomery Ward. The purchase price was $26.2 million
which was funded by a $20 million acquisition loan with the
balance funded from the Company's credit lines. This Mall is
being redeveloped, remodeled, retenanted and expanded.
On January 2, 1998, the Company purchased the 823,916 square foot
Asheville Mall in Asheville, North Carolina for $65 million, which
was funded by a $48.9 million acquisition loan with the balance
funded from the Company's credit lines.
On January 30, 1998, the Company purchased the 1,078,568 square foot
Burnsville Center in Burnsville (Minneapolis), Minnesota for $81
million which was funded by a $60.8 million acquisition loan with
the balance funded from the Company's credit lines.
RISKS ASSOCIATED WITH THE COMPANY'S GROWTH STRATEGY
In connection with the implementation of this growth strategy, the Company
and the Operating Partnership will incur various risks including the risk that
development or expansion opportunities explored by the Company and the
Operating Partnership may be abandoned; the risk that construction costs of
aproject may exceed original estimates, possibly making the project not
profitable; the risk that the Company and the Operating Partnership may not
be able to refinance construction loans which are generally with full
recourse to the Company and the Operating Partnership; the risk that
occupancy rates and rents at a completed project will not meet projections,
and will therefore be insufficient to make the project profitable; and the
need for anchor, mortgage lender and property partner approvals for certain
expansion activities. In the event of an unsuccessful development project,
the Company's and the Operating Partnership's loss could exceed its
investment in the project.
The Company has in the past elected not to proceed with certain
development projects and anticipates that it will do so again from time to
time in the future. If the Company elects not to proceed with a development
opportunity, the development costs associated therewith ordinarily will be
charged against income for the then-current period. Any such charge could
have a material adverse effect on the Company's results of operations for
the period in which the charge is taken.
-13-
<PAGE>
COMPETITION
There are numerous shopping facilities that compete with the Properties
in attracting retailers to lease space. In addition, retailers at the
Properties face continued competition from discount shopping centers, outlet
malls, wholesale clubs, direct mail, telemarketing, television shopping
networks and shopping via the Internet. Competition could adversely affect
the Operating Partnership's revenues and funds available for distributions
to partners, which in turn will affect the Company's revenues and funds
available for distribution to stockholders.
SEASONALITY
The Company's business is somewhat seasonal in nature with tenant sales
achieving the highest levels during the fourth quarter because of the holiday
season. The Malls earn most of their "temporary" rents (rents from short-
term tenants) during the holiday period. Thus, occupancy levels and revenue
production are generally the highest in the fourth quarter of each year.
Results of operations realized in any one quarter may not be indicative of
the results likely to be experienced over the course of the entire year.
QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST
The Company has elected to be taxed as real estate investment trust under
the Code, commencing with its taxable year ended December 31, 1993, and will
seek to maintain such status. As a qualified real estate investment trust,
the Company generally will not be subject to Federal income tax to the extent
it distributes at least 95% of its real estate investment trust taxable income
to its shareholders. If the Company fails to qualify as a real estate
investment trust in any taxable year, the Company will be subject to Federal
income tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates.
INSURANCE
The Operating Partnership carries comprehensive liability, fire, extended
coverage and rental loss insurance covering all the Properties, with policy
specifications and insured limits customarily carried for similar properties.
Management believes that the Properties are adequately insured in accordance
with industry standards.
ITEM 2. PROPERTIES.
MALLS
Each of the Malls is an enclosed regional shopping complex. Each Mall
generally has at least three Anchors which own or lease their stores and
numerous non-anchor stores with GLA less than 30,000 square feet ("Mall
Stores"), most of which are national or regional retailers, located along
enclosed malls connecting the Anchors. At most of the Malls, additional
freestanding restaurants and retail stores are located on the periphery of
the Mall complex. These freestanding stores are, in most cases, owned by
their occupants. Eight of the Mall complexes include one or more Associated
Centers.
The total GLA of the 22 Malls is approximately 16.1 million square feet
or an average GLA of approximately 733,000 square feet per Mall. Mall store
GLA is 3,503,490 square feet at December 31, 1997. The Stabilized Mall
occupancy was 91.7% at December 31, 1997 (94.6% including
leased Anchor GLA). The Company wholly owns all but six of its Malls and
manages all but one of them.
In the years ended December 31, 1995, 1996 and 1997, Mall revenues
represented approximately 72.5%, 72.8% and 72.9%, respectively, of total
revenues from the Company's Properties.
-14-
<PAGE>
Mall stores in the Stabilized Malls ("Stabilized Mall Stores") occupancy
increased from 89.0% at December 31, 1996, to 91.7% at December 31, 1997.
St. Clair Square and Foothills Mall, which were acquired during 1996, were
included in the Stabilized Mall category at December 31, 1996.
In the years ended December 31, 1995, 1996 and 1997, average Stabilized
Mall Store sales per square foot were approximately $237, $240 and $251,
respectively (computed using a monthly weighted average). Average Stabilized
Mall Store sales per square foot increased by 4.7% for the year ended
December 31, 1997 as compared to the year ended December 31, 1996.
Average base rent per square foot at the Mall Stores decreased from
$19.64 at December 31, 1996 to $18.98 at December 31, 1997. Average
base rents decreased in the Mall Stores during 1997 due to the fact that
several higher quality, larger space tenants leased space during the year.
The revenue increases from increases in occupancy have more than made up
for any reduction in revenues from average base rents going forward.
Occupancy costs as a percentage of sales for tenants in the Stabilized
Malls (excluding St. Clair Square and Foothills Mall from 1995 and 1996)
were 12.3%, 11.7% and 11.2% for the years 1995, 1996, and 1997, respectively.
The Malls are generally located in middle-markets. Management believes
that the Malls have strong competitive positions because they generally are
the only or largest enclosed malls within their respective trade areas.
Trade areas have been identified by management based upon a number of sources
of information, including the location of other malls, publicly available
population information, customer surveys, surveys of customer automobile
license plates as well as ZIP codes and third-party market studies.
The two largest revenue-producing Malls are Hamilton Place and
CoolSprings Galleria. Hamilton Place is located on a 187-acre site in
Chattanooga, Tennessee and represented, as of December 31, 1997, 4.67% of
the Properties' total GLA, 5.48% of total Mall Store GLA and 8.0% of total
revenues from the Company's Properties. CoolSprings Galleria is located on
a 148-acre site in metropolitan Nashville, Tennessee and represented, as of
December 31, 1997, 4.55% of the Properties' total GLA, 5.59% of total Mall
Store GLA and 8.0% of total revenues from the Company's Properties.
Seventeen of the twenty-two Malls have undergone an expansion or
remodeling since their opening, and all but one of the Malls have either
been built or renovated in the last 10 years or are in the process of being
renovated, including the renovation of Hamilton Place and a redevelopment
and expansion of Springdale Mall. The Company plans to renovate Governor's
Square beginning later in 1998 and plans to expand Lakeshore Mall in 1999
by adding a fifth department store. Two of the Malls have
available Anchor pads providing expansion potential totaling approximately
205,700 buildable square feet at December 31, 1997. Eighteen existing
Anchors at ten Malls have aggregate expansion potential at their existing
stores of approximately 473,000 buildable square feet.
With the exception of WestGate Mall, St. Clair Square and Springdale Mall
which were acquired by the Company in March 1995, November, 1996 and
September 1997, respectively, each of the Malls was developed by the Company.
The land underlying the Malls is owned in fee in all cases, except for Walnut
Square, WestGate Mall, St. Clair Square, and Bonita Lakes MAll which are each
subject to long-term ground leases for all or a portion of the land underlying
these Malls.
The table on the following page sets forth certain information for each
of the Malls as of December 31, 1997 and includes Asheville Mall and
Burnsville Center, which were acquired in January 1998.
-15-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mall
Year Ownership by Total Store Percentage
Most Company and Mall Sales per Mall Store Fee or
Year of Recent Operating Total Store Square GLA Anchor Ground
Name of Mall/Location Opening Expansion Partnership GLA(1) GLA(2) Foot(3) Leased(4) Anchors Vacancies Lease
- --------------------- ------- --------- ------------ --------- --------- --------- ---------- ------------------ --------- -------
NEW MALLS
Bonita Lakes Mall 1997 N/A 100% 631,555 182,108 $ 93(15) 86% Goody's, Dillard's, None Ground
Meridian, MS JCPenney, Sears, Leased
MaRae's (14)
Oak Hollow Mall 1995 N/A 75% 829,194 252,366 223 87% Goody's, JCPenney, None Fee
High Point, NC Belk-Beck, Sears,
Dillard's
Springdale Mall 1960(7) N/A 100% 926,376 325,031 218 84% Gayfers, Montgomery None Fee
Mobile, AL Ward, McRae's
Turtle Creek Mall 1994 1995 100% 846,234 223,140 263 98% JCPenney, Sears, None Fee
Hattiesburg, MS Dillard's, Gayfers,
Goody's, McRae's
WestGate Mall 1975 1996 100% 1,100,575 276,461 272 91% Belk-Hudson, None Fee/
Spartanburg, SC --------- --------- ---- JCPenney, Dillard's, Ground
Sears, Upton's, Lease
JB White (5)
TOTAL NEW MALLS 4,333,934 1,259,106 89%
========= ========= ====
STABILIZED MALLS
Asheville Mall 1972(8) 1994 100% 823,916 260,581 $272 99% Dillard's, Montgomery None Fee
Asheville, NC Ward, JCPenney, Sears,
Belk
Burnsville Center 1977(12) N/A 100% 1,078,568 417,525 281 93% Mervyn's, Dayton's, None Fee
Burnsville, MN JCPenney, Sears
College Square 1988 1993 100% 460,463 157,594 213 86% JCPenney, Sears, None Fee
Morristown, TN Wal*Mart, Goody's,
Proffit's
CoolSpring Galleria 1991 1994 100% 1,130,597 375,582 299 94% Castner-Knott, None Fee
Nashville, TN Dillard's, Sears,
JCPenney, Parisian
Foothills Mall 1983(6) 1997 95% 476,768 180,072 190 89% Sears, JCPenney, None Fee
Maryville, TN Goody's, Proffitt's,
Proffitt's II
Frontier Mall 1981 1983 100% 523,004 202,417 184 85% Dillard's, JCPenney, None Fee
Cheyenne, WY Joslins, Sears
Georgia Square 1981 N/A 100% 680,135 258,581 217 96% Belk, JCPenney, None Fee
Athens, GA Macy's, Sears
Governor's Square 1986 1994 48% 692,320 271,319 225 94% JCPenney, Parks- None Fee
Clarksville, TN Belk, Sears,
Dillard's, Goody's
Hamilton Place 1987 1992 90% 1,159,636 367,988 322 97% Belk, Parisian, None Fee
Chattanooga, TN Proffitt's I,
Proffitt's II,
Sears, JCPenney
Lakeshore Mall 1992 N/A 100% 408,534 153,062 184 79% Kmart, Belk-Lindsey, None Fee
Sebring, FL JCPenney, Beall's (9)
Madison Square 1984 1985 50% 933,845 300,025 301 98% Castner Knott, None Fee
Huntsville, AL JCPenney, McRae's,
Parisian, Sears
Pemberton Square 1985 1990 100% 353,300 135,065 182 92% JCPenney, McRae's, None Fee
Vicksburg, MS Wal*Mart, Goody's
Plaza Del Sol 1979 1990 51% 245,685 89,504 158 97% Beall Bros.(9), None Fee
Del Rio, TX JCPenney, Kmart
Post Oak Mall 1982 1985 100% 776,823 318,642 231 83% Beall Bros.(9), None Fee
College Station, TX Dillard's, Foley's,
Service Merchandise,
Sears, JCPenney
-16-
<PAGE>
Mall
Year Ownership by Total Store Percentage
Most Company and Mall Sales per Mall Store Fee or
Year of Recent Operating Total Store Square GLA Anchor Ground
Name of Mall/Location Opening Expansion Partnership GLA(1) GLA(2) Foot(3) Leased(4) Anchors Vacancies Lease
- --------------------- ------- --------- ------------ --------- --------- --------- ---------- ------------------ --------- -------
St. Clair Square 1974(10) N/A 100% 1,044,599 315,656 342 96% Famous Barr, Sears, None Fee/
Fairview Heights, IL JCPenney, Dillard's, Ground
Lease
(11)
Twin Peaks Mall 1985 1987 100% 556,153 245,268 193 87% JCPenney, Dillard's None Fee
Longmont, CO Joslins, Sears
Walnut Square 1980 1992 100% 450,385 171,192 191 96% Belk, JCPenney, None Ground
Dalton, GA ---------- --------- ---- --- Proffitt's, Sears, Lease
Goody's (13)
TOTAL STABILIZED MALLS 11,794,731 4,220,073 $252 92%
========== ========= ==== ===
</TABLE>
( 1) Includes the total square footage of the Anchors (whether owned or leased
by the Anchor) and Mall Stores. Does not include future expansion areas.
( 2) Does not include Anchors.
( 3) Totals represent weighted averages.
( 4) Includes tenants paying rent for executed leases as of December 31, 1997.
( 5) The Company is the lessee under several ground leases for approximately
53% of the underlying land. The leases extend through October 31, 2084,
including six ten-year renewal options. Rental amount is $130,000 per
year. In addition to base rent, the landlord receives 20% of the
percentage rents collected. The Company has a right of first refusal to
purchase the fee.
( 6) Originally opened in 1983 and controlling interest acquired by the
Company in December 1996.
( 7) Originally opened in 1960, was acquired by the Company in September 1997,
and is currently under going expansion and renovation.
( 8) Originally opened in 1972, last renovation completed in 1994, and
acquired by the Company in January 1998.
( 9) Beall Bros. operating in Texas is unrelated to Beall's operating in
Florida.
(10) Originally opened in 1974, last renovation completed in 1994, and
acquired by the Company in November, 1996.
(11) The Company is the lessee under a ground lease for 20 acres which
extends through January 31, 2073, including 14 five-year renewal
options and one four-year renewal option. Rental amount is $40,000
per year. In addition to base rent, the landlord receives .25% of
Dillard's sales in excess of $16,200,000.
(12) Originally opened in 1977, last renovation completed in 1989, and
acquired by the Company in January 1998.
(13) The Company is the lessee under several ground leases which extend
through March 14, 2078, including six ten-year renewal options and
one eight-year renewal option. Rental amount is $149,450 per year.
In addition to base rent, the landlord receives 20% of the percentage
rents collected. The Company has a right of first refusal to purchase
the fee.
(14) The Company is the lessee under a ground rent for 116.4 acres which
extends through June 30, 2035. The average annual base rent is $77,509.
(15) Center opened in fourth quarter of 1997.
-17-
<PAGE>
Anchors. Anchors are a critical factor in a Mall's success because the
public's identification with a property typically focuses on its Anchors.
Mall Anchors generally are department stores whose merchandise appeals to a
broad range of shoppers. Although the Malls derive a smaller percentage of
their operating income from Anchor stores than from Mall Stores, strong
Anchors play an important part in generating customer traffic and making the
Malls desirable locations for Mall Store tenants.
Anchors either own their stores together with the land under them,
sometimes with adjacent parking areas, or enter into long-term leases with
respect to their stores at rental rates that are significantly lower than
the rents charged to tenants of Mall Stores. Anchors which lease their
stores account for approximately 12.0% of the total revenues from the
Company's Properties. Each Anchor which owns its own store has entered into
a reciprocal easement agreement with the Company covering, among other
things, operating covenants, reciprocal easements, property operations,
initial construction and future expansions.
The Malls have a total of 103 Anchors. No Anchor Stores at any of the
Malls were vacant as of December 31, 1997. The following table indicates all
Mall Anchors and sets forth the aggregate number of square feet owned or
leased by Anchors in the Malls as of March 15, 1998.
-18-
<PAGE>
MALL ANCHOR SUMMARY INFORMATION
<TABLE>
<S> <C> <C> <C> <C>
GLA GLA TOTAL
NUMBER OWNED LEASED OCCUPIED
OF ANCHOR BY BY BY
NAME STORES ANCHOR ANCHOR ANCHOR (1)
- -------------------- ---------- --------- --------- -----------
JCPenney 21 554,971 1,309,823 1,864,794
Sears 18 1,406,551 651,466 2,058,017
Dillard's 11 1,150,247 252,704 1,402,951
Proffitt's
Proffitt's (2) 6 492,654 0 492,654
McRae's 5 383,559 168,000 551,559
Parisian 3 207,520 133,000 340,520
---------- --------- --------- -----------
Subtotal 14 1,083,733 301,000 1,384,733
Belk
Belk 5 0 555,888 555,888
Belk-Lindsey 1 0 61,029 61,029
Belk-Hudson 1 0 152,890 152,890
Parks-Belk 1 0 122,367 122,367
---------- --------- --------- -----------
Subtotal 7 0 892,174 892,174
Mercantile Stores
Castner Knott 2 326,004 30,000 356,004
J.B. White 1 150,000 0 150,000
Gayfers 2 407,800 0 127,800
Joslins 2 152,914 2,500 155,414
---------- --------- --------- -----------
Subtotal 7 1,036,718 32,500 1,069,218
The May Company
Foley's 1 103,888 0 103,888
Famous Barr 1 0 236,489 236,489
- -------------------- ---------- --------- --------- -----------
Subtotal 2 103,888 236,489 340,377
Goody's 8 0 256,838 256,838
Montgomery Ward 2 0 245,829 245,829
Dayton-Hudson 1 221,326 0 221,326
Wal*Mart 2 0 214,653 214,653
Kmart 2 0 173,940 173,940
Mervyn's 1 124,919 0 124,919
Macy's 1 115,623 0 115,623
Uptons 1 0 69,993 69,993
Beall Bros. (Texas) 2 0 61,916 61,916
Beall's (Florida) 1 0 45,844 45,844
Service Merchandise 1 0 40,804 40,804
---------- --------- --------- -----------
Total 103 5,797,976 4,693,489 10,491,465
========== ========= ========= ===========
</TABLE>
(1) Includes all square footage owned by or leased to such Anchor including
tire, battery and automotive facilities and storage square footage.
(2) Proffitt's occupies two Anchor spaces at Foothills Mall and three at
Hamilton Place Mall.
Mall Stores. The Malls have approximately 1,624 Mall Stores. National or
regional chains (excluding individually franchised stores) lease
approximately 82.0% of the occupied Mall Store GLA. Although Mall Stores
occupy only 33.7% of total Mall GLA, for the year ended December 31, 1997,
the Malls derived approximately 87.6% of their revenue from Mall Stores.
Among the companies with the largest representation among Mall Stores are:
The Limited, Inc. stores /Intimate Brands (The Limited, Limited Too, Express,
Lerner New York, Lane Bryant, Structure, Victoria Secret, and Bath and Body
Works) and Woolworth Corporation (Footlocker, Lady Footlocker, Kinney Shoes,
Champs Sports Stores, Afterthoughts Boutique and San Francisco Music Box).
As of December 31, 1997, The Limited's Stores, Inc.'s and
-19-
<PAGE>
Intimate Brands' 77 stores accounted for 13.1% of total leased GLA and 8.0%
of total revenues from the Company's Properties. No single Mall Store
retailer accounted for more than 13.1% of total leased GLA and no single Mall
Store retailer accounted for more than 8.0% of total revenues from the
Company's Properties.
The following table sets forth certain information for executed renewal
leases with current tenants or leases of previously occupied space with new
tenants at the Malls during the year ended December 31, 1997.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Prior Lease New Lease Increase Increase
Total Base and Initial Year per New Lease per
Number Square Percentage Rent Base Rent Square Average Square
of leases Feet per Square Foot per Square Foot Foot Base Rent Foot
- --------- -------- --------------- --------------- --------- ---------- --------
237 473,272 $19.85 $20.77 $0.91 $21.22 $1.37
</TABLE>
The following table sets forth the total Mall Store GLA, the total square
footage of leased Mall Store GLA, the percentage of Mall Store GLA leased,
the average base rent per square foot of Mall Store GLA and average Mall
Store sales per square foot as of the end of each of the past five years.
STABILIZED MALL STORE SUMMARY INFORMATION
<TABLE>
<S> <C> <C> <C> <C> <C>
Total Percentage Average Average Mall
Total Mall Store of Mall Store Base Rent Store Sales
At Mall Store Leased GLA per Square per Square
December 31, GLA GLA Leased(1) Foot(2) Foot(3)
- ------------- ---------- ---------- ----------- ----------- ------------
1993 2,576,047 2,268,790 88.1% $16.12 $217
1994 2,576,047 2,284,987 88.7 16.55 226
1995 3,003,334 2,697,969 89.8 18.28 237
1996 3,452,997 3,073,190 89.0 19.03 240
1997 3,503,490 3,214,176 91.7 18.98 252
</TABLE>
- -------------------
(1) Mall Store occupancy includes tenants with executed leases who are paying
rent.
(2) Average base rent per square foot is based on Mall Store GLA occupied as
of the last day of the indicated period for the preceding twelve-
month period.
(3) Calculated for the preceding twelve-month period.
Lease Expirations. The following table shows the scheduled lease
expirations for the Malls (assuming that none of the tenants exercise
renewal options) for the year ending December 31, 1998 and for the next
nine years for the Mall Stores.
MALL LEASE EXPIRATION
<TABLE>
<S> <C> <C> <C> <C> <C>
Percentage of Total
Approximate Represented by
Mall Store Expiring Leases
Number of Annualized Base GLA of --------------------------
Leases Rent of Expiring Expiring Annualized Leased Mall
December 31, Expiring Leases (1) Leases Base Rent Store GLA
- -------------- --------- ---------------- ------------- ------------ -----------
1998 233 $6,385,665 359,618 8.00% 8.52%
1999 175 5,925,743 309,889 7.42 7.34
2000 170 6,583,360 389,614 8.25 9.23
2001 129 6,510,819 335,515 8.16 7.95
2002 190 8,433,978 409,572 10.57 9.71
2003 133 6,675,899 341,094 8.36 8.08
2004 129 6,564,279 313,380 8.22 7.43
2005 136 8,319,776 384,254 10.42 9.11
2006 106 5,697,381 288,301 7.14 6.83
2007 137 8,960,179 431,102 11.22 10.22
</TABLE>
-20-
<PAGE>
(1) Total annualized base rent for all leases executed as of December 31, 1997
includes rent for space that is leased but not yet occupied but excludes (i)
percentage rents, (ii) additional payments by tenants for common area
maintenance, real estate taxes and other expense reimbursements and (iii)
contractual rent escalations and cost of living increases due after
December 31, 1997.
Cost of Occupancy. Management believes that in order to maximize the
Company's Funds from Operations, tenants in Mall Stores must be able to
operate profitably. A major factor contributing to tenant profitability is
the tenant's cost of occupancy.
The following table summarizes for Stabilized Mall Store tenants the
occupancy costs under their leases as a percentage of total Mall Store sales
for the last three years.
<TABLE>
<S> <C> <C> <C>
For the Year Ended
December 31, (1)
------------------------------
1995 1996 1997
--------- --------- --------
Mall Store sales (in thousands)(2) $526,107 $515,121 $666,506
Minimum rents 8.6% 7.9% 7.7%
Percentage rents 0.5 0.3 0.4
Expense recoveries (3) 3.2 3.3 3.1
--------- --------- --------
Mall tenant occupancy costs 12.3% 11.5% 11.2%
======= ========= =======
</TABLE>
(1) Excludes Malls not open for full reporting period.
(2) Consistent with industry practice, sales are based on reports by
retailers (excluding theaters) leasing Mall Store GLA and
occupying space for the reporting period. Represents 100% of sales for
these Malls. In certain cases, the Company and the
Operating Partnership will own less than 100% interest in these Malls.
(3) Represents real estate tax and common area maintenance charges.
At December 31, 1997, the Company had investments in three malls in joint
ventures with third parties, all of which are reflected using the equity
method of accounting. Condensed combined results of operations for the
three unconsolidated affiliates are presented in the following table
(dollars in thousands).
<TABLE>
<S> <C> <C> <C> <C>
Company's Share
Total for the Year for the Year
Ended Ended
December 31, December 31,
------------------- -------------------
1997 1996 1997 1996
------- -------- -------- --------
Revenues $21,295 $21,014 $10,475 $10,318
Depreciation & Amortization 2,678 2,592 1,311 1,268
Interest Expense 8,044 8,278 3,951 4,061
Other Operating Expenses 6,955 6,389 3,432 3,159
------- -------- -------- --------
Net Income Before Extraordinary Item 3,618 3,755 1,781 1,830
Extraordinary Item 0 1,727 0 820
------- -------- -------- --------
Net Income $3,618 $2,028 $1,781 $1,010
======= ======== ======== ========
</TABLE>
-21-
<PAGE>
ASSOCIATED CENTERS
The twelve Associated Centers are each part of a Mall complex and
generally have one or two Anchor tenants and various smaller tenants.
Anchor tenants in these centers include such retailers as Books-A-Million,
Target, Toys "R" Us, TJ Maxx, and Service Merchandise which are category
dominant retailers that benefit from the regional draw of the Malls. The
Associated Centers also increase the draw to the total Mall complex.
Total leasable GLA of the twelve Associated Centers is approximately 0.9
million square feet, including Anchors, or an average of approximately 76,000
square feet per center. As of December 31, 1997, 83.3% of total leasable GLA
at the Associated Centers was occupied. This decrease in occupancy is due to
the Company relocating a tenant to a Mall store and the retenanting of
Westgate Crossing.
In the years ended December 31, 1995, 1996, and 1997, revenues from the
Associated Centers represented approximately 3.5%, 3.3% and 3.8%,
respectively, of total revenues from the Company's Properties.
In the years ended December 31, 1995, 1996 and 1997, average tenant
sales per square foot at the Associated Centers were approximately $215,
$207 and $189, respectively.
Average base rent per square foot at the Associated Centers increased
from $8.59 at December 31, 1996 to $9.43 at December 31, 1997.
Each of the Associated Centers was developed by the Company, except for
WestGate Crossing which was acquired in August 1997. All of the land
underlying the Associated Centers is owned in fee.
Lease Expirations. The following table shows for the Associated Centers
(assuming that none of the tenants exercise renewal options) the scheduled
lease expirations for the year ending December 31, 1998 and for the next
nine years.
ASSOCIATED CENTER LEASE EXPIRATION
<TABLE>
<S> <C> <C> <C> <C> <C>
Percentage of Total
Approximate Represented by
Mall Store Expiring Leases
Number of Annualized Base GLA of --------------------------
Leases Rent of Expiring Expiring Annualized Leased Mall
December 31, Expiring Leases (1) Leases Base Rent Store GLA
- -------------- --------- ---------------- ------------- ------------ -----------
1998 13 $278,698 35,696 4.21% 5.03%
1999 14 335,342 24,120 5.06 3.40
2000 22 808,972 72,653 12.21 10.25
2001 5 389,708 43,516 5.88 6.14
2002 14 647,380 52,229 9.77 7.37
2003 9 408,579 52,394 6.17 7.39
2004 4 556,204 94,060 8.40 13.26
2005 2 336,489 46,428 5.08 6.55
2006 2 288,625 32,720 4.36 4.61
2007 4 596,890 8,476 9.01 1.20
</TABLE>
(1) Total annualized base rent for all leases executed as of December 31,
1997 includes 12 months of rent for space that is newly leased but not
yet occupied but excludes (i) percentage rents, (ii) additional
payments by tenants for common area maintenance, real estate taxes and
other expenses reimbursements and (iii) contractual rent escalations
and cost of living increases due after December 31, 1997.
-22-
<PAGE>
The following table sets forth certain information for executed renewal
leases with current tenants or leases of previously occupied space with new
tenants at the Associated Centers during the year ended December 31, 1997.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Prior Lease New Lease Increase Increase
Total Base and Initial Year per New Lease per
Number Square Percentage Rent Base Rent Square Average Square
of leases Feet per Square Foot per Square Foot Foot Base Rent Foot
- --------- -------- --------------- --------------- --------- ---------- --------
33 58,905 $12.61 $13.29 $0.68 $13.47 $0.87
</TABLE>
The following table sets forth certain information for each of the
Associated Centers as of December 31, 1997:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Year of Ownership by
Name of Opening/Most Company and Total Percentage
Associated Recent Operating Total Leased GLA
Center/Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors
- ----------------------- ------------ ------------- ------------ ------------ ---------- ----------------------------
Bonita Crossing 1997 100% 110,524 110,524 100% Books-A-Million
Meridian, MS TJ Maxx
CoolSprings Crossing 1992 100% 340,596 40,513 100% Target, Service Merchandise,
Nashville, TN Toys "R" Us, Uptons, Carmike
Cinemas
Foothills Plaza 1983/1988 100% 204,400(4) 124,400(4) 60.9%(4) Food Lion, Eckerd(6), Carmike
Maryville, TN Cinemas
Frontier Square 1985 100% 161,615 16,615 88% Buttrey Food & Drug, Target
Cheyenne, WY
Georgia Square Plaza 1984 100% 15,393 15,393 100%
General Cinema
Athens, GA
Governor's Square Plaza 1985(5) 49% 180,018 57,820 100% Office Max, Premier Medical
Clarkesville, TN Group, Target
Hamilton Corner 1990 90% 88,298 88,298 100% Michael's, Goody's,
Chattanooga, TN Fresh Market
Hamilton Crossing 1987/1994 92% 171,370 78,257 98% Service Merchandise, Toys
Chattanooga, TN "R" Us, TJ Maxx
Madison Plaza 1984(7) 75% 153,085 98,690 100% Food World, TJ Maxx
Huntsville, AL Service Merchandise
Pemberton Plaza 1986 100% 77,998 27,052 78% Kroger
Vicksburg, MS
The Terrace 1997 92% 156,317 117,045 100% Barnes & Novle, HomePlace,
Chattanooga, TN The Gap, Staples,Circuit City
WestGate Crossing 1985(8) 100% 151,489 151,489 43% Circuit City(9), Toys "R" Us
Spartanburg, SC --------- ------- ----
TOTAL ASSOCIATED CENTERS 1,811,103 896,096 83%
========= ======= ====
</TABLE>
-23-
<PAGE>
(1) Includes the total square footage of the Anchors (whether owned or leased
by the Anchor) and shops. Does not include future expansion areas.
(2) Includes leasable Anchors.
(3) Includes tenants with executed leases at December 31, 1997.
Calculation includes leased Anchors.
(4) Total GLA includes and Total Leasable GLA and Percentage GLA Leased
exclude a vacant former Hills Department Store (80,000 square feet of
GLA), which is owned by senior management of the Company. The Company
has a ten-year option (with approximately six years remaining) to
acquire this property for a fixed acquisition price of $3,800,000.
Carmike Cinemas is subject to a ground lease (30,000 square feet of
GLA).
(5) Originally opened in 1985, and was acquired by the Company in June 1997.
(6) Eckerd has closed its store but is continuing to meet its financial
obligations under its lease.
(7) Center was renovated during 1995.
(8) Originally opened in 1985, and was acquired by the Company in August
1997, and is currently under going expansion and renovations.
(9) Circuit City has closed its store but is continuing to meet its
financial obligations under its lease.
COMMUNITY AND POWER CENTERS
In addition to Mall development, the Company's development activities focus
on Community Centers, and power centers. Community Centers
pose fewer development risks than Malls because they have shorter development
timetables and lower up-front costs. Community Centers also afford the
Company the opportunity to meet the needs of retailers for whom a
"convenience" type of location is more appropriate and the needs of customers
whose trade areas cannot support a regional mall. Power centers are larger
than other Community Centers, with several large anchor stores which draw
shoppers from a wider geographic area.
The Company's Community Center developments in the 1980's were generally
anchored by supermarkets, and, in certain cases, by drug stores.
Management's current focus has expanded to include the development of larger
centers, anchored by mass merchandisers and department stores, while
continuing the development of smaller centers anchored by supermarkets and
drug stores. Recently completed Community Centers include centers in
Richmond, Virginia; Fort Smith, Arkansas, two centers in Virginia Beach,
Virginia, and Richmond, Virginia. Anchors at these new centers include,
Regal Cinema, Wal*Mart, Goody's and Hannaford Bros. The Company sold, in a
tax deffered exchange, one free-standing Lowe's in Joplin, Missouri in
the last quarter of 1997.
Community Centers, other than power centers, range in size from 25,000
square feet to in excess of 286,000 square feet. Anchors in Community
Centers generally lease their store space and occupy 60-85% of a center's
GLA. The number of stores in a Community Center ranges up to sixteen with
an average of seven stores per center.
The Company's two power centers, which were completed and opened in 1997,
average 785,000 square feet and have a average of nine major anchor stores
and additional small shop space ranging from 38,000 square feet to 136,000
square feet. The projects include expansion area for additional major
retailers and additional space in second phases some of which are currently
being constructed. These power centers are included in the Community Center's
classification in this report.
Total GLA of the 81 Community Centers is approximately 8.4 million square
feet, or an average of approximately 84,000 square feet per center. As of
December 31, 1997, 97.6% of total leasable GLA at the Community Centers was
leased.
In the years ended December 31, 1995, 1996 and 1997, revenues from the
Community Centers represented approximately 21.2%, 21.4% and 21.2%,
respectively, of total revenues from the Company's Properties.
Occupancy at the Community Centers increased from 97.2% at December 31,
1996 to 97.6% at December 31, 1997.
Average base rent per square foot at the Community Centers increased from
$6.94 at December 31, 1996, to $7.42 at December 31, 1997.
-24-
<PAGE>
As of December 31, 1997, Food Lion, a major regional supermarket operator
with headquarters in North Carolina served as an anchor tenant in 37 of the
Company's Community Centers and in one Associated Center. For the year
ended December 31, 1997, Food Lion accounted for approximately 4.4% of the
revenues generated by the Company's Properties.
With the exception of Suburban Plaza and Sutton Plaza, which were acquired
by the Company in March, 1995 and January, 1997 respectively, each of the
Community Centers was developed by the Company.
The following table summarizes the percentage of total leasable GLA leased,
average base rent per square foot (excluding percentage rent) and tenant
sales per square foot at the Community Centers for each of the last five
years.
COMMUNITY CENTER SUMMARY INFORMATION
<TABLE>
<S> <C> <C> <C>
Average
Percentage Base Rent Tenant
Year Ended GLA Per Square Sales Per
December 31, Leased(1) Foot(2) Square Foot(3)
- ------------------- ---------- ---------- --------------
1994 96.5% 6.64 200
1995 96.8% 6.66 202
1996 97.2% 6.94 210
1997 97.6% 7.42 221
</TABLE>
(1) Percentage leased includes tenants who have executed leases and are
paying rent as of the specified date.
(2) Average base rent per square foot is based on GLA occupied as of the
last day of the indicated period.
(3) Consistent with industry practice, sales are based on reports by
retailers (excluding theaters) leasing GLA and occupying space for
the 12 months ending on the last day of the indicated period.
Lease Expirations. The following table shows the scheduled lease expirations
for the Community Centers (assuming that none of the tenants exercise renewal
options) for the year ending December 31, 1998, and for the next nine years.
COMMUNITY CENTER LEASE EXPIRATION
<TABLE>
<S> <C> <C> <C> <C> <C>
Percentage of Total
Represented by
Approximate Expiring Leases
Number of Annualized Base GLA of --------------------------
Leases Rent of Expiring Expiring Annualized Leased Mall
December 31, Expiring Leases (1) Leases Base Rent Store GLA
- -------------- --------- ---------------- ------------- ------------ -----------
1998 106 $2,238,662 272,014 5.87% 5.43%
1999 119 2,473,578 333,807 6.49 6.66
2000 83 2,027,918 237,918 5.32 4.75
2001 52 1,549,880 230,329 4.07 4.59
2002 90 3,015,163 407,610 7.91 8.13
2003 33 1,918,070 372,322 5.03 7.43
2004 15 1,111,590 182,755 2.92 3.65
2005 18 1,695,965 213,370 4.45 4.26
2006 10 1,342,598 212,686 3.52 4.24
2007 17 2,346,601 280,714 6.16 5.60
</TABLE>
(1) Total annualized base rent for all leases executed as of December 31,
1997 includes 12 months of rent for space that is newly leased but not yet
occupied but excludes (i) percentage rents, (ii) additional payments by
tenants for common area maintenance, real estate taxes and other expense
reimbursements and (iii) contractual rent escalations and cost of living
increases for periods after December 31, 1997.
The following table sets forth certain information for executed renewal
leases with current tenants or leases of previously occupied space with new
tenants at the Community Centers during the year ended December 31, 1997.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Prior Lease New Lease Increase Increase
Total Base and Initial Year per New Lease per
Number Square Percentage Rent Base Rent Square Average Square
of leases Feet per Square Foot per Square Foot Foot Base Rent Foot
- --------- -------- --------------- --------------- --------- ---------- --------
160 347,126 $7.73 $7.94 $ 0.21 $8.23 $ 0.49
</TABLE>
The following table sets forth certain information for each of the
Company's Community Centers at December 31, 1997.
26
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ownership
Opening/ by Company
Most and Total Percentage Fee or Number
Name of Recent Operating Total Leasable GLA Anchor Ground of
Community Center Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors Vacancies Lease Stores
- ---------------- ---------------- --------- ----------- -------- -------- ---------- ------------------- --------- ------- ------
Anderson Plaza Greenwood, SC 1983/1994 100% 46,258 46,258 98% Food Lion, Eckerd None Fee 3
Bartow Village Bartow, FL 1990 100% 40,520 40,520 95% Food Lion, Family None Fee 4
Dollar
Beach Crossing Myrtle Beach, SC 1984 100% 45,790 45,790 100% FoodLion(4), 21,000 Fee 6
Revco Drug sq.ft.
Bennington Place Roanoke, VA 1994 100% 42,712 42,712 100% Food Lion None Fee 3
BJ's Plaza Portland, ME 1991 100% 104,233 104,233 100% BJ's Wholesale Club None Ground 1
Lease
(5)
Briarcliff Square Oak Ridge, TN 1989 100% 41,778 41,778 100% Food Lion None Fee 10
Buena Vista Plaza Columbus, GA 1989/1994 100% 151,320 17,500 85% Wal*Mart, Winn Dixie None Fee 7
Bulloch Plaza Statesboro, GA 1986 100% 34,400 34,400 96% Food Lion, Rite Aid None Fee 3
Capital Crossing Raleigh, NC 1995 100% 83,700 83,700 100% Hannaford Bros., None Fee 2
Staples
Cedar Bluff
Crossing Knoxville, TN 1987/1996 100% 53,050 53,050 98% Food Lion None Fee 12
Cedar Plaza Cedar Springs, MI 1988 100% 95,000 50,000 100% Quality Stores None Fee 5
Centerview Plaza China Grove, NC 1986/1994 100% 43,720 43,720 100% Food Lion, Eckerd None Fee 6
Chester Square Richmond, VA 1997 100% 10,000 10,000 100% Hannaford Brothers None Fee 3
Chestnut Hills Murray, KY 1982 100% 68,364 68,364 100% JCPenney None Fee 10
Clark's Pond Portland, ME 1995 100% 134,920 134,920 100% Home Quarters None Fee 1
Warehouse
Colleton Square Walterboro, SC 1986 100% 31,000 31,000 100% Food Lion None Fee 5
Collins Park
Commons Plant City, FL 1989 100% 37,400 37,400 87% Food Lion None Ground 4
Lease
(6)
Conway Plaza Conway, SC 1985 100% 33,000 33,000 96% Food Lion(7) 21,000 Ground 6
sq. ft. Lease
(8)
Cosby Station Douglasville, GA 1994/1995 100% 77,811 77,811 100% Publix None Fee 9
Courtlandt Towne Cortlandt, NY 1997/1998 100% 772,451 639,208 94% Marshalls, Wal*Mart, None Fee 28
Center (Westchester Home Depot, Home
county Place, A & P Food
Store, Steinbach's,
Barnes & Noble,
Office Max, PetsMart
County Park Plaza Scottsboro, AL 1982 100% 47,325 47,325 82% Bi-Lo 28,875 Fee 3
(9)
sq. ft.
Devonshire Place Cary, NC 1996 100% 104,517 104,517 100% Hannaford Bros., None Ground 4
Kinetix, Borders Lease
Books (10)
Dorchester
Crossing Charleston, SC 1985/1997 100% 45,278 45,278 96% Food Lion None Fee 6
East Ridge
Crossing Chattanooga, TN 1988 100% 54,000 54,000 100% Food Lion, Revco None Fee 13
East Towne
Crossing Knoxville, TN 1989/1990 100% 158,751 70,011 97% Home Depot, Regal None Fee 8
Cinemas, Food Lion
58 Crossing Chattanooga, TN 1988 100% 49,984 49,984 100% Food Lion, Revco None Fee 9
Garden City Plaza Garden City, KS 1984/1991 100% 188,446 76,246 95% Wal*Mart(21), JCPenney None Fee 15
Genesis Square Crossville, TN 1990/1996 100% 35,000 35,000 100% Food Lion None Fee 4
Girvin Plaza Jacksonville, FL 1990 100% 56,297 20,375 94% Winn Dixie None Fee 8
Greenport Towne
Centre Hudson, NY 1994 100% 191,622 75,525 100% Wal*Mart, Price- None Fee 3
Chopper
Hampton Plaza Tampa, FL 1990 100% 44,624 44,624 97% Food Lion None Fee 8
-27-
<PAGE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ownership
Opening/ by Company
Most and Total Percentage Fee or Number
Name of Recent Operating Total Leasable GLA Anchor Ground of
Community Center Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors Vacancies Lease Stores
- ---------------- ---------------- --------- ----------- -------- -------- ---------- ------------------- --------- ------- ------
Henderson Square Henderson, NC 1995 100% 268,327 164,329 100% JCPenney, Legget's, None Fee 14
Goody's, Wal*Mart
Hollins
Plantation
Plaza Roanoke, VA 1985 100% 40,640 40,640 100% Food Lion, Revco Drug None Fee 5
Jasper Square Jasper, AL 1986/1990 100% 95,950 50,550 100% Lowe's, Goody's None Fee 7
Jean Ribaut Beaufort, SC 1977/1993 100% 223,497 223,497 100% Belk, Kmart, Bi-Lo None Fee 17
Karns Corner Knoxville, TN 1987/1996 100% 35,000 35,000 100% Food Lion None Fee 4
Keystone Crossing Tampa, FL 1989 100% 40,400 40,400 100% Food Lion None Fee 5
Kingston Overlook Knoxville, TN(20)1996/1997 100% 119,222 119,222 100% Baby Superstore, None Fee/ 3
Home Place, Ground
Michael's Lease
(11)
Lady's Island Beaufort, SC 1983/1993 100% 60,687 60,687 100% Winn Dixie, Eckerd None Fee 9
LaGrange Commons LaGrange, NY 1996 100% 59,799 59,799 90% A & P Food Store None Fee 6
Lakeshore
Crossing Gainesville, GA 1994 100% 8,000 8,000 100% None Fee 5
Longview Crossing Hickory, NC 1988 100% 29,800 29,800 96% Food Lion None Ground 3
Lease(12)
Lunenburg
Crossing Lunenburg, MA 1994 100% 198,115 25,515 92% Wal*Mart,Shop'n Save None Fee 7
Massard Crossing Ft. Smith, AR 1997 100% 290,717 88,410 100% Wal*Mart,TJ Maxx None Fee 14
Goody's
North Creek Plaza Greenwood, SC 1983 100% 28,500 28,500 100% Food Lion None Fee 2
North Haven
Crossing North Haven, CT 1993 100% 104,612 104,612 100% Sports Authority, None Fee 6
Office Max, Barnes &
Noble
Northpark Center Richmond, VA 1997 100% 62,500 62,500 100% Hannaford Brothers, None Fee 3
Lowe's, Wal*Mart
Northridge Plaza Hilton Head, SC 1984/1988 100% 129,570 79,570 99% Winn Dixie, Eckerd None Fee 18
Northwoods Plaza Albemarle, NC 1983/1992 100% 32,705 32,705 100% Food Lion None Fee 2
Oaks Crossing Otsego, MI 1990/1993 100% 144,978 27,280 100% Wal*Mart, Rite Aid None Fee 11
Orange Plaza Roanoke, VA 1983 100% 46,875 46,875 100% Food World (13) 24,900 Fee 9
sq. ft.
Park Village Lakeland, FL 1990 100% 48,570 48,570 89% Food Lion, Family None Fee 8
Dollar
Perimeter Place Chattanooga, TN 1985/1988 100% 156,945 54,525 97% Home Depot, None Fee 16
Fred's Drugs For Less
Rawlinson Place Rock Hill, SC 1987 100% 35,750 35,750 94% Food Lion None Fee 7
Rhett at Remount Charleston, SC 1983/1994 100% 42,628 42,628 100% Food Lion, Eckerd None Fee 3
Salem Crossing Virginia Beach, VA 1997 100% 289,305 92,377 100% Hannaford Brothers None Fee 16
Sattler Square Big Rapids, MI 1989 100% 132,746 94,760 93% Quality Stores, Perry None Fee 14
Drugs
Seacoast Shopping
Center Seabrook, NH 1991 100% 208,690 91,690 97% Wal*Mart None Fee 14
Shaw's Supermarket
Shenandoah
Crossing Roanoke, VA 1988 100% 28,600 28,600 100% Food Lion None Fee 2
Signal Hills
Village Statesville, NC 1987/1989 100% 24,100 24,100 69% (14) None Ground 6
Lease
(15)
Southgate
Crossing Bristol, TN 1985 100% 40,100 40,100 100% Food Lion(4) 25,000 Ground 3
sq. ft. Lease
(16)
-28-
<PAGE>
Year Ownership
Opening/ by Company
Most and Total Percentage Fee or Number
Name of Recent Operating Total Leasable GLA Anchor Ground of
Community Center Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors Vacancies Lease Stores
- ---------------- ---------------- --------- ----------- -------- -------- ---------- ------------------- --------- ------- ------
Sparta Crossing Sparta, TN 1989 100% 31,400 31,400 100% Food Lion None Fee 2
Springhurst
Towne Center Louisville, KY 1997 100% 798,736 410,736 98% Cinemark, Books None Fee 19
A Million, Kohl's,
Party Source, TJ Maxx,
Old Navy, Target,
Kitchen & Company
Springs Crossing Hickory, NC 1987/1996 100% 42,920 42,920 100% Food Lion, Rite Aid None Ground 4
Lease
(17)
Statesboro Square Statesboro, GA 1986 100% 41,000 41,000 100% Food Lion(7) 25,000 Fee 6
Stone East Plaza Kingsport, TN 1983 100% 45,259 45,259 96% Food Lion(4) None Fee 10
Strawbridge
Market Virginia Beach, VA 1997 100% 43,570 43,570 100% Regal Cinema None Fee 1
Place
Suburban Plaza Knoxville, TN 1995 100% 129,321 129,321 97% Toys "R" Us None Fee 20
Barnes & Noble
Surry Square Elkin, NC 1985 100% 32,900 32,900 96% Food Lion(4), 21,000 Fee 3
Revco Drug sq. ft.
Sutton Plaza Mt. Olive, NJ 1972(19) 100% 122,027 122,027 100% A & P Food Store, None Fee 14
Ames
34th St.
Crossing St. Petersburg, FL 1989 100% 51,120 51,120 94% Food Lion, Family None Fee 11
Dollar
Townshire
ShoppingCenter Bryan, TX 1988 100% 72,440 72,440 75% Blinn College 12,500 Space 2
sq.ft. Lease
(18)
Tyler Square Radford, VA 1987 100% 48,370 48,370 100% Food Lion, Revco Drug None Fee 8
University
Crossing Pueblo, CO 1986 100% 101,964 20,053 69% Wal*Mart None Fee 7
Uvalde Plaza Uvalde, TX 1987/1992 75% 111,160 34,000 100% Wal*Mart, Beall's None Fee 8
Valley Commons Salem, VA 1988/1994 100% 45,580 45,580 97% Food Lion None Fee 10
Valley Crossing Hickory, NC 1988/1991 100% 186,077 186,077 100% Goody's, TJ Maxx, None Fee 21
Office Depot, Circuit
City, Belk Outlet
Store(7), Factory Card
Outlet
The Village
at Wexford Cadillac, MI 1990 100% 102,450 72,450 92% Quality Stores(20), None Fee 8
Village Square Houghton Lake, MI 1990/1993 100% 163,294 27,050 96% Wal*Mart, None Fee 11
Fashion Bug
Wildwood Plaza Salem, VA 1985/1994 100% 39,580 39,580 100% Food Lion None Fee 4
Willow Springs
Plaza Nashua, NH 1991/1994 100% 224,344 121,956 99% Home Depot, Office Max, None Fee 10
--------- --------- ---- JCPenney Home Store
TOTAL COMMUNITY CENTERS 8,384,111 5,757,049 97%
========= ========= ====
</TABLE>
- -----------------
-29-
<PAGE>
( 1) Includes the total square footage of the Anchors (whether owned by others
or leased by the Anchor) and shops. Does not include future expansion
areas.
( 2) Includes leasable Anchors.
( 3) Includes tenants paying rent on executed leases on December 31, 1997.
Calculation includes leased Anchors.
( 4) Tenant has closed its store but is continuing to meet its financial
obligation and is sub-leasing the space
( 5) Ground Lease term extends to 2051 including four 10-year extensions.
Lessee has an option to purchase and a right of first refusal to
purchase the fee.
( 6) Ground Lease term extends to 2049 including three 10-year extensions.
Lessor receives a share of percentage rents during initial term and
extensions. Lessee has an option to purchase and a right of first
refusal to purchase the fee.
( 7) Represents a tenant which has closed its store but is continuing to meet
its financial obligations under its lease.
( 8) Ground Lease term extends to 2055 including two 20-year extensions.
During extension periods, lessor receives a share of percentage rents.
Lessee has a right of first refusal to purchase the fee. Lessor
receives a share of sale proceeds upon sale of the center to a third
party.
( 9) Bi-Lo is closed but continues to meet its financial obligations under
its lease.
(10) Ground lease extends to 2097 including 12 five year options. Lessor
receives no additional rent.
(11) Ground lease for an out-parcel extends to 2046 including 4 ten
year options. Lessor receives 20% of percentage rentals.
(12) Ground Lease term extends to 2049 including three 10-year extensions.
Lessor receives a share of percentage rents during initial term and
extensions. Lessee has a right of first refusal to purchase the fee.
(13) Represents a Food World which has closed its store but is continuing to
meet its financial obligations under its lease and is sub-leasing the
space.
(14) Signal Hills Village is part of Signal Hills Crossing, a Property on
which the Company holds a Mortgage.
(15) Ground Lease term extends to 2084. Rent for entire term has been
prepaid. Lessee has an option to purchase the fee under certain
circumstances.
(16) Ground Lease term extends to 2055 including one 20-year extension.
Commencing in 2005, rental will be the greater of base rent or a share
of the revenue from the center. Lessee has a right of first refusal
to purchase the fee.
(17) Ground Lease term extends to 2048 including three 10-year extensions.
Lessor receives a share of percentage rents during initial term and
extensions. Lessee has a right of first refusal to purchase the fee.
(18) Represents a space lease for this center. Lease term expires in 1999
with one 10-year extension option available.
(19) Sutton Place opened in 1972 and was acquired by the Company in
January, 1997.
(20) Quality Stores has an option to purchase its 56,850 square foot store
commencing in 1996 for a price based upon capitalizing minimum annual
rent being paid at the time of exercise at a rate of 8.33%.
(21) Wal*Mart who owns their one store has closed and has entered into a
lease commitment with Sear's to occupy the space.
MORTGAGES
The Company owns certain Mortgages which were granted prior to the
Offering in connection with sales by CBL of properties which it had previously
developed.
The Company also holds fee mortgages on six community centers, which
mortgages had, as of December 31, 1997, an aggregate outstanding principal
of $7.9 million. Such mortgages entitle the Company to receive substantially
all of such properties' current cash flow in the form of periodic debt
service payments. The encumbered properties all opened between 1981 and
1984 and have no Anchor vacancies.
In the years ended December 31, 1995, 1996, and 1997, revenues from the
Mortgages represented approximately 2.2%, 2.02%, and 0.7%, respectively, of
total revenues from the Company's Properties. During 1997, a large proportion
of the balances on two mortgages were repaid from the proceeds of
institutional debt financing. The remaining balance on a second and third
mortgage is to be repaid from the remaining cash flow after debt service.
The Company's acquisition of a property at the end of 1996 on which the
Company had a mortgage reduced income from mortgages in 1997.
The following table sets forth certain additional information regarding the
Mortgages as of December 31, 1997.
-30-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage Information Center Information
_____________________________________________ ________________________________________
Annual Principal Annual Total Percentage Number
Name of Center/ Interest Balance as Debt Maturity Total Leasable GLA of
Location Rate of 12/31/97 Service Date GLS(1) GLS Leased(2) Anchors Stores
- ------------------- --------- ----------- --------- --------- -------- --------- ----------- ----------- -------
BI-LO SOUTH 9.50% $1,479 $175 DEC-2006 48,075 48,075 100% BI-LO, 7
CLEVELAND, TN RITE-AID
GASTON SQUARE 11.00 1,638 179 OCT-97(3) 33,640 33,640 100 FOOD LION, 4
GASTONIA, NC ECKERD
INLET CROSSING 11.00 1,824 327 OCT-97(3) 55,248 55,248 100 FOOD LION, 13
MYRTLE BEACH, SC REVCO DRUG
OLDE BRAINERD
CENTER 9.50 164 48 DEC-2006 57,293 57,293 100 BI-LO, 7
CHATTANOOGA, TN REVCO DRUG
DRUG
SIGNAL HILLS CROSSING 11.00 2,351 244 OCT-1997(3) 44,220 44,220 100 FOOD LION, 6
STATESVILLE, NC REVCO DRUG
SODDY DAISY PLAZA 9.50 446 48 DEC-2006 100,095 47,325 100 WAL*MART,BI- 5
SODDY DAISY, TN ------ ------ ------- -------- ---- LO, REVCO --
DRUG
Total $7,902 $1,021 338,571 285,801 100% 42
====== ====== ======= ======= ==== ==
</TABLE>
(1) Includes Anchors.
(2) Includes all leases executed on or before December 31, 1997. Leased
GLA includes non-Anchor GLA and leased Anchor GLA.
(3) The mortgage is on a month-to-month extension pending execution of
extension agreement.
OFFICE BUILDING
The Company owns a 95% interest in a 49,082 square foot office building in
Chattanooga, Tennessee in which the Company's headquarters are located. The
Company occupies 27,088 square feet or 55% of the total square footage of
the Office Building. The Office Building is 100% occupied.
-31-
<PAGE>
TOP 25 TENANTS
The following table sets forth the Company's top 25 tenants based upon a
percentage of total revenues from the Company's Properties in 1997.
<TABLE>
<S> <C> <C> <C> <C>
NUMBER
% OF OF SQUARE
RANK TENANT REVENUES STORES FEET
- ----- --------------------------- --------- ------- ---------
1 The Limited, Inc. 6.61% 59 473,759
2 Food Lion 4.39% 38 1,039,407
3 JC Penney Co., Inc. 2.79% 23 1,724,174
4 Woolworth Corp. 2.19% 47 109,893
5 Goody's Family 1.79% 12 410,347
Clothing, Inc.
6 Belk Atlanta Group Office. 1.63% 9 774,018
7 The Gap 1.50% 13 104,121
8 Barnes & Noble, Inc. 1.39% 8 124,300
9 Intimate Brands 1.35% 22 83,591
10 Regal Cinemas, Inc. 1.25% 5 149,635
11 The Shoe Show 1.18% 17 78,921
12 The Regis Corporation 1.07% 43 47,047
13 Sears, Roebuck, & Co. 0.86% 17 1,731,509
14 Footstar Corporation 0.85% 12 53,299
15 Walden Book Company, Inc. 0.84% 13 46,625
16 Parisian, Inc.. 0.76% 3 340,520
17 The May Department Stores 0.76% 20 396,733
18 Boney Wilson & Sons, Inc. 0.76% 4 225,542
19 U.S. Shoe Corporation 0.73% 12 39,768
20 Consolidated Stores
Corporation 0.70% 14 48,726
21 Tandy Corporation. 0.68% 22 51,293
22 United Artists Theater 0.66% 4 92,779
23 American Eagle Outfitters 0.66% 9 36,469
24 Namco Cybertainment Inc. 0.63% 12 31,927
25 General Nutrition
Corporation 0.61% 25 36,325
</TABLE>
MORTGAGE DEBT AND RATIO TO TOTAL MARKET CAPITALIZATION
As of December 31, 1997, the Operating Partnership's proportionate share
of indebtedness of all Properties (whether or not consolidated for financial
statement reporting purposes, including the Construction Properties) was
approximately $761.4 million. The Company's total market capitalization
(the aggregate market value of the Company's outstanding shares of Common
Stock, assuming the full exchange of the limited partnership interests in
the Operating Partnership for Common Stock, plus the $761.4 million total
debt of the Operating Partnership) as of December 31, 1997 was $1.6
billion. Accordingly, the Company's debt to total market capitalization
ratio as of December 31, 1997 was 47.9%. The debt to total market
capitalization ratio, which is based upon the Company's proportionate share
of consolidated and unconsolidated indebtedness and market values of equity,
differs from debt-to-book capitalization ratios, which are based upon
consolidated indebtedness and book values.
-32-
<PAGE>
The following table sets forth certain information regarding the mortgages
and secured lines of credit encumbering the Properties.
MORTGAGE DEBT
(Dollars in thousands; numbers may not add due to rounding)
MORTGAGE LOANS OUTSTANDING IN
WHOLE OR IN PART AT DECEMBER 31, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ownership
Share of Estimated Earliest
Company Balloon Date at
and Principal Annual Annual Payment Which Loans
Operating Annual Balance as of Interest Debt Maturity Due on Can Be
Center Pledged as Collateral Partnership Interest Rate 12/31/97(1) Payment(2) Service Date Maturity Prepaid(3)
- ---------------------------- ----------- ------------- ------------- ---------- --------- -------- --------- -------------
MALLS:
Asheville Mall(4) 100% 6.840% $48,900 $3,345 $3,345 Feb-1998 $48,900 --
Bonita Lakes Mall 100% 7.000% 31,703 2,219 2,219 Oct-1998 31,703 --
College Square 100% 10.000% 13,650 1,365 1,548 Jan-2003 13,393 -- (5)
Coolsprings Galleria 100% 8.290% 68,033 5,640 6,636 Sep-2010 -- Oct-2000(6)
Frontier Mall 100% 10.000% 7,188 719 2,220 Dec-2001 -- -- (7)
Governor's Square 48% 8.230% 36,211 3,485 3,476 Sep-2016 14,454 Sep-2001(8)
Hamilton Place 90% 7.000% 74,147 5,190 6,361 Mar-2009 59,160 -- (9)
Madison Square 50% 9.250% 49,030 4,535 4,936 Mar-2002 46,482 Feb-1997(10)
Oak Hollow Mall 75% 7.310% 52,498 4,037 4,709 Feb-2008 39,567 Feb-2002(11)
Plaza del Sol(12) 51% 9.500%(13) 1,954 186 244 Nov-1998 1,729 --
St. Clair Square 100% 7.250%(14) 66,000 4,785 4,739 Nov-1999 66,000 --
Springdale Mall 100% 6.770% 19,950 1,351 1,351 Nov-1999 19,950 --
Turtle Creek Mall 100% 7.400% 34,300 2,723 2,966 Mar-2006 26,992 Mar-1999(15)
Walnut Square(16) 100% 9.500% 909 92 140 Feb-2008 -- -- (17)
Walnut Square 100% 10.000%(18) 389 39 39 Jun-1998 389 -- (18)
WestGate Mall 100% 6.950% 50,969 3,542 4,819 Feb-2017 44,819 Feb-2002(19)
-------
MALLS SUBTOTAL: 555,831
ASSOCIATED CENTERS:
The Terrace 92% 7.300% 10,939 799 1,047 Sep-2002 9,618 --(20)
Georgia Square Plaza 100% 9.000% 377 34 141 Jan-2001 -- Feb-1997(9)
Hamilton Corner 90% 10.125% 3,477 352 471 Aug-2011 -- --(21)
Madison Plaza 75% 10.125% 2,577 261 537 Feb-2004 -- --(22)
------
ASSOCIATED CENTERS SUBTOTAL: 17,370
======
COMMUNITY CENTERS:
Bennington Place 100% 10.250% 590 60 83 Aug-2010 -- Jul-2000(23)
BJ's Plaza 100% 10.400% 3,503 364 476 Dec-2011 -- --(20)
Briarcliff Square 100% 10.375% 1,721 179 226 Feb-2013(24) -- Feb-1998(25)
Cedar Bluff Crossing 100% 10.625% 1,417 151 230 Jan-2008 -- Jan-2008(26)
Centerview Plaza 100% 10.000% 1,363 136 191 Jan-2010(27) -- Jan-1999(23)
Colleton Square 100% 9.375% 1,060 99 143 Aug-2010(28) -- Aug-1998(23)
Collins Park Commons 100% 10.250% 1,439 147 202 Oct-2010 -- Sept-2000(23)
Cosby Station 100% 8.500% 4,364 371 490 Sep-2014 -- Sep-2001(29)
East Ridge Crossing 100% 10.125% 1,345 136 324 May-2003 -- Jan-2001(30)
Fifty-Eight Crossing 100% 10.125% 1,296 131 312 May-2003 -- Jan-2001(30)
Genesis Square 100% 10.250% 1,094 112 147 Aug-2010 -- Jul-2000(31)
Greenport Towne Center 100% 9.000% 4,569 411 529 Sep-2014 -- --(32)
Henderson Square 100% 7.500% 7,054 529 750 Apr-2014 -- May-2005(33)
Jean Ribaut 100% 8.750% 4,092 358 477 Oct-1998 4,019 --(15)
Karns Corner 100% 10.250% 1,011 104 146 Jan-2010(34) -- Feb-1999(23)
Longview Crossing 100% 10.250% 468 48 66 Aug-2010 -- Aug-2000(23)
North Haven Crossing 100% 9.550% 8,252 788 1,225 Oct-2008 -- Oct-1998(35)
Northwoods Plaza 100% 9.750% 1,323 129 171 Jun-2012 -- --(36)
Perimeter Place 100% 10.625% 1,715 182 278 Jan-2008 -- Jan-2008(26)
Seacoast Shopping Center 100% 9.750% 5,944 580 721 Sep-2002 5,110 Oct-1997(37)
Shenandoah Crossing 100% 10.250% 588 60 83 Aug-2010 -- Aug-2000(23)
-33-
<PAGE>
Ownership
Share of Estimated Earliest
Company Balloon Date at
and Principal Annual Annual Payment Which Loans
Operating Annual Balance as of Interest Debt Maturity Due on Can Be
Center Pledged as Collateral Partnership Interest Rate 12/31/97(1) Payment(2) Service Date Maturity Prepaid(3)
- ---------------------------- ----------- ------------- ------------- ---------- --------- -------- --------- -------------
Sparta Crossing 100% 10.250% $899 $92 $127 Aug-2010 -- Jul-2000(38)
Springhurst Towne Center 100% 7.220% 22,700 1,639 1,639 Nov-1998 22,700 --
Suburban Plaza 100% 8.500% 6,940 590 682 May-1999 5,325 --
34th St. Crossing(39) 100% 10.625% 1,647 175 234 Dec-2010 -- Dec-2000(40)
Uvalde Plaza 75% 10.625% 824 88 133 Feb-2008 -- Feb-2008(26)
Valley Commons 100% 10.250% 1,013 104 142 Oct-2010 -- Oct-2000(23)
Willow Springs Plaza 100% 9.750% 5,835 569 934 Aug-2007 601 Aug-1997(38)
------
COMMUNITY CENTERS SUBTOTAL: 94,066
CONSTRUCTION PROPERTIES:
Courtlandt Towne Center 100% 7.370% 45,918 3,384 3,384 Nov-1998 45,918 --
------
CONSTRUCTION PROPERTIES SUBTOTAL: 45,918
OTHER:
Park Place 95% 10.000% 1,891 189 459 Apr-2003 -- --(9)
Credit Lines 100% 6.882%(41) 113,534(41) 7,813 7,867 Various 115,595 --
--------
Total: $828,610
========
OPERATING PARTNERSHIP'S SHARE OF TOTAL: $761,418(42)
</TABLE>
(1) The amount listed includes 100% of the loan amount even though the
Company and the Operating Partnership may own less than 100% of the
property.
(2) Interest has been computed by multiplying the annual interest rate by
the outstanding principal balance as of December 31, 1997.
(3) Unless otherwise noted, loans are prepayable at any time.
(4) A replacement loan of $51 million with a two year term at 90 basis
points over LIBOR closed in February 1998.
(5) Prepayment premium is greater of 1% or yield maintenance for any
prepayment prior to January, 1998; thereafter, the prepayment premium
is 5%, decreasing by .5% per year to a minimum of 3%; there is no
prepayment premium after July 15, 2002.
(6) Prepayment premium is the greater of 1% or yield maintenance after
October 1, 2000.
(7) Prepayment premium is based on yield maintenance (not less than 1%)
for any prepayment prior to January, 1997; thereafter, the prepayment
premium is 5%, decreasing by 1% per year to a minimum of 1%; there is
no prepayment premium during the last 120 days of the loan term.
(8) Prepayment premium is based on the greater of yield maintenance or 2%.
(9) Prepayment premium is the greater of 1% or yield maintenance.
(10) Prepayment premium is based on yield maintenance; there is no
prepayment premium after October 1, 2001.
(11) Prepayment premium is the greater of 1% or yield maintenance.
(12) This loan can be extended for 2 one year periods, the extension fee
is 1/4 point for each extension.
(13) Interest is floating at 1% over prime priced at December 31, 1997.
(14) The interest rate is floating at 150 Basis points over LIBOR. Loan may
be extended for 2 years with 90 days written notice prior to maturity
date. Extension fee equal to 1/4% of the outstanding balance.
(15) Prepayment premium is the greater of 1% or yield maintenance.
(16) The loan is secured by a first mortgage lien on the land and
improvements comprising the Goody's anchor store and no other
property.
(17) Prepayment premium is the greater of 1% or yield maintenance; there
is no prepayment premium after November 1, 2007.
(18) Interest is floating at 11/2% over prime priced at December 31, 1997.
The maturity date is 90 days after notice.
(19) Loan is closed to prepayment for the term. Lender shall adjust the
interest rate every 5th year of the loan. If borrower does not
except the new rate loan may be prepaid at that time without
prepayment penalty.
(20) Prepayment penalty is based on yield maintenance.
(21) Prepayment premium is the greater of 1% or yield maintenance; there is
no prepayment premium during the last 120 days of the loan term.
(22) Prepayment premium is the greater of 1% or yield maintenance; there is
no prepayment premium after November 1, 2003.
(23) Prepayment premium is 5%, decreasing by 1% per year to a minimum of 2%
there is no prepayment premium during the last 120 days of the loan term.
(24) Lender has option to accelerate loan between March 1, 2001 and
February 28, 2002; March 1, 2006 and February 28, 2007; and
March 1, 2011 and February 28, 2012.
(25) Prepayment premium is 7%, decreasing by 1% per year to a minimum of 3%.
(26) Loan may not be prepaid.
(27) Lender may accelerate the loan after September, 2006 upon expiration
of the primary term of the lease of either Food Lion or Eckerd,
unless both leases have been extended beyond January 1, 2010.
(28) Lender may accelerate loan on July 1, 2007 unless Food Lion exercises
an extension option.
(29) Prepayment premium of 7% decreasing by 1% per year to a minimum of 2%;
there is no prepayment premium during the last six months of the loan
term.
(30) Prepayment premium is 5%, decreasing 1% per year to a minimum of 1%;
there is no prepayment premium during the last two years of the loan
term.
(31) Prepayment premium is 5% from July 1, 2000 to June 30, 2001;
thereafter decreasing by 1% per year to a minimum of 2%; there is no
prepayment premium after May 1, 2010.
(32) Prepayment premium is the greater of 10% or 1/12 of the annual yield
difference before Oct-2014. Thereafter the prepayment premium is 1%.
(33) Loan may be prepaid after 9 years. The prepayment premium is the
greater of 1% or yield maintenance.
-34-
<PAGE>
(34) Lender may accelerate loan after January 1, 2008 unless Food Lion
exercises an extension option beyond January 1, 2008.
(35) Prepayment premium is the greater of 2% or yield maintenance before
October, 1998, afterwards it is the greater of 1% or yield maintenance.
(36) Prepayment premium is based on yield maintenance; there is no loan
prepayment premium during the last 120 days of the loan term.
(37) Prepayment premium is the greater of 1% or yield maintenance; there
is no loan prepayment premium during the last three months of the
loan term.
(38) Prepayment premium is 5% from August 1, 2000 to July 30, 2001;
thereafter decreasing by 1% per year to a minimum of 2%; there is no
prepayment premium after May 1, 2010.
(39) The note is secured by rent payable by the Food Lion Anchor store.
(40) Prepayment premium is 5%, decreasing by 1% per year to a minimum of
2%. There is no loan prepayment premium during the last 90 days of
the loan term.
(41) Interest rates on the credit lines are at various spreads over LIBOR
whose weighted average interest rate is 6.882% with various maturities
through 1999.
(42) Represents non-recourse indebtedness on Properties and reflects the
less than 100% ownership of the Company and the Operating Partnership
with respect to certain Properties subject to such indebtedness.
ITEM 3. LEGAL PROCEEDINGS.
The Company and the Operating Partnership are not currently involved in any
material litigation nor, to management's knowledge, is any material
litigation currently threatened against the Company, the Operating
Partnership, the Property Partnerships or the Properties, other than
litigation arising in the ordinary course of business, most of which is
expected to be covered under liability insurance policies held by the
Company or the Operating Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
(a) Market Information
The principal United States market in which the Common Stock is traded
is the New York Stock Exchange.
The following table sets forth the high and low sales prices for the
Common Stock for each quarter of the Company's two most recent fiscal years.
<TABLE>
<S> <C> <C>
1996 QUARTER ENDED HIGH LOW
-------------------- ------- --------
March 31 $22.000 $20.375
June 30 22.875 19.750
September 30 23.500 21.500
December 31 25.875 22.750
</TABLE>
<TABLE>
<S> <C> <C>
1997 QUARTER ENDED HIGH LOW
-------------------- ------- -------
March 31 $26.125 $24.500
June 30 25.375 23.125
September 30 27.625 23.563
December 31 26.313 22.625
</TABLE>
(b) Holders
The approximate number of shareholders of record of the Common
Stock was 370 as of March 20, 1998.
-35-
<PAGE>
(c) Dividends
The following table sets forth the frequency and amounts of dividends
declared and paid for each quarter of the Company's two most recent fiscal
years.
<TABLE>
<S> <C> <C>
QUARTER ENDED 1996 1997
- --------------------- ------- -------
March 31 $0.4200 $0.4425
June 30 0.4200 0.4425
September 30 0.4200 0.4425
December 31 0.4200 0.4425
</TABLE>
Future dividend distributions are subject to the Company's actual
results of operations, economic conditions and such other factors as the
Board of Directors of the Company deems relevant. The Company's actual
results of operations will be affected by a number of factors, including
the revenues received from the Properties, the operating expenses of the
Company, the Operating Partnership and the Property Partnerships, interest
expense, the ability of the anchors and tenants at the Properties to meet
their obligations and unanticipated capital expenditures.
-36-
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected financial data of the Company, which
should be read in conjunction with the financial statements and notes
thereto (IN THOUSANDS, EXCEPT PER SHARE DATA).
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CBL
CBL & Associates Properties, Inc. Properties(1)
--------------------------------------------------- -------------
Period From Period From
November 3, January 1,
Year Ended December 31, 1993 to 1993 to
-------------------------------------- December 31 November 2,
1997 1996 1995 1994 1993 1993
-------- -------- -------- -------- ----------- -------------
TOTAL REVENUES $177,604 $146,805 $131,727 $108,094 $17,620 $59,092
TOTAL EXPENSES 135,200 111,012 104,128 84,091 12,806 57,138
-------- -------- -------- -------- ----------- -------------
INCOME FROM OPERATIONS 42,404 35,793 27,599 24,003 4,814 1,954
GAIN ON SALES OF REAL ESTATE
ASSETS 6,040 13,614 2,213 2,135 - 2,072
EQUITY IN EARNINGS (LOSSES) OF
UNCONSOLIDATED AFFILIATES 1,916 1,831 1,450 1,469 490 (117)
MINORITY INTEREST
IN EARNINGS:
Operating partnership (13,819) (15,468) (10,527) (9,836) (598) -
Shopping center properties (508) (527) (386) (312) (35) (199)
-------- -------- -------- -------- ----------- -------------
INCOME BEFORE EXTRAORDINARY
ITEM 36,033 35,243 20,349 17,459 4,671 3,710
EXTRAORDINARY LOSS ON
EXTINGUISHMENT OF DEBT (1,092) (820) (326) - (3,820) -
-------- -------- -------- -------- ----------- -------------
NET INCOME $34,941 $34,423 $20,023 $17,459 $851 $3,710
======== ======== ======== ======== =========== =============
BASIC EARNINGS PER
COMMON SHARE:
Income before extraordinary
item $1.51 $1.69 $1.14 $1.05 $0.31
-------- -------- -------- -------- -----------
Net income $1.46 $1.65 $1.12 $1.05 $0.06
-------- -------- -------- -------- -----------
Weighted average shares
outstanding 23,895 20,890 17,827 16,625 15,442
======== ======== ======== ======== ===========
DILUTED EARNINGS PER COMMON SHARE:
Income before extraordinary
item $1.49 $1.68 $1.14 $1.05 $0.30
-------- -------- -------- -------- -----------
Net income $1.45 $1.64 $1.12 $1.05 $0.06
======== ======== ======== ======== ===========
Weighted average shares
and dilutive equivalent
shares outstanding 24,151 21,022 17,856 16,625 15,442
======== ======== ======== ======== ===========
Dividends declared per
share (2) $1.77 $1.68 $1.59 $1.50 $0.31
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31,
----------------------------------------------------
1997 1996 1995 1994 1993 1993
BALANCE SHEET DATA:
Net investment in
real estate assets $1,142,324 $ 987,260 $758,938 $679,725 $578,319 $578,319
Total assets 1,245,025 1,025,925 814,168 728,209 629,545 629,545
Total debt 741,413 590,295 392,754 373,300 276,928 276,928
Minority interest 123,897 114,425 113,692 108,036 109,796 109,796
Shareholders' equity 330,853 272,804 270,892 209,338 216,808 216,808
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Cash flows provided
by (used in):
Operating activities $60,120 $ 54,789 $28,977 $29,432 $ --
Investing activities (179,044) (218,016) (99,690) (112,608) --
Financing activities 183,858 164,496 71,689 72,863 --
Funds from Operations
("FFO") of the
Operating Partnership(3) 74,096 61,997 51,236 43,634 --
FFO applicable to the
Company 52,853 42,778 35,353 27,908 --
</TABLE>
-37-
<PAGE>
(1) Represents the historical combined operations and combined financial
position of CBL Properties, the predecessor entity. On November 3,
1993, the Company completed an initial public offering.
(2) The dividend of $.31 declared in 1993 represents an annualized divided
of $1.50 paid for the period November 3, 1993 through December 31, 1993.
(3) Please refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations for the definition of FFO. FFO
does not represent cash flow from operations as defined by generally
accepted accounting principles (GAAP) and is not necessarily indicative
of the cash available to fund all cash requirements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis of the financial condition and
results of operations should be read in conjunction with CBL & Associates
Properties, Inc. Consolidated Financial Statements and Notes thereto.
Information included herein may contain "forward-looking statements"
within the meaning of the federal securities laws. Such statements are
inherently subject to risks and uncertainties, many of which cannot be
predicted with accuracy and some of which might not even be anticipated.
Future events and actual results, financial and otherwise, may differ
materially from the events and results discussed in the forward-looking
statements. We direct you to the Company's other filings with the
Securities and Exchange Commission, including without limitation the
Company's discussion of such risks and uncertainties elsewhere in this
Annual Report on Form 10-K.
GENERAL BACKGROUND
The Company is the 100% owner of two qualified REIT subsidiaries, CBL
Holdings I and CBL Holdings II, which are the sole general partner and
majority owner, respectively, of the Operating Partnership. As a result,
the CBL & Associates Properties, Inc. Consolidated Financial Statements and
Notes thereto reflect the consolidated financial results of the Operating
Partnership, which includes at December 31, 1997, the operations of a
portfolio of properties consisting of seventeen Malls, eleven Associated
Centers, eighty-one Community Centers, an Office Building, joint venture
investments in three Malls and one Associated Center, and income from six
Mortgages. The Operating Partnership currently has under construction one
Mall, one Associated Center, one power center and two Community Centers and
owns options to acquire certain shopping center development sites. The
consolidated financial statements also include the results of the
Management Company.
The Company classifies its regional malls into two categories -
Stabilized Malls and New Malls. The New Mall category is presently comprised
of WestGate Mall in Spartanburg, South Carolina, which was renovated and
expanded and reopened in October 1996; Turtle Creek Mall in Hattiesburg,
Mississippi which opened partially in October 1994 and the remainder in
March 1995; Oak Hollow Mall in High Point, North Carolina which opened
in August 1995; Springdale Mall in Mobile, Alabama which was acquired in
September 1997 and is being redeveloped and retenanted; and Bonita
Lakes Mall in Meridian, Mississippi which opened in October 1997.
On January 15, 1997, the Company completed a spot offering of 3,000,000
shares of common stock at $26.125. Management of the Company purchased
55,000 of those shares. The net proceeds of $74.3 million, after
underwriters' discount, were used to repay variable rate indebtedness
incurred in the development and acquisition program.
On January 2, 1998, the Company purchased the 823,916 square foot
Asheville Mall in Asheville, North Carolina for $65 million, which was
funded by a $48.9 million acquisition loan with the balance funded from
the Company's credit lines. On January 30, 1998 the Company, purchased
the 1,078,568 square foot Burnsville Center
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<PAGE>
in Burnsville (Minneapolis), Minnesota for $81 million which was funded
by a $60.8 million acquisition loan with the balance funded from the
Company's credit lines.
SALES
Mall store sales, for those tenants who have reported, in the fifteen
Stabilized Malls in the Company's portfolio, increased by 4.7% on a
comparable per square foot basis as shown below:
Year Ended December 31,
-------------------------
1997 1996
-------- --------
Sales per square foot $251.73 $240.45
Total sales volume in the mall portfolio, including New Malls, increased
21.6% to $875.1 million in 1997 from $719.5 million in 1996.
Occupancy costs as a percentage of sales for the years ended
December 31, 1997, 1996 and 1995 for the stabilized malls (excluding
St. Clair Square and Foothills Mall from 1996 and 1995) were 11.2%, 11.7%
and 12.3%, respectively. The decrease in occupancy costs as a percentage
of sales from 1996 to 1997 was due to both the Company's policy of cost
containment and increasing sales.
OCCUPANCY
Occupancy remained stable for the Company's overall portfolio with a
breakdown by asset category as
follows:
<TABLE>
<S> <C> <C>
At December 31,
--------------------------
1997 1996
------ ------
Stabilized Malls 91.7% 89.0%
New Malls 89.2 87.7
Associated Centers 83.3 99.6
Community Centers 97.6 97.2
------ ------
Total portfolio 93.7% 93.3%
====== ======
AVERAGE BASE RENTS
Average base rents for the Company's three portfolio categories:
</TABLE>
<TABLE>
<S> <C> <C> <C>
At December 31,
--------------------------------
Percentage
Increase
1997 1996 (Decrease)
-------- -------- ----------
Malls $19.33 $19.64 (1.6)%
Associated Centers 9.43 8.59 9.8
Community Centers 7.42 6.94 6.9
</TABLE>
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<PAGE>
LEASE ROLLOVERS
On spaces previously occupied, the Company achieved the following results
from rollover leasing for the year ended December 31, 1997 over and above the
base and percentage rent being paid by the previous tenant:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Per Square Per Square
Foot Rent Foot Rent Percentage
Prior Lease(1) New Lease(2) Increase
----------- ------------ -----------
Malls $19.85 $21.22 6.9%
Associated Centers 12.61 13.47 6.8
Community Centers 7.73 8.23 6.5
</TABLE>
(1) - Rental achieved for spaces previously occupied at the end
of the lease including percentage rent.
(2) - Average base rent over the term of the lease.
In 1997 and 1996, respectively, revenues from the Malls represented 72.9%
and 72.8% of total revenues from the properties; revenues from Associated
Centers represented 3.8% and 3.3%, respectively; revenues from Community
Centers represented 21.2% and 21.4%, respectively; and revenues from
Mortgages and the Office Building represented 2.1% and 2.5%, respectively.
Accordingly, revenues and results of operations are disproportionately
impacted by the Malls' achievements.
The Company's business is somewhat seasonal in nature with tenant sales
achieving the highest levels during the fourth quarter because of the holiday
season. The Malls earn most of their "temporary" rents (rents from short-
term tenants) during the holiday period. Thus, occupancy levels and revenue
production are generally the highest in the fourth quarter of each year.
Results of operations realized in any one quarter may not be indicative of
the results likely to be experienced over the course of the entire year.
COMPARISON OF RESULTS OF OPERATIONS FOR 1997 TO THE RESULTS OF
OPERATIONS FOR 1996
Total revenues in 1997 increased by $30.8 million, or 21.0%, to $177.6
million as compared to $146.8 million in 1996. Of this increase, minimum
rents increased by $22.4 million, or 24.0%, to $115.6 million as compared to
$93.2 million in 1996, percentage rents increased by $1.0 million, or 37.0%,
to $3.7 million as compared to $2.7 million in 1996, other rents increased
by $0.1 million, or 5.6%, to $1.9 million as compared to $1.8 million in
1996, and tenant reimbursements increased by $8.9 million, or 21.0%, to
$51.3 million as compared to $42.4 million in 1996.
Approximately $7.6 million of the increase in revenues resulted from a
full year of operations at the one Mall and three new Community Centers
opened during 1996 and $11.0 million from a full year of operations from
St. Clair Square in Fairview Heights, Illinois. Approximately $10.2 million
of the increase in revenues resulted from the nine new Community Centers and
one Associated Center opened and the one Mall, one Associated Center and one
Community Center acquired during 1997 offset by $1.9 million of revenues no
longer received from five Community Centers sold in 1996. Improved
occupancies and operations, expansions to existing properties, and increased
rents in the Company's operating portfolio generated approximately $3.9
million of the increased revenues with Stabilized Malls contributing
approximately $3.1 million and the Associated Center and Community Center
portfolio contributing $0.8 million in increased revenues.
Management, development and leasing fees were $2.4 million in both 1997
and 1996. Managed properties continue to provide the majority of this
revenue augmented by an increase in development fees. Interest and other
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<PAGE>
income decreased by $1.6 million to $2.7 million in 1997 from $4.3 million in
1996. This decrease was primarily due to the acquisition of a mortgaged
property at the end of 1996 and the resulting elimination of interest income
from the property.
Property operating expenses, including real estate taxes and maintenance
and repairs, increased in 1997 by $10.9 million, or 24.3%, to $55.7 million
as compared to $44.8 million in 1996. This increase is primarily the result
of the opening of the thirteen new Properties over the past twenty four
months and the acquisition of four Properties. The Company's cost recovery
ratio decreased to 92.2% in 1997 as compared to 94.7% in 1996 primarily due
the addition of properties with non-recoverable ground rent.
Depreciation and amortization increased in 1997 by $6.9 million, or
27.2%, to $32.3 million as compared to $25.4 million in 1996. This increase
resulted primarily from depreciation and amortization on the thirteen new
Properties opened and the acquisition of four Properties over the past twenty
four months.
Interest expense increased in 1997 by $6.1 million or, 19.2%, to $37.8
million as compared to $31.7 million in 1996. This increase is primarily
due to increased interest expense on the thirteen new Properties opened and
the acquisition of four Properties over the past twenty four months offset
by the reduction of variable rate debt with proceeds from the Company's
follow-on offering in January 1997.
General and administrative expense was $9.0 million in 1997 as compared
to $8.5 million in 1996. This increase was primarily due to increases in
reserves for state tax expense and general increases in overhead.
Other expense was $0.3 million in 1997 and $0.6 million in 1996. These
amounts represent the write-off of development projects which the Company
has elected not to pursue.
Gain on sales of real estate assets was $6.0 million in 1997 as compared
to $13.6 million in 1996. The majority of these gains in 1997 are from
outparcel and pad sales at the Community Centers under development:
Cortlandt Towne Center in Cortlandt, New York, Salem Crossing in Virginia
Beach, Virginia and Springhurst Towne Center in Louisville, Kentucky. The
gain on sales in 1997 also includes a $0.7 million gain on the sale of one
completed Community Center. The majority of gain on sales in 1996 were from
sales of five completed Community Centers for $7.6 million. Most of the
remaining $6.0 million of outparcel sales in 1996 were in connection with
the development of Springhurst Towne Center in Louisville, Kentucky and
Massard Crossing in Ft. Smith, Arkansas.
The extraordinary loss in 1997 of $1.1 million resulted from the
extinguishment of debt on a number of properties, the largest of which was
Hamilton Place Mall in Chattanooga, Tennessee. The reduction in the
interest rate on the refinanced debt on Hamilton Place was 2.25% per annum.
COMPARISON OF RESULTS OF OPERATIONS FOR 1996 TO THE RESULTS OF OPERATIONS
FOR 1995
Total revenues in 1996 increased by $15.1 million, or 11.4%, to $146.8
million as compared to $131.7 million in 1995. Of this increase, minimum
rents increased by $10.9 million, or 13.2%, to $93.2 million as compared
to $82.3 million in 1995, percentage rents decreased by $0.1 million, or
3.1%, to $2.7 million as compared to $2.8 million in 1995, other rents
increased by $0.3 million, or 16.6%, to $1.8 million as compared to $1.5
million in 1995, tenant reimbursements increased by $4.0 million, or 10.6%,
to $42.4 million as compared to $38.4 million in 1995.
Approximately $8.2 million of the increase in revenues resulted from a
full year of operations at the five Community Centers opened during 1995 and
a full year of operations for Phase II of Turtle Creek Mall in Hattiesburg,
Mississippi. The Mall and one Community Center the Company acquired on
March 31, 1995 contributed
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<PAGE>
approximately $2.0 million of new revenues in 1996. The four Community
Centers and one Mall opened during 1996 contributed approximately $0.7
million of new revenues during 1996. Those Properties are as follows:
(i) 101,000-square-foot free-standing Lowe's in Adrian, Michigan, opened
June 1996; (ii) 105,000-square-foot Devonshire Place in Cary, North
Carolina, opened September 1996; (iii) 60,000-square-foot LaGrange
Commons in LaGrange, New York, opened November 1996; (iv) 119,000-square-
foot Kingston Overlook in Knoxville, Tennessee, opened November 1996 and
(v) 1,100,000-square-foot WestGate Mall in Spartanburg, South Carolina,
reopened October 1996.
St. Clair Square in Fairview Heights, Illinois, the Mall acquired on
November 25, 1996, contributed $1.3 million of new revenues in 1996.
Improved occupancies and operations, and increased rents in the Company's
operating portfolio generated approximately $2.9 million of the new
revenues with Stabilized Malls contributing approximately $1.8 million
and the Associated Center and Community Center portfolio contributing
$1.1 million in increased revenues.
Management, leasing and development fees decreased $0.1 million to $2.4
million in 1996 from $2.5 million in 1995. This decrease was primarily due
to the curtailment of development fees earned in 1995 from Hannaford Bros.
offset by the increase from a management contract for Ogden City Mall in
Ogden, Utah and increased management and leasing fees from Madison Square
Mall in Huntsville, Alabama, which the Company owns in a joint venture.
Interest and other income increased by $0.1 million to $4.3 million in
1996 from $4.2 million in 1995.
Property operating expenses, including real estate taxes and maintenance
and repairs, increased in 1996 by $4.1 million, or 10.0%, to $44.8 million
as compared to $40.7 million in 1995. This increase is primarily the result
of the opening of the nine new Community Centers and one Mall over the past
twenty four months, the acquisition of the three Properties, and increases
in maintenance and security in the Company's operating portfolio. The
Company's cost recovery ratio increased slightly to approximately 94.7% in
1996 as compared to 94.3% in 1995.
Depreciation and amortization increased in 1996 by $2.6 million, or
11.4%, to $25.4 million as compared to $22.8 million in 1995. This increase
resulted primarily from depreciation and amortization on the nine new
Community Centers and one Mall opened and the acquisition of three
Properties over the past twenty four months.
Interest expense decreased in 1996 by $0.3 million, or 0.8%, to $31.7
million as compared to $32.0 million in 1995. This decrease is primarily
due to the conversion of variable rate debt to permanent rate debt, the
reduction of variable rate debt with proceeds from the Company's follow-on
offering in September 1995, and lower interest rates on variable rate debt
offset by increased interest expense on the nine new Community Centers and
one Mall opened and the acquisition of three Properties over the past twenty
four months.
General and administrative expense was $8.5 million in 1996 as compared
to $8.0 million in 1995. This increase was primarily due to increases in
reserves for state tax expense and for payroll in management and leasing.
Other expense was $0.6 million in 1996 and 1995. These amounts
represent the write-off of development projects which the Company has
elected not to pursue.
Gain on sales of real estate assets was $13.6 million in 1996 as
compared to $2.2 million in 1995. The majority of these gains were from
sales of five completed Community Centers for $7.6 million. These Community
Centers consist of: (i) Lowe's Plaza in Adrian, Michigan; (ii) Lowe's in
Benton Harbor, Michigan; (iii) Hannaford Bros. in Richmond, Virginia; (iv)
Chester Plaza in Chester, Virginia; and (v) Lakeshore Crossing in
Gainesville, Georgia. Most of the remaining $6.0 million of outparcel
sales in 1996 were in connection with the development of Springhurst Towne
Center in Louisville, Kentucky and Massard Crossing in Fort Smith, Arkansas.
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<PAGE>
The extraordinary loss in 1996 of $0.8 million resulted from the
Company's share of the early extinguishment of debt from its joint venture
in Governor's Square in Clarksville, Tennessee. The reduction in the
interest rate on the refinanced debt was 1.4% per annum.
LIQUIDITY AND CAPITAL RESOURCES
The principal uses of the Company's liquidity and capital resources
have historically been for property development, expansion and renovation
programs, and debt repayment. To maintain its qualification as a REIT under
the Internal Revenue Code, the Company is required to distribute to its
shareholders at least 95% of its "Real Estate Investment Trust Taxable
Income" as defined in the Code.
As of February 28, 1998, the Company had $12.7 million available in
unfunded construction loans to be used for completion of the construction
projects and replenishment of working capital previously used for
construction. Additionally, as of February 28, 1998, the Company had
obtained revolving credit lines and term loans totaling $187.5 million of
which $36.1 million was available. Also, as a publicly traded company, the
Company has access to capital through both the public equity and debt
markets. The Company has filed a shelf registration statement authorizing
shares of the Company's preferred stock, common stock and warrants to
purchase shares of the Company's Common Stock with an aggregate public
offering price of up to $350 million. The Company anticipates that the
combination of these sources will, for the foreseeable future, provide
adequate liquidity to enable it to continue its capital programs
substantially as in the past and make distributions to its shareholders in
accordance with the Code's requirements applicable to real estate investment
trusts.
Management expects to refinance the majority of the mortgage notes
payable maturing over the next five years with replacement loans.
The Company's current capital structure includes property specific
mortgages, which are generally non-recourse, revolving lines of credit,
common stock and a minority interest in the Operating Partnership. The
minority interest in the Operating Partnership represents the 28.3%
ownership interest in the Operating Partnership held by the Company's
executive and senior officers and certain other persons which may be
exchanged for approximately 9.5 million shares of Common Stock.
Additionally, Company executive officers and directors own approximately
1.7 million shares of the outstanding common stock of the Company, for a
combined total interest in the Operating Partnership of approximately
33.2%. Assuming the exchange of all limited partnership interests in the
Operating Partnership for common stock, there would be outstanding
approximately 33.5 million shares of Common Stock with a market value of
approximately $828.0 million at December 31, 1997 (based on the closing
price of $24.688 per share on December 31, 1997). The ownership interests
in the Operating Partnership of the executive officers and directors of the
Company and their affiliates had a market value of approximately $274.7
million at December 31, 1997.
Mortgage debt consists of debt on certain consolidated properties as
well as on three properties in which the Company owns a non-controlling
interest accounted for under the equity method of accounting. At
December 31, 1997, the Company's share of funded mortgage debt on its
consolidated properties adjusted for minority investors' interests in
seven properties was $718.7 million and its pro rata share of mortgage debt
on unconsolidated properties (accounted for under the equity method) was
$42.7 million for total debt obligations of $761.4 million with a weighted
average interest rate of 7.6%. Variable rate debt accounted for $349.7
million with a weighted average interest rate of 7.0%. Variable rate debt
accounted for approximately 45.9% of the Company's total debt and 22.0% of
its total capitalization. Of this variable rate debt, $159.5 million is
related to construction projects. Periodically, the Company enters into
interest rate cap and swap agreements to reduce interest rate risks on
variable rate debt. The
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<PAGE>
Company has entered into interest rate cap and swap agreements for $155.2
million at year end and an additional $146 million in swaps in 1998 on the
variable rate debt associated with operating properties. The Company's
current exposure to interest rate fluctuations which could impact funds
from operations is effectively eliminated after taking into account
interest rate cap and swap agreements.
In April 1995, the Company executed a three-year interest rate swap
agreement with First Union National Bank on $5.5 million of debt on its
shopping center in Benton Charter Township, Michigan. This swap agreement
effectively fixes the interest rate on the $5.5 million of debt at 8.5%.
In June 1995, the Company executed a $50.0 million interest rate swap
agreement with NationsBank N.A. for a three-year period whish has the
effect of fixing $50 million of LIBOR-based variable rate debt at a
LIBOR rate no greater than 5.52%. There were no fees charged to the
Company related to these transactions. In December 1997, the Company
obtained two one year $100 million caps which has the effect of fixing $100
million of LIBOR-based variable rate debt at a LIBOR rate no greater than
7% for 1998 and 7.5% for 1999. There was a fee paid to obtain these caps. In
January 1998, the Company executed an interest
rate swap agreement which has the effect of fixing the LIBOR component of
$65 million of the company's LIBOR-based variable rate debt at 5.72% for a
term of two years. In February 1998, the Company executed an interest rate
swap agreement which has the effect of fixing the LIBOR component of $81
million of the company's LIBOR-based variable rate debt at 5.54% for a term
of two years.
In February 1997, the Company added $38 million and one additional bank
to its credit facilities. The Company has reduced the variable interest
rate on all of its credit facilities to a weighted average interest rate of
99 basis points over LIBOR at January 31, 1998 from a weighted average
interest rate of 144 basis points over LIBOR at December 31, 1996.
The following table sets forth the Company's credit facilities at
January 31, 1998 as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Interest Rate Current
Credit Facility Amount Over LIBOR Balance Maturity
- ------------------ ---------- ---------------- -------- ---------------
SunTrust $ 10,000 90 Basis Points $10,000 April 1999
First Tennessee 80,000 100 Basis Points 65,900 June 1999
Wells Fargo 85,000 100 Basis Points 62,134 September 1999
</TABLE>
The First Tennessee credit facility has $2.5 million of outstanding
letters of credit which reduce the amount of available credit. Each
of the credit facilities include covenants that require the Company to
maintain minimum net worth levels, interest and debt coverage ratios, total
obligations to capitalized value, and limitations on fixed rate debt. The
credit facilities also require the Company's senior management continue to
consist of certain individuals and to maintain certain levels of minority
ownership in the Operating Partnership. The First Tennessee Bank credit
facility provides that if the Company completes an offering of its securities,
not less than 75% of the net proceeds of any such offering will be applied
for the benfit of the Operating Partnership.
During March 1997, the Company closed on a ten-year loan on Hamilton
Place Mall in Chattanooga, Tennessee, owned 90% by the Company, in the
amount of $75 million at an interest rate of 7.0% and a twenty-year loan
with a five-year rate reset option on WestGate Mall in Spartanburg, South
Carolina in the amount of $52 million at an interest rate of 6.95%. The
proceeds from these loans were used to repay existing fixed rate and
variable rate debt.
On January 15, 1997, the Company completed a spot offering of 3,000,000
shares of common stock at $26.125. Management of the Company purchased
55,000 of those shares. The net proceeds of $74.3 million, after
underwriters' discount, were used to repay variable rate indebtedness
incurred in the development and acquisition
-44-
<PAGE>
program. This transaction provided the Company with a stronger capital
structure to pursue its new developments and acquisitions.
In January 1998, the Company extended a term loan with Compass Bank in
the amount of $12.5 million at an interest rate of 50 basis points over
LIBOR. The maturity of this facility has been extended to April 15, 1998.
This loan was used to repay higher variable rate debt.
Based on the debt (including construction projects) and the market value
of equity described above, the Company's debt to total market capitalization
(debt plus market value equity) ratio was 47.9% at December 31, 1997, as
compared to 43.8% at December 31, 1996.
DEVELOPMENT, EXPANSIONS AND ACQUISITIONS
During 1997, the Company opened approximately 3,166,000 square feet of
new retail properties consisting of the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total
Project Name Location GLA Anchors
- --------------------------- ---------------------- --------- -----------------------------------------------
Northpark Center Richmond, Virginia 62,500 Hannaford Food & Drug
The Terrace Chattanooga, Tennessee 156,317 HomePlace, Barnes & Noble, Circuit City,
Staples
Massard Crossing Fort Smith, Arkansas 290,717 Wal*Mart, Goody's, TJ Maxx
Strawbridge Marketplace Virginia Beach, Virginia 43,570 Regal Cinemas
Springhurst Towne Center Louisville, Kentucky 798,736 Target, Meijer, TJ Maxx, Kohl's,
Cinemark, Books-A-Million, Office Max
Bonita Lakes Mall Meridian, Mississippi 631,555 Dillard's, Goody's, JCPenney, McRae's, Sears
Bonita Lakes Crossing Meridian, Mississippi 110,524 Books-A-Million, TJ Maxx, Office Max
Cortlandt Town Center Cortlandt, 772,451 Wal*Mart, Home Depot, HomePlace, Steinbach,
(Westchester County) A&P, Office Max, United Artists, PetsMart,
New York Marshalls, Barnes & Noble
Salem Crossing Virginia Beach, Virginia 289,305 Hannaford, Wal*Mart
Chester Plaza Richmond, Virginia 10,000 Hannaford Food & Drug
</TABLE>
During 1997, the Company acquired 1,199,892 square feet consisting
of the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total
Project Name Location GLA Anchors
- --------------------------- ---------------------- --------- -----------------------------------------------
Springdale Mall Mobile, Alabama 926,376 Gayfers, McRae's, Montgomery Ward
Sutton Plaza Mount Olive, New Jersey 122,027 A&P Food Market, Ames Department Store
WestGate Crossing Spartanburg, South 151,489 Circuit City, Toys R Us
Carolina
</TABLE>
During the first month of 1998, the Company acquired 1,902,484 square
feet consisting of the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total
Project Name Location GLA Anchors
- --------------------------- ---------------------- ---------- -----------------------------------------------
Asheville Mall Asheville, North 823,916 Dillard's, Belk, JCPenney, Sears,
Carolina Montgomery Ward
Burnsville Center Burnsville (Minneapolis), 1,078,568 Dayton-Hudson, JCPenney, Mervyn's, Sears
Minnesota
</TABLE>
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<PAGE>
During 1997, the Company added more than 200,000 square feet to existing
centers through expansions as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total
Project Name Location GLA Additions
- --------------------------- ---------------------- --------- -----------------------------------------------
Buena Vista Plaza Columbus, Georgia 7,500 Shops
Pemberton Plaza Vicksburg, Mississippi 12,000 Shops
Twin Peaks Mall Longmont, Colorado 108,000 Dillard's and shops
Frontier Mall Cheyenne, Wyoming 85,540 Dillard's
</TABLE>
The Company currently has approximately 1,900,000 square feet under
construction consisting of:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total
Project Name Location GLA Opening Date
- --------------------------- ---------------------- --------- -----------------------------------------------
Arbor Place Mall Douglasville, Georgia 854,000 October 1999
The Landing at Arbor Place Douglasville, Georgia 162,000 October 1999
Sand Lake Corners Orlando, Florida 594,000 November 1998/April 1999
Sterling Creek Commons Portsmouth, Virginia 66,000 June 1998
Fiddler's Run Morganton, North 163,000 March 1999
Carolina
Hamilton Crossing
(expansion) Chattanooga, Tennessee 14,000 March/April 1998
Girvin Plaza (expansion) Jacksonville, Florida 23,645 May 1998
Springdale Mall (redevelop) Mobile, Alabama 26,000 May 1998
</TABLE>
The Company has also entered into a number of option agreements for the
development of future regional malls and community centers. Except for
these projects and as further described below, the Company currently has no
other capital commitments.
It is management's expectation that the Company will continue to have
access to the capital resources necessary to expand and grow its business.
Future development and acquisition activities will be undertaken by the REIT
as suitable opportunities arise. Such activities are not expected to be
undertaken unless adequate sources of financing are available and a
satisfactory budget with targeted returns on investment has been internally
approved.
The Company will fund its major development, expansion and acquisition
activity with its traditional sources of construction and permanent debt
financing as well as from other debt and equity financings, including public
financings, and its credit facilities.
OTHER CAPITAL EXPENDITURES
Management prepares an annual capital expenditure budget for each
property which is intended to provide for all necessary recurring capital
improvements. Management believes that its annual operating reserve for
maintenance and recurring capital improvements and reimbursements from
tenants will provide the necessary funding for such requirements. The
Company intends to distribute approximately 70% to 90% of its funds from
operations with the remaining 10% to 30% to be held as a reserve for capital
expenditures and continued growth opportunities.
Major tenant finish costs for currently vacant space are expected to be
funded with working capital, operating reserves, or revolving lines of
credit, and a return on the funds so invested is expected to be earned.
For the year ended December 31, 1997, revenue generating capital
expenditures or tenant allowances for improvements were $5.8 million.
These capital expenditures generate a return by increased rents from these
tenants
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<PAGE>
over the term of their leases. Revenue enhancing capital expenditures, or
remodeling and renovation costs, were $3.8 million. Revenue neutral capital
expenditures, such as parking lot and roof repairs, which are recovered from
the tenants, were $6.1 million in 1997.
The Company believes that the Properties are in compliance in all
material respects with all federal, state and local ordinances and
regulations regarding the handling, discharge and emission of hazardous or
toxic substances. The Company has not been notified by any governmental
authority, and is not otherwise aware, of any material noncompliance,
liability or claim relating to hazardous or toxic substances in connection
with any of its present or former properties. The Company has not recorded
in its financial statements any material liability in connection with
environmental matters.
IMPACT OF INFLATION
In the last three years, inflation has not had a significant impact on
the Company because of the relatively low inflation rate. Substantially all
tenant leases do, however, contain provisions designed to protect the
Company from the impact of inflation. Such provisions include clauses
enabling the Company to receive percentage rentals based on tenants' gross
sales, which generally increase as prices rise, and/or escalation clauses,
which generally increase rental rates during the terms of the leases. In
addition, many of the leases are for terms of less than ten years which may
enable the Company to replace existing leases with new leases at higher base
and/or percentage rentals if rents from the existing leases are below the
then-existing market rate. Most of the leases require the tenants to pay
their share of operating expenses, including common area maintenance, real
estate taxes and insurance, thereby reducing the Company's exposure to
increases in costs and operating expenses resulting from inflation.
YEAR 2000 ISSUES
The Company has certain existing computer programs that were written
using two digits rather than four to define the applicable year. As a
result, those computer programs have time sensitive software that recognizes
a date using 00 as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send orders and invoices, or engage in similar normal business
activities.
The Company has completed a program to identify its applications that
are not year 2000 compliant. As a result of this identification program,
the Company believes that while its core accounting application is year 2000
compliant, certain of its other applications are not yet year 2000 compliant.
The Company has undertaken to correct or replace all non-compliant systems
and applications. Given the information known at this time about the
Company's systems that are noncompliant and the Company's ongoing efforts
to correct or replace all non-compliant systems, Management does not expect
the year 2000 compliance of the Company's systems to have a material effect
on the Company's future liquidity or results of operations. No assurance can
be given, however, that all of the Company's systems will be year 2000
compliant or that compliance costs or the impact of a failure by the Company
to achieve substantial year 2000 compliance will not have a material adverse
effect on the Company's future liquidity or results of operations.
The Company has initiated communications with its significant suppliers
and tenants to determine the extent to which the Company is vulnerable to
the failure of such parties to remediate their year 2000 compliance issues.
No assurance can be given, however, that the systems of these outside
parties will be made year 2000
-47-
<PAGE>
compliant in a timely manner or that the noncompliance of the systems of any
of these parties would not have a materially affect on the Company's
liquidity or results of operations.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." This statement requires that all items required to
be recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. The Company will adopt SFAS
No. 130 for all periods ending after January 1, 1998. The adoption of SFAS
No. 130 is not expected to have any material effect on the results of
operations of the Company.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise & Related Information". This statement requires that
segments of a business be disclosed in interim and annual financial
statements. The Company will adopt SFAS No. 131 for all periods ending after
January 1998.
CASH FLOWS
Cash flows provided by operating activities for 1997 increased by $6.1
million, or 11.1%, to $60.9 million from $54.8 million in 1996. This
increase was primarily due to the cash provided from the operations of
thirteen new Properties and the acquisition of four Properties in the last
twenty-four months. Cash flows used in investing activities for 1997
increased by $27.9 million, or 12.8%, to $245.9 million compared to $218.0
million in 1996. This increase was due primarily to the borrowing and
escrow of cash on December 31, 1997 to purchase Asheville Mall in Asheville,
North Carolina on January 2, 1998, offset by a smaller dollar amount of
acquisitions in 1997 as compared to 1996. Cash flows provided by financing
activities for 1997 increased by $19.4 million, or 11.8%, compared to 1996
primarily due to increased borrowings related to the development and
acquisition program offset by the January 1997 follow-on offering which was
used to pay down borrowings.
FUNDS FROM OPERATIONS
Management believes that Funds from Operations as defined on page 9
provides an additional indicator of the financial performance of the
Properties. Funds from Operations is defined by the Company as net income
(loss) before property depreciation, other non-cash items (consisting of the
effect of straight-lining of rents and the write-off of development projects
not being pursued), gains or losses on sales of real estate assets and gains
or losses on investments in marketable securities. The cost of interest
rate caps and finance costs on the Company's lines of credit are amortized
in interest expense and therefore reduces Funds from Operations. The
Company's calculation of Funds from Operations excludes the difference in
average rents (straight-lining) and actual rents received. Funds From
Operations also includes the Company's share of Funds from Operations in
unconsolidated properties and excludes minority interests' share of Funds
From Operations in consolidated properties.
The use of Funds from Operations as an indicator of financial
performance is influenced not only by the operations of the Properties,
but also by the capital structure of the Operating Partnership and the
Company. Accordingly, management expects that Funds from Operations will
be one of the significant factors considered by the Board of Directors in
determining the amount of cash distributions the Operating Partnership will
make to its partners (including the Company). Management also believes that
Funds from Operations is a widely used measure of the operating performance
of REITs and provides a relevant basis for comparison among REITs. Funds
From Operations does not represent cash flow from operations as defined by
generally accepted accounting principles and is not necessarily indicative
of cash from operations available to fund all cash flow needs and should not
be considered
-48-
<PAGE>
as an alternative to net income for purposes of evaluating the Company's
operating performance or to cash flows as a measure of liquidity.
In 1997, Funds from Operations increased by $12.1 million, or 19.5%, to
$74.1 million as compared to $62.0 million in 1996. The increase in Funds
From Operations was primarily attributable to the continuing increase in
revenues and income from operations, new developments and acquisitions.
Beginning with the first quarter of 1996 the Company complied with
NAREIT's revised definition of Funds from Operations by not adding back
depreciation and amortization of finance costs and non-real estate assets
to income from operations. The Company has restated prior year's Funds
From Operations to conform with the revised definition. Although NAREIT
allows it the Company will continue to exclude outparcel sales (which would
have added $5.3 million in 1997) and the effect of straight-line rents
(which would have added $2.4 million in 1997) from its Funds from
Operations calculation, even though the revised definition allows their
inclusion.
The Company's calculation of Funds from Operations is as follows
(dollars in thousands):
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Year Ended
December 31, December 31,
------------------- ------------------
1997 1996 1997 1996
--------- -------- -------- -------
Income from operations $12,336 $ 9,622 $42,404 $35,793
ADD:
Depreciation & amortization
from consolidated properties 8,669 6,856 32,308 25,439
Income from operations of
unconsolidated affiliates 402 302 1,916 1,831
Depreciation & amortization
from unconsolidated affiliates 341 306 1,334 1,203
Write-off of development costs
charged to net income 285 196 330 646
SUBTRACT:
Minority investors' share
of income from operations
in nine properties (103) (142) (508) (527)
Minority investors' share
of depreciation and amortization
in nine properties (252) (173) (834) (659)
Preference return paid to mortgagees -- (64) -- (395)
Adjustment for the straight-
lining of rents:
Consolidated properties (917) (311) (2,445) (1,039)
Unconsolidated affiliates (44) 5 (46) 9
Minority investor's share of
nine propertiese 16 (28) 73 (17)
Depreciation and amortization
of non-real estate assets amd
finance costs (116) (93) (436) (287)
--------- -------- -------- -------
TOTAL FUNDS FROM OPERATIONS $20,617 $16,476 $74,096 $61,997
========= ======== ======== =======
</TABLE>
-49-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Reference is made to the Index to Financial statements contained in
Item 14 on page 58.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated herein by reference from the Company's definitive proxy
statement filed on March 27, 1997 with the Securities and Exchange Commission
(the "Commission") with respect to its Annual Meeting of Stockholders to be
held on April 30, 1998.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated herein by reference from the Company's definitive proxy
statement filed on March 27, 1998 with the Commission with respect to its
Annual Meeting of Stockholders to be held on April 30, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated herein by reference from the Company's definitive proxy
statement filed on March 27, 1998 with the Commission with respect to its
Annual Meeting of Stockholders to be held on April 30, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated herein by reference from the Company's definitive proxy
statement filed on March 27, 1998 with the Commission with respect to its
Annual Meeting of Stockholders to be held on April 30, 1998.
-50-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(1) Financial Statements Page
Report of Independent Public Accountants 59
CBL & Associates Properties, Inc. Consolidated Balance Sheets as of 60
December 31, 1997 and 1996.
CBL & Associates Properties, Inc. Consolidated Statements of 61
Operations for the Years Ended December 31, 1995, 1996 and 1997
CBL & Associates Properties, Inc. Consolidated Statements of 62
Shareholders' Equity for the Years Ended December 31, 1995, 1996
and 1997
CBL & Associates Properties, Inc. Consolidated Statements of 63
Cash Flows for the Years Ended December 31, 1995, 1996 and 1997
Notes to Financial Statements 64
(2) Financial Statement Schedules
Schedule II Allowance for Credit Losses 77
Schedule III Real Estate and Accumulated Depreciation 78
Schedule IV Mortgage Loans on Real Estate 86
Financial Statement Schedules not listed herein are either not required
or are not present in amounts sufficient to require submission of the schedule
or the information required to be included therein is included in the
Company's Consolidated Financial Statements in item 14 or are reported
elseware.
(3) Exhibits
EXHIBIT
NUMBER DESCRIPTION
3.1 -- Amended and Restated Certificate of Incorporation of the
Company(a)
3.2 -- Certificate of Amendment to the Amended & Restated
Certificate of Incorporation of the Company (b)
3.3 -- Amended and Restated Bylaws of the Company(a)
-51-
<PAGE>
4 -- See Amended and Restated Certificate of Incorporation of
the Company, relating to the Common Stock(a)
10.1 -- Partnership Agreement of the Operating Partnership(a)
10.2 -- Property Management Agreement between the Operating
Partnership and the Management Company(a)
10.3 -- Property Management Agreement relating to Retained
Properties(a)
10.4.1 -- CBL & Associates Properties, Inc. 1993 Stock Incentive
Plan(a)dagger
10.4.2 -- Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Charles B. Lebovitz dagger
10.4.3 -- Non-Qualified Stock Option Agreement, dated May 10, 1994,
for James L. Wolford dagger
10.4.4 -- Non-Qualified Stock Option Agreement, dated May 10, 1994,
for John N. Foy dagger
10.4.5 -- Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Jay Wiston dagger
10.4.6 -- Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Ben S. Landress dagger
10.4.7 -- Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Stephen D. Lebovitz dagger
10.4.8 -- Stock Restriction Agreement, dated December 28, 1994, for
Charles B. Lebovitz dagger
10.4.9 -- Stock Restriction Agreement, dated December 2, 1994, for
John N. Foy dagger
10.4.10 -- Stock Restriction Agreement, dated December 2, 1994, for
Jay Wiston dagger
10.4.11 -- Stock Restriction Agreement, dated December 2, 1994, for
Ben S. Landress dagger
10.4.12 -- Stock Restriction Agreement, dated December 2, 1994, for
Stephen D. Lebovitz dagger
-52-
<PAGE>
10.5 -- Purchase Agreement relating to Frontier Mall(c)
10.6.1 -- Purchase Agreement relating to Georgia Square (JMB)(c)
10.6.2 -- Purchase Agreement Relating to Georgia Square
(JCPenney)(c)
10.7 -- Purchase Agreement relating to Post Oak Mall(c)
10.8 -- Indemnification Agreements between the Company and the
Management Company and their officers and directors(a)
10.9.1 -- Employment Agreement for Charles B. Lebovitz(a) dagger
10.9.2 -- Employment Agreement for James L. Wolford(a)dagger
10.9.3 -- Employment Agreement for John N. Foy(a)dagger
10.9.4 -- Employment Agreement for Jay Wiston(a)dagger
10.9.5 -- Employment Agreement for Ben S. Landress(a)dagger
10.9.6 -- Employment Agreement for Stephen D. Lebovitz(a)dagger
10.10 -- Subscription Agreement relating to purchase of the Common
Stock and Preferred Stock of the Management Company(a)
10.11 -- Option Agreement relating to certain Retained Properties(a)
10.12 -- Option Agreement relating to Outparcels(a)
10.13.1 -- Property Partnership Agreement relating to Hamilton Place(a)
10.13.2 -- Property Partnership Agreement relating to CoolSprings
Galleria(a)
10.14.1 -- Acquisition Option Agreement relating to Hamilton Place(a)
10.14.2 -- Acquisition Option Agreement relating to the Hamilton Place
Centers(a)
10.14.3 -- Acquisition Option Agreement relating to the Office
Building(a)
10.15 -- Revolving Credit Agreement between the Operating
Partnership and First Tennessee Bank, National
Association, dated as of March 2, 1994(d)
10.16 -- Revolving Credit Agreement, dated July 28, 1994,
between the Operating Partnership and Wells Fargo
Advisors Funding, Inc., NationsBank of Georgia, N.A.
and First Bank National Association(e)
-53-
<PAGE>
10.17 -- Revolving Credit Agreement, dated October 14, 1994,
between the Operating Partnership and American
National Bank and Trust Company of Chattanooga(f)
10.18 -- Revolving Credit Agreement, dated November 2, 1994,
between the Operating Partnership and First Tennessee
Bank National Association(f)
10.19 -- Promissory Note Agreement between the Operating
Partnership and Union Bank of Switzerland dated
May 5, 1995(g)
10.20 -- Amended and Restated Loan Agreement between the
Operating Partnership and First Tennessee Bank
National Association dated July 12, 1995(h)
10.21 -- Second Amendment to Credit Agreement between the
Operating Partnership and Wells Fargo Realty
Advisors Funding, Inc. dated July 5, 1995(h)
10.22 -- Consolidation, Amendment, Renewal, and Restatement
of Notes between the Galleria Associates, L.P. and
The Northwestern Mutual Life Insurance Company(i)
10.23 -- Promissory Note Agreement between High Point
Development Limited Partnership and The
Northwestern Mutual Life Insurance Company dated
January 26, 1996(j)
10.24 -- Promissory Note Agreement between Turtle Creek
Limited Partnership and Connecticut General Life
Insurance Company dated February 14, 1996(j)
10.25 -- Amended and Restated Credit Agreement between the
Operating Partnership and Wells Fargo Bank N.A.
etal dated September 26, 1996. (k)
10.26 -- Promissory Note Agreement between the Operating
Partnership and Compass Bank dated
September 17, 1996. (k)
10.27 -- Promissory Note Agreement between St Clair Square
Limited Partnership and Wells Fargo National
Bank dated, December 11, 1996.(l)
10.28 -- Promissory Note Agreement between Lebcon Associates
and Principal Mutual Life Insurance Company dated,
March 18, 1997.(l)
-54-
<PAGE>
10.29 -- Promissory Note Agreement between Westgate Mall
Limited Partnership and Principal Mutual Life
Insurance Company dated, February 16, 1997.(l)
10.30 -- Amended and Restated Credit Agreement between the
Operating Partnership and First Tennessee Bank
etal dated February 24, 1997.(l)
10.31 -- Amended and Restated Credit Agreement between the
Operating Partnership and First Tennessee Bank
etal dated July 29, 1997
10.32 -- Second Amended and Restated Credit Agreement between
the Operating Partnership and Wells Fargo Bank N.A.
etal dated June 5, 1997 Effective April 1,1997.
10.33 -- First Amendment to Second Amended and Restated Credit
Agreement between the Operating Partnership and Wells
Fargo Bank N.A. etal dated November 11, 1997.
10.34 -- Loan Agreement between Asheville LLC and Wells Fargo
Bank N.A. dated February 17, 1998
10.35 -- Loan Agreement between Burnsville Minnesota LLC
and U.S. Bank National Association dated
January 30, 1998
10.36 -- Modification No. One to the Amended and Restated
Agreement of Limited Partnership of CBL & Associates
Limited Partnership Dated March 31, 1997.
10.37 -- Modification No. Two to the Amended and Restated
Agreement of Limited Partnership of CBL & Associates
Limited Partnership Dated February 19, 1998.
21 -- Subsidiaries of the Company
23 -- Consent of Arthur Andersen LLP
(a) Incorporated by reference to Post-Effective Amendment No. 1 to the
Company's Registration Statement on Form S-11 (No. 33-67372), as
filed with the Commission on January 27, 1994.
(b) Incorporated by reference to Exhibit B to the Company's Definitive
Schedule 14A, Dated April 1, 1996.
-55-
<PAGE>
(c) Incorporated by reference to Amendment No. 2 to the Company's
Registration Statement on Form S-11 (No. 33-67372), as filed with
the Commission on October 26, 1993.
(d) Incorporated herein by reference to the Company's Annual Report in
Form 10-K for the fiscal year ended December 31, 1993.
(e) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994.
(f) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1994.
(g) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995.
(h) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995.
(i) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995.
(j) Incorporated by reference to the Company's Annual Report in Form 10-K for
the fiscal year ended December 31, 1995.
(k) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996.
(l) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996.
dagger A management contract or compensatory plan or arrangement required to
be filed pursuant to Item 14(c) of this report.
(4) Reports on Form 8-K
Information on the Acquisition of Asheville Mall in Asheville, North
Carolina was filed on January 16, 1998.
The outline from the Company's February 4, 1998 conference call
with analysts regarding earnings (Item 5) was filed on
February 4, 1998.
Information on the Acquisition of Burnsville Center in
Burnsville, Minneapolis was filed on February 13, 1998.
Additional Information on the acquisition of Asheville
Mall in Asheville, North Carolina was filed in an 8-K/A
on February 18, 1998.
-56-
<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.
CBL & ASSOCIATES PROPERTIES, INC.
(Registrant)
By: /s/ Charles B. Lebovitz
------------------------
Charles B. Lebovitz
Chairman of the Board,
President and Chief
Executive Officer
Dated: March 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ---------- ------ -----
/s/ Charles B. Lebovitz Chairman of the Board, March 30, 1998
- ------------------------ President and Chief
Charles B. Lebovitz Executive Officer (Principal
Executive Officer)
/s/ John N. Foy Director, Executive March 30, 1998
- ------------------------ Vice President, Chief
John N. Foy Financial Officer and
Secretary (Principal Financial
Officer and Principal
Accounting Officer)
/s/ Stephen D. Lebovitz
- ------------------------ Director, Senior Vice March 30, 1998
Stephen D. Lebovitz President and Treasurer
/s/ Claude M. Ballard Director March 30, 1998
- ------------------------
Claude M. Ballard
/s/ Leo Fields Director March 30, 1998
- -------------------------
Leo Fields
/s/ Willian J. Poorvu Director March 30, 1998
- -------------------------
William J. Poorvu
/s/ Winston W. Walker Director March 30, 1998
- -------------------------
Winston W. Walker
*By:/s/ Charles B. Lebovitz Attorney-in-Fact March 30, 1998
- --------------------------
Charles B. Lebovitz
-57-
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants 59
CBL & Associates Properties, Inc. Consolidated Balance Sheets as of 60
December 31, 1997 and 1996.
CBL & Associates Properties, Inc. Consolidated Statements of 61
Operations for the Years Ended December 31, 1995, 1996 and 1997
CBL & Associates Properties, Inc. Consolidated Statements of 62
Shareholders' Equity for the Years Ended December 31, 1995,
1996 and 1997
CBL & Associates Properties, Inc. Consolidated Statements of Cash 63
Flows for the Years Ended December 31, 1995, 1996 and 1997
Notes to Financial Statements 64
Schedule II Allowance for Credit Losses 77
Schedule III-Real Estate and Accumulated Depreciation 78
Schedule IV- Mortgage Loans on Real Estate 86
-58-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of CBL & Associates Properties, Inc.:
We have audited the accompanying consolidated balance sheets of CBL &
ASSOCIATES PROPERTIES, INC. (a Delaware corporation) and subsidiary as
of December 31, 1997 and 1996, and the related consolidated statements
of operations, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of CBL &
Associates Properties, Inc. and subsidiary as of December 31, 1997 and
1996, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index of
financial statements are presented for purposes of complying with the
Securities and Exchange Commissions rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in
our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
Arthur Andersen LLP
Chattanooga, Tennessee
February 3, 1998
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<PAGE>
CBL & ASSOCIATES PROPERTIES, INC. CONSOLDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<S> <C> <C>
December 31,
----------------------
ASSETS 1997 1996
---------- ----------
REAL ESTATE ASSETS:
Land $ 164,895 $ 119,965
Buildings and improvements 1,019,283 883,683
---------- ----------
1,184,178 1,003,648
Less: Accumulated depreciation (145,641) (114,536)
---------- ----------
1,038,537 889,112
Developments in progress 103,787 98,148
---------- ----------
Net investment in real estate assets 1,142,324 987,260
CASH AND CASH EQUIVALENTS 3,124 4,298
CASH IN ESCROW 66,108 -
RECEIVABLES:
Tenant, net of allowance for doubtful
accounts of $1,300 in 1997 and
$450 in 1996 12,891 11,417
Other 1,121 1,087
MORTGAGE NOTES RECEIVABLE 11,678 14,858
OTHER ASSETS 7,779 7,005
---------- ----------
$1,245,025 $1,025,925
LIABILITIES AND SHAREHOLDERS' EQUITY
MORTGAGE AND OTHER NOTES PAYABLE $ 741,413 $ 590,295
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 41,978 39,785
---------- ----------
Total liabilities 783,391 630,080
DISTRIBUTIONS AND LOSSES IN EXCESS OF
INVESTMENT IN UNCONSOLIDATED AFFILIATES 6,884 8,616
---------- ----------
MINORITY INTEREST 123,897 114,425
---------- ----------
COMMITMENTS AND COMTIGENCIES (NOTES 4 AND 13)
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, - -
5,000,000 shares authorized, none issued
Common stock, $.01 par value, 95,000,000
shares authorized, 24,063,963 and
20,965,790 shares issued and outstanding
in 1997 and 1996, respectively 241 210
Excess stock, $.01 par value, 100,000,000
shares authorized, none issued - -
Additional paid-in capital 359,541 293,824
Accumulated deficit (28,433) (20,855)
Deferred compensation (496) (375)
---------- ----------
Total shareholders' equity 330,853 272,804
---------- ----------
$1,245,025 $1,025,925
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
-60-
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
-----------------------------
1997 1996 1995
--------- -------- --------
REVENUES:
Rentals:
Minimum $115,640 $93,217 $82,319
Percentage 3,660 2,724 2,811
Other 1,949 1,758 1,507
Tenant reimbursements 51,302 42,447 38,370
Management, development and leasing fees 2,378 2,384 2,506
Interest and other 2,675 4,275 4,214
--------- -------- --------
Total revenues 177,604 146,805 131,727
EXPENSES:
Property operating 30,585 24,232 21,611
Depreciation and amortization 32,308 25,439 22,834
Real estate taxes 14,859 11,587 10,087
Maintenance and repairs 10,239 8,957 8,991
General and administrative 9,049 8,467 8,049
Interest 37,830 31,684 31,951
Other 330 646 605
--------- -------- --------
Total expenses 135,200 111,012 104,128
--------- -------- --------
INCOME FROM OPERATIONS 42,404 35,793 27,599
GAIN ON SALES OF REAL ESTATE ASSETS 6,040 13,614 2,213
EQUITY IN EARNINGS OF
UNCONSOLIDATED AFFILIATES 1,916 1,831 1,450
MINORITY INTEREST IN EARNINGS:
Operating partnership (13,819) (15,468) (10,527)
Shopping center properties (508) (527) (386)
--------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM 36,033 35,243 20,349
EXTRAORDINARY LOSS ON
EXTINGUISHMENT OF DEBT (1,092) (820) (326)
--------- -------- --------
NET INCOME $34,941 $34,423 $20,023
========= ======== ========
BASIC EARNINGS PER COMMON SHARE:
Income before extraordinary item $1.51 $1.69 $1.14
Extraordinary loss on
extinguishment of debt (0.05) (0.04) (0.02)
--------- -------- --------
Net income $1.46 $1.65 $1.12
========= ======== ========
Weighted average shares outstanding 23,895 20,890 17,827
DILUTED EARNINGS PER COMMON SHARE:
Income before extraordinary item $1.49 $1.68 $1.14
Extraordinary loss on
extinguishment of debt (0.05) (0.04) (0.02)
--------- -------- --------
Net income $1.45 $1.64 $1.12
========= ======== ========
Weighted average shares and
dilutive equivalent shares
outstanding: 24,151 21,022 17,856
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
-61-
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC. CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
(In thousands, except share and per share data)
<TABLE>
<S> <C> <C> <C> <C> <C>
Additional
Common Paid-in Accumulated Deferred
Stock Capital Deficit Compensation Total
--------- ---------- ----------- ------------ --------
BALANCE, DECEMBER 31, 1994 $ 166 $219,776 $(10,366) $ (238) $209,338
Net income - - 20,023 - 20,023
Dividends, $1.59 per share - - (29,799) - (29,799)
Issuance of 29,624 shares of
common stock - 602 - (282) 320
Issuance of 4,163,500 shares of
common stock through a
public offering 42 80,618 - - 80,660
through a public offering
Minority interest in Operating
Partnership - (9,924) - - (9,924)
Exercise of stock options - 110 - - 110
Amortization of deferred
compensation - - - 164 164
--------- ---------- ----------- ------------ --------
BALANCE, December 31, 1995 208 291,182 (20,142) (356) 270,892
Net income - - 34,423 - 34,423
Dividends, $1.68 per share - - (35,136) - (35,136)
Issuance of 34,891 shares of
common stock 1 804 - (347) 458
Exercise of stock options 1 1,838 - - 1,839
Amortization of deferred
compensation - - - 328 328
--------- ---------- ----------- ------------ --------
BALANCE, December 31, 1996 210 293,824 (20,855) (375) 272,804
Net income - - 34,941 - 34,941
Dividends, $1.77 per share - - (42,519) - (42,519)
Issuance of 42,573 shares of
common stock - 1,047 - (459) 588
Issuance of 3,000,000 shares
of common stock through
a public offering 30 74,242 - - 74,272
Minority interest in Operating
Partnership - (10,680) - - (10,680)
Exercise of stock options 1 1,108 - - 1,109
Amortization of deferred
compensation - - - 338 338
--------- ---------- ----------- ------------ --------
BALANCE, December 31, 1997 $ 241 $359,541 $(28,433) $ (496) $330,853
</TABLE>
The accompanying notes are an integral part of these statements.
-62-
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
----------------------------
1997 1996 1995
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 34,941 $ 34,423 $ 20,023
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest in earnings 14,327 15,995 10,913
Depreciation 29,091 24,036 22,190
Amortization 3,934 2,677 1,217
Extraordinary loss on extinguishment
of debt 1,092 820 326
Gain on sales of real estate assets (6,040) (13,614) (2,213)
Equity in earnings of unconsolidated
affiliates (1,916) (1,831) (1,450)
Issuance of stock under incentive plan 331 146 80
Amortization of deferred compensation 338 328 94
Write-off of development projects 330 646 605
Distributions from unconsolidated
affiliates 2,192 3,398 3,186
Distributions to minority investors (16,868) (15,874) (15,182)
Changes in assets and liabilities:
Tenant and other receivables (1,639) (1,051) (2,837)
Other assets (330) (487) (75)
Accounts payable and accrued
libilities 1,069 5,177 (7,900)
-------- -------- --------
Net cash provided by
operating activities 60,852 54,789 28,977
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate assets (139,746) (141,842) (57,654)
Acquisitions of real estate assets (36,429) (103,464) (32,301)
Capitalized interest (9,218) (6,978) (4,290)
Other capital expenditures (15,681) (9,538) (8,313)
Deposits in escrow (66,108) - -
Proceeds from sales of real estate assets 19,341 47,968 7,185
Additions to mortgage notes receivable (3,461) (3,697) (2,006)
Payments received on mortgage notes receivable 6,771 3,193 396
Additional investments in and advances
to unconsolidated affiliates (491) (2,566) (859)
Additions to other assets (862) (1,092) (1,848)
-------- -------- --------
Net cash used in investing
activities (245,884) (218,016) (99,690)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage and other notes payable 316,813 309,494 149,831
Principal payments on mortgage and other
notes payable (165,694) (111,953) (130,377)
Additions to deferred finance costs (1,174) (1,173) (708)
Refunds of finance costs - 721 -
Proceeds from issuance of common stock 74,530 178 80,681
Proceeds from exercise of stock options 1,109 1,839 110
Prepayment penalties on extinguishment of debt (1,049) - (95)
Dividends paid (40,677) (34,610) (27,753)
-------- -------- --------
Net cash provided by financing
activities 183,858 164,496 71,689
-------- -------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,174) 1,269 976
CASH AND CASH EQUIVALENTS, beginning of period 4,298 3,029 2,053
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of period $ 3,124 $ 4,298 $ 3,029
======== ======== ========
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest,
net of amounts capitalized $ 37,791 $ 30,587 $ 31,923
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
-63-
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
CBL & Associates Properties, Inc. (the "REIT"), a Delaware corporation, is
engaged in the development and operation of regional shopping malls and
community centers, primarily in the southeast and northeast regions of the
United States. During 1997, the REIT transferred its general partnership
and majority ownership interest in CBL & Associates Properties Limited
Partnership (the "Operating Partnership") to its newly formed and wholly
owned qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings,
II, Inc. This was treated similar to a pooling of interests. As a result,
the REIT will continue to own and will conduct its business through the
Operating Partnership, which at December 31, 1997, owns controlling
interests in a portfolio of properties consisting of seventeen regional
malls, eleven associated centers, each of which is part of a regional
shopping mall complex, two power centers, seventy-nine community centers
and one office building. Additionally, the Operating Partnership owns
noncontrolling interests in three regional malls and one associated center.
The Operating Partnership has one mall, one associated center, one power
center and two community centers currently under construction and owns
options to acquire certain development properties owned by third parties.
At December 31, 1997, CBL Holdings I, Inc. owned a 2.8% general partnership
interest and CBL Holdings II, Inc. owned a 68.95% limited partnership
interest in the Operating Partnership for a combined interest held by
the REIT of 71.75%.
The minority interest in the Operating Partnership is held primarily by
CBL & Associates, Inc. and its affiliates (collectively "CBL") who
contributed their interests in certain real estate properties and joint
ventures to the Operating Partnership in exchange for a limited partnership
interest in connection with the formation of the Operating Partnership in
November 1993. At December 31, 1997, CBL owns a 28.25% limited partnership
interest in the Operating Partnership (Note 9).
In September 1995, the REIT completed a follow-on offering of 4,163,500
shares of its common stock at $20.625 per share. The net proceeds of
$80.7 million were used to repay variable rate indebtedness incurred in
the REIT's development and acquisition program.
In January 1997, the REIT completed a spot offering of 3,000,000 shares
of its common stock at $26.125 per share. The net proceeds of $74.3
million were used to repay variable rate indebtedness incurred in the
REIT's development and acquisition program.
To comply with certain technical requirements of the Internal Revenue
Code of 1986, as amended (the "Code"), the Operating Partnership carries
out the REIT's property management and development activities through
CBL & Associates Management, Inc. (the "Management Company"). The
Operating Partnership holds 100% of the preferred stock and 5% of the
common stock of the Management Company, with CBL holding the remaining
95% of the common stock. Through the ownership of the preferred stock,
the Operating Partnership receives substantially all of the cash flow, and
therefore enjoys substantially all of the economic benefits of the
Management Company's operations. Due to the REIT's ability, as sole
general partner, to control the Operating Partnership and Operating
Partnership's rights to substantially all of the economic benefits of the
Management Company, the accounts of each entity are included in the
accompanying consolidated financial statements. The REIT, the Operating
Partnership and the Management Company are referred to collectively as
the "Company".
All significant intercompany balances and transactions have been eliminated
in the consolidated presentation.
-64-
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Real Estate Assets
Costs directly related to the acquisition and development of real estate
assets, including overhead costs directly attributable to property
development, are capitalized. Interest costs incurred during the
development and construction period are capitalized.
Ordinary repairs and maintenance are expensed as incurred. Major
replacements and betterments are capitalized and depreciated over their
estimated useful lives. Depreciation is computed on a straight-line basis
generally over forty years for buildings and improvements and seven to
ten years for equipment and fixtures. Tenant improvements are
capitalized and depreciated on a straight-line basis over the life of the
related lease.
Long-Lived Assets
The Company periodically evaluates the carrying value of a long-lived asset
to be held and used when events or changes in circumstances warrant such
a review. The carrying value of a long-lived asset is considered impaired
when the projected undiscounted future cash flow of such asset is less
than its carrying value. Management believes that no material impairment
existed at December 31, 1997, and accordingly, no loss was recognized.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and cash equivalent investments
with original maturities of three months or less, primarily consisting of
demand deposits in banks.
Cash in Escrow
Cash in escrow includes cash deposited in escrow accounts which is to be
used for the purchase of specific real estate assets.
Deferred Financing Costs
Deferred financing costs are included in other assets in the accompanying
consolidated balance sheets and include fees and costs incurred to obtain
long-term financing and are being amortized over the terms of the respective
mortgage notes payable. Unamortized deferred financing costs are written off
when mortgage notes payable are retired before the maturity date.
Revenue Recognition
Rental revenue attributable to operating leases is recognized on a
straight-line basis over the initial term of the related leases. Certain
tenants are required to pay additional rent if sales volume exceeds
specified amounts. The Company recognizes this additional rent as revenue
when such amounts become determinable. A substantial portion of the
Company's rental income is derived from various national and regional
retail companies.
Tenant Reimbursements
The Company receives reimbursements from tenants for certain costs as
provided in the lease agreements. These costs consist of real estate
taxes, common area maintenance and other recoverable costs. Tenant
reimbursements are recognized as revenue in the period the costs are
incurred.
-65-
<PAGE>
Management, Development and Leasing Fees
Management fees are charged as a percentage of rentals and are recognized
as revenue as they are earned. Leasing fees are charged for newly executed
leases. These fees are recognized as revenues as they are earned.
Development fees are recognized as revenue on a pro rata basis over the
development period.
Gain on Sales of Real Estate Assets
Gain on sales of real estate assets are recognized at the time title to the
asset is transferred to the buyer, subject to the adequacy of the buyer's
initial and continuing investment and the assumption by the buyer of all
future ownership risks of operations of the property.
Income Taxes
The REIT is qualified as a real estate investment trust under Section 856
through 860 of the Code and applicable treasury regulations. In order to
maintain qualification as a real estate investment trust, the REIT is
required to distribute at least 95% of its taxable income to shareholders
and meet certain other asset and income tests as well as other requirements.
As a real estate investment trust, the REIT will generally not be liable for
federal corporate income taxes. Thus, no provision for federal income taxes
has been included in the accompanying consolidated financial statements.
If the REIT fails to qualify as a real estate investment trust in any
taxable year, the REIT will be subject to federal income tax on its taxable
income at regular corporate tax rates. Even if the REIT maintains its
qualification for taxation as a real estate investment trust, the REIT may
be subject to certain state and local taxes on its income and property and
to federal income and excise taxes on its undistributed income. State
income taxes were not significant in 1997, 1996 and 1995.
Derivative Financial Instruments
Interest rate cap and swap agreements, which are principally used by the
Company in the management of interest rate exposure, are accounted for on
an accrual basis. Amounts to be paid or received under interest rate cap
and swap agreements are recorded in interest expense in the period in which
they accrue.
Concentration of Credit Risk
The Company's tenants consist of national, regional and local retailers.
Financial instruments which subject the Company to concentrations of credit
risk consist primarily of tenant receivables. The Company does not obtain
collateral or other security to support financial instruments subject to
credit risk but monitors the credit standing of tenants.
Earnings Per Common Share
Effective for the year ended December 31, 1997, the Company adopted Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share,"
which replaces the presentation of primary earnings per share ("EPS") and
fully diluted EPS with a presentation of basic EPS and diluted EPS,
respectively. Basic EPS excludes dilution and is computed by dividing
earnings available to common shareholders by the weighted-average number
of common shares outstanding for the period. Similar to fully diluted EPS,
diluted EPS assumes the issuance of common stock for all potentially
dilutive equivalent shares outstanding. The right to convert CBL's
minority interest in the Operating Partnership into shares of common stock
is not dilutive (Note 9). All prior period EPS data have been restated.
The difference in basic and diluted EPS was due to the assumed conversion
of outstanding stock options resulting in 256,000, 132,000 and 29,000
equivalent shares in 1997, 1996 and 1995, respectively.
-66-
<PAGE>
Stock-Based Compensation
The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB No. 25). Effective in 1996, the Company adopted the disclosure option
of SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123
requires companies that do not choose to account for stock-based
compensation as prescribed by the statement to disclose the pro forma
effects on net income and earnings per share as if SFAS No. 123 had been
adopted. Additionally, certain other disclosures are required with respect
to stock-based compensation and the assumptions used to determine the pro
forma effects of SFAS No. 123.
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 reported period. Actual results could differ from those
estimates.
3. UNCONSOLIDATED AFFILIATES
The Company has investments in four partnerships and joint ventures, all of
which are reflected on the equity method of accounting in the accompanying
consolidated financial statements and consist of the following at
December 31, 1997:
Company's
Partnership Property Name Interest
Governor's Square IB Governor's Plaza 49.0%
Governor's Square Company Governor's Square 47.5%
Madison Square Associates, Ltd. Madison Square 50.0%
Mall Shopping Center Company Plaza Del Sol 50.6%
-67-
<PAGE>
Condensed combined financial statement information of the partnerships and
joint ventures are presented as follows (in thousands):
<TABLE>
<S> <C> <C>
December 31,
-------------------
1997 1996
-------- --------
ASSETS:
Net investment in real estate assets $ 62,624 $ 62,779
Other assets 3,002 3,132
-------- --------
Total assets 65,626 65,911
LIABILITIES:
Mortgage note payable 87,192 88,667
Other liabilities 1,204 1,253
-------- --------
Total liabilities 88,396 89,920
OWNERS' DEFICIT:
Company (6,884) (8,616)
Other investors (15,886) (15,393)
-------- --------
Total owners' deficit (22,770) (24,009)
-------- --------
Total liabilities and owners'
deficit $ 65,626 $ 65,911
======== ========
</TABLE>
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
-------------------------------
1997 1996 1995
-------- -------- --------
Revenues $ 21,684 $ 21,014 $ 20,729
Depreciation expense 2,724 2,592 2,583
Other operating expenses 15,066 14,668 15,171
-------- -------- --------
Operating income 3,894 3,754 2,975
Gain on sales of real estate assets - 1 -
-------- -------- --------
Income before extraordinary item 3,894 3,755 2,975
Extraordinary loss on extinguishment of debt - (1,727) -
-------- -------- --------
Net income $3,894 $2,028 $2,975
======== ======== ========
Company's share of:
Income before extraordinary item $1,916 $1,831 $1,450
Extraordinary loss on extinguishment of debt - (820) -
-------- -------- --------
Net income $1,916 $1,011 $1,450
======== ======== ========
</TABLE>
During 1996, the mortgage note payable on Governor's Square was
refinanced with lower fixed rate debt. A prepayment penalty of approximately
$1,727,000 was incurred in connection with the refinancing. The Company's
share of this prepayment penalty has been reflected as extraordinary loss
on extinguishment of debt in the accompanying consolidated statement of
operations.
In general, contributions and distributions of capital or cash flows
and allocations of income and expense are made on a pro rata basis in
proportion to the equity interest held by each general or limited partner.
-68-
<PAGE>
4. MORTGAGE AND OTHER NOTES PAYABLE
Mortgage and other notes payable consist of the following at
December 31, 1997 and 1996 (in thousands):
<TABLE>
<S> <C> <C>
1997 1996
-------- --------
Permanent loans $527,558 $473,305
Construction loans 100,321 26,395
Lines of credit 113,534 90,595
-------- --------
$741,413 $590,295
======== ========
</TABLE>
Permanent Loans
Permanent loans consist of loans secured by properties held by the Company
at December 31, 1997 with a carrying amount of $682,814,000. At
December 31, 1997, permanent loans totaling $392,708,000 bear interest at
fixed rates ranging from 6.95% to 10.625%. Permanent loans totaling
$134,850,000 bear interest at variable interest rates indexed to the prime
lending rate or LIBOR rate (6.77% to 8.50% at December 31, 1997). Permanent
loans mature at various dates from 1998 through 2014. Extraordinary loss
on extinguishment of debt consist of prepayment penalties on extinguishment
of debt before maturity and the write off of related unamortized deferred
finance costs.
Construction Loans
At December 31, 1997, the Company had construction loans on three
properties, one of which was still under construction. The total
commitment under the construction loans is $120,275,000, of which
$100,321,000 is outstanding at December 31, 1997. The construction loans
mature in 1998 (extention options are available on all three) and bear
interest at variable interest rates indexed to the prime lending rate or
LIBOR rate (7.00% to 7.37% at December 31, 1997).
Lines of Credit
The Company maintains line of credit agreements with banks for construction
and working capital purposes. At December 31, 1997, the Company has
$187,500,000 available under its line of credit agreements, of which
$113,534,000 is outstanding. The lines expire at various dates through
1999 and bear interest at variable rates indexed to the prime lending rate
or LIBOR rate (6.47% to 7.07% at December 31, 1997). At December 31, 1997,
outstanding letters of credit issued under the line of credit agreements,
not reflected in the accompanying consolidated balance sheet, total
approximately $1,316,000. The line of credit agreements contain, among
other restrictions, certain restrictive covenants including the maintenance
of certain coverage ratios, minimum net worth and limitations on
distributions.
-69-
<PAGE>
Debt Maturities
As of December 31, 1997, the scheduled principal payments on all mortgage
and other notes payable are as follows (in thousands):
<TABLE>
<S> <C>
1998 $176,480
1999 205,257
2000 12,530
2001 13,363
2002 70,228
Thereafter 263,555
--------
$741,413
========
</TABLE>
5. MORTGAGE NOTES RECEIVABLE
Substantially all mortgage notes receivable are collateralized by wrap-
around mortgages which are first mortgages on the underlying real estate
and related improvements. Interest rates on these notes range from 9.5%
to 11.0% at December 31, 1997.
6. MINIMUM RENTS
Tenant leases are usually for five to twenty year periods and generally
provide for renewals and annual rentals which are subject to upward
adjustments based on tenant sales volume. Future minimum rents are
scheduled to be received under noncancellable tenant leases at
December 31, 1997, as follows (in thousands):
<TABLE>
<S> <C>
1998 $134,869
1999 126,803
2000 117,814
2001 110,108
2002 99,792
Thereafter 582,598
</TABLE>
No single tenant collectively accounts for more than 10% of the Company's
total revenue.
7. DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to
manage well defined interest rate risks.
Under interest rate swap agreements, the Company agrees with other parties
to exchange, at specified intervals, the difference between fixed rate and
variable rate interest amounts calculated by reference to an agreed-upon
notional amount. At December 31, 1997, 1996 and 1995, the Company had two
interest rate swap agreements outstanding with financial institutions, each
expiring in 1998. One interest rate swap agreement fixes the LIBOR
component on $50 million of the Company's LIBOR based variable rate debt at
5.52%. The Company will receive interest payments from the financial
institution for the amount LIBOR exceeds 5.52% for each monthly settlement
period. The second interest rate swap agreement has a notional amount of
$5.2 million. Under this agreement, the Company will receive interest
payments at a rate equal to LIBOR plus 140 basis points (7.36% at
December 31, 1997) and will pay interest at a fixed rate of 8.5%.
-70-
<PAGE>
In December, 1997, the Company obtained two $100 million interest rate caps
on LIBOR based variable rate debt, one at 7.0% for 1998 and one at 7.5% for
1999. In January 1998, the Company executed an interest rate swap agreement
which fixes the LIBOR component of $65 million of the company's LIBOR based
variable rate debt at 5.72% for a term of two years. In February 1998, the
Company executed an interest rate swap agreement which fixes the LIBOR
component of $81 million of the company's LIBOR based variable rate debt at
5.54% for a term of two years.
The Company is exposed to credit losses in the event of nonperformance by
the counterparties to its interest rate swap and cap agreements and
nonderivative financial assets but has no off-balance sheet credit risk of
accounting loss. The Company anticipates, however, that counterparties will
be able to fully satisfy their obligations under the contracts. The
Company does not obtain collateral or other security to support financial
instruments subject to credit risk but monitors the credit standing of
counterparties.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, cash in escrow,
receivables, accounts payable and accrued liabilities are reasonable
estimates of their fair values because of the short maturity of these
financial instruments. Based on the interest rates for similar financial
instruments, the carrying value of mortgage notes receivable is a
reasonable estimation of fair value. The carrying value of mortgage and
other notes payable, based on borrowing rates currently available to the
Company, is a reasonable estimation of fair value at December 31, 1997 and
1996. The fair value of the interest rate swap and cap agreements, which
represent the cash requirement if the existing agreements had been settled
at year end, was not significant at December 31, 1997 and 1996.
9. CBL RIGHTS
Pursuant to the Operating Partnership agreement, the limited partners were
granted rights (the "CBL Rights") to convert their limited partnership
interests in the Operating Partnership into shares of common stock, subject
to certain limits, and to sell to the REIT after November 3, 1996 part or
all of their limited partnership interest in the Operating Partnership in
exchange for shares of common stock or their cash equivalent at the REIT's
election, as defined.
CBL sold properties to the Operating Partnership in exchange for 67,850 and
34,246 limited partnership units in the Operating Partnership during 1997
and 1996, respectively.
At December 31, 1997 and 1996, there remained outstanding CBL Rights to
convert CBL's minority interest in the Operating Partnership to 9,475,856
and 9,408,006 shares of common stock, respectively.
10. 401(K) PROFIT SHARING PLAN
The Management Company maintains a 401(k) profit sharing plan, which is
qualified under Section 401(a) and Section 401(k) of the Code to cover
employees of the Management Company. All employees who have attained the
age of 21 and have completed at least one year of service are eligible to
participate in the plan. The plan provides for employer matching
contributions on behalf of each participant equal to 50% of the portion of
such participant's contribution which does not exceed 2.5% of such
participant's compensation for the plan year. Additionally, the Management
Company has the discretion to make additional profit-sharing-type
contributions not related to participant elective contributions. Total
contributions by the Management Company were not significant for 1997,
1996, and 1995.
-71-
<PAGE>
11. STOCK INCENTIVE PLAN
The Company maintains the 1993 Stock Incentive Plan (the "Plan") which
permits the issuance of stock options and common stock to selected
officers, employees and directors of the Company, up to 2,800,000
shares of common stock. The Plan is administered by the Compensation
Committee of the Board of Directors (the "Committee").
Stock options issued under the Plan allow for the purchase of common stock
at the fair market value of the stock at the date of grant. Stock options
granted to officers and employees under the Plan vest and become
exercisable in installments on each of the first five anniversaries of the
date of grant and expire ten years after the date of grant. Stock options
granted to directors are fully vested upon grant, but may not be sold,
pledged or otherwise transferred in any manner during the director's term
or for one year thereafter.
The Company accounts for its stock-based compensation plans under APB
No. 25, under which no compensation expense has been recognized for stock
options granted as all employee options have been granted with an exercise
price equal to the fair value of the Company's common stock on the date of
grant. The Company adopted SFAS No. 123 for disclosure purposes only in
1996. For SFAS No. 123 purposes, the fair value of each employee option
grant has been estimated as of the date of grant using the Black-Sholes
option pricing model and the following weighted average assumptions for
1997, 1996 and 1995, respectively:
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
---------- --------- ----------
Risk-free interest rate 6.73% 6.53% 6.58%
Dividend yield 7.87% 7.64% 7.75%
Expected volatility 16.00% 16.00% 16.00%
Expected life 7.0 years 6.5 years 6.7 years
</TABLE>
Using these assumptions, the fair value of the employee stock options
granted in 1997, 1996 and 1995 is $989,000, $860,000 and $965,000,
respectively, which would be amortized as compensation expense over the
vesting period of the options. Had compensation cost for the plan been
determined in accordance with SFAS No. 123, utilizing the assumptions
detailed above, the Company's pro forma net income and net income per
share would have been as follows for the years ended December 31, 1997,
1996 and 1995, respectively.
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
------- ------- -------
Net income (in thousands):
As reported $34,941 $34,423 $20,023
Pro forma 34,442 34,117 19,910
Net income per share:
Basic as reported $1.46 $1.65 $1.12
Pro forma basic 1.44 1.63 1.12
Diluted as reported 1.45 1.64 1.12
Pro forma diluted 1.43 1.62 1.12
</TABLE>
The pro forma effect on net income in this disclosure is not
representative of the pro forma effect on net income in future years
because it does not take into consideration pro forma compensation expense
related to grants made prior to 1995.
-72-
<PAGE>
A summary of the Company's stock option activity for 1997, 1996, and 1995
is as follows:
<TABLE>
<S> <C> <C> <C>
Weighted-Average
Shares Option Price Exercise Price
-------- ------------------- ----------
Outstanding at December 31, 1994 384,000 $19.5625 - $20.3125 $ 19.57
Granted 532,000 $19.6250 - $21.6250 19.63
Exercised (5,600) $19.5625 19.56
Outstanding at December 31, 1995 910,400 $19.5625 - $21.6250 19.61
Granted 582,000 $20.5000 - $25.6250 20.52
Exercised (93,800) $19.5625 - $21.6250 19.60
Outstanding at December 31, 1996 1,398,600 $19.5625 - $25.6250 19.99
Granted 539,000 $23.6250 23.63
Exercised (55,600) $19.5625 - $20.5000 19.95
Lapsed (190,400) $19.5625 - $23.6250 20.26
Outstanding at December 31, 1997 1,691,600 $19.5625 - $25.6250 $ 21.11
</TABLE>
The weighted-average fair value of options granted during 1997, 1996 and
1995 was $1.84, $1.66 and $1.62, respectively.
Shares subject to options outstanding at December 31, 1997 have a weighted-
average remaining contractual life of 8.0 years. Of the options outstanding
at December 31, 1997, 381,000 are currently exercisable with a weighted-
average exercise price of $19.83 per share.
Under the Plan, common stock may be awarded either alone, in addition to,
or in tandem with other stock awards granted under the Plan. The Committee
has the authority to determine eligible persons to whom common stock will
be awarded, the number of shares to be awarded and the duration of the
vesting period, as defined.
During 1997, the Company issued 31,745 shares of common stock under the
Plan with a weighted-average grant-date fair value of $24.86 per share, of
which 13,483 shares of common stock were immediately vested. The remaining
18,262 shares of common stock vest at various dates from 1998 to 1999.
During 1996, the Company issued 26,780 shares of common stock under the
Plan with a weighted-average grant-date fair value of $23.35 per share, of
which 12,391 shares of common stock were immediately vested. The remaining
14,389 shares of common stock vest at various dates from 1997 to 1999.
During 1995, the Company issued 28,606 shares of common stock under the
Plan with a weighted-average grant-date fair value of $20.43 per share, of
which 14,910 shares of common stock were immediately vested. The remaining
13,696 shares of common stock vest at various dates in 1997.
Deferred compensation related to the common stock issued under the Plan
is reflected in the accompanying consolidated statements of shareholders'
equity based on the market value of the common stock at the date of grant and
is amortized ratably over the period the awards vest.
-73-
<PAGE>
12. RELATED PARTY TRANSACTIONS
CBL and certain officers of the Company have a significant minority interest
in the construction company that has been engaged by the Company in the
building of substantially all of the properties.
The Management Company provides management and leasing services to
affiliated partnerships and joint ventures not controlled by the Company.
Revenue recognized for these services amounted to $837,000 in 1997,
$1,537,000 in 1996, and $1,419,000 in 1995.
A company that provides security, maintenance, cleaning services and
background music for certain of the real estate properties was majority
owned by officers of the Company during a portion of 1997. The company was
sold to an independent third party in 1997. Expenses related to these
services were not significant in 1997, 1996 and 1995.
In 1995, officers of the Company had an ownership interest in a company
engaged in the title insurance business that had written title insurance on
certain of the real estate properties. Expenses related to these services
were not significant in 1995.
An insurance agency that has served as agent with respect to the placing of
insurance on certain of the real estate properties was majority owned by
certain employees of the Management Company at December 31, 1996. Total
insurance premiums paid by the Company to the related insurance agency were
$2,229,000 in 1996 and $1,750,000 in 1995. Due to a change in insurance
agent, no premiums were paid in 1997 to this agency.
13. COMMITMENTS AND CONTINGENCIES
The Company is currently involved in certain litigation arising in the
ordinary course of business. In the opinion of management, the pending
litigation will not materially affect the financial statements of the
Company. Additionally, based on environmental studies completed to date
on the real estate properties, management believes exposure related to
environmental cleanup will be immaterial to the consolidated financial
position and consolidated results of operations of the Company.
The Company has entered into standby purchase agreements with third-party
developers (the "Developers") for the construction, development and
potential ownership of two community centers in Georgia and Texas (the "Co-
Development Projects"). The Developers have utilized theses standby
purchase agreements to assist in obtaining financing to fund the
construction of the Co-Development Projects. The standby purchase
agreements, which expire in 1999, are dependent upon certain completion
requirements, rental levels, the inability of the Developers to obtain
adequate permanent financing and the inability to sell the Co-Development
Project before the Company has to fund their equity contribution or
purchase the Co-Development Project. In return for its commitment to
purchase a Co-Development Project pursuant to a standby purchase agreement,
the Company receives a fee as well as a participation interest in each Co-
Development Project. In addition to the standby purchase agreements, the
Company has extended secured credit to two of these developers to cover
pre-development costs. The outstanding amount of purchase and secured
credit agreements at December 31, 1997 is $52.8 million.
14. EVENTS SUBSEQUENT TO YEAR END
On January 2, 1998, the REIT purchased Asheville Mall in Asheville, North
Carolina for $65 million, which was funded by a $48.9 million acquisition
loan with the balance funded from the REIT's credit lines. On January 30,
1998, the REIT purchased Burnsville Center in Burnsville (Minneapolis),
Minnesota for $81 million which was funded by a $60.8 million acquisition
loan with the balance funded from the REIT's credit lines.
-74-
<PAGE>
15. DIVIDENDS
The allocations of dividends declared and paid for income tax purposes
are as follows:
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
----------------------------
1997 1996 1995
-------- -------- --------
Dividends per share $1.77 $1.68 $1.59
ALLOCATIONS
Ordinary income 81.54% 89.67% 77.31%
Capital gain 0.04% 8.93% 0.53%
Return of capital 18.42% 1.40% 22.16%
-------- -------- --------
Total 100.00% 100.00% 100.00%
======== ======== ========
</TABLE>
16. OPERATING PARTNERSHIP
Condensed financial statement information for the Operating Partnership is
presented as follows (in thousands):
<TABLE>
<S> <C> <C>
DECEMBER 31,
----------------------
1997 1996
---------- ----------
ASSETS:
Net investment in real estate assets $1,135,707 $ 987,260
Other assets 70,361 38,665
---------- ----------
Total assets $1,206,068 $1,025,925
LIABILITIES:
Mortgage and other notes payable $ 741,413 $ 590,295
Other liabilities 29,745 27,027
---------- ----------
Total liabilities 771,158 617,322
Distributions and losses in excess of
investment in unconsolidated affiliates 6,884 8,616
Minority interest 123,902 729
OWNERS' EQUITY 304,124 399,258
---------- ----------
Total liabilities and owners' equity $1,206,068 $1,025,925
========== ==========
</TABLE>
-75-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
----------------------------
1997 1996 1995
-------- -------- --------
Revenues $174,903 $146,805 $131,727
Depreciation expense 32,102 25,439 22,837
Other operating expenses 99,468 85,573 81,294
-------- -------- --------
Operating income 43,333 35,793 27,599
Gain on sales of real estate assets 3,278 13,614 2,213
Equity in earnings of
unconsolidated affiliates 1,916 1,831 1,450
Minority investors' interest (430) (527) (386)
-------- -------- --------
Income before extraordinary item 48,097 50,711 30,876
Extraordinary loss on
extinguishment of debt (1,092) (820) (326)
-------- -------- --------
Net income $47,005 $49,891 $30,550
======== ======== ========
</TABLE>
17. RECLASSIFICATIONS
Certain reclassifications have been made to prior years' financial
information to conform with the 1997 presentation.
18. QUARTERLY INFORMATION (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C> <C>
Basic Diluted
Earnings Earnings
Per Per
Net Common Common
Revenues Operations Income Share(1) Share(1)
-------- ---------- ------- -------- --------
1997 QUARTER ENDED:
March 31 $ 41,242 $ 9,573 $ 8,980 $0.38 $0.38
June 30 42,458 9,789 7,607 0.32 0.31
September 30 43,243 10,706 8,055 0.33 0.33
December 31 50,661 12,336 10,299 0.43 0.42
Total $177,604 $42,404 $34,941 $1.46 $1.45
1996 QUARTER ENDED:
March 31 $ 35,380 $ 8,621 $ 6,737 $0.32 $0.32
June 30 35,969 8,614 10,897 0.52 0.52
September 30 35,491 8,935 6,779 0.32 0.32
December 31 39,965 9,623 10,010 0.48 0.47
Total $146,805 $35,793 $34,423 $1.65 $1.64
</TABLE>
(1) The sum of quarterly earnings per share amounts may differ from
annual earnings per share.
-76-
<PAGE>
SCHEDULE II Allowance For Credit Losses (in thousands)
Year Ended Balance At Provision Balance At
Beginning Of For Credit Account End of
Year Losses Written Off Year
December 31, 1995 $ 0 $ 363 $ (363) $ 0
====== ====== ====== =====
December 31, 1996 0 812 (362) 450
====== ====== ====== =====
December 31, 1997 450 1,027 (177) 1,300
====== ====== ====== =====
-77-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
Initial Cost(A) Costs Gross Amounts at Which Carried at
----------------------- Capitalized Close of Period
Buildings Subsequent ---------------------------------- (D) Date of
Encumbrances and To Buildings and Accumulated Construction
Description (B) Land Improvements Acquisition Land Improvements Total(C) Depreciation /Purchase
---------- ------- ----------- ------------ ------ ----------- --------- ------------ ----------
MALLS
Asheville Mall $48,900 $ ---- $ ---- $ ---- $ ---- $ ---- $ ---- $ ---- ----
Asheville, NC
Georgia Square (E) ---- 2,982 31,071 3,742 2,982 34,813 37,795 6,275 1982
Athens, GA
Hamilton Place 74,147 2,880 42,211 10,227 2,932 52,386 55,318 12,539 1986-1987
Chattanooga, TN
Frontier Mall 7,188 2,681 15,858 5,899 2,681 21,757 24,438 3,857 1984-1985
Cheyenne, WY
Post Oak Mall (E) ---- 3,936 48,948 1,233 3,936 50,181 54,117 15,242 1984-1985
College Station, TX
Walnut Square (E) 1,298 50 15,138 4,721 50 19,859 19,909 7,653 1984-1985
Dalton, GA
St. Clair Square 66,000 11,028 75,581 2,711 11,028 78,292 89,320 2,109 1996
Fairview Heights, IL
Turtle Creek Mall 34,300 2,345 26,418 7,120 3,535 32,348 35,883 3,977 1994-1995
Hattiesburg, MS
Oak Hollow Mall 52,498 4,344 52,904 2,701 4,344 55,605 59,949 4,312 1994-1995
High Point, NC
Twin Peaks Mall (E) ---- 1,873 22,022 13,657 1,828 35,724 37,552 8,715 1984
Longmont, CO
Foothills Mall ---- 4,537 15,226 5,715 4,537 20,941 25,478 944 1996
Maryville, TN
Foothills Mall JCP ---- ---- 2,650 5 ---- 2,655 2,655 883 1983
Maryville, TN
Bonita Lakes Mall 31,703 4,924 31,933 ---- 4,924 31,933 36,857 203 1997
Meridian, MS
Springdale Mall 19,950 19,538 6,676 ---- 19,538 6,676 26,214 42 1997
Mobile, AL
College Square 13,650 2,954 17,787 3,613 2,927 21,427 24,354 5,197 1987-1988
Morristown, TN
Coolsprings Galleria 68,033 13,527 86,755 20,254 13,527 107,009 120,536 13,686 1989-1991
Nashville, TN
Lakeshore Mall ---- 1,443 28,819 656 1,443 29,475 30,918 4,382 1991-1992
Sebring, FL
Westgate Mall 50,969 2,150 23,257 34,150 2,150 57,407 59,557 3,019 1995
Spartanburg, SC
Pemberton Square ---- 1,191 14,305 3,729 581 18,644 19,225 4,787 1986
Vicksburg, MS
-78-
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
Initial Cost(A) Costs Gross Amounts at Which Carried at
----------------------- Capitalized Close of Period
Buildings Subsequent ---------------------------------- (D) Date of
Encumbrances and To Buildings and Accumulated Construction
Description (B) Land Improvements Acquisition Land Improvements Total(C) Depreciation /Purchase
---------- ------- ----------- ------------ ------ ----------- --------- ------------ ----------
ASSOCIATED CENTERS
Coolsprings Xing (E) ---- 2,803 14,985 34 2,804 15,018 17,822 1,954 1991-1993
Nashville, TN
Madison Plaza 2,577 473 2,888 155 473 3,043 3,516 339 1984
Hunstville,AL
Bonita Crossing ---- 794 4,786 ---- 794 4,786 5,580 26 1997
Meridian,MS
Foothills Pl.Exp ---- 137 1,960 403 148 2,352 2,500 841 1984-1988
Maryville,TN
Foothills Plaza (E) ---- 132 2,123 14 141 2,128 2,269 485 1984-1988
Maryville,TN
The Terrace 10,939 4,166 9,729 ---- 4,166 9,729 13,895 196 1997
Chattanooga,TN
Hamilton Corner 3,477 960 3,670 405 734 4,301 5,035 844 1986-1987
Chattanooga,TN
Frontier Square ---- 346 684 99 260 869 1,129 216 1985
Cheyenne,WY
Hamilton Crossing ---- 3,318 4,387 (885) 1,948 4,872 6,820 1,339 1987
Chattanooga,TN
General Cinema 377 100 1,082 14 100 1,096 1,196 493 1984
Athens,GA
Pemberton Plaza ---- ---- 662 124 ---- 786 786 212 1986
Vicksburg,MS
Westgate Crossing ---- 1,082 3,422 ---- 1,082 3,422 4,504 36 1997
Spartanburg,SC
COMMUNITY CENTERS
Northwoods Plaza 1,323 496 1,403 93 496 1,496 1,992 212 1995
Albemarle,NC
Bartow Plaza ---- 224 2,010 229 224 2,239 2,463 395 1989
Bartow,FL
Jean Ribaut Kmart (E) ---- 317 2,065 674 340 2,716 3,056 391 1983-1984
Beaufort,SC
Jean Ribaut Square 4,092 505 4,007 1,313 505 5,320 5,825 1,415 1983
Beaufort,SC
Lady's Island (E) ---- 300 2,323 278 300 2,601 2,901 349 1992
Beaufort,SC
Sattler Square (E) ---- 792 4,155 161 705 4,403 5,108 939 1988-1989
Big Rapids,MI -79-
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
Initial Cost(A) Costs Gross Amounts at Which Carried at
----------------------- Capitalized Close of Period
Buildings Subsequent ---------------------------------- (D) Date of
Encumbrances and To Buildings and Accumulated Construction
Description (B) Land Improvements Acquisition Land Improvements Total(C) Depreciation /Purchase
---------- ------- ----------- ------------ ------ ----------- --------- ------------ ----------
Southgate Crossing ---- ---- 1,002 12 ---- 1,014 1,014 283 1984-1985
Bristol,TN
Townshire Center ---- ---- ---- 27 ---- 27 27 4 1997
Bryan,TX
Village @ Wexford ---- 555 3,009 25 501 3,088 3,589 605 1989-1990
Cadillac,MI
Devonshire Place ---- 371 3,449 2,481 520 5,781 6,301 196 1995-1996
Cary,NC
Ceder Springs Plaza ---- 206 1,845 108 206 1,953 2,159 432 1988
Cedar Springs,MI
Dorchester Plaza ---- 493 1,483 334 443 1,867 2,310 528 1985
Charleston,SC
Rhett @ Remount ---- 67 1,877 848 67 2,725 2,792 558 1992
Charleston,SC
Fifty Eight Crossing 1,296 839 2,360 (71) 743 2,385 3,128 555 1988
Chattanooga,TN
Perimeter Place 1,715 764 2,049 321 770 2,364 3,134 726 1985
Chattanooga,TN
Chester Plaza 0 165 720 0 165 720 885 3 1997
Chester,VA
Centerview Plaza 1,363 246 1,584 706 197 2,339 2,536 562 1986
China Grove,NC
Buena Vista Plaza ---- 830 1,476 (404) 604 1,298 1,902 207 1988-1989
Columbus,GA
Conway Plaza ---- 110 1,071 787 ---- 1,968 1,968 552 1984
Conway,SC
Cortlandt Towne Ctr 45,918 7,000 10,000 1,186 7,000 11,186 18,186 271 1996
Cortlandt,NY
Genesis Square 1,094 227 1,435 970 223 2,409 2,632 278 1990
Crossville,TN
Cosby Station 4,364 999 4,516 480 999 4,996 5,995 436 1993-1994
Douglasville,GA
Ridge Crossing 1,345 832 2,494 (9) 731 2,586 3,317 593 1988
East Ridge,TN
Surrey Square ---- ---- 1,402 ---- ---- 1,402 1,402 412 1985
Elkin,NC
-80-
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
Initial Cost(A) Costs Gross Amounts at Which Carried at
----------------------- Capitalized Close of Period
Buildings Subsequent ---------------------------------- (D) Date of
Encumbrances and To Buildings and Accumulated Construction
Description (B) Land Improvements Acquisition Land Improvements Total(C) Depreciation /Purchase
---------- ------- ----------- ------------ ------ ----------- --------- ------------ ----------
Massard Crossing ---- 843 5,726 79 843 5,805 6,648 93 1997
Fort Smith,AR
Lakeshore Station ---- 200 401 10 200 411 611 40 1993-1994
Gainesville,GA
Garden City Plaza (E) ---- 1,056 2,569 122 580 3,167 3,747 1,036 1984
Garden City,KS
Anderson Plaza ---- 198 1,316 1,562 198 2,878 3,076 423 1983
Greenwood,SC
Northcreek Plaza ---- 98 1,201 38 97 1,240 1,337 178 1983
Greenwood,SC
Henderson Square 7,054 428 8,074 68 435 8,135 8,570 596 1994-1995
Henderson,NC
Springs Crossing ---- ---- 1,422 927 ---- 2,349 2,349 405 1987
Hickory,NC
Valley Crossing (E) ---- 2,390 6,471 4,377 3,034 10,204 13,238 1,647 1988
Hickory,NC
Northridge Plaza (E) ---- 1,087 2,970 1,999 1,244 4,812 6,056 1,423 1984
Hilton Head,SC
Village Square ---- 750 3,591 (933) 142 3,266 3,408 675 1989-1990
Houghton Lake,MI
Greenport Towne Ctr 4,569 659 6,161 194 659 6,355 7,014 587 1993-1994
Hudson,NY
Girvin Plaza ---- 898 1,998 (86) 727 2,083 2,810 370 1989-1990
Jacksonville,FL
Jasper Square (E) ---- 235 1,423 592 235 2,015 2,250 545 1986
Jasper,AL
Stone East Plaza (E) ---- 266 1,635 14 217 1,698 1,915 599 1987
Kingsport,TN
Cedar Bluff 1,417 412 2,128 824 412 2,952 3,364 656 1987
Knoxville,TN
Eastowne Center (E) ---- 867 2,765 533 786 3,379 4,165 668 1989
Knoxville,TN
Karnes Corner 1,010 206 1,360 788 206 2,148 2,354 437 1987
Knoxville,TN
Kingston Overlook ---- 1,693 8,274 (624) 2,105 7,238 9,343 182 1996-1997
Knoxville,TN
Suburban Plaza 6,940 3,223 3,796 3,084 3,223 6,880 10,103 432 1995
Knoxville,TN
-81-
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
Initial Cost(A) Costs Gross Amounts at Which Carried at
----------------------- Capitalized Close of Period
Buildings Subsequent ---------------------------------- (D) Date of
Encumbrances and To Buildings and Accumulated Construction
Description (B) Land Improvements Acquisition Land Improvements Total(C) Depreciation /Purchase
---------- ------- ----------- ------------ ------ ----------- --------- ------------ ----------
LaGrange Commons ---- 835 5,765 403 835 6,168 7,003 172 1995-1996
LaGrange,NY
Park Village ---- 586 2,874 72 520 3,012 3,532 455 1990
Lakeland,FL
Longview Crossing 468 ---- 1,308 4 ---- 1,312 1,312 301 1988
Longview,NC
Springhurst Town Ctr 22,700 7,424 31,716 (1,044) 7,424 30,672 38,096 189 1997
Louisville,KY
Lunenburg Crossing ---- 1,020 2,308 (26) 1,019 2,283 3,302 190 1993-1994
Lunenburg,MA
Sutton Plaza ---- 1,042 4,671 0 1,042 4,671 5,713 116 1997
Mt. Olive,NJ
Chestnut Hills (E) ---- 600 1,775 134 600 1,909 2,509 311 1992
Murray,KY
Beach Crossing ---- 725 1,749 20 623 1,871 2,494 450 1984
Myrtle Beach,SC
Willow Springs 5,835 2,917 6,107 4,991 2,917 11,098 14,015 1,420 1991
Nashua,NH
North Haven Crossing 8,252 3,229 8,061 1 3,229 8,062 11,291 924 1992-1993
North Haven,CT
Briarcliff Square 1,721 299 1,936 45 267 2,013 2,280 427 1989
Oak Ridge,TN
Oaks Crossing ---- 571 2,885 (1,388) 655 1,413 2,068 563 1988
Otsego,MI
Collins Park Common 1,439 25 1,858 6 25 1,864 1,889 392 1989
Plant City,FL
BJ's Wholesale 3,503 170 4,735 ---- 170 4,735 4,905 750 1991
Portland,ME
Clark's Pond ---- 2,739 ---- 59 2,738 60 2,798 9 1994
Portland,ME
University Crossing ---- 545 1,216 (27) 377 1,357 1,734 418 1985
Pueblo,CO
Tyler Square ---- 196 2,021 (48) 103 2,066 2,169 569 1986
Radford,VA
Capital Crossing ---- 1,908 756 2,261 2,544 2,381 4,925 110 1995
Raleigh,NC
Northpark Center ---- 1,465 1,581 ---- 1,465 1,581 3,046 29 1997
Richmond,VA -82-
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
Initial Cost(A) Costs Gross Amounts at Which Carried at
----------------------- Capitalized Close of Period
Buildings Subsequent ---------------------------------- (D) Date of
Encumbrances and To Buildings and Accumulated Construction
Description (B) Land Improvements Acquisition Land Improvements Total(C) Depreciation /Purchase
---------- ------- ----------- ------------ ------ ----------- --------- ------------ ----------
Bennington Place 589 256 1,754 623 175 2,458 2,633 608 1988
Roanoke,VA
Hollins Plantation ---- 229 1,845 234 198 2,110 2,308 639 1985
Roanoke,VA
Orange Plaza ---- 395 2,111 75 395 2,186 2,581 309 1992
Roanoke,VA
Shenandoah 588 122 1,382 13 115 1,402 1,517 330 1988
Roanoke,VA
Rawlinson Place ---- 279 1,573 63 292 1,623 1,915 417 1987
Rock Hill,SC
Valley Commons 1,013 342 1,819 596 342 2,415 2,757 520 1988
Salem,VA
Wildwood Plaza ---- 429 1,082 1,033 357 2,187 2,544 565 1985
Salem,VA
County Park Plaza ---- 196 1,500 40 140 1,596 1,736 315 1980
Scottsboro,AL
Seacoast 5,944 1,374 4,164 2,480 1,195 6,823 8,018 1,023 1991
Seabrook,NH
Sparta Crossing 899 180 1,463 927 145 2,425 2,570 366 1989
Sparta,TN
Bullock Plaza ---- 98 1,493 15 98 1,508 1,606 432 1986
Statesboro,GA
Statesboro Square (E) ---- 237 1,643 135 227 1,788 2,015 520 1986
Statesboro,GA
Signal Hills Villag ---- ---- 579 427 ---- 1,006 1,006 235 1983-1984
Statesville,NC
Strawbridge Mrkt Pl ---- 1,969 2,492 ---- 1,969 2,492 4,461 62 1997
Strawbridge,VA
34th Street Crossin 1,647 1,102 2,743 48 1,023 2,870 3,893 603 1989
St. Petersburg,FL
Hampton Plaza ---- 973 2,689 21 965 2,718 3,683 484 1989-1990
Tampa,FL
Keystone Plaza ---- 938 2,216 (48) 825 2,281 3,106 582 1989
Tampa,FL
Uvalde Plaza 824 574 1,506 (167) 319 1,594 1,913 470 1987
Uvalde,TX
Salem Crossing ---- 2,385 7,564 (470) 2,385 7,094 9,479 109 1997
Virginia Beach,VA -83-
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
Initial Cost(A) Costs Gross Amounts at Which Carried at
----------------------- Capitalized Close of Period
Buildings Subsequent ---------------------------------- (D) Date of
Encumbrances and To Buildings and Accumulated Construction
Description (B) Land Improvements Acquisition Land Improvements Total(C) Depreciation /Purchase
---------- ------- ----------- ------------ ------ ----------- --------- ------------ ----------
Colleton Square 1,060 190 1,349 (10) 156 1,373 1,529 379 1986
Walterboro,SC
DISPOSALS
Lowe's Plaza ---- 1,427 4,440 (5,867) ---- ---- ---- ---- 1992-1993
Joplin, Mo
OTHER
Park Place 1,891 ---- 3,590 721 231 4,080 4,311 1,313 1984
Chattanooga,TN
High Point,NC - Land ---- ---- ---- 1,294 ---- 1,294 1,294 93 ----
CBL & Associates,LP ---- ---- ---- ---- ---- ---- ---- 775 ----
DEVELOPMENTS IN PROGRESS
Consisting of
Construction and
Development
Properties 113,534 2,955 ---- 100,947 115 103,787 103,902 ---- ----
-----------------------------------------------------------------------------------------------------------
TOTALS $741,413 $171,487 $863,272 $253,206 $164,893 $1,123,070 $1,287,965 $145,641
===========================================================================================================
</TABLE>
(A) Initial cost represents the total cost capitalized including carrying
cost at the end of the first fiscal year in which the property opened
or was aquired.
(B) Encumbrances represent the mortgage notes payable balance at
December 31, 1997.
(C) The aggregate cost of land and buildings and improvements for federal
income tax purposes is approximately $1.143 billion.
(D) Depreciation for all properties is computed over the useful life which
is generally forty years.
(E) Property is pledged as collateral on the secured lines of credit used
for development properties.
-84-
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC.
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
The changes in real estate assets and accumulated depreciation for the years
ending December 31, 1997, 1996, and 1995 (dollars in thousands).
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
---------- ---------- ----------
REAL ESTATE ASSETS:
Balance at beginning of period $1,101,797 $ 848,756 $ 747,228
Additions during the period:
Additions and improvements 163,807 165,035 75,533
Acquisitions of real estate assets 36,431 123,372 32,301
Deductions during the period:
Cost of sales (13,741) (34,720) (5,701)
Write-off of development projects (330) (646) (605)
---------- ---------- ----------
Balance at end of period $1,287,964 $1,101,797 $ 848,756
========== ========== ==========
ACCUMULATED DEPRECIATION:
Balance at beginning of period $ 114,536 $ 89,818 $ 67,503
Accumulated depreciation on
properties sold (777) (423) --
Depreciation expense 31,881 25,141 22,315
---------- ---------- ----------
Balance at end of period $ 145,640 $ 114,536 $ 89,818
</TABLE>
-85-
<PAGE>
Schedule IV
CBL & ASSOCIATES PROPERTIES, INC.
MORTGAGE LOANS ON REAL ESTATE
AT DECEMBER 31, 1997
(Dollars in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal
Amount of
Carrying Mortgages
Monthly Balloon Face Amount Subject to
Final Payment Payment Amount of Delinquent
Interest Maturity Amount at Prior of Mortgage Principal
Name of Center/Location Rate Date (1) Maturity Liens Mortgage (2) or Interest
- ---------------------------- --------- ------------- -------- --------- -------- --------- ---------- -------
COMMUNITY CENTERS
Bi-Lo South 9.50% 12/06 $22 $ 0 None $ 1,479 $ 1,479 $0
Cleveland, Tennessee
Gaston Square 11.00% 10/97(3) 15 1,638 None 1,638 1,638 0
Gastonia, North Carolina
Inlet Crossing
Myrtle Beach,
South Carolina 11.00% 10/97(3) 27 1,824 None 1,824 1,824 0
Olde Brainerd Centre 9.50% 12/06 4 0 None 164 164 0
Chattanooga, Tennessee
Signal Hills Plaza 11.00% 10/97(3) 20 2,351 None 2,351 2,351 0
Statesville, North Carolina
Soddy Daisy Plaza 9.50% 12/06 4 337 None 446 446 0
Soddy Daisy, Tennessee
Other 10.00% 07/98-09/03 0 3,776 3,776 3,776 0
------ ------- ------ --------- -------- ------
$92 $9,926 $11,678 $11,678 $0
------ ------- ------- -------- --------- -------
</TABLE>
(1) Equal monthly installments comprised of principal and interest unless
otherwise noted.
(2) The aggregate carrying value for federal income tax purposes is
approximately $11,678 at December 31, 1997.
(3) Mortgage has been extended on a month to month basis at the same terms
while renegotiating mortgage extension.
<TABLE>
<S> <C> <C> <C>
CBL & ASSOCIATES PROPERTIES, INC.
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1997 1996 1995
------------ ------------ ------------
Beginning Balance $14,858 $34,262 $32,651
Additions 3,591 3,697 2,006
Other Reductions(a) 0 19,908 0
Payments (6,771) (3,193) (395)
------------ ------------ ------------
Ending Balance $11,678 $14,858 $34,262
============ ============ ============
</TABLE>
(a) Other reductions in 1996 represent the acquisition of Foothills Mall
and conversion of the mortgage note receivable to the basis in the
acquired asset.
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<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
3.1 Amended and Restated Certificate of Incorporation
of the Company(a)
3.2 Certificate of Amendment to the Amended & Restated
Certificate of Incorporation of the Company (b)
3.3 Amended and Restated Bylaws of the Company(a)
4 See Amended and Restated Certificate of Incorporation
of the Company, relating to the Common Stock(a)
10.1 Partnership Agreement of the Operating Partnership(a)
10.2 Property Management Agreement between the Operating
Partnership and the Management Company(a)
10.3 Property Management Agreement relating to Retained
Properties(a)
10.4.1 CBL & Associates Properties, Inc. 1993 Stock
Incentive Plan(a)
10.4.2 Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Charles B. Lebovitz dagger
10.4.3 Non-Qualified Stock Option Agreement, dated May 10, 1994,
for James L. Wolford dagger
10.4.4 Non-Qualified Stock Option Agreement, dated May 10, 1994,
for John N. Foy dagger
10.4.5 Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Jay Wiston dagger
10.4.6 Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Ben S. Landress dagger
10.4.7 Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Stephen D. Lebovitz dagger
10.4.8 Stock Restriction Agreement, dated December 28, 1994, for
Charles B. Lebovitz dagger
10.4.9 Stock Restriction Agreement, dated December 2, 1994, for
John N. Foy dagger
10.4.10 Stock Restriction Agreement, dated December 2, 1994, for
Jay Wiston dagger
10.4.11 Stock Restriction Agreement, dated December 2, 1994, for
Ben S. Landress dagger
-87-
10.4.12 Stock Restriction Agreement, dated December 2, 1994, for
Stephen D. Lebovitz dagger
10.5 Purchase Agreement relating to Frontier Mall(c)
10.6.1 Purchase Agreement relating to Georgia Square (JMB)(c)
10.6.2 Purchase Agreement Relating to Georgia Square (JCPenney)(c)
10.7 Purchase Agreement relating to Post Oak Mall(c)
10.8 Indemnification Agreements between the Company and the
Management Company and their officers and directors(a)
10.9.1 Employment Agreement for Charles B. Lebovitz(a) dagger
10.9.2 Employment Agreement for James L. Wolford(a) dagger
10.9.3 Employment Agreement for John N. Foy(a) dagger
10.9.4 Employment Agreement for Jay Wiston(a) dagger
10.9.5 Employment Agreement for Ben S. Landress(a) dagger
10.9.6 Employment Agreement for Stephen D. Lebovitz(a) dagger
10.10 Subscription Agreement relating to purchase of the Common
Stock and Preferred Stock of the Management Company(a)
10.11 Option Agreement relating to certain Retained Properties(a)
10.12 Option Agreement relating to Outparcels(a)
10.13.1 Property Partnership Agreement relating to Hamilton Place(a)
10.13.2 Property Partnership Agreement relating to CoolSprings
Galleria(a)
10.14.1 Acquisition Option Agreement relating to Hamilton Place(a)
10.14.2 Acquisition Option Agreement relating to the Hamilton
Place Centers(a)
10.14.3 Acquisition Option Agreement relating to the Office
Building(a)
10.15 Revolving Credit Agreement between the Operating
Partnership and First Tennessee Bank, National
Association, dated as of March 2, 1994(d)
10.16 Revolving Credit Agreement, dated July 28, 1994,
between the Operating Partnership and Wells Fargo
Advisors Funding, Inc., NationsBank of Georgia, N.A.
and First Bank National Association(e)
-88-
<PAGE>
10.17 Revolving Credit Agreement, dated October 14, 1994,
between the Operating Partnership and American
National Bank and Trust Company of Chattanooga(f)
10.18 Revolving Credit Agreement, dated November 2, 1994,
between the Operating Partnership and First Tennessee
Bank National Association(f)
10.19 Promissory Note Agreement between the Operating
Partnership and Union Bank of Switzerland dated
May 5, 1995(g)
10.20 Amended and Restated Loan Agreement between the
Operating Partnership and First Tennessee Bank
National Association dated July 12, 1995(h)
10.21 Second Amendment to Credit Agreement between the
Operating Partnership and Wells Fargo Realty
Advisors Funding, Inc. dated July 5, 1995(h)
10.22 Consolidation, Amendment, Renewal, and Restatement
of Notes between the Galleria Associates, L.P. and
The Northwestern Mutual Life Insurance Company(i)
10.23 Promissory Note Agreement between High Point
Development Limited Partnership and The Northwestern
Mutual Life Insurance Company dated January 26, 1996(j)
10.24 Promissory Note Agreement between Turtle Creek
Limited Partnership and Connecticut General Life
Insurance Company dated February 14, 1996(j)
10.25 Amended and Restated Credit Agreement between the
Operating Partnership and Wells Fargo Bank N.A. etal
dated September 26, 1996. (k)
10.26 Promissory Note Agreement between the Operating
Partnership and Compass Bank dated
September 17, 1996. (k)
10.27 Promissory Note Agreement between St Clair Square
Limited Partnership and and Wells Fargo National
Bank dated, December 11, 1996.(l)
10.28 Promissory Note Agreement between Lebcon Associates
and Principal Mutual Life Insurance Company dated,
March 18, 1997.(l)
10.29 Promissory Note Agreement between Westgate Mall
Limited Partnership and and Principal Mutual Life
Insurance Company dated, February 16, 1997.(l)
10.30 Amended and Restated Credit Agreement between the
Operating Partnership and First Tennessee Bank etal
dated February 24, 1997.(l)
-89-
<PAGE>
10.31 Amended and Restated Credit Agreement between the
Operating Partnership and First Tennessee
Bank etal dated July 29, 1997.
10.32 Second Amended and Restated Credit Agreement between
the Operating Partnership and Wells Fargo Bank
N.A. etal dated June 5, 1997 Effective April 1,1997.
10.33 First Amendment to Second Amended and Restated Credit
Agreement between the Operating Partnership and Wells
Fargo Bank N.A. etal dated November 11, 1997.
10.34 Loan Agreement between Ashville LLC and Wells Fargo
Bank N.A. dated February 17, 1998
10.35 Loan Agreement between Burnsville Minnesota LLC and
U.S. Bank National Association dated
January 30, 1998
10.36 Modification No. One to the Amended and Restated
Agreement of Limited Partnership of CBL & Associates
Limited Partnership Dated March 31, 1997.
10.37 Modification No. Two to the Amended and Restated
Agreement of Limited Partnership of CBL & Associates
Limited Partnership Dated February 19, 1998.
21 Subsidiaries of the Company
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
(a) Incorporated by reference to Post-Effective Amendment No. 1 to the
Company's Registration Statement on Form S-11 (No. 33-67372), as
filed with the Commission on January 27, 1994.
(b) Incorporated by reference to Exhibit B to the Company's Definitive
Schedule 14A, Dated April 1, 1996.
=
(c) Incorporated by reference to Amendment No. 2 to the Company's
Registration Statement on Form S-11 (No. 33-67372), as filed with
the Commission on October 26, 1993.
(d) Incorporated herein by reference to the Company's Annual Report in
Form 10-K for the fiscal year ended December 31, 1993.
(e) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994.
(f) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994.
(g) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995.
-90-
<PAGE>
(h) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995.
(i) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995.
(j) Incorporated by reference to the Company's Annual Report in
Form 10-K for the fiscal year ended December 31, 1995.
(k) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996.
(l) Incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996.
dagger A management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14(c) of this report.
-91-
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT ("Loan Agreement") amends
and restates in its entirety that certain Loan Agreement dated to be
effective February 24, 1997 between the parties hereto and is made to be
effective as of the 29 day of July, 1997, by and between CBL & ASSOCIATES
LIMITED PARTNERSHIP, a Delaware limited partnership, whose address is One
Park Place, 6148 Lee Highway, Chattanooga, Tennessee 37421-2931 (the
"Borrower"), and LAKESHORE/SEBRING LIMITED PARTNERSHIP, a Florida limited
partnership, whose address is the same as the Borrower's described above
("Lakeshore"), and FIRST TENNESSEE BANK NATIONAL ASSOCIATION, a national
banking association organized and existing under the statutes of the
United States of America, with offices at 701 Market Street, Chattanooga,
Tennessee 37402 (hereinafter referred to as the "Bank").
Recitals of Fact
Borrower has requested that the Bank commit to make loans and
advances to it, and to Lakeshore, for the benefit of Borrower, on a
revolving credit basis in an amount not to exceed at any one time
outstanding the aggregate principal sum of Eighty Million Dollars
($80,000,000.00) for the purpose of providing working capital for
pre-development expenses, development costs, equity investments, repayment
of existing indebtedness, certain distributions to limited partners (as
allowed herein), letters of credit and construction and for general
corporate purposes. The Bank has agreed to make certain portions of such
loans and advances on the terms and conditions herein set forth. KeyBank
National Association, formerly Society National Bank, Compass Bank and
AmSouth Bank, all as participants in the Loan have also agreed to make
certain portions of such loan and advances on the terms and conditions
herein set forth.
This Loan Agreement is currently being amended to increase the
revolving credit loan and to modify certain covenants.
NOW, THEREFORE, incorporating the Recitals of Fact set forth above
and in consideration of the mutual agreements herein contained, the
parties agree as follows:
AGREEMENTS
SECTION 1: DEFINITIONS AND ACCOUNTING TERMS
1.1 Certain Defined Terms. For the purposes of this Loan
Agreement, the following terms shall have the following meanings (such
1
<PAGE>
meanings to be applicable equally to both the singular and plural forms
of such terms) unless the context otherwise requires:
"Adjusted Loan Amount" means the combined Net Operating Income from
the properties described in the CBL Mortgage as of each July 1, January
1, April 1 and October 1, as the case may be, based upon the then
immediately preceding twelve (12) month period, divided by 1.25 with the
resulting figure being further divided by the applicable mortgage
constant of .1159.
"Affiliate" means as to any Person, any other Person which, directly
or indirectly, owns or controls, on an aggregate basis including all
beneficial ownership and ownership or control as a trustee, guardian or
other fiduciary, at least ten percent (10%) of the outstanding shares of
Capital Stock or other ownership interest having ordinary voting power
to elect a majority of the board of directors or other governing body
(irrespective of whether, at the time, stock of any other class or
classes of such corporation shall have contingency) of such Person or at
least ten percent (10%) of the partnership or other ownership interest
of such Person; or which controls, is controlled by or is under common
control with such Person. For the purposes of this definition, "control"
means the possession, directly or indirectly, of the power to direct or
cause the direction of management and policies, whether through the
ownership of voting securities, by contract or otherwise.
Notwithstanding the foregoing, a pension fund, university or other
endowment funds, mutual fund investment company or similar fund having
a passive investment intent owning such a ten percent (10%) or greater
interest in a Person shall not be deemed an Affiliate of such Person
unless such pension, mutual, endowment or similar fund either (i) owns
fifty percent (50%) or more of the Capital Stock or other ownership
interest in such Person, or (ii) has the right or power to select one or
more members of such Person's board of directors or other governing body.
"Agent" means Wells Fargo Realty Advisors Funding, Incorporated, a
Colorado corporation as agent pursuant to the Credit Agreement dated July
28, 1994 between Borrower and Agent.
"Applicable Law" means, in respect of any Person, all provisions of
statutes, rules, regulations and orders of any governmental authority
applicable to such Person, and all orders and decrees of all courts and
arbitrators in proceedings or actions in which the person in question is
a party.
"Bank's Proportionate Share" means the Bank's undivided
participating interest in the Loan which shall be equal to Twenty Two
Million Five Hundred Thousand and NO/100 Dollars ($22,500,000.00).
2
<PAGE>
"Base Rate" means the base commercial rate of interest established
from time to time by Bank. The currently existing Base Rate is eight and
one quarter percent (8.25%) per annum.
"Borrowing Base" is the limitation on the aggregate Revolving Credit
Loan indebtedness which may be outstanding at any time during the term
of this Agreement. The Borrowing Base will be calculated each July 1,
January 1, April 1 and October 1. The Borrowing Base will be an amount
not to exceed the Borrower's Adjusted Loan Amount.
"Business Day" means a banking business day of the Bank.
"Capital Stock" shall mean, as to any Person, any and all shares,
interests, warrants, participations or other equivalents (however
designated) of corporate stock of such Person.
"Capitalized Value" shall mean an amount, calculated as of any date,
equal to the quotient of (a) the sum of (i) Borrower's Funds From
Operations during the most recent quarter end, annualized plus (ii) the
Interest Expense used in calculating Borrower's Funds From Operations
pursuant to clause (i) above, and (b) nine percent (.09).
"CBL Holdings" means CBL Holdings I, Inc., a Delaware corporation
and the sole general partner of Borrower.
"CBL Management, Inc." means CBL & Associates Management, Inc., a
Delaware corporation.
"CBL Mortgage" means the mortgages and/or deeds of trust with
security agreements and assignments of rents and leases and related
amendments executed by Borrower, Coolsprings Crossing Limited
Partnership, East Towne Crossing Limited Partnership, Valley Crossing
Associates Limited Partnership, Walnut Square Associates Limited
Partnership, Lakeshore/Sebring Limited Partnership [Including the
Lakeshore Mortgage (New) and the Lakeshore Mortgage (Old)] and/or
Vicksburg Mall Associates, Ltd. and/or any other entity related to or
owned by Borrower and/or CBL & Associates Properties, Inc. and/or CBL
Holdings I, Inc. in favor of Bank covering their interest in the
properties described in Exhibit "A," attached hereto and made a part
hereof, referred to in Section 4.1(e) hereof.
"CBL Properties, Inc." means CBL & Associates Properties, Inc., a
Delaware corporation and a qualified public REIT and formerly until
MAY 21, 1997 the sole general partner of Borrower.
3
<PAGE>
"Closing Date" means the date set out in the first paragraph of this
Loan Agreement.
"Combined" means, as to any calculation hereunder, that such
calculation shall be made on a combined basis for Borrower, CBL Holdings,
CBL Properties, Inc. and CBL Management, Inc., with each such calculation
being made, (a) in respect of Borrower, on a consolidated basis for
Borrower and its Subsidiaries, (b) in respect of CBL Holdings, on a
consolidated basis for CBL Holdings and its Subsidiaries, (c) in respect
of CBL Properties, Inc., on a consolidated basis for CBL Properties, Inc.
and its Subsidiaries, and (d) in respect of CBL Management, Inc., on a
consolidated basis for CBL Management, Inc. and its Subsidiaries.
"Contingent Obligations" means, for any Person, any material
commitment, undertaking, Guarantee or material obligation constituting
a continuing liability under GAAP, but only to the extent the same are
required to be reflected on such Persons' audited financial statements.
"Credit Agreement" means the Credit Agreement dated as of July 28,
1994 and as amended by amendments dated as of May 5, 1995, July 5, 1995
and subsequent amendments between the Borrower, Wells Fargo Realty
Advisors Funding, Incorporated and others.
"Debt Coverage Ratio" shall mean, as of any date the same is
calculated, the ratio of (a) EBITDA for the fiscal quarter ending on or
most recently ended prior to such date to (b) Debt Service during such
fiscal quarter, in each case calculated on a Combined basis in accordance
with GAAP.
"Debt Service" means, with respect to Borrower, CBL Properties,
Inc., and their respective Subsidiaries for any period, the sum of (a)
Interest Expense of Borrower, CBL Properties, Inc. and their respective
Subsidiaries for such period, plus (b) regularly scheduled principal
payments on Indebtedness of Borrower, CBL Properties, Inc. and their
respective Subsidiaries during such period other than (x) in respect of
any period following the Termination Date, the scheduled principal
payments of the Term Out Amount made after the Termination Date, the
scheduled principal payments of the Term Out Amount made after the
Termination Date and (y) any regularly scheduled principal payment
payable on any Indebtedness which prepays such Indebtedness in full, to
the extent the amount of such final scheduled principal payment is
greater than the scheduled principal payment immediately preceding such
final scheduled principal payment, determined in each case on a Combined
basis in accordance with GAAP. For purposes of this definition, a
voluntary prepayment of Indebtedness shall not constitute a regularly
scheduled principal payment even if, under the terms of the agreement
governing such Indebtedness, the notice of prepayment has the effect of
4
<PAGE>
causing the amount of the prepayment to become due and payable on the
date set for such notice of such prepayment.
"EBITDA" means, for any period, the sum of (i) Net Income of
Borrower, CBL Properties, Inc. and their respective Subsidiaries for such
period (excluding equity in net earnings (or loss) of their
Unconsolidated Affiliates), plus (ii) depreciation and amortization
expense and other non-cash charges of Borrower, CBL Properties, Inc. and
their respective Subsidiaries for such period, plus (iii) interest
expense of Borrower, CBL Properties, Inc. and their respective
Subsidiaries for such period, plus (iv) income tax expense in respect of
such period, plus (v) cash dividends and distributions actually received
by Borrower, CBL Properties, Inc. and their respective Subsidiaries
during such period from Unconsolidated Affiliates, plus (vi)
extraordinary losses (and any unusual losses arising in or outside the
ordinary course of business of Borrower, CBL Properties, Inc. and their
respective Subsidiaries not included in extraordinary losses determined
in accordance with GAAP that have been reflected in the determination of
Net Income) for such period, minus (vii) extraordinary gains of Borrower,
CBL Properties, Inc. and their respective Subsidiaries (and any unusual
gains arising in or outside the ordinary course of business of Borrower,
CBL Properties, Inc. or such respective Subsidiaries not included in
extraordinary gains determined in accordance with GAAP that have been
reflected in the determination of Net Income) for such period, determined
in each case on a Combined basis in accordance with GAAP.
"Effective Date," which definition is used and only applies within
Section 7.9 hereof, means the date the Credit Agreement between the
Borrower and Wells Fargo Realty Advisors Funding Incorporated became
effective in accordance with Section 4.1 thereof.
"Environmental Laws" means all applicable local, state or federal
laws, rules or regulations pertaining to environmental regulation,
contamination or cleanup, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Resource Conservation and Recovery Act of 1976 or any state
lien or superlien or environmental cleanup statutes.
"Event of Default" has the meaning assigned to that phrase in
Section 8.
"Funds from Operations" means, as to any period, an amount equal to
(a) income (loss) from operations of Borrower, CBL Properties, Inc. and
their respective Subsidiaries for such period, plus (b) depreciation and
amortization, plus (minus) (c) to the extent not included in clause (a)
5
<PAGE>
above, gain (loss) on the sales of outparcels made in the ordinary course
of business, and after adjustments for Unconsolidated Affiliates,
determined in each case on a Combined basis in accordance with GAAP.
Adjustments for Unconsolidated Affiliates will be calculated to reflect
funds from operations on the same basis.
"GAAP" shall mean generally accepted accounting principles applied
on a basis consistent with those which are to be used in making the
calculations for purposes of determining compliance with this Agreement.
All calculations made for the purposes of determining compliance with
this Agreement shall (except as may be otherwise expressly provided
herein) be made by application of generally accepted accounting
principles applied on a basis consistent with those used in preparation
of the annual and quarterly financial statements of CBL Properties, Inc.
furnished to the Securities and Exchange Commission.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay
(or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise), or (ii) entered into for the purpose
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against
losses in respect thereof (in whole or in part), provided that the term
"Guarantee" shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has
a corresponding meaning.
"Hazardous Substances" shall mean and include all hazardous and
toxic substances, wastes or materials, any pollutants or contaminants
(including, without limitation, asbestos and raw materials which include
hazardous constituents), or any other similar substances or materials
which are included under or regulated by any applicable Environmental
Laws.
"Indebtedness" shall mean, as applied to any Person at any time,
without duplication (a) all indebtedness, obligations or other
liabilities of such Person (i) for borrowed money or evidenced by debt
securities, debentures, acceptances, notes or other similar instruments,
and any accrued interest, fees and charges relating thereto; (ii) with
respect to letters of credit issued for such Person's account; (iii)
under agreements for the prospective purchase or repurchase assets other
6
<PAGE>
than obligations arising under unexercised option agreements; (iv) to
make future investments in any Person; (v) to pay the deferred purchase
price of property or services previously purchased or rendered, except
unsecured trade accounts payable and accrued expenses required to be
capitalized in accordance with GAAP; (b) all indebtedness, obligations
or other liabilities of such Person or others secured by a Lien on any
asset of such Person, whether or not such Person is otherwise obligated
on such indebtedness, obligations or liabilities are assumed by such
Person, all as of such time; (c) all indebtedness, obligations or other
liabilities of such Person in respect of any foreign exchange contract
or any interest rate swap, cap or collar agreement or similar
arrangement, net of liabilities owed to such Person by the counterparties
thereon; (d) all shares of Capital Stock or equivalent ownership interest
subject (upon the occurrence of any contingency or otherwise) to
mandatory redemption prior to the date the Loan is scheduled to be repaid
in full; (e) obligations of others to the extent Guaranteed by such
Person or to the extent such Person is otherwise liable on a recourse
basis; and (f) such Person's pro rata share of non-recourse Indebtedness
of a partnership in which such Person is a partner (it being understood
that the remaining portion of such non-recourse partnership Indebtedness
shall not constitute Indebtedness of such Person).
"Interest Coverage Ratio" means, as of any date the same is
calculated, the ratio of (a) EBITDA for the fiscal quarter ending on or
most recently ended prior to such date to (b) Interest Expense for such
fiscal quarter, determined in each case on a Combined basis in accordance
with GAAP.
"Interest Expense" means, for any Person for any period, total
interest expense on Indebtedness of such Person, whether paid or accrued,
but without duplication (including the interest component of capital
leases), including, without limitation, (a) all commissions, discounts
and other fees and charges owed with respect to letters of credit, and
(b) one hundred percent (100%) of any interest expense, whether paid or
accrued, or any other Person for which such Person is wholly or partially
liable (whether by Guarantee, pursuant to Applicable Law or otherwise)
but excluding (i) interest on Reserved Construction Loan and (ii) swap
or other interest hedging breakage costs, all as determined in conformity
with GAAP.
"Investment" in any Person shall mean any investment, whether by
means of share purchase, loan, advance, extension of credit, capital
contribution or otherwise, in or to such Person, the Guarantee of any
Indebtedness of such Person, or the subordination of any claim against
such Person to other Indebtedness of such Person.
7
<PAGE>
"Lakeshore Note" means the promissory note from Lakeshore in the
original principal sum of $ 34,600,000.00 payable to the order of Agent,
later assigned by Agent to Shopping Center Finance Corp., and later
assigned by Shopping Center Finance Corp. to the Bank, such Promissory
Note being now for the principal sum of $20,400,000.00, as amended,
renewed, or replaced from time to time, but it does not include the
Renewal of Promissory Note dated December 6, 1994 to be effective April
1, 1994.
"Lakeshore Mortgage" means the Florida Mortgage from
Lakeshore/Sebring Limited Partnership in favor of Agent later assigned
by Agent to Shopping Center Finance Corp. and subsequently assigned of
even date herewith to the Bank, as amended from time to time.
"LIBOR Rate" means the London Interbank Offered Rates as established
from time to time and published in The Wall Street Journal, Money Rates
Section which, unless otherwise specified herein or in the Note, is a one
(1) month LIBOR Rate.
"Lien" means any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute or contract, and
including but not limited to the security interest or lien arising from
a deed of trust, mortgage, encumbrance, pledge, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes, and
including but not limited to reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases,
and other title exceptions and encumbrances affecting Property.
"Loan" means the Revolving Credit Loan from the Bank to the
Borrower, including the Lakeshore Note which was purchased by the Bank.
"Loan Agreement" means this Loan Agreement between the Borrower,
Lakeshore and the Bank, and any modifications, amendments, or
replacements thereof, in whole or in part.
"Maximum Rate" means the maximum variable contract rate of interest
which the Bank may lawfully charge under applicable statutes and laws
from time to time in effect.
"Mortgages" or "Mortgage" means a mortgage, deed of trust, deed to
secure debt or similar security instrument made or to be made by a Person
owning real estate or an interest in real estate granting a Lien on such
real estate or interest in real estate as security for the payment of
indebtedness.
8
<PAGE>
"Net Income" means, with respect to Borrower, CBL Properties, Inc.,
and their respective Subsidiaries for any period, net earnings (or loss)
after deducting therefrom all operating expenses, income taxes and
reserves and net earnings (or loss) attributable to minority interests
in Subsidiaries for the period in question, determined in each case on
a Combined basis in accordance with GAAP. Without limiting the
generality of the foregoing, earnings (or losses) from the sale of
outparcels in the ordinary course of business shall be included in
determining Net Income.
"Net Operating Income" means, for any Property for the period in
question (a) any cash rentals, expense or cost reimbursements, or other
income or gain earned by Borrower with respect to such Property, less (b)
all cash expenses (excluding items capitalized under GAAP) incurred by
Borrower during such period in connection with the operation or leasing
of such Property.
"Net Worth" means, with respect to Borrower, CBL Properties, Inc.
and their Subsidiaries as of any date, the sum of (a) the total
shareholders' equity of CBL Properties, Inc., plus (b) the value of all
minority interests in Borrower, plus (c) depreciation and amortization
since December 31, 1993, minus (d) all intangible assets, determined on
a Combined basis in accordance with GAAP.
"Note" means the Revolving Credit Note or Notes executed by the
Borrower to the Bank in the original principal sums of Ten Million Six
Hundred Thousand Dollars ($10,600,000.00) (the "$10,600,000.00 Note") and
Forty Nine Million Dollars ($49,000,000.00), dated of even date herewith,
and the Lakeshore Note, as such note or notes may be modified, renewed
or extended from time to time; and any other note or notes executed at
any time to evidence the indebtedness under this Loan Agreement, in whole
or in part, and any renewals, modifications and extensions thereof, in
whole or in part.
"Participant" means KeyBank National Association, Compass Bank,
AmSouth Bank, their successors and assigns, and any other participants
in the Loan.
"Participant's Proportionate Share (AmSouth)" means AmSouth Bank's
(or any successor to such bank's interest in the Loan) undivided
participating interest in the Loan which shall be equal to Twenty Two
Million Five Hundred Thousand and NO/100 Dollars ($22,500,000.00).
"Participant's Proportionate Share (KeyBank)" means KeyBank's (or
any successor to such bank's interest in the Loan) undivided
participating interest in the Loan which shall be equal to Twenty Two
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Million Five Hundred Thousand and NO/100 Dollars ($22,500,000.00).
"Participant's Proportionate Share (Compass)" means Compass Bank's,
(or any successor to such bank's interest in the Loan) undivided
participating interest in the Loan which shall be equal to Twelve Million
Five Hundred Thousand Dollars ($12,500,000.00).
"Participants' Proportionate Share" means Participant's
Proportionate Share (KeyBank), Participant's Proportionate Share
(Compass), and Participant's Proportionate Share (AmSouth).
"Participation Agreement" means that certain Participation Agreement
entered into of even date herewith among Bank, KeyBank National
Association, Compass Bank, AmSouth Bank and/or any other participants in
the Loan, as amended from time to time.
"Permitted Encumbrances" shall mean and include:
(a) liens for taxes, assessments or similar governmental charges
not in default or being contested in good faith by appropriate
proceedings;
(b) workmen's, vendors', mechanics' and materialmen's liens and
other liens imposed by law incurred in the ordinary course of business,
and easements and encumbrances which are not substantial in character or
amount and do not materially detract from the value or interfere with the
intended use of the properties subject thereto and affected thereby;
(c) liens in respect of pledges or deposits under social security
laws, worker's compensation laws, unemployment insurance or similar
legislation and in respect of pledges or deposits to secure bids,
tenders, contracts (other than contracts for the payment of money),
leases or statutory obligations;
(d) any liens and security interests specifically listed and
described in Exhibit "B" hereto attached or in any exhibit describing
permitted exceptions and attached to any CBL Mortgage;
(e) such other liens and encumbrances to which Bank shall consent
in writing; and
(f) leases, licenses, rental agreements or other agreements for use
and occupancy of the subject property.
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, association, joint venture or a government
or agency or political subdivision thereof.
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"Project" or "Projects," which definition is used and only applies
within Section 7.9 hereof, means the real estate projects owned by
Borrower, a Wholly Owned Subsidiary of Borrower, a Subpartnership or, to
the extent approved by the Supermajority Lenders, any other Person and
"Project" shall mean any one of the Projects. The capitalized terms used
in this definition shall have the same meaning as provided in the Credit
Agreement.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"Reserved Construction Loan" shall mean a construction loan extended
to Borrower or a Subsidiary of Borrower for the construction of a project
in respect of which: (a) neither any monetary or material non-monetary
default nor any event of default exists; (b) interest on such loan has
been budgeted to accrue at a rate of not less than the Base Rate plus two
percent (2%) at the time the interest reserve account is established; (c)
the amount of such budgeted interest has been (i) included in the
principal amount of such loan and (ii) segregated into an interest
reserve account (which shall include any arrangement whereby loan
proceeds equal to such budgeted interest are reserved and only disbursed
to make interest payments in respect of such loan); (d) absent an event
of default or a monetary or material non-monetary default, such interest
can be paid out of such interest reserve account only for the purpose of
making interest payments on such loan; (e) the amount held in such
interest reserve account in respect of such loan, together with the net
income if any, from such project projected by the Agent in its reasonable
judgment, will be sufficient, as reasonably determined by the Agent from
time to time, to pay all Interest Expense on such loan until the date
that the EBITDA of the project being financed by such loan is anticipated
to be sufficient to pay all Interest Expense on such loan; and (f)
Borrower has delivered all certificates required by Section 6 hereof.
"Revolving Credit Advances" means advances of principal on the
Revolving Credit Loan by the Bank under the terms of this Loan Agreement
to the Borrower during the term of the Revolving Credit Loan pursuant to
Section 3.1.
"Revolving Credit Loan" means the aggregate of the Borrower's and
Lakeshore's indebtedness to the Bank pursuant to Section 2 of this Loan
Agreement.
"Revolving Credit Note" means the Notes as described in Section 2.3
hereof and the Lakeshore Note.
"Subsidiary" shall mean, as to any Person, any other Person, more
than fifty percent (50%) of the outstanding shares of Capital Stock,
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partnership interest or other ownership interest, having ordinary voting
power to elect a majority of the board of directors or similar governing
body of such other Person (irrespective of whether or not at the time
stock or other ownership interests of any other class or classes of such
other Person shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned
or controlled by such Person or by one or more "Subsidiaries" of such
Person, and whose financial reports are prepared on a consolidated basis
with such Person. "Wholly Owned Subsidiary" shall mean any such Person
of which all of the shares of Capital Stock or ownership interests (other
than, in the case of a corporation, directors' qualifying shares) are so
owned or controlled. For purposes of this Agreement CBL Management, Inc.
shall be deemed to be a Subsidiary of Borrower.
"Termination Date of Revolving Credit Loan" shall mean the earlier
of (a) June 1, 1999, or in the event that the Bank and Borrower shall
hereafter mutually agree in writing that the Revolving Credit Loan and
the Bank's commitment hereunder shall be extended to another date, such
other date mutually agreed upon between Bank and Borrower to which the
Bank's commitment shall have been extended, or (b) the date as of which
Borrower shall have terminated the Bank's commitment under the provisions
of Section 2.5 hereof.
"Term Out Amount" means the then outstanding principal balance of
the Loan due and owing the Bank under the Note, if the Bank elects not
to extend the existing Maturity Date and the Borrower elects to cap the
line of credit as provided in the Note.
"Total Obligations" means, as of any date, the sum (without
duplication) of (a) the Indebtedness of Borrower, CBL Properties, Inc.
and their respective Subsidiaries (other than Indebtedness described in
clauses (a)(iii) and (a)(iv) of the definition thereof); plus (b) the
aggregate amount of Contingent Obligations of Borrower, CBL Properties,
Inc. and their respective Subsidiaries in respect of Indebtedness (other
than Indebtedness described in clauses (a)(iii) and (a)(iv) of the
definition thereof); plus (c) Borrower's, CBL Properties, Inc's or their
respective Subsidiaries' proportionate share of Indebtedness (other than
Indebtedness described in clauses (a)(iii) and (a)(iv) of the definition
thereof) of any Unconsolidated Affiliate, whether or not Borrower, CBL
Properties, Inc. or such Subsidiary is obligated on such Indebtedness;
plus (d) all other amounts which would be classified as a liability on
the consolidated balance sheets of Borrower or CBL Properties, Inc.,
determined in each case on a Combined basis in accordance with GAAP.
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"Unconsolidated Affiliate" shall mean, in respect of any Person, any
other Person in whom such Person holds an Investment, which Investment
is accounted for in the financial statements of such Person on an equity
basis of accounting.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation
of the financial statements required to be delivered from time to time
pursuant to Section 6.5 hereof.
SECTION 2: COMMITMENT; FUNDING AND TERMS OF REVOLVING
CREDIT LOAN
2.1 The Commitment. Subject to the terms and conditions herein set
out, Bank agrees and commits to make loan advances and letter of credit
advances to the Borrower from time to time, from the Closing Date until
the Termination Date of Revolving Credit Loan, in an aggregate principal
amount not to exceed, at any one time outstanding, the lesser of
(a) Eighty Million Dollars ($80,000,000.00) minus the sum, if any,
applicable under the provisions of Section 2.8 hereof; or (b) the
Borrower's Borrowing Base, as defined in Section 1.
2.2 Funding the Loan. Each loan advance hereunder shall be made
upon the written request of the Borrower to the Bank, specifying the date
and amount and intended use thereof. All advances hereunder, whether
under the Note or the Lakeshore Note, shall be made by depositing the
same to the checking account of Borrower at the Bank or other methods
acceptable to Borrower and Bank. LAKESHORE ACKNOWLEDGES AND AGREES THAT
NO ADVANCES SHALL BE MADE DIRECTLY TO LAKESHORE EXCEPT UPON THE EXPRESS
WRITTEN CONSENT OF THE BORROWER RECEIVED BY THE BANK PRIOR TO THE ADVANCE
BEING MADE.
2.3 The Note and Interest. The Revolving Credit Loan shall be
evidenced by two (2) promissory notes of the Borrower and one (1)
promissory note of Lakeshore, each payable to the order of the Bank in
the aggregate principal amount of Eighty Million Dollars
($80,000,000.00), in form substantially the same as the copy of the
Revolving Credit Note and the Lakeshore Note attached hereto as
Exhibit "C." The entire principal amount of the Loan shall be due and
payable on the Termination Date of Revolving Credit Loan. The unpaid
principal balances of the Revolving Credit Loan shall bear interest from
the Closing Date on disbursed and unpaid principal balances (calculated
on the basis of a year of 365 or 366 days as is appropriate) at a rate
per annum as specified in the Note. Said interest shall be payable
monthly on the first day of each month after the Closing Date, commencing
August 1, 1997 provided the Bank has in each instance mailed to the
Borrower a billing notice at least ten (10) days prior thereto setting
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forth the payment amount next due, with the final installment of
interest, together with the entire outstanding principal balance of the
Revolving Credit Loan, being due and payable on the Termination Date of
Revolving Credit Loan. The first selection of the one (1) month, three
(3) months, six (6) months or one (1) year LIBOR Rate shall be made by
the Borrower and Lakeshore (but the rate selected by Lakeshore must
always be the same as the rate selected by the Borrower) on or prior to
the date of the Note and each selection thereafter shall be made at least
twenty-four (24) hours prior to the end of the then applicable interest
rate period. Neither the Borrower nor Lakeshore may ever select a rate
period which exceeds the Termination Date of the Revolving Credit Loan.
2.4 Commitment Fee/Servicing Fee. On the Closing Date, the
Borrower agrees to pay to the Bank in addition to the commitment fee it
paid in: (a) March of 1994 in the amount of Seventy-Five Thousand Dollars
($75,000.00); (b) November of 1994 in the amount of Fifty Thousand
Dollars ($50,000.00); (c) July of 1995 in the amount of No Dollars
($-0-); (d) March of 1996 in the amount of Eighty Five Thousand and NO/100
Dollars ($85,000.00); and (e) February of 1997 in the amount of One
Hundred Ninety Thousand and no/100 Dollars ($190,000.00), a commitment
fee in the amount of
$-0- in consideration of the Bank's agreement to make additional funds
available to Borrower under the terms and provisions hereof from the
Closing Date until the initial Termination Date of Revolving Credit Loan
specified in Section 1 hereof. In addition to the commitment fee, on
each November 2 hereafter, the Borrower shall pay to the Bank a servicing
fee in the amount of Twenty Four Thousand and NO/100 Dollars ($24,000.00)
for the Bank's services in connection with administering the Loan
participation with Participant. The servicing fee shall belong solely
to the Bank and the Participant shall have no interest therein. Borrower
agrees that the commitment fees and servicing fee are fair and reasonable
considering the condition of the money market, the creditworthiness of
Borrower, the interest rate to be paid, and the nature of the security
for the Loan. In the event that Borrower and Bank shall hereafter
mutually agree to extend the term of the Bank's commitment hereunder,
they may also agree at that time as to an additional commitment fee, if
any, to be paid for such further commitment by the Bank, but not to
exceed the maximum permitted by applicable law.
2.5 Borrowings under, Prepayments or Termination of the Revolving
Credit Loan. The Borrower may, at its option, from time to time, subject
to the terms and conditions hereof including Section 2.8 hereof, without
penalty, borrow, repay and reborrow amounts under the Revolving Credit
Note and the Lakeshore Note, first from the Ten Million Six Hundred
Thousand Dollars ($10,600,000.00) Note, then from the Forty Nine Million
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Dollars ($49,000,000.00) Note, then from the Lakeshore Note and principal
payments received shall be applied by the Bank to the Revolving Credit
Note and the Lakeshore Note in such order and amounts as the Bank deems
appropriate in its sole discretion. Neither the Borrower nor Lakeshore
shall be permitted to borrow, repay and reborrow up to the principal
amounts of the Lakeshore Note unless documentary stamps tax and
intangibles tax, required by law to be paid, has been paid on the amounts
readvanced and unless the Bank has a first in priority mortgage on the
Florida property owned by Lakeshore securing the Lakeshore Note.
By notice to the Bank in writing, Borrower shall be entitled to
terminate the Bank's commitment to make further advances on the Revolving
Credit Loan; and provided that the Revolving Credit Loan and all interest
and all other obligations of Borrower to Bank arising hereunder shall
have been paid in full, Bank shall thereupon at Borrower's request
release its security interest in all of Borrower's Property securing the
Revolving Credit Loan.
2.6 Substitution of Collateral. Upon the Bank's prior written
approval, the Borrower may substitute collateral originally provided for
the Revolving Credit Loan for collateral of equal value but such
substituted collateral must be acceptable to the Bank and the acceptance
thereof is solely within the discretion of the Bank.
2.7 Secondary Financing by CBL Properties, Inc. CBL Properties,
Inc. was formerly the general partner of the Borrower. It is also a real
estate investment trust. In the event CBL Properties, Inc. does any
secondary offering of its securities, it will apply no less than 75% net
of expenses of the monies received from such offering for the benefit of
the Borrower and will not use that percentage of funds so received to
capitalize or otherwise fund any other new partnerships or entities.
2.8 Cap On Loan. Notwithstanding anything contained in this Loan
Agreement to the contrary, if at any time the Bank does not have a
first-in-priority lien on the Florida property (Lakeshore Mall)
pursuant to the Lakeshore Mortgage up to the sum of Thirty One Million Dollars
($31,000,000.00) the Loan shall be capped at Forty Nine Million Dollars
($49,000,000.00).
SECTION 3: REQUIRED PAYMENTS, PLACE OF PAYMENT, ETC.
3.1 Required Repayments. In the event that the outstanding
aggregate principal balance of the Revolving Credit Loan shall at any
time exceed the Borrowing Base, upon discovery of the existence of such
excess borrowings, the Borrower shall, within one hundred twenty (120)
days from the date of such discovery, make a principal payment which will
reduce the outstanding principal balance of the Revolving Credit Loan to
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an amount which does not exceed the Borrowing Base and/or at Borrower's
option provide the Bank with additional collateral for the Revolving
Credit Loan of a value and type reasonably satisfactory to the Bank which
additional collateral shall be at a minimum sufficient to secure the then
outstanding balance of the Loan (after credit for any principal reduction
payment received from Borrower, if any), and if Borrower intends to
request additional advances under the Loan, the additional collateral
shall include collateral, deemed sufficient in the Bank's discretion, to
secure the Eighty Million Dollars ($80,000,000.00) credit line
limitation, thereafter permitting Borrower to obtain additional advances
in the manner and to the extent provided under the terms of this Loan
Agreement.
In addition and during such one hundred twenty (120) day
period or until the principal payment or satisfactory collateral is
received, whichever is less, the Borrower will not make any additional
requests for advances under the Revolving Credit Loan. Once calculated,
the Borrowing Base shall remain effective until the next Borrowing Base
calculation date as provided in Section 1 of this Agreement.
3.2 Place of Payments. All payments of principal and interest on
the Revolving Credit Loan and all payments of fees required hereunder
shall be made to the Bank, at its address listed in Section 9.2 of this
Agreement in immediately available funds.
3.3 Payment on Non-Business Days. Whenever any payment of
principal, interest or fees to be made on the indebtednesses evidenced
by the Note shall fall due on a Saturday, Sunday or public holiday under
the laws of the State of Tennessee, such payment shall be made on the
next succeeding business day.
SECTION 4: CONDITIONS OF LENDING
4.1 Conditions Precedent to Closing and Funding Initial Advance.
The obligation of the Bank to fund the initial Revolving Credit Loan
Advance hereunder is subject to the condition precedent that the Bank
shall have received, on or before the Closing Date, all of the following
in form and substance satisfactory to the Bank:
(a) This Loan Agreement.
(b) The Note.
(c) The Lakeshore Note.
(d) The CBL Mortgage, the Lakeshore Mortgage together with a title
commitment from a title insurance company acceptable to the Bank,
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providing for the issuance of a mortgagee's loan policy insuring the lien
of the CBL Mortgage in form, substance and amount satisfactory to the
Bank, containing no exceptions which are unacceptable to the Bank, and
containing such endorsements as the Bank may require; provided, however,
with respect to the Florida (Lakeshore Mall) and Mississippi (Pemberton
Mall) properties being added as collateral for the Loan, the Bank, in its
sole discretion may require only a title report and may not require the
issuance of a mortgagee's loan policy.
(e) Current draft financial statements of the Borrower in form
satisfactory to the Bank to be held by the Bank in strict confidence.
(f) Certified copy of Borrower's limited partnership agreement and
certificate of limited partnership, and all amendments thereto and a
certificate of existence for the Borrower.
(g) Certified corporate resolutions of Borrower's general partner,
and certificate(s) of existence for Borrower's general partner from the
state of its incorporation and such other states as Bank shall require,
together with a copy of the charter and bylaws of the Borrower's general
partner.
(h) The opinion of counsel for Borrower and the Borrower's general
partner, that the transactions herein contemplated have been duly
authorized by all requisite corporate and partnership authority, that
this Loan Agreement and the other instruments and documents herein
referred to have been duly authorized, validly executed and are in full
force and effect, and pertaining to such other matters as the Bank may
require.
(i) A certificate from an insurance company, satisfactory to Bank,
setting forth the information concerning insurance which is required by
Section 6.3 of this Loan Agreement; or, if the Bank shall so require,
certified copies of the original insurance policies evidencing such
insurance.
(j) Environmental audits of the properties described in the CBL
Mortgage.
(k) Current surveys of the property subject to the CBL Mortgage,
indicating the location of all building lines, easements (visible,
reflected in the public records or otherwise) and any existing
improvements or encroachments, which survey shall contain no set of facts
objectionable to the Bank and shall be accompanied by the Bank's usual
survey certificate.
(l) Copies of the appraisals of the real estate described in
Exhibit "A" attached hereto.
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(m) The Guaranty Agreements of the Borrower guarantying the
Lakeshore Note and of CBL Properties, Inc. guarantying the Loan.
(n) All the items and information shown on the Checklist for
Closing, a copy of which is attached hereto and marked Exhibit "D".
4.2 Conditions Precedent to All Revolving Credit Loan Advances.
The obligation of the Bank to make Revolving Credit Advances pursuant
hereto (including the initial advance at the Closing Date) shall be
subject to the following additional conditions precedent:
(a) The Borrower shall have furnished to the Bank a written
request stating the amount of Revolving Credit Advance requested together
with the intended use of the advance.
(b) The Borrower and Lakeshore shall not be in default of any of
the terms and provisions hereof or of any instrument or document now or
at any time hereafter evidencing or securing all or any part of the
Revolving Credit Loan indebtednesses. Each of the Warranties and
Representations of the Borrower and Lakeshore, as set out in Section 5
hereof shall remain true and correct in all material respects as of the
date of such Loan advance.
(c) Within forty-five (45) days after each July 1, January 1, April
1 and October 1, Borrower shall furnish to the Bank a Non-Default
Certificate executed by a duly authorized officer of Borrower, in the
form of Exhibit "E" attached hereto.
(d) The Borrower shall have furnished to the Bank an updated and
current title report with respect to the property or properties covered
by any CBL Mortgage held by the Bank. If any lien shall have been placed
on the property subsequent to the date of this Agreement or the
applicable CBL Mortgage, other than liens in favor of the Bank, no
additional advances shall be made.
SECTION 5: REPRESENTATIONS AND WARRANTIES
Borrower and Lakeshore represent and warrant that:
5.1 Partnership Status. The Borrower is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Delaware; it has the power and authority to own its properties
and assets and is duly qualified to carry on its business in every
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jurisdiction wherein such qualification is necessary. Lakeshore is a
limited partnership duly organized, validly existing and in good standing
under the laws of the State of Florida; it has the authority to own its
properties and assets and is duly qualified to carry on its business in
every jurisdiction wherein such qualification is necessary. Lakeshore
is a wholly owned subsidiary of the Borrower.
5.2 Power and Authority. The execution, delivery and performance
of the Loan Agreement, the Note, the CBL Mortgage and the other loan and
collateral documents executed pursuant thereto by the Borrower and/or
Lakeshore have been duly authorized by all requisite action and, to the
best of Borrower's and Lakeshore's knowledge, will not violate any
provision of law, any order of any court or other agency of government,
the limited partnership agreement of the Borrower or Lakeshore, any
provision of any indenture, agreement or other instrument to which
Borrower and/or Lakeshore is a party, or by which Borrower's and/or
Lakeshore's respective properties or assets are bound, or be in conflict
with, result in a breach of, or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or
assets of Borrower and/or Lakeshore, except for liens and other
encumbrances provided for and securing the indebtedness covered by this
Loan Agreement.
5.3 Financial Condition. (a) (i) The audited balance sheet of
Borrower and Lakeshore for the fiscal year ended as of December 31, 1995,
and the related statement of income and changes in financial conditions
for the year then ended, and (ii) the unaudited interim balance sheet of
Borrower and Lakeshore for September 30, 1996 and the related statement
of income and changes in financial conditions for the period then ended,
a copy of each of which has been furnished to the Bank, together with any
explanatory notes therein referred to and attached thereto, are correct
and complete and fairly present the financial condition of Borrower and
Lakeshore as at the date of said balance sheets and the results of its
operations for said periods and as of the date of closing of this Loan
Agreement and related transactions, respectively. All such financial
statements have been prepared in accordance with Generally Accepted
Accounting Principles applied on a consistent basis maintained through
the period involved.
(b) There has been no substantial adverse change in the business,
properties or condition, financial or otherwise, of Borrower and/or
Lakeshore since September 30, 1996.
(c) (i) The audited balance sheet of CBL Properties, Inc. for the
fiscal year ended as December 31, 1995, the unaudited balance sheet of
CBL Properties, Inc. for the period ended September 30, 1996, and the
related statement of income and changes in financial conditions for the
year ended 1995 and the period ended September 30, 1996, a copy of which
has been furnished to the Bank, together with any explanatory notes
therein referred to and attached thereto, are correct and complete and
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fairly present the financial condition of CBL Properties, Inc. as at the
date of said balance sheets and the results of its operations for said
periods and as of the date of closing of this Loan Agreement and related
transactions, respectively. All such financial statements have been
prepared in accordance with Generally Accepted Accounting Principles
applied on a consistent basis maintained through the period involved.
(d) There has been no substantial adverse change in the business,
properties or condition, financial or otherwise, of CBL Properties, Inc.
since September 30, 1996.
(e) The warranties and representations made in this Section 5.3 are
and were made as of the date of this Loan Agreement and any violation
thereof shall be determined as of that date.
5.4 Title to Assets. Borrower and Lakeshore have good and
marketable title to all its properties and assets reflected on the most
recent balance sheet furnished to Bank subject to the Permitted
Encumbrances with respect to the properties described in the CBL
Mortgages and subject to all encumbrances, whether of record or not, with
respect to all other properties.
5.5 Litigation. There is no action, suit or proceeding at law or
in equity or by or before any governmental instrumentality or other
agency now pending, or, to the knowledge of the Borrower and Lakeshore
threatened against or affecting Borrower and/or Lakeshore, or any
properties or rights of Borrower and/or Lakeshore, which, if adversely
determined, would materially adversely affect the financial or any other
condition of Borrower and/or Lakeshore except as set forth in Exhibit "F"
attached hereto.
5.6 Taxes. Borrower and Lakeshore have filed or caused to be filed
all federal, state or local tax returns which are required to be filed,
and has paid all taxes as shown on said returns or on any assessment
received by it, to the extent that such taxes have become due, except as
otherwise permitted by the provisions hereof.
5.7 Contracts or Restrictions. In Borrower's and Lakeshore's
opinions, Borrower and Lakeshore are not a party to any agreement or
instrument or subject to any partnership agreement restrictions adversely
affecting its business, properties or assets, operations or condition
(financial or otherwise) other than this agreement, other bank loan or
property partnership agreements that contain certain restrictive
covenants or other agreements entered into in the ordinary course of
business.
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5.8 No Default. No Event of Default (as defined herein) has
occurred and not been waived under any agreement or instrument to which
it is a party beyond the expiration of any applicable notice and cure
period, which default if not cured would materially and substantially
affect the financial condition, property or operations of the Borrower
and/or Lakeshore. For the purposes of this Paragraph 5.8, monetary
defaults specifically excepted under the provisions of Paragraph 8.2
(which excludes non-recourse debt) below shall not be deemed material
defaults.
5.9 Patents and Trademarks. Borrower and Lakeshore possess all
necessary patents, trademarks, trade names, copyrights, and licenses
necessary to the conduct of its businesses.
5.10 ERISA. To the best of Borrower's and Lakeshore's knowledge
and belief, Borrower is in compliance with all applicable provisions of
the Employees Retirement Income Security Act of 1974 ("ERISA") and all
other laws, state or federal, applicable to any employees' retirement
plan maintained or established by it.
5.11 Hazardous Substances. No Hazardous Substances are unlawfully
located on or have been unlawfully stored, processed or disposed of on
or unlawfully released or discharged (including ground water
contamination) from any property owned by Borrower and/or Lakeshore which
is encumbered by the CBL Mortgage and no above or underground storage
tanks exist unlawfully on such property. No private or governmental lien
or judicial or administrative notice or action related to Hazardous
Substances or other environmental matters has been filed against any
property which, if adversely determined, would materially adversely
affect the business, operations or the financial condition of Borrower
and/or Lakeshore except as set forth in Exhibit "F" attached hereto.
5.12 Ownership of Borrower. As of the date hereof, CBL Holdings
owns an approximate ___% general partnership interest in the Borrower.
As of the date hereof, CBL Properties, Inc. owns an approximate 60%
____________ partnership interest in the Borrower. As of the date
hereof, CBL & Associates, Inc. and its affiliates, officers and key
employees owns an approximate 40% limited partnership interest in the
Borrower. As of the date hereof, CBL Management, Inc. owns an
approximate ____% _________________ partnership interest in the Borrower.
The Borrower has no other general partners. As of the date hereof the
Borrower owns 100% of the partnership interests in Lakeshore.
5.13 Outstanding Balance on Lakeshore Note. As of the date hereof,
the outstanding unpaid principal balance of the Lakeshore Note is
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$18,000,000.00 and the undisbursed amount of the Lakeshore Note is
$2,400,000.00 and no defenses or offsets exist against the holder of the
Lakeshore Note or otherwise.
SECTION 6: AFFIRMATIVE COVENANTS OF BORROWER AND LAKESHORE
Borrower and Lakeshore covenant and agree that from the date hereof
and until payment in full of the principal of and interest on
indebtednesses evidenced by the Note and the Lakeshore Note, unless the
Bank shall otherwise consent in writing, such consent to be at the
discretion of the Bank, Borrower and Lakeshore will:
6.1 Business and Existence. Perform all things necessary to
preserve and keep in full force and effect its existence, rights and
franchises, comply with all laws applicable to it and continue to conduct
and operate its business in a sound and prudent manner.
6.2 Maintain Property. Maintain, preserve, and protect all leases,
franchises, and trade names and preserve all of its properties used or
useful in the conduct of its business in a sound and prudent manner, keep
the same in good repair, working order and condition, ordinary wear and
tear excepted, and from time to time make, or cause to be made, all
needed and proper repairs, renewals, replacements, betterments and
improvements thereto so that the business carried on in connection
therewith may be properly conducted at all times.
6.3 Insurance. (a) With respect to all of the Property which
serves as collateral for the Loan, at all times maintain in some company
or companies (having a Best's rating of A:XI or better) approved by Bank:
(i) Comprehensive public liability insurance covering claims
for bodily injury, death, and property damage, with minimum limits
satisfactory to the Bank, but in any event not less than those
amounts customarily maintained by companies in the same or
substantially similar business;
(ii) Business interruption insurance and/or loss of rents
insurance in a minimum amount specified by Bank, with loss payable
clause in favor of Bank;
(iii) Hazard insurance insuring Borrower's and Lakeshore's
property and assets against loss by fire (with extended coverage)
and against such other hazards and perils (including but not limited
to loss by windstorm, hail, explosion, riot, aircraft, smoke,
vandalism, malicious mischief and vehicle damage) as Bank, in its
sole discretion, shall from time to time require, all such insurance
to be issued in such form, with such deductible provision, and for
such amount as shall be satisfactory to Bank, with loss payable
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clause in favor of Bank. The Bank is hereby authorized and
empowered, at its option, to adjust or compromise any loss under any
such insurance policies and to collect and receive the proceeds from
any such policy or policies as provided in the CBL Mortgage; and
(iv) Such other insurance as the Bank may, from time to time,
reasonably require by notice in writing to the Borrower and/or to
Lakeshore.
(b) All required insurance policies shall provide for not less than
thirty (30) days' prior written notice to the Bank of any cancellation,
termination, or material amendment thereto; and in all such liability
insurance policies, Bank shall be named as an additional insured. Each
such policy shall, in addition, provide that there shall be no recourse
against the Bank for payment of premiums or other amounts with respect
thereto. Hazard insurance policies shall contain the agreement of the
insurer that any loss thereunder shall be payable to the Bank
notwithstanding any action, inaction or breach of representation or
warranty by the Borrower and/or Lakeshore. The Borrower and Lakeshore
will deliver to Bank original or duplicate policies of such insurance,
or satisfactory certificates of insurance, and, as often as Bank may
reasonably request, a report of a reputable insurance broker with respect
to such insurance. Any insurance proceeds received by Bank shall be
applied upon the indebtednesses, liabilities, and obligations of the
Borrower to the Bank (whether matured or unmatured) or, at Bank's option,
released to the Borrower or Lakeshore, as the case might be.
6.4 Obligations, Taxes and Liens. Pay all of its indebtednesses
and obligations in accordance with normal terms and practices of its
business and pay and discharge or cause to be paid and discharged all
taxes, assessments, and governmental charges or levies imposed upon it
or upon any of its income and profits, or upon any of its properties,
real, personal or mixed, or upon any part thereof, before the same shall
become in default, as well as all lawful claims for labor, materials, and
supplies which otherwise, if unpaid, might become a lien or charge upon
such properties or any part thereof; provided, however, that the Borrower
shall not be required to pay and discharge or to cause to be paid and
discharged any such indebtedness, obligation, tax, assessment, trade
payable, charge, levy or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings satisfactory to Bank,
and Bank shall be furnished, if Bank shall so request, bond or other
security protecting it against loss in the event that such contest should
be adversely determined. In addition, Borrower and Lakeshore shall
immediately pay, upon the request of the Bank, all mortgage and/or
intangible taxes and/or penalties payable to government officials with
respect to any CBL Mortgage and/or the Note or, if Bank has elected to
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pay same, Borrower shall immediately reimburse Bank therefor upon the
request of the Bank; provided, however Borrower shall not be required to
pay or reimburse so long as Borrower is contesting the tax and/or
penalties in good faith and through continuous and appropriate
proceedings.
6.5 Financial Reports and Other Data. Furnish to the Bank as soon
as available and in any event within ninety (90) days after the end of
each fiscal year of Borrower and Lakeshore, respectively, an unqualified
audit as of the close of such fiscal year of Borrower and Lakeshore,
including a balance sheet and statement of income and surplus of Borrower
and Lakeshore together with the unqualified audit report and opinion of
Arthur Andersen Company, Certified Public Accountant, or other
independent Certified Public Accountant which is widely recognized and
of good national repute or which is otherwise acceptable to the Bank,
showing the financial condition of Borrower at the close of such year and
the results of operations during such year; and, within forty-five (45)
days after the end of each fiscal quarter, (i) financial statements
similar to those described above for Borrower and for CBL Properties,
Inc., not audited but certified by the Chief Financial Officer or
Controller of Borrower and CBL Properties, Inc., as the case may be, such
balance sheets to be as of the end of such quarter and such statements
of income and surplus to be for the period from the beginning of said
year to the end of such quarter, in each case subject only to audit and
year-end adjustment and the preparation of required footnotes; and (ii)
a Non-Default Certificate in the form prescribed on Exhibit "E" Attached
hereto and made a part hereof; and, within thirty (30) days after the end
of each fiscal quarter, rent rolls and operating statements related to
the properties described in the CBL Mortgage.
6.6 Additional Information. Furnish such other information
regarding the operations, business affairs and financial condition of the
Borrower and/or Lakeshore as Bank may reasonably request, including but
not limited to written confirmation of requests for loan advances, true
and exact copies of its books of account and tax returns, and all
information furnished to the owners of its partnership interests, or any
governmental authority, and permit the copying of the same and Bank
agrees that all such information shall be maintained in strict
confidence. Provided, however, the Borrower and Lakeshore shall not be
required to divulge the terms of other financing arrangements with other
lending institutions if and to the extent Borrower and/or Lakeshore is
prohibited by contractual agreement with such lending institutions from
disclosing such information with the exception that Borrower and
Lakeshore shall promptly notify Bank in writing of all defaults, if any,
which exist beyond any applicable cure periods and the nature thereof,
which occur in connection with such financing arrangements and which
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defaults would constitute an Event of Default hereunder. Borrower and
Lakeshore shall not enter into any such contractual arrangement whereby
the Borrower or Lakeshore is prohibited from disclosing such financial
arrangements, without providing Bank with written notice of the nature
of such prohibitions. In addition, Borrower and Lakeshore shall not
enter into any such arrangement while any Event of Default hereunder
exists beyond any applicable cure periods.
6.7 Right of Inspection. Permit any person designated by the Bank,
at the Bank's expense, to visit and inspect any of the properties, books
and financial reports of the Borrower and Lakeshore and to discuss its
affairs, finances and accounts with its principal officers, at all such
reasonable times and as often as a Bank may reasonably request provided
that such inspection shall not unreasonably interfere with the operation
and conduct of Borrower's and/or Lakeshore's properties and business
affairs and provided further that such person shall disclose such
information only to the Bank, the Bank's appraisers and examiners as
required by banking laws, rules and regulations.
6.8 Environmental Laws. Maintain at all times all of Borrower's
and Lakeshore's property described in the CBL Mortgage in compliance with
all applicable Environmental Laws, and immediately notify the Bank of any
notice, action, lien or other similar action alleging either the location
of any Hazardous Substances or the violation of any Environmental Laws
with respect to any of such properties.
6.9 Notice of Adverse Change in Assets. At the time of Borrower's
and/or Lakeshore's first knowledge or notice, immediately notify the Bank
of any information that may adversely affect in any material manner the
properties of the Borrower and/pr Lakeshore which are subject to the CBL
Mortgage.
6.10 Minimum Net Worth. Borrower shall not permit Net Worth at any
time to be less than an amount equal to $410,000,000.00 plus ninety
percent (90%) of the net proceeds or value (whether cash, property or
otherwise) received by CBL Properties, Inc. or Borrower from any issuance
after the effective date of this Loan Agreement of any shares of Capital
Stock of CBL Properties, Inc., any operating partnership units of
Borrower or any shares of Capital Stock or other equity interest in any
Subsidiary of Borrower.
6.11 Total Obligations to Capitalized Value. Maintain at all times
beginning on the Closing Date, a ratio of Total Obligations to
Capitalized Value of not more than .60 to 1.00.
6.12 Appraisals. Deliver to the Bank upon the Bank's request but,
for each property, no more frequently than once per every eighteen (18)
month period, reappraisals of the property or properties described in the
CBL Mortgage.
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6.13 Interest Coverage Ratio. Borrower shall not permit, as of the
last day of any fiscal quarter, the Interest Coverage Ratio to be less
than 2.00 to 1.00.
6.14 Debt Coverage Ratio. Borrower shall not permit, as of the
last day of any fiscal quarter of Borrower, the Debt Coverage Ratio to
be less than 1.75 to 1.00.
6.15 Agreements regarding Lakeshore Note and Lakeshore Mortgage.
So long as no Event of Default then exists or with notice or lapse of
time would exist, upon the request of the Borrower, but in the Bank's
discretion, the Bank shall sell to the Borrower and/or the Borrower's
designated subsidiary, the Lakeshore Note and/or the Lakeshore Mortgage
for the balance due under the Lakeshore Note (the "Lakeshore Principal
Balance") plus accrued interest.
SECTION 7: NEGATIVE COVENANTS OF BORROWER AND LAKESHORE
Borrower and Lakeshore covenant and agree that at all times from and
after the Closing Date, unless the Bank shall otherwise consent in
writing, such consent to be at the discretion of the Bank, Borrower and
Lakeshore will not, either directly or indirectly:
7.1 Indebtedness. Incur, create, assume or permit to exist any
indebtedness or liability, secured by any of the properties described in
the CBL Mortgage, (except with respect to the Borrower only) for
indebtedness, which is subordinate in all respects to the indebtedness
evidenced by the Note, which indebtedness does not exceed Two Hundred
Fifty Thousand Dollars ($250,000.00) in the aggregate per property and
is used for renovation of the property or properties described in the CBL
Mortgage.
7.2 Mortgages, Liens, Etc. Create, assume or suffer to exist any
mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever on any of the properties subject to the CBL Mortgage except:
(a) Liens in favor of the Bank securing payment of the Note and/or
the Lakeshore Note;
(b) Existing liens securing indebtednesses permitted under
Section 7.1 above;
(c) Permitted Encumbrances (as defined at Section 1); and
(d) Liens securing indebtedness permitted under Section 7.1 above.
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7.3 Sale of Assets. Sell, lease, convert, transfer or dispose
(other than in the normal course of business) of all or a substantial
part of its assets for less than book value or fair market consideration
without the Bank's prior written consent; provided, however, while the
Revolving Credit Loan is outstanding, the Borrower and Lakeshore may not
sell in a single transaction or related series of transactions properties
whose GAAP base value exceeds twenty percent (20%) of the GAAP book value
of the Borrower's assets, without the Bank's approval or review. All
transfers, whether or not the Bank's approval shall be required as set
forth above, shall be reported to the Bank.
7.4 Consolidation or Merger; Acquisition of Assets. Enter into any
transaction of merger or consolidation, acquire any other business or
corporation, or acquire all or substantially all of the property or
assets of any other Person unless the Borrower and/or its general partner
shall be the surviving entities.
7.5 Partnership Distributions and Other Payments. Except as
hereinafter provided, declare or pay, or set apart any funds for the
payment of, any distributions on any partnership interest in Borrower
and/or Lakeshore, or apply any of its funds, properties, or assets to or
set apart any funds, properties or assets for, the purchase or other
retirement of or make any other distribution (whether by reduction of
partnership capital or otherwise) in respect of, any partnership interest
in Borrower and/or Lakeshore; or without the consent of Bank, pay any fee
or other compensation of any nature to or for the benefit of CBL &
Associates, Inc., CBL Holdings, and/or CBL Properties, Inc. and/or their
affiliates, officers or key employees (the "Distributees").
Notwithstanding anything stated in the foregoing to the contrary, (a)
Borrower may pay to such Distributees and its other partners quarterly
distributions so long as such distributions do not exceed in the
aggregate 95% of Funds from Operations and (b) Borrower may pay any fee
or other reasonable compensation of any nature to or for the benefit of
(i) CBL Management, Inc., or (ii) any other Distributee, which payment
has been made in the ordinary course of business and approved by the
independent directors of CBL Holdings. Borrower may make a distribution
from Loan proceeds but only once during any rolling twelve (12) month
period and provided Borrower is not in default hereunder and such
distribution will not create a default hereunder.
7.6 Loans to Officers and Employees. Permit or allow loans to
officers and employees of Borrower or holders of partnership interests
in Borrower to exceed $500,000.00 in any one instance or $2,000,000.00
in the aggregate, provided that nothing in the foregoing shall be deemed
to limit loans made in the ordinary course of business to CBL Properties
Management, Inc.
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7.7 Limitations on Floating Rate Indebtedness. Incur, assume or
suffer to exist any outstanding indebtedness bearing interest at a
variable rate that fluctuates during the scheduled life of such
indebtedness (other than indebtedness under Reserved Construction Loans,
as that term is defined hereinafter) in an aggregate principal amount in
excess of $175,000,000.00 at any one time outstanding unless Borrower has
obtained an interest rate swap, cap or collar agreement or similar
arrangement with a recognized investment grade financial institution
which prevents the all-in effective interest rate payable by Borrower
with respect to the principal amount of such indebtedness in excess of
$175,000,000.00 (including base rate, applicable margin and reserve and
similar costs) from increasing above the rate set forth below with
respect to such indebtedness:
Principal Amount in
Excess of $175,000,000.00 Interest Rate
Less than or equal
to $50,000,000.00 8.5%
Greater than
$50,000,000.00 and
less than or equal
to $100,000,000.00 8.0%
Greater than
$100,000,000.00 and
less than or equal
to $150,000,000.00 7.5%
Greater than
$150,000,000.00 7.0%
For purposes of this Loan Agreement, "Reserved Construction
Loan" shall mean a construction loan extended to Borrower or Lakeshore
or to a subsidiary of Borrower for the construction of a project in
respect to which (a) neither any monetary or material non-monetary
default nor any event of default exists; (b) interest on such loan has
been budgeted to accrue at a rate of not less than the Base Rate plus two
percent (2%) at the time the interest reserve account is established; (c)
the amount of such budgeted interest has been (i) included in the
principal amount of such loan and (ii) segregated into an interest
reserve account (which shall include any arrangement whereby loan
proceeds equal to such budgeted interest are reserved and only disbursed
to make interest payments with respect to such loan); (d) absent an event
of default or a monetary or material non-monetary default, such interest
can be paid out of such interest reserve account only for the purpose of
making interest payments on such loan; (e) the amount held in such
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interest reserve account with respect to such loan, together with the net
income, if any, from such project projected by the Bank in its reasonable
judgment, will be sufficient, as reasonably determined by the Bank from
time to time, to pay all interest expense on such loan until the date
that the earnings before income, taxes, depreciation and amortization of
the project being financed by such loan is anticipated to be sufficient
to pay all interest expense on such loan; and (f) Borrower has delivered
all certificates required by this Loan Agreement.
7.8 Limitations on Actions Against Bank and Participants. Take any
action against:
(a) Bank, if any Participant fails or refuses to fund for the
account of Borrower and/or Lakeshore or to Bank for the benefit of
Borrower and/or Lakeshore, such Participant's respective Proportionate
Share and such failure or refusal has not been caused by Bank's breach
of this Loan Agreement; or
(b) any Participant, if Bank fails or refuses to fund for the
account of Borrower and/or Lakeshore any Participant's Proportionate
Share, to the extent such Participant's Proportionate Share has been
received by Bank; or
(c) any Participant, if Bank fails or refuses to fund for the
account of Borrower and/or Lakeshore Bank's Proportionate Share and such
failure has not been caused by such Participant's breach of this Loan
Agreement or the Participation Agreement. Borrower's and Lakeshore's
cause of action under this Loan Agreement, if any, for failure to fund
being directly against the lender which fails or refuses to fund, and
then only if such failure or refusal to fund would constitute a breach
of this Loan Agreement.
7.9 Investment Concentration. (a) Borrower shall not make, and
shall not permit any of its Subsidiaries to make, any Investment in the
following items which would cause the value of such holdings of Borrower
and/or to exceed the following percentages of Borrower's Net Worth:
(i) raw land, such that the aggregate book value of all such
raw land (other than: (A) raw land subject to a ground lease under which
Borrower is the landlord and a Person not an Affiliate of Borrower is the
tenant; (B) land on which the development of a Project has commenced; (C)
land subject to a binding contract of sale under which Borrower one of
its Subsidiaries is the seller, the buyer is not an Affiliate of Borrower
and (D) out-parcels held for lease or sale) exceeds ten percent (10%) of
Net Worth;
(ii) developed real estate used primarily for non-retail
purposes, such that the aggregate book value of such real estate (other
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than the real estate located at 6148 Lee Highway, Chattanooga, Tennessee)
exceeds ten percent (10%) of Net Worth;
(iii) Capital Stock of any Person, such that the aggregate
value of such Capital Stock in Unconsolidated Affiliates other than CBL
Management, Inc., calculated on the basis of the lower of cost or market,
exceeds ten percent (10%) of Net Worth;
(iv) Mortgages, such that the aggregate principal amount
secured by Mortgages acquired by Borrower after the Effective Date
exceeds ten percent (10%) of Net Worth;
(v) Investments made after the date hereof in partnerships,
joint ventures and other non-corporate Persons accounted for an equity
basis (determined in accordance with GAAP), such that the aggregate
outstanding amount of such Investments (other than Investments in
partnerships in which (A) Borrower is the sole general partner and the
only limited partners are either (I) the Person from whom the real estate
owned by such partnership was purchased, and such Person's successors and
assigns or (II) a Person operating stores which anchor the development
constructed or to be constructed by such partnership or (B) Borrower owns
not less than ninety percent (90%) of the partnership interests and has
the unilateral right to make all operational and strategic decisions)
exceeds ten percent (10%) of Net Worth.
(b) Neither Borrower nor any of its Subsidiaries shall acquire the
business of all or substantially all of the assets or stock of any
Person, or any division of any Person, whether through Investment,
purchase of assets, merger or otherwise; provided that Borrower or its
Subsidiaries may make such an acquisition so long as Borrower has
delivered to Agent, not less than thirty (30) days prior to the date such
acquisition is consummated, (i) all information related to such
acquisition as is reasonably requested by the Agent and (ii) a
certificate, signed by the chief financial officer of Borrower,
certifying that, giving effect to such acquisition, there shall not exist
any Default or Event of Default hereunder and setting forth in reasonable
detail the calculations setting forth, on a pro forma basis giving effect
such acquisition, Borrower's compliance with Sections 6.8, 6.11, 6.12,
6.13, 6.14, 6.15, 6.17 or 6.18 of the loan documents which exist between
Borrower and Agent.
SECTION 8: EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following shall
occur:
8.1 Payment of Principal, Interest to Bank. The Borrower and/or
Lakeshore defaults in the payment as and when due of principal or
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interest on any Note or the Lakeshore Note or any fees due under this
Loan Agreement which default shall continue for more than ten (10) days
following mailing of notice from Bank to Borrower and/or Lakeshore
thereof; or the Borrower and/or Lakeshore defaults in the payment when
due of any other recourse indebtednesses, liabilities, or obligations to
the Bank beyond the expiration of any applicable notice and cure period,
whether now existing or hereafter created or arising; direct or indirect,
absolute or contingent; or
8.2 Payment of Obligations to Others. The Borrower and/or
Lakeshore defaults in the payment as and when due of any other
indebtedness or obligation but only if: (a) such indebtedness or
obligation is with recourse to the Borrower and/or Lakeshore; and (b) the
effect of such default is to accelerate the maturity of such indebtedness
or obligation, or the effect of such default is to permit the holder
thereof to cause such indebtedness or obligation to become due prior to
its stated maturity; and (c) the default is not cured within the
applicable cure period, if any, or subsequently waived by the lender to
whom payment is owed. Provided, however, even if such indebtedness or
obligation is with recourse to the Borrower and/or Lakeshore, the
Borrower and Lakeshore will not be considered in default hereunder if the
default is either: (a) a monetary default which does not exceed One
Million Dollars ($1,000,000.00) and is not a failure to pay a normal
monthly, quarterly or other periodic principal or interest installment
due; or, (b) is being contested by the Borrower and/or Lakeshore in good
faith through appropriate proceedings acceptable to Bank; or
8.3 Performance of Obligations to Bank. The Borrower and/or
Lakeshore defaults with respect to the performance of any non-monetary
obligation incurred in connection with the Loan other than its
obligations under Section 7.8 hereof and such default continues for more
thirty (30) days following mailing of notice thereof from Bank to
Borrower and/or Lakeshore, or, if such default is incapable of cure
within such thirty (30) day period, Borrower and/or Lakeshore fails to
diligently, continuously and in good faith pursue such cure to
completion; or the Borrower and/or Lakeshore defaults with respect to the
performance of any other non-monetary obligation incurred in connection
with any recourse indebtedness for borrowed money owed to the Bank an
such default continues for more thirty (30) days following mailing of
notice thereof from Bank to Borrower and/or Lakeshore, as the case may
be, or, if such default is incapable of cure within such thirty (30) day
period, Borrower and/or Lakeshore fails to diligently, continuously and
in good faith pursue such cure to completion; or
8.4 Performance of Obligations to Others. An event of default
occurs with respect to the performance of non-monetary obligations
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incurred in connection with any recourse indebtedness for borrowed money
owed to a lender other than Bank, if the default even if subsequently
waived by the Lender is considered a material default by the Bank and if
the default is not cured within the applicable cure period provided by
the lender to whom such performance is owed; provided, however, if the
indebtedness is in an amount less that $1,000,000.00, or if the lender's
declaration of default is being continuously and diligently contested by
the Borrower and/or Lakeshore in good faith through appropriate
proceedings, such default shall not constitute a default hereunder; or
8.5 Representation or Warranty. Any representation or warranty
made by the Borrower and/or Lakeshore herein, or in any report,
certificate, financial statement or other writing furnished in connection
with or pursuant to this Loan Agreement shall prove to be false,
misleading or incomplete in any substantial material respect on the date
as of which made; or
8.6 Bankruptcy, Etc. The Borrower or Lakeshore or CBL Holdings or
CBL Properties, Inc. shall make a general assignment of assets for the
benefit of creditors, file a petition in bankruptcy, petition or apply
to any tribunal for the appointment of a custodian, receiver or any
trustee for it or a substantial part of its assets, or shall commence on
its or their behalf any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, whether now or hereafter in effect; or if
there shall have been filed any such petition or application, or any such
proceeding shall have been commenced against Borrower or Lakeshore or CBL
Holdings or CBL Properties, Inc., in which an order for relief is entered
against Borrower or CBL Properties, Inc. or which remains undismissed for
a period of ninety (90) days or more; or Borrower or Lakeshore or CBL
Holdings or CBL Properties, Inc. by any act or omission shall indicate
its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a
custodian, receiver or any trustee for it or any substantial part of any
of its properties, or shall suffer any such custodianship, receivership
or trusteeship to continue undischarged for a period of ninety (90) days
or more; or Borrower or Lakeshore or CBL Holdings or CBL Properties, Inc.
shall generally not pay its debts as such debts become due; or
8.7 Concealment of Property, Etc. The Borrower or Lakeshore or CBL
Holdings or CBL Properties, Inc. shall have concealed, removed, or
permitted to be concealed or removed, any part of its property, with
intent to hinder, delay or defraud its or his creditors or any of them,
or made or suffered a transfer of any of its property which shall
constitute a fraudulent act under any bankruptcy, fraudulent conveyance
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or similar law; or shall have made any transfer of its property to or for
the benefit of a creditor at a time when other creditors similarly
situated have not been paid; or shall have suffered or permitted, while
insolvent, any creditor to obtain a lien upon any of its property through
legal proceedings or distraint which is not vacated within thirty (30)
days from the date thereof; or
8.8 Management Change. Management of the Borrower shall, for a
period of one hundred eighty (180) consecutive days, cease to be in at
least one of the following persons: (a) Charles B. Lebovitz, (b) John
N. Foy, (c) Jay Wiston, or (d) Stephen D. Lebovitz, who shall be in an
executive management position with Borrower or who shall be a senior vice
president, executive vice president, senior executive vice president or
president with Borrower's general partner; or
8.9 Change in Ownership. CBL & Associates, Inc., its affiliates,
officers and key employees shall have, through sale or transfer, reduced
their aggregate partnership interest in Borrower (which, for this
purpose, shall include a proportionate share of CBL Holdings' and CBL
Properties, Inc.'s partnership interest in Borrower equal to their
proportionate shareholding in CBL Holdings and CBL Properties, Inc.) to
less than 50% of such partnership interests owned by them on November 7,
1993. Provided, however, if the change in ownership occurs as a result
of actions taken by Borrower in compliance with Section 2.7 of this Loan
Agreement, no such change of ownership shall result in an Event of
Default hereunder; or
8.10 Loan Documents Terminated or Void. This Loan Agreement, the
Note, or any instrument securing the Note shall, at any time after their
respective execution and delivery and for any reason, cease to be in full
force and effect or shall be declared to be null and void; or the
Borrower and/or Lakeshore shall deny it has any or further liability
under this Loan Agreement or the Note, respectively; or
8.11 Covenants. The Borrower or Lakeshore or any grantor under any
CBL Mortgage defaults in the performance or observance of any covenant,
agreement or undertaking on its part to be performed or observed,
contained herein, in the Security Agreement, CBL Mortgage or in any other
instrument or document which now or hereafter evidences or secures all
or any part of the loan indebtedness which default shall continue for
more than thirty (30) days following the mailing of notice from Bank to
Borrower and/or Lakeshore and/or such grantor under any CBL Mortgage
thereof; or
8.12 Breach of Section 7.8 of this Loan Agreement. The Borrower
and/or Lakeshore shall fail to observe or perform its obligations to the
33
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Bank, and/or any Participant under Section 7.8 of this Loan Agreement;
8.13 Placement of Liens on Property. The Borrower or any other
grantor of a CBL Mortgage shall, without the prior written consent of the
Bank, create, place or permit to be created or placed, or through any act
or failure to act, acquiesce in the placing of, or allow to remain, any
mortgage, deed of trust, pledge, lien (statutory, constitutional or
contractual), or security interest, encumbrance or charge on, or
conditional sale or other title retention agreement, regardless of
whether same are expressly subordinate to the liens of the CBL Mortgage,
with respect to the property described in the Lakeshore Mortgage or any
other CBL Mortgage.
8.14 Remedy. Upon the occurrence of any Event of Default, as
specified herein, the Bank shall, at its option, be relieved of any
obligation to make further Revolving Credit Advances under this
Agreement; and the Bank may at its option record the Lakeshore Mortgage
(New); and the Bank may, at its option, thereupon declare the entire
unpaid principal balances of the Note of Borrower and the Lakeshore Note,
all interest accrued and unpaid thereon and all other amounts payable
under this Loan Agreement to be immediately due and payable for all
purposes, and may exercise all rights and remedies available to it under
the CBL Mortgage, any other instrument or document which secures the Note
and/or the Lakeshore Note, or available at law or in equity. All such
rights and remedies are cumulative and nonexclusive, and may be exercised
by the Bank concurrently or sequentially, in such order as the Bank may
choose.
SECTION 9: MISCELLANEOUS
9.1 Amendments. The provisions of this Loan Agreement, the Note
or the Lakeshore Note or any instrument or document executed pursuant
hereto or securing the indebtednesses may be amended or modified only by
an instrument in writing signed by the parties hereto.
9.2 Notices. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, certified mail, return
receipt requested, or delivered, if to the Borrower and/or Lakeshore, to
it at c/o CBL & Associates Properties, Inc., One Park Place, 6148 Lee
Highway, Chattanooga, Tennessee 37421, Attention: President; if to the
Bank, to it at 701 Market Street, Chattanooga, Tennessee 37402,
Attention: Gregory L. Cullum; or as to any such person at such other
address as shall be designated by such person in a written notice to the
other parties hereto complying as to delivery with the terms of this
Section 9.2. All such notices and other communications shall be
effective (i) if mailed, when received or three business days after
34
<PAGE>
mailing, whichever is earlier; or (ii) if delivered, upon delivery and
receipt of an executed acknowledgment of receipt by the party to whom
delivery is made.
9.3 No Waiver, Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Bank, any right, power or
privilege hereunder, shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. Waiver of any right, power, or
privilege hereunder or under any instrument or document now or hereafter
securing the indebtedness evidenced hereby or under any guaranty at any
time given with respect thereto is a waiver only as to the specified
item. The rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies provided by law.
9.4 Indemnification. Borrower and Lakeshore agree to indemnify
Bank from and against any and all claims, losses and liabilities,
including, without limitation, reasonable attorneys' fees, growing out
of or resulting from this Agreement (including, without limitation,
enforcement of this Agreement), except claims, losses or liabilities
resulting solely and directly from Bank's gross negligence or willful
misconduct or from Bank's violation of applicable banking rules and
regulations. The indemnification provided for in this Section shall
survive the payment in full of the loan.
9.5 Survival of Agreements. All agreements, representations and
warranties made herein shall survive the delivery of the Note. This Loan
Agreement shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors and assigns, except that the
Borrower shall not have the right to assign its rights hereunder or any
interest therein.
9.6 Governing Law. This Loan Agreement shall be governed and
construed in accordance with the laws of the State of Tennessee; except
(a) that the provisions hereof which relate to the payment of interest
shall be governed by (i) the laws of the United States or, (ii) the laws
of the State of Tennessee, whichever permits the Bank to charge the
higher rate, as more particularly set out in the Note, and (b) to the
extent that the Liens in favor of the Bank, the perfection thereof, and
the rights and remedies of the Bank with respect thereto, shall, under
mandatory provisions of law, be governed by the laws of a state other
than Tennessee.
9.7 Execution in Counterparts. This Loan Agreement may be executed
in any number of counterparts, each of which when so executed shall be
35
<PAGE>
deemed to be an original and all of which taken together shall constitute
but one and the same instrument.
9.8 Terminology; Section Headings. All personal pronouns used in
this Loan Agreement whether used in the masculine, feminine, or neuter
gender, shall include all other genders; the singular shall include the
plural, and vice versa. Section headings are for convenience only and
neither limit nor amplify the provisions of this Loan Agreement.
9.9 Enforceability of Agreement. Should any one or more of the
provisions of this Loan Agreement be determined to be illegal or
unenforceable, all other provisions, nevertheless, shall remain effective
and binding on the parties hereto.
9.10 Interest Limitations. (a) The loan and the Note evidencing
the loan, including any renewals or extensions thereof, may provide for
the payment of any interest rate (i) permissible at the time the contract
to make the loan is executed, (ii) permissible at the time the loan is
made or any advance thereunder is made, or (iii) permissible at the time
of any renewal or extension of the loan or the Note.
(b) It is the intention of the Bank and the Borrower to comply
strictly with applicable usury laws; and, accordingly, in no event and
upon no contingency shall the Bank ever be entitled to receive, collect,
or apply as interest any interest, fees, charges or other payments
equivalent to interest, in excess of the maximum rate which the Bank may
lawfully charge under applicable statutes and laws from time to time in
effect; and in the event that the holder of the Note ever receives,
collects, or applies as interest any such excess, such amount which, but
for this provision, would be excessive interest, shall be applied to the
reduction of the principal amount of the indebtedness thereby evidenced;
and if the principal amount of the indebtedness evidenced thereby, and
all lawful interest thereon, is paid in full, any remaining excess shall
forthwith be paid to the Borrower, or other party lawfully entitled
thereto. In determining whether or not the interest paid or payable,
under any specific contingency, exceeds the highest rate which Bank may
lawfully charge under applicable law from time to time in effect, the
Borrower and/or Lakeshore and the Bank shall, to the maximum extent
permitted under applicable law, characterize any non-principal payment
as a reasonable loan charge, rather than as interest. Any provision
hereof, or of any other agreement between the Bank and the Borrower
and/or Lakeshore, that operates to bind, obligate, or compel the Borrower
to pay interest in excess of such maximum rate shall be construed to
require the payment of the maximum rate only. The provisions of this
paragraph shall be given precedence over any other provision contained
herein or in any other agreement between the Bank and the Borrower and/or
36
<PAGE>
Lakeshore that is in conflict with the provisions of this paragraph.
The Note and the Lakeshore Note shall be governed and construed
according to the statutes and laws of the State of Tennessee from time
to time in effect, except to the extent that Section 85 of Title 12 of
the United States Code (or other applicable federal statue) may permit
the charging of a higher rate of interest than applicable state law, in
which event such applicable federal statute, as amended and supplemented
from time to time shall govern and control the maximum rate of interest
permitted to be charged hereunder; it being intended that, as to the
maximum rate of interest which may be charged, received, and collected
hereunder, those applicable statutes and laws, whether state or federal,
from time to time in effect, which permit the charging of a higher rate
of interest, shall govern and control; provided, always, however, that
in no event and under no circumstances shall the Borrower and/or
Lakeshore be liable for the payment of interest in excess of the maximum
rate permitted by such applicable law, from time to time in effect.
9.11 Non-Control. In no event shall the Bank's rights hereunder
be deemed to indicate that the Bank is in control of the business,
management or properties of the Borrower and/or Lakeshore or has power
over the daily management functions and operating decisions made by the
Borrower and/or Lakeshore.
9.12 Loan Review; Extensions of Termination Date; Continuing
Security. (a) The specific Termination Date of Revolving Credit Loan
mentioned in Article One may be extended for additional periods of one
(1) year. On each June 1 hereafter, so long as the Loan remains unpaid,
Bank shall review the performance of the Loan. If the Bank deems
performance of the Loan acceptable, it will renew the Loan for one (1)
year from the then existing Termination Date of Revolving Credit Loan.
If Bank deems performance of the Loan not acceptable, Bank shall not be
obligated to extend the Termination Date of Revolving Credit Loan;
however, the Borrower shall then have the right to repay the Loan
pursuant to the repayment provisions contained in the Note. Assessment
of performance and the decision whether to extend the Termination Date
of Revolving Credit Loan shall be solely within Bank's discretion. The
Bank will not deem the performance of the Loan acceptable unless and
until the Borrower provides to the Bank, among other things, updated
title commitments with respect to all properties covered by any CBL
Mortgage, which title commitments must be in form and substance
acceptable to the Bank and must contain no exceptions unacceptable to the
Bank. Bank shall notify Borrower of the results of its review of the
Loan no later than eleven (11) months prior to the then effective
Termination Date of the Revolving Credit Loan. If Bank elects not to
renew the Loan, Bank shall not perform or cause to be performed, except
37
<PAGE>
at Bank's expense, any inspections, appraisals, surveys or similar items
between: (a) the date notice thereof is given Borrower or the
Termination Date, whichever first occurs, and (b) the date the Note is
repaid as provided herein.
(b) Upon the specific Termination Date of Revolving Credit Loan so
fixed in Article One, or in the event of the extension of this Agreement
to a subsequent Termination Date (when no effective extension is in
force), the Revolving Credit Loan and all other extensions of credit
(unless sooner declared to be due and payable by the Bank pursuant to the
provisions hereof), and subject to Borrower's election as set forth in
subparagraph (a) above, shall become due and payable for all purposes.
Until all such indebtednesses, liabilities and obligations secured by the
CBL Mortgage are satisfied in full, such termination shall not affect the
security interest granted to Bank pursuant to the CBL Mortgage, nor the
duties, covenants, and obligations of the Borrower therein and in this
Agreement; and all of such duties, covenants and obligations shall remain
in full force and effect until the Revolving Credit Loan and all
obligations under this Loan Agreement have been fully paid and satisfied
in all respects.
9.13 Fees and Expenses. The Borrower agrees to pay, or reimburse
the Bank for, the reasonable actual third party out-of-pocket expenses,
including counsel fees and fees of any accountants, inspectors or other
similar experts, as deemed necessary by the Bank, incurred by the Bank
in connection with the development, preparation, execution, amendment,
recording, (excluding the salary and expenses of Bank's employees and
Bank's normal and usual overhead expenses) or enforcement of, or the
preservation of any rights under this Loan Agreement, the Notes, and any
instrument or document now or hereafter securing the and Revolving Credit
Loan indebtednesses.
9.14 Time of Essence. Time is of the essence of this Loan
Agreement, the Note, and the other instruments and documents executed and
delivered in connection herewith.
9.15 Compromises, Releases, Etc. Bank is hereby authorized from
time to time, without notice to anyone, to make any sales, pledges,
surrenders, compromises, settlements, releases, indulgences, alterations,
substitutions, exchanges, changes in, modifications, or other
dispositions including, without limitation, cancellations, of all or any
part of the Loan indebtedness, or of any contract or instrument
evidencing any thereof, or of any security or collateral therefor, and/or
to take any security for or guaranties upon any of said indebtedness; and
the liability of any guarantor, if any, shall not be in any manner
affected, diminished, or impaired thereby, or by any lack of diligence,
38
<PAGE>
failure, neglect, or omission on the part of Bank to make any demand or
protest, or give any notice of dishonor or default, or to realize upon
or protect any of said indebtedness or any collateral or security
therefor. Bank shall have the right to apply such payments and credits
first to the payment of all its expenses, including costs and reasonable
attorneys' fees, then to interest due under the Note and then to
principal due under the Note. Bank shall be under no obligation, at any
time, to first resort to, make demand on, file a claim against, or
exhaust its remedies against the Borrower and/or Lakeshore, or its
property or estate, or to resort to or exhaust its remedies against any
collateral, security, property, liens, or other rights whatsoever. Upon
the occurrence of an Event of Default, it is expressly agreed that Bank
may at any time make demand for payment on, or bring suit against, the
Borrower and/or Lakeshore and any guarantor, jointly or severally and may
compromise with any of them for such sums or on such terms as it may see
fit, and without notice or consent, the same being hereby expressly
waived.
9.16 Joinder of CBL Properties, Inc. CBL Properties, Inc. joins
herein for the purpose of acknowledging and consenting to the terms and
provisions of Section 2.7 hereof.
9.17 Bank's Consent. Except as otherwise expressly provided
herein, in any instance hereunder where Bank's approval or consent is
required or the exercise of its judgment is required, the granting or
denial of such approval or consent and the exercise of such judgment
shall be within the sole discretion of Bank, and Bank shall not, for any
reason or to any extent, be required to grant such approval or consent
or exercise such judgment provided that the Bank shall proceed at all
times in good faith and in a commercially reasonable manner. Bank may
consult with counsel, and the written advice or opinion of such counsel
shall be full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
9.18 Venue of Actions. As an integral part of the consideration
for the making of the loan, it is expressly understood and agreed that
no suit or action shall be commenced by the Borrower, Lakeshore, CBL
Holdings, CBL Properties, Inc., by any guarantor, or by any successor,
personal representative or assignee of any of them, with respect to the
loan contemplated hereby, or with respect to this Loan Agreement or any
other document or instrument which now or hereafter evidences or secures
all or any part of the loan indebtedness, other than in a state court of
competent jurisdiction in and for the County of the State in which the
principal place of business of the Bank is situated, or in the United
States District Court for the District in which the principal place of
business of the Bank is situated, and not elsewhere. Nothing in this
40
<PAGE>
paragraph contained shall prohibit Bank from instituting suit in any
court of competent jurisdiction for the enforcement of its rights
hereunder or in any other document or instrument which evidences or
secures the loan indebtedness.
9.19 Waiver of Right to Trial By Jury. EACH PARTY TO THIS
AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS AGREEMENT
OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED
HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
9.20 Conflict. In the event of any conflict between the provisions
hereof and any other loan document during the continuance of this
Agreement (including but not limited to the Construction Loan Agreement
and any other documents received by the Bank via assignment in connection
with the Lakeshore Mall), the provisions of this Agreement shall control.
9.21 Participation Agreement. The Borrower and Lakeshore
acknowledge that the Participation Agreement exists and that the Bank is
obligated, subject to the terms and conditions hereof, to fund Eighty
Million Dollars ($80,000,000.00) to the Borrower but that of that amount
KeyBank National Association, formerly Society National Bank and AmSouth
Bank are obligated, subject to the terms and conditions of the
Participation Agreement, to fund Twenty Two Million Five Hundred Thousand
Dollars ($22,500,000.00) each to the Bank and Compass Bank is obligated,
subject to the terms and conditions of the Participation Agreement, to
fund Twelve Million Five Hundred Thousand and NO/100 Dollars
($12,500,000.00) to the Bank.
40
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(Signatures on Next Page)<PAGE>
IN WITNESS WHEREOF, the Borrower, Lakeshore, the Bank, CBL Holdings
and CBL Properties, Inc. have caused this Agreement to be executed by
their duly authorized officers and/or partner, all as of the day and year
first above written.
CBL & ASSOCIATES LIMITED PARTNERSHIP
BY: CBL HOLDINGS I, INC.,
Its Sole General Partner
/s/ John N. Foy
----------------------
By: John N. Foy
----------------------
Title: Executive Vice President
----------------------
BORROWER
LAKESHORE/SEBRING LIMITED PARTNERSHIP
BY: CBL & ASSOCIATES LIMITED PARTNERSHIP,
It's sole General Partner
BY: CBL HOLDINGS I, INC.,
Its sole General Partner
/s/ John N. Foy
----------------------
By: John N. Foy
----------------------
Title: Executive Vice President
----------------------
LAKESHORE
CBL & ASSOCIATES PROPERTIES, INC.
/s/ John N. Foy
----------------------
By: John N. Foy
----------------------
Title: Executive Vice President
----------------------
GUARANTOR
CBL HOLDINGS I, INC.
/s/ John N. Foy
----------------------
By: John N. Foy
----------------------
Title: Executive Vice President
----------------------
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION
/s/ Gregory L. Cullum
By:________________________________
Gregory L. Cullum, Senior Vice
President
BANK
41
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<PAGE>
EXHIBIT "A"
Real property known as:
Coolsprings Crossing located in Franklin, TN
Valley Crossing located in Hickory, NC
East Towne Crossing located in Knoxville, TN
Jean Ribaut Square located in Beaufort, SC
Garden City Plaza, Garden City, Kansas
North Ridge Plaza, Hilton Head, South Carolina
Ladies Island, Beaufort, South Carolina
Sattler Square, Big Rapids, Michigan
Walnut Square Mall, Dalton, Georgia
Lakeshore Mall, Sebring, Florida
Pemberton Mall, Vicksburg, Mississippi
all as more particularly described in the individual deeds of trust
and/or mortgages applicable to the above described properties.
42
<PAGE>
<PAGE>
EXHIBIT "B"
PERMITTED ENCUMBRANCES
1. As described in the Mortgages.<PAGE>
43
<PAGE>
EXHIBIT "C"
REVOLVING CREDIT NOTES AND LAKESHORE NOTE <PAGE>
44
<PAGE>
EXHIBIT "D"
CHECKLIST FOR CLOSING <PAGE>
45
<PAGE>
EXHIBIT "E"
NON-DEFAULT CERTIFICATE
46
<PAGE>
<PAGE>
EXHIBIT "F"
LITIGATION
Disclosure Pursuant to Paragraph 5.5
See Exhibit "F-1" attached for description of all litigation.
ENVIRONMENTAL MATTERS
Disclosure pursuant to Paragraph 5.11
48
<PAGE>
None.
<PAGE>
JOINDER IN AMENDED AND RESTATED LOAN AGREEMENT
KEYBANK NATIONAL ASSOCIATION as "Participant" under the terms
of that certain Amended and Restated Loan Agreement (the "Loan
Agreement") dated effective as of July 29, 1997, between and among First
Tennessee Bank National Association, CBL & Associates Limited Partnership
and Lakeshore/Sebring Limited Partnership, in consideration of the mutual
agreements of the parties thereto and of the undersigned therein
contained, hereby joins as a party to said Loan Agreement and agrees to
perform all obligations to be performed on its part thereunder.
IN WITNESS WHEREOF, the undersigned has caused this Joinder in
Amended and Restated Loan Agreement to be executed by its duly authorized
officer effective as of July 29, 1997.
KEYBANK NATIONAL ASSOCIATION
/s/ Ray E. Rudy
By:________________________________
Vice President
Title:___________________________
49
<PAGE>
<PAGE>
JOINDER IN AMENDED AND RESTATED LOAN AGREEMENT
COMPASS BANK as "Participant" under the terms of that certain
Amended and Restated Loan Agreement (the "Loan Agreement") dated
effective as of July 29, 1997, between and among First Tennessee Bank
National Association, CBL & Associates Limited Partnership and
Lakeshore/Sebring Limited Partnership, in consideration of the mutual
agreements of the parties thereto and of the undersigned therein
contained, hereby joins as a party to said Loan Agreement and agrees to
perform all obligations to be performed on its part thereunder.
IN WITNESS WHEREOF, the undersigned has caused this Joinder in
Amended and Restated Loan Agreement to be executed by its duly authorized
officer effective as of July 29, 1997.
COMPASS BANK
/s/ C. Douglas Vibert
By:________________________________
C. Douglas Vibert, Vice President
50
<PAGE>
<PAGE>
JOINDER IN AMENDED AND RESTATED LOAN AGREEMENT
AMSOUTH BANK as "Participant" under the terms of that certain
Amended and Restated Loan Agreement (the "Loan Agreement") dated
effective as of July 29, 1997, between and among First Tennessee Bank
National Association, CBL & Associates Limited Partnership and
Lakeshore/Sebring Limited Partnership, in consideration of the mutual
agreements of the parties thereto and of the undersigned therein
contained, hereby joins as a party to said Loan Agreement and agrees to
perform all obligations to be performed on its part thereunder.
IN WITNESS WHEREOF, the undersigned has caused this Joinder in
Amended and Restated Loan Agreement to be executed by its duly authorized
officer effective as of July 29, 1997.
AMSOUTH BANK
/s/ Rusty Campbell
By:________________________________
Rusty Campbell, Vice President
51
<PAGE>
_________________________________________________________
$85,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of September 26, 1996
By and Among
CBL & ASSOCIATES LIMITED PARTNERSHIP,
a Delaware limited Partnership, as Borrower,
and
WELLS FARGO BANK, N.A.
as successor in interest to
Wells Fargo Realty Advisors Funding, Incorporated,
NATIONSBANK, N.A. (SOUTH), successor by merger to
NationsBank of Georgia, N.A.,
FIRST BANK NATIONAL ASSOCIATION,
UNION BANK OF SWITZERLAND (NEW YORK BRANCH),
TOGETHER WITH THOSE ASSIGNEES
BECOMING PARTIES HERETO PURSUANT TO SECTION 9.6
as Lenders,
and
WELLS FARGO BANK, N.A.,
as successor in interest to
Wells Fargo Realty Advisors Funding, Incorporated,
as Agent
_______________________________________________________
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2 Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . 17
1.3 Accounting Terms, Calculation. . . . . . . . . . . . . . . . . . . . 17
1.4 Terminology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 2.
2.1 Commitment to Lend. . . . . . . . . . . . . . . . . . . . . . . 19
2.2 Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.3 Method of Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . 22
2.4 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.5 Interest Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.6 Special Provisions for LIBOR Advances. . . . . . . . . . . . . . . . 25
2.7 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.8 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.9 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . 31
2.10 Option to Replace Lenders . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 3.
3.1 Borrowing Base. . . . . . . . . . . . . . . . . . . . . . . . . 33
3.2 Leases and Major Agreements. . . . . . . . . . . . . . . . . . . . . 38
3.3 Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.4 Major Construction . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 4.
4.1 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.2 Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.3 Conditions Precedent to a Project Becoming An Eligible Project . . . . . .43
4.4 Conditions to Conversion to Term Loan. . . . . . . . . . . . . . . . 45
ARTICLE 5.
5.1 Organization and Power. . . . . . . . . . . . . . . . . . . . . 45
5.2 Validity of Loan Instruments . . . . . . . . . . . . . . . . . . . . 46
5.3 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.4 Financial Information. . . . . . . . . . . . . . . . . . . . . . . . 47
5.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.6 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.7 Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . 47
5.8 Taxes and Other Payments . . . . . . . . . . . . . . . . . . . . . . 49
5.9 Not an Investment Company. . . . . . . . . . . . . . . . . . . . . . 50
5.10 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.11 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.12 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.13 Title to the Projects . . . . . . . . . . . . . . . . . . . . . . . 50
5.14 Governmental Requirements . . . . . . . . . . . . . . . . . . . . . 50
5.15 ERISA; Plan Assets. . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 6.
6.1 Reporting Requirements. . . . . . . . . . . . . . . . . . . . . 51
6.2 Payment and Performance. . . . . . . . . . . . . . . . . . . . . . . 53
6.3 Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . 54
6.4 Business; Existence. . . . . . . . . . . . . . . . . . . . . . . . . 54
6.5 Payment of Impositions . . . . . . . . . . . . . . . . . . . . . . . 54
6.6 Compliance with Legal Requirements . . . . . . . . . . . . . . . . . 55
6.7 Inspection of Property, Books and Records. . . . . . . . . . . . . . 55
6.8 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6.9 Consolidations, Mergers and Sales of Assets. . . . . . . . . . . . . 56
6.10 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6.11 Investment Concentration. . . . . . . . . . . . . . . . . . . . . . 56
6.12 Total Obligations to Gross Asset Value. . . . . . . . . . . . . . . 57
6.13 Minimum Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.14 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . 58
6.15 Debt Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . 58
6.16 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.17 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.18 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 7.
7.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . 59
7.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.3 Actions in Respect of the Letters of Credit Upon Default . . . . . . 63
7.4 Curing Defaults Under Collateral Documents . . . . . . . . . . . . . 63
7.5 Permitted Deficiency . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 8.
8.1 Appointment and Authorization . . . . . . . . . . . . . . . . . 65
8.2 Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 65
8.3 Action by Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.4 Consultation with Experts. . . . . . . . . . . . . . . . . . . . . . 66
8.5 Reliance by Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 66
8.6 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
8.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 66
8.8 Credit Decision. . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.9 Failure to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.10 Resignation or Removal of Agent; Co-Agent . . . . . . . . . . . . . 67
8.11 Consent and Approvals . . . . . . . . . . . . . . . . . . . . . . . 68
8.12 Agency Provisions Relating to Collateral. . . . . . . . . . . . . . 71
8.13 Defaulting Lenders. . . . . . . . . . . . . . . . . . . . . . . . . 73
8.14 Borrower Not a Beneficiary. . . . . . . . . . . . . . . . . . . . . 75
ARTICLE 9.
9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.2 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.3 Expenses; Documentary Taxes; Indemnification . . . . . . . . . . . . 77
9.4 Waiver of Set-Offs; Sharing of Set-Offs. . . . . . . . . . . . . . . 78
9.5 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . 78
9.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 80
9.7 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . 81
9.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
9.9 Notice of Final Agreement. . . . . . . . . . . . . . . . . . . . . . 82
9.10 Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . . . . 82
9.11 Maximum Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
9.12 Limitation Upon Liability . . . . . . . . . . . . . . . . . . . . . 83
9.15 Conflict of Terms . . . . . . . . . . . . . . . . . . . . . . . . . 84
9.16 Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . 85
9.17 Waiver of Right to Trial by Jury. . . . . . . . . . . . . . . . . . 85
9.18 Amendment and Restatement . . . . . . . . . . . . . . . . . . . . . 85
Schedule 3.1 List of Projects
Schedule 5.5 Litigation
Schedule 0 ERISA Plans
Schedule 5.11 Insurance
Exhibit A Notes
Exhibit B Notice of Borrowing
Exhibit C Rate Selection Notice
Exhibit D Form of Mortgage
Exhibit E Form of Environmental Indemnity Agreement
Exhibit F Form of Closing Certificate
Exhibit G Form of Guaranty
Exhibit H Form of Assignment
Exhibit I Form of Extension Request
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT (the "Agreement") is
made and entered into as of this 26th day of September, 1996, by and
between CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited
partnership (hereinafter referred to as the "Borrower"), WELLS FARGO
BANK, N.A., a national banking association, as successor in interest
to Wells Fargo Realty Advisors Funding, Incorporated, a Colorado
corporation, NATIONSBANK, N.A. (SOUTH), successor by merger to
NationsBank of Georgia, N.A., a national banking association, FIRST
BANK NATIONAL ASSOCIATION, a national banking association, and UNION
BANK OF SWITZERLAND (NEW YORK BRANCH) (hereinafter referred to
individually as a "Lender" and collectively as the "Lenders") and
WELLS FARGO BANK, N.A., a national banking association, as successor
in interest to Wells Fargo Realty Advisors Funding, Incorporated, a
Colorado corporation, as agent for the benefit of each of the Lenders
(in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, Borrower, Wells Fargo Realty Advisors Funding,
Incorporated, NationsBank of Georgia, N.A., and First Bank National
Association (collectively, the "Original Lenders") and Agent entered
into that certain Credit Agreement dated as of July 28, 1994 (the
"Credit Agreement"), pursuant to which the Original Lenders agreed
to extend to Borrower a credit facility (the "Credit Facility") in
the aggregate principal amount of up to Seventy-Five Million Dollars
($75,000,000.00) at any one time outstanding; and
WHEREAS, Borrower, Original Lenders, Union Bank of Switzerland
(New York Branch) ("UBS") and Agent entered into that certain First
Amendment to Credit Agreement dated as of May 5, 1995 (the "First
Amendment") to, among other matters, add UBS as a "Lender" and
increase the aggregate principal amount of the Credit Facility to up
to Eighty-Five Million Dollars ($85,000,000.00) at any one time
outstanding; and
WHEREAS, Borrower, Lenders and Agent entered into that certain
Second Amendment to Credit Agreement dated as of July 5, 1995 (the
"Second Amendment"); and
WHEREAS, Borrower, Lenders and Agent entered into that certain
Third Amendment to Credit Agreement dated as of May 23, 1996 (the
"Third Amendment"); and
WHEREAS, Borrower, Lenders and Agent entered into that certain
Fourth Amendment to Credit Agreement dated as of July 26, 1996 (the
"Fourth Amendment") (the Credit Agreement, the First Amendment, the
Second Amendment, the Third Amendment and the Fourth Amendment being
collectively referred to herein as the "Original Credit Agreement");
and
WHEREAS, Borrower, Lenders and Agent desire to modify, amend
and restate the Original Credit Agreement in the manner and for the
purposes set forth herein.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual
obligations and covenants hereinafter contained, the parties hereto
hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions. When used herein, the following
terms shall have the following meanings:
"Adjusted Asset Value" means, as of a given date, (a) EBITDA
for Borrower's fiscal quarter most recently ended multiplied by (b)
4 and divided by (c) the Capitalization Rate. For purposes of
determining Adjusted Asset Value, EBITDA shall be adjusted by the
Agent in its reasonable discretion to take into account acquisitions
and dispositions of property by Borrower and shall exclude any EBITDA
from property not owned by Borrower for the entire fiscal quarter
most recently ended or upon which construction was in progress at the
end of the fiscal quarter most recently ended.
"Advance" shall have the meaning given such term in Section 2.1
hereof. An Advance may be either a LIBOR Advance or a Base Rate
Advance.
"Affiliate" shall mean, as to any Person, any other Person
which, directly or indirectly, owns or controls, on an aggregate
basis, including all beneficial ownership and ownership or control
as a trustee, guardian or other fiduciary, at least ten percent (10%)
of the outstanding shares of Capital Stock or other ownership
interest having ordinary voting power to elect a majority of the
board of directors or other governing body (irrespective of whether,
at the time, stock of any other class or classes of such corporation
shall have contingency) of such Person or at least ten percent (10%)
of the partnership or other ownership interest of such Person; or
which controls, is controlled by or is under common control with such
Person. For the purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause
the direction of management and policies, whether through the
ownership of voting securities, by contract or otherwise.
Notwithstanding the foregoing, a pension fund, university or other
endowment funds, mutual fund investment company or similar fund
having a passive investment intent owning such a ten percent (10%)
or greater interest in a Person shall not be deemed an Affiliate of
such Person unless such pension, mutual, endowment or similar fund
either (i) owns fifty percent (50%) or more of the Capital Stock or
other ownership interest in such Person, or (ii) has the right or
power to select one or more members of such Person's board of
directors or other governing body.
"Applicable Law" means, in respect of any Person, all
provisions of statutes, rules, regulations and orders of any
Governmental Authority applicable to such Person, and all orders and
decrees of all courts and arbitrators in proceedings or actions in
which the Person in question is a party.
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<PAGE>
"Appraisal" means, in respect of any Project or proposed
Project, a M.A.I. appraisal commissioned by and addressed to Agent
(acceptable to Agent, in Agent's reasonable judgment, as to form,
substance and appraisal date), prepared by a professional appraiser
acceptable to Agent, in Agent's reasonable judgment, having at least
the minimum qualifications required under applicable regulations
governing Agent, including FIRREA, and determining the "as is" market
value of such Project or proposed Project as between a willing buyer
and a willing seller.
"Appraised Value" means, as to any Project or proposed Project,
the "as is" market value of such Project as reflected in the then
most recent Appraisal of such Project as the same may have been
adjusted by Agent based upon its internal review of such Appraisal
which is based on criteria and factors then generally used and
considered by Agent in determining the value of similar projects,
which review shall be conducted prior to acceptance of such Appraisal
by Agent and in any event within thirty (30) days after receipt by
Agent of such Appraisal. In the event that an Appraisal of a Project
is performed after the occurrence of either (a) a casualty affecting
such Project or (b) a condemnation of a portion of such Project which
results in a loss of less than 10% of the acreage of the Project and
of no portion of the principal structures, but prior to complete
restoration of the same, the Appraised Value shall, to the extent
permitted by applicable regulations, be made on an "as-restored"
basis.
"Approved Percentage" means with respect to the Appraised Value
of any Project, a percentage not to exceed sixty five percent (65%),
as determined by Agent and disclosed to Borrower prior to admission
of such Project into the Borrowing Base. With respect to the
Appraised Value of the Property listed in Schedule 3.1 attached
hereto, the Approved Percentage is sixty five percent (65%).
"Base Rate" shall mean an interest rate per annum, fluctuating
daily, equal to the higher of (a) the rate announced by Agent from
time to time at its principal office in San Francisco, California as
its prime rate in effect on such day, or (b) the Federal Funds Rate
in effect on such day plus 0.5%. The Base Rate is not necessarily
intended to be the lowest rate of interest charged by Agent or any
Lender in connection with extensions of credit. Each change in Base
Rate shall result in a corresponding change in the interest rate
hereunder with respect to a Base Rate Advance and such change shall
be effective on the effective date of such change in the Base Rate.
"Base Rate Advance" means any Advance hereunder with respect to
which the interest rate is calculated by reference to the Base Rate.
"Borrowing Base" has the meaning set forth in Section 3.1(b)
hereof.
"Business Day" means any day on which all major departments of
Agent are open for business at its downtown headquarters in San
Francisco, California.
"Capital Stock" shall mean, as to any Person, any and all
shares, interests, warrants, participations or other equivalents
(however designated) of corporate stock of such Person.
"Capitalization Rate" means nine and one-quarter percent
(9.25%).
"CBL Management, Inc." means CBL & Associates Management, Inc.,
a Delaware corporation.
3
<PAGE>
"CBL Properties, Inc." means CBL & Associates Properties, Inc.,
a Delaware corporation, and a qualified public REIT and sole general
partner of Borrower.
"Collateral" means the real and personal property comprising
each Eligible Project securing payment of the Loan pursuant to the
Collateral Documents.
"Collateral Documents" means the Mortgages, assignments,
security agreements, financing statements, subordination, attornment
and non-disturbance agreements, tenant estoppel letters, title
insurance policies and other loan and collateral documents creating,
evidencing, perfecting insuring or relating to the Liens and security
interests in the Collateral.
"Combined" means, as to any calculation hereunder, that such
calculation shall be made on a combined basis for Borrower, CBL
Properties, Inc. and CBL Management, Inc., with each such calculation
being made, (a) in respect of Borrower, on a consolidated basis for
Borrower and its Subsidiaries, (b) in respect of CBL Properties,
Inc., on a consolidated basis for CBL Properties, Inc. and its
Subsidiaries, and (c) in respect of CBL Management, Inc., on a
consolidated basis for CBL Management, Inc. and its Subsidiaries.
"Commitment" means, in respect of each Lender, the obligation
of such Lender to make Advances to Borrower, subject to the terms and
conditions hereof, up to an aggregate principal amount not to exceed
at any one time outstanding the amount set forth opposite such
Lender's name on the signature pages hereto or as set forth in any
amendment to this Agreement, subject to adjustment, in the case of
any Lender, from time to time by assignment pursuant to Section 9.6
hereof or decrease by Borrower pursuant to Section 2.1 hereof, and
"Commitments" shall mean the Commitment of all the Lenders in an
aggregate principal amount not to exceed at any one time outstanding
Eighty-Five Million Dollars ($85,000,000).
"Consequential Loss" means, for any Lender with respect to (a)
Borrower's payment of all or any portion of the then-outstanding
principal amount of a LIBOR Advance on a day other than the last day
of the Interest Period applicable thereto or (b) any of the
circumstances specified in Section 2.3(c) upon which a Consequential
Loss may be incurred, any loss, cost or expense incurred by such
Lender as a result of the timing of such payment or Advance or in the
redepositing, redeploying or reinvesting the principal amount so paid
or affected by the timing of such Advance or the circumstances
described in Section 2.3(c) including the sum of (i) the interest
which, but for the payment or timing of the Advance, such Lender
would have earned in respect of such principal amount, reduced, if
such Lender is able to redeposit, redeploy, or reinvest such
principal amount by the interest earned by such Lender as a result
of so redepositing, redeploying or reinvesting such principal amount,
plus (ii) any expense or penalty incurred by such Lender on
redepositing, redeploying or reinvesting such principal amount.
"Contingent Obligations" means, for any Person, any material
commitment, undertaking, Guarantee or other material obligation
constituting a contingent liability under GAAP, but only to the
extent the same are required to be reflected on such Person's audited
financial statements.
"Conversion Date" has the meaning set forth in Section 2.3(c)
hereof.
4
<PAGE>
"Debt Coverage Ratio" shall mean, as of any date the same is
calculated, the ratio of (a) EBITDA for the fiscal quarter ending on
or most recently ended prior to such date to (b) Debt Service during
such fiscal quarter, in each case calculated on a Combined basis in
accordance with GAAP.
"Debt Service" means, with respect to Borrower, CBL Properties,
Inc., and their respective Subsidiaries for any period, the sum of
(a) Interest Expense of Borrower, CBL Properties, Inc. and their
respective Subsidiaries for such period, plus (b) regularly scheduled
principal payments on Indebtedness of Borrower, CBL Properties, Inc.
and their respective Subsidiaries during such period other than (x)
in respect of any period following the Term Loan Conversion Date, the
scheduled principal payments on the Term Loan and (y) any regularly
scheduled principal payment payable on any Indebtedness which repays
such Indebtedness in full, to the extent the amount of such final
scheduled principal payment is greater than the scheduled principal
payment immediately preceding such final scheduled principal payment,
determined in each case on a Combined basis in accordance with GAAP.
For purposes of this definition, a voluntary prepayment of
Indebtedness shall not constitute a regularly scheduled principal
payment even if, under the terms of the agreement governing such
Indebtedness, the notice of prepayment has the effect of causing the
amount of the prepayment to become due and payable on the date set
for such notice for such prepayment.
"Default" means any condition or event which, with the giving
of notice or lapse of time or both would, unless cured or waived,
become an Event of Default.
"Defaulting Lender" means any Lender which fails or refuses to
perform its obligations under this Agreement within the time period
specified for performance of such obligation or, if no time frame is
specified, if such failure or refusal continues for a period of five
(5) days after notice from Agent.
"EBITDA" means, for any period, the sum of (i) Net Income of
Borrower, CBL Properties, Inc. and their respective Subsidiaries for
such period (excluding equity in net earnings (or loss) of their
Unconsolidated Affiliates), plus (ii) depreciation and amortization
expense and other non-cash charges of Borrower, CBL Properties, Inc.
and their respective Subsidiaries for such period, plus (iii)
interest expense of Borrower, CBL Properties, Inc. and their
respective Subsidiaries for such period, plus (iv) income tax expense
(federal and state) in respect of such period, plus (v) cash
dividends and distributions actually received by Borrower, CBL
Properties, Inc. and their respective Subsidiaries during such period
from Unconsolidated Affiliates, plus (vi) extraordinary losses (and
any unusual losses arising in or outside the ordinary course of
business of Borrower, CBL Properties, Inc. and their respective
Subsidiaries not included in extraordinary losses determined in
accordance with GAAP that have been reflected in the determination
of Net Income) for such period, minus (vii) extraordinary gains of
Borrower, CBL Properties, Inc. and their respective Subsidiaries (and
any unusual gains arising in or outside the ordinary course of
business of Borrower, CBL Properties, Inc. or such respective
Subsidiaries not included in extraordinary gains determined in
accordance with GAAP that have been reflected in the determination
of Net Income) for such period, determined in each case on a Combined
basis in accordance with GAAP.
"Effective Date" means the date this Agreement becomes
effective in accordance with Section 4.1 hereof.
5
<PAGE>
"Eligible Project" means a Project which the Agent and the
Lenders have agreed, in their reasonable discretion, to include in
the Borrowing Base.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, judicial decisions, regulations,
ordinances, rules, judgments, orders, decrees, plans, injunctions,
permits, concession, grants, franchises, licenses, agreements and
other governmental restrictions relating to the environment, the
effect of the environment on human health or to emissions, discharges
or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment including, without limitation, ambient
air, surface water, ground water, or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or wastes or the clean-up or other remediation
thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and all rules and regulations
from time to time promulgated thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) which, together with Borrower, is treated as a single
employer under Sections 414(b), (c), (m) or (o) of the Internal
Revenue Code.
"ERISA Plan" means any employee benefit plan subject to Title
I of ERISA.
"Event of Default" has the meaning set forth in Section 7.1
hereof.
"Federal Funds Rate" means, on any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal
to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such
day, provided that (i) if such day is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next
succeeding Business Day, and (ii) if no such rate is published on
such next succeeding Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Agent on such day of such
transactions as determined by Agent.
"FIRREA" means the Financial Institution Recovery, Reform and
Enforcement Act of 1989, as amended from time to time.
"Funds from Operations" means, as to any period, an amount
equal to (a) income (loss) from operations of Borrower, CBL
Properties, Inc. and their respective Subsidiaries for such period,
excluding gain (loss) from debt restructuring and sale of properties,
plus (b) depreciation and amortization of real estate assets, plus
(minus) (c) to the extent not included in clause (a) above, gain
(loss) on the sales of outparcels made in the ordinary course of
business, and after adjustments for Unconsolidated Affiliates,
determined in each case on a Combined basis in accordance with GAAP.
Adjustments for Unconsolidated Affiliates will be calculated to
reflect funds from operations on the same basis.
6
<PAGE>
"GAAP" shall mean generally accepted accounting principles
applied on a basis consistent with those which, in accordance with
the last sentence of Section 1.3(a) hereof, are to be used in making
the calculations for purposes of determining compliance with this
Agreement.
"Governmental Authority" means, in respect any Person, any
government (or any political subdivision or jurisdiction thereof) ,
court, bureau, agency or other governmental authority having
jurisdiction over such Person or any Affiliate of such Person or any
of its or their business, operations or properties.
"Gross Asset Value" means, at a given time, the sum of (a)
Adjusted Asset Value at such time, plus (b) all of Borrower's cash
and cash equivalents at the end of the fiscal quarter most recently
ended, plus (c) the current book value of all real property of
Borrower upon which construction was in progress at the end of the
fiscal quarter most recently ended, plus (d) the purchase price paid
by Borrower for any real property purchased by Borrower during the
fiscal quarter most recently ended.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise), or (ii) entered into
for the purpose of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part),
provided that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substances" shall mean any pollutant, contaminant,
hazardous, toxic or dangerous waste, substance or material, or any
other substance or material regulated or controlled pursuant to any
Environmental Law, including, without limiting the generality of the
foregoing, asbestos, PCBs, petroleum products (including crude oil,
natural gas, natural gas liquids, liquified natural gas or synthetic
gas) or any other substance defined as a "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "hazardous
material," "hazardous chemical," "hazardous waste," "regulated
substance," "toxic chemical," "toxic substance" or other similar term
in any Environmental Law.
"Impositions" shall mean (i) all real estate and personal
property taxes, charges, assessments, excises and levies and any
interest, costs or penalties with respect thereto, general and
special, ordinary and extraordinary, foreseen and unforeseen, of any
kind and nature whatsoever, which at any time prior to or after the
execution hereof may be assessed, levied or imposed upon the
Collateral or the ownership, use, occupancy or enjoyment thereof, or
any portion thereof, or the sidewalks, streets or alleyways adjacent
thereto; (ii) any charges, fees, license payments or other sums
7
<PAGE>
payable for any easement, license or agreement maintained for the
benefit of the Collateral; and (iii) water, gas, sewer, electricity,
telephone and other utility charges and fees that are or may become
a Lien against the Collateral.
"Indebtedness" shall mean, as applied to any Person at any
time, without duplication (a) all indebtedness, obligations or other
liabilities of such Person (i) for borrowed money or evidenced by
debt securities, debentures, acceptances, notes or other similar
instruments, and any accrued interest, fees and charges relating
thereto; (ii) with respect to letters of credit issued for such
Person's account; (iii) under agreements for the prospective purchase
or repurchase assets other than obligations arising under unexercised
option agreements; (iv) to make future Investments in any Person; (v)
to pay the deferred purchase price of property or services previously
purchased or rendered, except unsecured trade accounts payable and
accrued expenses arising in the ordinary course of business; or (vi)
as a lessee arising under a lease that is required to be capitalized
in accordance with GAAP; (b) all indebtedness, obligations or other
liabilities of such Person or others secured by a Lien on any asset
of such Person, whether or not such Person is otherwise obligated on
such indebtedness, obligations or liabilities are assumed by such
Person, all as of such time; (c) all indebtedness, obligations or
other liabilities of such Person in respect of any foreign exchange
contract or any interest rate swap, cap or collar agreement or
similar arrangement, net of liabilities owed to such Person by the
counterparties thereon; (d) all shares of Capital Stock or equivalent
ownership interest subject (upon the occurrence of any contingency
or otherwise) to mandatory redemption prior to the date the Loan is
scheduled to be repaid in full; (e) obligations of others to the
extent Guaranteed by such Person or to the extent such Person is
otherwise liable on a recourse basis; and (f) such Person's pro rata
share of non-recourse Indebtedness of a partnership in which such
Person is a partner (it being understood that the remaining portion
of such non-recourse partnership Indebtedness shall not constitute
Indebtedness of such Person).
"Indemnitee" has the meaning set forth in Section 9.3(c)
hereof.
"Interest Coverage Ratio" means, as of any date the same is
calculated, the ratio of (a) EBITDA for the fiscal quarter ending on
or most recently ended prior to such date to (b) Interest Expense for
such fiscal quarter, determined in each case on a Combined basis in
accordance with GAAP.
"Interest Expense" means, for any Person for any period, total
interest expense on Indebtedness of such Person, whether paid or
accrued, but without duplication (including the interest component
of capital leases), including, without limitation, (a) all
commissions, discounts and other fees and charges owed with respect
to letters of credit, and (b) one hundred percent (100%) of any
interest expense, whether paid or accrued, of any other Person for
which such Person is wholly or partially liable (whether by
Guarantee, pursuant to Applicable Law or otherwise) but excluding (i)
interest on Reserved Construction Loan and (ii) swap or other
interest hedging breakage costs, all as determined in conformity with
GAAP and (iii) all Interest to a Project.
"Interest Period" means, with respect to a LIBOR Advance, a
period commencing:
(a) on the borrowing date of such LIBOR Advance made
pursuant to Section 2.3(a) of this Agreement; or
(b) on the Conversion Date pertaining to such LIBOR
Advance, if such LIBOR Advance is made pursuant to a conversion
as described in Section 2.3(c) hereof; or
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<PAGE>
(c) on the last day of the preceding Interest Period in
the case of a rollover to a successive Interest Period;
and ending 1, 2, 3, 6 or 12 months thereafter, as Borrower shall
elect in accordance with Section 2.3(c) of this Agreement; provided,
that:
(i) any Interest Period that would otherwise end
on a day which is not a LIBOR Business Day shall be
extended to the next succeeding LIBOR Business Day,
unless such LIBOR Business Day falls in another calendar
month in which case such Interest Period shall end on the
next preceding LIBOR Business Day;
(ii) any Interest Period that begins on the last
LIBOR Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the
calendar month or at the end of such Interest Period)
shall, subject to Clause (i) above, end on the last LIBOR
Business Day of a calendar month;
(iii) if the Interest Period for any LIBOR Advance
would otherwise end after the final maturity date of the
Loan, then such Interest Period shall end on the final
maturity date of the Loan; and
(iv) if Borrower elects an Interest Period of 12
months with respect to any LIBOR Advance, and any Lender
determines that either deposits in United States Dollars
(in the applicable amounts) are not being offered to it
in the interbank eurodollar market for such Interest
Period or that quotes of the LIBOR Rate are not available
for such Interest Period, then Agent shall give notice
thereof to Borrower, and Borrower shall be deemed to have
elected an Interest Period of 6 months.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, or any successor statute.
"Investment" in any Person shall mean any investment, whether
by means of share purchase, loan, advance, extension of credit,
capital contribution or otherwise, in or to such Person, the
Guarantee of any Indebtedness of such Person, or the subordination
of any claim against such Person to other Indebtedness of such
Person.
"Issuing Bank" means Agent or an affiliate of Agent, as the
issuer of Letters of Credit hereunder.
"Lease" means any lease, sublease, license, concession or other
agreement (written or verbal, now or hereafter in effect) to which
Borrower, any Wholly Owned Subsidiary of Borrower or any
Subpartnership is a party and which grant a possessory interest in
and to, or the right to use, all or any part of an Eligible Project,
save and except any lease or sublease pursuant to which Borrower, any
Wholly Owned Subsidiary of Borrower or any Subpartnership is granted
a possessory interest in the land underlying such Eligible Project.
"Legal Requirements" shall mean (i) any and all present and
future judicial decisions, statutes, rulings, rules, regulations,
permits, certificates or ordinances of any Governmental Authority in
any way applicable to Borrower, any Wholly Owned Subsidiary of
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Borrower or any Subpartnership owning an Eligible Project, or the
Collateral, including, without limiting the generality of the
foregoing, the ownership, use, occupancy, possession, operation,
maintenance, alteration, repair or reconstruction thereof; (ii) any
and all covenants, conditions and restrictions contained in any deed
or other form of conveyance or in any other instrument of any nature
that relate in any way or are applicable to the Collateral or the
ownership, use or occupancy thereof; (iii) Borrower's and each such
Wholly Owned Subsidiary's and Subpartnership's presently or
subsequently effective Articles of Partnership, Limited Partnership,
Joint Venture, Trust or other form of business association agreement;
(iv) any Major Agreements and Major Leases; and (v) any lease or
other contract pursuant to which Borrower is granted a possessory
interest in any land.
"Lending Office" means Agent's office located 420 Montgomery
Street, 6th Floor, San Francisco, California 94163, or such other
office as Agent may hereafter designate as its Lending Office by
notice to Borrower and Lenders.
"Letter of Credit Obligations" means, collectively, (a) all
reimbursement and other obligations of Borrower in respect of Letters
of Credit, (b) all amounts paid by Agent to the Issuing Bank in
respect of Letters of Credit and (c) all amount paid by the Lenders
to the Agent and/or the Issuing Bank in respect of Letters of Credit.
"Letters of Credit" means the letters of credit made in
connection with the Loan issued by the Issuing Bank for the account
of Borrower in an aggregate face amount not to exceed $10,000,000.00
outstanding at any one time, as they may be drawn on, advanced,
replaced, or modified from time to time.
"LIBOR Advance" means any Advance hereunder with respect to
which the interest rate is calculated by reference to the LIBOR Rate
for a particular Interest Period.
"LIBOR Business Day" means a Business Day on which dealings in
United States Dollars are carried out in the London interbank market.
"LIBOR Rate" means, with respect to any Interest Period, the
rate per annum which is equal to the quotient of the average rate per
annum (determined solely by the Agent and rounded upwards, if
necessary, to the next higher 1/16 of 1%) at which deposits in United
States Dollars are offered to Wells Fargo Bank by brokers in the
London interbank market as of 11:00 a.m. (London time) two (2) LIBOR
Business Days prior to the first day of such Interest Period, in an
amount equal to LIBOR Advance so requested and for a period equal to
such Interest Period. Each determination of the LIBOR Rate by Agent
shall, in absence of manifest error, be conclusive and binding.
"LIBOR Reserve Requirement" means the daily average during the
Interest Period of the maximum aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves and
taking into account any transitional adjustments or other schedule
changes in reserve requirements during the Interest Period) which is
imposed under Regulation D against "Eurocurrency liabilities" as
defined in Regulation D. Each determination by Agent of the LIBOR
Reserve Requirement shall, in the absence of manifest error, be
conclusive and binding.
"Lien" means any deed to secure debt, mortgage, deed of trust
or similar security instruments (including any Mortgage), pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority
10
<PAGE>
or other security agreement or preferential arrangement of any kind
or nature whatsoever (including, without limitation, any title
retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of, or
agreement to give, any financing statement perfecting a security
interest under the Uniform Commercial Code or comparable law of any
jurisdiction).
"Loan" means the aggregate principal amount of outstanding
Advances made by Lenders pursuant to Article 2 hereof. From and
after the Term Loan Conversion Date, the term "Loan" shall mean and
refer to the Term Loan.
"Loan Documents" means this Agreement, the Notes and the
Collateral Documents.
"Major Agreements" means, at any time, (a) each operating,
cross-easement, restrictions or similar agreement encumbering or
affecting an Eligible Project and any adjoining property material to
the use and operation of such Project; (b) each management agreement
with respect to an Eligible Project; and (c) any other agreement,
such as engineers' contracts, utility contracts, maintenance
agreements and service contracts, which in any way relates to the
use, occupancy, operation, maintenance, enjoyment or ownership of an
Eligible Project, the breach or loss of which would have a material
adverse effect on such Project.
"Major Lease", with respect to any Eligible Project, shall mean
any lease of 50,000 or more leasable square feet, in the case of any
Project which is a regional mall or 20,000 or more leasable square
feet, in the case of any Project which is a strip center, or (ii)
collectively, the leases of space in the Projects by one or more
tenants which are affiliates or operate under separate leases of
space within the Projects if the aggregate leasable square footage
leased by such affiliates is 50,000 or more leasable square feet, in
the case of any Project which is a regional mall or 20,000 or more
leasable square feet, in the case of any Project which is a strip
center.
"Majority Lenders" shall mean, at any time, Lenders holding at
least sixty-six and two-thirds percent (66_%) of the aggregate
principal amount of the Commitment or, if the Commitment has been
terminated, Lenders holding at least sixty-six and two-thirds percent
(66_%) of the aggregate outstanding principal amount of the Loan;
provided however, in determining such percentage at any given time,
all then existing Defaulting Lenders will be disregarded and excluded
and the Pro Rata Shares of Lenders shall be redetermined, for voting
purposes only, to exclude the Pro Rata Shares of such Defaulting
Lenders.
"Maximum Rate" means the highest nonusurious rate of interest
(if any) permitted from day to day by applicable law.
"Mortgage" shall mean a mortgage, deed of trust, deed to secure
debt or similar security instrument made or to be made by a Person
owning real estate or an interest in real estate granting a Lien on
such real estate or interest in real estate as security for the
payment of Indebtedness.
"Net Income" means, with respect to Borrower, CBL Properties,
Inc., and their respective Subsidiaries for any period, net earnings
(or loss) after deducting therefrom all operating expenses, income
taxes and reserves and net earnings (or loss) attributable to
minority interests in Subsidiaries for the period in question,
determined in each case on a Combined basis in accordance with GAAP.
Without limiting the generality of the foregoing, earnings (or
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<PAGE>
losses) from the sale of outparcels in the ordinary course of
business shall be included in determining Net Income.
"Net Operating Income" means, for any Project for the period in
question, but without duplication (a) any cash rentals, proceeds,
expense reimbursements or income earned by such Project (but
excluding security or other deposits, late fees, early lease
termination or other penalties, and other charges deemed by Agent to
be of a non-recurring nature and excluding rent dedicated to the
repayment of Indebtedness secured by a Lien permitted by Section
6.17(b) hereof) during such period; less (b) all cash costs and
expenses that Borrower incurred during such period, as a result of,
or in connection with, the development, operation, or leasing of such
Project (but excluding principal and interest payments during such
period); plus (less) (c) gains (losses) from the sale of outparcels
made in the ordinary course of business; less (c) to the extent
exceeding the amounts for the applicable costs and expenses incurred
by Borrower pursuant (b) above, appropriate accruals for items such
as taxes, insurance, or other expenses reasonably determined by
Agent, in each case determined in accordance with GAAP.
"Net Worth" means, with respect to Borrower, CBL Properties,
Inc. and their Subsidiaries as of any date, the sum of (a) the total
shareholders' equity of CBL Properties, Inc., plus (b) the value of
all minority interests in Borrower, plus (c) cumulative depreciation
and amortization after June 30, 1996, minus (d) all intangible
assets, determined on a Combined basis in accordance with GAAP.
"Non-ERISA Plan" means any Plan subject to Section 4975 of the
Internal Revenue Code.
"Non Pro Rata Advance" means an Advance with respect to which
less than all Lenders have funded their respective Pro Rata Shares
of such Advance and the failure of the non-funding Lender or Lenders
to fund its or their respective Pro Rata Shares of such Advance
constitutes a breach of this Agreement. For purposes of this
definition, the Pro Rate Shares of the Lenders will be calculated
without regard to the proviso contained in the definition of "Pro
Rata Share".
"Notes" means the amended and restated promissory notes
executed by Borrower, substantially in the form of Exhibit A hereto,
payable to each of the Lenders in an amount equal to such Lender's
Commitment, as the same may be amended, supplemented, modified, or
restated from time to time, evidencing the obligation of Borrower to
repay the Loan, and all renewals, modifications and extensions
thereof, and "Note" means any one of the Notes.
"Notice of Borrowing" means a notice substantially in the form
of Exhibit B attached hereto.
"Obligations" means the Loan, the Letter of Credit Obligations
and any and all other Indebtedness, liabilities and obligations of
Borrower to the Lenders, or any of them, or to any Indemnitee, of
every kind and nature (including, without limitation, interest
charges, expenses, attorneys' fees and other sums chargeable to
Borrower by Lenders and future advances made to or for the benefit
of Borrower), arising under this Agreement or under any of the other
Loan Documents, whether direct or indirect, absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter
acquired.
"Permanent Loan Estimate" means, as of any date and with
respect to any Project included in the Borrowing Base, an amount
equal to the quotient of (a) an amount equal to the aggregate Net
<PAGE>
Operating Income of such Project for the immediately preceding
twelve (12) month period divided by (b) the product of (i) 1.25 and
(ii) the percent of a principal amount of a loan required to be paid
each year in order to repay the principal amount of such loan in full
based on a twenty-five (25) year amortization, and to pay the amount
of interest due at each installment, utilizing a rate of interest
equal to 1.5% in excess of the average of the rates published during
the four fiscal quarters ending on or most recently prior to such
date in the United States Federal Reserve Statistical Release (H.15)
for 10-year Treasury Constant Maturities, in equal monthly
installments of principal and interest.
"Permitted Liens" means (i) pledges or deposits made to secure
payment of worker's compensation (or to participate in any fund in
connection with worker's compensation insurance), unemployment
insurance, pensions or social security programs, (ii) encumbrances
consisting of zoning restrictions, easements, or other restrictions
on the use of real property, provided that such items do not
materially impair the use of such property for the purposes intended
and none of which is violated in any material respect by existing or
proposed structures or land use, (iii) the following to the extent
no Lien has been filed in any applicable jurisdiction or agreed to:
(A) Liens for taxes not yet due and payable; and (B) Liens imposed
by mandatory provisions of law such as for materialmen's, mechanic's,
warehousemen's and other like Liens arising in the ordinary course
of business, securing payment of Indebtedness whose payment is not
yet due, (iv) Liens for taxes, assessments and governmental charges
or assessments that are being contested in good faith by appropriate
proceedings diligently conducted, and for which reserves or other
adequate security acceptable to Agent have been provided, (v) to the
extent expressly approved in writing by Agent, Liens on Projects
where Borrower and Agent are insured against such Liens by title
insurance acceptable to the Lenders, (vi) Liens securing assessments
or charges payable to a property owner association or similar entity,
which assessments are not yet due and payable, or (vii) other Liens
expressly permitted by the terms of the Mortgages granted by Borrower
or its Affiliates in favor of the Agent.
"Person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other
entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan which
is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Internal Revenue Code.
"Projects" means the real estate projects owned by Borrower, a
Wholly Owned Subsidiary of Borrower, a Subpartnership or, to the
extent approved by the Supermajority Lenders, any other Person and
"Project" shall mean any one of the Projects.
"Pro Rata Share" means, with respect to any Lender, the
percentage obtained by dividing (a) such Lender's Commitment by (b)
the aggregate Commitments of all Lenders, or, if the Commitments
shall have been terminated, the percentage obtained by dividing (x)
the aggregate unpaid principal amount of such Lender's Note or Notes
by (y) the aggregate unpaid principal amount of all Lenders' Notes;
provided however, in determining such percentage at any given time,
all then existing Defaulting Lenders will be disregarded and excluded
and the Pro Rata Shares of Lenders shall be redetermined to exclude
the Pro Rata Shares of such Defaulting Lenders.
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"Protective Advance" means all sums expended as determined by
Agent to be necessary to: (a) protect the priority, validity and
enforceability of the Liens on, and security interests in, any
Collateral and the instruments evidencing or securing the
Obligations, or (b) (i) prevent the value of any Collateral from
being materially diminished (assuming the lack of such a payment
within the necessary time frame could potentially cause such
Collateral to lose value), or (ii) protect any of the Collateral from
being materially damaged, impaired, mismanaged or taken, including,
without limitation, any amounts expended in accordance with
Section 9.3 or post-foreclosure ownership, maintenance, operation or
marketing of any Eligible Project.
"Rate Selection Notice" has the meaning set forth in Section
2.3(c) hereof. Each Rate Selection Notice shall be substantially in
the form of Exhibit C attached hereto.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System from time to time in effect
and shall include any successor or other regulation relating to
reserve requirements applicable to member banks of the Federal
Reserve System.
"REIT" means a real estate investment trust qualified under the
Internal Revenue Code.
"Reserved Construction Loan" shall mean a construction loan
extended to Borrower or a Subsidiary of Borrower for the construction
of a Project in respect of which: (a) neither any monetary or
material non-monetary default nor any event of default exists; (b)
interest on such loan has been budgeted to accrue at a rate of not
less than the Base Rate plus two percent (2%) at the time the
interest reserve account is established; (c) the amount of such
budgeted interest has been (i) included in the principal amount of
such loan and (ii) segregated into an interest reserve account (which
shall include any arrangement whereby loan proceeds equal to such
budgeted interest are reserved and only disbursed to make interest
payments in respect of such loan); (d) absent an event of default or
a monetary or material non-monetary default, such interest can be
paid out of such interest reserve account only for the purpose of
making interest payments on such loan; (e) the amount held in such
interest reserve account in respect of such loan, together with the
net income if any, from such Project projected by the Agent in its
reasonable judgment, will be sufficient, as reasonably determined by
the Agent from time to time, to pay all Interest Expense on such loan
until the date that the EBITDA of the Project being financed by such
loan is anticipated to be sufficient to pay all Interest Expense on
such loan; and (f) Borrower has delivered all certificates required
by Section 6.1(f) hereof.
"Senior Officer" shall mean, with respect to Borrower or CBL
Properties, Inc., the President, any Senior Executive Vice President,
Executive Vice President or Senior Vice President of CBL Properties,
Inc.
"Significant Subsidiary" shall mean any Subsidiary which either
(a) owns any of the Collateral or (b) has assets having an aggregate
book value in excess of $500,000.
"Subpartnership" means any partnership in which Borrower is the
sole general partner or managing general partner, and in which CBL
Properties, Inc. is the sole limited partner or sole other general
partner. For purposes of clarity, each Subpartnership is a
Subsidiary of Borrower.
"Subsidiary" shall mean, as to any Person, any other Person,
more than fifty percent (50%) of the outstanding shares of Capital
Stock, partnership interest or other ownership interest, having
ordinary voting power to elect a majority of the board of directors
or similar governing body of such other Person (irrespective of
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<PAGE>
whether or not at the time stock or other ownership interests of any
other class or classes of such other Person shall have or might have
voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or by
one or more "Subsidiaries" of such Person, and whose financial
reports are prepared on a consolidated basis with such Person.
"Wholly Owned Subsidiary" shall mean any such Person of which all of
the shares of Capital Stock or ownership interests (other than, in
the case of a corporation, directors' qualifying shares) are so owned
or controlled. For purposes of this Agreement CBL Management, Inc.
shall be deemed to be a Subsidiary of Borrower.
"Supermajority Lenders" shall mean, at any time, Lenders
holding at least eighty-five percent (85%) of the aggregate principal
amount of the Commitment or, if the Commitment has been terminated,
Lenders holding at least eighty-five percent (85%) of the aggregate
outstanding principal amount of the Loan; provided however, in
determining such percentage at any given time, all then existing
Defaulting Lenders will be disregarded and excluded and the Pro Rata
Shares of Lenders shall be redetermined, for voting purposes only,
to exclude the Pro Rata Shares of such Defaulting Lenders.
"Term Loan" has the meaning set forth in Section 2.12 hereof.
"Term Loan Conversion Date" has the meaning set forth in
Section 2.12 hereof.
"Term Loan Termination Date" means the date which is three (3)
years after the Term Loan Conversion Date.
"Termination Date" means the earlier to occur of (a) September
26, 1999, or such later date to which the Termination Date may be
extended by the written agreement of the Borrower, the Agent and all
the Lenders pursuant to Section 2.11 hereof, (b) the date Lenders'
Commitment to fund Advances are terminated pursuant to Section 7.2
hereof or (c) the date that Lender's Commitments are reduced to zero
by Borrower pursuant to Section 2.1 hereof.
"Total Obligations" means, as of any date, the sum (without
duplication) of (a) the Indebtedness of Borrower, CBL Properties,
Inc. and their respective Subsidiaries (other than Indebtedness
described in clauses (a)(iii) and (a)(iv) of the definition thereof);
plus (b) the aggregate amount of Contingent Obligations of Borrower,
CBL Properties, Inc. and their respective Subsidiaries in respect of
Indebtedness (other than Indebtedness described in clauses (a)(iii)
and (a)(iv) of the definition thereof); plus (c) Borrower's, CBL
Properties, Inc.'s or their respective Subsidiaries' proportionate
share of Indebtedness (other than Indebtedness described in clauses
(a)(iii) and (a)(iv) of the definition thereof) of any Unconsolidated
Affiliate, whether or not Borrower, CBL Properties, Inc. or such
Subsidiary is obligated on such Indebtedness; plus (d) all other
amounts which would be classified as a liability on the consolidated
balance sheets of Borrower or CBL Properties, Inc., determined in
each case on a Combined basis in accordance with GAAP.
"Unconsolidated Affiliate" shall mean, in respect of any
Person, any other Person in whom such Person holds an Investment,
which Investment is accounted for in the financial statements of such
Person on an equity basis of accounting.
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"Unused Facility Fee" has the meaning set forth in Section
2.8(a) hereof.
1.2 Use of Defined Terms. All terms defined in this Agreement
and the Exhibits hereto shall have the same defined meanings when
used in any other Loan Document, unless the context shall require
otherwise.
1.3 Accounting Terms, Calculation. (a) Except as otherwise
expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the
Lenders hereunder shall (unless otherwise disclosed to the Lenders
in writing at the time of delivery thereof in the manner described
in subsection (b) below) be prepared, in accordance with generally
accepted accounting principles applied on a basis consistent with
those used in the preparation of the latest financial statements
furnished to the Lenders hereunder (which, prior to the delivery of
the first financial statements under Section 6.1 hereof, shall mean
the certified financial statements as at June 30, 1996 referred to
in Section 5.4 hereof). All calculations made for the purposes of
determining compliance with this Agreement shall (except as otherwise
expressly provided herein) be made by application of generally
accepted accounting principles applied on a basis consistent with
those used in the preparation of the annual or quarterly financial
statements furnished to the Lenders pursuant to Section 6.1 hereof
most recently prior to or concurrently with such calculations (or,
prior to the delivery of the first financial statements under
Section 6.1 hereof, used in the preparation of the certified
financial statements as at June 30, 1996 referred to in Section 5.4
hereof) unless (i) either (x) Borrower shall have objected to
determining such compliance on such basis at the time of delivery of
such financial statements or (y) the Majority Lenders shall so object
in writing within 30 days after delivery of such financial statements
and (ii) Borrower and the Majority Lenders have not agreed upon
amendments to the provisions of this Agreement to reflect any change
in such basis, in which event such calculations shall be made on a
basis consistent with those used in the preparation of the latest
financial statements as to which such objection shall not have been
made (which, if objection is made in respect of the first financial
statements delivered under Section 6.1 hereof, shall mean the
financial statements referred to in Section 5.4 hereof).
(b) Borrower shall deliver to the Lenders at the same
time as the delivery of any annual or quarterly financial statement
under Section 6.1 hereof (i) a description in reasonable detail of
any material variation between the application of accounting
principles employed in the preparation of such statement and the
application of accounting principles employed in the preparation of
the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence
of subsection (a) above and (ii) reasonable estimates of the
difference between such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of
compliance with the covenants set forth in Article 6 hereof, Borrower
will not change the last day of its fiscal year from December 31 of
each year, or the last days of the first three fiscal quarters in
each of its fiscal years from March 31, June 30 and September 30 of
each year, respectively, without the prior written approval of the
Majority Lenders.
1.4 Terminology. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender,
shall include all other genders; the singular shall include the
plural, and the plural shall include the singular. Titles of
Sections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement, and all
references in this Agreement to Sections, Subsections, paragraphs,
clauses, subclauses, Exhibits or Schedules shall refer to the
corresponding Section, Subsection, paragraph, clause, subclause of,
Exhibit or Schedule attached to, this Agreement, unless specific
16
<PAGE>
reference is made to the articles, sections or other subdivisions
of, Exhibits or Schedules to, another document or instrument. All
Exhibits and Schedules attached hereto are by reference made a part
hereof. All references to any instrument, document or agreement
shall, unless the context otherwise requires, refer to such
instrument, document or agreement as the same may be, from time to
time, amended, modified, supplemented, renewed, extended, replaced
or restated. In the event that the Section references contained in
any Mortgage granted to the Agent on an Eligible Project (a "Project
Mortgage") vary from the Section references set forth in the form of
Mortgage attached hereto as Exhibit D (the "Form Mortgage"), any
reference contained in this Agreement to a specific section of a
Mortgage shall, when applied to such Project Mortgage, be deemed to
refer to the section in the Project Mortgage which most closely
corresponds to the text of specified section in the Form Mortgage.
ARTICLE 2.
THE LOAN
SECTION 2.1 Commitment to Lend. Subject to the terms and
conditions set forth in this Agreement, so long as there exists no
(i) Default under Sections 7.1(a), 7.1(g) or 7.1(h) hereof, (ii)
other Default as to which Agent has given Borrower notice or (iii)
Event of Default, each Lender severally agrees to make loans (each
an "Advance" and collectively the "Advances") to Borrower from time
to time on any Business Day or LIBOR Business Day, as appropriate,
during the period from and including the Effective Date to, but not
including, the Term Loan Conversion Date (in the event the Loan is
converted into the Term Loan) or the Termination Date (in the event
the Loan is not converted into the Term Loan) in a principal amount
not to exceed the lesser of (a) such Lender's Commitment less such
Lender's Pro Rata Share of the aggregate face amount of outstanding
Letters of Credit or (b) such Lender's Pro Rata Share of the amount
equal to (i) the Borrowing Base less (ii) the aggregate face amount
of the outstanding Letters of Credit. Advances hereunder made at any
one time shall be in an aggregate principal amount of not less than
$200,000.00 or any larger multiple of $25,000.00 (except that any
Base Rate Advance may be in the aggregate amount of the unused
Commitments). Within the foregoing limits, Borrower may borrow under
this Section 2.1, prepay the Advances as provided in this Agreement,
and reborrow at any time prior to the Term Loan Conversion Date (in
the event the Loan is converted into the Term Loan) or the
Termination Date (in the event the Loan is not converted into the
Term Loan) under this Section 2.1. Borrower shall have the right,
upon (3) Business Days' prior written notice to Agent, to permanently
reduce the unutilized portion of the Commitments; provided that any
portion of the reduction shall be in the minimum amount of
$1,000,000.00 or in any integral multiple thereof.
SECTION 2.2 Letters of Credit.
(a) Subject to the terms and conditions set forth in this
Agreement, at any time and from time to time through the day that is
the earlier to occur of the Term Loan Conversion Date or thirty (30)
days prior to the Termination Date, the Agent shall cause the Issuing
Bank to issue such Letters of Credit for the account of Borrower as
the Borrower may request by a request for Letter of Credit; provided
that (i) upon issuance of such Letters of Credit, the sum of the
aggregate principal amount of all outstanding Advances plus the
aggregate face amount of all outstanding Letters of Credit shall not
exceed the lesser of (A) the Borrowing Base or (B) then applicable
aggregate amount of the Commitments; (ii) the aggregate face amount
of all outstanding Letters of Credit (including without limitation
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the requested Letter of Credit) shall not exceed Ten Million Dollars
($10,000,000); and (iii) unless all the Lenders otherwise consent in
writing, the term of any Letter of Credit shall not extend beyond the
Termination Date and no Letter of Credit shall contain an automatic
extension or renewal clause.
(b) Borrower shall deliver to the Agent a duly executed
request for Letter of Credit not later than 9:00 A.M., Pacific Time,
at least five (5) Business Days prior to the date upon which the
requested Letter of Credit is to be issued. The Borrower shall
further deliver to the Agent and the Issuing Bank such additional
instruments and documents as the Agent and/or the Issuing Bank may
require, in conformity with the then standard practices of its letter
of credit department, in connection with the issuance of such Letter
of Credit.
(c) The Agent shall, if it approves of the content of the
request for Letter of Credit (which approval shall not be
unreasonably withheld) give prompt written notice to the Lenders upon
the approval of the request, and subject to the conditions set forth
in this Agreement, cause the issuance of the Letter of Credit on or
before 5:00 p.m. Pacific Time, on or before the day five (5) Business
Days following receipt of the documents last due pursuant to Section
2.2(b). Upon issuance of a Letter of Credit, the Agent shall
promptly notify the Lenders of the amount and terms thereof. The
Agent shall provide copies of each Letter of Credit to the Lenders
promptly following issuance thereof and shall notify the Lenders
promptly of all payments, reimbursements, expirations, negotiations,
transfers and other activity with respect to outstanding Letters of
Credit.
(d) Upon the issuance of a Letter of Credit, each Lender shall
be deemed to have purchased a pro rata issuer participation therein
from the Issuing Bank in an amount equal to the Lender's Pro Rata
Share of the face amount of the Letter of Credit.
(e) If and to the extent that any amounts are drawn upon any
Letters of Credit the amount so drawn shall immediately be paid by
Agent to the Issuing Bank, and, from the date of payment thereof by
the Issuing Bank, shall be considered (i) so long as there exists no
Default or Event of Default, an Advance of the Agent for all purposes
hereunder and (ii) if there then exists a Default or Event of
Default, a purchase by the Agent of the Issuing Bank's right to
reimbursement in respect of such Letter of Credit.
(f) Promptly after payment by the Issuing Bank of any amount
drawn upon any Letter of Credit, the Agent shall, without notice to
or the consent of the Borrower, direct the Lenders to advance to the
Agent, their Pro Rata Share of the amount so drawn. The proceeds of
such advances shall be applied by the Agent to reimburse it for the
payment made by it to the Issuing Bank under the Letter of Credit.
All amounts paid by the Lenders pursuant to this Section 2.2(f) shall
be deemed to be (i) so long as there exists no Default or Event of
Default, Base Rate Advances made pursuant to this Agreement and (ii)
if there then exists a Default or Event of Default, a purchase by
each Lender of a participation in the Letter of Credit Obligations
in respect of such Letter of Credit.
(g) On the occurrence of (i) the Termination Date (in the
event the Loan is not converted into the Term Loan), or (ii) the Term
Loan Termination Date (in the event the Loan is converted into the
Term Loan), prior to the expiration of all Letters of Credit, the
Borrower shall provide to the Agent a standby letter of credit issued
by a bank satisfactory to the Agent, in form and substance
satisfactory to the Agent, in favor of the Agent in a face amount
equal to outstanding Letters of Credit on that date, or shall make
other provisions satisfactory to the Agent for the full
collateralization, by cash or cash equivalent, of such outstanding
Letter of Credit. In the event of failure of the Borrower to comply
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with the requirement of this Section 2.2(g), such portion of the
face amount of all outstanding Letters of Credit as to which the
Borrower has failed to comply shall be deemed to be immediately due
and payable.
(h) The issuance of any supplement, modification, amendment,
renewal, or extension to or of any Letter of Credit shall be treated
in all respects the same as issuance of a new Letter of Credit.
(i) Borrower assumes all risks of the acts or omissions of any
beneficiary or transferee of any Letter of Credit with respect to its
use of such Letter of Credit. Neither the Issuing Bank, the Agent,
any Lender nor any of their respective officers or directors shall
be liable or responsible for, nor shall Borrower's obligations
hereunder in respect of such Letters of Credit be impaired as a
result of:
(i) any lack of validity or enforceability of any Letter
of Credit or any other agreement or instrument relating thereto
(such Letter of Credit and any other agreement or instrument
relating thereto being, collectively, the "Letter of Credit
Documents");
(i) the use that may be made of any Letter of Credit or
any acts or omissions of any beneficiary or transferee in
connection therewith;
(ii) any statement or any other document presented under
a Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iii) the existence of any claim, set-off, defense
or other right that the Borrower may have at any time against
any beneficiary or any transferee of a Letter of Credit (or any
Persons for whom any such beneficiary or any such transferee
may be acting), the Issuing Bank or any other Person, whether
in connection with the transactions contemplated by the Letter
of Credit Documents or any unrelated transaction;
(iv) payment by the Issuing Bank against presentation of
documents that do not comply with the terms of a Letter of
Credit, including failure of any documents to bear any
reference or adequate reference to the Letter of Credit; or
(v) any other circumstances whatsoever in making or
failing to make payment under any Letter of Credit.
In furtherance and not in limitation of the foregoing, the Issuing
Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any
notice or information to the contrary
SECTION 2.3 Method of Borrowing.
(a) Application for Advance. Borrower shall deliver to Agent
a Notice of Borrowing not later than 10:00 A.M. (Pacific Standard
Time or Pacific Daylight Time, as applicable) at least one (1)
Business Day prior to the date such Advance is to be made, in the
case of a Base Rate Advance, and at least three (3) LIBOR Business
Days prior to the date such Advance is to be made, in the case of a
LIBOR Advance. Prior to delivering a Notice of Borrowing, Borrower
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may (without specifying whether the Advance shall be a Base Rate
Advance or a LIBOR Advance) request that Agent provide Borrower with
the most recent LIBOR Rate available to Agent. Agent shall endeavor
to provide such quoted rate to Borrower and to Lenders on the date
of such request.
(b) Funding.
(i) Promptly after receipt of a Notice of Borrowing under
Section 2.3(a), Agent shall send a copy thereof to each Lender
by telex or telecopy, or other similar form of transmission.
Each Lender shall deposit an amount equal to its Pro Rata Share
of the Advance requested by Borrower with Agent at its Lending
Office, in immediately available funds not later than 10:00
A.M. (Pacific Standard Time or Pacific Daylight Time, as
applicable) on the date such Advance is to be made. Upon
fulfillment of all applicable conditions set forth herein,
Agent shall make available to Borrower at Agent's Lending
Office, not later than 2:00 P.M. (Pacific Standard Time or
Pacific Daylight Time, as the case may be) on the date of each
Advance, the proceeds of such amounts received by Agent. The
failure of any Lender to deposit the amount described above
with Agent shall not relieve any other Lender of its
obligations hereunder to make its Pro Rata Share of the
Advance.
(ii) Unless Agent shall have been notified by any Lender
that such Lender will not make available to Agent such Lender's
Pro Rata Share of a proposed Advance, Agent may in its
discretion assume that such Lender has made such Advance
available to Agent in accordance with this Section 2.3(b) and
Agent may, if it chooses, in reliance upon such assumption,
make such Advance available to Borrower. If and to the extent
such Lender shall not so make its Pro Rata Share of the
proposed Advance available to Agent, such Lender and Borrower
severally agree to pay or repay to Agent within two (2) days
after demand the amount of such Advance together with interest
thereon, for each day from the date such Advance is made
available to Borrower until the date such amount is paid or
repaid to Agent at (A) in the case of Borrower, the interest
rate applicable at the time to other Lenders' Advances made on
the date of such Advance, (B) in the case of such Lender, the
Federal Funds Rate. If such Lender shall pay to Agent such
amount, such amounts so repaid shall constitute such Lender's
Advance for purposes of this Agreement. If such Lender shall
fail to pay such amount to Agent and Borrower repays such
amount to Agent, Borrower shall be entitled to pursue any
remedies it might have against such Lender under this Agreement
or at law or in equity for failure to make such Advance.
(c) Selection of Interest Period. Upon delivering a Notice
of Borrowing under Section 2.3(a) hereof, Borrower shall advise Agent
as to whether the Advance shall be (i) a LIBOR Advance, in which case
Borrower shall specify the applicable Interest Period therefor, or
(ii) a Base Rate Advance. Prior to 2:00 P.M. at least three (3)
LIBOR Business Days prior to the expiration of each Interest Period
with respect to a LIBOR Advance, Borrower shall give Agent notice (a
"Rate Selection Notice"), specifying whether such Advance shall, on
the last day of such Interest Period, be continued as a LIBOR Advance
or converted to a Base Rate Advance. With respect to any Base Rate
Advance, Borrower shall have the right, on any LIBOR Business Day,
as the case may be ("Conversion Date"), to convert such Base Rate
Advance to a LIBOR Advance, by giving Agent a Rate Selection Notice
of such selection at least three (3) LIBOR Business Days prior to
such Conversion Date. Each Rate Selection Notice shall either be in
writing or by telephone immediately followed by written notice. If
any Rate Selection Notice shall specify that said Advance shall be
a LIBOR Advance, such Rate Selection Notice shall also specify the
length of the succeeding Interest Period selected by Borrower with
respect to such Advance. If a Rate Selection Notice shall not have
been timely received by Agent in respect of a LIBOR Advance prior to
the expiration of the then-relevant Interest Period for such LIBOR
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Advance, then Borrower shall be deemed to have elected to continue
such Advance as a LIBOR Advance, with an Interest Period of thirty
(30) days. Promptly after receipt of a Rate Selection Notice under
this Section 2.3(c), Agent shall send a copy thereof to each Lender
by telex or telecopy, or similar form of transmission.
Notwithstanding anything to the contrary contained herein, (i)
no more than four (4) Interest Periods shall be in effect at any one
time with respect to LIBOR Advances; (ii) Borrower shall have no
right to select an Interest Period of longer than one (1) month if
at the time of such LIBOR Advance, the outstanding principal balance
of the Loan exceeds the Borrowing Base or, to the extent Borrower is
then permitted to request LIBOR Advances, if there exists any Default
hereunder; (iii) Borrower shall have no right to request an Interest
Period (A) in the event the Loan has not been converted into the Term
Loan, that extends beyond the Termination Date, or (B) in the event
the Loan has been converted into the Term Loan, that extends beyond
a date on which a quarterly principal payment on the Term Loan is due
unless, giving effect to such Interest Period, the aggregate amount
of LIBOR Advances having Interest Periods ending after such date is
not greater than the principal amount of the Term Loan scheduled to
be outstanding after such date; and (iv) Borrower shall have no right
to request a LIBOR Advance if (A) there then exists any (1) Event of
Default; (2) Default under Sections 7.1(a), 7.1(g) or 7.1(h) hereof,
(3) other Default as to which Agent has given Borrower notice, or (B)
the interest rate applicable thereto under Section 2.5 would exceed
the Maximum Rate in effect on the first day of the Interest Period
applicable to such LIBOR Advance.
Each Notice of Borrowing and each Rate Selection Notice shall
be considered delivered only upon actual receipt thereof by the
Agent, shall be irrevocable and binding on Borrower and, in respect
of any LIBOR Advance specified in such Notice of Borrowing or Rate
Selection Notice, Borrower shall indemnify Agent and each Lender
against any Consequential Loss incurred by Agent and each Lender as
a result of (i) any failure to fulfill, on or before the date
specified for such Advance, the conditions to such Advance set forth
herein, or (ii) Borrower's requesting that an Advance not be made,
continued or converted on the date specified for such Advance in the
Notice of Borrowing or Rate Selection Notice. A certificate of Agent
and each Lender establishing the amount due from Borrower according
to the preceding sentence, together with a description in reasonable
detail of the manner in which such amount has been calculated, shall
be conclusive in the absence of manifest error.
SECTION 2.4 Notes. Each Lender's Pro Rata Share of the Loan
shall be evidenced by a Note payable to the order of such Lender in
the principal face amount equal to such Lender's Commitment.
SECTION 2.5 Interest Rate.
(a) All Advances. The unpaid principal of each Base Rate
Advance shall bear interest from the date of such Advance to but not
including the date such Advance is either converted pursuant to
Section 2.3(c) or is repaid in full at a rate per annum that shall
from day to day be equal to the lesser of (i) the Base Rate in effect
from day to day, or (ii) the Maximum Rate. The unpaid principal of
each LIBOR Advance shall bear interest from the date of such Advance
to but not including the date such Advance is either converted
pursuant to Section 2.3(c) or is repaid in full at a rate per annum
that shall be equal to the lesser of (i) the LIBOR Rate for the then
applicable Interest Period plus one and one-half percent (1.50%), or
(ii) the Maximum Rate.
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(b) Default Rate. Upon the occurrence of an Event of Default,
all principal of, and to the extent permitted by applicable law,
interest on the Obligations shall bear interest until paid at the
lesser of (i) the Base Rate from time to time in effect plus two
percent (2%), or (ii) the Maximum Rate. Such lesser rate is referred
to herein and in the Loan Documents as the "Default Rate".
(c) Late Fee. Borrower acknowledges that late payment to
Agent will cause Agent and Lenders to incur costs not contemplated
by this Agreement, including, but not limited to, processing and
accounting charges. Accordingly, in the event Borrower fails to make
any payment hereunder within fifteen (15) days after the date such
payment is due and payable, Borrower shall pay to the Agent, for the
benefit of the Lenders, as liquidated damages for the purpose of
defraying the expense incident to handling such delinquent payment
and not as a penalty, a late charge equal to three percent (3%) of
the amount of such payment, whether such payment is of principal,
interest, fees, expenses or other amounts due hereunder or under the
Loan Documents; provided, however, that in the event that (i)
Borrower has not been invoiced for any payment hereunder (other than
principal payments) within fifteen (15) days after the date such
payment was due, and (ii) Borrower requested in writing such invoice
from Agent not later than ten (10) days after the date such payment
was due, Borrower shall not be required to pay such late fee unless
such payment remains unpaid fifteen (15) days after Borrower's
receipt of such invoice. Borrower and Agent agree that this late
charge represents a reasonable sum considering all of the
circumstances existing on the date hereof and represents a fair and
reasonable estimate of the costs that Agent and Lenders will incur
by reason of late payment. Borrower and Agent further agree that
proof of actual damages would be costly and inconvenient. Acceptance
of any late charge shall not constitute a waiver of the default with
respect to the overdue installment (except to the extent payment of
such late charge is accompanied by payment of the Obligations in
full), and shall not prevent Agent from exercising any of the other
rights available hereunder or any other Loan Document. Such late
charge shall be paid without prejudice to any other rights of Agent.
Payment of any late charge hereunder may be waived upon the consent
of the Majority Lenders.
(d) Recapture Rate. If the applicable interest rate ever
exceeds the Maximum Rate thereby causing the interest charged on the
Obligations to be limited to the Maximum Rate, then, to the extent
permitted by Applicable Law, any subsequent reductions in the
applicable interest rate shall not reduce the rate of interest
charged hereunder below the Maximum Rate until the total amount of
interest accrued on the Obligations equals the amount of interest
that would have accrued thereon if the applicable contract rate had
at all times been in effect.
SECTION 2.6 Special Provisions for LIBOR Advances.
(a) Inadequacy of LIBOR Pricing. If with respect to an
Interest Period for any LIBOR Advance, Agent reasonably determines
that, by reason of circumstances occurring subsequent to the date
hereof affecting the interbank eurodollar market generally, either
deposits in United States Dollars (in the applicable amounts) are not
being offered to Wells Fargo Bank in the interbank eurodollar market
for such Interest Period or that quotes of the LIBOR Rate are not
generally available, then Agent shall forthwith give notice thereof
to Borrower and Lenders, whereupon until Agent notifies Borrower that
the circumstances giving rise to such suspension no longer exist, (A)
the obligation of Lenders to make LIBOR Advances shall be suspended,
and (B) Borrower shall either (x) repay in full the then-outstanding
principal amount of the LIBOR Advances, together with accrued
interest thereon on the last day of the then-current Interest Period
applicable to such LIBOR Advances, or (y) convert such LIBOR Advances
to Base Rate Advances in accordance with Section 2.3(c) of this
Agreement
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on the last day of the then-current Interest Period applicable to
each such LIBOR Advance.
(b) Illegality of LIBOR Advances. If, after the date of this
Agreement, the adoption of any applicable law, rule or regulation,
or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank
or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender with any request
or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful
or impossible for any Lender to make, maintain or fund its LIBOR
Advances, such Lender shall forthwith give notice thereof to Agent
and Borrower. Before giving any notice pursuant to this Section
2.6(b) such Lender shall designate a different LIBOR lending office
if such designation will avoid the need for giving such notice and
will not be otherwise disadvantageous to such Lender (as determined
in good faith by such Lender). Upon receipt of such notice, Borrower
shall either (i) repay in full the then outstanding principal amount
of any of such Lender's LIBOR Advances, together with accrued
interest thereon, or (ii) convert such Lender's LIBOR Advances to
Base Rate Advances, on either (A) the last day of the then-current
Interest Period applicable to such LIBOR Advance if such Lender may
lawfully continue to maintain and fund such LIBOR Advance to such day
or (B) immediately if such Lender may not lawfully continue to fund
and maintain such LIBOR Advance to such day.
(c) Increased Costs. If, after the date hereof, any
Governmental Authority, central bank or other comparable authority,
shall at any time impose, modify or deem applicable any reserve
(including, without limitation, the LIBOR Reserve Requirement and any
other reserve imposed by the Board of Governors of the Federal
Reserve System), special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended
by, any Lender, or shall impose on any Lender (or its eurodollar
lending office) or the interbank eurodollar market any other
condition affecting its LIBOR Advances, such Lender's Note, its
obligation to make LIBOR Advances or its obligations to issue,
maintain or participate in Letters of Credit; and the result of any
of the foregoing is to increase the cost to such Lender of making or
maintaining its LIBOR Advances or of agreeing to issue or of issuing,
maintaining or participating in Letters of Credit, or to reduce the
amount of any sum received or receivable by such Lender under this
Agreement, or under such Lender's Note, by an amount deemed by such
Lender to be material, then, within five (5) days after demand by
such Lender, Borrower shall pay to such Lender such additional amount
or amounts as will compensate such Lender for such increased cost or
reduction with respect to such Lender's Note, its obligation to make
or maintain LIBOR Advances or its obligations to issue, maintain or
participate in Letters of Credit. Such Lender will use good faith
and reasonable efforts to designate a different lending office for
such Lender's LIBOR Advances if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the
sole opinion of such Lender, be disadvantageous to such Lender. A
certificate of such Lender claiming compensation under this Section
2.6(c) and setting forth in reasonable detail the calculation of the
additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. If such Lender demands
compensation under this Section 2.6(c) in respect of its LIBOR
Advances, then Borrower may at any time, upon at least five (5)
Business Days' prior notice to such Lender, either (i) repay in full
such Lender's then outstanding LIBOR Advances, together with accrued
interest thereon to the date of prepayment or (ii) convert such
Lender's LIBOR Advances to Base Rate Advances in accordance with the
provisions of this Agreement; provided, however, that Borrower shall
be liable for any Consequential Loss arising pursuant to such
actions, unless the requirement or condition giving rise to the
incurred costs is not generally applicable to lenders similar to the
affected Lender, but rather is applicable solely to such Lender.
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(d) Effect on Base Rate Advances. If notice has been given
pursuant to Section 2.6(a) or Section 2.6(b) requiring LIBOR Advances
of a Lender to be repaid or converted, then unless and until Agent
notifies Borrower that the circumstances giving rise to such
repayment no longer apply, all Advances shall be Base Rate Advances.
If Agent notifies Borrower that the circumstances giving rise to such
repayment no longer apply, Borrower may thereafter select Advances
from such Lender to be LIBOR Advances in accordance with Section 0
of this Agreement.
(e) Payments Not At End of Interest Period. If Borrower makes
any payment of principal with respect to any LIBOR Advance on any day
other than the last day of an Interest Period applicable to such
LIBOR Advance (other than any such payment required by Section 0
hereof), then Borrower shall reimburse Lenders on demand the
Consequential Loss incurred by Lenders as a result of the timing of
such payment. A certificate of any Lender setting forth in
reasonable detail the basis for the determination of the amount of
Consequential Loss shall be delivered to Borrower by Agent and shall,
in the absence of manifest error, be conclusive and binding. Any
conversion of a LIBOR Advance to a Base Rate Advance on any day other
than the last day of the Interest Period for such LIBOR Advance shall
be deemed a payment for purposes of this Section 0.
(f) Each Lender shall notify Borrower and the Agent of any
event occurring after the date of this Agreement entitling such
Lender to compensation under Section 2.6(c) within 45 days after such
Lender obtains actual knowledge thereof; provided that if any Lender
fails to give such notice to Borrower within 45 days after it obtains
actual knowledge of such an event, such Lender shall, with respect
to compensation payable pursuant to such subsection (c) in respect
of any costs resulting from such event, only be entitled to payment
under subsection (c) for costs incurred from and after the date 45
days prior to the date that such Lender gives such notice.
SECTION 2.7 Payments.
(a) Payment of Interest. Interest on the unpaid principal
amount of each Advance shall be payable monthly as it accrues on the
first day of each month, commencing with the first such day occurring
after the date of the Initial Advance, and thereafter until the Loan
is paid in full.
(b) Payment of Principal of Loan. Subject to Section 2.12,
the Loan shall be due and payable in full on the Termination Date.
(c) Payment of Principal of Term Loan. Borrower shall repay
the principal balance of the Term Loan in twelve equal consecutive
quarterly installments, with the first installment due on the first
day of the month immediately following the date which is ninety (90)
days after the Term Loan Conversion Date, the second through eleventh
installments due on the first day of the month every three (3) months
thereafter, and the final installment due on the Term Loan
Termination Date.
(d) Optional Prepayments. Borrower may, upon at least one (1)
Business Day's notice to Agent, prepay the Loan in whole at any time,
or from time to time in part in an amount equal to $100,000.00 or
any greater amount which would reduce the outstanding principal
balance of the Loan to a multiple of $100,000.00, by paying the
principal amount to be prepaid together with accrued interest thereon
to the date of prepayment; provided, however, that if Borrower shall
prepay the principal of any LIBOR Advance on any date other than the
last day of the Interest
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Period applicable thereto, Borrower shall simultaneously therewith
make the payments required by Section 2.1 hereof; provided further,
however, that Borrower shall not make any prepayment which would
reduce the outstanding principal balance of the Loan to zero unless
Borrower concurrently reduces the Commitments to zero pursuant to
Section 2.1. Any such prepayment made on the Term Loan on or after
the Term Loan Conversion Date shall be applied to the principal
installments of the Loan in the inverse order of their maturity.
(e) Mandatory Prepayments.
(i) In the event the sum of the outstanding principal
balance of the Advances made by any Lender plus such Lender's Pro
Rata Share of the aggregate face amount of the outstanding Letters
of Credit exceeds such Lender's Commitment, Borrower shall, within
two (2) days after demand therefor, pay to Agent for the benefit of
such Lender, the amount by which such Advances and the Lender's Pro
Rata Share of the outstanding Letters of Credit exceeds such lender's
Commitment.
(ii) In the event the sum of the outstanding principal
balance of the Loan plus the aggregate face amount of the outstanding
Letters of Credit exceeds the Borrowing Base at any time other than
by reason of a reduction of the Borrowing Base pursuant to Section
3.1(b)(ii), Borrower shall, within thirty (30) days after such date,
deliver to each Lender a plan acceptable to the Lenders for bringing
the Loan within the Borrowing Base within ninety (90) days after the
acceptance of such plan through the payment of such excess, the
admission of additional Projects into the Borrowing Base, or through
other means acceptable to Lenders in their sole discretion. Lenders
agree that they will review and respond to such proposed plan in a
reasonably prompt manner. In the event either (A) Borrower fails to
deliver an acceptable plan to the Lenders within said thirty (30)
days or (B) the Loan continues to exceed the Borrowing Base for
ninety (90) days following delivery of an acceptable plan (or, if the
Lenders, in their discretion, consent to a period longer than 90 days
as a part of any such plan, beyond the end of such longer period),
Borrower shall prepay the amount of the Loan in excess of the
Borrowing Base, together with accrued interest thereon (collectively,
the "Overadvance Amount"), as follows:
(1) on such thirtieth (30th) day, ninetieth (90th) day
or the last day of such longer period as the Lenders, in their
discretion, have approved, as the case may be, (the "Applicable
Date"), Borrower shall prepay an amount equal to the lesser of
the Overadvance Amount and the outstanding principal amount of
Base Rate Advances;
(2) to the extent that the outstanding principal amount
of Base Rate Advances are less than the Overadvance Amount, on
the last day of each Interest Period to expiring after the
Applicable Date, Borrower shall prepay an amount equal to the
lesser of the amount of the LIBOR Advance to which such
Interest Period relates and the unpaid portion of the
Overadvance Amount; and
(3) on thirtieth (30th) day after the Applicable Date,
Borrower shall prepay the remaining portion of the Overadvance
Amount.
(iii) Failure by Borrower to have complied with the
foregoing in a timely manner shall constitute an Event of Default
without further notice or grace period hereunder. No further
Advances, or release of all or any portion of any Eligible Project,
shall be permitted so long as such excess borrowing condition shall
continue to exist. Nothing in this Section 2.7(e) shall excuse
Borrower's
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compliance with all terms, conditions, covenants and other
obligations imposed upon it under the Loan Documents during the
period of such excess borrowing, nor in any manner condition or
impair Agent's or Lenders' rights thereunder in respect of any such
breach thereof.
(f) General Provisions as to Payments. Borrower shall make
each payment of principal of, and interest on, the Loan or fees
payable hereunder, not later than 11:00 A.M. (Pacific Standard Time
or Pacific Daylight Time, as the case may be) on the date when due,
without offset, deduction or counterclaim, in Federal or other funds
immediately available, at Agent's Lending Office. Whenever any
payment of principal of, or interest on, the Loan or fees (if any)
shall be due on a day which is not a Business Day, the date for
payment thereof shall be extended to the next succeeding Business
Day. If the date for any payment of principal is extended by
operation of law or otherwise, interest thereon shall be payable for
such extended time.
(g) Application of Recoveries. Except to the extent otherwise
provided in Section 8.13 hereof, all payments made and actually
received by the Agent in respect of the Loan (from any person or
source including, without limitation, proceeds of title insurance
policies with respect to any Eligible Project) shall be applied in
the following order of priority:
(i) to the reimbursement of any reasonable costs
incurred by the Agent to administer, enforce, collect or deal with
the Loan (including payments made pursuant to Section 8.11 or Section
8.12 hereof) (or to reimbursement of the Lenders to the extent such
costs have been paid by the Lenders) (based on Pro Rata Shares
thereof);
(ii) to the repayment of any Protective Advances (to
the extent not paid pursuant to clause (i) above) (based on Pro Rata
Shares thereof);
(iii) to the payment of all interest (including default
interest) due and payable on the Notes (based on Pro Rata Shares
thereof);
(iv) to the payment of fees payable under the Loan
Documents (based on Pro Rata Shares thereof); and
(v) to the payment of principal of the Notes (based
on Pro Rata Shares thereof).
Agent shall wire transfer to each Lender, at such Lender's bank
account as designated by such Lender to Agent in writing, its Pro
Rata Share of any payments (to the extent payable to Lender pursuant
to this Section 2.7(g)) within one (1) Business Day of Agent's
receipt of such payment. Agent shall pay to the Lenders interest
thereon, at the Federal Funds Rate, from the Business Day following
receipt of such funds by Agent until such funds are paid in
immediately available funds to the Lender. The Agent shall in any
event not be bound to inquire into or determine the validity, scope
or priority of any interest or entitlement of any Lender and may
suspend all payments and seek appropriate relief (including, without
limitation, instructions from the Majority Lenders or all Lenders,
as applicable, or an action in the nature of interpleader) in the
event of any doubt or dispute as to any apportionment or distribution
contemplated hereby. In the absence of gross negligence or willful
misconduct, the Agent shall not be liable for any apportionment or
distribution of payments made by it in good faith pursuant to this
Section, and if any such apportionment or distribution is
subsequently determined to have been made in error, the sole recourse
of any person to whom payment was 26
<PAGE>
due, but not made, shall be to recover from the recipients of such
payments any payment in excess of the amount to which they are
determined to have been entitled.
(h) Excess Payments. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right
of set-off or otherwise) on account of its interest in the Loan in
excess of its Pro Rata Share in the Loan, then such Lender shall
forward such excess payment to Agent and Agent shall distribute such
excess payment to each Lender Pro Rata Shares thereof; provided,
however, that if all or any portion of such excess payment is
thereafter recovered by the Borrower or other party entitled thereto
through legal action or otherwise, each Lender shall reimburse the
party returning such excess payment in an amount equal to such
Lender's Pro Rata Share of the excess payment.
SECTION 2.8 Fees.
(a) Unused Fee. Borrower agrees to pay to the Agent, for the
benefit of the Lenders an Unused Facility Fee for each calendar
quarter, or portion thereof, during which any of the Commitments are
in effect, during the period commencing on the date hereof and
continuing to but not including the Term Loan Conversion Date (in the
event the Loan is converted into the Term Loan) or the Termination
Date (in the event the Loan is not converted into the Term Loan),
equal to the average daily unused portion of the Commitments during
such quarter times one-eighth percent (_%) per annum; provided,
however, that if the average daily unused portion of the Commitments
is greater than fifty percent (50%) of the Commitment, during any
quarter (or portion thereof for which such fee is computed), such
Unused Facility Fee shall be equal to the sum of (i) fifty percent
(50%) of the Commitments times one-eighth percent (1/8%) per annum,
plus (ii) the amount by which the average daily unused portion of the
Commitments exceeds fifty percent (50%) of the Commitments, times
one-quarter percent (1/4%) per annum. Such Unused Facility Fee on the
unused portion of the Commitments shall be payable quarterly in
arrears on the first day of each December, March, June and September,
commencing on December 1, 1996, and continuing regularly thereafter
so long as the Commitment is in effect, and shall also be payable on
the Term Loan Conversion Date or the Termination Date, as applicable.
By way of illustration, the Unused Facility Fee for the calendar
quarter ending on September 30 shall be due and payable on December
1. Borrower acknowledges that the Unused Facility Fees payable
hereunder are bona fide commitment fees and are intended as
reasonable compensation to Lenders for committing to make funds
available to Borrower as described herein and for no other purposes.
For purposes of this Section 2.8(a), the unused portion of the
Commitments shall mean the amount by which the aggregate amount of
the Commitments exceeds the sum of (x) the aggregate principal amount
of the outstanding Advances plus (y) the aggregate face amount of the
outstanding Letters of Credit.
(b) Extension Fee. If, pursuant to Section 2.11, Lenders
grant an extension of the Termination Date, Borrower agrees to pay
to Agent, for the benefit of the Lenders, an extension fee equal to
fifteen one-hundredths percent (0.15%) of the aggregate amount of the
Commitments at such time. Such fee shall be payable on the date on
which Lenders grant such extension.
(c) Term Loan Conversion Fee. If, pursuant to Section 2.12,
the outstanding balance of the Loan is converted into the Term Loan,
Borrower agrees to pay to Agent, for the benefit of the Lenders, an
annual conversion fee, payable on each of the first anniversary and
the second anniversary of the Term Loan Conversion Date, equal to
fifteen one-hundredths percent (0.15%) of the principal balance of
the Term Loan outstanding on each such date (taking into account any
principal payment made on such dates).
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(d) Other Fees. Borrower shall pay Agent such fees as are
provided for in the fee agreement between Agent and Borrower, as set
forth in that certain letter dated September 26, 1996 from Agent to
Borrower.
(e) Letter of Credit Fees. As additional consideration for
the issuance of any Letters of Credit pursuant to Section 2.2 hereof,
Borrower agrees to pay to the Agent, for the account of the Lenders
in accordance with their respective Pro Rata Shares, a letter of
credit fee, in addition to the processing, administrative and similar
fees normally charged by and payable to the Issuing Bank in
connection with the issuance of Letters of Credit and any other sums
due pursuant to Article 3 hereof, equal to one and one-half percent
(11/2%) per annum of the average daily aggregate undrawn amount of the
Letters of Credit, payable quarterly on the last day of each fiscal
quarter of Borrower and on the Termination Date.
SECTION 2.9 Computation of Interest and Fees. Fees and
interest on the Loan and the Letters of Credit shall be computed on
the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day).
SECTION 2.10 Option to Replace Lenders. If any Lender,
other than Agent, shall:
(a) become a Defaulting Lender;
(b) has either (i) declined to approve as Eligible
Projects three or more Projects which the Agent and each of the
remaining Lenders have approved as Eligible Projects or (ii)
approved three or more Projects as Eligible Project on the
condition that the Approved Percentage for each such Project is
at least fifteen percent (15%) below the average Approved
Percentage approved by the each of the remaining Lenders for
such Project;
(c) become subject to the provisions of Section 2.6(b);
(d) make any demand for payment or reimbursement
pursuant to Section 2.6(c) or Section 9.7 hereof; or
(e) has declined to approve an Extension Request and
each of the remaining Lenders have approved such Extension
Request.
then, in any of the foregoing cases, provided that (x) there does not
then exist any Default or Event of Default and (y) in the case of the
circumstances described in clauses (c) and (d), the circumstances
resulting in such demand for payment or reimbursement under Section
2.6(c) or Section 9.7 or the applicability of Section 2.6(b) are not
applicable to all Lenders, the Borrower may either (i) designate
another financial institution (such financial institution being
herein called a "Replacement Lender") acceptable to the Agent (which
acceptance will not be unreasonably withheld) and which is not an
Affiliate of the Borrower, to assume such Lender's Commitment
hereunder and to purchase the Loan of such Lender and such Lender's
rights under this Agreement and the Note held by such Lender, all
without recourse to or representation or warranty (except as to title
of such Lender's portion of the Loan and as to the authority of such
Lender to transfer the same) by, or expense to, such Lender, for a
purchase price equal to the outstanding principal amount of the Loan
payable to such Lender plus any accrued but unpaid interest on such
Loan and accrued but unpaid fees owing to such Lender plus any
29
<PAGE>
amounts payable to such Lender under Section 2.6(c) or Section 9.7,
if any, hereof, and upon such assumption, purchase and substitution,
and subject to the execution and delivery to the Agent by the
Replacement Lender of documentation reasonably satisfactory to the
Agent (pursuant to which such Replacement Lender shall assume the
obligations of such original Lender under this Agreement), the
Replacement Lender shall succeed to the rights and obligations of
such Lender hereunder or (ii) pay to the Agent, as cash collateral,
an amount equal to such Lender's Pro Rata Share of the outstanding
Letters of Credit and pay to such Lender the outstanding principal
amount of the Advances payable to such Lender plus any accrued but
unpaid interest on such Advances and accrued but unpaid fees owing
to such Lender plus any amounts payable to such Lender under Section
2.6(c) or Section 9.7 hereof. In the event that the Borrower
exercises its rights under the preceding sentence, the Lender against
which such rights were exercised shall no longer be a party hereto
or have any rights or obligations hereunder. The remedies of
Borrower under this Section 2.10 shall be cumulative of any other
remedies Borrower may have against a Defaulting Lender under this
Agreement or at law or in equity.
SECTION 2.11 Extension of Termination Date. Borrower
may request Agent and Lenders to extend the current Termination Date
by successive one-year intervals by executing and delivering to Agent
at least ninety (90) days but no more than one hundred twenty (120)
days prior to the date which is one (1) year prior to the current
Termination Date, a written request in the form of Exhibit I (an
"Extension Request"). Agent shall forward to each Lender a copy of
each Extension Request delivered to Agent promptly upon receipt
thereof. Borrower understands that this Section 2.11 has been
included in this Agreement for Borrower's convenience in requesting
an extension and acknowledges that none of Lenders nor Agent has
promised (either expressly or impliedly), nor has any obligation or
commitment whatsoever, to extend the Termination Date at any time.
If all Lenders shall have notified Agent on or prior to the date
which is forty-five (45) days prior to the date which is one (1) year
prior to the current Termination Date that they accept such Extension
Request, the Termination Date shall be extended for one (1) year.
If one and only one Lender shall not have notified Agent on or prior
to the date which is forty-five (45) days prior to the date one year
prior to the Termination Date that it accepts such Extension Request,
the Termination Date shall not be extended unless Borrower proceeds
pursuant to Section 2.10, in which event the Termination Date shall
be extended as to all Lenders which have accepted such Extension
Request. If two or more Lenders shall not have notified Agent on or
prior to the date which is forty-five (45) days prior to the date one
year prior to the Termination Date that they accept such Extension
Request, the Termination Date shall not be extended. Agent shall
promptly notify Borrower whether the Extension Request has been
accepted or rejected.
SECTION 2.12 Term Loan Conversion. Subject to the terms
and conditions of this Agreement, if any Extension Request of
Borrower shall be denied, Borrower may then elect to convert the
aggregate principal amount of the Loan then outstanding into a term
loan owing to Lenders (the "Term Loan") provided (a) Borrower has
given Agent notice of Borrower's intention to so convert the Loan not
less than thirty (30) days following receipt by Borrower of notice
from Agent that Borrower's Extension Request has been rejected, and
(b) the conditions set forth in Section 4.4 have been satisfied as
of the date one year prior to the current Termination Date. Any such
conversion shall become effective on the date which is one (1) year
prior to the Termination Date (the "Term Loan Conversion Date").
Upon the effectiveness of the conversion of the outstanding principal
balance of Loan into the Term Loan as contemplated by this Section,
Borrower shall have no right to request or borrow, and no Lender
shall have any obligation to make, any Advance. If the Loan is not
converted to the Term Loan, the Loan shall be due and payable in full
on the Termination Date. 29
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ARTICLE 3.
BORROWING BASE; ELIGIBLE PROJECTS
SECTION 3.1 Borrowing Base.
(a) Admission of Projects into the Borrowing Base.
(i) As of the date hereof, the Lenders have admitted into
the Borrowing Base as Eligible Projects the Projects listed on
Schedule 3.1 attached hereto, with the amount of the Borrowing
Base attributable thereto as is set forth in respect of each
such Project on Schedule 3.1.
(ii) If Borrower desires that Lenders admit a Project
into the Borrowing Base, Borrower shall notify Agent thereof in
writing. No Project will be evaluated by Lenders for potential
inclusion into the Borrowing Base unless it is a domestic
operating regional retail shopping mall or retail strip
shopping center, and unless and until Borrower delivers to
Agent and each Lender the following, in form and substance
acceptable to Agent:
(A) A current operating statement for such Project
audited or certified by Borrower as being true and
correct in all material respects and prepared in
accordance with GAAP and a comparative sales report for
the current period and for the previous two (2) fiscal
years or, if such Project has been in operation only for
a lesser period, such lesser period; and
(B) A current rent roll for such Project,
certified by Borrower as being true and correct in all
material respects and a operating and occupancy history
of such Project for the previous three (3) fiscal years
or, if such Project has been in operation only for a
lesser period, such lesser period, in form satisfactory
to Agent, and certified by Borrower and the management
agent of such Project to be true and correct.
(iii) Within ten (10) days after the Agent and the Lenders
have received the foregoing documents and information, each
Lender shall notify the Agent whether or not such Lender is
willing to consider such Project and the Agent shall notify the
Borrower as to whether the Agent and the Lenders are prepared
to consider such Project for inclusion in the Borrowing Base;
provided, however, that failure to give such notice within such
period shall not constitute approval to consider such Project
as an Eligible Project. If the Lenders agree to so consider
such Project, Agent will promptly notify Borrower and obtain an
Appraisal of such Project in order to determine the Appraised
Value thereof. Upon request of Borrower, Agent shall notify
Borrower of the reasons, to the Agent's knowledge, for any
Lender's rejection of a Project as an Eligible Project. No
Project will be further evaluated by Lenders for potential
inclusion into the Borrowing Base unless and until Borrower
delivers to the Agent and each Lender the following, in form
and substance acceptable to Agent and/or the Majority Lenders:
(A) A copy of the most recent ALTA Owner's Policy
of Title Insurance covering such Project showing the
identity of the fee titleholder thereto and all matters
of record;
(B) Copies of all documents of record reflected in
Schedule B of the Owner's Policy of Title Insurance and
a copy of the most recent real estate tax bill and notice
of assessment;
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(C) A survey of such Project certified by a
surveyor licensed in the applicable jurisdiction to have
been prepared in accordance with the then effective
Minimum Standard Detail Requirements for ALTA/ACSM Land
Title Surveys;
(D) A "Phase I" environmental assessment of such
Project not more than twelve (12) months old;
(E) A certificate from a licensed engineer or
other professional satisfactory to Agent that such
Project is not located in a Special Flood Hazard Area as
defined by the Federal Insurance Administration;
(F) Copies of (I) all Major Leases, (II) all Major
Agreements, (III) the form or forms of tenant lease used
at such Project, and (IV) all material maintenance or
service agreements affecting such Project;
(G) In the case of a Project which was owned by
Borrower or any Wholly Owned Subsidiary of Borrower or
Subpartnership on the Effective Date, a summary, prepared
by a Senior Officer or appropriate vice president of the
CBL Properties, Inc., of any engineering, mechanical,
structural or maintenance studies performed with respect
to such Project or, in the case of any other Project,
copies of any engineering, mechanical, structural or
maintenance studies performed (if not previously
performed, such studies shall be required by Agent on
behalf of Lenders) with respect to such Project;
(H) Evidence that such Project complies with
applicable zoning and land use laws;
(I) A schedule of all personal property, including
intangible personal property owned by Borrower or any
Wholly Owned Subsidiary of Borrower or Subpartnership and
used in connection with the maintenance or operation of
such Project; and
(J) Such other information reasonably requested by
Agent in order to evaluate the Project for potential
inclusion in the Borrowing Base.
(iv) Within thirty (30) days after the delivery to the
Lenders of all information and other documents required hereby
or requested by the Agent relating to the Project proposed by
Borrower as an Eligible Project (including, but not limited to,
an Appraisal in respect of such Project), each Lender shall
notify the Agent whether such Lender approves such Project as
an Eligible Project and the Agent shall provide Borrower with
written notice of whether the Supermajority Lenders have
approved a Project as an Eligible Project and, if so approved,
the Approved Percentage applicable to such Project; provided,
however, that failure to give such notice within such period
shall not constitute approval of such Project as an Eligible
Project; provided, further, that is such Project is not
approved as an Eligible Project, the Agent shall, upon the
request of Borrower, notify Borrower as to Agent's
understanding of why such Project was not approved as an
Eligible Project;
(v) Upon acceptance by Supermajority Lenders and
execution and delivery of documents and completion of all other
closing requirements imposed by Agent, which shall include the
Collateral Documents and other items described in Section 4.3
and such other items or documents as may be
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appropriate under the circumstances, including updates of the
documents described in Section 3.1(a)(ii) and Section
3.1(a)(iii)(C),(D) (if then more than twelve (12) months old),
(F) and (I), such Project shall become an Eligible Project
admitted into the Borrowing Base.
(vi) The Lenders may, in their sole discretion, notify
Borrower that a Project that is not otherwise an Eligible
Property, may be included in the Borrowing Base, provided that
Agent or the Lenders may require additional terms and
conditions (including a lower Approved Percentage or a
different method of calculating the Permanent Loan Estimate) to
be evidenced in writing as a supplement to this Agreement in
order for such Project to be an Eligible Project and to be
admitted into the Borrowing Base.
(vii) If the Appraised Value of a Project is adjusted
from that set forth in the Appraisal relating to such Project
as a result of Agent's internal review, Agent shall advise the
Borrower and, upon request of Borrower, provide a reasonably
detailed report describing the nature and amount of such
adjustments; provided, however, that failure to provide such a
report shall not affect the Appraised Value of a Project;
(viii) Pursuant to Section 9.3 hereof, Borrower shall pay
to Agent all reasonable third-party out-of-pocket expenses
(which shall be deemed to include, if outside counsel is not
used by the Agent, the allocated cost of in-house counsel of
Agent) of Agent incurred in connection with Agent's review of
requests for a Project to be admitted into the Borrowing Base.
(ix) If it shall be unlawful for Agent to require
Borrower to pay any taxes with respect to a Project or the
Collateral Documents covering a Project, then the Agent may, in
its sole discretion, refuse to submit such Project to the
Lenders for consideration whether such Project shall be an
Eligible Project and be admitted into the Borrowing Base, or,
if such Project has been admitted into the Borrowing Base, then
the Agent or the Lenders may, in its or their sole discretion,
elect to remove such Project from the Borrowing Base.
(b) Borrowing Base. The Borrowing Base for the Projects shall
be, as of any date, equal to (i) the lesser of (A) the sum of the
Approved Percentage of the Appraised Value of each of the Eligible
Projects or (B) the aggregate Permanent Loan Estimates for the
Eligible Projects less (ii) reserves established pursuant to Section
7.5 hereof. In all events, the Borrowing Base is subject to
reduction in the manner set forth in this Agreement including,
without limitation, Section 6.3 and Section 7.4 hereof.
(c) Computation of Net Operating Income. Borrower shall
deliver to Agent quarterly computations of Net Operating Income for
each Eligible Project with the Borrowing Base information required
pursuant to Section 0 herein. Agent shall notify Borrower in writing
of any additional adjustments to Net Operating Income required by
Agent and corresponding adjustments to the Borrowing Base (if any).
(d) Release of Eligible Projects. Upon repayment and
satisfaction in full of all Obligations and the termination of all
Commitments and this Agreement, Agent will release the Collateral
Documents with respect to each of the Eligible Projects. From time
to time Borrower may request, upon not less than thirty (30) days
prior written notice, that an Eligible Project or portion thereof be
released from the Liens created by the Collateral Documents
applicable thereto, which release ("Property Release") shall be
delivered by Agent if all of the following conditions are satisfied
as of the date of such Property Release:
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(i) after giving effect to such Property Release, any of
Post Oak Mall, Georgia Square Mall or any regional mall which
may be included in the Borrowing Base and is determined by the
Majority Lenders to be of equivalent financial strength to any
of the foregoing malls, will remain as an Eligible Project in
the Borrowing Base;
(ii) no Default or Event of Default has occurred and is
then continuing or will occur after giving effect to such
Property Release and the reduction in the Borrowing Base by
reason of the release of all or a portion of such Eligible
Project;
(iii) the Termination Date has not occurred by reason
of the events described in clauses (b) or (c) of the definition
thereof;
(iv) Borrower shall have delivered to Agent a Borrowing
Base Certificate reflecting the Borrowing Base after giving
effect to such Property Release;
(v) Borrower shall have delivered to Agent all documents
and instruments reasonably requested by Agent including,
without limitation, the following:
(A) a survey of the portion of the Eligible
Project to be released;
(B) the quitclaim deed or other instrument to be
used to effect such release; and
(C) an endorsement to the mortgagee title
insurance policy in effect with respect to the
affected Eligible Project.
(vi) Agent shall have determined that the outstanding
principal balance of the Loans will not exceed the Borrowing
Base after giving effect to such Property Release and any
prepayment to be and/or the acceptance of any prepayment to be
made and/or the acceptance of any Project as an additional or
replacement Eligible Project in the Borrowing Base to be given
concurrently with such Property Release; and
(vii) with respect to a Property Release relating to
a portion of an Eligible Project, (A) the value of such
Property is $1,000,000.00 or less and (ii) after giving effect
to the proposed Property Release, the aggregate value of all
Property Releases made in respect of such Eligible Property is
$5,000,000.00 or less.
If following any such Property Release, the Wholly-Owned Subsidiary
or Subpartnership owning the Project so released does not have any
ownership interest in any of the remaining Collateral, the Agent and
the Lenders shall, at Borrower's request, release such Wholly-Owned
Subsidiary or Subpartnership from any guaranty of the Obligations
executed by it.
SECTION 3.2 Leases and Major Agreements.
(a) Borrower shall, or shall cause any Wholly Owned
Subsidiary of Borrower or Subpartnership Owning the applicable
Eligible Project to, (i) submit any and all proposed Major Agreements
and Major Leases to Agent for approval prior to the execution
thereof, which approval shall not be unreasonably withheld; (ii) duly
and punctually perform and comply with any and all material
representations,
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warranties, covenants and agreements expressed as binding upon
Borrower under any Major Agreement or Major Lease; (iii) proceed in
a commercially reasonable manner to maintain each of the Major
Agreements and Major Leases in full force and effect during the term
thereof; (iv) appear in and defend any action or proceeding in any
manner connected with any of the Major Agreements and Major Leases;
(v) deliver to Agent execution counterparts of all Major Agreements
and Leases; (vi) act in a commercially reasonable manner in entering
into, performing and enforcing the Major Agreements and the Leases;
and (vii) deliver to Agent such further information, and execute and
deliver to Agent such further assurances and assignments, with
respect to the Major Agreements and Leases as Agent may from time to
time reasonably request. Without Agent's prior written consent,
Borrower shall not (A) do or knowingly permit to be done anything to
materially impair the value of any of the Major Agreements or Major
Leases; (B) except for deposits not to exceed one month's rent for
any one lessee, collect any of the Rent more than one (1) month in
advance of the time when the same becomes due; (C) discount any
future accruing Rent; (D) amend or modify any of the financial or
other economic terms of any Major Agreement or Major Lease; (E)
terminate any Major Agreement or Major Lease other than as a result
of a material default thereunder; or (F) assign or grant a security
interest in or to any of the Major Agreements or Leases.
(b) Borrower shall not, and shall not permit any
Subsidiary or Subpartnership owning an Eligible Project to, amend,
modify in any material manner, or terminate its management agreement
with CBL Management, Inc. except upon thirty (30) days prior written
notice to Agent. If such proposed amendment or modification limits
or extinguishes Borrower's absolute right to terminate the management
agreement upon thirty (30) days notice or Agent notifies Borrower
that, in Agent's judgment, such proposed amendment, modification or
termination, as applicable, will either (i) increase the management
fees, reimbursements or other payments to manager to levels which are
in excess of applicable market levels or (ii) have a material adverse
effect upon Borrower or any Affiliate or Subsidiary of Borrower or
its ability to perform its obligations under the Collateral
Documents, then Borrower shall not enter into such amendment,
modification or termination without the consent of Majority Lenders;
provided however, that any such termination which is required by
Applicable Law in order for CBL Properties, Inc. to maintain its
status as a real estate investment trust shall not require such
consent. Borrower shall not enter into a management agreement with
a manager other than CBL Management, Inc., or another affiliate or
subsidiary of Borrower, in respect of any Eligible Project without
the prior written consent of Majority Lenders.
(c) Within sixty (60) days after the execution of each
Major Lease, Borrower agrees to deliver or to cause to be delivered
to Agent a fully executed and acknowledged non-disturbance,
attornment, estoppel and subordination agreement from the tenant
under such Major Lease. With respect to all Leases, Borrower agrees
to exercise diligent efforts to deliver to Agent fully executed
estoppel certificates from each tenant at such times as Agent may
reasonably request, and Agent agrees to execute attornment agreements
with each such tenant who requests such an agreement; provided,
however, that such tenant is not in default of any of its obligations
under its Lease. At Agent's request, Borrower shall also exercise
diligent efforts to deliver fully executed estoppel certificates
executed by the parties to the Major Agreements. All agreements
required under the terms of this Section 3.2(c) shall be in form and
substance satisfactory to Agent in its sole but reasonable
discretion.
SECTION 3.3 Appraisals. (a) Prior to classifying any
Project as an Eligible Project, the Agent will cause, at Borrower's
expense, an Appraisal to be
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made of such Project for use in determining the Appraised Value
thereof. From time to time an Eligible Project may be reappraised,
at Borrower's option and expense, upon notice by Borrower to Agent
of its exercise of its option to reappraise a Project, in which event
Agent shall cause such Appraisal or Appraisals to be made. Agent
shall disclose the results of such Appraisal to Borrower after
acceptance of such Appraisal by Agent.
(b) In addition, no later than June 28, 1998, upon five
(5) Business Days prior written notice to Borrower, Agent shall, at
Borrower's expense, cause an Appraisal of all of the Eligible
Projects to be performed, to redetermine the Appraised Value thereof.
(c) In addition, at any time and from time to time (but
no more often than once per year as to each Eligible Project), upon
five (5) Business Days prior written notice to Borrower, Agent may,
at Lenders' expense, cause an Appraisal of any or all Eligible
Projects to be prepared, to redetermine the Appraised Value thereof.
(d) In addition, at any time and from time to time, upon
five (5) Business Days prior written notice to Borrower, Agent may,
at Borrower's expense, redetermine the Appraised Value of any
Eligible Project if (i) in Agent's reasonable judgment a material
adverse change has occurred with respect to such Eligible Project,
including without limitation, an anchor or tenant under a Major Lease
in an Eligible Project closes or vacates its premises and no
commercially reasonably replacement is obtained, or a (ii) major
casualty or condemnation has occurred with respect to such Eligible
Project, or (iii) reasonably necessary or advisable in order to
comply with Legal Requirements applicable to Agent or any Lender.
SECTION 3.4 Major Construction. If Borrower or any Wholly
owned Subsidiary or Subpartnership intends to engage in any
construction, remodeling or demolition project or series of related
projects, with respect to an Eligible Project (each, a "Construction
Project"), the aggregate cost of which will exceed $1,000,000.00,
Borrower shall first notify Agent, provided that (i) if any
Construction Project (whether or not carried on simultaneously or in
conjunction with other Construction Projects) consists of
construction of improvements which would materially adversely affect
the value of such Eligible Project or (ii) the aggregate cost of such
Construction Project (other than for tenant improvements) will exceed
$5,000,000.00 (a "Major Construction Project"), such Major
Construction Project shall be subject to approval of the Majority
Lenders, which approval shall not be unreasonably withheld.
ARTICLE 4.
CONDITIONS
SECTION 4.1 Effectiveness. This Agreement shall become
effective on September 26, 1996, provided that on or before said date
all of the following conditions shall have been satisfied (the
"Effective Date"):
(a) receipt by Agent of counterparts of this Agreement signed
by each of the parties hereto;
(b) receipt by Lenders of the duly executed Notes on or before
the Effective Date, complying with the provisions of Section 2.4
hereof;
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(c) receipt by Agent of the opinions of Shumacker & Thompson,
P.C. and such other counsel located in the jurisdictions where the
Eligible Projects are located, addressed to Agent and each Lender and
satisfactory in form and substance to Agent covering the legal
matters addressed in Article 0 hereof and such additional matters
relating to the transactions contemplated hereby as Agent may
reasonably request;
(d) receipt by Agent of a certificate of Borrower approving
the execution, delivery and performance of this Agreement (when
executed and delivered pursuant to this Agreement) and the
transactions contemplated therein, duly adopted by Borrower in
accordance with the terms of Borrower's Partnership Agreement;
(e) receipt by Agent of (i) certificates of existence and good
standing for Borrower issued by the State of Delaware and
certificates of qualification and good standing for Borrower issued
by each of the states wherein any Eligible Project is located and
such qualification is required, and (ii) certificates of existence
and good standing for each Subpartnership which is a party to any
Collateral Document issued by the state of each such Subpartnership's
formation and the state in which the Eligible Project owned by such
Subpartnership is located;
(f) receipt by Agent of a certificate of an officer of
Borrower, certifying that there have been no amendments to Borrower's
certificate of partnership, partnership agreement or other
organizational documents since July 28, 1994, other than such
amendments as may be attached to such certificate and certified as
being true, correct and complete as of the date of such
certification (with any amendment to Borrower's certificate
of partnership being certified by the Secretary of State of
the State of Delaware);
(g) a certificate of the Secretary of CBL Properties, Inc.
dated as of the Effective Date certifying (A) that there have been
no amendment to the By-laws of CBL Properties, Inc., since July
28, 1994, other than such amendments as may be attached to such
certificate and certified as being true, correct and complete as
of such certification; (B) that attached thereto is a true and
complete copy of Resolutions adopted by the Board of Directors of
CBL Properties, Inc., authorizing the execution and delivery on
behalf of Borrower of this Agreement and any other documents
executed in connection herewith to which Borrower is a party,
authorizing the execution and delivery on behalf of Borrower as
general partner of each Subpartnership of each of the documents
executed in connection herewith to which such Subpartnership is a
party, and authorizing the execution, delivery and performance of
each of the documents executed in connection herewith to which CBL
Properties, Inc. is a party; and (C) as to the incumbency and
genuineness of the signatures of the officers of CBL Properties,
Inc. executing any of the documents executed in connection
herewith to which CBL Properties, Inc., Borrower or any
Subpartnership is a party;
(h) a certificate of the Secretary of CBL Properties, Inc.,
certifying that (i) there have been no amendments to the
Certificate of Incorporation of CBL
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Properties, Inc. since July 28, 1994, other than such amendments
as may be attached to such certificate and certified by the
Secretary of State of Delaware as of a date not earlier than
fifteen (15) days prior to the Effective Date, and (ii) there have
been no amendments to the certificates of partnership, partnership
agreements or other organizational documents of any Subpartnership
which is a party to any Collateral Document since July 28, 1994,
other than such amendments as may be attached to such certificate
and certified as being true, correct and complete as of the date
of such certification;
(i) good standing certificates for CBL Properties, Inc.,
each dated as of a date close to the Effective Date, issued by the
Secretaries of State of Delaware and of each state wherein CBL
Properties, Inc. is qualified to do business and where such
qualification is required;
(j) since June 30, 1996, there shall not have occurred any
material adverse change in the business, operations (including the
operation performance of any Eligible Project), condition
(financial or otherwise), assets, liabilities, properties or
prospects of Borrower, or any event, condition, or state of facts
which would be expected materially and adversely to affect the
prospects of Borrower subsequent to consummation of the
transactions contemplated by this Agreement, in each case, as
determined by Agent in its reasonable discretion;
(k) since June 30, 1996, there shall not have occurred any
material adverse change in the business, operations, condition
(financial or otherwise), assets, liabilities, properties or
prospects of any Eligible Project included or to be included in
the Borrowing Base, or any event, condition, or state of facts
which would be expected materially and adversely to affect the
prospects of any such Project subsequent to consummation of the
transactions contemplated by this Agreement, in each case, as
determined by Agent in its reasonable discretion;
(l) there shall exist no Default or Event of Default; and
(m) all of the representations and warranties made by
Borrower, any Wholly Owned Subsidiary of Borrower or any
Subpartnership hereunder, under any of the Notes or under any of
the Collateral Documents shall be true and correct in all material
respects as of the Effective Date with the same force and effect
as if made on and as of such date.
This Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied
on or before September 26, 1996.
SECTION 4.2 Advances. The obligation of Agent and each
Lender to make any Advance or to have any Letter of Credit issued
is subject to the satisfaction of the following conditions:
(a) receipt by Agent of a Notice of Borrowing as required
by Section 0, in the case of an Advance, or a request for a Letter
of Credit as required by Section 0, in the case of a Letter of
Credit, and a compliance certificate as described in Section 0
hereof;
(b) the fact that the proposed use of proceeds of such
Advance set forth in the Notice of Borrowing or the proposed use
of such Letter of Credit set forth in such request for Letter of
Credit is consistent with the provisions of Section 6.1 and
Section 2.2, respectively;
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(c) (i) in the case of the issuance of a Letter of Credit,
there shall exist no Default or Event of Default nor any event or
condition which, with the issuance of such Letter of Credit, would
constitute a Default or Event of Default or (ii) in the case of
the making of an Advance, there shall exist no (A) Event of
Default, (B) Default under Sections 0, 0 or 0 hereof, or (C) other
Default as to which Agent has given Borrower notice nor any event
or condition which, with the making of such Advance, would
constitute an Event of Default or any such Default;
(d) all of the representations and warranties made by
Borrower, any Wholly Owned Subsidiary of Borrower or any
Subpartnership hereunder, under any of the Notes or under any of
the Collateral Documents shall be true and correct in all material
respects as of the date of such Advance or the date of such Letter
of Credit with the same force and effect as if made on and as of
such date, except to the extent such representations or warranties
specifically relate to an earlier date and except for changes
therein occurring in the ordinary course of business which do not
otherwise constitute a Default or Event of Default hereunder;
(e) all of the Collateral Documents for each Eligible
Project comprising the Borrowing Base shall be in full force and
effect and shall constitute a first priority perfected Lien on and
security interest in each such Project, subject only to Permitted
Liens.
Acceptance by Borrower of an Advance hereunder or the issuance of
a Letter of Credit shall be deemed to be a representation and
warranty by Borrower on the date of such Advance or such Letter of
Credit as to the facts specified in clauses (b), (c), (d) and (e)
of this Section 0.
SECTION 4.3 Conditions Precedent to a Project Becoming An
Eligible Project. No Project shall become an Eligible Project
until Borrower shall have granted, or shall have caused any Wholly
Owned Subsidiary or Subpartnership owning such Project to grant,
to Agent, for the benefit of Lenders, as security for the payment
and performance of the Obligations of Borrower, a valid,
enforceable, perfected, first priority and (except for Permitted
Liens) only security interest and Lien in and to such Project and
all real and personal property relating thereto and, in connection
therewith, Borrower shall have executed and delivered, or shall
have caused any Wholly-Owned Subsidiary or Subpartnership owning
such Project to execute and deliver, to Agent, in form and
substance reasonably satisfactory to Agent, the following
instruments, documents and agreements in respect of such Project:
(a) a Mortgage encumbering such Project in favor of the
Agent for the benefit of Lenders, such Mortgage to be
substantially in the form of Exhibit D attached hereto and
incorporated herein by reference, modified as appropriate to
conform to the laws of the jurisdiction in which the Project is
situate;
(b) an environmental indemnity agreement, substantially in
the form of Exhibit E attached hereto and incorporated herein by
reference;
(c) a closing certificate and affidavit, in substantially
the form of Exhibit F attached hereto and incorporated herein by
reference;
(d) if requested by the Agent or the Majority Lenders,
collateral assignments of operating agreements, reciprocal
easement agreements, management agreements and other agreements
requested by the Agent or the Majority Lenders, all in form and
substance reasonably satisfactory to the Agent and the Lenders;
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(e) assurance from a title insurance company satisfactory
to the Agent (the "Title Company") that such Title Company is
committed to cause the Mortgage to be recorded and, upon recorda-
tion of the Mortgage, to issue its ALTA lender's title insurance
policies in a form reasonably acceptable to the Agent and in an
amount equal to the Borrowing Base to be attributable to the
Eligible Project described therein or such higher amount as may be
reasonably requested by the Agent, showing the Agent as the
"insured mortgagee" and insuring the validity and priority of the
Mortgage as a first priority Lien upon the Eligible Project and
Collateral described therein, subject to Permitted Liens;
(f) receipt by Agent of an opinion of outside counsel
reasonably acceptable to the Agent, addressed to Agent and each
Lender and satisfactory in form and substance to Agent covering
the legal matters addressed in Article 0 hereof and such
additional matters relating to the transactions contemplated
hereby as Agent may reasonably request;
(g) receipt by Agent of a Borrowing Base report certified
by the chief financial officer or the chief accounting officer of
Borrower, setting forth in reasonable detail the calculations
establishing the Borrowing Base;
(h) if such Eligible Project is owned by a Wholly Owned
Subsidiary of Borrower or Subpartnership of Borrower, a guaranty,
substantially in the form of Exhibit G hereto, by such Wholly
Owned Subsidiary or Subpartnerships of the obligations of Borrower
under this Agreement, duly executed and delivered by such Wholly
Owned Subsidiary or Subpartnership;
(i) if such Eligible Project is owned by a Wholly Owned
Subsidiary of Borrower, instruments, documents, certificates and
items in respect of such Wholly Owned Subsidiary as are comparable
to the instruments, documents, certificates and other items
described in subsections (g) through (i) of Section 0 in respect
of CBL Properties, Inc. and/or Borrower;
(j) if such Eligible Project is owned by a Subpartnership,
instruments, documents, certificates and items in respect of such
Subpartnership, as are comparable to the instruments, accounts,
certificates and other items described in subsections (d) through
(i) of Section 0 in respect of Borrower.
(k) receipt by Agent of all documents it may reasonably
request relating to the validity and enforceability of the Loan
Documents and the Collateral Documents (when executed and
delivered pursuant to this Agreement) and any other matters
relevant hereto, all in form and substance satisfactory to Agent;
(l) such other instruments, documents, agreements,
financing statements, certificates, opinions and other Collateral
Documents as the Agent or the Majority Lenders may reasonably
request.
Borrower shall perform, and shall cause the Wholly Owned
Subsidiaries and Subpartnerships to perform, any and all
reasonable steps requested by Agent to perfect, maintain and
protect Agent's Lien in the Projects and the Collateral pledged to
the Agent, including, without limitation, executing and filing
Mortgage Supplements, financing or continuation statements, or
amendments thereof, in form and substance satisfactory to Agent;
and delivering to Agent all documents, notes and other instruments
or chattel paper included in the Collateral, the possession
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of which is necessary or appropriate to perfect Agent's security
interest therein. Agent may file one or more financing statements
disclosing Agent's Lien under the Collateral Documents without
Borrower's or any such Subsidiary's signature appearing thereon
and Borrower shall pay the costs of, or incidental to, any
recording or filing of any financing statements concerning the
Collateral.
SECTION 4.4 Conditions to Conversion to Term Loan.
The right of Borrower to convert Loan into the Term Loan
under Section 2.12 is subject to the condition precedent that the
following conditions be satisfied in the judgment of Agent:
(a) timely receipt by Agent of the notice required under
such Section;
(b) immediately before and after such conversion, no Event
of Default shall have occurred and be continuing; and
(c) the representations and warranties of Borrower
contained in this Agreement and the other Loan Documents shall be
true in all material respects on and as of the date of such
conversion except to the extent such representations or warranties
specifically relate to an earlier date or such representations or
warranties become untrue by reason of events or conditions
otherwise permitted hereunder and the other Loan Documents.
The delivery of the notice required under such Section shall
constitute a certification by Borrower to Agent and Lenders that
the statements in the immediately preceding clauses (b) and (c)
are true.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Agent and each
Lender that:
SECTION 5.1 Organization and Power. Borrower is a limited
partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has all requisite
partnership powers and all material governmental certificates of
authority, licenses, permits, qualifications, documentation,
consents and approvals required to own, lease and operate its
properties and to carry on its business as now conducted. CBL
Properties, Inc. is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and
has all requisite corporate powers and all material governmental
certificates of authority, licenses, permits, qualifications,
documentation, consents and approvals required to own, lease and
operate its properties and to carry on its business as now
conducted. Each of Borrower's Subsidiaries is a limited
partnership or a corporation duly organized, validly existing and
in good standing under the laws of its state of formation, and has
all requisite partnership powers and all material governmental
certificates of authority, licenses, permits, qualifications,
documentation, consents and approvals required to own, lease and
operate its properties and to carry on its business as now
conducted.
SECTION 5.2 Validity of Loan Instruments. The execution,
delivery and performance by Borrower of the Loan Documents and the
execution, delivery and performance by any Wholly Owned Subsidiary
of Borrower or by any Subpartnership of
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any Collateral Documents to which such Wholly Owned Subsidiary or
Subpartnership is a party, when executed and delivered pursuant to
the Original Credit Agreement and/or this Agreement, (a) are
within Borrower's or such Subsidiary's or Subpartnership's powers,
(b) have been duly authorized by all necessary corporate,
partnership or other action, (c) require no action by or in
respect of, or filing with, any governmental body, agency or
official and (d) do not and will not contravene, or constitute a
default under, any Applicable Law or of the partnership agreement
or other organizational document of Borrower or such Subsidiary or
Subpartnership or of any agreement, judgment, injunction, order,
decree or other instrument binding upon Borrower or such
Subsidiary or Subpartnership or result in the creation or
imposition of any Lien on any asset of Borrower or such Subsidiary
or Subpartnership. The execution and delivery by CBL Properties,
Inc. on behalf of Borrower of the Loan Documents and the
Collateral Documents (when executed and delivered pursuant to the
Original Credit Agreement and/or this Agreement) are within CBL
Properties, Inc.'s corporate powers, have been duly authorized by
all necessary corporate action, require no action by or in respect
of, or filing with, any governmental body, agency or official and
do not and will not contravene, or constitute a default under,
Applicable Law or of the Certificate of Incorporation or by-laws
of CBL Properties, Inc. or of any agreement, judgment, injunction,
order, decree or other instrument binding upon CBL Properties,
Inc. or result in the creation or imposition of any Lien on any
asset of CBL Properties, Inc.
SECTION 5.3 Binding Effect. This Agreement constitutes a
valid and binding agreement of Borrower and the other Loan
Documents (when executed and delivered in accordance with the
Original Credit Agreement and/or this Agreement) do and will
constitute valid and binding obligations of Borrower, enforceable
in accordance with their respective terms, except as may be
limited by bankruptcy, insolvency, and other similar laws
affecting the rights of creditors generally. All Collateral
Documents, when executed and delivered in accordance with the
Original Credit Agreement and/or this Agreement, do and will
constitute valid and binding obligations of Borrower and/or the
Subsidiary or Subpartnership which is a party thereto enforceable
in accordance with their respective terms, except as may be
limited by bankruptcy, insolvency, and other similar laws
affecting the rights of creditors generally.
SECTION 5.4 Financial Information.
(a) The balance sheet of Borrower as of June 30, 1996 and
the related statements of funds from operations, stockholders'
equity and cash flows for the fiscal year then ended, certified by
Borrower's Chief Financial Officer or Controller, and filed with
the Securities and Exchange Commission, copies of which
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have been delivered to Agent, fairly present, in conformity with
GAAP (as modified by the rules and regulations of the Securities
and Exchange Commission and the New York Stock Exchange), the
financial position of Borrower as of such date and its results of
operations and cash flows for such fiscal year.
(b) Between June 30, 1996 and the Effective Date, there has
been no material adverse change in the business, properties,
financial position, results of operations or prospects of CBL
Properties, Inc., Borrower, the Subpartnerships or any of their
respective Subsidiaries, taken as a whole.
SECTION 5.5 Litigation. Except as set forth in Schedule 0
attached hereto, there are no actions, suits or proceedings of a
material nature pending or threatened in writing against or
affecting Borrower, CBL Properties, Inc., any of their respective
Subsidiaries or the Collateral before any court or arbitrator or
any governmental body, agency or official which (a) could have a
material adverse effect on the business, properties, financial
position, results of operations or prospects of Borrower, CBL
Properties, Inc. and their respective Subsidiaries other than a
material adverse effect which Borrower has fully disclosed to the
Agent unless the Agent notifies Borrower that Agent has determined
that such material adverse effect is likely to result in a future
Default or Event of Default under any covenant set forth in
Section 8 hereof; (b) could have a material adverse effect on any
Eligible Project; or (c) in any manner draw into question the
validity of any Loan Document or Collateral Document or the
priority of any Lien, Mortgage or security interest created hereby
or pursuant to the Collateral Documents; and, subject to the
provisions of Section 0 hereof, to the best knowledge of Borrower,
no event has occurred which will violate, be in conflict with,
result in the breach of or constitute (with due notice or lapse of
time, or both) a default of a material nature under Applicable Law
or result in the creation or imposition of any Lien, charge or
encumbrance of any nature whatsoever on the Collateral.
SECTION 5.6 ERISA. Except as set forth on Schedule 0
hereof, neither Borrower nor any ERISA Affiliate maintains, or
participates in, and has not at any time maintained or
participated in, any ERISA Plan.
SECTION 5.7 Hazardous Substances. Borrower warrants,
represents and agrees as follows:
(a) Borrower has had performed reasonable
investigations, studies and tests as to any environmental
contamination, liabilities or problems with respect to the
Collateral, including without limitation, the storage,
disposal, presence, discharge or release of any Hazardous
Substances at or with respect to the Collateral, copies of
which have been provided to the Agent prior to the date
hereof, and, except as otherwise set forth in the Mortgages,
such investigations, studies, and tests have disclosed no
Hazardous Substances or possible violations of any
Environmental Laws.
(b) No personal or real property owned by Borrower or
any of its Subsidiaries is subject to any private or
governmental Lien, or to the best of Borrower's knowledge
judicial or administrative notice or action relating to
Hazardous Substances or environmental problems, impairments
or liabilities with respect to such property or the direct or
indirect violation of any Environmental Laws, in each case
which could have a material adverse effect on the business,
properties, financial position, results of operations or
prospects of Borrower, CBL Properties, Inc. and their
respective Subsidiaries other than a material adverse effect
which Borrower has fully disclosed to the Agent unless the
Agent notifies Borrower that Agent has determined that
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such material adverse effect is likely to result in a future
Default or Event of Default under any covenant set forth in
Section 8 hereof;
(c) Except as disclosed in the Mortgages, no Hazardous
Substances are located on or have been stored, processed or
disposed of on or released or discharged from (including
ground water contamination) the Collateral and no above or
underground storage tanks exist on the Collateral. Borrower
shall not allow, and shall not permit its Subsidiaries to
allow, any Hazardous Substances to be stored, located,
discharged, possessed, managed, processed or otherwise
handled on any of their properties or the Collateral other
than small quantities which are utilized in the ordinary
course of business of such properties, and which are used and
disposed of in a lawful manner, and shall comply, and cause
said Subsidiaries to comply, with all Environmental Laws
affecting such properties or the Collateral.
(d) Borrower shall immediately notify Agent should
Borrower become aware of (i) the existence of any Hazardous
Substance in, on or beneath any of its properties or the
properties of its Subsidiaries in violation of any
Environmental Law, or any other violation of any
Environmental Law with respect to such properties, (ii) any
"release" or threatened "release" (as defined in CERCLA and
rules and regulations promulgated thereunder) of any
Hazardous Substances on or from the Collateral or any other
real property owned by Borrower or any of its Subsidiaries,
or (iii) any Lien, action, or notice of the nature described
in subparagraph (b) above, in each case which could have a
material adverse effect on the business, properties,
financial position, results of operations or prospects of
Borrower, CBL Properties, Inc. and their respective
Subsidiaries other than a material adverse effect which
Borrower has fully disclosed to the Agent unless the Agent
notifies Borrower that Agent has determined that such
material adverse effect is likely to result in a future
Default or Event of Default under any covenant set forth in
Section 8 hereof. Upon the occurrence of any such event,
Borrower shall, and shall cause its Subsidiaries, at its or
such Subsidiary's own cost and expense, take all actions as
shall be necessary or advisable for the clean-up of any such
property including all removal, containment and remedial
actions to the extent required by applicable Environmental
Laws, and shall further pay or cause to be paid at no expense
to Agent and other Lenders all clean-up, administrative, and
enforcement costs of applicable government agencies asserted
against such property or the owner thereof. All costs,
including, without limitation, those costs set forth above,
damages, liabilities, losses, claims, expenses (including
reasonable attorneys' fees actually incurred and
disbursements) which are incurred by Agent (except to the
extent resulting from the gross negligence or willful
misconduct of Agent), without requirement of waiting for the
ultimate outcome of any other proceeding, shall be paid by
Borrower to Agent as incurred within ten (10) days after
notice from Agent itemizing the amounts incurred to the date
of such notice.
(e) Upon reasonable prior notice to Borrower, and
subject to the rights of tenants, Agent or its
representatives may from time to time (whether before or
after the commencement of a nonjudicial or judicial
proceeding) enter and inspect Collateral for the purpose of
determining the existence, location, nature and magnitude of
any past or present release or threatened release of any
Hazardous Substance into, onto, beneath or from such
properties. Except in cases of emergency, any such
inspection shall be conducted in a manner which does not
unreasonably interfere with the operation of the Collateral.
All warranties and representations contained in this Section
0 shall be deemed to be continuing and shall remain true and
correct in all material respects until the Indebtedness has been
paid in full and any limitations period expires. Notwithstanding
anything to the contrary contained herein or in any of the other
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Loan Documents, Borrower's agreements and Borrower's
indemnification of Lenders contained in this Section 0 shall
survive the exercise of any remedy by Agent under any of the
Collateral Documents, including foreclosure (or deed in lieu
thereof), even if, as a part of such foreclosure or deed in lieu
of foreclosure, the Indebtedness is satisfied in full, but only
with respect to liability or costs arising as a result of events
occurring prior to the date upon which Borrower and its
Subsidiaries, are divested of title to the Collateral whether
voluntarily, involuntarily or by operation of law.
SECTION 5.8 Taxes and Other Payments. As of the date
hereof, no United States federal income tax returns of the
"affiliated group" (as defined in the Internal Revenue Code) of
which Borrower is a member have been examined and closed. To the
best of Borrower's knowledge, each member of such affiliated
group, including Borrower, have filed all federal, state, county,
municipal and city income and other tax returns required to have
been filed by it and has paid all taxes which have become due
pursuant to such returns or pursuant to any assessments received
by it, and each member, including Borrower, does not know of any
basis for any material additional assessment in respect of any
such taxes. Borrower has paid or will pay (or has caused to be
paid or will be caused to be paid) in full (except for such
retainages as may be permitted or required by any Legal
Requirement to be withheld pending completion of any improvements)
all sums by Borrower or its Affiliates owing or claimed from
Borrower or such Affiliates for labor, material, supplies,
personal property (whether or not forming a fixture hereunder) and
services of every kind and character used, furnished or installed
in or on the Collateral and no claim for same exists or will be
permitted to be created; provided, however, that Borrower may
contest such amounts in good faith by appropriate proceedings so
long as Borrower provides Agent adequate security therefor.
SECTION 5.9 Not an Investment Company. Neither Borrower,
any of its Subsidiaries nor CBL Properties, Inc. is an "investment
company" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 5.10 Information. All information, reports,
papers and data given to Agent with respect to CBL Properties,
Inc., Borrower, their respective Subsidiaries or others obligated
under the terms of the Original Credit Agreement, this Agreement,
the other Loan Documents or the Collateral Documents are, or at
the time of delivery will be, when taken as a whole, accurate,
complete and correct in all material respects and do not, or will
not, omit any fact, the inclusion of which is necessary to prevent
the facts contained therein from being materially misleading; all
financial data have been, or when delivered will have been,
prepared in accordance with GAAP consistently applied and fully
and accurately present, or will present, in all material respects,
the financial condition of the subjects thereof as of the dates
thereof; and with respect to the financial data heretofore
furnished, no material adverse change has occurred in the
financial conditions reflected therein since the dates thereof
other than a material adverse change which Borrower has fully
disclosed to the Agent unless the Agent notifies Borrower that
Agent has determined that such material adverse effect is likely
to result in a future Default or Event of Default under any
covenant set forth in Section 8 hereof.
SECTION 5.11 Insurance. Schedule 0 sets forth a true and
correct description of the insurance coverage maintained by or on
behalf of Borrower and its Subsidiaries currently in effect.
SECTION 5.12 Liens. The liens and security interests
granted to Agent pursuant to the Collateral Documents (when
executed and delivered to Agent pursuant
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to the Original Credit Agreement and/or this Agreement) are valid
and enforceable first priority liens and security interests
subject only to Permitted Liens.
SECTION 5.13 Title to the Projects. Borrower or a Wholly
Owned Subsidiary of Borrower or a Subpartnership holds full legal
and equitable title to the Eligible Projects subject only to Liens
permitted by Section 0 hereof.
SECTION 5.14 Governmental Requirements. To the best
knowledge of Borrower, no violation of any material governmental
requirement exists with respect to the Eligible Projects, and the
use or anticipated use thereof complies with applicable zoning
ordinances, regulations and restrictive covenants affecting such
Projects, and all governmental requirements for such use have been
satisfied, except where such violation or noncompliance could not
(a) have a material adverse effect on the business, properties,
financial position, results of operations or prospects of
Borrower, CBL Properties, Inc. and their respective Subsidiaries
other than a material adverse effect which Borrower has fully
disclosed to the Agent unless the Agent notifies Borrower that
Agent has determined that such material adverse effect is likely
to result in a future Default or Event of Default under any
covenant set forth in Section 8 hereof; (b) have a material
adverse effect on any Eligible Project; or (c) in any manner draw
into question the validity of any Loan Document or Collateral
Document or the priority of any Lien, Mortgage or security
interest created hereby or pursuant to the Collateral Documents.
SECTION 5.15 ERISA; Plan Assets. Borrower is a not an
"employee benefit plan" as defined in Section 3(3) of ERISA and
the assets of Borrower do not constitute "plan assets" within the
meaning of 29 C.F.R. SECTION 2510.3-101. The execution, delivery and
performance of this Agreement, and the borrowing and repayment of
amounts thereunder, do not and will not constitute on the part of
Borrower "prohibited transactions" under ERISA or the Internal
Revenue Code.
ARTICLE 6.
COVENANTS
Borrower agrees that, so long as Lenders have any Commitment
hereunder, any of the Obligations remain unpaid or any Letter of
Credit remains outstanding, unless the Majority Lenders otherwise
agree in writing:
SECTION 6.1 Reporting Requirements. Borrower shall deliver
to Agent (with copies for each Lender):
(a) as soon as available and in any event within one
hundred twenty (120) days after the end of each fiscal year of
Borrower, Combined audited annual financial statements of Borrower
and CBL Properties, Inc., for such fiscal year, consisting of
Combined balance sheet of the end of such fiscal year and the
related Combined statements of income and retained earnings and
Combined statements of cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the
previous fiscal year, and accompanied by the materially
unqualified opinion of Arthur Anderson & Co. or any other
nationally recognized firm of independent certified public
accountants regularly retained by Borrower and acceptable to the
Majority Lenders;
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(b) as soon as available and in any event within sixty (60)
days after the end of each fiscal quarter of Borrower, Combined
interim unaudited financial statements of Borrower and CBL
Properties, Inc., including Combined balance sheets, Combined
statements of income and retained earnings and Combined statements
of cash flow, for the quarter and year-to-date period then ended,
prepared in accordance with GAAP, setting forth in comparative
form the figures for the corresponding quarter and the
corresponding portion of Borrower's previous fiscal year, all
certified (subject to normal year-end adjustments) by the chief
financial officer or the chief accounting officer of Borrower;
(c) simultaneously with the delivery the financial
statements referred to in clauses (a) and (b) above, a certificate
of the chief financial officer or the chief accounting officer of
Borrower (i) setting forth in reasonable detail the calculations
required to establish whether Borrower was in compliance with the
requirements of Sections 0, 0 through 0 and 0 on the date of such
financial statements, (ii) stating whether, to the actual
knowledge of such officer, any Default or Event of Default exists
on the date of such certificate and, if any Default or Event of
Default then exists, setting forth the details thereof and the
action which Borrower is taking or proposes to take with respect
thereto, and (iii) setting forth a schedule of all Contingent
Obligations of Borrower as of the date of such financial
statements;
(d) as soon as available and in any event within forty five
(45) days after the end of each fiscal quarter of Borrower, a
Borrowing Base report, certified by the chief financial officer or
the chief accounting officer of Borrower, setting forth in
reasonable detail the calculations required to establish the
Borrowing Base for each Eligible Project and the Borrowing Base
for all Eligible Projects as of the last day of such quarter, all
in reasonable detail and satisfactory to Agent; provided, however,
that any change in the Borrowing Base reflected in such Borrowing
Base report shall not become effective until Agent notifies
Borrower in writing of Agent's approval of such Borrowing Base
report. Agent shall use its reasonable efforts to notify Borrower
of its approval or non-approval of the Borrowing Base report
within ten (10) business days after Agent's receipt of the
Borrowing Base report, together with a statement, in reasonable
detail, of the reasons for any non-approval of such report;
(e) simultaneously with the delivery of each set of
financial statements referred to in clause (a) above, a statement
of the firm of independent public accountants which reported on
such statements (i) whether anything has come to their attention
in the normal course of their audit to cause them to believe that
any Default or Event of Default existed on the date of such
statements and (ii) confirming the calculations set forth in the
officer's certificate delivered simultaneously therewith pursuant
to clause (c) above;
(f) simultaneously with the delivery of each set of
financial statements referred to in clause (b) above, a
certificate of the chief financial officer or the chief accounting
officer of Borrower, certifying as to each Reserved Construction
Loan: (i) that, to the actual knowledge of such officer, no
monetary or material non-monetary default or event of default
exists thereunder; (ii) the amount currently available in the
interest reserve available for the payment of interest on such
Reserved Construction Loan; (iii) an updated cash flow projections
for the project being constructed with the proceeds of such
Reserved Construction Loan, setting forth the assumptions on which
such projections are based; (iv) the outstanding principal balance
of such Reserved Construction Loan; (v) the undisbursed amount of
such Reserved Construction Loan (other than such interest
reserve); and (vi) such other matters as the Agent or the Majority
Lenders may reasonably request;
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(g) as soon as available and in any event within one
hundred twenty (120) days after the end of each fiscal year of
Borrower, all financial information of Borrower, CBL Properties,
Inc., CBL Management Inc., and the Eligible Projects as Agent
shall reasonably request and as shall be reasonably available to
Borrower, CBL Properties, Inc. or CBL Management, Inc.;
(h) within forty five (45) days after the end of each
fiscal quarter, operating statements for each Eligible Project for
such quarter and for the year-to-date period then ended, together
with a rent roll, lease expiration report (unless included in the
rent roll) and leasing status report for each Eligible Project;
(i) promptly after obtaining actual knowledge of any
Default or Event of Default, a certificate of the controller or
senior vice-president in accounting of Borrower setting forth the
details thereof and the action which Borrower is taking or
proposes to take with respect thereto;
(j) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and reports
on Forms 10-K, 10-Q and 8-K (or their equivalents) which CBL
Properties, Inc., Borrower or any of their respective Affiliates
shall have filed with the Securities and Exchange Commission;
(k) promptly upon the consummation thereof, a description
in reasonable detail of any acquisition of assets in excess of
$35,000,000.00 in a single transaction or related series of
transactions;
(l) promptly upon obtaining actual knowledge thereof, a
description in reasonable detail of any event or condition which
could materially adversely affect the business, properties,
financial position, results of operations or prospects of Borrower
or which in any material manner draws into question the validity
of any Loan Document;
(m) from time to time such additional information regarding
the financial position or business of Borrower, its Affiliates or
any Project as Agent may reasonably request, to the extent such
information is reasonably available to Borrower;
(n) concurrently with, subject to the requirements of the
Securities and Exchange Commission or any securities exchange on
which CBL Properties, Inc.'s securities are traded, issuance to
analysts and the media (after notification of the New York Stock
Exchange and release to an established wire service recognized as
an official disclosure source) of any press release concerning
Borrower, telecopy notice of such press release and the contents
thereof.
SECTION 6.2 Payment and Performance. Borrower shall pay and
discharge, and shall cause each of its Subsidiaries to pay and
discharge, at or before maturity, subject to any applicable notice
and grace periods, all material obligations and liabilities,
including, without limitation, tax liabilities, except where the
same may be contested in good faith by appropriate proceedings,
and will maintain, in accordance with GAAP, appropriate reserves
for the accrual of any of the same; and shall pay the
Indebtedness, as and when called for in this Agreement, and on or
before the due dates thereof, subject to any applicable notice and
grace periods, and will perform all of the Obligations in full and
on or before the dates
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same are to be performed subject to any applicable notice and
grace periods.
SECTION 6.3 Maintenance of Property; Insurance.
(a) Borrower shall keep, or cause to be kept, all
Collateral in good working order and condition, ordinary wear and
tear and insured casualty losses excepted.
(b) Borrower shall obtain and maintain, or cause to be
obtained and maintained, insurance upon and relating to the
Collateral, insuring against personal injury and death, loss by
fire and such other hazards, casualties and contingencies
(including business interruption insurance covering loss of rents
for a period of twelve [12] months and builder's all risk
coverage) as are normally and usually covered by extended coverage
policies in effect where the Collateral is located and such other
risks as may be reasonably specified by Agent, from time to time,
all in such amounts and with such insurers of recognized
responsibility as are reasonably acceptable to Agent. Each
insurance policy covering the Collateral issued in connection
therewith shall provide by way of endorsements, riders or
otherwise that (a) proceeds will be payable to Agent as its
interest may appear, it being agreed by Borrower and Agent that
such payments, less Agent's expenses in collecting such insurance
proceeds, shall be applied, to the restoration, repair or
replacement of the Collateral to the extent provided for in the
Collateral Documents encumbering such Collateral, provided,
however, notwithstanding anything to the contrary contained herein
or in the Collateral Documents, so long as no Default or Event of
Default is then in existence, Borrower may instruct Agent to apply
all or any portion of casualty insurance proceeds held by Agent in
connection with damage to an Eligible Project to prepayment of the
Loan. In the event Borrower so instructs Agent to apply insurance
proceeds to the prepayment of the Loan, the Borrowing Base shall
be reduced by the amount of insurance proceeds so applied;
provided however, that notwithstanding such reduction in the
Borrowing Base, Borrower may reborrow, in accordance with the
terms hereof, an amount not greater than the amount of such
proceeds so applied to prepayment of the Loan, so long as the
amount so reborrowed is used for the restoration of the Eligible
Project giving rise to such proceeds in the manner required under
the Collateral Documents, and upon full restoration, the Borrowing
Base shall be increased by an amount equal to the prior reduction.
SECTION 6.4 Business; Existence. Neither Borrower nor any
of its wholly Owned Subsidiaries nor any Subpartnership shall
engage to any substantial extent in any line or lines of business
other than the businesses of owing, managing, leasing and
operating regional malls and retail strip shopping centers and
other related businesses to the extent incidental to the conduct
of any of the foregoing businesses. Except as otherwise expressly
permitted by the terms of this Agreement, Borrower shall, and
shall cause each of its Wholly Owned Subsidiaries and each
Subpartnership to, preserve and keep in full force and effect its
existence, rights, franchises and trade names.
SECTION 6.5 Payment of Impositions. Borrower shall duly pay
and discharge, or cause to be paid and discharged, all Impositions
not later than the due date thereof, or the day prior to the day
any fine, penalty, interest or cost may be added thereto or
imposed, or the day prior to the day any Lien may be filed, for
the nonpayment thereof (if such day is used to determine the due
date of the respective item); provided, however, that Borrower
may, if, to the extent and in the manner permitted by law, (a) pay
the Impositions in installments, whether or not interest shall
accrue on the unpaid balance of such Impositions, if such
installment payment would not create or permit the filing of a
Lien against the Collateral, and (b) contest the payment of any
Impositions in good faith and by
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appropriate proceedings provided that: (i) any such contests
shall be prosecuted diligently and in a manner not prejudicial to
the rights, liens and security interests of Agent, (ii) Borrower
shall deposit funds with Agent or obtain a bond in form and
substance and with an issuing company reasonably satisfactory to
Agent in an amount sufficient to cover any amounts which may be
owing in the event the contest may be unsuccessful (Borrower
agreeing to make such deposit or obtain such bond, as the case may
be, within five (5) days after demand therefor and that, if made
by payment of funds to Agent, the amount so deposited shall be
disbursed in accordance with the resolution of the contest either
to Borrower or the adverse claimant), (iii) no contest may be
conducted and no payment may be delayed beyond the date on which
the Collateral could be sold for nonpayment (provided however,
that such contest may be continued beyond such date so long as
Borrower provides assurances, by bond, payment or otherwise, that
the Collateral will not be so sold) and (iv) Agent may pay over to
the taxing authority entitled thereto any or all of the funds at
any time when, in the opinion of Agent's counsel, the entitlement
of such authority to such funds is established and no reasonable
avenues for contesting such entitlement are available to Borrower.
Subject to Borrower's right to contest as provided for herein,
Borrower shall submit to Agent copies of tax statements and paid
tax receipts evidencing the due and punctual payment of all real
estate and personal property taxes, charges and assessments levied
upon or assessed or charged against the Collateral on or before
thirty (30) days of the delinquent date of any such taxes.
SECTION 6.6 Compliance with Legal Requirements. Borrower
shall, and shall cause each Wholly Owned Subsidiary or
Subpartnership owing any of the Collateral to, promptly and
faithfully comply with, conform to and obey all present and future
material Legal Requirements, whether or not same shall necessitate
structural changes in, improvements to, or interfere with the use
or enjoyment of the Collateral; provided, however, that Borrower
may contest a Legal Requirement in good faith by appropriate
proceedings; provided further, that with respect to Legal
Requirements affecting any portion of the Collateral (or any other
property of Borrower) which is leased to a financially capable
tenant, if such Lease provides that compliance with such Legal
Requirement is the obligation of the tenant thereunder, Borrower
shall be deemed to comply with its obligations under this
Agreement with respect to such Legal Requirement if Borrower is
continuing to exercise in good faith any remedies it may have
under said Lease to compel such tenant to comply with such Legal
Requirement.
SECTION 6.7 Inspection of Property, Books and Records.
Borrower will keep, and will cause each Subsidiary to keep, proper
books of record and account in which full, true and correct
entries shall be made of all dealings and transactions in relation
to its business and activities; and will permit, and will cause
each Subsidiary to permit, representatives of Agent to visit and
inspect any of their respective properties, to examine and make
abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their
respective officers, employees and independent public accountants,
all at such reasonable times and as often as may reasonably be
desired.
SECTION 6.8 Indebtedness. Borrower shall not incur, assume
or suffer to exist any outstanding Indebtedness bearing interest
at a variable rate that fluctuates during the scheduled life of
such Indebtedness (other than Indebtedness under Reserved
Construction Loans) in an aggregate principal amount in excess of
twenty-five percent (25%) of Gross Asset Value at any one time
outstanding unless Borrower has obtained an interest rate swap,
cap or collar agreement or similar arrangement with a recognized
investment grade financial institution which prevents the all-in
effective interest rate payable by Borrower in respect of the
principal amount of such Indebtedness in excess of twenty-five
percent (25%) of Gross Asset
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Value (including base rate, applicable margin and reserve and
similar costs) from increasing above ten percent (10%) per annum.
SECTION 6.9 Consolidations, Mergers and Sales of Assets.
Borrower shall not and shall not permit its Subsidiaries to, (i)
consolidate or merge with or into any other Person (other than
Borrower or another Subsidiary) (ii) sell, lease or otherwise
transfer, directly or indirectly, any of its real estate
properties or investments in ventures holding such properties to
any other Person, other than in the ordinary course of business.
SECTION 6.10 Use of Proceeds. The proceeds of the
Advances made under this Agreement shall be used by Borrower (a)
for the payment of pre-development and development costs incurred
in connection with the Projects or proposed Projects; (b) to
finance acquisitions and loans permitted by Section 0 hereof; (c)
to pay Indebtedness of Borrower and its Subsidiaries; (d) to make
equity Investments permitted hereunder (e) to provide for the
general working capital needs of Borrower and its Subsidiaries;
and (f) to make dividend payments; provided, however, that (i)
proceeds of Advances may not be used to make dividend payments (A)
more than twice during any calendar year; or (B) in respect of two
(2) consecutive fiscal quarters of Borrower. No portion of the
proceeds of any Advance may be used by Borrower in any manner
which would cause such Loan or the application of the proceeds
thereof to violate any of Regulations G, T, U or X of the Board of
Governor of the Federal Reserve System.
SECTION 6.11 Investment Concentration. (a) Borrower
shall not make, and shall not permit any of its Subsidiaries to
make, any Investment in the following items which would cause the
value of such holdings of Borrower to exceed the following
percentages of Borrower's Gross Asset Value:
(i) raw land, such that the aggregate book value of
all such raw land (other than: (A) raw land subject to a
ground lease under which Borrower is the landlord and a
Person not an Affiliate of Borrower is the tenant; (B) land
on which development of a Project has commenced; (C) land
subject to a binding contract of sale under which the
Borrower or one of its Subsidiaries is the seller, the buyer
is not an Affiliate of Borrower and (D) out-parcels held for
lease or sale) exceeds ten percent (10%) of Gross Asset
Value;
(ii) developed real estate used primarily for non-retail
purposes, such that the aggregate book value of such
real estate (other than the real estate located at 6148 Lee
Highway, Chattanooga, Tennessee) exceeds ten percent (10%) of
Gross Asset Value;
(iii) Capital Stock of any Person, such that the
aggregate value of such Capital Stock in Unconsolidated
Affiliates other than CBL Management, Inc., calculated on the
basis of the lower of cost or market, exceeds ten percent
(10%) of Gross Asset Value;
(iv) Mortgages, such that the aggregate principal
amount secured by Mortgages acquired by Borrower after the
Effective Date exceeds ten percent (10%) of Gross Asset
Value;
(v) Investments made after the date hereof in
partnerships, joint ventures and other non-corporate Persons
accounted using the equity basis of accounting (determined in
accordance with GAAP), such that the aggregate outstanding
amount of such Investments (other than Investments in (A)
partnerships in which (I) Borrower is the sole general
partner and the only
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limited partners are either (a) the Person from whom the real
estate owned by such Partnership was purchased, and such
Person's successors and assigns or (b) a Person operating
stores which anchor the development constructed or to be
constructed by such partnership or (II) Borrower owns not
less than ninety percent (90%) of the partnership interests
and has the unilateral right to make all operational and
strategic decisions, or (B) partnerships, joint ventures and
other non-corporate Persons whose financial reports are
prepared on a consolidated basis with Borrower) exceeds
fifteen percent (15%) of Gross Asset Value;
(vi) items described in subsections (i), (ii), (iii)
and (v) of this Section 6.11(a), such that the aggregate
value thereof, determined in accordance with such
subsections, exceeds thirty percent (30%) of Gross Asset
Value.
(b) Neither Borrower nor any of its Subsidiaries shall
acquire the business of or all or substantially all of the assets
or stock of any Person, or any division of any Person, whether
through Investment, purchase of assets, merger or otherwise;
provided that Borrower or its Subsidiaries may make such an
acquisition so long as Borrower has delivered to Agent, not less
than thirty (30) days prior to the date such acquisition is
consummated, (i) all information related to such acquisition as is
reasonably requested by the Agent and (ii) a certificate, signed
by the chief financial officer of Borrower, certifying that,
giving effect to such acquisition, there shall not exist any
Default or Event of Default hereunder and setting forth in
reasonable detail the calculations setting forth, on a pro forma
basis giving effect such acquisition, Borrower's compliance with
Sections 0, 0, 0, 0, 0, 0, 0 or 0; and
SECTION 6.12 Total Obligations to Gross Asset Value. Borrower
shall not at any time permit the ratio of (a) Total
Obligations to (b) Gross Asset Value to exceed 0.55 to 1.00.
SECTION 6.13 Minimum Net Worth. Borrower shall not
permit Net Worth at any time to be less than an amount equal to
$315,330,052 plus fifty percent (50%) of the net proceeds or value
(whether cash, property or otherwise) received by CBL Properties,
Inc. or Borrower from any issuance after the Effective Date of any
shares of Capital Stock of CBL Properties, Inc., any operating
partnership units of Borrower or any shares of Capital Stock or
other equity interest in any Subsidiary of Borrower.
SECTION 6.14 Interest Coverage Ratio. Borrower shall not
permit, as of the last day of any fiscal quarter, the Interest
Coverage Ratio to be less than 2.0 to 1.0.
SECTION 6.15 Debt Coverage Ratio. Borrower shall not
permit, as of the last day of any fiscal quarter of Borrower, the
Debt Coverage Ratio to be less than 1.75 to 1.0.
SECTION 6.16 ERISA. Borrower will operate, or will cause
its ERISA Affiliates to operate, each ERISA Plan described on
Schedule 0, and each ERISA Plan that either Borrower or its ERISA
Affiliates may adopt, sponsor or participate in after the
Effective Date, in accordance with the terms of such ERISA Plan
and in accordance with all applicable requirements of ERISA and
the Internal Revenue Code.
SECTION 6.17 Liens. Borrower shall not create, assume or
suffer to exist and shall not permit any Subsidiary to create,
assume or suffer to exist, any Lien securing Indebtedness on any
of the Collateral, except for (a) Permitted Liens; and (b) Liens
to secure Indebtedness incurred for common area maintenance,
improvements and leasing costs provided that: (i) such Lien is
expressly subordinate, on terms
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and conditions satisfactory to the Agent and the Majority
Lenders, to the Lien created by the Collateral Documents; (ii) the
principal amount of such Indebtedness, and all interest thereon,
can be repaid from common area maintenance charges or from
additional rental charges (not a part of a rent for such Project
used most recently to determine the Appraised Value of such
Project) specifically dedicated to the repayment of such
Indebtedness; and (iii) in the case of leasing costs, such
Indebtedness does not exceed, in respect of any single Project,
$3,000,000 in aggregate principal amount at any one time
outstanding.
SECTION 6.18 Restricted Payments.
(a) Borrower shall not directly or indirectly declare or
make, or incur any liability to make, any cash or other
distributions on, or in respect of, any partnership interest in
Borrower, or other payments or transfers made in respect of the
redemption, repurchase or acquisition of such partnership
interests, except for distributions in an aggregate amount not to
exceed during any fiscal year ninety-five percent (95%) of Funds
from Operations for such fiscal year.
(b) Borrower shall not enter into any transaction with, or
pay any management or other fees to, any Affiliate, except, so
long as Borrower effectively receives at least 99% of the economic
benefit thereof, management or other fees payable to CBL
Management, Inc.
ARTICLE 7.
DEFAULTS
SECTION 7.1 Events of Default. It shall be an event of
default ("Event of Default") if one or more of the following
events shall have occurred and be continuing:
(a) Borrower shall fail, refuse or neglect to pay, in full,
any installment or portion of the Obligations as and when the same
shall become due and payable, whether at the due date thereof
stipulated in this Agreement or the Notes, or at a date fixed for
prepayment, or by acceleration or otherwise, and such failure,
refusal or neglect continues for a period of fifteen (15) days
after notice thereof from Agent; provided, however, that Agent
shall not be required to give such notice more than twice during
any twelve consecutive month period; provided, further, that if
such installment or portion of the Obligations becomes due and
payable as a result of Agent's accelerating the maturity of the
Obligations in accordance with the this Agreement, neither any
requirement of notice nor the fifteen (15) day grace/cure period
for payment set forth in this Section 0 shall apply to the
accelerated due date;
(b) Borrower or any of its Subsidiaries shall fail to
observe or perform any covenant or agreement contained in Sections
0, 0, 0, 0, 0, 0, 0 or 0 hereof and such failure shall continue
for ninety (90) days after the earlier of (i) the date any Senior
Officer of Borrower has actual knowledge of such failure or (ii)
the date written notice of such failure has been given to Borrower
by Agent;
(c) Borrower or any of its Subsidiaries shall fail to
observe or perform any covenant or agreement contained in this
Agreement (other than those covered by clause (a) or (b) above)
for thirty (30) days after written notice thereof has been given
to Borrower by Agent; provided; however, that is such failure is
curable but
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requires work to be performed, acts to be done or conditions to
be remedied which, by their nature, cannot be performed, done or
remedied, as the case may be, within such thirty (30) day period,
no Event Default shall be deemed to have occurred if Borrower or
its Subsidiaries commence same within such thirty (30) day period
and continuously prosecute the same to completion within ninety
(90) days after such notice.
(d) Borrower, CBL Properties, Inc. or any of their
Subsidiaries shall fail to observe or perform any covenant or
agreement contained in any of the Collateral Documents, or there
occurs any other default under any of the Collateral Documents,
and such failure or default shall continue beyond any applicable
grace or cure period;
(e) any representation, warranty or statement made by
Borrower, CBL Properties, Inc. or any of their Subsidiaries in,
under or pursuant to this Loan Documents or the Collateral
Documents or any affidavit or other instrument executed in
connection with the Loan Documents or Collateral Documents shall
be false or misleading in any material respect as of the date
hereof or shall become so at any time prior to the repayment in
full of the Obligation and, except in the case of fraud, such
breach is not cured with 30 days after the earlier of (i) the date
any Senior Officer of Borrower or CBL Properties, Inc. has actual
knowledge of such breach or (ii) the date written notice of such
breach is given to Borrower by Agent;
(f) Borrower, CBL Properties, Inc. or any of their
Subsidiaries shall default in the payment when due of any
Indebtedness under any Guarantee, note, indenture or other
agreement relating to or evidencing Indebtedness (other than
Indebtedness which is fully non-recourse as to Borrower, CBL
Properties, Inc. or such Subsidiary and which has a principal
balance of less than any amount equal to $10,000,000.00 less the
outstanding amount of Permitted Deficiencies), or any event
specified in any Guarantee, note, indenture or other agreement
relating to or evidencing any such Indebtedness shall occur if the
effect of such event is to cause or to permit (giving effect to
any grace or cure period applicable thereto) the holder or holders
of such Indebtedness to cause such Indebtedness to become due, or
to be prepaid in full (whether by redemption, purchase or
otherwise), prior to its stated maturity;
(g) Borrower, CBL Properties, Inc. or any of their
Significant Subsidiaries shall (1) voluntarily be adjudicated as
bankrupt or insolvent, (2) file any petition or commence any case
or proceeding under any provision or chapter of the Federal
Bankruptcy Code or any other federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or
reorganization, (3) make a general assignment for the benefit of
its or his creditors, (4) have an order for relief entered under
the Federal Bankruptcy Code with respect to it or him, (5) convene
a meeting of its or his creditors, or any class thereof, for the
purpose of effecting a moratorium upon or extension or composition
of its or his debts, (6) admit in writing that it or he is
generally not able to pay its or his debts as they mature or
generally not pay its or his debts as they mature, or (7) become
insolvent;
(h) (1) a petition is filed or any case or proceeding
described in Section 0 above is commenced against Borrower, CBL
Properties, Inc. or any of their Significant Subsidiaries, or
against the assets of any such persons or entities and either an
order for relief is granted or such petition and the case or
proceeding initiated thereby is not dismissed within ninety (90)
days from the date of the filing, (2) an answer is filed by
Borrower, CBL Properties, Inc. or any of their
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Significant Subsidiaries, admitting the allegations of any such
petition, or (3) a court of competent jurisdiction enters an
order, judgment or decree appointing, without the consent of
Borrower, CBL Properties, Inc. or any of their Significant
Subsidiaries, a custodian, trustee, agent or receiver for it or
him, or for all or any part of its or his property, or authorizing
the taking possession by a custodian, trustee, agent or receiver
of it or him, or all or any part of its or his property unless
such appointment is vacated or dismissed or such possession is
terminated within ninety (90) days from the date of such
appointment or commencement of such possession, but not later than
five (5) days before the proposed sale of any assets of Borrower,
CBL Properties, Inc. or such Significant Subsidiary, by such
custodian, trustee, agent or receiver, other than in the ordinary
course of the business of Borrower, CBL Properties, Inc. or such
Subsidiary;
(i) one or more judgments or orders for the payment of
money in excess of an amount equal to $10,000,000 less the
outstanding amount of Permitted Deficiencies shall be rendered
against Borrower, CBL Properties, Inc. or any of their Significant
Subsidiaries and such judgment(s) or order(s) shall continue
unbonded, unsatisfied and unstayed for a period of sixty (60)
days;
(j) the failure of Charles B. Lebovitz to remain active in
the management of Borrower, CBL Properties, Inc. and CBL
Management, Inc.; provided, however, that in the event of the
death or incapacity of Charles B. Lebovitz, no Default or Event of
Default shall arise solely by virtue of this clause (j) if either
(i) Borrower, CBL Properties, Inc. and CBL Management, Inc. shall
have each retained, within 180 days of the date of the death or
incapacity of Charles B. Lebovitz, senior management having, in
the reasonable opinion of the Agent and the Majority Lenders,
sufficient skill and experience in Borrower's industry to manage
Borrower competently and efficiently; or (ii) at least two of
James L. Wolford, John N. Foy, Jay Wiston and/or Stephen Lebovitz
remain active as Senior Officers of Borrower, CBL Properties, Inc.
and CBL Management, Inc.
(k) (1) Borrower, CBL Properties, Inc. or any of their
Subsidiaries shall die, dissolve, terminate or liquidate, or merge
with or be consolidated into any other entity (except as permitted
by Section 0 hereof), or shall hypothecate, pledge, mortgage or
otherwise encumber all or any part of the beneficial ownership
interest in Borrower or shall attempt to do any of the same; or
(2) Borrower or any of its Subsidiaries shall amend or modify, in
a manner which would adversely affect Agent or the Lenders, its
articles of incorporation, bylaws, articles of partnership,
certificate of partnership or other charter or enabling documents,
and Majority Lenders have not given its prior written consent to
such amendments or modifications;
(l) the failure of Charles B. Lebovitz, James L. Wolford,
John N. Foy, Jay Wiston, Ben S. Landress and/or Stephen Lebovitz
to own, directly or through CBL & Associates, Inc., beneficially
and of record, at least twenty percent (20%) of the shares of
equity of Borrower and CBL Properties, Inc., on a Combined basis
(without giving effect to the issuance after the date hereof of
stock of CBL Properties, Inc. at a price equal to the fair market
value of such stock on the date of such issuance); the failure of
CBL Properties, Inc. to be the sole general partner of Borrower;
or the failure of Charles B. Lebovitz, James L. Wolford, John N.
Foy, Jay Wiston, Ben S. Landress and/or Stephen Lebovitz to
collectively own, beneficially and of record, with power to vote,
an aggregate amount of at least fifty one percent (51%) of the
shares of voting stock of CBL Management, Inc., unless such
failure is the result of the merger of CBL Management, Inc. with
and into Borrower
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or CBL Properties, Inc., with Borrower or CBL Properties, Inc. as
the surviving Person; provided, however, that Charles B. Lebovitz,
James L. Wolford, John N. Foy, Jay Wiston, Ben S. Landress and
Stephen Lebovitz shall be deemed to own any equity interest so
long as the same is owned by (i) such Person, (ii) a Subsidiary of
such Person, (iii) a trust or similar entities in which such
Person and members of such Person's family, including spouses,
children, parents, siblings and their descendants, are the sole
beneficiaries of all of the interest therein;
(m) Borrower or any of its Subsidiaries shall fail to
maintain the insurance coverage described in Schedule 0 as being
maintained by it at the date of this Agreement or any insurer
listed as providing any of such insurance coverage shall cease to
have an A.M Best policyholders rating of at least A-IX (with
respect to liability) or A-XII (with respect to property damage);
provided that it shall not constitute an Event of Default
hereunder if Borrower shall establish deductibles with respect to
any such listed insurance not exceeding $50,000.00 per occurrence;
or
(n) the assets of Borrower, CBL Properties, Inc. or any of
their Subsidiaries at any time constitute assets, within the
meaning of ERISA, the Internal Revenue Code and the respective
regulations promulgated thereunder, of any ERISA Plan or Non-ERISA
Plan.
(o) CBL Properties, Inc. shall (i) fail to have the shares
of its Capital Stock listed for trading on the New York Stock
Exchange or the American Stock Exchange, or the respective
successors thereto; (ii) fail to remain qualified as a REIT under
the Internal Revenue Code; or (iii) amend or modify its
Certificate of Incorporation in a manner which would adversely
affect Agent or the Lenders except (A) with the prior written
consent of the Majority Lenders; (B) to the extent required in
order to remain qualified as a real estate investment trust under
the Internal Revenue Code; or (C) to the extent required by
Applicable Law.
(p) Borrower shall cease to represent at least ninety
percent (90%) of the book value of CBL Properties, Inc. or the
revenues of Borrower for any fiscal year shall fail to represent
at least ninety percent (90%) of the total revenues of CBL
Properties, Inc. for such fiscal year.
(q) At any time, for any reason (i) subject to the
provisions of Section 7.3 hereof, any Collateral Document or other
Loan Document ceases to be in full force and effect in any
material respect or (ii) Borrower or any Affiliate of Borrower
seeks to repudiate its Obligations thereunder and the Liens
intended to be created thereby are, or Borrower or any Affiliate
of Borrower seeks to render such Liens, invalid and unperfected,
or (iii) subject to the provisions of Section 7.3 hereof, Liens in
favor of the Agent and/or Lenders contemplated by the Collateral
Documents shall, at any time, for any reason, be invalidated or
otherwise cease to be in full force and effect, or such Liens
shall be subordinated or shall not have the priority contemplated
by this Agreement or the other Loan Documents, and such Default
under this item (ii) continues for thirty (30) days after written
notice thereof has been given to Borrower Agent.
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<PAGE>
SECTION 7.2 Remedies. Upon the occurrence of an Event of
Default: (a) in the case of any Event of Default specified in
clauses 0 or 0 above with respect to Borrower, CBL Properties,
Inc. or any of their respective Significant Subsidiaries, the
Commitments shall automatically terminate and the Obligations
(together with accrued interest thereon) shall become immediately
due and payable, without any notice to Borrower or any other act
by Agent and without presentment, demand, protest, notice of
intention to accelerate or notice of acceleration, or other notice
of any kind, all of which are hereby waived by Borrower; (b) the
Agent shall, at the direction of the Majority Lenders (i) by
notice to Borrower terminate the Commitments, which shall
thereupon terminate, and (ii) by notice to Borrower declare the
Obligations (together with accrued interest thereon) to be, and
the Obligations shall thereupon become, immediately due and
payable without presentment, demand, protest, notice of intention
to accelerate or notice of acceleration, or other notice of any
kind, all of which are hereby waived by Borrower; and (c) the
Agent may exercise any and all other rights and remedies granted
to the Agent under this Agreement or under any of the Loan
Documents or pursuant to law, all of which shall be cumulative and
none of which shall be exclusive.
SECTION 7.3 Actions in Respect of the Letters of Credit Upon
Default. If any Event of Default shall have occurred and be
continuing, the Agent may, irrespective of whether it is taking
any of the actions described in Section 7.2 or otherwise, make
demand upon Borrower to, and forthwith upon such demand Borrower
will, pay to the Agent on behalf of the Lenders in same-day funds
at the Agent's Lending Office, for deposit in a cash collateral
account, an amount equal to the aggregate face amount of all
Letters of Credit then outstanding. If at any time the Agent
determines that any funds held in any such cash collateral account
are subject to any right or claim of any Person other than the
Agent and the Lenders or that the total amount of such funds is
less than the aggregate face amount of all Letters of Credit,
Borrower will, forthwith upon demand by the Agent, pay to the
Agent, as additional funds to be deposited and held in such cash
collateral account, an amount equal to the excess of (a) such
aggregate face amount of all outstanding Letters of Credit over
(b) the total amount of funds, if any, then held in such cash
collateral account that the Agent determines to be free and clear
of any such right and claim.
SECTION 7.4 Curing Defaults Under Collateral Documents.
Lenders hereby agree that Borrower may cure any Default under
Section 7.1(d) hereof relating to the Collateral Documents and any
Default under this Agreement which relates solely to an Eligible
Project by giving Agent written notice within the applicable
notice and cure period that the Eligible Project to which such
Collateral Document relates shall be removed from the Borrowing
Base, so long as both of the following conditions are satisfied:
(a) such Default does not constitute a Default or
Event of Default under any other term of this
Agreement; and
(b) the sum of the aggregate principal amount of the
outstanding Advances plus the aggregate face
amount of the outstanding Letters of Credit does
not exceed the Borrowing Base after giving effect
to the removal of such Eligible Project.
SECTION 7.5 Permitted Deficiency. Notwithstanding anything
to the contrary set forth herein, (a) failure of Borrower or any
other Person owing any of the Collateral to keep such Collateral
in the condition required under Section 6.3 hereof or under the
comparable provisions of the Mortgage applicable thereto; (b)
failure of Borrower or any of its Subsidiaries or any other Person
owning an
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<PAGE>
Eligible Project to pay Impositions in the manner required under
Section 6.5 hereof
or under the comparable provisions of the Mortgage applicable
thereto; (c) failure of Borrower or any other Person owning an
Eligible Project to comply with Legal Requirements applicable to
the Collateral as required under Section 0 hereof or under the
comparable provisions of the Mortgage applicable thereto; (d)
failure of Borrower or any of its Subsidiaries or any other Person
owning an Eligible Project to comply with any Legal Requirement
required under Section 5.1 of the Mortgage applicable thereto; (e)
failure of Borrower or any other Person owning an Eligible Project
to prevent alterations to any Eligible Project as required under
Section 5.2 of the Mortgage applicable thereto; (f) failure of
Borrower or any other Person owning an Eligible Project to replace
"Fixtures" or "Personalty" required under, and as such terms are
defined in, Section 5.3 of the Mortgage applicable thereto; (g)
the existence of any non-consensual Lien on the any of the
Collateral not permitted by Section 0 hereof or by the applicable
terms of the Collateral Documents; or (h) Borrower and/or its
Subsidiary, Subpartnership or other Person owing an Eligible
Project shall fail to deposit with the Agent any "Casualty
Completion Deposit" or "Escrowed Sums" required under, and as such
terms are defined in, the Mortgage to which such Eligible Project
is subject, shall not constitute a Default or Event of Default
hereunder, so long as the following conditions are satisfied:
(i) the sum (without duplication) of (A) the cost of
correcting all failures described in (a) through (f)
above, as determined by Agent in its reasonable
discretion, plus (B) the amount secured by Liens
described in (g) above plus (C) the amount of
Indebtedness secured by Liens permitted under Section
0 hereof plus (D) the aggregate amount of unpaid
Casualty Completion Deposits or Escrowed Sums (said
sum being referred to herein as the "Permitted
Deficiency"), plus (E) the amount of all judgments or
orders for the payment of money rendered against
Borrower, CBL Properties, Inc. or any of their
Significant Subsidiaries which have continued
unbonded, unsatisfied and unstayed for a period of
sixty (60) days; plus (F) the principal balance of any
Indebtedness under any Guarantee, note, indenture or
other agreement relating to or evidencing Indebtedness
of Borrower, CBL Properties, Inc. or any of their
Subsidiaries on which any payment is past due or in
respect of which any event has occurred the effect of
which is to cause or to permit (giving effect to any
grace or cure period applicable thereto) the holder or
holders of such Indebtedness to cause such
Indebtedness to become due, or to be prepaid in full
(whether by redemption, purchase or otherwise), prior
to its stated maturity does not exceed, in the
aggregate at any one time, $5,000,000.00;
(ii) Such Permitted Deficiency does not constitute a
Default or Event of Default under this Agreement or
the other Loan Documents except to the extent
described in clauses (a) through (h) above;
(iii) The aggregate amount of the Permitted Deficiencies
either secured by a Lien or consisting of unpaid
Casualty Completion Deposits or Escrowed Sums does not
exceed the difference between (A) the Borrowing Base
(prior to reduction by the amount of the Permitted
Deficiency, as required by this Section 0), minus (B)
the sum of the aggregate principal amount of all
outstanding Advances plus the aggregate face amount of
all outstanding Letters of Credit;
(iv) Borrower is proceeding to cure all such failures in a
diligent manner; and 57
<PAGE>
(v) The Borrowing Base shall be reduced by the amount of
(A) any outstanding Permitted Deficiency secured by a
Lien on any of the Collateral and (B) any outstanding
Permitted Deficiency representing an unpaid Casualty
Completion Deposit or Escrowed Sums.
ARTICLE 8.
THE AGENT
SECTION 8.1 Appointment and Authorization. Each Lender
irrevocably appoints and authorizes Agent to take such action as
agent on its behalf and to exercise such powers under the Loan
Documents and the Collateral Documents as are granted to Agent by
the terms thereof, together with all such powers as are reasonably
incidental thereto. Borrower shall be entitled to rely upon a
written notice or written response from Agent as being made
pursuant to the requisite concurrence or consent of the Lenders
necessary to take such action without investigation or otherwise
contacting the Lenders hereunder.
SECTION 8.2 Agent and Affiliates. Agent shall have the same
rights and powers under the Loan Documents and the Collateral
Documents as any other Lender and may exercise or refrain from
exercising the same as though it were not Agent, and Agent and its
Affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with Borrower or Affiliate of
Borrower as if it were not Agent hereunder.
SECTION 8.3 Action by Agent. The Agent (which term as used
in this sentence and in Section 0 hereof and the first sentence of
Section 0 hereof shall include reference to its Affiliates and its
own and its Affiliates' shareholders, officers, directors,
employees and agents): (a) shall have no duties or
responsibilities except those expressly set forth in this
Agreement, and shall not by reason of this Agreement be a trustee
for any Lender; (b) shall not be responsible to the Lenders for
any recitals, statements, representations or warranties contained
in this Agreement or any of the other Loan Documents, or in any
certificate or other instrument, document or agreement referred to
or provided for in, or received by any of them under, this
Agreement or any of the other Loan Documents, or for the value,
validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement, any Note or any of the other Loan
Documents or for any failure by Borrower or any other Person to
perform any of its obligations hereunder or thereunder;
(c) subject to Section 0 hereof, shall not be required to initiate
or conduct any litigation or collection proceedings hereunder; (d)
shall have no liability to any Lender for any determination made
in good faith by the Agent that such Lender is in default of its
obligations hereunder; and (e) shall not be responsible for any
action taken or omitted to be taken by it hereunder or under any
other agreement, document or instrument referred to or provided
for herein or in connection herewith, except for its own gross
negligence or willful misconduct. The Agent may deem and treat
the payee of any Note as the holder thereof for all purposes
hereof unless and until a written notice of the assignment or
transfer complying with the terms and conditions of Section 0
hereof.
SECTION 8.4 Consultation with Experts. Agent may consult
with legal counsel (who may be counsel for Borrower) , independent
public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken by it in
good faith in accordance with the advice of such counsel,
accountants or experts.
57
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<PAGE>
SECTION 8.5 Reliance by Agent. The Agent shall be entitled
to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, facsimile, telegram or
cable) believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons.
As to any matters not expressly provided for by this Agreement,
the Agent shall in all cases be fully protected in acting, or in
refraining from acting, and no Lender shall have any right of
action against Agent as a result of Agent acting or refraining
from acting, hereunder or under the other Loan Documents in
accordance with instructions signed by the Majority Lenders (or,
where applicable, all Lenders) and such instructions and any
action taken or failure to act pursuant thereto shall be binding
on all of the Lenders; provided, however, the Agent shall not be
required to take any action which (a) the Agent reasonably
believes will expose it to personal liability unless the Agent
receives an indemnification satisfactory to it from the Lenders
with respect to such action or (b) is contrary to this Agreement,
the Notes, the other Loan Documents or Applicable Law.
SECTION 8.6 Defaults. The Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default or Event of
Default (other than the non-payment of principal of or interest on
Loans or of fees) unless the Agent has received notice from a
Lender or the Borrower specifying such Default or Event of Default
and stating that such notice is a "Notice of Default." In the
event of any such non-payment or in the event the Agent receives
such a notice of the occurrence of a Default or Event of Default,
the Agent shall give, and to the extent the Agent otherwise has
actual knowledge of a Default or Event of Default the Agent shall
use best efforts to give, prompt notice thereof to the Lenders.
SECTION 8.7 Indemnification. Each Lender shall, in
accordance with its Pro Rata Share, promptly (and in all events
within ten [10] days after demand therefor) reimburse (to the
extent not reimbursed by Borrower) Agent for, and indemnify Agent
against, any third- party costs (including, without limitation,
Protective Advances and costs described in Section 0 and Section
0), expense (including attorneys' fees and disbursements provided
that, if outside counsel is not used by the Agent, the allocated
cost of in-house counsel of Agent shall be deemed to be a
third-party cost and expense ), claim, demand, action, loss or liability
(except such as result from Agent's gross negligence or willful
misconduct) that Agent may pay, suffer or incur in connection with
the Loan Documents, the Collateral Documents or any action taken
or omitted by Agent. The obligations of Lenders under this
Section 0 shall survive the payment in full of all Obligations and
the termination of this Agreement. In the event that after
payment and distribution of any amount by Agent to Lenders, any
Lender or third party, including Borrower, any creditor of
Borrower or a trustee in bankruptcy, recovers from Agent any
amount found to have been wrongfully paid to Agent or disbursed by
Agent to Lenders, then Lenders, in proportion to their respective
Pro Rata Share, shall reimburse Agent for all such amounts.
Notwithstanding the foregoing, Agent shall not be obligated to
advance any amounts hereunder (other than Agent's Pro Rata Share
of each Advance) and may require the deposit with Agent by each
Lender of its Pro Rata Share of any material expenditures
anticipated by Agent before they are incurred or made payable.
SECTION 8.8 Credit Decision. Each Lender acknowledges that
it has, independently and without reliance upon Agent or any other
Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to
enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon Agent or any other
Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit
decisions in taking or not taking any action
58
<PAGE> under the Loan Documents (including without limitation
decisions with respect to the matters described in clauses (i)
through (x) of Section 0(a) of this Agreement) or the Collateral
Documents.
SECTION 8.9 Failure to Act. Except for action expressly
required of the Agent hereunder, the Agent shall in all cases be
fully justified in failing or refusing to act hereunder unless it
shall receive further assurances to its satisfaction from the
Lenders of their indemnification obligations under Section 0
hereof against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such
action.
SECTION 8.10 Resignation or Removal of Agent; Co-Agent.
(a) Subject to the appointment and acceptance of a
successor Agent as provided below, the Agent may resign at any
time by giving notice thereof to the Lenders and the Borrower.
For good cause, the Majority Lenders may remove Agent at any time
by giving at least thirty (30) days prior written notice to Agent,
Borrower and the other Lenders. For purposes of this Section
8.10, in determining whether the Majority Lenders have approved
the removal of the Agent, the Agent, in its capacity as a Lender,
will be disregarded and excluded and the Pro Rata Shares of the
remaining Lenders shall be redetermined, for voting purposes only,
to exclude the Pro Rata Shares of the Agent. Such resignation or
removal shall take effect upon the acceptance of appointment as
Agent by the successor Agent. Upon any such resignation or
removal, the Majority Lenders shall have the right to appoint a
successor Agent consented to by Borrower, which consent shall not
be unreasonably withheld. If no successor Agent shall have been
so appointed by the Majority Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Agent's
giving of notice of resignation or the Majority Lender's removal
of the retiring Agent, the retiring Agent may, on behalf of the
Lenders appoint a successor Agent consented to by Borrower, which
consent shall not be unreasonably withheld. Any successor Agent
must be a bank (i) the senior debt obligations of which (or such
bank's parent's senior debt obligations) are rated not less than
Baa-1 by Moody's Investors Services, Inc. or a comparable rating
by a rating agency acceptable to the Majority Lenders and (ii)
which has total assets in excess of $10,000,000,000.00. Upon the
acceptance of any appointment as Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation or removal
hereunder as Agent, the provisions of this Article 0 shall
continue in effect for its benefit in respect of any actions taken
or omitted to be taken by it while it was acting as the Agent.
Upon the acceptance of any appointment as Agent, such successor
Agent shall confirm to Borrower, in writing, the agency fees to be
paid to such successor Agent pursuant to Section 0.
(b) In the event that Applicable Law imposes any
restrictions on the identity of an agent such as the Agent or
requires the appointment of any co-agent in connection therewith,
the Agent may, in its discretion, for the purpose of complying
with such restrictions, appoint one or more co-agents hereunder
consented to by Borrower, which consent shall not be unreasonably
withheld by Borrower. Any such Co-Agent(s) shall have the same
rights, powers, privileges and obligations as the Agent and shall
be subject to and entitled to the benefits of all provisions of
this Agreement and the Loan Documents relative to the Agent but
the appointment of a co-agent shall not increase the obligation of
Borrower hereunder. In addition to any rights of the Majority
Lenders set forth in Section 0 above, any such Co-Agent may be
removed at any time by the Agent.
59
<PAGE> SECTION 8.11 Consent and Approvals.
(a) Each Lender has authorized and directed, and hereby
authorizes and directs, Agent to enter into the Loan Documents
other than this Agreement for the benefit of Lenders. Each Lender
agrees that any action taken by Agent or the Majority Lenders (or,
where required by the express terms of this Agreement, a greater
proportion of Lenders) in accordance with the provisions of this
Agreement or any Loan Document, and the exercise by Agent or the
Majority Lenders (or, where so required, such greater proportion),
of the powers set forth herein or therein, together with such
other powers as are reasonably incidental thereto, shall be
authorized and binding upon all Lenders. Without limiting the
generality of the foregoing, the Agent shall have the sole and
exclusive right and authority to:
(i) act as the disbursing and collecting agent for the
Lenders with respect to all payments and collections arising
in connection with this Agreement and the Loan Documents
relating to the Collateral;
(ii) execute and deliver each Collateral Document and
accept delivery of each such agreement delivered by the
Borrower or any of its Subsidiaries;
(iii) act as collateral agent for the Lenders for
purposes of the perfection of all security interests and
Liens created by such agreements and all other purposes
stated therein, provided, however, the Agent hereby appoints,
authorizes and directs the Lenders to act as collateral
sub-agents for the Agent and the Lenders for purposes of the
perfection of all security interests and Liens with respect
to any of the Collateral held by such Lender;
(iv) manage, supervise and otherwise deal with the
Collateral;
(v) take such action as is necessary or desirable to
maintain the perfection and priority of the security interest
and Liens created or purported to be created by the Loan
Documents;
(vi) deliver notices, including notices of default,
hereunder and under the other Loan Documents; and
(vii) except as may be otherwise specifically
restricted by the terms of this Agreement or any other Loan
Document, exercise all remedies given to the Agent or the
Lenders with respect to the Collateral under the Loan
Documents, Applicable Law or otherwise.
(b) Each of the following shall require the approval or
consent of the Majority Lenders:
(i) approval of certain actions with respect to
management agreements for the Eligible Projects pursuant to
Section 0 hereof;
(ii) approval of a Major Construction Project under
Section 0 hereof;
(iii) approval of any material amendment of the
organizational documents of Borrower, CBL Properties, Inc. or
their respective Subsidiaries prohibited by Section 0 hereof;
(iv) approval of certain changes in executive officers
otherwise prohibited by Section 0 hereof;
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(v) acceleration of the Obligations following an Event
of Default or rescission of such acceleration under Section 0
hereof;
(vi) approval of the exercise of rights and remedies
under the Loan Documents following an Event of Default;
(vii) removal of Agent and appointment of a successor
under Section 0 hereof;
(viii) approval of a Post-Foreclosure Plan and related
matters pursuant to Section 0 hereof; and
(ix) except as otherwise provided in Section 0,
approval of any amendment, modification or termination of
this Agreement.
(c) Designation of a Project as an Eligible Project shall
require the approval or consent of the Supermajority Lenders
pursuant to Section 0 hereof.
(d) Approval of certain Protective Advances shall require
the approval of either the Majority Lenders or all of the Lenders,
all as set forth in Section 0 hereof.
(e) In addition to the required consents or approvals
referred to in Section 0 above, Agent may at any time request
instructions from the Majority Lenders with respect to any actions
or approvals which, by the terms of this Agreement or of any of
the Loan Documents, Agent is permitted or required to take or to
grant without instructions from any Lenders, and if such
instructions are promptly requested, Agent shall be absolutely
entitled to refrain from taking any action or to withhold any
approval and shall not be under any liability whatsoever to any
Person for refraining from taking any action or withholding any
approval under any of the Loan Documents until it shall have
received such instructions from the Majority Lenders. Agent shall
promptly notify each Lender at any time that the Majority Lenders
have instructed Agent to act or refrain from acting pursuant
hereto.
(f) All communications from Agent to Lenders requesting
Lenders determination, consent, approval or disapproval (i) shall
be given in the form of a written notice to each Lender, (ii)
shall be accompanied by a description of the matter or thing as to
which such determination, approval, consent or disapproval is
requested, or shall advise each Lender where such matter or thing
may be inspected, or shall otherwise describe the matter or issue
to be resolved, (iii) shall include, if reasonably requested by a
Lender and to the extent not previously provided to such Lender,
written materials and a summary of all oral information provided
to Agent by Borrower in respect of the matter or issue to be
resolved, and (iv) shall include Agent's recommended course of
action or determination in respect thereof. Each Lender shall
reply promptly, but in any event within ten (10) Business Days
after receipt of the request therefor by Agent (the "Lender Reply
Period"). Unless a Lender shall give written notice to Agent that
it objects to the recommendation or determination of Agent
(together with a written explanation of the reasons behind such
objection) within the Lender Reply Period, such Lender shall be
deemed to have approved of or consented to such recommendation or
determination. With respect to decisions requiring the approval
of Majority Lenders or all Lenders, Agent shall submit its
recommendation or determination for
61
<PAGE>
approval of or consent to such recommendation or determination to
all Lenders and upon receiving the required approval or consent
shall follow the course of action or determination recommended to
Lenders by Agent or such other course of action recommended by
Majority Lenders or all Lenders, as the case may be, and each
non-responding Lender shall be deemed to have concurred with such
recommended course of action.
SECTION 8.12 Agency Provisions Relating to Collateral.
(a) Agent is hereby authorized on behalf of all Lenders,
without the necessity of any notice to or further consent from any
Lender, from time to time prior to an Event of Default, to take
any action with respect to any Collateral or Loan Document which
may be necessary to perfect and maintain perfected Liens upon the
Collateral granted pursuant to the Collateral Documents. Agent
may make, and shall be reimbursed for, Protective Advance(s)
during any one calendar year with respect to each Eligible Project
up to the sum of (i) amounts expended to pay real estate taxes,
assessments and governmental charges or levies imposed upon such
Eligible Project, (ii) amounts expended to pay insurance premiums
for policies of insurance related to such Eligible Project, and
(iii) $500,000.00. Protective Advances in excess of said sum
during any calendar year for any Eligible Project shall require
the consent of Majority Lenders. Any Protective Advance which
would, when aggregated with all other Advances, cause the Lenders
to exceed their Commitments, shall require the consent of all of
the Lenders; provided, however, that each Lender will approve or
disapprove any request by the Agent for such Protective Advance
within three (3) Business Days after receipt of such request from
the Agent; provided, further, that any Lender who fails to so
approve or disapprove within such three (3) Business Day period
shall be deemed to have approved such Protective Advance.
(b) Lenders hereby irrevocably authorize Agent, at its
option and in its discretion, to release any Lien granted to or
held by Agent upon any Collateral (i) upon termination of the
Commitments and repayment and satisfaction of all Loans, and all
other Obligations and the termination of this Agreement or (ii)
constituting property being released in compliance with Section 0
hereof or (iii) if approved, authorized or ratified in writing by
Agent at the direction of all Lenders. Without in any manner
limiting Agent's authority to act without any specific or further
authorization or consent by Lenders (as set forth in Section 0),
upon request by Agent at any time, Lenders will confirm in writing
Agent's authority to release the Collateral Documents with respect
to any Eligible Project pursuant to Section 0 or this Section 0.
(c) So long as no Default or Event of Default is then
continuing, upon receipt by Agent of any such written confirmation
as referenced in Section 0 from all Lenders of its authority to
release Collateral, and upon at least five (5) Business Days prior
written request by Borrower, Agent shall (and is hereby
irrevocably authorized by Lenders to) execute such documents as
may be necessary to evidence the release of the Liens granted to
Agent for the benefit of Lenders herein or pursuant hereto upon
such Collateral; provided, that (i) Agent shall not be required to
execute any such document on terms which, in Agent's opinion,
would expose Agent to liability or create any obligation or entail
any consequence other than the release of such Liens without
recourse or warranty, and (ii) such release shall not in any
manner discharge, affect or impair the Obligations or any Liens
upon (or obligations of Borrower in respect of) any Project which
shall continue to constitute part of the Collateral.
(d) Except as provided in this Agreement, Agent shall have
no obligation whatsoever to any Lender or to any other Person to
assure that the Collateral exists or is owned by Borrower or is
cared for, protected or insured or has been
63
<PAGE> encumbered or that the Liens granted to Agent herein or in
any of the other Loan Documents or pursuant hereto or thereto have
been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority,
or to exercise at all or in any particular manner or under any
duty of care, disclosure or fidelity, or to continue exercising,
any of the rights, authorities and powers granted or available to
the Agent in this Agreement or in any of the Loan Documents, it
being understood and agreed that in respect of the Collateral, or
in any act, omission or event related thereto, the Agent may act
in any manner it may deem appropriate, in its sole discretion,
given its own interest in the Collateral as one of the Lenders and
that the Agent shall have no duty or liability whatsoever to any
Lender.
(e) Should Agent commence any proceeding or in any way seek
to enforce its rights or remedies under the Loan Documents,
irrespective of whether as a result thereof Agent shall acquire
title to any Collateral, either through foreclosure, deed in lieu
of foreclosure, or otherwise, each Lender, upon demand therefor
from time to time, shall contribute its share (based on its Pro
Rata Share) of the reasonable costs and/or expenses of any such
enforcement or acquisition, including, but not limited to, fees of
receivers or trustees, court costs, title company charges, filing
and recording fees, appraisers' fees and fees and expenses of
attorneys to the extent not otherwise reimbursed by Borrower.
Without limiting the generality of the foregoing, each Lender
shall contribute its share (based on its Pro Rata Share) of all
reasonable costs and expenses incurred by Agent (including
reasonable attorneys' fees and expenses) if Agent employs counsel
for advice or other representation (whether or not any suit has
been or shall be filed) with respect to any Collateral or any part
thereof, or any of the Loan Documents, or the attempt to enforce
any security interest or Lien on any of the Collateral, or to
enforce any rights of Agent or any of Borrower's or any other
party's obligations under any of the Loan Documents, but not with
respect to any dispute between Agent and any other Lender(s). Any
loss of principal and interest resulting from any Event of Default
shall be shared by Lenders in accordance with their respective Pro
Rata Shares. It is understood and agreed that in the event Agent
determines it is necessary to engage counsel for Lenders from and
after the occurrence of an Event of Default, said counsel shall be
selected by Agent and written notice of such selection, together
with a copy of such counsel's engagement letter and fee estimate,
shall be delivered to Lenders.
(f) In the event that all or any portion of the Collateral
is acquired by Agent as the result of a foreclosure or the
acceptance of a deed or assignment in lieu of foreclosure, or is
retained in satisfaction of all or any part the Obligations, title
to any such Collateral or any portion thereof shall be held in the
name of Agent or a nominee or subsidiary of Agent, as agent, for
the ratable benefit of Agent and Lenders. Agent shall prepare a
recommended course of action for such Collateral (the
"Post-Foreclosure Plan"), which shall be subject to the approval
of the Majority Lenders. In the event that Majority Lenders do
not approve such Post-Foreclosure Plan, any Lender shall be
permitted to submit an alternative Post-Foreclosure Plan to Agent
and Agent shall submit any and all such additional Post-Foreclosure
Plans to the Lenders for evaluation and the approval
of Majority Lenders. Agent shall manage, operate, repair,
administer, complete, construct, restore or otherwise deal with
the Collateral acquired and administer all transactions relating
thereto, including, without limitation, employing a management
agent, leasing agent and other agents, contractors and employees,
including agents of the sale of such Collateral, and the
collecting of rents and other sums from such Collateral and paying
the expenses of such Collateral. Upon demand therefor from time
to time, each Lender will contribute its share (based on its Pro
Rata Share) of all reasonable costs and expenses incurred by Agent
pursuant 64
<PAGE> to the Post-Foreclosure Plan in connection with the
construction, operation, management, maintenance, leasing and sale
of such Collateral. In addition, Agent shall render or cause to
be rendered by the managing agent, to each of the Lenders,
monthly, an income and expense statement for such Collateral, and
each of the Lenders shall promptly contribute its Pro Rata Share
of any operating loss for such Collateral, and such other expenses
and operating reserves as Agent shall deem reasonably necessary
pursuant to and in accordance with the Post-Foreclosure Plan. To
the extent there is net operating income from such Collateral,
Agent shall, in accordance with the Post-Foreclosure Plan,
determine the amount and timing of distributions to Lenders. All
such distributions shall be made to Lenders in accordance with
their respective Pro Rata Shares. Lenders acknowledge that if
title to any Collateral is obtained by Agent or its nominee, such
Collateral will not be held as a permanent investment but will be
liquidated as soon as practicable. Agent shall undertake to sell
such Collateral, at such price and upon such terms and conditions
as the Majority Lenders shall reasonably determine to be most
advantageous. Any purchase money mortgage or deed of trust taken
in connection with the disposition of such Collateral in
accordance with the immediately preceding sentence shall name
Agent, as agent for Lenders, as the beneficiary or mortgagee. In
such case, Agent and Lenders shall enter into an agreement with
respect to such purchase money mortgage defining the rights of
Lenders in the same Pro Rata Shares as provided hereunder, which
agreement shall be in all material respects similar to this
Agreement insofar as this Agreement is appropriate or applicable.
SECTION 8.13 Defaulting Lenders.
(a) If a Lender fails or refuses to fund its Pro Rata Share
of an Advance hereunder and each other Lender has funded its Pro
Rata Share of such Advance, Borrower may request that the Agent
deliver to such non-funding Lender a notice stating that unless
such Lender funds such Advance within five (5) days of its receipt
of such notice, such Lender shall be a Defaulting Lender. The
Agent, upon receipt of such request, shall send such notice if
either (i) the Agent determines that such Lender, by not funding
its Pro Rata Share of such Advance, has defaulted in its
obligations hereunder or (ii) Borrower has obtained a judgment
from a court of competent jurisdiction that such non-funding
Lender has breach it obligations to Borrower by failing to fund
its Pro Rata Share of such Advance. Any determination made in
good faith by the Agent pursuant to clause (i) above shall be
conclusive and binding on Borrower and such Lender unless and
until a judgment to contrary is obtained as described in clause
(ii) above.
(b) Once a Lender becomes a Defaulting Lender, the Agent
shall notify the other Lenders of such occurrence, whereupon the
Pro Rata Share of each of the other Lenders shall be recalculated
to exclude the Pro Rata Share of such Defaulting Lender.
(c) Notwithstanding any provision hereof to the contrary,
until such time as a Defaulting Lender has funded its Pro Rata
Share of any Advance which was previously a Non Pro Rata Advance,
or such Lender is determined by a court of competent jurisdiction
not to have defaulted in it obligations hereunder or all other
Lenders have received payment in full (whether by repayment or
prepayment) of the principal and interest due in respect of such
Non Pro Rata Advance, all of the Obligations owing to such
Defaulting Lender hereunder shall be subordinated in right of
payment, as provided in the following sentence, to the prior
payment in full of all principal, interest and fees in respect of
all Non Pro Rata Advances in which the Defaulting Lender has not
funded its Pro Rata Share (such principal,
65
<PAGE> interest and fees being referred to as "Senior Loans").
All amounts paid by Borrower and otherwise due to be applied to
the Obligations owing to the Defaulting Lender pursuant to the
terms hereof shall be distributed by Agent to the other Lenders in
accordance with their respective Pro Rata Shares (recalculated for
purposes hereof to exclude the Defaulting Lender's Commitment),
until all Senior Loans have been paid in full. This provision
governs only the relationship among Agent, each Defaulting Lender,
and the other Lenders; nothing hereunder shall limit the
obligation of Borrower to repay all Advances in accordance with
the terms of this Agreement. The provisions of this section shall
apply and be effective regardless of whether an Event of Default
occurs and is then continuing, and notwithstanding (i) any other
provision of this Agreement to the contrary, (ii) any instruction
of Borrower as to its desired application of payments or (iii) the
suspension of such Defaulting Lender's right to vote on matters
which are subject to the consent or approval of Majority Lenders,
Supermajority Lender or all Lenders.
(d) Agent shall be entitled to (i) collect interest from
such Lender for the period from the date on which the payment was
due until the date on which the payment is made at the Federal
Funds Rate for each day during such period, (ii) withhold or
setoff, and to apply to the payment of the defaulted amount and
any related interest, any amounts to be paid to such Defaulting
Lender under this Agreement, and (iii) bring an action or suit
against such Defaulting Lender in a court of competent
jurisdiction to recover the defaulted amount and any related
interest. In addition, the Defaulting Lender shall indemnify,
defend and hold Agent and each of the other Lenders harmless from
and against any and all costs, expenses and liabilities plus
interest thereon at the Default Rate set forth in the Loan
Documents for funds advanced by Agent or any other Lender on
account of the Defaulting Lender which they may sustain or incur
by reason of or as a direct consequence of the Defaulting Lender's
failure or refusal to abide by its obligations under this
Agreement.
(e) So long as any Lender is a Defaulting Lender, (i) no
Unused Facility Fee shall accrue in favor of, or be payable to,
such Defaulting Lender; (ii) the Defaulting Lender's outstanding
portion of the Loan shall accrue interest during each month at a
rate equal to the LIBOR Rate applicable to an Interest Period
having a duration one-month and commencing on the first LIBOR
Business Day of such month; and (iii) at the request of Borrower,
all interest payable to such Defaulting Lender shall be placed by
the Agent in a cash collateral account and held as security for
the Obligations owed to all of the Lenders and such interest shall
not be paid to such Defaulting Lender until such time as either
(A) the other Lenders have been paid in full or (B) such Lender is
no longer a Defaulting Lender; provided, however, if such Lender
has been found to be a Defaulting Lender pursuant to a judgment of
a court of competent jurisdiction that such non-funding Lender has
breached its funding obligations hereunder and such judgment is
not a final, non-appealable judgment, then until Borrower obtains
such a final, non-appealable judgment that such non-funding Lender
is in breach of its funding obligations hereunder, Borrower shall
continue to pay the Unused Facility Fee on such Defaulting
Lender's Commitment and shall pay interest on the Defaulting
Lender's portion of the outstanding Loan at the rate applicable to
the other Lenders' portion of the outstanding Loan and the Agent
shall, at the request of Borrower, deposit such Unused Facility
Fee and the excess of such interest over the interest payable at
the rate set forth in clause (ii) above into a cash collateral
account, held as security for the Obligations owed to all of the
Lenders and paid (x) to the Borrower, if such non-funding Lender
is determined, in a final, non-appealable judgment from a court of
competent jurisdiction to have breached its funding
66
<PAGE> obligations hereunder, or (y) to such non-funding Lender,
if such non-funding Lender is determined, in a final, non-appealable
judgment from a court of competent jurisdiction not to
have breached its funding obligations hereunder.
(f) A Defaulting Lender shall cease to be a Defaulting
Lender upon (i) the payment by such Defaulting Lender to the
Agent, for the benefit of the Agent and the Lenders, as
appropriate, of its Pro Rata Share (determined without giving
affect to any recalculation thereof as a result of such Lender
being a Defaulting Lender) of an amount equal to the amount of
each Advance which was previously a Non Pro Rata Advance plus all
other amounts required to be paid or funded by Lenders hereunder
since the date such Lender became a Defaulting Lender and for
which such Defaulting Lender has not paid or funded its Pro Rata
Share, (ii) any judgment that such non-funding Lender has breached
its obligations to Borrower in respect of such Non Pro Rata
Advance is reversed or vacated for any reason; or (iii) the Agent
and all other Lenders receiving payment in full (whether by
repayment or prepayment) of the principal and interest due in
respect of all such Non Pro Rata Advances and all such other
amounts.
(g) In the event a non-funding Lender is designated as a
Defaulting Lender as a result of a judgment that such non-funding
Lender has breached its obligations to Borrower in respect of such
Non Pro Rata Advance and such judgment is subsequently reversed
for any reason, then (i) such Lender shall not longer be a
Defaulting Lender, (ii) the Pro Rata Share of each Lender shall be
adjusted to include the Commitment of such Lender, (iii) such
Lender shall be entitled to immediate payment of any and all
amounts owed to it and held in any cash collateral account
established pursuant to Section 0; (iv) the Borrower shall, within
three (3) Business Days, repay to the Agent, for the benefit of
the other Lenders, the aggregate amount by which the outstanding
Advances made by each Lender exceeds such Lender's Pro Rata Share
of the Loan (giving effect to the recomputation of Pro Rata Share
pursuant to clause (ii) above); and (v) such Lender shall have the
right to recover from Borrower any damages that such Lender may
have suffered as a result of having been categorized as
"Defaulting Lender" and (vi) such Lender such other remedies
against Borrower as it may have under this Agreement, at law or in
equity.
SECTION 8.14 Borrower Not a Beneficiary. The provisions
of this Article 0 are solely for the benefit of the Agent and the
Lenders and neither the Borrower nor any Affiliate of the Borrower
shall have any right to rely on or enforce any of the provisions
hereof; provided, however, that the Borrower shall have the rights
granted to it in subsections (a), (b), (e) and (f) of Section 0
hereof. In performing its functions and duties under this
Agreement, the Agent shall act solely as the agent of the Lenders
and does not assume and shall not be deemed to have assumed any
obligations or relationship of agency, trustee or fiduciary with
or for the Borrower or any Affiliate of the Borrower. Lenders
represent to Borrower that, other than letter agreements relating
to the payment of fees and letters committing to participate as a
Lender, the Loan Documents contain as of the date hereof all of
the written agreements establishing the relationships between the
Agent and the Lenders and among the Lenders in connection with the
Loan.
ARTICLE 9.
MISCELLANEOUS
SECTION 9.1 Notices. All notices or other communications
required or permitted to be given pursuant to this Agreement shall
be in writing and shall be 67
<PAGE> considered as properly given if mailed by first-class
United States mail, postage prepaid, registered or certified with
return receipt requested, if sent by national overnight courier
providing documentation of receipt, if delivered in person to the
intended addressee or if sent by prepaid telegram, telex or
telecopy, with a copy of such telegram, telex or telecopy sent by
mail, overnight courier or personal delivery as aforesaid. Notice
so mailed shall be effective three (3) Business Days after its
deposit (provided however, that any Notice of Borrowing or Rate
Selection Notice so mailed shall be effective only if and when
received by Agent). Notice given in any other manner shall be
effective only if and when received by the addressee. For
purposes of notice, the addresses of the parties shall be as set
forth on the signature pages hereto; provided, however, that any
party shall have the right to change its address for notice
hereunder to any other location within the continental United
States by the giving of thirty (30) days' notice to the other
parties in the manner set forth hereinabove.
SECTION 9.2 No Waiver. Any failure by Agent or any Lender
to insist, or any election by Agent or any Lender not to insist,
upon strict performance by Borrower or its Affiliates of any of
the terms, provisions or conditions of the Loan Documents shall
not be deemed to be a waiver of same or of any other term,
provision or condition thereof, and Agent and the Lenders shall
have the right at any time or times thereafter to insist upon
strict performance by Borrower and its Affiliates of any and all
such terms, provisions and conditions. No delay or omission by
Agent or any Lender to exercise any right, power or remedy
accruing upon any Default or Event of Default shall exhaust or
impair any such right, power or remedy or shall be construed to be
a waiver of any such Default or Event of Default, or acquiescence
therein, and every right, power and remedy given by this Agreement
to Agent or any Lender may be exercised from time to time and as
often as may be deemed expedient by Agent or any Lender. No
consent or waiver, expressed or implied, by Agent or any Lender to
or of any Default or Event of Default by Borrower or its
Affiliates in the performance of the Obligations of Borrower and
its Affiliates hereunder or to any other Event of Default shall be
deemed or construed to be a consent or waiver to or of any other
Default or Event of Default in the performance of the same or any
other Obligations of Borrower or its Affiliates hereunder.
Failure on the part of Agent or any Lender to complain of any act
or failure to act or to declare an Event of Default, irrespective
of how long such failure continues, shall not constitute a waiver
by Agent or any such Lender of its rights hereunder or impair any
rights, powers, or remedies of Agent or any Lender hereunder.
SECTION 9.3 Expenses; Documentary Taxes; Indemnification.
(a) Borrower agrees to reimburse the Agent for all of the
Agent's reasonable costs and expenses incurred in connection with
the development, preparation, execution, delivery, modification or
amendment of this Agreement, the Notes and the Collateral
Documents, including reasonable audit costs, appraisal costs, the
cost of searches, filings and filing fees, taxes and the fees and
disbursements of Agent's attorneys, Messrs. Troutman Sanders and
any counsel retained by them. Borrower further agrees to
reimburse the Agent and each Lender for all reasonable third-party
costs and expenses incurred by the Agent or such Lender (including
attorneys' fees and disbursements provided that, if outside
counsel is not used by the Agent, the allocated cost of in-house
counsel of Agent shall be deemed to be a third-party cost and
expense) from and after the occurrence of a Default to:
(i) commence, defend or intervene in any court proceeding;
(ii) file a petition, complaint, answer, motion or other
pleading, or to take any other action in or with respect to any
suit or proceeding (bankruptcy or otherwise) relating to the
Collateral or this Agreement, the Notes or any of the Collateral
Documents; (iii) protect, collect, lease, sell, take possession
of, or liquidate any of the Collateral; (iv) attempt to enforce
any security interest in any of the Collateral or to seek any
advice with respect to such enforcement; and (v) enforce any of
the Agent's and the Lenders' rights to collect any of the
Obligations.
(b) Borrower also agrees to pay, and to save harmless the Agent
and the Lenders from any delay in paying, any intangibles,
documentary stamp and other taxes, if any, which may be payable in
connection with the execution and delivery of this
68
<PAGE> <PAGE>
Agreement, the Notes, the Letters of Credit or any of the
Collateral Documents, or the recording of any thereof, or in any
modification hereof or thereof.
(c) Borrower agrees to indemnify Agent and each Lender,
their respective Affiliates and the respective directors,
officers, agents and employees of the foregoing (each an
"Indemnitee") and hold each Indemnitee harmless from and against
any and all liabilities, losses, damages, costs and expenses of
any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such indemnitee
in connection with any investigative, administrative or judicial
proceeding (whether or not such Indemnitee shall be designated a
party thereto) brought or threatened relating to or arising out of
the Loan Documents or the Collateral Documents or any actual or
proposed use of proceeds of the Loan hereunder; provided that no
Indemnitee shall have the right to be indemnified hereunder for
such Indemnitee's own gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
(d) In the event of the passage of any state, federal,
municipal or other governmental law, order, rule or regulation,
subsequent to the date hereof, in any manner changing or modifying
the laws now in force governing the taxation of Mortgages,
security agreements, or assignments of leases or debts secured
thereby or the manner of collecting such taxes so as to adversely
affect Agent or any Lender, Borrower will pay any such tax on or
before the due date thereof. If Borrower fails to make such
prompt payment or if, in the opinion of Agent, any such state,
federal, municipal, or other governmental law, order, rule or
regulation prohibits Borrower from making such payment or would
penalize Agent if Borrower makes such payment or if, in the
opinion of Agent, the making of such payment might result in the
imposition of interest beyond the maximum amount permitted by
applicable law, then the entire balance of the Obligations and all
interest accrued thereon shall, at the option of Agent, become
immediately due and payable.
SECTION 9.4 Waiver of Set-Offs; Sharing of Set-Offs. (a)
Each Lender hereby waives any right of set-off against the
Obligations it has with respect to any deposit account of
Borrower, its Subsidiaries or Affiliates maintained with such
Lender or any other account or property of Borrower, its
Subsidiaries or its Affiliates held by such Lender other than the
Collateral; provided however, that the within waiver is not
intended, and shall not be deemed, to waive any right of set-off
(i) any Lender has with respect to any account required to be
maintained pursuant to this Agreement or any other Loan Document
or (ii) arising other than pursuant to this Agreement, the
Collateral Documents or the other Loan Documents.
(b) As to any set-off permitted pursuant to Section 9.4(a)
above, each Lender agrees that if it shall, by exercising any
right of set-off or counterclaim or otherwise, receive payment of
a proportion of the aggregate amount of principal and interest due
with respect to the Obligations held by it which is greater than
the proportion received by any other Lender in respect of the
aggregate amount of principal and interest due with respect to the
Obligations held by such other Lender, such Lender receiving such
proportionately greater payment shall promptly purchase such
participation in the Obligations held by the other Lenders, and
such other adjustments shall be made, as may be required so that
all such payments of principal and interest with respect to the
Obligations held by Lenders shall be shared by Lenders based upon
each Lender's Pro Rata Share; provided that nothing in this
Section shall impair the right of any Lender to exercise any right
of set-off or counterclaim it may have and to apply the amount
subject to such exercise to the payment of Indebtedness of
Borrower other than the Obligations. Borrower agrees, to the
fullest extent it may effectively do so under applicable law, that
any holder of a participation in a Obligations, whether or not
acquired pursuant to the foregoing arrangements, may exercise
rights of set-off or counterclaim and other rights with respect to
such participation as fully as if such holder of a participation
were a direct creditor of Borrower in the amount of such
participation.
69
PAGE
<PAGE>
SECTION 9.5 Amendments and Waivers.
(a) No amendment or modification of any provision of this
Agreement shall be effective without the written agreement of the
Majority Lenders (after notice to all Lenders) and Borrower
(except for amendments which by the express terms of this
Agreement do not require the consent of Borrower), and (b) no
termination or waiver of any provision of this Agreement, or
consent to any departure by Borrower therefrom (except as
expressly provided in Section 0 below with respect to waivers of
late fees), shall in any event be effective without the written
concurrence of the Majority Lenders (after notice to all Lenders),
which Majority Lenders shall have the right to grant or withhold
at their sole discretion; provided, however, that any amendment to
Section 0 shall require the consent of the Supermajority Lenders;
provided, further, that the following amendments, modifications or
waivers shall require the consent of all Lenders:
(i) increasing or decreasing the Commitment of any
Lender (except for ratable decreases in the Commitments by
Borrower pursuant to Section 0);
(ii) changing the principal amount or final maturity
of the Loan;
(iii) reducing the interest rates applicable to the
Loan;
(iv) reducing the rates on which fees payable
pursuant hereto are determined;
(v) forgiving or delaying any amount payable or
receivable under Article 0 or waiving any Default or Event of
Default in respect thereof;
(vi) changing the definition of "Majority Lenders",
"Supermajority Lenders," "Pro Rata Share" or "Borrowing
Base";
(vii) changing any provision contained in this Section
0;
(viii) releasing any obligor under any Loan
Document or any Collateral, unless such release is otherwise
required or permitted by the terms of this Agreement; or
(ix) consent to assignment by Borrower of all of its
duties and Obligations hereunder pursuant to Section 0;
(x) permitting the term of any Letter of Credit to
extend beyond the Termination Date;
provided, further, any amendment, waiver or modification of the
provisions of Article 0 (other than subsections (a), (b), (e), (f)
and (g) of Section 0) may be made without the consent of the
Borrower. Agent agrees to provide Borrower with notice of any
such amendment, waiver or modification; provided, however, that
the failure to give such notice shall not invalidate such
amendment, waiver or modification.
No amendment, modification, termination or waiver of any
provision of Article 0 or any other provision referring to Agent
shall be effective without the written concurrence of Agent, but
only if such amendment, modification, termination or waiver alters
the obligations or rights of Agent. Any waiver or consent shall
be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on
Borrower in any case shall entitle Borrower
70
<PAGE> to any other further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this Section 9.5 shall be
binding on each assignee, transferee or recipient of Agent's or
any Lender's Commitment under this Agreement or the Advances at
the time outstanding.
SECTION 9.6 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their
respective successors and assigns, except that Borrower may not
assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all Lenders.
(b) Any Lender may, in accordance with applicable law, at
any time sell to one or more banks or other institutions (each a
"Participant") participating interests in any Advances owing to
such Lender, the Note held by such Lender, the Commitment held by
such Lender hereunder or any other interests of such Lender
hereunder. Borrower agrees that each Participant shall be
entitled to the benefits of Sections 0, 0 and 0 hereof with
respect to its participation; provided that no Participant shall
be entitled to receive any greater amount pursuant to such Section
than such Lender would have been entitled to receive in respect of
the amount of the participation transferred by such Lender to such
Participant had no such transfer occurred. In no event shall a
Lender that sells a participation be obligated to the Participant
to take or refrain from taking any action hereunder, under such
Lender's Note or in respect of such Lender's Commitment except
that such Lender may agree that it will not, without the consent
of the Participant, agree to (i) the increase or extension of the
term, or the extension of the time or waiver of any requirement
for the reduction or termination, of such Lender's Commitment,
(ii) the extension of any date fixed for the payment of principal
of or interest on the related Loan or Loans or any portion of any
fees payable to the Participant, (iii) the reduction of any
payment of principal thereof, or (iv) the reduction of the rate at
which either interest is payable thereon to a level below the rate
at which the Participant is entitled to receive interest in
respect of such participation.
(c) Each Lender may at any time assign, pursuant to an
assignment substantially in the form of Exhibit H attached hereto
and incorporated herein by reference, with (unless such assignment
is to an existing Lender or to an Affiliate of any such Lender)
the consent of the Agent and the Borrower (not to be unreasonably
withheld) to one or more banks or other institutions (in either
case, an "Assignee") all or any part of any Advances owing to such
Lender, the Note held by such Lender, the Commitment held by such
Lender or any other interest of such Lender hereunder; provided,
however, that (i) each such assignment by a Lender shall be made
in such manner so that the same portion of its Advances, Note and
Commitment is assigned to the Assignee and (ii) unless Borrower
and the Agent consent otherwise, and except in the case of an
assignment to another Lender, any partial assignment of a Lender's
Commitment shall be in a minimum principal amount of
$10,000,000.00, and (iii) at all times prior to its resignation or
replacement, Agent's Commitment shall be equal to or greater than
the Commitment of each other Lender. Without restricting the
right of Borrower or Agent to reasonably object to any bank or
financial institutional becoming an assignee of an interest of a
Lender hereunder, each proposed assignee must be an existing
Lender or a bank or financial institution which (i) has (or, in
the case of a bank which is a subsidiary, such bank's parent has)
a rating of its senior debt obligations of not less than Baa-1 by
Moody's Investors Services, Inc. or a comparable rating by a
rating agency acceptable to Agent and (ii) has total assets in
excess of $10,000,000,000.00. Borrower and the Lenders agree
that, to the extent of any assignment, the Assignee
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<PAGE> shall be deemed to have the same rights and benefits with
respect to Borrower under this Agreement and the Notes as it would
have had if it were a Lender hereunder on the date hereof with
respect to its Pro Rata Share and the assigning Lender shall be
released from its Commitment hereunder, to the extent of such
assignment. Upon the making of an assignment, the assigning
Lender shall pay to the Agent an assignment fee of $2,500.
(d) In addition to the assignments and participations
permitted under the foregoing provisions of this Section 0, any
Lender may assign and pledge all or any portion of its Advances
and its Note to any Federal Reserve Bank as collateral security
pursuant to Regulation A and any Operating Circular issued by such
Federal Reserve Bank. No such assignment shall release the
assigning Lender from its obligations hereunder.
(e) Borrower authorizes each Lender to disclose to any
Participant or Assignee ("Transferee") and any prospective
Transferee any and all financial information in such Lender's
possession concerning Borrower which has been delivered to such
Lender by Borrower or the Agent pursuant to this Agreement or
which has been delivered to such Lender by Borrower in connection
with such Lender's credit evaluation of Borrower prior to entering
into this Agreement.
(f) Any Lender, at such Lender's sole cost and expense,
shall be entitled to have the Note held by it subdivided in
connection with a permitted assignment of all or any portion of
such Note and the respective Advances evidenced thereby pursuant
to Section 9.6(c) above. Any Lender, which by reason of an
assignment pursuant to Section 9.6(c) hereof or otherwise, has or
would have more than one (1) Note hereunder shall be entitled to
have such Notes consolidated into a single Note. In the case of
any such subdivision or consolidation, the new Note (the "New
Note") issued in exchange for a Note or Notes (the "Old Note(s)")
previously issued hereunder (i) shall be substantially in the form
of Exhibit A hereto, as appropriate, (ii) shall be dated the date
of such assignment or of the most recent Note held by such Lender,
as the case may be, (iii) shall be otherwise duly completed and
(iv) shall bear a legend, to the effect that such New Note is
issued in exchange for such Old Note(s) and that the indebtedness
represented by such Old Note(s) shall not have been extinguished
by reason of such exchange.
(g) Borrower will use reasonable efforts to cooperate with
Agent and Lenders in connection with the assignment of interests
under this Agreement or the sale of participations herein.
SECTION 9.7 Capital Adequacy. If, after the date hereof,
any Lender shall have determined that either (i) the adoption or
implementation of any applicable law, rule, regulation or
guideline of general applicability regarding capital adequacy, or
any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank
or comparable agency charged with the interpretation or
administration thereof, or (ii) compliance by such Lender (or any
lending office of such Lender) with any request or directive of
general applicability regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the
rate of return on such Lender's capital as a consequence of its or
Borrower's obligations hereunder to a level below that which such
Lender could have achieved but for such adoption, implementation,
change or compliance (taking into consideration such Lender's
policies with respect to capital adequacy) by an amount deemed by
such Lender to be material, then from time to time, within ten
(10) days after demand by such Lender, which demands shall include
a calculation and a reference to the applicable law, rule or
regulation, Borrower shall pay to such Lender such additional
amount of
72
<PAGE>
amounts as will adequately compensate such Lender for such
reduction. Such Lender will use good faith and reasonable efforts
to designate a different lending office for such Lender's Advances
if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the sole opinion of such
Lender, be disadvantageous to such Lender. Each Lender shall
notify the Agent and the Borrower of any event occurring after the
date of this Agreement entitling such Lender to compensation under
this Section 0 within 45 days, after such Lender obtains actual
knowledge thereof; provided that if any Lender fails to give such
notice within 45 days after it obtains actual knowledge of such an
event, such Lender shall, with respect to compensation payable
pursuant to this Section 0 in respect of any costs resulting from
such event, only be entitled to payment for costs incurred from
and after the date 45 days prior to the date that such Lender
gives such notice. A certificate of such Lender claiming
compensation under this Section 0 and setting forth the additional
amount of amounts to be paid to it hereunder, together with the
description of the manner in which such amounts have been
calculated, shall be conclusive in the absence of manifest error.
In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
SECTION 9.8 Counterparts. This Agreement may be signed in
any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were
upon the same instrument.
SECTION 9.9 Notice of Final Agreement. THIS AGREEMENT
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS
BETWEEN THE PARTIES.
SECTION 9.10 Invalid Provisions. Any provision of any
Loan Document held by a court of competent jurisdiction to be
illegal, invalid or unenforceable shall not invalidate the
remaining provisions of such Loan Document which shall remain in
full force and effect and the effect thereof shall be confined to
the provision held invalid or illegal.
SECTION 9.11 Maximum Rate. Regardless of any provision
contained in any of the Loan Documents, Lenders shall never be
entitled to receive, collect or apply as interest (whether termed
interest herein or deemed to be interest by operation of law or
judicial determination) on the Obligations any amount in excess of
interest calculated at the Maximum Rate, and, in the event that
any Lender ever receives, collects or applies as interest any such
excess, the amount which would be excessive interest shall be
deemed to be a partial prepayment of principal and treated
hereunder as such; and, if the principal amount of the Obligations
are paid in full, any remaining excess shall forthwith be paid to
Borrower. In determining whether or not the interest paid or
payable under any specific contingency exceeds interest calculated
at the Maximum Rate, Borrower and Lenders shall, to the maximum
extent permitted under applicable law, (i) characterize any non-principal
payment as an expense, fee or premium rather than as
interest; (ii) exclude voluntary prepayments and the effects
thereof; and (iii) amortize, prorate, allocate and spread, in
equal parts, the total amount of interest throughout the entire
contemplated term of the Obligations; provided that, if the
Obligations are paid and performed in full prior to the end of the
full contemplated term thereof, and if the interest received for
the actual period of existence thereof exceeds interest calculated
at the Maximum Rate, Lenders shall refund to Borrower the amount
of such excess or credit the amount of such excess against the
principal amount of the Obligations and, in such event, Lenders
shall not be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving or receiving interest
in excess of interest calculated at the Maximum Rate.
73<PAGE>
<PAGE>
SECTION 9.12 Limitation Upon Liability. Subject to the
exceptions and qualifications described below, CBL Properties,
Inc., Borrower's sole general partner, its successors and assigns
(the "General Partner"), shall not be personally liable for the
payment of the Obligations. Notwithstanding the foregoing
provisions of this paragraph: (a) if an Event of Default occurs,
nothing hereinabove stated shall in any way prevent or hinder the
Agent or the Lenders in the enforcement or foreclosure of the
Liens now or at any time hereafter securing the payment of the
Obligations, or in the pursuit or enforcement of any remedy or
judgment against Borrower and its assets; and (b) the General
Partner shall be fully liable to the Agent and the Lenders to the
same extent that the General Partner would be liable absent the
foregoing provisions of this Section 0: (i) for fraud or willful
misrepresentation by the General Partner or its Affiliates (to the
full extent of losses suffered by the Agent or any Lender by
reason of such fraud or willful misrepresentations); (ii) for the
retention of any rental income or other income in excess of
operating expenses of the property arising with respect to the
property covered by any Loan Document and collected by Borrower
after the Agent has given Borrower any notice that Borrower is in
default under any of the Loan Documents and that the Agent and the
Lenders have exercised their option to accelerate the maturity of
the Obligations, foreclose or require the foreclosure of the Liens
securing payment thereof or exercise any of the other rights,
remedies and recourses of the Agent or the Lenders under the Loan
Documents (to the full extent of the rental income or other income
in excess of such operating expenses collected by Borrower after
the giving of any such notice); (iii) for the fair market value,
as of the time of the giving of any notice referred to in (ii)
above, of any personalty or fixtures removed or disposed of by
Borrower (other than in accordance with the terms of the Mortgage
encumbering the same) after the giving of any notice referred to
in (ii) above; and (iv) for the misapplication by Borrower
(contrary to the provisions of this Agreement or the Loan
Documents) of (x) any proceeds paid under any insurance policy by
reason of damage, loss or destruction to any portion of the
Collateral or the Projects (to the full extent of such proceeds so
misapplied); or (y) any proceeds or awards resulting from the
condemnation of all or any part of the Collateral or Projects (to
the full extent of such proceeds or awards so misapplied). No
subsequent owner of the Collateral or the Projects shall be liable
under the foregoing clause (b) for the acts and omissions of any
prior owner, provided such subsequent owner and any partner
therein or other party thereto is not an Affiliate of such prior
owner or any partner therein or other party thereto, and further
provided that the Agent and the Majority Lenders have given their
prior written approval to the transfer of such Collateral or
Projects to such subsequent owner, if such approval is required
under the Loan Documents.
SECTION 9.13 Course of Dealing. Borrower and Lenders
mutually agree that each shall proceed at all times in good faith
and in a commercially reasonable manner in the performance of its
obligations and in the exercise of its judgment or discretion
hereunder and under the other loan documents.
SECTION 9.14 Treatment of Certain Information;
Confidentiality.
(a) Borrower acknowledges that from time to time
financial advisory, investment banking and other services may be
offered or provided to Borrower or one or more of its Subsidiaries
(in connection with this Agreement or otherwise) by any Lender or
by one or more Subsidiaries or Affiliates of such Lender and
Borrower hereby authorizes each Lender to share any information
delivered to such Lender by Borrower and its Subsidiaries pursuant
to this Agreement, or in connection with the decision of such
Lender to enter into this Agreement, to any such Subsidiary or
74
<PAGE> Affiliate, it being understood that any such Subsidiary or
Affiliate receiving such information shall be bound by the
provisions of clause (b) below as if it were a Lender hereunder.
(b) Each Lender agrees (on behalf of itself and each
of its Affiliates, directors, officers, employees and
representatives) to keep confidential, in accordance with their
customary procedures for handling confidential information of this
nature and in accordance with safe and sound banking practices,
any non-public information supplied to it by Borrower pursuant to
this Agreement which is identified by Borrower as being
confidential at the time the same is delivered to the Lenders,
provided that nothing herein shall limit the disclosure of any
such information (i) to the extent required by statute, rule,
regulation or judicial process, (ii) to counsel for any of the
Lenders, (iii) to bank examiners, auditors or accountants, (iv) to
any other Lender, (v) in connection with any litigation to which
any one or more of the Lenders is a party (provided, that each
such Lender will promptly notify Borrower of such litigation and
of such proposed disclosure prior to the disclosure of such
information (unless prohibited from doing so by the relevant
court)) or (vi) to any Transferee (or prospective Transferee) so
long as such Transferee (or prospective Transferee) first executes
and delivers to the respective Lender a Confidentiality Agreement
containing substantially the term of this Section 0.
SECTION 9.15 Conflict of Terms. In the event of a
conflict between the terms and provisions of this Agreement and
the terms and provisions of any of the other Loan Documents, the
terms of this Agreement shall govern; provided, however, that any
term or provision of any Collateral Document applicable to the
Collateral shall be deemed to be supplemental to, and not in
conflict with, the terms and provisions of this Agreement.
SECTION 9.16 Governing Law; Submission to Jurisdiction.
THIS AGREEMENT AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA. BORROWER HEREBY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA AND OF ANY
GEORGIA STATE COURT SITTING IN ATLANTA, GEORGIA FOR PURPOSES OF
ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY. BORROWER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE
VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM
THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
SECTION 9.17 Waiver of Right to Trial by Jury. EACH
PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
(1) ARISING UNDER THIS AGREEMENT, ANY NOTE OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION THEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT, ANY NOTE OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH
75
<PAGE>
PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
________________
Initials
SECTION 9.18 Amendment and Restatement. This Agreement constitutes
an amendment to and a restatement in the entirety of the Original Credit
Agreement, and the obligations set forth therein, as amended and restated
hereby, continue in full force and effect. This Agreement is not and shall
not be deemed to constitute a novation of the underlying obligations. The
Original Credit Agreement shall govern the relationship of the parties and
the Loan through the date preceding the Effective Date; from and after the
Effective Date, this Agreement shall govern and control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
76
PAGE
<PAGE>
"Borrower"
CBL & ASSOCIATES LIMITED PARTNERSHIP
By: CBL & Associates Properties, Inc.,
as General Partner
/s/ John N. Foy
By:____________________
Name John N. Foy
Title: Ececutive Vice President
/s/ Jeff Curry
Attest:_______________________
Name Jeff Curry
Assistant Secretary
Address for Notices:
CBL & Associates Limited Partnership
c/o CBL & Associates Properties, Inc.
One Park Place
6148 Lee Highway
Chattanooga, Tennessee 37421
Attn: President
Telecopy Number: (615) 490-8662
with a copy to:
CBL & Associates Properties, Inc.
One Park Place
6148 Lee Highway
Chattanooga, Tennessee 37421
Attn: Mary Ann Okrasinski, Esq.
Telecopy Number: (615) 490-8662
(Signatures continued on next page)
77
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<PAGE>
(Signatures continued from previous page)
"Lenders"
Commitment:
$30,000,000 WELLS FARGO BANK, N.A., as successor in
interest to Wells Fargo Realty Advisors
Funding, Incorporated
/s/ Robert W. Belson
By: ______________________________
Robert W. Belson
Name:_________________________
Title:____Senior Vice President
Wells Fargo Bank, N.A.
2859 Paces Ferry Road, Suite 1805
Atlanta, Georgia 30339
Attn: Loan Administration Manager
Telecopy Number: (770) 435-2262
with copies to:
Wells Fargo Bank, N.A.
420 Montgomery Street, 9th Floor
San Francisco, California 94163
Attn: Christopher Jordan
Telecopy Number: (415) 391-2971
Wells Fargo Bank, N.A.
2030 Main Street, Suite 800
Irvine, California 92714
Attn: Debra Autry
Telecopy Number: (714) 261-0946
Troutman Sanders LLP
Suite 5200
600 Peachtree Street
Atlanta, Georgia 30308-2216
Attn: Joseph R. White, Esq.
Telecopy Number: (404) 885-3900
(Signatures continued on next page)
78
PAGE
<PAGE>
(Signatures continued from previous page)
Commitment:
$15,000,000 NATIONSBANK, N.A. (SOUTH), successor by
merger to NationsBank of Georgia, N.A.
/s/ Donna W. Friedel
By: ______________________________
Donna W. Friedel
Name:_________________________
Title:__Senior Vice President
NationsBank, N.A. (South)
NationsBank Plaza
600 Peachtree Street, N.W.
Sixth Floor
Atlanta, Georgia 30308
Attn: Commercial Real Estate Department
Telecopy Number: (404) 607-4145
Commitment:
$25,000,000 FIRST BANK NATIONAL ASSOCIATION
/s/ Stephen P. Bailey
By: ______________________________
Stephen P. Bailey
Name:_________________________
Title:______Vice President
First Bank National Association
First Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attn: Real Estate Banking Division
Telecopy Number: (612) 973-0830
(Signatures continued on next page)
79
PAGE
<PAGE>
(Signatures continued from previous page)
Commitment:
$15,000,000 UNION BANK OF SWITZERLAND
(NEW YORK BRANCH)
/s/ Joseph Bass
By: ______________________________
Joseph Bass
Name:_________________________
Title:___Vice President
Union Bank of Switzerland
(New York Branch)
299 Park Avenue
New York, New York 10171
Attn: Mara Martez
Telecopy Number: (212) 821-4138
"Agent"
WELLS FARGO BANK, N.A., as successor in
interest to Wells Fargo Realty Advisors Funding, Incorporated, as Agent
/s/ Robert W. Belson
By: ______________________________
Robert W. Belson
Name:_________________________
Title:____Senior Vice President
Wells Fargo Bank, N.A.
2859 Paces Ferry Road, Suite 1805
Atlanta, Georgia 30339
Attn: Loan Administration Manager
Telecopy Number: (770) 435-2262
with copies to:
Wells Fargo Bank, N.A.
420 Montgomery Street, 9th Floor
San Francisco, California 94163
Attn: Christopher Jordan
Telecopy Number: (415) 391-2971
(Signatures continued on next page)
80
PAGE
<PAGE>
(Signatures continued from previous page)
Wells Fargo Bank, N.A.
2030 Main Street, Suite 800
Irvine, California 92714
Attn: Debra Autry
Telecopy Number: (714) 261-0946
Troutman Sanders LLP
Suite 5200
600 Peachtree Street
Atlanta, Georgia 30308-2216
Attn: Joseph R. White, Esq.
Telecopy Number: (404) 885-3900
81
PAGE
<PAGE>
EXHIBIT I
FORM OF EXTENSION REQUEST
______________ __, 199_
Wells Fargo Bank, N.A.
2859 Paces Ferry Road
Suite 1805
Atlanta, Georgia 30339
Attention: ________________
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Credit Agreement
dated as of September 26, 1996, (the "Credit Agreement"), by and among CBL
& Associates Limited Partnership (the "Borrower"), Wells Fargo Bank, N.A.,
NationsBank, N.A. (South), First Bank National Association and Union Bank of
Switzerland (New York Branch) and their assignees under Section 9.6 thereof
("Lenders"), and Wells Fargo Bank, N.A., as Agent (the "Agent"). Capitalized
terms used herein, and not otherwise defined herein, have their respective
meanings given them in the Credit Agreement.
Pursuant to Section 2.11 of the Credit Agreement, the Borrower hereby
requests that the Lenders and Agent extend the current Termination Date of
_____________ __, 199_ by a one-year period to _________________ __, 1999_.
The Borrower hereby certifies to the Agent and the Lenders that as of
the date hereof (a) no Default or Event of Default has occurred and is
continuing, and (b) the representations and warranties of the Borrower
contained in the Credit Agreement and the other Loan Documents are true and
correct in all material respects, except to the extent such representations
or warranties specifically relate to an earlier date or such representations
or warranties become untrue by reason of events or conditions otherwise
permitted under the Credit Agreement or the other Loan Documents.
CBL & ASSOCIATES LIMITED
PARTNERSHIP
By: CBL & Associates
Properties, Inc., as
General Partner
By:_______________________________
Name: _____________________
Title: ____________________
Attest: __________________________
Name: _____________________
Title: ____________________
FIRST AMENDMENT
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT
AGREEMENT (this "Amendment") is made and entered into as of the 15th
day of November, 1997, by and among CBL & ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership (hereinafter referred to
as "Borrower"), WELLS FARGO BANK, N.A., a national banking
association, NATIONSBANK, N.A., a national banking association, U.S.
BANK NATIONAL ASSOCIATION, a national banking association, and UNION
BANK OF SWITZERLAND (NEW YORK BRANCH) (hereinafter referred to
individually as a "Lender" and collectively as "Lenders") and WELLS
FARGO BANK, N.A., a national banking association, as agent for the
benefit of each of the "Lenders" (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, Borrower, Lenders and Agent entered into that certain
Second Amended and Restated Credit Agreement dated as of June 5, 1997,
to be effective as of April 1, 1997 (the "Credit Agreement"), pursuant
to which the Lenders agreed to extend to Borrower a credit facility
(the "Credit Facility") in the aggregate principal amount of up to
Eighty-Five Million Dollars ($85,000,000.00) at any one time
outstanding; and
WHEREAS, capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to such terms in the Credit
Agreement; and
WHEREAS, Borrower, Lenders and Agent desire to modify and amend
the Credit Agreement to, among other matters, change the rate of
interest charged thereunder.
NOW THEREFORE, for and in consideration of the premises, for Ten
and No/100 Dollars ($10.00) in hand paid by the parties to each other,
and for other good and valuable consideration, the receipt, adequacy
and sufficiency of which are hereby acknowledged by Borrower, Lenders,
and Agent, Borrower, Lenders, and Agent do hereby covenant and agree
as follows:
1. Interest Rate. Section 2.5(a) of the Credit Agreement is
hereby amended by deleting the words, numbers and figures "one and
one-fourth percent (1.25%)" therefrom, and inserting the words,
numbers and figures "one percent (1.00%)" in lieu thereof.
Notwithstanding the within modifications, the unpaid
balance of each LIBOR Advance outstanding on the date hereof shall
continue to bear interest to and including the earlier of the final
day of the Interest Period with respect to such LIBOR Advance or the
date such LIBOR Advance is repaid in full at a rate per annum equal to
the LIBOR Rate for the applicable Interest Period plus one and one-fourth
percent (1.25%) per annum.
2. Representations and Warranties; No Default. Borrower
hereby represents and warrants to the Agent and the Lenders that (a)
all of Borrower's representations and warranties contained in the
Credit Agreement and the other Loan Documents are true and correct on
and as of the date of Borrower's execution of this Amendment; (b) no
Default or Event of Default has occurred and is continuing as of such
date under any Loan Document; (c) Borrower has the power and authority
to enter into this Amendment and to perform all of its obligations
hereunder; (d) the execution, delivery and performance of this
Amendment by Borrower have been duly authorized by all necessary
corporate, partnership or other action; and (e) the execution and
delivery of this Amendment and performance thereof by or on behalf
Borrower does not and will not violate the Partnership Agreement of
Borrower or the Certificate of Incorporation, By-laws or other
organizational documents of CBL Holdings I, Inc. or CBL Properties,
Inc. and does not and will not violate or conflict with any law,
order, writ, injunction, or decree of any court, administrative agency
or other governmental authority applicable to Borrower, CBL Holdings
I, Inc., CBL Properties, Inc. or their respective properties.
3. Expenses. Borrower agrees to pay, immediately upon demand
by the Agent, all reasonable costs, expenses, fees and other charges
and expenses actually incurred by the Agent in connection with the
negotiation, preparation, execution and delivery of this Amendment and
the Amendment Documents.
4. Defaults Hereunder. The breach of any representation,
warranty or covenant contained herein or in any document executed in
connection herewith, or the failure to observe or comply with any term
or agreement contained herein shall constitute a Default or Event of
Default under the Credit Agreement (subject to any applicable cure
period set forth in the Credit Agreement) and the Agent and the
Lenders shall be entitled to exercise all rights and remedies they may
have under the Credit Agreement, any other documents executed in
connection therewith and applicable law.
5. References. All references in the Credit Agreement and the
Loan Documents to the Credit Agreement shall hereafter be deemed to be
references to the Credit Agreement as amended hereby and as the same
may hereafter be amended from time to time.
6. Limitation of Agreement. Except as especially set forth
herein, this Amendment shall not be deemed to waive, amend or modify
any term or condition of the Credit Agreement, each of which is hereby
ratified and reaffirmed and which shall remain in full force and
effect, nor to serve as a consent to any matter prohibited by the
terms and conditions thereof.
7. Counterparts. This Amendment may be executed in any number
of counterparts, and any party hereto may execute any counterpart,
each of which, when executed and delivered, will be deemed to be an
original and all of which, taken together will be deemed to be but one
and the same agreement.
8. Further Assurances. Borrower agrees to take such further
action as the Agent or the Lenders shall reasonably request in
connection herewith to evidence the amendments herein contained to the
Credit Agreement.
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9. Successors and Assigns. This Amendment shall be binding
upon and inure to the benefit of the successors and permitted assigns
of the parties hereto.
10. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of Georgia,
without regard to principles of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment under seal as of the date first above written.
"BORROWER"
CBL & ASSOCIATES LIMITED PARTNERSHIP
By: CBL Holdings I, Inc. as General
Partner
/s/ John N. Foy
By:_________________________
Name: John N. Foy
Title: Executive Vice President
/s/ Joan C. Perry
Attest:_______________________
Name: Joan C. Perry
Title: Assistant Secretary
(CORPORATE SEAL)
(Signatures continued on next page)
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PAGE
<PAGE>
Signatures continued from previous page)
"LENDERS"
WELLS FARGO BANK, N.A.
/s/ Samuel Wammok
By: __________________________
Name:___Samuel Wammok_______
Title:_____Vice President______
(Signatures continued on next page)
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PAGE
<PAGE>
(Signatures continued from previous page)
NATIONSBANK, N.A., Successor to
NationsBank, N.A. (South)
/s/ S. Ellen Porter
By: ___________________________
Name:___S. Ellen Porter __________
Title:____Vice President _________
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(Signatures continued on next page)
<PAGE>
(Signatures continued from previous page)
U.S. BANK NATIONAL ASSOCIATION, f/k/a and
d/b/a First Bank National Association
/s/ Stephen P. Bailey
By: ___________________________
Name:____ Stephen P. Bailey ______
Title:_____Vice President______
(Signatures continued on next page)
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PAGE
<PAGE>
(Signatures continued from previous page)
UNION BANK OF SWITZERLAND (NEW YORK
BRANCH)
/s/ David Goldman
By: ___________________________
Name:____ David Goldman ______
Title:_____Assistent Vice President______
/s/ Jeffery W. Wald
By: ___________________________
Name:____Jeffery W. Wald______
Title:____Director______________
(Signatures continued on next page)
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PAGE
<PAGE>
(Signatures continued from previous page)
"AGENT"
WELLS FARGO BANK, N.A.
/s/ Samuel Wammok
By: __________________________
Name:___Samuel Wammok_______
Title:_____Vice President______
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PROMISSORY NOTE
$51,000,000.00 February 17, 1998
FOR VALUE RECEIVED, the undersigned, ASHEVILLE, LLC, a North
Carolina limited liability company (hereinafter called "Maker"),
promises to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION, a national banking association, (hereinafter, together
with all subsequent holders of this Note, called "Payee") on or
before the 31st day of December, 1999 (the "Maturity Date"), as
hereinafter provided, the principal sum of FIFTY-ONE MILLION AND
NO/100 DOLLARS ($51,000,000.00), or so much thereof as may actually
be advanced from time to time, together with interest on the unpaid
principal balance from time to time outstanding at the rate per
annum equal to the "Base Rate" of interest as it fluctuates;
provided, however, subject to the limitations stated herein, Maker
may elect in accordance with the procedures set forth below to have
interest accrue and be paid on all or a portion of the outstanding
principal balance hereof at a rate per annum equal to the "Fixed
Increment Rate" (as defined below).
Defined Terms:
"Base Rate:" An interest rate per annum, fluctuating daily,
equal to the rate announced by Payee from time to time at its
principal office in San Francisco, California as its prime rate in
effect on such day. Neither the Base Rate nor the prime rate of
Payee is necessarily intended to be the lowest rate of interest
charged by Payee in connection with extensions of credit. Each
change in the prime rate shall result in a corresponding change in
the Base Rate and such change shall be effective on the effective
date of such change in the prime rate.
"Business Day:" (a) With respect to any advance, payment or
rate determination for a Fixed Increment, a day, other than a
Saturday or Sunday, on which Payee is open for business in San
Francisco and on which dealings in United States Dollars are carried
on in the London interbank market; and (b) for all other purposes,
any day of the week (but not a Saturday, Sunday or holiday) on which
the offices of Payee are open to the public for carrying on
substantially all of Payee's business functions. Unless
specifically referenced in this Note as a Business Day, all
references to "days" shall be to calendar days.
"Event of Default:" Any default hereunder or under the other
Security Documents, subject to any applicable notice and cure
period.
"Fixed Increment:" The portion of the outstanding principal
balance hereof specified by Maker to Payee effective as of the
applicable "Fixed Period Commencement Date" (as defined below);
provided, however, in no event shall any such Fixed Increment be
less than One Million and No/100 Dollars ($1,000,000.00).
"Fixed Increment Rate:" The "Fixed LIBO Rate" (as defined
below), plus nine-tenths of one percent (.90%) (i.e. 90 basis
points) per annum.
"Fixed LIBO Rate:" With respect to any "Fixed Period" (as
defined below), the rate per annum which is equal to the quotient of
the average rate per annum (determined solely by Payee and rounded
upwards, if necessary, to the next higher 1/16 of 1%) at which
deposits in United States Dollars are offered to Payee by brokers in
the London interbank market as of 11:00 a.m. (London time) two (2)
Business Days prior to the first day of such Fixed Period, in an
amount equal to the "Fixed Increment" (as defined below) so
requested and for a period equal to such Fixed Period. Each
determination of the Fixed LIBO Rate by Payee shall, in absence of
manifest error, be conclusive and binding.
"Fixed Period:" A period as designated by Maker and confirmed
by Payee which is at least thirty (30) days, commencing on the Fixed
Period Commencement Date. Notwithstanding the foregoing, in no event
shall any Fixed Period extend beyond the Maturity Date.
<PAGE>
"Fixed Period Commencement Date:" The proposed commencement of
the applicable Fixed Period.
"Guaranty:" That certain Guaranty of or about even date
herewith from CBL & Associates Limited Partnership in favor of
Payee.
"Loan:" The loan advanced under this Note and evidenced
hereby and by the other Security Documents.
"Loan Agreement." That certain Loan Agreement of even date
herewith by and between Maker and Payee. Capitalized terms used
herein but not defined herein shall have the meanings ascribed to
them in the Loan Agreement.
"Regulation D:" Regulation D of the Board of Governors of the
Federal Reserve System from time to time in effect and shall include
any successor or other regulation relating to reserve requirements
applicable to member banks of the Federal Reserve System.
"Reserve Requirement:" The daily average during the Fixed
Period of the maximum aggregate reserve requirement (including all
basic, supplemental, marginal and other reserves and taking into
account any transitional adjustments or other schedule changes in
reserve requirements during the Fixed Period) which is imposed under
"Regulation D" (as defined below) against "Eurocurrency liabilities"
as defined in Regulation D. Each determination by Payee of the
Reserve Requirement shall, in the absence of manifest error, be
conclusive and binding.
"Security Documents:" As that term is defined in the Loan
Agreement.
Selection of Fixed Increment Rate
If Maker elects to have the Fixed Increment Rate apply, it
shall advise Payee in writing of its election and the Fixed Period
and Fixed Increment for which Maker desires said rate to apply not
later than 11:00 a.m., Pacific Standard Time or Pacific Daylight
Time (as applicable), three (3) Business Days prior to the Fixed
Period Commencement Date. Any such election may be made only (i)
once during any thirty (30) day period and (ii) while no Event of
Default is in existence and no event has occurred which with notice
and/or lapse of time would constitute an Event of Default. After
Maker has designated a Fixed Increment to which the Fixed Increment
Rate shall apply, such rate shall apply to the Fixed Increment for
the duration of the Fixed Period. At any one time during the term
hereof, no more than three (3) Fixed Increments may be outstanding.
If Maker elects the Fixed Increment Rate, but the applicable Fixed
Period will commence on a date which is not a Business Day, such
Fixed Period shall be deemed to commence on the next Business Day
after it would otherwise commence, and any interest which accrues
hereunder in the interim shall accrue at the Base Rate.
Notwithstanding anything contained herein to the contrary, if
Maker elects the Fixed Increment Rate to apply but Payee is unable
for any reason to obtain funds from Payee in the amount of the Fixed
Increment elected for the Fixed Period elected, interest on such
Fixed Increment shall accrue at the Base Rate unless and until a new
election of the Fixed Increment Rate is made by Maker and Payee is
then able to obtain such funds.
In the absence of an effective election by Maker of the Fixed
Increment Rate in accordance with the above procedures prior to the
expiration of the then current Fixed Period with respect to any
Fixed Increment, Payee shall be deemed to have elected that such
Fixed Increment thereafter bear interest at the Fixed Increment Rate
for a fixed period of thirty (30) days.
Special Provisions Applicable to LIBO Rate Provisions.
Notwithstanding any other provisions hereof:
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<PAGE>
A. Change in Law: If, after the date hereof, the adoption
of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by
Payee with any request or directive (whether or not having the force
of law) of any such authority, central bank or comparable agency
shall make it unlawful or impossible for Payee to make, maintain or
fund advances at the Fixed Increment Rate, Payee shall forthwith
give notice thereof to Maker. Before giving any notice Payee shall
designate a different LIBO lending office if such designation will
avoid the need for giving such notice and will not be otherwise
disadvantageous to Payee (as determined in good faith by Payee).
Upon receipt of such notice, Maker shall either (i) repay in full
the then outstanding principal amount of any Fixed Increment,
together with accrued interest thereon, or (ii) convert such Fixed
Increments to the Base Rate, either (a) on the last day of the
then-current Fixed Period applicable to such Fixed Increment if Payee may
lawfully continue to maintain and fund advances at the Fixed
Increment Rate to such day or (b) immediately if Payee may not
lawfully continue to fund and maintain advances at the Fixed
Increment Rate to such day.
B. Increased Costs. If, after the date hereof, any
governmental authority, central bank or other comparable authority,
shall at any time impose, modify or deem applicable any reserve
(including, without limitation, the Reserve Requirement and any
other reserve imposed by the Board of Governors of the Federal
Reserve System), special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended
by, Payee, or shall impose on Payee (or its eurodollar lending
office) or the interbank eurodollar market any other condition
affecting Fixed Increments, this Note, or Payee's obligation to
permit Maker to elect to have the Fixed Increment Rate apply to a
Fixed Increment; and the result of any of the foregoing is to
increase the cost to Payee of making or maintaining advances at the
Fixed Increment Rate, or to reduce the amount of any sum received or
receivable by Payee hereunder, by an amount deemed by Payee to be
material, then, within five (5) days after demand by Payee, Maker
shall pay to Payee, such additional amount or amounts as will
compensate Payee for such increased cost or reduction. Payee will
use good faith and reasonable efforts to designate a different LIBO
lending office if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the sole
opinion of Payee, be disadvantageous to Payee. A certificate of
Payee claiming compensation under this Paragraph B and setting forth
in reasonable detail the calculation of the additional amount or
amounts to be paid to it hereunder shall be conclusive in the
absence of manifest error. If Payee demands compensation under this
Paragraph B, then Maker may at any time, upon at least five (5)
Business Days' prior notice to Payee either (i) repay in full all
then outstanding Fixed Increments, together with accrued interest
thereon on the date of prepayment or (ii) convert such Fixed
Increments to the Base Rate; provided, however, that Maker shall be
liable for any "Consequential Loss" (as defined below) arising
pursuant to such actions, unless the requirement or condition giving
rise to the incurred costs is not generally applicable to lenders
similar to Payee, but rather is applicable solely to Payee.
C. Payments Not At End of Interest Period. If Maker makes
any payment of principal with respect to any Fixed Increment on any
day other than the last day of a Fixed Period applicable to such
Fixed Increment (other than any such payment required by Paragraph
A(ii)(b) above), then Maker shall reimburse Payee on demand the
Consequential Loss incurred by Payee as a result of the timing of
such payment. A certificate of Payee setting forth in reasonable
detail the basis for the determination of the amount of
Consequential Loss shall be delivered to Maker by Payee and shall,
in the absence of manifest error, be conclusive and binding. Any
conversion of a Fixed Increment to the Base Rate on any day other
than the last day of the Fixed Period for such Fixed Increment shall
be deemed a payment for purposes of this Paragraph C.
D. Effect on Fixed Increments. If notice has been given
pursuant to Paragraph A above requiring a Fixed Increment to be
repaid or converted, then unless and until Payee notifies Maker that
the circumstances giving rise to such repayment or conversion no
longer apply, Maker shall not have the right to elect to have the
Fixed Increment Rate apply. If Payee notifies Maker that the
circumstances giving rise to such repayment or conversion no longer
apply, Maker may thereafter elect to have the Fixed Increment Rate
apply in accordance with the terms of this Note.
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<PAGE>
E. Notice. Payee shall notify Maker of any event occurring
after the date hereof entitling Payee to compensation under
Paragraph B above within 45 days after Payee obtains actual
knowledge thereof; provided that if Payee fails to give such notice
to Maker within 45 days after it obtains actual knowledge of such an
event, Payee shall, with respect to compensation payable pursuant to
such Paragraph B in respect of any costs resulting from such event,
only be entitled to payment under Paragraph B for costs incurred
from and after the date 45 days prior to the date that Payee gives
such notice.
F. Consequential Loss. The term "Consequential Loss" shall
mean any loss, cost or expense incurred by Payee as a result of the
payment or conversion of any Fixed Increment on a day other than the
last day of the Fixed Period applicable thereto or in the
redepositing, redeploying or reinvesting the principal amount so
paid or affected by the timing of such conversion including the sum
of (i) the interest which, but for the payment or conversion Payee
would have earned in respect of such principal amount, reduced, if
Payee is able to redeposit, redeploy, or reinvest such principal
amount by the interest earned by Payee as a result of so
redepositing, redeploying or reinvesting such principal amount, plus
(ii) any expense or penalty incurred by Payee on redepositing,
redeploying or reinvesting such principal amount.
General Provisions:
Interest based on a 360-day year will be accrued on the number
of days funds are actually outstanding. Interest shall be
calculated on a daily basis and shall be payable monthly on the
first day of each and every month following the date hereof until
the Maturity Date, at which time all accrued and unpaid interest and
the unpaid principal balance hereof shall be due and payable in
full.
All payments on this Note shall, at the option of Payee, be
applied first to the payment of accrued but unpaid interest, and any
remainder shall be applied to reduction of the principal balance
hereof. All payments hereunder shall be made to Payee at c/o Wells
Fargo Bank, National Association, 2120 East Park Place, Suite 100,
El Segundo, California 90245, or at such other address as Payee may
from time to time designate in writing to Maker.
Except as otherwise specifically provided in the Security
Documents, Maker and any endorsers or guarantors hereof jointly and
severally waive presentment and demand for payment, notice of intent
to accelerate maturity, notice of acceleration of maturity, protest
or notice of protest and nonpayment, bringing of suit and diligence
in taking any action to collect any sums owing hereunder or in
proceeding against any of the rights and properties securing payment
hereof. Maker and any endorsers or guarantors hereof agree that the
time for any payments hereunder may be extended from time to time
without notice and consent to the acceptance of further security or
the release of any existing security for this Note, all without in
any manner affecting their liability under or with respect to this
Note. No extension of time for the payment of this Note or any
installment hereof shall affect the liability of Maker under this
Note even though Maker is not a party to such agreement.
If a default is made in the payment, in whole or in part, of
any sum provided for herein when due and such default is not cured
within fifteen (15) days after written notice thereof from Payee to
Maker, or if an Event of Default shall occur under the any of the
Security Documents, then Payee may, at its option, without further
notice or demand, except as otherwise specifically provided in the
Security Documents, declare the unpaid principal balance and accrued
interest on this Note at once due and payable, foreclose all deeds
of trust, mortgages and liens securing payment hereof, pursue any
and all other rights, remedies, and recourses available to Payee, or
pursue any combination of the foregoing, all remedies hereunder and
under the Security Documents being cumulative.
Failure to exercise any of the foregoing options shall not
constitute a waiver of the right to exercise the same or any other
option at any subsequent time in respect to any other event. The
acceptance by Payee of any payment hereunder that is less than
payment in full of all amounts due and payable at the time of such
payment shall not constitute a waiver of the right to exercise any
of the foregoing options at that time or at any subsequent time or
nullify any prior exercise of any such option without the express
written consent of Payee.
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<PAGE>
If any payment required under this Note is not paid within
fifteen (15) days after written notice has been given to Maker that
the same has become due and payable, Payee may require a late charge
for late payment to compensate for Payee's loss of use of funds and
for the expenses of handling the delinquent payment, in an amount
not to exceed four percent (4%) of such delinquent payment. Said
late charge shall be paid in any event not later than the due date
of the next subsequent installment of principal and/or interest. In
the event the maturity of the indebtedness hereunder is accelerated
by Payee, this paragraph shall apply only to payments overdue prior
to the time of such acceleration. This paragraph shall not be
deemed to be a waiver of Payee's right to accelerate payment of this
Note under the terms hereof.
Maker shall have the right prior to the Maturity Date, upon
ten (10) days' prior written notice, to prepay all or any portion
(except any portion constituting a Fixed Increment during its
applicable Fixed Period) of the principal balance owing hereunder
from time to time without the payment of any premium or penalty;
provided, however, that (a) if such prepayment is only a partial
payment of the then outstanding principal balance hereof, such
prepayment shall be accompanied by the payment of all accrued but
unpaid interest on the portion of the outstanding principal balance
of the Note being so paid through the date the prepayment is made,
and (b) for same day credit all monies shall be received at Payee's
office at c/o Wells Fargo Bank, National Association, 2120 East Park
Place, Suite 100, El Segundo, California 90245 on or before 11:00
a.m., Pacific Standard Time or Pacific Daylight Time (as
applicable). All monies received after this time shall be deemed
received on the following Business Day and shall continue to accrue
interest at the Base Rate to the date funds are deemed received.
Maker shall have the right to prepay any Fixed Increment
during its applicable Fixed Period only upon payment to Payee at the
time of such prepayment, of an amount (the "Fixed Increment
Liquidation Amount") equal to the excess of (i) the interest that
would have been payable by Maker for such Fixed Increment for the
remainder of the applicable Fixed Period at the applicable Fixed
Increment Rate had such prepayment not been made by Maker, over (ii)
the interest to be earned on sums equal to the amount of such Fixed
Increment for the remainder of the applicable Fixed Period as
invested by Payee in an interest bearing obligation of Payee's
selection, in its sole and absolute discretion.
In addition, in any such event, the provisions of the
immediately preceding paragraph hereto (relating to the obligation
of Maker to pay to Payee certain amounts in the event of the
prepayment of a Fixed Increment prior to the last day of the
applicable Fixed Period) shall apply with respect to any Fixed
Increment prepaid by Maker prior to the last day of the applicable
Fixed Period as a result of the acceleration by Payee of the
outstanding principal balance hereof.
Upon the occurrence of an Event of Default, at the option of
Payee, all amounts payable hereunder or under the Security Documents
shall bear interest for the period beginning with the date of
occurrence of such Event of Default at a rate of interest per annum
(the "Default Rate"), payable on the first day of each and every
month, equal to three percent (3%) above the Base Rate, as it
fluctuates, or three percent (3%) above the Fixed Increment Rate,
whichever is applicable.
Notwithstanding any other provision of this Note to the
contrary, from and after the Maturity Date of this Note, or such
earlier date as the unpaid principal owing on this Note becomes due
and payable upon acceleration or otherwise pursuant to the terms
hereof, the whole of the unpaid principal and, to the fullest extent
permitted by law, interest owing on this Note, shall thereafter bear
interest until paid in full at the Default Rate.
All amounts payable hereunder are payable in lawful money of
the United States of America. Maker agrees to pay all costs of
collection hereof when incurred, including reasonable attorneys'
fees, whether or not any legal action shall be instituted to enforce
this Note.
This Note is given for business purposes and none of the
proceeds of the Loan or this Note will be used for personal, family
or household purposes.
This Note is issued pursuant to the Loan Agreement and is
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secured, inter alia, by a Deed of Trust, Security Agreement and
Assignment of Leases and Rents of even date herewith (the "Deed of
Trust"), executed by Maker for the benefit of Payee, covering
certain real and personal property situated in Buncombe County,
North Carolina, as more particularly described therein. All of the
agreements, conditions, covenants, warranties, representations,
provisions and stipulations made by or imposed upon Maker under the
Loan Agreement, the Deed of Trust and the other Security Documents
are hereby made a part of this Note to the same extent and with the
same force and effect as if they were fully inserted herein, and
Maker covenants and agrees to keep and perform the same, or cause
them to be kept and performed, strictly in accordance with their
terms. This Note is given for business purposes and none of the
proceeds of the Loan or this Note will be used for personal, family
or household purposes.
If this Note is executed by more than one party, each such
party shall be jointly and severally liable for the obligations of
Maker under this Note. If Maker is a partnership, each general
partner of Maker shall be jointly and severally liable hereunder,
and each such general partner hereby waives any requirement of law
that, upon an occurrence of an Event of Default hereunder or under
the Security Documents, Payee exhaust any assets of Maker before
proceeding against such general partner's assets.
MAKER AGREES THAT TIME IS OF THE ESSENCE IN THE PERFORMANCE OF
ALL OBLIGATIONS HEREUNDER.
This Note shall be governed by and construed according to the
laws of the State of Georgia.
It is expressly stipulated and agreed to be the intent of
Maker and Payee at all times to comply with the applicable law now
or hereafter governing the interest payable on this Note or the Loan
(or applicable United States federal law to the extent that it
permits Payee to contract for, charge, take, reserve, or receive a
greater amount of interest than under Georgia law). If the
applicable law is ever revised, repealed, or judicially interpreted
so as to render usurious any amount called for under this Note, or
under any of the Security Documents, or contracted for, charged,
taken, reserved or received with respect to the Loan, or if Payee's
exercise of the option herein contained to accelerate the maturity
of this Note, or if any prepayment by Maker results in Maker's
having paid any interest in excess of that permitted by applicable
law, then it is Maker's and Payee's express intent that all excess
amounts theretofore collected by Payee be credited on the principal
balance of this Note (or, if the Note has been paid in full,
refunded to Maker), and the provisions of this Note and the Security
Documents immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity
of the execution of any new document, so as to comply with the then
applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder and thereunder.
All sums paid or agreed to be paid to Payee for the use,
forbearance or detention of the indebtedness evidenced hereby and by
the other Security Documents shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full
so that the rate or amount of interest on account of such
indebtedness does not exceed the usury ceiling from time to time in
effect and applicable to the Loan for so long as debt is outstanding
under the Loan.
The term "Maker" as used in this Note shall mean and have
reference to, collectively, all parties and each of them directly or
indirectly obligated for the indebtedness evidenced by this Note,
whether as principal maker, endorser, guarantor, or otherwise,
together with the respective heirs, administrators, executors, legal
representatives, successors and assigns of each of the foregoing.
All notices hereunder shall be given at the following
addresses: If to Maker, c/o CBL & Associates Limited Partnership,
One Park Place, 6148 Lee Highway, Chattanooga, Tennessee 37421,
Attention: President. If to Payee, Suite 1805, 2859 Paces Ferry
Road, Atlanta, Georgia 30339, with a copy of all notices to Chief
Credit Officer - Real Estate Group, Wells Fargo Bank, National
Association, 420 Montgomery Street, 6th Floor, San Francisco,
California 94163. Either party may change their address for notice
purposes upon giving thirty (30) days' prior notice thereof to the
other party in accordance with this paragraph. All notices given
hereunder shall be in writing and shall be considered properly given
if mailed by first-class United States mail, postage prepaid,
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registered or certified with return receipt requested, if sent by
national overnight courier providing documentation of receipt, if
delivered in person, or if sent by prepaid telegram, telex or
telecopy, with a copy of any communication so sent by telegram,
telex or telecopy being sent by mail, overnight courier or personal
delivery as aforesaid. Any notice mailed as above provided shall be
effective three (3) business days after its deposit in the custody
of the United States Postal Service; all other notices shall be
effective upon receipt.
Whenever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note shall be
prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of this Note.
IN WITNESS WHEREOF, this Note has been duly executed under
seal in Chattanooga, Tennessee on the date first above written.
"MAKER"
ASHEVILLE, LLC, a North
Carolina limited liability
company (SEAL)
By:CBL & Associates Limited
Partnership, a Delaware limited
partnership, its sole member
By:CBL Holdings I, Inc., a
Delaware corporation, its sole
general partner
/s/ John N. Foy
By: -----------------------
John N. Foy
Executive Vice President
/s/ Mary Ann Okrasinski
Attest:
Mary Ann Okrasinski
Assistant Secretary
(CORPORATE SEAL)
This signature page is attached to and is a part of that certain
Promissory Note in the original principal amount of Fifty-One
Million and No/100 Dollars ($51,000,000.00), from Asheville, LLC, as
"Maker," to Wells Fargo Bank, National Association, as "Payee."
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made and entered
into as of the 17 day of February, 1998, by and between WELLS
FARGO BANK, NATIONAL ASSOCIATION ("WFB"), a national banking
association, as Agent and Bank, whose address for notice hereunder
is Suite 1805, 2859 Paces Ferry Road, Atlanta, Georgia 30339,
with a copy of all correspondence or notices to Chief Credit
Officer - Real Estate Group, Wells Fargo Bank, National
Association, 420 Montgomery Street, 6th Floor, San Francisco,
California 94163, and ASHEVILLE, LLC, a North Carolina limited
liability company ("Borrower") whose address for notice is c/o CBL
& Associates Properties, Inc., One Park Place, 6148 Lee Highway,
Chattanooga, Tennessee 37421, Attention: President, with a copy
to Mary Ann Okrasinski, Esq. (at the same address).
W I T N E S S E T H:
Article 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following
terms shall have the meanings indicated:
(a) Agent: WFB in its capacity as agent for the Banks
pursuant to the Intercreditor Agreement and in its capacity as
agent for the Banks under the Security Documents, and shall be
deemed to refer to Agent in its individual capacity as a Bank
where the context so requires.
(b) Banks: WFB and any other bank, finance company,
insurance company or other financial institution which is or
becomes a party to this Agreement by execution of a counterpart
signature page hereto or an Assignment and Assumption Agreement in
the form attached as Exhibit A to the Intercreditor Agreement, as
assignee, as and when such bank, finance company, insurance
company or other financial institution becomes a Bank. At all
times that there are no Banks other than WFB, the terms "Bank" and
"Banks" shall mean WFB, in its individual capacity. In no event
shall any lender which becomes a party to the Intercreditor
Agreement or this Agreement subsequent to the date hereof have the
right to approve any actions taken by Borrower prior to the time
such entity became a Bank.
(c) Commitment: Not Applicable
(d) Deed of Trust: The Deed of Trust, Security
Agreement and Assignment of Leases and Rents of even date herewith
executed by Borrower encumbering the Mortgaged Property for the
benefit of Agent on behalf of the Banks to secure the repayment of
the Indebtedness and performance of the Obligations, and all
amendments thereto.
(e) Event of Default: Any happening or occurrence
described in Article 6.
(f) Governmental Authority: Any and all courts,
boards, agencies, commissions, offices or authorities of any
nature whatsoever for any governmental unit (federal, state,
county, district, municipal, city or otherwise) whether now or
hereafter in existence.
(g) Guarantor: CBL & Associates Limited Partnership,
a Delaware limited partnership whose sole general partner is CBL
Holdings I, Inc., a Delaware corporation.
2
<PAGE>
(h) Guaranty: That or those instruments or agreements
of guaranty, guaranty and completion, or otherwise, now or
hereafter in effect, from one or more Guarantors in favor of
Agent, on behalf of the Banks, guaranteeing the repayment of all
or any part of the Indebtedness and/or the satisfaction of, or
continued compliance with, the Obligations, or all of the above.
(i) Improvements: The improvements located on the
Land, including the improvements described in the Deed of Trust,
being generally described as 813,311 square feet of space within a
regional shopping center, together with all tenant finish work and
with related facilities and amenities.
(j) Indebtedness: The principal of, interest on and
all other amounts, payments and premiums due under, or secured by,
the Note, the Deed of Trust, the Guaranty and any and all other
documents now or hereafter executed by Borrower, Guarantor or any
other person or party in connection with the Loan.
(k) Intercreditor Agreement: An Intercreditor
Agreement to be executed by the Borrower, Agent and the Banks
under the circumstances described in Paragraph 8.10 below.
Borrower's approval of the Intercreditor Agreement shall not be
unreasonably withheld and Borrower shall be deemed to have
approved the form of Intercreditor Agreement attached hereto as
Exhibit "E".
(l) Land: The real estate or interest therein
described in Exhibit "A" attached hereto and incorporated herein
by this reference, all fixtures or other improvements situated
thereon and all rights, titles and interests appurtenant thereto.
(m) Leases: Any and all leases, subleases, licenses,
concessions or other agreements (written or oral, now or hereafter
in effect) which grant a possessory interest in and to, or the
right to use, all or any part of the Mortgaged Property, together
with all security and other deposits made in connection therewith
and all other agreements, such as architect's contracts,
engineer's contracts, utility contracts, maintenance agreements
and service contracts, which in any way relate to the design, use,
occupancy, operation, maintenance, enjoyment or ownership of the
Mortgaged Property, save and except any and all leases, subleases
or other agreements pursuant to which Borrower is granted a
possessory interest in the Land.
(n) Legal Requirements: (i) Any and all present and
future judicial decisions, statutes, rulings, rules, regulations,
permits, certificates or ordinances of any Governmental Authority
in any way applicable to Borrower, any Guarantor or the Mortgaged
Property, including, without limiting the generality of the
foregoing, the ownership, use, construction, occupancy,
possession, operation, maintenance, alteration, repair or
reconstruction thereof; (ii) any and all covenants, conditions and
restrictions contained in any deed or other form of conveyance or
in any other instrument of any nature that relate in any way or
are applicable to the Mortgaged Property or the ownership, use or
occupancy thereof; (iii) Borrower's or any Guarantor's presently
or subsequently effective by-laws and articles of incorporation or
partnership, limited partnership, joint venture, trust or other
form of business association agreement; (iv) any and all Leases;
and (v) any and all leases other than those described in
(iv) above, and other contracts (written or oral) of any nature
3
<PAGE>
that relate, in any way, to the Mortgaged Property and to which
Borrower may be bound, including, without limiting the generality
of the foregoing, any lease or other contract pursuant to which
Borrower is granted a possessory interest in the Land.
(o) Loan: The loan evidenced by the Note and secured
by the Deed of Trust.
(p) Intentionally Omitted.
(q) Mortgaged Property: The Land, Improvements and
Leases, all other property (real, personal or mixed) which is
conveyed by the Deed of Trust or any other Security Document in
which a security interest is therein created and all other
property (real, personal or mixed) on which a lien or security
interest is placed or granted to secure the repayment of the
Indebtedness or the performance and discharge of the Obligations.
(r) Note: Individually or collectively, as the case
may be, the Promissory Note of even date herewith, made by
Borrower, payable to the order of Bank, in the principal face
amount of FIFTY-ONE MILLION AND NO/100 DOLLARS ($51,000,000.00)
and any other Promissory Notes issued from time to time from
Borrower to a Bank or Banks pursuant hereto in substantially the
form of Exhibit "D" hereto, the aggregate principal amounts of all
such Promissory Notes being in the sum of FIFTY- ONE MILLION AND
NO/100 DOLLARS ($51,000,000.00), and any and all renewals,
reinstatements, rearrangements, enlargements or extensions of any
such Promissory Note or of any promissory note or notes given in
substitution therefor, including, without limitation, any
replacement note or notes executed in connection with an
assignment of any portion of any such Promissory Note.
(s) Obligations: Any and all of the covenants,
warranties, representations and other obligations (other than to
repay the Indebtedness) made or undertaken by Borrower (or any of
them), Guarantor or any other person or party to any Bank, Agent
on behalf of any Bank or all of the Banks or others as set forth
in the Security Documents, Leases and all other documents now or
hereafter executed by Borrower or Guarantor or any other party or
person in connection with the Loan and in any deed, conveyance,
lease, sublease or other agreement pursuant to which Borrower is
granted a possessory interest in the Land.
(t) Security Documents: This Agreement, the Note, the
Deed of Trust, the Guaranty, that certain Indemnity Agreement of
even date herewith from Borrower and Guarantor to Agent on behalf
of any Bank or all of the Banks and any and all other documents
now or hereafter executed by Borrower (or any of them), Guarantor
or any other person or party to evidence or secure the payment of
the Indebtedness or the performance and discharge of the
Obligations.
(u) Title Company: The issuer of the Title Insurance.
(v) Title Insurance: A mortgagee's policy of title
insurance, all in form and substance satisfactory to Agent and
containing no exceptions (printed or otherwise) which are
unacceptable to Agent, issued by a title company (or, if Agent so
requires, by several title companies on a re-insured or co-insured
basis, at Agent's option) acceptable to Agent in the face amount
of the Note and insuring that Agent, on behalf of the Banks, has a
4
<PAGE>
first and prior lien on the Mortgaged Property, subject only to
the Permitted Encumbrances described in the Deed of Trust.
Article 2
BORROWER'S WARRANTIES AND REPRESENTATIONS
Borrower hereby unconditionally warrants and represents unto
Agent and the Banks as follows:
2.1 Information. Any and all information, reports, papers
and other data (including, without limiting the generality of the
foregoing, any and all balance sheets, statements of income or
loss, reconciliation of surplus and financial data of any other
kind) heretofore furnished, or to be furnished, to Agent by or on
behalf of Borrower are, or when delivered will be, true and
correct in all material respects; all financial data have been, or
when delivered will have been, prepared in accordance with
generally accepted accounting principles consistently applied
(except as otherwise required by the New York Stock Exchange or
the Securities and Exchange Commission) and fully and accurately
present, or will present, in all material respects, the financial
condition of the subjects thereof as of the dates thereof; and
with respect to the financial data heretofore furnished, no
materially adverse change has occurred in the financial condition
reflected therein since the dates thereof.
2.2 Litigation. Except as may be otherwise set forth on
Exhibit "C" attached hereto, there are no actions, suits or
proceedings of a material nature pending or, to the best knowledge
of Borrower, threatened against or affecting Borrower, any
Guarantor or the Mortgaged Property, or involving the validity or
enforceability of the Deed of Trust or the priority of the lien,
mortgage and security interest created therein; and to the best of
Borrower's knowledge no event has occurred (including specifically
Borrower's and Guarantor's execution of the respective Security
Documents and Borrower's consummation of the Loan) which will
violate, be in conflict with, result in the breach of or
constitute (with due notice or lapse of time, or both) a material
default under any Legal Requirement or result in the creation or
imposition of any lien, charge or encumbrance of any nature
whatsoever on the Mortgaged Property other than the liens and
security interests created by or expressly permitted under the
Security Documents.
2.3 Streets, Easements, Utilities and Other Services. All
streets, easements, utilities and related services necessary for
the operation of the Improvements for their intended purpose are
(or, when necessary or appropriate, will be) available to the
boundaries of the Land, including potable water, storm and
sanitary sewer, gas, electric and telephone facilities and garbage
removal.
2.4 Intentionally Omitted.
2.5 Validity of Security Documents. All action on
Borrower's part requisite for the due authorization, creation,
issuance, execution and delivery of the Security Documents has
been duly and effectively taken, and each such document
constitutes a legal and binding obligation of, and is valid and
enforceable against Borrower and the Mortgaged Property (as the
case may be) in accordance with the terms thereof.
5
<PAGE>
2.6 Intentionally Omitted.
2.7 Hazardous Substances. As used below, and in any of the
other Security Documents, "Hazardous Substances" shall mean and
include all hazardous and toxic substances, wastes or materials,
any pollutants or contaminants (including, without limitation,
asbestos and raw materials which include hazardous constituents),
or any other similar substances, or materials which are included
under or regulated by any local, state or federal law, rule or
regulation pertaining to environmental regulation, contamination
or clean-up, including, without limitation, "CERCLA", as amended,
or as may be amended from time to time, "RCRA", as amended, or as
may be amended from time to time, or state lien or state superlien
or environmental clean-up statutes (all such laws, rules and
regulations being referred to collectively as "Environmental
Laws"). Borrower warrants, represents and agrees as follows:
(a) Borrower has had performed reasonable
investigations, studies and tests as to any environmental
contamination, liabilities or problems with respect to the
Mortgaged Property, including without limitation, the
storage, disposal, presence, discharge or release of any
Hazardous Substances at or with respect to the Mortgaged
Property, has provided copies of the same to Agent, and that
except as disclosed in that certain Phase I and Limited ACM
Environmental Site Assessment prepared by CURA, Inc. dated
November 25, 1996 and Limited Phase II Environmental Site
Assessment prepared by CURA, Inc. dated November 25, 1996
(the "Environmental Report") such investigations, studies,
and tests have disclosed no Hazardous Substances or
violations of any Environmental Laws.
(b) (i) The Mortgaged Property is not subject to any
private or governmental lien, or to the best of Borrower's
knowledge to any judicial or administrative notice or action
relating to Hazardous Substances or environmental problems,
impairments or liabilities, or the direct or indirect
violation of any Environmental Laws.
(ii) No other personal or real property owned by
Borrower is subject to any governmental lien, or to the best
of Borrower's knowledge to any judicial or administrative
notice or action, relating to Hazardous Substances or
environmental problems, impairments or liabilities with
respect thereto, or the direct or indirect violation of any
Environmental Laws, which could materially and adversely
affect the business, properties, financial position, results
of operations or prospects of Borrower.
(c) To the best of Borrower's knowledge and belief, no
Hazardous Substances are located on or have been stored,
processed or disposed of on or released or discharged from
(including ground water contamination) the Mortgaged Property
and no above or underground storage tanks exist on the
Mortgaged Property, except as may be disclosed in the
Environmental Report. Borrower shall not allow any Hazardous
Substances to be stored, located, discharged, possessed,
managed, processed or otherwise handled on the Mortgaged
Property other than small quantities, which are utilized in
the ordinary course of business in the operation of the
Mortgaged Property, and which are used and disposed of in a
5
<PAGE> lawful manner, and Borrower shall comply with all
Environmental Laws affecting the Mortgaged Property.
(d) Borrower shall immediately notify Agent should
Borrower become aware of (i) the existence of any Hazardous
Substance in, on or beneath the Mortgaged Property or any
other property owned by Borrower in violation of any
Environmental Law, or any other violation of any
Environmental Law with respect to the Mortgaged Property or
any other property owned by Borrower, (ii) any "release" or
threatened "release" (as defined in CERCLA and rules and
regulations promulgated thereunder) of any Hazardous
Substances on or from the Mortgaged Property or any other
real property owned by Borrower, or (iii) any lien, action,
or notice of the nature described in subparagraph (b) above.
Borrower shall, at its own cost and expense, take all actions
as shall be necessary or advisable for the clean-up of the
Mortgaged Property, including all removal, containment and
remedial actions in accordance with all applicable
Environmental Laws (and in all events in a manner reasonably
satisfactory to Agent), and shall further pay or cause to be
paid at no expense to Agent or the Banks all clean-up,
administrative, and enforcement costs of applicable
government agencies which may be asserted against the
Mortgaged Property or the owner thereof. All costs,
including, without limitation, those costs set forth above,
damages, liabilities, losses, claims, expenses (including
reasonable attorneys' fees actually incurred and
disbursements) which are incurred by Agent and/or the Banks,
without requirement of waiting for the ultimate outcome of
any litigation, claim or other proceeding, shall be paid by
Borrower to Agent as incurred within ten (10) days after
notice from Agent itemizing the amounts incurred to the date
of such notice; provided however, that Borrower's within
indemnity of Agent and the Banks shall be limited to those
costs, damages, liabilities, losses, claims and expenses
arising out of or based upon any violation of claim of
violation of Environmental Laws with respect to the Mortgaged
Property, or any governmental or judicial claim, order or
judgment with respect to the environmental status of the
Mortgaged Property arising, or alleged to have arisen, as a
result of violations or claims of violations occurring, or
environmental conditions existing on, under or about the
Mortgaged Property, at any time prior to the date upon which
Borrower, Guarantor and any affiliates of Borrower or
Guarantor are divested of title to the Mortgaged Property
whether voluntarily, involuntarily or by operation of law, or
are otherwise brought against Agent or the Banks solely by
virtue of its interest as mortgagee of the Mortgaged
Property.
(e) Upon reasonable prior notice to Borrower, and
subject to the rights of tenants, Agent, its employees and
agents, may from time to time (whether before or after the
commencement of a nonjudicial or judicial foreclosure
proceeding) enter and inspect the Mortgaged Property for the
purpose of determining the existence, location, nature and
magnitude of any past or present release or threatened
release of any Hazardous Substance into, onto, beneath or
from the Mortgaged Property. Except in cases of emergency,
any such inspection shall be conducted in a manner which does
not unreasonably interfere with the operation of the
Mortgaged Property.
6
<PAGE>
All warranties and representations contained in this
Paragraph 2.7 shall be deemed to be continuing and shall remain
true and correct in all material respects until the Indebtedness
has been paid in full and any limitations period expires.
Notwithstanding anything to the contrary contained herein or in
any of the other Security Documents, Borrower's agreements and
Borrower's indemnification of Agent and the Banks contained in
this Paragraph 2.7 shall survive the exercise of any remedy by
Agent under any of the Security Documents, including foreclosure
under the Security Documents (or deed in lieu thereof), even if,
as a part of such foreclosure or deed in lieu of foreclosure, the
Indebtedness is satisfied in full. It shall, at the option of
Agent, be an Event of Default hereunder should any of the
representations or warranties contained in this Paragraph 2.7 be
or become untrue or misleading (and the same is not cured within
the period described in Paragraph 6.6 below), should Borrower
breach any of its agreements contained in this Paragraph 2.7 (and
not cure such breach within the period described in Paragraph 6.5
below), or should the Mortgaged Property, or any other property
owned by Borrower, become subject to any claim, notice, or action
of a nature described in subparagraph (b) above. In addition to
all other remedies that Agent may have as a result of an Event of
Default, Agent may accelerate payment of the Indebtedness as
provided in Paragraph 7.3 herein.
2.8 Flood Zone Notification. If required by applicable law,
Borrower, as lessor or seller of the Mortgaged Property and the
Improvements under any existing or future lease or sale agreement,
shall promptly give written notice to all lessees or purchasers of
the Mortgaged Property and the Improvements of the fact that the
Mortgaged Property and the Improvements are or will be located in
a flood hazard area. Borrower acknowledges that such written
notices have been given by it or will be promptly given.
Article 3
BORROWER'S COVENANTS
Borrower hereby unconditionally covenants with Agent and the
Banks as follows:
3.1 Negative Covenants. At no time shall Borrower (i) use,
maintain, operate or occupy, or allow the use, maintenance,
operation or occupancy of, any portion of the Mortgaged Property
for any purpose or in any manner which violates any Legal
Requirement, which constitutes a public or private nuisance, which
may make void, voidable or cancelable any insurance then in force
with respect thereto, or which, by virtue of being atypical of
regional shopping malls, will materially increase the premium
payable by Borrower for any insurance then in force with respect
thereto, or (ii) create or place, permit to be created or placed
or, through any act or failure to act, acquiesce in the creation
or placing of, or allow to remain, any mortgage, deed of trust,
security deed, lien (statutory, constitutional or contractual),
pledge, security interest, encumbrance or charge or conditional
sale or other title retention agreement on the Mortgaged Property
(or any portion thereof) other than those created by or expressly
permitted herein and under the Security Documents, regardless of
whether same is expressly subordinate to the liens and security
interests created in the Security Documents. If any such
mortgage, deed of trust, security deed, lien, pledge, security
interest, encumbrance or charge is asserted against the Mortgaged
7
<PAGE> Property (or any portion thereof), Borrower shall promptly,
at its own cost and expense, (a) pay the underlying claim in full
or take any other action necessary to cause same to be released,
or, at Borrower's election, bonded to the satisfaction of Agent
and the Title Company, and (b) within ten (10) days from the date
that such mortgage, deed of trust, security deed, security lien,
pledge, security interest, encumbrance or charge has been
asserted, give Agent notice thereof. The notice shall specify who
is asserting such mortgage, deed of trust, security deed, lien,
pledge, security interest, encumbrance or charge and shall, to the
extent known to Borrower, detail the origin and nature of the
underlying claim giving rise to the asserted mortgage, deed of
trust, security deed, lien, pledge, security interest, encumbrance
or charge.
Article 4
INSPECTION
4.1 Right of Inspection. Agent, through its officers,
agents or employees, shall have the right at all reasonable times
at Borrower's expense:
(a) To enter upon the Mortgaged Property and inspect
the Improvements to determine that it is in conformity with the
requirements hereof (Agent agreeing to conduct such inspections in
a manner which does not unreasonably interfere with the operation
of the Mortgaged Property or violate any Legal Requirement or the
terms of any Lease); and
(b) To examine, copy and make extracts of the books,
records, accounting data and other documents of Borrower that
relate in any way to the Mortgaged Property, including, without
limiting the generality of the foregoing, all permits, licenses,
consents and approvals of all Governmental Authorities having
jurisdiction over Borrower or the Mortgaged Property, and, to the
extent Borrower has access to the same. All such books, records
and documents shall be made available to Agent promptly upon
written demand therefor; and, at the request of Agent, Borrower
shall furnish Agent with convenient facilities for the foregoing
purpose.
4.2 No Duty to Inspect. It is expressly understood and
agreed that neither the Agent nor the Banks shall have any duty to
supervise or to inspect the Improvements or any books and records,
and that any such inspection shall be for the sole purposes of
determining whether or not the Obligations of Borrower under this
Agreement are being properly discharged and of preserving the
rights of Agent and the Banks hereunder. If Agent or the Banks,
or any independent supervising architect acting on behalf of Agent
or the Banks, should inspect the Improvements or any books and
records, Agent and the Banks shall have no liability or obligation
to Borrower or any third party arising out of such inspection
(except those obligations set forth in Paragraph 8.17 below).
Inspection not followed by notice of default shall not constitute
a waiver of any default then existing; nor shall it constitute an
acknowledgment or representation by Agent that there has been or
will be compliance with the Legal Requirements or waiver of
Agent's right thereafter to insist that the Improvements be
operated in accordance with the Legal Requirements. Agent's
failure to inspect the Improvements or any part thereof or any
books and records shall not constitute a waiver of any of Agent's
rights hereunder. Neither Borrower nor any third party shall be
entitled to rely upon any such inspection or review. Agent owes
8
<PAGE> no duty of care to Borrower or any third person to protect
against, or inform Borrower or any third person of the existence
of, negligent, faulty, inadequate or defective operation of the
Improvements; provided however, Agent will use its reasonable
efforts to give Borrower notice of any such negligent, faulty,
inadequate or defective operation of which Agent has knowledge and
which would constitute an Event of Default.
4.3 Borrower's Responsibilities. Borrower shall be solely
responsible for all aspects of Borrower's business and conduct in
connection with the Mortgaged Property and Improvements.
4.4 Inspection Fee. In furtherance of Agent's rights
hereunder, Agent may, at its option, require an inspection of the
Mortgaged Property, by any party contracted by Agent, at least
semi-annually. Borrower shall pay all fees incurred by Agent for
all inspections of the Mortgaged Property. Furthermore, if Agent
determines in connection with any such inspection that extra
services will be required as a result of Borrower's failure to
satisfy the requirements of any agreement, the Borrower shall pay,
in addition to the fees for such inspections, the reasonable cost
of all such extra services.
Article 5
AGENT'S COMMITMENT TO FUND
5.1 Loan. Subject to the terms, provisions and conditions
of this Agreement, the Banks will make and Borrower will accept a
loan in the aggregate amount of the principal sum of the Note, it
being understood that interest as called for in the Note shall be
calculated only on any sums actually advanced and only from the
dates of such advances.
5.2 Conditions to Closing. The Banks shall not be
obligated to make the Loan to Borrower unless and until:
(a) Agent has received true, legible and correct
copies of the following:
(i) all authorizations and permits which are
then procurable and required by any Legal Requirement for the
proposed use of the Improvements;
(ii) an original current survey of the Land
containing the certification of the surveyor in form and
substance satisfactory to Agent and showing the perimeter of
the Land by courses and distances, all easements and
rights-of-way, the boundary lines of the streets abutting the
Land and the width thereof, any encroachments and the extent
thereof in feet and inches, the relation of the Improvements
by distances to the perimeter of the Land and the proposed
building lines all acceptable to the Title Company to modify
the "areas, boundaries and encroachments" exception to the
maximum extent permitted by law;
(iii) the policies of insurance required by
the Security Documents accompanied by evidence of the payment
of the premium therefor;
(iv) a soils investigation report from a soils
engineer satisfactory to Agent;
9
<PAGE> (v) evidence satisfactory (e.g. surveyor's
certification) to Agent that the Land is not located within
the 100-year flood plain or identified as a special flood
hazard area as defined by the Federal Insurance
Administration;
(vi) the tax identification number(s) assigned to
the Mortgaged Property (i.e. county, city and school, etc.),
the approximate date tax statement(s) are to be issued and
the date(s) taxes would become delinquent if not paid.
(vii) an opinion of counsel for Borrower and
Guarantor satisfactory to Agent;
(viii) a copy of the form of tenant lease
satisfactory to Agent to be used by Borrower in connection
with the Leases;
(ix) environmental study of the Land in form and
substance satisfactory to Agent; and
(x) any other documents and information as Agent
may reasonably require which are in Borrower's possession or
at Borrower's disposal.
(b) The Security Documents have been duly authorized,
executed and recorded or filed in accordance with applicable Legal
Requirements and original counterparts thereof delivered to Agent;
(c) The Title Company has issued the Title Insurance;
(d) Agent shall have received, reviewed and approved
fully executed counterparts of:
(i) all reciprocal easement and/or operating
agreements with respect to the Mortgaged Property;
(ii) all Leases, together with executed estoppel
certificates, in form and substance satisfactory to Agent;
(iii) subordination, non-disturbance and
attornment agreements, satisfactory in form and substance to
Lender, from Dillard's Department Stores, Inc., Montgomery
Ward, Belk Department Store, The Limited, and Eastwyn
Theaters, Inc., and any amendment relating thereto; and
(ii) Borrower shall pay to Agent, or any other
person or party entitled thereto, all fees and costs then due
and payable in connection with this Agreement and the subject
hereof including, without limiting the generality of the
foregoing, any matters set forth in Paragraph 8.1 hereof.
(e) Agent shall have received a commitment fee in the
amount of $2,100.00.
Article 6
EVENTS OF DEFAULT
Each of the following shall constitute an Event of Default
hereunder:
6.1 Intentionally Omitted.
10
<PAGE> 6.2 Voluntary Bankruptcy. If Borrower, Guarantor or
any general partner of Borrower or Guarantor, shall (a)
voluntarily be adjudicated as bankrupt or insolvent, (b) file any
petition or commence any case or proceeding under any provision or
chapter of the Federal Bankruptcy Code or any other federal or
state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, (c) make a general assignment for
the benefit of creditors, (d) have an order for relief entered
under the Federal Bankruptcy Code with respect to it, (e) fail
generally to pay its debts as they mature, (f) admit in writing
that it is unable to pay its debts as they mature, or (g) become
insolvent.
6.3 Involuntary Bankruptcy. If (a) a petition is filed or
any case or proceeding described in Paragraph 6.2 above is
commenced against Borrower, Guarantor or any general partner of
Borrower or Guarantor or against the assets of any such persons or
entities, unless such petition and the case or proceeding
initiated thereby is dismissed within ninety (90) days from the
date of the filing, (b) an answer is filed by Borrower, Guarantor
or any general partner of Borrower or Guarantor admitting the
allegations of any such petition, or (c) a court of competent
jurisdiction enters an order, judgment or decree appointing,
without the consent of Borrower, Guarantor or any general partner
of Borrower or Guarantor, a custodian, trustee, agent or receiver
for it, or for all or any part of its property, or authorizing the
taking possession by a custodian, trustee, agent or receiver of
it, or all or any part of its property unless such appointment is
vacated or dismissed or such possession is terminated within
ninety (90) days from the date of such appointment or commencement
of such possession, but not later than five (5) days before the
proposed sale of any assets of Borrower, Guarantor or any general
partner of Borrower or Guarantor by such custodian, trustee,
agent or receiver, other than in the ordinary course of the
business of Borrower, Guarantor or any general partner of Borrower
or Guarantor.
6.4 Payment of Indebtedness. If Borrower shall fail,
refuse or neglect to pay, in full, any installment or portion of
the Indebtedness, including the Indebtedness evidenced by the
Note, as and when the same shall become due and payable, whether
at the due date thereof stipulated in the Security Documents, or
at a date fixed for prepayment, or by acceleration or otherwise,
and such failure, refusal or neglect continues for a period of
fifteen (15) days after written notice of such failure, refusal or
neglect is given to Borrower; provided, however, that if such
installment or portion of the Indebtedness becomes due and payable
as a result of Agent's accelerating the maturity of the
Indebtedness in accordance with the Security Documents, the
fifteen (15) day grace period for payment set forth in this
Paragraph 6.4 shall not apply to the accelerated due date.
6.5 Performance of Obligations. If Borrower shall fail,
refuse or neglect to perform and discharge fully and timely any of
the Obligations as and when called for and such failure, refusal
or neglect shall either be incurable or, if curable, shall remain
uncured for a period of thirty (30) days after the date Agent
gives written notice thereof to Borrower; provided, however, that
if such default is curable but requires work to be performed, acts
to be done or conditions to be remedied which, by their nature,
cannot be performed, done or remedied, as the case may be, within
such thirty (30) day period, no Event of Default shall be deemed
to have occurred if Borrower commences same within such thirty
(30) day period and thereafter diligently and continuously
11
<PAGE> prosecutes the same to completion within sixty (60) days
after such notice.
6.6 False Representations. If any representation,
statement or warranty made by Borrower, Guarantor or others in,
under or pursuant to the Security Documents or any affidavit or
other instrument executed in connection with the Security
Documents shall be false or misleading in any material respect, as
of the date hereof, or shall become so at any time prior to the
repayment in full of the Indebtedness and, except in the case of
fraud, such breach is not cured within thirty (30) days after the
earlier to occur of (a) the date any senior officer of Borrower or
such other party has actual knowledge of such breach, or (b) the
date written notice of such breach is given to Borrower by Agent.
6.7 Dissolution, Change or Encumbrance of Ownership. (a)
Except as permitted under Paragraph 6.8 below, if Borrower,
Guarantor or any general partner of Borrower or Guarantor shall
dissolve, terminate or liquidate, or merge with or be consolidated
into any other entity, or shall hypothecate, pledge, mortgage or
otherwise encumber all or any part of the beneficial ownership
interest in Borrower, Guarantor or such general partner or shall
attempt to do any of the same, or (b) if Borrower shall amend or
modify, in a manner which would adversely affect Agent, its
articles of incorporation, bylaws, articles of partnership,
certificate of partnership or other charter or enabling documents,
and Agent has not given its prior written consent to such
amendments or modifications.
6.8 Disposition of Mortgaged Property and Beneficial
Interest in Borrower. If Borrower sells, leases, exchanges,
assigns, conveys, transfers or otherwise disposes of (herein
collectively called "Disposition") all or any portion of the
Mortgaged Property (or any interest therein), or all or any part
of the beneficial ownership interest in Borrower (if Borrower is a
corporation, partnership, joint venture, trust or other type of
business association or legal entity), without the prior written
consent of Agent; provided, however, so long as no event has
occurred which with giving of notice or the passage of time, or
both, would constitute an Event of Default hereunder, (i)
reapportionments and transfers of beneficial interests in Borrower
shall be permitted without prior review or consent of Agent as
long as at least fifty-one percent (51%) in the aggregate of the
general partnership interest in the Borrower shall be held by CBL
& Associates Limited Partnership, CBL & Associates Properties,
Inc., and/or their respective affiliates and subsidiaries, and/or
Charles B. Lebovitz, John N. Foy, Jay Wiston, Ben S. Landress,
Stephen Lebovitz, Michael Lebovitz and/or Ron Fullam (provided,
however, that Charles B. Lebovitz, John N. Foy, Jay Wiston, Ben S.
Landress, Stephen Lebovitz, Michael Lebovitz and/or Ron Fullam
shall be deemed to own any beneficial interest so long as the same
is owned by (a) such person, (b) any corporation, partnership,
limited liability company, association or other organization in
which such person owns more than fifty percent (50%) of the
outstanding shares of capital stock, partnership interest or other
ownership interest, having ordinary voting power to elect a
majority of the board of directors or similar governing body, or
(c) a trust or similar entity in which such person and members of
such person's family, including spouses, children, parents,
siblings and their descendants, are the sole beneficiaries of all
of the interest therein), and (ii) transfers of Borrower's
interest in the Mortgaged Property shall be permitted without
prior review or consent of Agent to any partnership or joint
venture in which CBL & Associates Limited Partnership or CBL &
12
<PAGE> Associates Properties, Inc. shall be the controlling
general partner or joint venturer, as the case may be, owning,
directly or indirectly at least fifty-one percent (51%) or more of
the general partnership or managing joint venturer's interest
therein, so long as such partnership or joint venture expressly
assumes all of the Obligations and the obligation to repay the
Indebtedness and Guarantor expressly remains liable under the
Guaranty. It is expressly agreed that in connection with
determining whether to grant or withhold such consent, Agent may
(but is not obligated to), among other things, (i) consider the
creditworthiness of the party to whom such Disposition will be
made and its management ability with respect to the Mortgaged
Property, (ii) consider whether or not the security for repayment
of the Indebtedness and the performance of the Obligations, or
Agent's ability to enforce its rights, remedies and recourses with
respect to such security, will be impaired in any way by the
proposed Disposition, (iii) require as a condition to granting
such consent, an increase in the rate of interest payable under
the Note or any other change in the terms and provisions of the
Note and other Security Documents, (iv) require that Agent be
reimbursed for all costs and expenses incurred by Agent in
investigating the creditworthiness and management ability of the
party to whom such Disposition will be made and in determining
whether Agent's security will be impaired by the proposed
Disposition, (v) require the payment to Agent of a transfer fee to
cover the cost of documenting the Disposition in its records, (vi)
require the payment of its reasonable attorney's fees actually
incurred in connection with such Disposition, (vii) require the
express assumption, from and after the date of such Disposition,
of Borrower's obligation to pay the Indebtedness and perform the
Obligations by the party to whom such Disposition will be made
(with or without the release of Borrower from liability for such
Indebtedness and Obligations), (viii) require the execution of
assumption agreements, modification agreements, supplemental
security documents and financing statements satisfactory in form
and substance to Agent, (ix) require endorsements (to the extent
available under applicable law) to any existing Title Insurance
insuring Agent's liens and security interests covering the
Mortgaged Property, and (x) require additional security for the
payment of the Indebtedness and performance of the Obligations.
6.9 Encumbrance Upon Mortgaged Property. If the Borrower
shall, without the prior written consent of Agent, create, place
or permit to be created or placed, or through any act or failure
to act, acquiesce in the placing of, or allow to remain, any
mortgage, security deed, pledge, lien (statutory, constitutional
or contractual), security interest, encumbrance or charge on, or
conditional sale or other title retention agreement, with respect
to the Mortgaged Property, except to the extent otherwise
permitted in the Security Documents, and does not remove, bond off
or insure the same in the manner and within the time period
provided for in the Security Documents.
6.10 Intentionally Omitted.
6.11 Change in Financial Condition. If (a) Guarantor shall
fail to observe or perform any covenant or agreement contained in
Paragraphs 9.1, 9.3 or 9.4 of the Guaranty and such failure shall
continue for ninety (90) days after the earlier of (i) the date
any senior officer of Guarantor has actual knowledge of such
failure, or (ii) the date written notice of such failure has been
given to Guarantor, or (b) Guarantor shall fail to observe or
perform any other covenant or agreement contained in Paragraph 9
of the Guaranty.
13
<PAGE> 6.12 Foreclosure of Other Liens. Subject to Borrower's
right to contest as set forth in the Security Documents, if the
holder of any lien or security interest on the Mortgaged Property
(without hereby implying Agent's consent to the existence,
placing, creating or permitting of any such lien or security
interest) institutes foreclosure or other proceedings for the
enforcement of its remedies thereunder and within sixty (60) days
after institution thereof (but in no event less than five (5)
business days prior to the date set for sale of all or any portion
of the Mortgaged Property) such foreclosure or other such
proceedings are not vacated, discharged or discontinued of record
by payment or by order of a court of competent jurisdiction.
6.13 Event of Default Under Security Documents. If any
default or Event of Default, or event which, with the passage of
time or the giving of notice or both, could give rise to a default
or Event of Default, shall occur under any of the other Security
Documents (even thought not listed as an Event of Default in this
Agreement) and the same is not cured within the applicable cure
period, if any.
6.14 Failure to Provide Tax Information. The failure of
Borrower to provide to Agent the tax statements and paid tax
receipts pursuant to Paragraph 8.14 herein.
6.15 Failure to Pay Loan Fee. The failure of Borrower to
pay to Agent a loan commitment fee in the amount of Seventy-Three
Thousand Three Hundred Fifty and No/100 Dollars ($76,500.00) on or
before December 31, 1998, which fee Borrower hereby agrees to pay.
14
<PAGE> Article 7
REMEDIES
7.1 Rights, Remedies and Recourses. Upon the happening of
any Event of Default, Agent, on behalf of the Banks, shall have,
in addition to any and all other rights, remedies and recourses
available to it under any of the Security Documents or otherwise
available at law or in equity, including specifically, but without
limitation, the right to declare immediately due and payable the
unpaid advanced principal and unpaid accrued interest on the Note
and to foreclose any and all liens and security interests securing
the repayment of same, the right (a) to take exclusive possession
of the Mortgaged Property, (b) to pay, settle or compromise all
existing bills and claims which are or may be liens against the
Mortgaged Property, or may be necessary or desirable for the
clearance of title, (c) to employ such contractors,
subcontractors, agents, attorneys, architects, accountants,
watchmen and inspectors as Agent may deem desirable to accomplish
any of the above purposes, (d) to immediate payment of the
Indebtedness, with an immediate right to obtain judgment against
Borrower, or any Guarantor, in the amount of the Indebtedness and
to exercise all remedies available under the laws of the State of
Georgia for actions on a matured contractual indebtedness, and
(e) following any foreclosure of the property or collateral
covered by the Security Documents, an immediate right to any
expenses incurred by Agent or any Bank in protecting, preserving
or defending its interests in connection with the Loan or under
the Security Documents, including, without limitation, all
reasonable attorneys' fees and all other expenses incurred by
Agent in connection with any foreclosure and/or sale of all or any
of the property or collateral covered by the Security Documents;
Agent and each Bank shall have an immediate right to obtain
judgment against Borrower, or any Guarantor, in the amounts set
forth above and Agent and each Bank may exercise all remedies
available under the laws of the State of Georgia or the State of
North Carolina, whichever is applicable, for action of a matured
contractual indebtedness. For these purposes, Borrower hereby
constitutes and appoints Agent its true and lawful
attorney-in-fact with full power of substitution to be coupled
with an interest. All sums expended by Agent and/or the Banks for
any of the above purposes shall be deemed to be advances hereunder
and shall be secured by the Security Documents.
7.2 Cessation of Agent's and Banks's Obligations. Upon the
happening of any such Event of Default, all obligations (if any)
of Agent and/or the Banks hereunder, including specifically any
obligation to advance funds hereunder, shall immediately cease and
terminate.
7.3 Acceleration. Notwithstanding anything to the contrary
herein contained or inferable from any provision of this
Agreement, upon the happening of an Event of Default, the unpaid
principal and unpaid accrued interest on the Note shall, at the
option of Agent on behalf of the Banks, immediately become due and
payable in full, without the necessity of any further action on
the part of Agent, and Borrower expressly waives any requirement
of notice of intent to accelerate, or of notice of such
acceleration of, the maturity of the Indebtedness.
Article 8
15
<PAGE> GENERAL TERMS AND PROVISIONS
8.1 Performance at Borrower's Expense. Subject to the
provisions of Paragraph 8.5 of this Agreement and without in any
way limiting Paragraph 7.1 hereof, Borrower shall (i) pay all
reasonable legal fees incurred by Agent in connection with the
preparation of this Agreement and any and all other Security
Documents contemplated hereby (including any amendments hereto or
thereto or consents, releases or waivers hereunder or thereunder);
(ii) pay all out-of-pocket expenses of Agent in connection with
the administration of this Agreement and the other Security
Documents including, without limitation, reasonable legal fees
and appraisal fees (including all fees for annual or special
appraisals necessary for regulatory reporting requirements or for
Agent's internal audit procedures), (iii) reimburse Agent and/or
the Banks promptly upon demand, for all reasonable amounts
expended, advanced or incurred by Agent or such Bank to satisfy
any obligation of Borrower under this Agreement or any other
Security Documents, which amounts shall include all court costs,
reasonable attorneys' fees (including, without limitation, for
trial, appeal or other proceedings), fees of auditors and
accountants, and investigation expenses reasonably incurred by
Agent or such Bank in connection with any such matter, and (iv)
any and all other costs and expenses required to satisfy any
provision of this Agreement. For all purposes of this Agreement,
Agent's and the Banks' costs and expenses shall include without
limitation, the cost of: all appraisal fees, cost engineering and
inspection fees, architectural fees, legal fees (including,
without limitation, fees for trial, appeal or other proceedings),
accounting fees, environmental consultant fees (if any), auditor
fees, and the cost to Agent of any documentary taxes, recording
fees, brokerage fees, title insurance premiums and title surveys.
In addition, Borrower recognizes and agrees that formal written
appraisals of the Mortgaged Property by a licensed independent
appraiser may be required by Agent's and/or Banks' internal
procedures and/or federal regulatory reporting requirements on an
annual and/or specialized basis. Except to the extent that
certain of these costs and expenses are included within the
definition of Indebtedness, the payment by Borrower of any of
these costs and expenses shall not be credited, in any way or to
any extent, against any portion of the Indebtedness. If any of
the services described in this Paragraph 8.1 are provided by an
employee of Agent, Borrower shall reimburse Agent its reasonable
charges for such services. Borrower shall reimburse Agent its
standard charge for the services of any in-house counsel used by
Agent to perform services described in this Paragraph 8.1, so long
as Borrower is not required to reimburse Agent for the services of
outside counsel in connection with the same matter.
8.2 Approval of Agent and Further Assurances. All
instruments of assurance to be executed and/or delivered to Agent,
and all proceedings to be taken in connection with this Agreement
and the Loan provided for herein, and all persons or parties
responsible in any way for the operation of the Improvements or
any obligation to be performed hereunder, or under the other
Security Documents, shall be subject to the acceptance of Agent as
to form, substance, coverage and identity. Promptly upon request
of Agent, Borrower will execute, acknowledge and deliver to Agent
such further instruments and do such further acts as Agent may
reasonably deem necessary to carry out more effectively the
purpose of this Agreement or to subject to the liens and security
interests of the Security Documents any property intended by the
terms thereof to be covered thereby, including specifically, but
16
<PAGE> without limitation, any renewals, additions, substitutions,
replacements, betterments or appurtenances to the Mortgaged
Property.
8.3 No Waiver. Any failure by Agent or any Bank to insist,
or any election by Agent not to insist, upon Borrower's (or any of
them), or any Guarantor's strict performance of any of the terms,
provisions or conditions of the Security Documents shall not be
deemed to be a waiver of same or of any other term, provision or
condition thereof and Agent and each Bank shall have the right at
any time thereafter to insist upon strict performance by Borrower
of any and all of same. In specific, no advance by Agent or any
Bank of any loan proceeds hereunder absent Borrower's strict
compliance with Article 5 hereinabove shall, in any way, preclude
Agent or such Bank from thereafter declaring such failure to
comply within the applicable notice and cure period to be an Event
of Default hereunder.
8.4 Modification. This Agreement shall not be amended,
waived, discharged or terminated orally but only by an instrument
executed by the party against which enforcement of the amendment,
waiver, discharge or termination is sought.
8.5 Applicable Law. This Agreement has been executed
under, and shall be construed and enforced in accordance with, the
laws of the State of Georgia from time to time in effect; except
to the extent that United States federal law permits Agent to
contract for, charge or receive a greater amount of interest than
under Georgia law. This Agreement and all of the Security
Documents are intended to be performed in accordance with, and
only to the extent permitted by, all applicable Legal
Requirements. It is expressly stipulated and agreed to be the
intent of Borrower and Agent at all times to comply with the
applicable law now or hereafter governing the interest payable on
the Indebtedness. If the applicable law is ever revised, repealed
or judicially interpreted so as to render usurious any amount
called for under the Note or under any of the Security Documents
or contracted for, charged, taken, reserved or received with
respect to the Indebtedness, or if Agent's exercise of the option
herein contained to accelerate the maturity of the Note, or if any
prepayment by Borrower results in Borrower's having paid any
interest in excess of that permitted by applicable law, then it is
Borrower's and Agent's express intent that all excess amounts
theretofore collected by Agent be credited on the principal
balance of the Note or any other principal indebtedness of
Borrower to Agent (or, if the Note and all of such other
indebtedness have been paid or would thereby be paid in full,
refunded to Borrower), and the provisions of the Note, the Deed of
Trust, this Agreement and the other Security Documents immediately
be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the
execution of any new documents, so as to comply with the then
applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder and thereunder. All sums
paid or agreed to be paid to Agent for the use, forbearance or
detention of the Indebtedness shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Indebtedness until payment in
full so that the rate or amount of interest on account of such
indebtedness does not exceed the usury ceiling from time to time
in effect and applicable to the Indebtedness for so long as the
Indebtedness is outstanding.
17
<PAGE> 8.6 Severability. If any provision hereof or of any
of the other Security Documents or the application thereof to any
person or circumstance shall, for any reason and to any extent, be
invalid or unenforceable, neither the application of such
provision to any other person or circumstance, nor the remainder
of the instrument in which such provision is contained, shall be
affected thereby, but rather shall be enforced to the greatest
extent permitted by law.
8.7 Rights, Remedies and Recourses Cumulative. All rights,
remedies and recourses afforded Agent in the Security Documents or
otherwise available at law or in equity, including specifically,
but without limitation, those granted by the Uniform Commercial
Code in effect in the State of North Carolina (a) shall be deemed
cumulative and concurrent, (b) may be pursued separately,
successively or concurrently against Borrower, any Guarantor or
anyone else obligated under any or all of the Security Documents,
or against the Mortgaged Property, or against any one or more of
them, at the sole discretion of Agent, (c) may be exercised as
often as the occasion therefor shall arise, it being understood by
Borrower that the exercise, failure to exercise or election to
exercise any of the same shall in no event be construed as a
waiver of same or of any other right, remedy or recourse available
to Agent and (d) are intended to be, and shall be, nonexclusive.
8.8 Successors and Assigns. Subject to the provisions of
Paragraph 6.8 hereof, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
heirs, successors, legal representatives and assigns.
8.9 Notices. All notices or other communications required
or permitted to be given pursuant to the provisions of this
Agreement shall be in writing and shall be considered as properly
given if mailed by first class United States mail, postage
prepaid, registered or certified with return receipt requested, if
sent by national overnight courier providing documentation of
receipt, if delivered in person, or if sent by prepaid telegram,
telex or telecopy, with a copy of any communication so sent by
telegram, telex or telecopy being sent by mail, overnight courier
or personal delivery as aforesaid. Notice so mailed shall be
effective three (3) business days after its deposit. Notice given
in any other manner shall be effective only if and when received
by the addressee. For purposes of notice, the addresses of the
parties shall be as set forth in the opening recital hereof,
provided however, that either party shall have the right to change
its address for notice hereunder to any other location within the
continental United States by the giving of thirty (30) days'
notice to the other party in the manner set forth hereinabove.
8.10 Assignments; Participation:
(a) Permitted Assignments. Any Bank may assign to any
affiliate of such Bank all or a portion of its respective Pro Rata
Share (as defined in the Intercreditor Agreement) of the Loan, in
such a manner as to create privity of contract between such
affiliate and the Borrower and to make such affiliate a Bank for
all purposes hereunder. Any Bank may assign to any entity which
meets the following conditions ("Assignee Bank") all or a portion
of its respective Pro Rata Share of the Loan, in such a manner as
to create privity of contract between such person and the Borrower
and to make such person a Bank for all purposes hereunder:
18
<PAGE> (i) The minimum portion of the total
commitment which the assigning Bank may assign to an Assignee Bank
shall be Ten Million Dollars ($10,000,000.00).
(ii) Without limiting the power of consent in
subparagraph (5) below, an Assignee Bank (or its direct or
indirect parent) shall be any financial institution which has
total assets in excess of Ten Billion Dollars ($10,000,000,000).
(iii) The senior unsecured debt of an
Assignee Bank (or its direct or indirect parent) shall have a
rating of Baa-2 or higher from Moody's Investors Service, Inc. or
a comparable rating agency.
(iv) Such assignment shall have been approved by
Borrower and Agent, which approval shall not be unreasonably
withheld (provided however, that Borrower may, in its sole
discretion, approve or disapprove any proposed assignment by the
Agent which would result in Agent having assigned more than
$20,000,000 of the Loan to parties which are not affiliates of
Agent). No sub-assignments shall be permitted to parties other
than affiliates of the assigning Bank without the prior approval
of Borrower and Agent, which approval may be granted or withheld
in their sole discretion.
(b) Assignment and Acceptance. The Borrower and Agent
may continue to deal solely and directly with the assigning Bank
in connection with the interest so assigned to an Assignee Bank
(or to an affiliate of such Bank) until such time as (i) written
notice of such assignment, together with payment instructions,
addresses and related information with respect to the Assignee
Bank (or such affiliate) shall have been given to the Borrower and
Agent by the assigning Bank and the Assignee Bank (or such
affiliate); (ii) the assigning Bank and the Assignee Bank (or such
affiliate) shall have delivered to the Borrower and Agent an
Assignment and Assumption.
Upon request, Borrower will execute and deliver to
Agent an appropriate replacement promissory note(s) in favor of
each assignee (and assignor, if such assignor is retaining a
portion of its commitment and loans) reflecting such assignee's
(and assignor's) Pro Rata Share(s). Upon execution and delivery
of such replacement promissory notes, the original promissory note
or notes evidencing all or any portion of the commitments and
loans being assigned shall be canceled and returned to the
Borrower.
(c) Notice by Agent. Promptly following receipt by
Agent of an executed Assignment and Acceptance, Agent shall give
notice to the Borrower and to the Banks of: (i) the effectiveness
of the assignment by the assigning Bank to the Assignee Bank (or
the affiliate of the Bank); and (ii) the revised percentages and
maximum amounts of the Pro Rata Share in effect as a result of
such assignment.
(d) Adjustment of Shares. Immediately upon delivery
of the Assignment and Acceptance to Agent, this Agreement shall be
deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee Bank (or
affiliate of the Bank) and the resulting adjustment of the Pro
Rata Shares arising therefrom. The Pro Rata Share assigned to each
Assignee Bank (or such affiliate) shall reduce the Pro Rata Share
of the assigning Bank by a like amount.
19
<PAGE> (e) Rights of Assignee. From and after the date
upon which Agent notifies the assigning Bank that it has received
an executed Assignment and Assumption: (i) the Assignee Bank (or
the Bank's affiliate) thereunder shall be a party to this
Agreement and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and
Assumption, shall have the rights and obligations of a Bank under
this Agreement and the Intercreditor Agreement; provided, however,
that the Assignee Bank's consent shall be required only with
respect to those matters which the Intercreditor Agreement
specifies require the consent of an Assignee Bank, and (ii) the
assigning Bank shall, to the extent that rights and obligations
under this Agreement have been assigned by it pursuant to such
Assignment and Assumption, relinquish its rights and be released
from its obligations under this Agreement.
(f) Assignee's Agreements. By executing and
delivering an Assignment and Assumption, the Assignee Bank (or the
Bank's affiliate) thereunder confirms and agrees as follows: (i)
other than as provided in such Assignment and Assumption, the
assigning Bank makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, the Note or any other
instrument or document furnished pursuant to the Loan; (ii) the
assigning Bank makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the
Borrower or any other parties or the performance or observance by
the Borrower of any of its obligations under the Note and this
Agreement; (iii) the Assignee Bank (or such affiliate) has
received a copy of this Agreement, together with such other
documents and information as the Assignee Bank (or such affiliate)
has deemed appropriate to make its own credit analysis and
decision to enter into the Assignment and Assumption; (iv) the
Assignee Bank (or such affiliate) will, independently and without
reliance upon Agent, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) the Assignee
Bank (or such affiliate) hereby appoints and authorizes Agent to
take such action as administrative agent on its behalf and to
exercise such powers under the Security Documents and this
Agreement as are delegated to Agent thereunder and hereunder,
together with such powers as are reasonably incidental thereto;
and (vi) the Assignee Bank (or such affiliate) agrees that it will
perform all of the obligations which by the terms of this
Agreement are required to be performed by it as a Bank and
confirms the representations and warranties of the assigning Bank
under this Agreement.
(g) Participations. Any Bank may sell a participation
interest in all or any portion of the Loan without the prior
consent of the Agent and the other Banks; provided, however, the
voting rights of any participants shall be limited to actions with
respect to increases in the maximum loan amount, extensions of the
maturity date beyond the extension option terms, changes in the
interest rates applicable to the Loan and releases of all or
substantially all of the collateral without replacement in those
cases which the Banks' consent is required.
8.11 Agent's Right to Perform the Obligations. If Borrower
shall fail, refuse or neglect to make any payment or perform any
act required by the Security Documents within the applicable
notice and cure period, then Agent at any time thereafter, without
notice to or demand upon Borrower and without waiving or releasing
20
<PAGE> any other right, remedy or recourse Agent may have because
of same, may make such payment or perform such act for the account
of and at the expense of Borrower, and shall have the right to
enter the Land and Improvements for such purpose and to take all
action with respect to the Mortgaged Property as it may deem
desirable. If Agent shall elect to pay any statement, invoice or
tax bill, Agent may do so in reliance on any bill, statement or
assessment procured from the appropriate Governmental Authority or
company without inquiring into the accuracy or validity thereof.
Similarly, in making any payments to protect the security intended
to be created by the Security Documents, Agent shall not be bound
to inquire into the validity of any apparent or threatened adverse
title, lien, encumbrance, claim or charge before making an advance
for the purpose of preventing or removing the same. Borrower
shall indemnify Agent and the Banks for all losses, expenses,
damages, claims and causes of action, including reasonable
attorneys' fees, incurred or accruing by reason of any acts
performed by Agent or the Banks pursuant to the provisions of this
Paragraph 8.11 or by reason of any other provision in the Security
Documents. Notwithstanding the foregoing, Borrower shall not be
obligated to indemnify Agent or the Banks with respect to any
intentional tort or act of gross negligence or willful misconduct
committed by Agent or the Banks. All sums paid by Agent and/or
the Banks pursuant to this Paragraph 8.11, and all sums expended
by Agent and/or the Banks to which it shall be entitled to be
indemnified, together with interest thereon at the Default Rate
(as defined in the Note) from the date of such payment or
expenditure, shall constitute advances on and additions to the
Indebtedness, shall be secured by the Security Documents and shall
be paid by Borrower to Agent or the Banks upon demand. This
indemnification shall survive the payment of all amounts payable
pursuant to and secured by, the Security Documents. Payment by
Agent and/or the Banks shall not be a condition precedent to the
obligations of Borrower under this indemnity; provided however, in
the event Agent or any Bank makes any demand hereunder prior to
payment, it shall provide reasonable evidence of the amount of the
losses, costs or expenses which have been incurred or are due and
payable by it.
8.12 Supplement to Deed of Trust. The provisions of this
Agreement are not intended to supersede the provisions of the Deed
of Trust but shall be construed as supplemental thereto. In the
event of any inconsistency between the provisions hereof and the
Deed of Trust, other than the selection of laws provision, this
Agreement shall be controlling. This Agreement shall remain in
effect until the Indebtedness has been paid in full.
8.13 Headings. The Article, Paragraph and Subparagraph
entitlements hereof are inserted for convenience of reference only
and shall in no way alter, modify or define, or be used in
construing, the text of such Articles, Paragraphs or
Subparagraphs.
8.14 Taxes and Assessments. Subject to Borrower's right to
contest as provided for herein, Borrower shall submit to Agent
copies of tax statements and paid tax receipts evidencing the due
and punctual payment of all real estate and personal property
taxes, charges and assessments levied or imposed upon the
Mortgaged Property on or before the delinquent date of any such
taxes.
8.15 Course of Dealing. Borrower and Agent mutually agree
that each shall proceed at all times in good faith and in a
21
<PAGE> commercially reasonable manner in the performance of its
obligations and in the exercise of its judgment or discretion
hereunder and under the other Security Documents.
8.16 WAIVER OF RIGHT TO TRIAL BY JURY. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION THEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE; AND TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY
COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO
TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
INITIAL: _/i/ _JNF__ __________
8.17 Treatment of Certain Information; Confidentiality. Agent and each
Bank agrees (on behalf of itself and each of its
affiliates, directors, officers, employees and representatives) to
keep confidential, in accordance with its customary procedures for
handling confidential information of this nature and in accordance
with safe and sound banking practices, any non-public information
supplied to it by Borrower pursuant to this Agreement or any other
Security Document which is identified by Borrower as being
confidential at the time the same is delivered to the Agent or
such Bank, provided that nothing herein shall limit the disclosure
of any such information (a) to the extent required by statute,
rule, regulation or judicial process, (b) to counsel for Agent,
(c) to bank examiners, auditors or accountants, (d) to any
potential purchaser, assignee or participant of or in the Loan, or
(e) in connection with any litigation to which the Agent or Bank
is a party (provided, that Agent and/or the Banks will promptly
notify Borrower of such litigation and of such proposed disclosure
prior to the disclosure of such information (unless prohibited
from doing so by the relevant court)).
8.18 Intercreditor Agreement. Borrower acknowledges that
WFB is acting as agent for the Banks on the terms and conditions
set forth in the Intercreditor Agreement.
[Signatures Appear on Following Page]
22
<PAGE>
<PAGE>
EXECUTED under seal as of the date first above written.
"AGENT"
WELLS FARGO BANK, NATIONAL ASSOCIATION,
a national banking association (SEAL)
By: /s/ Robert W. Belson
Name: Robert W. Belson
Title: Senior Vice President
[Bank Seal]
"BANK"
WELLS FARGO BANK, NATIONAL ASSOCIATION,
a national banking association
By: /s/ Robert W. Belson
Name: Robert W. Belson
Title: Senior Vice President
[Bank Seal]
"BORROWER"
ASHEVILLE, LLC.,
a North Carolina limited liability
company (SEAL)
By: CBL & Associates Limited
Partnership,
a Delaware limited partnership,
its sole member
By: CBL Holdings I, Inc.,
a Delaware corporation,
its sole general partner
By: /s/ John N. Foy
John N. Foy
Executive Vice President
/s/ Mary Ann Okrasinski
Attest:
Mary Ann Okrasinski
Assistant Secretary
(CORPORATE SEAL)
23
PAGE
<PAGE>
EXHIBIT "A"
Legal Description
(to be attached)
24
<PAGE>
<PAGE>
EXHIBIT "B"
Intentionally Omitted
25
PAGE
<PAGE>
EXHIBIT "C"
Pending Litigation
(to be attached)
26
PAGE
<PAGE>
EXHIBIT "D"
Form of Note
[To be attached]
27
PAGE
<PAGE>
EXHIBIT "E"
Intercreditor Agreement
[To be attached]
28
<PAGE>
3
LOAN AGREEMENT
THIS AGREEMENT, Made and entered into as of the ___30th___ day of
_January__, 1998, by and between BURNSVILLE MINNESOTA, LLC, a Minnesota
limited liability company, and U.S. BANK NATIONAL ASSOCIATION, a national
banking association.
WITNESSETH THAT, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
following respective meanings, unless the context hereof clearly requires
otherwise:
Adjusted Eurodollar Rate: With respect to each Interest Period
applicable to a Eurodollar Rate Advance, the rate (rounded upward, if
necessary, to the next one hundredth of one percent) determined by dividing
the Eurodollar Rate for such Interest Period by 1.00 minus the Eurodollar
Reserve Percentage.
Advance: The principal amount of the Loan advanced by Lender to
or for the benefit of Borrower in accordance with the terms hereof on or
about the date hereof.
Affiliate: When used with reference to any Person, (a) each Person
that, directly or indirectly, controls, is controlled by or is under common
control with, the Person referred to, (b) each Person which beneficially owns
or holds, directly or indirectly, five percent (5%) or more of any class of
voting stock of the Person referred to (or if the Person referred to is not
a corporation, five percent [5%] or more of the equity interest), (c) each
Person, five percent (5%) or more of the voting stock (or if such Person is
not a corporation, five percent (5%) or more of the equity interest) of which
is beneficially owned or held, directly or indirectly, by the Person referred
to, and (d) each of such Person's officers, directors, joint venturers and
partners. The term control (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of the
Person in question.
Agreement: This Loan Agreement, including any amendments hereof
and supplements hereto executed by Borrower and Lender.
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<PAGE>
Anchor Retailers: The following major retailers which each owns
land which is adjacent to the Land and have each constructed on its said
land a retail store which has been integrated with the Improvements:
(a) Dayton Hudson Corporation ( Dayton's),
(b) Dayton Hudson Corporation (Mervyn's of California),
(c) Sears Roebuck & Company,
(d) J. C. Penney Company, Inc.
Applicable Margin: With respect to:
(a) Reference Rate Advances -- 0.00%.
(b) Eurodollar Rate Advances:
(i) 0.90% through the first annual anniversary
of the date hereof, and
(ii) 0.95% thereafter.
Thus, if any Interest Period includes time both before
and after said first annual anniversary date, the
interest rate applicable thereto shall be increased by
0.05% on said first annual anniversary date.
Appraisal: A third party appraisal of the value of the Project,
commissioned by Lender and prepared at the expense of Borrower by a duly
licensed and qualified appraiser selected by Lender (e.g., Mardell, Amundson,
Johnson and Leirness, Inc.), which complies with all applicable Governmental
Requirements and the requirements of Lender and its chief review appraiser.
Board: The Board of Governors of the Federal Reserve System or
any successor thereto.
Borrower: BURNSVILLE MINNESOTA, LLC, a Minnesota limited liability
company, and its permitted successors and assigns.
Business Day: Any day (other than a Saturday, a Sunday, or a legal
holiday in the State of Minnesota) on which national banks are permitted to
be open.
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<PAGE>
CBLH: CBL Holdings I, Inc., a Delaware corporation.
Code: The Internal Revenue Code of 1986, as amended.
Consultants: Third party experts retained by Lender to assist it
in connection with closing, advancing or administering the Loan.
Default Rate: The Default Rate of interest specified in Section
I.2.C hereof.
Environmental Audit: A written environmental review, audit,
assessment or report addressed to Lender, setting forth the results of an
investigation of the Project, including an historical investigation of the
uses and ownership of the Land, contacts with appropriate governmental
agencies and any Tests which may be requested by Lender, prepared by a
competent environmental engineer or consultant who is acceptable to Lender
and is licensed, bonded and insured in accordance with all applicable
statutes, and which otherwise complies with Lender's standard requirements
therefor.
Equipment: All fixtures, equipment and personal property owned by
Borrower and located in or on, and used in connection with the management,
maintenance or operation of, the Land and the Improvements.
Eurodollar Business Day: A Business Day which is also a day for
trading by and between banks in United States dollar deposits in the
interbank Eurodollar market and a day on which banks are open for business
in New York City.
Eurodollar Rate: With respect to each Interest Period applicable
to a Eurodollar Rate Advance, the interest rate per annum (rounded, if
necessary, to the closest one-hundredth of one percent) at which United
States dollar deposits are offered to Lender in the interbank Eurodollar
market two (2) Eurodollar Business Days prior to the first day of such
Interest Period for delivery in Immediately Available Funds on the first
day of such Interest Period and in an amount approximately equal to the
Advance to which such Interest Period is to apply as determined by Lender
and for a maturity comparable to the Interest Period; provided that, in lieu
of determining the rate in the foregoing manner, Lender may substitute the
per annum Eurodollar rate (LIBOR) for United States dollars displayed on
the LIBO page of the Reuters Monitor Money Rate Screen (hereinafter called
Reuters LIBO page).
Eurodollar Rate Advance: A portion of the Advance, in the minimum
amount of $500,000.00, with respect to which Borrower has elected, pursuant
hereto, to have the interest rate determined by reference to the Adjusted
Eurodollar Rate.
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<PAGE>
Eurodollar Reserve Percentage: As of any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by
the Board for determining the actual reserve requirement (including any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System, with deposits comparable in amount to those held by Lender,
in respect of "Eurocurrency Liabilities" as such term is defined in
Regulation D of the Board. The rate of interest applicable to any
outstanding Eurodollar Rate Advances shall be adjusted automatically on and
as of the effective date of any change in the Eurodollar Reserve Percentage.
GAAP: Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession, which are applicable to the circumstances as
of any date of determination, subject to any inconsistent requirements
imposed by the Securities and Exchange Commission and/or the New York Stock
Exchange.
Governmental Requirements: All laws, statutes, codes, ordinances,
and governmental rules, regulations and requirements applicable to Borrower,
Lender and the Project.
Guarantor: CBL & Associates Limited Partnership, a Delaware limited
partnership, subject to the terms, conditions and provisions of the Guaranty.
Guaranty: The guaranty of payment and performance of the
obligations of Borrower under the Loan Documents, of even date herewith,
executed by Guarantor, together with any amendments thereof or supplements
thereto executed by Guarantor and Lender.
Immediately Available Funds: Funds with good value on the day and
in the city in which payment is received.
Improvements: The buildings and improvements described on
Exhibit B attached hereto and hereby made a part hereof which are now located
upon the Land, together with any additions thereto consented to by Lender.
Indemnification Agreement: Lender's form of indemnification
agreement relating to environmental and accessibility matters of even date
herewith, covering the Project and executed by Borrower and Guarantor,
jointly and severally, in favor of Lender to secure the Loan, including any
amendments thereof and supplements thereto executed by Borrower, Guarantor
and Lender.
-4-
<PAGE>
Inspecting Architect: HDR Engineering, Inc. and/or any other
independent architect, engineer or consultant selected by Lender.
Interest Period: With respect to each Eurodollar Rate Advance,
the period commencing on the date of such Eurodollar Rate Advance or on the
last day of the immediately preceding Interest Period, if any, applicable to
an outstanding Eurodollar Rate Advance and ending one (1), two (2), three
(3), six (6) or twelve (12) months thereafter, as Borrower may elect in the
applicable notice or request of or for borrowing, continuation or conversion;
provided that:
(1) Any Interest Period that would otherwise end on a day
which is not a Eurodollar Business Day shall be extended to the next
succeeding Eurodollar Business Day, unless such Eurodollar Business Day falls
in another calendar month, in which case such Interest Period shall end on
the next preceding Eurodollar Business Day; and
(2) Any Interest Period that begins on the last Eurodollar
Business Day of a calendar month (or a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Eurodollar Business Day of a calendar month.
No Interest Period may end after the Maturity Date. Any payment of
a Eurodollar Rate Advance on a date other than the last day of the Interest
Period applicable thereto shall be accompanied by an additional payment in
an amount computed in accordance with Section I.10.
Land: The approximately 38.7546 acres of land legally described
on Exhibit A attached hereto and hereby made a part hereof, together with
all additions thereto, deletions therefrom and/or substitutions therefor
agreed to by Borrower and Lender.
Leases: Leases of space within the Improvements which have been
fully executed by Borrower and the tenant and are in full force and effect.
Lender: U.S. Bank National Association, a national banking
association, and its successors and assigns.
Loan: The loan of the proceeds of the Note by Lender to Borrower
in an Advance to be made pursuant to the terms of this Agreement.
Loan Documents: The documents described in Section II.2 of this
Agreement, which evidence and secure the Loan, including but not limited to
the Note, the Mortgage, this Agreement, and the Indemnification Agreement,
and
-5-
<PAGE>
including any amendments thereof and supplements thereto executed by
Borrower, Lender and any other party thereto.
Maturity Date: A date two (2) years after the date of this
Agreement, i.e., ___January 30___,2000.
Mortgage: The first Combination Mortgage, Security Agreement and
Fixture Financing Statement of even date herewith, covering the Project,
executed by Borrower to Lender, including any amendments thereof and
supplements thereto.
Note: The Promissory Note, of even date herewith, executed and
delivered by Borrower to Lender in the principal amount of Sixty Million
Seven Hundred Fifty Thousand and No/100ths Dollars ($60,750,000.00), to
evidence the Loan, as the same may be amended, modified or replaced from
time to time.
Operating Budget: A detailed listing of all anticipated annual
income and expenses from and for managing, maintaining and operating the
Project for its current fiscal year and for each succeeding fiscal year of
operation, prepared by Borrower or its agent and in form and substance
acceptable to Lender.
Operating Statement: A current, detailed statement of income and
expenses from and for managing, maintaining and operating the Project, in
form and substance acceptable to Lender, certified as true, correct and
complete by the member in Borrower, and expressly showing all variations
from the Operating Budget for the period covered thereby.
Permitted Encumbrances: The liens, charges and encumbrances on
title to the Project listed on Exhibit A hereto, if any.
Plans: The final working plans for the Improvements, including
drawings, specifications, details and manuals (if available).
Pollutant: Any hazardous or toxic substance, waste or material,
or other pollutant or contaminant (including but not limited to radioactive
materials, gasoline, asbestos, dioxin, radon, urea-formaldehyde and
polychlorinated biphenyls), as those terms are defined or used in any
Governmental Requirement.
Pre-Closing Requirements: The pre-closing requirements set forth
in Section II.1 hereof.
Project: The Land, the Improvements and the Equipment.
-6-
<PAGE>
Property Management Agreement: That certain Property Management
Agreement by and between Borrower and CBL & Associates Management, Inc.,
relating to the Project, dated as of __January 30__, 199_8_, as the same
may be amended or supplemented from time to time with the consent of Lender.
Purchase Agreement: That certain Agreement of Purchase and Sale
covering the Project and dated December 31, 1997, by and between Corporate
Property Investors, a Massachusetts business trust, as seller, and
Development Options, Inc., a Wyoming corporation, as buyer.
Purchase Price: As that term is defined in the Purchase Agreement,
i.e., $81,000,000.00.
Reference Rate: The rate of interest from time to time publicly
announced by Lender as its "reference rate". Lender may lend to its
customers at rates that are at, above or below the Reference Rate. For
purposes of determining any interest rate hereunder or under any Loan
Document which is based on the Reference Rate, such interest rate shall
change as and when the Reference Rate shall change.
Reference Rate Advance: A portion of the Advance with respect to
which the interest rate is determined by reference to the Reference Rate.
Regulatory Change: Any change after the date hereof in federal,
state or foreign laws or regulations or the adoption or making after such
date of any interpretations, directives or requirements applying to a class
of banks including Lender under any federal, state or foreign laws or
regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
Termination Date: The earlier of (a) the Maturity Date, or (b)
the date on which the Note is declared to be immediately due and payable
pursuant hereto or to the Note.
Tests: Such soil tests, water tests, chemical tests, materials
tests and other tests and analyses as are appropriately required to confirm,
with relative certainty, the absence of Pollutants from the Project.
Title Company: First American Title Insurance Company, a
California corporation.
Title Policy: A loan policy of title insurance in favor of Lender
issued by the Title Company and complying with Lender's standard requirements
therefor,
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<PAGE>
including its requirements for reinsurance above the level of $30,000,000;
provided, however, that no zoning or usury endorsement thereto will be
required.
Transaction Documents: This Agreement, each other Loan Document
and the Guaranty.
Except as may be expressly provided to the contrary herein, all
accounting terms used herein shall be interpreted, and all accounting
determinations hereunder shall be made, in accordance with GAAP. To the
extent any change in GAAP affects any computation or determination required
to be made pursuant to this Agreement, such computation or determination
shall be made as if such change in GAAP had not occurred, unless Borrower
and Lender agree in writing on an adjustment to such computation or
determination to account for such change in GAAP. In this Agreement, in the
computation of a period of time from a specified date to a later specified
date, unless otherwise stated, the word "from" means "from and including"
and the words "to" or "until" each means "to but excluding". The words
"hereof", "herein" and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. References to Sections,
Subsections, Exhibits, schedules and like references are to this Agreement
unless otherwise expressly provided. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly
requires, "or" has the inclusive meaning represented by the phrase "and/or".
I. LOAN
I.1 - Principal
Lender agrees to lend to Borrower, and Borrower agrees to borrow from
Lender, the proceeds of the Loan, in accordance with the terms hereof until
the Maturity Date, for the purpose of acquiring and holding the Project;
provided, however, that the maximum amount of such proceeds which Lender
will be obligated to lend hereunder shall be the lesser of (a) seventy-five
percent (75%) of the Purchase Price, or (b) seventy-five percent (75%) of
the as-is value of the Project, as shown by the Appraisal. If Lender makes
the Advance prior to the delivery by Borrower to Lender of the Appraisal,
and if the Appraisal, when thereafter delivered, shows that the unpaid
principal balance of the Loan is more than seventy-five percent (75%) of
the as-is value of the Project, Borrower shall prepay a portion of said
principal balance, without premium or penalty (except as provided in Section
I.4 if such prepayment is applied to one [1] or more Eurodollar Rate
Advance(s) because there are not sufficient Reference Rate Advances to which
the same may be applied), to a level such that said unpaid principal balance
does not exceed seventy-five percent (75%) of said as-is value of the
Project. The Advance shall be evidenced by the Note, and
-8-
<PAGE>
Borrower shall give Lender written notice not later than 10:00 A.M.
(Minneapolis time) two (2) Eurodollar Business Days prior to the date of the
Advance, if Borrower desires that any portion thereof be a Eurodollar Rate
Advance. The entire unpaid principal amount of the Loan shall be deemed
payable on the Termination Date.
I.2 - Interest
Interest shall accrue and be payable as follows:
A. Each Eurodollar Rate Advance shall bear interest on the
unpaid principal amount thereof during the Interest Period applicable thereto
at a rate per annum equal to the sum of (i) the Adjusted Eurodollar Rate for
such Interest Period, plus (ii) the Applicable Margin. (If Borrower has made
no election of an interest rate option with respect to any portion of the
Advance, said portion shall be deemed to be a Reference Rate Advance.)
B. Each Reference Rate Advance shall bear interest on the
unpaid principal amount thereof at a varying rate per annum equal to the sum
of (i) the Reference Rate, plus (ii) the Applicable Margin.
C. Any portion of the Advance not paid when due, whether at
the date scheduled therefor or earlier upon acceleration, which remains
unpaid for more than ten (10) days following written notice by Lender to
Borrower thereof, shall bear interest until paid in full (i) during the
balance of any Interest Period applicable to such portion, at a rate per
annum equal to the sum of the rate applicable to such portion during such
Interest Period plus 3.0%, and (ii) otherwise, at a rate per annum equal to
the sum of (A) the Reference Rate, plus (B) the Applicable Margin for
Reference Rate Advances, plus (C) 3.0% (herein called the "Default Rate").
D. Interest shall be payable (i) on the first day of each
calendar month, commencing on the first day of ________, 1998 (pursuant to
monthly statements to be provided by Lender therefor); (ii) upon any
permitted prepayment (on the amount prepaid); and (iii) on the Termination
Date; provided that interest under Section I.2.C shall be payable on demand.
Interest on the Loan shall be computed on the basis of actual days elapsed
and a year of 360 days.
I.3 Conversions and Continuations
On the terms and subject to the limitations hereof, Borrower shall have the
option at any time and from time to time to convert all or any portion of
the Advance into Reference Rate Advances or Eurodollar Rate Advances, or to
continue a Eurodollar Rate Advance as such; provided, however that a
Eurodollar Rate Advance may be converted or continued only on the last day
of the Interest Period applicable thereto,
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<PAGE>
and no portion of the Advance may be converted to or continued as a
Eurodollar Rate Advance if a default or an event of default has occurred and
is continuing on the proposed date of continuation or conversion. In
addition, portions of the Advance may be converted to, or continued as,
Eurodollar Rate Advances only in amounts of $500,000.00 or more, and
Borrower shall pay an administration fee to Lender in the amount of $250.00
for each such conversion or continuation. Borrower shall give Lender written
notice of any continuation or conversion of any portion of the Advance, and
such notice must be given so as to be received by the Bank not later than
10:00 A.M. (Minneapolis time) two (2) Eurodollar Business Days prior to the
requested date of conversion or continuation in the case of the continuation
of, or conversion to, a Eurodollar Rate Advance, and not later than
10:00 A.M. (Minneapolis time) on the date of the requested conversion to a
Reference Rate Advance. Each such notice shall specify (a) the amount to be
continued or converted, (b) the date for the continuation or conversion
(which must be (i) the last day of the preceding Interest Period for any
continuation or conversion of Eurodollar Rate Advances, (ii) a Eurodollar
Business Day in the case of conversions to or continuations as Eurodollar
Rate Advances, and (iii) a Business Day in the case of conversions to
Reference Rate Advances), and (c) in the case of conversions to or
continuations as Eurodollar Rate Advances, the Interest Period applicable
thereto. Any notice given by Borrower under this Section shall be
irrevocable. If Borrower shall fail to notify Lender of the continuation
of any Eurodollar Rate Advance within the time required by this Section,
such Eurodollar Rate Advance shall, on the last day of the Interest Period
applicable thereto, automatically be converted into a Reference Rate Advance
of the same principal amount. Notwithstanding anything to the contrary
herein set forth, the maximum number of Eurodollar Rate Advances which may
be outstanding at any given time shall be six (6).
I.4 Optional Prepayments.
Borrower may prepay Reference Rate Advances, in whole or in part, at any
time, without premium or penalty. Any such prepayment must be accompanied
by accrued and unpaid interest on the amount prepaid. Borrower may prepay
Eurodollar Rate Advances only on the last day of the Interest Period
applicable thereto, unless such prepayment (whether voluntary or mandatory
upon an acceleration following an event of default) is accompanied by an
additional payment in an amount computed pursuant to Section I.10 hereof,
as well as by accrued and unpaid interest on the amount prepaid. Amounts
so prepaid shall be applied against the principal installments on the Note,
if any, in the inverse order of maturity and cannot be reborrowed, unless
Lender, in its discretion, hereafter agrees to permit such reborrowing on
terms and conditions acceptable to Lender.
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I.5 Payments.
Payments and prepayments of principal of, and interest on, the Note and all
fees, expenses and other obligations under this Agreement payable to Lender
shall be made without setoff or counterclaim in Immediately Available Funds
not later than 1:00 P.M. (Minneapolis time) on the dates called for under
this Agreement and the Note to the Lender at its main office in Minneapolis,
Minnesota. Funds received after such time shall be deemed to have been
received on the next Business Day. Whenever any payment to be made
hereunder or on the Note shall be stated to be due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day
and such extension of time, in the case of a payment of principal, shall be
included in the computation of any interest on such principal payment.
I.6 Interest Rate Not Ascertainable, Etc.
If, on or prior to the date for determining the Adjusted Eurodollar Rate in
respect of the Interest Period for any Eurodollar Rate Advance, Lender
determines (which determination shall be conclusive and binding, absent
error) that:
(a) deposits in dollars (in the applicable amount) are not being
made available to Lender in the relevant market for such Interest
Period, or
(b) the Adjusted Eurodollar Rate, as a result of an event or
change of circumstances (other than simple rate fluctuations) occurring
after the date of this Agreement, will not adequately and fairly reflect
the cost to Lender of funding or maintaining Eurodollar Rate Advances for
such Interest Period, and Borrower does not agree, in writing, to pay the
additional costs actually incurred by Lender,
Lender shall forthwith give notice to Borrower of such determination,
whereupon the obligation of Lender to make or continue, or to convert any
Advances to, Eurodollar Rate Advances shall be suspended until Lender
notifies Borrower that the circumstances giving rise to such suspension no
longer exist. While any such suspension continues, all further Advances by
Lender shall be Reference Rate Advances. No such suspension shall affect
the interest rate then in effect during the applicable Interest Period for
any Eurodollar Rate Advance outstanding at the time such suspension is
imposed.
I.7 Increased Cost.
If any Regulatory Change:
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(a) shall subject Lender to any tax, duty or other charge with
respect to its Eurodollar Rate Advances, the Note, or its obligation to
make Eurodollar Rate Advances or shall change the basis of taxation of
payment to Lender of the principal of or interest on Eurodollar Rate
Advances or any other amounts due under this Agreement in respect of
Eurodollar Rate Advances or its obligation to make Eurodollar Rate
Advances (except for changes in the rate of tax on the overall net
income of Lender imposed by the jurisdiction in which Lender's
principal office is located); or
(b) shall impose, modify or deem applicable any reserve, special
deposit, capital or similar requirement (including, without limitation,
any such requirement imposed by the Board, but excluding with respect to
any Eurodollar Rate Advance any such requirement to the extent included
in calculating the applicable Adjusted Eurodollar Rate) against assets
of, deposits with or for the account of, or credit extended by, Lender
or shall impose on Lender or on the interbank Eurodollar market any
other condition affecting its Eurodollar Rate Advances, the Note or its
obligation to make Eurodollar Rate Advances;
and the result of any of the foregoing is to increase the cost to Lender of
making or maintaining any Eurodollar Rate Advance, or to reduce the amount
of any sum received or receivable by Lender under this Agreement or under
the Note, then, within thirty (30) days after demand by Lender, Borrower
shall pay to Lender such additional amount or amounts as will compensate
Lender for such increased cost or reduction; provided, however, that
Borrower shall not be required to so compensate Lender for any such
increased cost or reduction which occurred, accrued or was incurred with
respect to any period more than six (6) months prior to the date of said
demand. Lender will promptly notify Borrower of any event of which it has
knowledge, occurring after the date hereof, which will entitle Lender to
compensation pursuant to this Section. A certificate of Lender claiming
compensation under this Section, setting forth the additional amount or
amounts to be paid to it hereunder and stating in reasonable detail the
basis for the charge and the method of computation, shall be conclusive in
the absence of error. In determining such amount, Lender may use any
reasonable averaging and attribution methods. Failure on the part of Lender
to demand compensation for any increased costs or reduction in amounts
received or receivable with respect to any Interest Period shall not
constitute a waiver of Lender's rights to demand compensation for any
increased costs or reduction in amounts received or receivable in any
subsequent Interest Period.
I.8 Illegality
If any Regulatory Change shall make it unlawful or impossible for Lender to
make, maintain or fund any Eurodollar Rate Advances, Lender shall notify
Borrower,
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whereupon the obligation of Lender to make or continue, or to
convert any Advances to, Eurodollar Rate Advances shall be suspended until
Lender notifies Borrower that the circumstances giving rise to such
suspension no longer exist. If Lender determines that it may not lawfully
continue to maintain any Eurodollar Rate Advances to the end of the
applicable Interest Periods, all of the affected Advances shall be
automatically converted to Reference Rate Advances as of the date of
Lender's notice, and upon such conversion Borrower shall indemnify Lender
in accordance with Section I.10, unless the unlawfulness thereof results
from conduct of Lender, other than conduct in conformance with the terms
hereof, which causes said Advance (which would otherwise be lawful) to
become unlawful.
I.9 Capital Adequacy
In the event that any Regulatory Change reduces or shall have the effect of
reducing the rate of return on Lender's capital or the capital of its parent
corporation (by an amount Lender deems material) as a consequence of the Loan
to a level below that which Lender or its parent corporation could have
achieved but for such Regulatory Change (taking into account Lender's
policies and the policies of its parent corporation with respect to capital
adequacy), then Borrower shall, within ten (10) days after written notice
and demand from Lender, pay to Lender additional amounts sufficient to
compensate Lender or its parent corporation for such reduction. Any
determination by Lender under this Section and any certificate as to the
amount of such reduction given to Borrower by Lender shall be final,
conclusive and binding for all purposes, absent error.
I.10 Funding Losses; Eurodollar Rate Advances
Borrower shall compensate Lender, upon its written request, for all actual
losses, expenses and liabilities (including any interest paid by Lender to
lenders of funds borrowed by it to make or carry Eurodollar Rate Advances to
the extent not recovered by Lender in connection with the re-employment of
such funds and including loss of anticipated profits) which Lender may
sustain: (i) if for any reason, other than a default by Lender, a funding
of a Eurodollar Rate Advance does not occur on the date specified therefor
in the Borrower's request or notice as to such Eurodollar Rate Advance
hereunder, or (ii) if, for whatever reason (including, but not limited to,
acceleration of the maturity of the principal balance of the Loan following
an event of default), any repayment of a Eurodollar Rate Advance, or a
conversion pursuant to Section I.8, occurs on any day other than the last
day of the Interest Period applicable thereto. Lender's request for
compensation shall set forth the basis for the amount requested and shall be
final, conclusive and binding, absent error.
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I.11 Discretion of Lender as to Manner of Funding
Lender shall be entitled to fund and maintain its funding of Eurodollar Rate
Advances in any manner it may elect, it being understood, however, that for
the purposes of this Agreement all determinations hereunder (including, but
not limited to, determinations under Section I.10, but excluding
determinations that Lender may elect to make from the Reuters Screen LIBO
page) shall be made as if the Bank had actually funded and maintained each
Eurodollar Rate Advance during the Interest Period for such Advance through
the purchase of deposits, having a maturity corresponding to the last day of
the Interest Period and bearing an interest rate equal to the Eurodollar Rate
for such Interest Period. Borrower shall not be obligated to compensate
Lender for any losses suffered by Lender as a result of its election not to
actually so maintain and fund any Eurodollar Rate Advance during the
Interest Period for such Eurodollar Rate Advance.
II. CONDITIONS OF BORROWING
Lender shall not be required to make the Advance hereunder until the pre-
closing requirements, conditions and other requirements set forth below have
been completed and fulfilled to the satisfaction of Lender, at Borrower's
sole cost and expense. It is agreed, however, that Lender may, in its
discretion, make the Advance prior to completion and fulfillment of any or
all of such pre-closing requirements, conditions and requirements, without
waiving its right to thereafter require such completion and fulfillment.
II.1 - Pre-Closing Requirements
At least ten (10) days prior to the closing of the Loan, Borrower shall
provide to Lender each of the following, in form and substance acceptable
to Lender:
A. A commitment for the Title Policy or a preliminary title
report from the Title Company, complying with Lender's
standard requirements therefor, together with two (2) copies
of each document referred to therein.
B. Two (2) complete sets of the Plans (if and to the extent
available).
C. Two (2) copies of any existing, recorded subdivision plat
affecting the Land.
D. Evidence of access to the Project by dedicated streets or by
insurable recorded easements.
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E. Four (4) copies of a current, certified, as built ALTA/ACSM
LAND TITLE SURVEY of the Project, which shall also be prepared
in accordance with Lender's standard requirements therefor.
F. Soil reports on the Land, showing that the soil will
adequately support the Improvements (if and to the extent
available).
G. An Environmental Audit showing that no Pollutant is present
above, on, in or under the Project, and all reports, data and
other information produced in connection with the Tests. The
Environmental Audit shall also specify whether or not any
environmental assessment, study or statement with respect to
the Project is required by any Governmental Requirement. If
such an assessment, study or statement is so required,
Borrower shall provide a copy thereof to Lender, and, if none
is so required, Borrower shall provide Lender with an
appropriate declaration of environmental nonsignificance
relating to the Project, if available in the jurisdiction in
which the Project is located.
H. A written report or certification from the Inspecting Architect
or from another qualified Consultant stating that the Project,
as built, is structurally sound and in good physical condition
as when new, ordinary wear and tear of reasonable use
excepted; that all mechanical, electrical, plumbing, utility
and other systems thereof are in proper working order; and
that the Project complies with all applicable Governmental
Requirements relating to the accessibility thereof to
disabled, handicapped and physically challenged persons,
including but not limited to the Americans With Disabilities
Act of 1991.
I. Insurance policies and/or certificates of insurance written
by insurers satisfactory to Lender and in amounts satisfactory
to Lender, prepared in accordance with Lender's standard
requirements therefor.
J. A flood zone certification from First American Flood Data
Services, Inc. (or another Consultant acceptable to Lender),
indicating that the Project is not located in a flood plain
or any other flood prone area, as designated by any
governmental agency; provided, however, that if the Project
is so located, Borrower shall obtain and deliver to Lender
evidence of flood insurance acceptable to Lender.
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<PAGE>
K. A letter addressed to Lender from an appropriate municipal
officer regarding zoning and building code compliance,
prepared in accordance with Lender's standard form therefor.
L. A fully executed copy of the Purchase Agreement, together
with (i) a true, correct and complete copy of each document
and item relating to the Project which Borrower is entitled
to receive from the seller thereunder; and (ii) a fully
executed copy of the assignment of the buyer's interest
thereunder to Borrower.
M. The Appraisal.
N. UCC chattel lien searches from the appropriate offices in
Dakota County, Minnesota, and Hamilton County, Tennessee,
and from the offices of the Secretaries of State of Minnesota
and Tennessee, covering the name of Borrower and of Guarantor.
O. Copies of all Leases which Lender shall request after
reviewing a rent roll for the Project, including all exhibits,
amendments and assignments thereto and thereof.
P. A copy of Borrower's Operating and/or Member Control Agreement
(certified by its member as being true, correct, complete,
unamended and in full force and effect) and a copy of
Borrower's Articles of Organization and a Certificate of
Good Standing for Borrower (each certified by the Secretary
of State of Minnesota), together with evidence, satisfactory
to Lender, that Borrower has complied with all other filing
requirements and fictitious name requirements, if any,
necessary to permit Borrower to do business in the State of
Minnesota, and evidence, satisfactory to Lender, that Borrower
has complied with the above-mentioned documents in executing
the Loan Documents.
Q. A copy of the Limited Partnership Agreement of Guarantor
(certified by its general partner as being true, correct,
complete, unamended and in full force and effect); a copy of
Guarantor's Certificate of Limited Partnership and a
Certificate of Good Standing for Guarantor, each currently
certified by the Delaware Secretary of State; and a
Certificate of Authority and a Certificate of Good Standing
for Guarantor, each certified by the Secretary of the State
of Minnesota, together with evidence, satisfactory to Lender,
that Guarantor has complied with all other filing requirements
and fictitious name requirements, if any, necessary to permit
Guarantor to do business in the State of Minnesota,
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and evidence, satisfactory to Lender, that Guarantor has
complied with the above-mentioned documents in executing the
Guaranty and the Indemnification Agreement.
R. A copy of the Certificate or Articles of Incorporation of
CBLH, the general partner in Guarantor, and a Certificate of
Good Standing for CBLH, each currently certified by the
Secretary of State of Delaware; copies of CBLH's Bylaws,
Resolutions of CBLH's Board of Directors authorizing the
transactions described herein and an incumbency certificate,
all currently certified by CBLH's corporate Secretary; and a
Certificate of Authority and a Certificate of Good Standing
for CBLH, each certified by the Secretary of State of
Minnesota.
S. A standard form of lease to be used by Borrower in leasing
space within the Project.
T. A rent roll for the Project, current as of the date of closing
of the Loan.
U. A certificate of occupancy, issued by the City of Burnsville,
Minnesota, covering the Improvements and each leased space
therein (if available).
V. A copy of each noncancellable agreement relating to the
management, operation or maintenance of the Project and of
each such agreement which cannot be cancelled by thirty (30)
days' or less notice, including the Property Management
Agreement.
W. A copy of each Reciprocal Easement and Operating Agreement
and/or Development Agreement which affects the Project.
X. An Operating Budget for the Project for 1998.
Y. The most current available financial statements of Borrower
and of Guarantor, as well as financial statements of each of
said parties for each of the three (3) full fiscal years of
said party immediately preceding the time period covered by
said current financial statements (if available), together
with copies of all federal income tax returns (with all
supporting schedules) of each of said parties for their three
(3) most recent fiscal years (if available), all signed and
certified as true, correct and complete by the party to which
they apply. If any such party is not an
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individual person, said financial statements must also be
certified by an independent certified public accountant of
recognized standing acceptable to Lender.
Z. A proforma, projected Operating Statement for the Project for
1998.
AA. Information concerning current ad valorem property taxes and
special assessments to which the Project is subject, including
copies of tax statements, tax parcel number(s) and payment
dates, as well as Borrower's Federal Taxpayer Identification
Number.
BB. A copy of each existing marketing report relating to the
Project.
CC. Evidence acceptable to Lender that each of the four (4) Anchor
Retailers (i) is in possession of its retail store which has
been integrated with the Project; and (ii) is operating the
same as a retail store in compliance with all applicable
Operating Agreements, together with evidence acceptable to
Lender that no default exists thereunder.
DD. Other agreements, documents and exhibits relating to the above
requirements which may be required, in Lender's judgment, to
assure compliance with all requirements of this Agreement.
II.2 - Loan Documents
On or before the date of closing of the Loan, Borrower shall execute and
deliver (or cause to be executed and delivered) to Lender this Agreement
and the following other documents in form and substance acceptable to
Lender and to its counsel, to evidence and secure the Loan:
A. The Note.
B. The Mortgage.
C. A general assignment of all leases of and rents and income
from the Project.
D. A first security interest in all Equipment and in all of
Borrower's intangible property relating to the Project, created
and evidenced by a security agreement (which may be
incorporated within the Mortgage) and by appropriate Uniform
Commercial Code financing statements.
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E. The Indemnification Agreement.
F. The Guaranty.
G. A sworn statement from and agreement by Borrower listing all
guarantees and contingent liabilities to which Borrower is a
party or for which Borrower may be liable and agreeing to
periodically update said listing, to which sworn statement
shall be attached current financial statements of Borrower and
of Guarantor, which shall be, in such sworn statement,
certified and sworn to by the party to which they relate as
being true, correct, complete and not misleading in any
material respect, and each such party shall also, in such
sworn statement, certify that there has been no material
change in the financial status of said party since the date
thereof.
H. Subordination, non-disturbance and attornment agreements
executed by Borrower, by each tenant of the Project which
pays more than $75,000.00 per year in rent (hereinafter called
"Large Tenant"), and by Lender.
I. A tenant estoppel letter or certificate signed by each Large
Tenant.
J. A current, certified rent roll for the Project.
K. An assignment of the Property Management Agreement and a
limited subordination of the rights of CBL & Associates
Management, Inc. thereunder to the rights of Lender under
the other Loan Documents.
L. Such other documents as Lender may reasonably require to
evidence and secure the Loan.
Lender may designate which of the Loan Documents are to be placed of
record, the order of recording thereof, and the offices in which the
same are to be recorded. Borrower shall pay all documentary, recording
and/or registration taxes and/or fees, if any, due upon the Loan Documents.
II.3 - Title Insurance
Lender shall have received the Title Policy, or the Title Company shall
have modified and initialled the commitment therefor in a manner acceptable
to Lender.
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II.4 - Opinion of Borrower's Attorneys
Lender shall have received from counsel for Borrower and/or Lender a current
written opinion, in scope, form and substance acceptable to Lender.
II.5 - Purchase Price
Lender shall have received a copy of the signed closing statement relating
to Borrower's acquisition of the Project, together with evidence acceptable
to Lender, that Borrower has paid, or has arranged to pay, the Purchase
Price, plus all closing costs which are the obligation of Borrower under
the Purchase Agreement, to the extent that the aggregate total thereof
exceeds $60,750,000.00.
II.6 - Origination Fee
Borrower shall have paid to Lender an origination fee in the amount of
$182,250.00 in Immediately Available Funds.
III. [INTENTIONALLY OMITTED]
IV. REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower represents and warrants to Lender that:
IV.1 - Legal Status of Borrower
Borrower is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Minnesota, and has all power,
authority, permits, consents, authorizations and licenses necessary to carry
on its business, to own and operate the Project and to execute, deliver and
perform this Agreement and the other Loan Documents; Guarantor is the sole
member in Borrower; all consents of said member necessary to authorize the
execution, delivery and performance of this Agreement and of the other Loan
Documents which have been or are to be executed by and on behalf of Borrower
have been duly obtained and are in full force and effect; this Agreement and
such other Loan Documents have been duly authorized, executed and delivered
by and on behalf of Borrower so as to constitute this Agreement and such
other Loan Documents the valid and binding obligations of Borrower,
enforceable in accordance with their terms; and Borrower has complied with
all applicable assumed and/or fictitious name requirements of the state in
which it is organized.
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IV.2 - Title
Borrower is the owner, in fee simple, of the Land and of the Improvements and
the Equipment now located on the Land, subject to no lien, charge, mortgage,
deed of trust, restriction or encumbrance, except Permitted Encumbrances.
IV.3 - No Breach of Applicable Agreements or Laws
The consummation of the transactions contemplated hereby and the execution,
delivery and/or performance of this Agreement and the other Loan Documents
will not result in any breach of or constitute a default under any mortgage,
deed of trust, lease, bank loan, credit agreement, or other instrument or,
to the best of Borrower's knowledge, violate any Governmental Requirements,
to which Borrower is a party, or by which Borrower may be bound or affected.
Borrower and its member have been formed in accordance with all applicable
federal and state securities laws and regulations, and there are no pending
or threatened claims against Borrower or its member alleging a violation of
any securities law or regulation.
IV.4 - No Litigation or Defaults
There are no actions, suits or proceedings pending or, to the knowledge of
Borrower, threatened against or affecting Borrower, Guarantor or the
Project, which will have a material adverse impact upon Borrower, Guarantor
or the Project, except as listed on Exhibit E attached hereto and hereby
made a part hereof, or involving the validity or enforceability of the Loan
Documents or the priority of the lien thereof, at law or in equity; and,
to the best of Borrower's knowledge, neither Borrower nor Guarantor is in
default under any order, writ, injunction, decree or demand of any court or
any administrative body having jurisdiction over Borrower or Guarantor.
IV.5 - Financial and Other Information
The financial statements of Borrower and of Guarantor previously or
hereafter delivered to Lender fairly and accurately present, or will fairly
and accurately present, the financial condition of Borrower and of
Guarantor, as of the dates of such statements, and neither this Agreement
nor any document, financial statement, financial or credit information,
certificate or statement referred to herein or furnished to Lender by
Borrower or Guarantor contains, or will contain, any untrue statement of a
material fact or omits, or will omit, a material fact, or is or will be
misleading in any material respect.
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IV.6 - No Defaults under Loan Documents or Other Agreements
There is, and, until Lender has been fully repaid the entire indebtedness
evidenced or to be evidenced by the Note, there will be, no default or
event of default on the part of Borrower or Guarantor under the Loan
Documents or under any other document to which Borrower or Guarantor is a
party and which relates to the acquisition, ownership, occupancy, use or
management of the Project; and Borrower is not and will not be in default
in the payment of the principal or interest on any of its indebtedness for
borrowed money, and is not and will not be, in default under any instrument
or agreement under and subject to which any indebtedness for borrowed money
has been issued or is secured, and no event has occurred, or will occur,
which, with the lapse of time or the giving of notice or both, would
constitute an event of default thereunder; and Guarantor is not, on the
date of this Agreement, in default in the payment of the principal or
interest on any of its recourse indebtedness for borrowed money; provided,
however, that no breach of the foregoing representations and warranties
shall be deemed to exist with respect to any alleged default so long as
Borrower (or Guarantor) is diligently contesting the existence of said
alleged default in good faith by appropriate legal proceedings. Guarantor
shall give Lender prompt written notice of any default by it under any
nonrecourse obligation, but no such default shall be deemed to be a breach
of the foregoing representations or warranties.
IV.7 - Boundary Lines; Conformance with Governmental Requirements and
Restrictions
To the best of Borrower's knowledge, the exterior lines of the Improvements
are, and at all times will be, within the boundary lines of the Land, and
Borrower has examined and is familiar with all applicable covenants,
conditions, restrictions and reservations, and with all applicable
Governmental Requirements, including but not limited to building codes and
zoning, environmental, hazardous substance, energy and pollution control
laws, ordinances and regulations affecting the Project, and the Project
will, to the best of Borrower's knowledge, in all respects conform to and
comply with said covenants, conditions, restrictions, reservations and
Governmental Requirements.
IV.8 - Single Asset Entity
Borrower is a single-asset entity, the only property owned by which is the
Project.
IV.9 Guarantor
Guarantor is a limited partnership duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has all power,
authority, permits, consents, authorizations and licenses necessary to carry
on its business,
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and to execute, deliver and perform the Guaranty, the Indemnification
Agreement and any other Loan Documents which it is required to execute; the
sole general partner in Guarantor is CBLH; all consents of general and/or
limited partners in Guarantor necessary to authorize the execution, delivery
and performance of the Guaranty, the Indemnification Agreement and such other
Loan Documents have been duly obtained and are in full force and effect; the
Guaranty, the Indemnification Agreement and such other Loan Documents have
been duly authorized, executed and delivered by and on behalf of Guarantor
so as to constitute the Guaranty, the Indemnification Agreement and such
other Loan Documents the valid and binding obligations of Guarantor,
enforceable in accordance with their terms; and Guarantor has complied
with all applicable assumed and/or fictitious name requirements of the
state in which it is organized and of the state in which the Project is
located.
IV.10 - CBLH
CBLH is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has all power, authority,
permits, consents, authorizations and licenses necessary to carry on its
business, and to execute, deliver and perform, on behalf of Guarantor, as
the sole general partner therein, the Guaranty, the Indemnification Agreement
and any other Loan Documents which Guarantor is required to execute; all
resolutions of the directors and/or shareholders of CBLH necessary to
authorize said execution, delivery and performance of the Guaranty, the
Indemnification Agreement and such other Loan Documents have been duly
adopted and are in full force and effect; and the Guaranty, the
Indemnification Agreement and such other Loan Documents have been duly
authorized, executed and delivered by and on behalf of CBLH, as the sole
general partner in Guarantor, so as to constitute the Guaranty, the
Indemnification Agreement and such other Loan Documents the valid and
binding obligations of Guarantor, enforceable in accordance with their
terms.
IV.11 - Purchase Agreement
The Purchase Agreement is in full force and effect and has not been
terminated, cancelled, modified or amended, subject to the provisions
thereof which provide for the merger thereof into the deed to Borrower
(with certain limited exceptions) upon the execution and delivery of said
deed. To the best of Borrower's knowledge, all representations and
warranties of Borrower and of the seller set forth therein are true,
correct and complete on the date hereof.
IV.12 - Anchor Retailers
All four (4) Anchor Retailers are in possession of and are operating their
respective retail stores, which have been integrated with the Project, as
retail stores in compliance with any and all Operating Agreements applicable
thereto.
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IV.13 - Miscellaneous
Borrower is not
A. Engaged principally or as one of its important activities in
the business of extending credit for the purpose of purchasing
or carrying margin stock (as defined in Regulation U of the
Board), and the value of all margin stock owned by Borrower
does not constitute more than twenty-five percent (25%) of the
value of the assets of Borrower.
B. An "investment company" or a company "controlled" by an
investment company within the meaning of the Investment
Company Act of 1940, as amended.
C. A "holding company" or a "subsidiary company" of a holding
company or an "affiliate" of a holding company or a subsidiary
company of a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
V. COVENANTS OF BORROWER
While this Agreement is in effect, and until Lender has been paid in full the
principal of and interest on all advances made by Lender hereunder and under
the other Loan Documents:
V.1 - Paying Costs of Project and Loan
Borrower shall pay and discharge, prior to delinquency, all taxes,
assessments and other governmental charges upon the Project, as well as all
claims for labor and materials which, if unpaid, might become a lien or
charge upon the Project; provided, however, that Borrower shall have the
right to bond off, to remove or to contest the amount, validity and/or
applicability of any of the foregoing in strict accordance with the terms of
the Mortgage.
Borrower shall also pay all third-party costs and expenses of Lender and all
costs and expenses of Borrower in connection with the Project, the
preparation and review of the Loan Documents and the evaluation, making,
closing, administration and/or repayment of the Loan, including but not
limited to the reasonable fees of Lender's attorneys (including Minnesota
counsel), fees of the Inspecting Architect and Consultants (including fees
for preparation and amendment of the Environmental Audit), appraisal fees,
an internal appraisal review fee of up to $2,500.00, administration fees,
title insurance costs, disbursement expenses, and all other costs and
expenses payable to third parties incurred by Lender or Borrower in
connection
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with the Loan. Such costs and expenses shall be so paid by Borrower
whether or not the Loan is fully advanced.
V.2 - Using Loan Proceeds
Borrower shall use the Loan proceeds solely to pay, or to reimburse Borrower
for paying, a portion of the Purchase Price.
V.3 - Keeping of Records
Borrower shall set up and maintain accurate and complete books, accounts and
records in the ordinary course of business pertaining to the Project in a
manner reasonably acceptable to Lender. Borrower will permit the Inspecting
Architect to have free access to and to inspect and copy all books, records
and contracts (except as herein expressly provided) of Borrower relating to
acquisition and operation of the Project, and will permit representatives of
Lender to have free access to and to inspect and copy all books, records and
contracts (except as herein expressly provided) of Borrower. Any such
inspection by Lender and/or the Inspecting Architect shall be for the sole
benefit and protection of Lender, and Lender shall have no obligation to
disclose the results thereof to Borrower or to any third party, unless Lender
elects to take some action against Borrower (or Guarantor) under the Loan
Documents as a result thereof, in which event Lender shall notify Borrower
(and Guarantor) of said results.
V.4 - Providing Financial Information
Borrower shall furnish such financial information concerning Borrower,
Guarantor and the Project as Lender may request, and shall furnish to Lender
(a) quarterly financial statements (including a balance sheet, income
statement and change in financial condition statement) for Borrower and
Guarantor (consolidated), if prepared in the ordinary course of its business,
within forty-five (45) days following the end of each fiscal quarter thereof,
(b) current annual financial statements (including a balance sheet, income
statement and change in financial condition statement) for Borrower and
Guarantor (consolidated) within ninety (90) days following the end of each
fiscal year thereof, (c) copies of the filed federal income tax returns (with
all supporting schedules) of Borrower and Guarantor due during the term of
the Loan within fifteen (15) days after receipt of a written request
therefor from Lender, and (d) upon receipt of a written request therefor
from Lender, quarterly written reports (i) setting forth any new direct
indebtedness, obligations or liabilities incurred by Borrower since the date
hereof (or the date of the last such written report after the first such
written report is so provided) ("Report Date"), and (ii) confirming that the
Exhibit to the Sworn Statement and Agreement Concerning Guarantees,
Contingent Liabilities and Financial Statements of even date herewith,
executed by Borrower and Guarantor to Lender, which lists Borrower's
Guarantees
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and Contingent Liabilities, as that term is defined in said Sworn
Statement, remains a true, correct, complete and fully representative list
of Borrower's Guarantees and Contingent Liabilities, or amending said
Exhibit to reflect any additions to, subtractions from or changes in such
Guarantees and Contingent Liabilities since the last Report Date, so long as
any portion of the indebtedness evidenced by the Note is unpaid. All such
financial statements shall be in reasonable detail, shall be prepared for
partnerships and corporations in accordance with GAAP and for individuals
in accordance with accounting principles consistently applied, shall be
certified by the party to which they apply as true, correct and complete,
and, with respect to annual statements of partnerships and corporations,
shall be audited by a certified public accountant of recognized standing
acceptable to Lender. With respect to Guarantor's financial statements,
copies of Form 10-Q (covering each fiscal quarter of Guarantor) filed by
Guarantor with the Securities and Exchange Commission shall satisfy the
requirements relating to Guarantor's quarterly financial statements set
forth above, and copies of Guarantor's Form 10-K (covering each fiscal year
of Guarantor) so filed by Guarantor shall satisfy the requirements relating
to Guarantor's annual financial statements set forth above. In addition,
Borrower shall also provide to Lender such other information regarding the
business, operation and financial condition of Borrower, Guarantor and the
Project as Lender may request and shall permit Lender to examine all of
Borrower's books and records pertaining thereto.
V.5 - Providing Operating Budgets and Operating Statements
Borrower shall deliver to Lender prior to the commencement of each fiscal
year of the Project, an Operating Budget for the Project for such fiscal year
of the Project. In addition, Borrower shall, by the fifteenth (15th) day of
each calendar month (or within fifteen [15] days after the end of each fiscal
quarter of the Project, at Lender's option), deliver to Lender an Operating
Statement for the Project for the preceding full or partial calendar month
(or fiscal quarter), which shall specifically note all variations from the
current Operating Budget. Borrower shall also deliver to Lender an annual
Operating Statement for the Project within ninety (90) days following the
end of each fiscal year thereof. All such Operating Statements shall be
certified as true, correct and complete by Borrower.
V.6 - Providing Leasing Information
Borrower shall not enter into, amend or modify any lease covering 7,500 or
more square feet of space in the Project (hereinafter called a "Major
Lease") without Lender's prior written consent, shall not enter into any
other lease of space in the Project unless entered in good faith, in a
commercially reasonable manner and in substantially the form of lease
previously provided to and approved by Lender, shall not amend or modify
any such other lease except in good faith and in a commercially reasonable
manner, and shall furnish to Lender, upon execution, a
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fully executed copy of each lease entered into by Borrower covering space
in the Project, together with all exhibits and attachments thereto and all
amendments and modifications thereof. Borrower shall provide Lender with a
copy of each proposed Major Lease (and of each other nonconforming lease) and
with financial information on the proposed tenant (if such financial
information is expressly requested by Lender) to aid Lender in determining
whether it will consent thereto. Unless Lender expressly refuses to consent
to a proposed Major Lease (or other nonconforming lease) by written notice to
Borrower within ten (10) Business Days after receipt from Borrower of a
copy thereof and a request for such consent, Lender shall be deemed to have
approved the same. Lender may declare each such lease to be prior or
subordinate to the Mortgage, at Lender's option. Borrower shall provide to
Lender a quarterly rent roll for, and a leasing status report on, the
Project, showing the names of all lessees, the areas leased, the major
terms of all leases, all letters of intent or agreements to lease, and all
prospective tenants with which written contacts have been made or with which
written negotiations for a lease have commenced, within thirty (30) days
after the end of each fiscal quarter of the Project.
V.7 - Maintaining Insurance Coverage
Borrower shall, at all times until Lender has been fully repaid all
indebtedness evidenced by the Note, maintain, or cause to be maintained, in
effect (and shall furnish to Lender copies of), insurance policies, as
required under the terms of Exhibit D attached hereto and hereby made a part
hereof, and shall furnish to Lender proof of payment of all premiums for such
insurance.
V.8 - Transferring, Conveying or Encumbering the Property
Borrower shall not voluntarily or involuntarily agree to, cause, suffer or
permit (a) any sale, transfer or conveyance of any interest of Borrower,
legal or equitable, in the Project or any part or portion thereof; or (b)
any mortgage, pledge, encumbrance or lien to be imposed or remain outstanding
against the Project, or any security interest to exist therein, except as
created by the Loan Documents, and except Permitted Encumbrances, without, in
each instance, the prior written consent of Lender, unless the same is being
contested in accordance with the provisions of the Mortgage. No addition to,
withdrawal of or other change in the member of Borrower, or any sale or
transfer of, or change in the ownership of, any membership interest in
Borrower, shall be permitted without Lender's prior written consent. Any
provision of this Agreement or of any other Loan Document to the contrary
notwithstanding, reapportionments and transfers of beneficial interests in
Borrower and Guarantor shall be permitted without prior review or consent of
Lender, so long as at least fifty-one percent (51%) in the aggregate of the
membership interest in Borrower and of the general partnership interest in
Guarantor shall be held by CBLH and/or its affiliates, subsidiaries and key
officers.
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V.9 - Complying with the Loan Documents and Other Documents
Borrower shall comply with and perform all of its agreements and obligations
under the Purchase Agreement, under the Loan Documents and under all other
contracts and agreements to which Borrower is a party relating to the
acquisition, ownership, occupancy, use or management of the Project, and
shall comply with all requests by Lender which are consistent with the terms
thereof.
V.10 - Miscellaneous
Borrower shall also:
A. Maintain its limited liability company existence in good
standing under the laws of the State of Minnesota and its
qualification to transact business in each other jurisdiction
where failure so to qualify would permanently preclude
Borrower from enforcing its rights with respect to any
material asset or would expose Borrower to any material
liability.
B. File all tax returns and reports which are required by law to
be filed by it and will pay before they become delinquent all
taxes, assessments and governmental charges and levies imposed
upon it and all claims or demands of any kind which, if
unpaid, might result in the creation of a lien upon its
property; provided that the foregoing items need not be paid if
they are being contested in good faith by appropriate
proceedings (and in accordance with the terms of the Mortgage,
if such taxes or assessments relate to the Project), and as
long as Borrower's title to its property is not materially
adversely affected, its use of such property in the ordinary
course of its business is not materially interfered with and
adequate reserves with respect thereto have been set aside on
Borrower's books in accordance with GAAP.
C. Give prompt written notice to Lender of the commencement of any
action, suit or proceeding before any court or arbitrator or
any governmental department, board, agency or other
instrumentality affecting Borrower, Guarantor or any property
of Borrower or to which Borrower or Guarantor is a party in
which an adverse determination or result could have a material
adverse effect on the business, operations, property or
condition (financial or otherwise) of Borrower or Guarantor or
on the ability of Borrower or Guarantor to perform its
obligations under this Agreement, the other Loan Documents or
the Guaranty, stating the nature and status of such action,
suit or proceeding.
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D. Remain a single asset entity, the only property owned by which
shall be the Project.
V.11 - Underground Tank Upgrade.
On or before December 22, 1998, Borrower shall upgrade the two (2) 25,000
gallon underground fuel oil storage tanks located within the Project as
required under applicable federal and state laws and regulations. Upon
completion of the upgrading, but not later than December 22, 1998, Borrower
shall deliver to Lender a certificate, signed by Borrower and an
environmental Consultant acceptable to Lender in its reasonable discretion,
certifying that said tanks have been so upgraded.
VI. DEFAULTS
VI.1 - Events of Default
Any of the following events shall constitute an event of default under this
Agreement:
a. Borrower shall default in the payment of principal due
according to the terms hereof or of the Note, which default
in any such case is not cured within ten (10) days following
delivery of notice thereof by Lender to Borrower.
b. Borrower shall default in the payment of interest due
hereunder or under the Note, or in the payment of fees or
any other amounts payable hereunder, under the Note or under
any of the other Loan Documents, which default in any such
case is not cured within ten (10) days following delivery of
notice thereof by Lender to Borrower.
c. Borrower shall default in the performance or observance of
any other agreement, covenant or condition required to be
performed or observed by Borrower under the terms of this
Agreement, which default is not cured within thirty (30) days
following delivery of written notice thereof by Lender to
Borrower; provided that in the event such default cannot be
cured in the exercise of reasonable diligence within said
thirty (30) day period, Borrower shall have such additional
time as shall be reasonably necessary to cure the same (not
to exceed sixty [60] days beyond said initial thirty [30] day
period), provided said cure is commenced within said initial
thirty (30) day period and is thereafter diligently pursued to
completion.
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d. Any representation or warranty made by Borrower or Guarantor
in this Agreement, in any of the other Loan Documents, or in
any certificate or document furnished under the terms of this
Agreement or in connection with the Loan, shall be untrue or
incomplete in any material respect, and Borrower shall fail
to correct the factual inaccuracy therein within thirty (30)
days following delivery by Lender to Borrower of written
notice thereof.
e. An event of default shall exist under the terms of any other
Loan Document or the Guaranty.
f. Borrower or Guarantor shall become insolvent or shall commit
an act of bankruptcy; or shall apply for, consent to or permit
the appointment of a receiver, custodian, trustee or
liquidator for it or any of its property or assets; or shall
fail to, or admit in writing its inability to, pay its debts
as they mature; or shall make a general assignment for the
benefit of creditors or shall be adjudicated bankrupt or
insolvent; or shall take other similar action for the benefit
or protection of its creditors; or shall give notice to any
governmental body of insolvency or pending insolvency or
suspension of operations; or shall file a voluntary petition
in bankruptcy or a petition or an answer seeking
reorganization or an arrangement with creditors, or to take
advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, rearrangement, dissolution, liquidation
or other similar debtor relief law or statute; or shall file
an answer admitting the material allegations of a petition
filed against it in any proceeding under any such law or
statute; or shall be dissolved, liquidated, terminated or
merged; or shall effect a plan or other arrangement with
creditors; or a trustee, receiver, liquidator or custodian
shall be appointed for it or for any of its property or
assets and shall not be discharged within sixty (60) days
after the date of his appointment; or a petition in
involuntary bankruptcy or similar proceedings is filed
against it and is not dismissed within sixty (60) days after
the date of its filing.
g. A judgment or judgments for the payment of money in excess
of the sum of $200,000.00 in the aggregate shall be rendered
against Borrower, and Borrower shall not discharge the same or
provide for its discharge in accordance with its terms, or
procure a stay of execution thereof, prior to any execution
on such judgment by the judgment creditor, within one hundred
twenty (120) days
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from the date of entry thereof, and within said period of one
hundred twenty (120) days, or such longer period during which
execution of such judgment shall be stayed, appeal therefrom
and cause the execution thereof to be stayed during such
appeal.
h. The maturity of any material indebtedness of Borrower (other
than indebtedness under this Agreement) shall be accelerated,
or Borrower shall fail to pay any such material indebtedness
when due (after the lapse of any applicable grace period) or,
in the case of such indebtedness payable on demand, when
demanded (after the lapse of any applicable grace period),
or any event shall occur or condition shall exist and shall
continue for more than the period of grace, if any,
applicable thereto and shall have the effect of causing, or
permitting the holder of any such indebtedness or any trustee
or other person, party or entity acting on behalf of such
holder to cause, such material indebtedness to become due
prior to its stated maturity or to realize upon any collateral
given as security therefor. For purposes of this Section,
indebtedness of Borrower shall be deemed "material" if it
exceeds $200,000.00 as to any item of indebtedness or in the
aggregate for all items of indebtedness with respect to which
any of the events described in this Subsection (h) has
occurred.
i. Any execution or attachment shall be issued whereby any
substantial part of the property of Borrower shall be taken
or attempted to be taken and the same shall not have been
vacated or stayed within ninety (90) days after the issuance
thereof.
j. Guarantor shall repudiate or purport to revoke the Guaranty,
or the Guaranty for any reason (except pursuant to the express
terms thereof) shall cease to be in full force and effect as
to Guarantor or shall be judicially declared null and void
as to Guarantor, unless Borrower replaces Guarantor with
another guarantor acceptable to Lender or pays the Loan in
full within ninety (90) days following delivery of written
notice thereof by Lender to Borrower.
k. Any Transaction Document shall, at any time, cease to be in
full force and effect or shall be judicially declared null
and void, or the validity or enforceability thereof shall be
contested by Borrower and/or Guarantor, or Lender shall cease
to have a valid and perfected security interest having the
priority contemplated thereunder in all of the collateral
described therein, other than by action or inaction of Lender
if (i) the
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aggregate value of the collateral affected by any of the
foregoing exceeds $500,000.00, and (ii) any of the foregoing
shall remain unremedied for ten (10) days or more after
receipt of notice thereof by Borrower from Lender.
l. Any member in Borrower on the date hereof shall, for whatever
reason, cease to be a member in Borrower, except as expressly
permitted by Section V.8.
m. CBL & Associates Properties, Inc. ceases to be a real estate
investment trust or the primary nature of its business ceases
to be the ownership and/or development of real property.
VI.2 - Rights and Remedies
Upon the occurrence of an event of default, unless such event of default is
subsequently waived in writing by Lender, Lender shall be entitled, at the
option of Lender, to exercise any or all of the following rights and
remedies, consecutively or simultaneously, and in any order:
a. If the Advance has not yet been made, Lender may terminate
its obligation to make the Advance under this Agreement.
b. Lender may exercise any or all remedies specified herein and
in the other Loan Documents, including (without limiting the
generality of the foregoing) the right to foreclose the
Mortgage, and/or any other remedies which it may have
therefor at law, in equity or under statute.
c. Lender may cure the event of default on behalf of Borrower,
and, in doing so, may enter upon the Project, and may expend
such sums as it may deem desirable, including reasonable
attorneys' fees, all of which shall be deemed to be advances
hereunder, even though causing the Loan to exceed the face
amount of the Note, shall bear interest at the Default Rate
and shall be payable by Borrower on demand.
d. Borrower hereby irrevocably authorizes Lender to set off any
sum owed to Lender under the Loan Documents against all
deposits and credits of Borrower with, and any and all
claims of Borrower against, Lender. Such right shall exist
whether or not Lender shall have made any demand hereunder or
under any other Loan Document, whether or not said sums, or
any part thereof, or deposits and credits held for the
account of Borrower
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is or are matured or unmatured, and regardless of the
existence or adequacy of any collateral, guaranty or any
othersecurity, right or remedy available to Lender. Lender
agrees that, as promptly as is reasonably possible after the
exercise of any such setoff right, it shall notify Borrower
of its exercise of such setoff right; provided, however, that
the failure of Lender to provide such notice shall not affect
the validity of the exercise of such setoff right. Nothing
in this Agreement shall be deemed a waiver or prohibition of
or restriction on Lender to all rights of banker's lien,
setoff and counterclaim available pursuant to law.
VII. MISCELLANEOUS
VII.1 - Binding Effect; Waivers; Cumulative Rights and Remedies
The provisions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, executors,
administrators, personal representatives, legal representatives, successors
and assigns; provided, however, that neither this Agreement nor the
proceeds of the Loan may be assigned by Borrower voluntarily, by operation
of law or otherwise, without the prior written consent of Lender. No delay
on the part of Lender in exercising any right, remedy, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder constitute such
a waiver or exhaust the same, all of which shall be continuing. The rights
and remedies of Lender specified in this Agreement shall be in addition to,
and not exclusive of, any other rights and remedies which Lender would
otherwise have at law, in equity or by statute, and all such rights and
remedies, together with Lender's rights and remedies under the other Loan
Documents, are cumulative and may be exercised individually, concurrently,
successively and in any order.
VII.2 - Survival
All agreements, representations and warranties made in this Agreement shall
survive the execution of this Agreement, the making of the Advance by
Lender, and the execution of the other Loan Documents, and shall continue
until Lender receives payment in full of all indebtedness of Borrower
incurred under this Agreement and under the other Loan Documents.
VII.3 - Governing Law; Waiver of Jury Trial
THIS AGREEMENT, THE RIGHTS OF THE PARTIES HEREUNDER, AND THE CONSTRUCTION,
INTERPRETATION, VALIDITY AND ENFORCEABILITY HEREOF SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
MINNESOTA, WITHOUT
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GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT
TO FEDERAL LAWS OF THE UNITED STATES RELATING TO NATIONAL BANKS. BY THE
EXECUTION HEREOF, BORROWER AND LENDER KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY HEREBY AGREE THAT:
(A) NEITHER BORROWER NOR LENDER, NOR ANY ASSIGNEE, SUCCESSOR,
HEIR OR LEGAL REPRESENTATIVE OF BORROWER OR LENDER, SHALL SEEK A JURY
TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION
PROCEDURE ARISING FROM OR BASED UPON THIS AGREEMENT, THE NOTE, THE
MORTGAGE OR ANY OF THE OTHER LOAN DOCUMENTS, OR THE DEALINGS OR
RELATIONSHIP BETWEEN OR AMONG THE PARTIES THERETO;
(B) NEITHER BORROWER NOR LENDER WILL SEEK TO CONSOLIDATE ANY
SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL HAS NOT BEEN OR CANNOT BE WAIVED;
(C) THE PROVISIONS OF THIS SECTION HAVE BEEN FULLY NEGOTIATED BY
THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO
EXCEPTIONS;
(D) NEITHER BORROWER NOR LENDER HAS IN ANY WAY AGREED WITH OR
REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION WILL
NOT BE FULLY ENFORCED IN ALL INSTANCES; AND
(E) THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO MAKE
THE LOAN TO BORROWER.
VII.4 - Counterparts
This Agreement may be executed in any number of counterparts, all of which
shall constitute a single Agreement.
VII.5 - Notices
Any notice required or permitted to be given by either party hereto to the
other under the terms of this Agreement, or documents related hereto, shall
be in writing and shall be sent by manual delivery, telegram, telex,
facsimile transmission, overnight courier or United States registered or
certified mail, return receipt requested (postage prepaid), addressed to such
party at the address specified on the signature page hereof, or at such other
address in the United States of America
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as such party shall have specified to the other party hereto in writing, at
least ten (10) days prior to the effective date of said change of address.
All periods of notice shall be measured from the date of delivery thereof if
manually delivered, from the date of sending thereof if sent by telegram,
telex or facsimile transmission, from the first Business Day after the date
of sending if sent by overnight courier, or from four (4) days after the date
of mailing if mailed; provided, however, that any notice to Lender
designating, continuing or converting any portion of the Advance as or into
a Eurodollar Rate Advance shall be deemed to have been given only when
received by Lender.
VII.6 - Lender's Publicity
Lender may, if it so desires, publicize its involvement with the Project,
including but not limited to issuing press releases, subject to the prior
review and approval thereof by Borrower, which approval shall not be
unreasonably withheld or delayed.
VII.7 - No Third Party Reliance
No third party shall be entitled to rely upon this Agreement or to have any
of the benefits of Lender's interest hereunder, unless such third party is
an express assignee of all or a portion of Lender's interest hereunder.
VII.8 - Sale of Loan or Participations
Lender may at any time sell, assign, transfer, syndicate, grant
participations in, or otherwise dispose of portions of the Loan (each such
interest so disposed of being herein called a "Transferred Interest") to
banks or other financial institutions which must be approved by Borrower
(hereinafter called "Transferees"), which approval shall not be unreasonably
withheld or delayed, and Borrower shall have the right to review and approve
any assignment, transfer, syndication or participation agreement before it
is executed, which approval shall also not be unreasonably withheld or
delayed. Notwithstanding the foregoing, in the event of any such
assignment, transfer, syndication or participation, Lender shall (A) be the
"agent bank" or "lead lender" with respect thereto, which retains all day-
to-day loan administration functions and decision making capacity with
respect to the Loan, and (B) retain at least a twenty-five percent (25%)
prorata interest in the Loan. Borrower agrees that each Transferee (except
a participant) shall be entitled to the benefits of Sections I.6, I.7, I.8,
I.9, I.10, I.11, V.1 and VI.2(d) with respect to its Transferred Interest
and that each Transferee may exercise any and all rights of banker's lien,
setoff and counterclaim as if such Transferee were a direct lender to
Borrower. If Lender makes any assignment to a Transferee, then upon notice
to the Borrower such Transferee, to the extent of such assignment (unless
otherwise provided therein), shall become a "Lender" hereunder and shall
have all the rights and obligations of Lender hereunder. Notwithstanding
the sale by Lender of any
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participation hereunder, (a) no participant shall be deemed to be or have
the rights and obligations of Lender hereunder, except that any participant
shall have a right of setoff under Section VI.2 as if it were Lender and the
amount of its participation were owing directly to such participant by
Borrower; and (b) Lender shall not in connection with selling any such
participation condition Lender's rights in connection with consenting to
amendments or granting waivers concerning any matter under any Loan Document
upon obtaining the consent of such participant other than on matters relating
to (i) any reduction in the amount of any principal of, or the amount of or
rate of interest on, the Note, (ii) any postponement of the date fixed for
any payment of principal of or interest on the Note, (iii) the release or
subordination of any material portion of any collateral other than pursuant
to the terms of any Loan Document, or (iv) the release of any Guaranty,
except in accordance with the terms thereof. All costs and expenses of any
such transfer, participation or syndication shall be paid by Lender.
VII.9 - Time of the Essence
Time is of the essence hereof with respect to the dates, terms and
conditions of this Agreement.
VII.10 - Entire Agreement; No Oral Modifications
This Agreement, the other Loan Documents and the other documents mentioned
herein set forth the entire agreement of the parties with respect to the
Loan and supersede all prior written or oral understandings and agreements
with respect thereto. No modification or waiver of any provision of this
Agreement shall be effective unless set forth in writing and signed by the
parties hereto.
VII.11 - Captions
The headings or captions of the Articles and Sections set forth herein are
for convenience only, are not a part of this Agreement and are not to be
considered in interpreting this Agreement.
VII.12 - Borrower-Lender Relationship
The relationship between Borrower and Lender created hereby and by the
other Loan Documents shall be that of a borrower and a lender only, and in
no event shall Lender be deemed to be a partner of, or a joint venturer
with, Borrower.
VII.13 - Commercial Reasonableness
Borrower and Lender shall each proceed in good faith and in a commercially
reasonable manner with respect to its obligations, duties, liabilities,
covenants, agreements, rights and remedies hereunder and under all of the
other Loan Documents, whether or not it is otherwise herein or therein
expressly required to so proceed.<PAGE>
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VII.14 - Multiple Appraisals
Borrower shall be required to pay for an Appraisal obtained by or for Lender
only (a) prior to the closing of the Loan; (b) upon the occurrence of an
event of default under this Agreement; and (c) at any other time an
Appraisal is required by Minnesota law or other applicable Governmental
Requirements.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
Address: BURNSVILLE MINNESOTA, LLC,
a Minnesota limited liability company
c/o CBL Holdings I, Inc.
One Park Place By: CBL & Associates Limited Partnership,
6148 Lee Highway Its Sole Member
Chattanooga, Tennessee 37421
Attention: President By: CBL Holdings I, Inc.,
Its General Partner
/s/ John N. Foy
By: _____________________________
John N. Foy
Its: Executive Vice President
(CORPORATE SEAL)
Address: U.S. BANK NATIONAL
ASSOCIATION
Mail Station - MPFP0802 /s/ Stephen P. Bailey
601 Second Avenue South By: _____________________________
Minneapolis, Minnesota 55402-4302 Vice President
Attention: Real Estate Banking Its: ___________________________
Division Head
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MODIFICATION NO. ONE
TO THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
CBL & ASSOCIATES LIMITED PARTNERSHIP
This Modification No. One to the Amended and Restated
Agreement of Limited Partnership of CBL & Associates Limited
Partnership, a Delaware limited partnership (the "Operating
Partnership"), is hereby entered into by the partners of the
Operating Partnership effective this 31st day of March, 1997.
WHEREAS, the Operating Partnership was formed by that
certain Agreement of Limited Partnership dated October 29, 1993, as
amended and restated by that certain Amended and Restated Agreement
of Limited Partnership dated November 3, 1993 (the Agreement of
Limited Partnership and the Amended and Restated Agreement of
Limited Partnership are herein referred to as the "Partnership
Agreement"), and the initial Certificate of Limited Partnership of
the Operating Partnership was filed in the office of the Delaware
Secretary of State on July 16, 1993, as amended by that certain
Certificate of Amendment to Certificate of Limited Partnership
filed in the office of the Delaware Secretary of State on December
15, 1993; and
WHEREAS, the undersigned partners of the Operating
Partnership (the "Partners") desire to convert a portion of certain
general partner interests in the Operating Partnership owned by CBL
& Associates Properties, Inc. to limited partner interests; and
WHEREAS, simultaneously with the conversion of a portion
of certain general partner interests as set forth above, CBL &
Associates Properties, Inc., in its capacity as General Partner and
Limited Partner, has as of the date hereof, assigned its interest
(i) as the sole General Partner of the Operating Partnership to CBL
Holdings I, Inc., a Delaware corporation, and (ii) as a Limited
Partner of the Operating Partnership to CBL Holdings II, Inc., a
Delaware corporation; and
WHEREAS, the parties desire to modify the Partnership
Agreement to recognize and document the aforesaid conversion of a
portion of general partner interests in the Operating Partnership
and the transfer and assignment by CBL & Associates Properties,
Inc. of its general partner interests to CBL Holdings I, Inc. and
the transfer and assignment by CBL & Associates Properties, Inc. of
its limited partner interests to CBL Holdings II, Inc..
-1-
<PAGE>
NOW, THEREFORE, in consideration of the premises and
mutual covenants and agreements contained herein, the Partnership
Agreement is hereby modified as follows:
1. Effective as of the date hereof, a certain portion of
general partner interests in the Operating Partnership owned by CBL
& Associates Properties, Inc. are hereby converted to limited
partner interests as follows:
Pre-Conversion Interest
Name of Partner Interest Following Conversion
CBL & Associates 71.8122% GP 2.8122% GP
Properties, Inc. 69.0000% LP
2. Effective as of the date hereof, the interest of CBL
& Associates Properties, Inc. in the Operating Partnership as the
sole General Partner is hereby deleted and, in its place, CBL
Holdings I, Inc., a Delaware corporation, is hereby inserted as the
sole General Partner of the Operating Partnership, owning a 2.8122%
interest in the Operating Partnership's capital, profits, losses
and income.
3. Effective as of the date hereof, the interest of CBL
& Associates Properties, Inc. in the Operating Partnership as a
Limited Partner is hereby deleted and, in its place, CBL Holdings
II, Inc., a Delaware corporation, is hereby inserted as a Limited
Partner of the Operating Partnership, owning a 69% interest in the
Operating Partnership's capital, profits, losses and income.
4. Paragraph 7.6 of the Partnership Agreement is hereby
amended by adding the terms "and its affiliates, including but not
limited to its parent corporation, CBL & Associates Properties,
Inc." after the term General Partner in the second line thereof.
5. Exhibit "A" to the Partnership Agreement of the
Operating Partnership is hereby deleted in its entirety and the
Partners do hereby agree that the Partners and their respective
partnership interests shall be as shown on the new Exhibit "A"
attached hereto and made a part hereof.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned Partners, in their
respective capacities as the withdrawing General Partner, the
incoming General Partner, the Withdrawing Limited Partner, the
incoming Limited Partner and the Limited Partners of the Operating
Partnership, being authorized so to do under the Partnership
Agreement, have executed this Modification No. One effective as of
the date referenced above.
WITHDRAWING GENERAL PARTNER:
CBL & ASSOCIATES PROPERTIES, INC.
/s/ Charles B. Lebovitz
By:__________________________________
Charles B. Lebovitz,
Chairman of the Board, President
and Chief Executive Officer
INCOMING GENERAL PARTNER:
CBL HOLDINGS I, INC.
/s/ Charles B. Lebovitz
By:__________________________________
Charles B. Lebovitz,
Chairman of the Board, President
and Chief Executive Officer
WITHDRAWING LIMTED PARTNER:
CBL & ASSOCIATES PROPERTIES, INC.
/s/ Charles B. Lebovitz
By:__________________________________
Charles B. Lebovitz,
Chairman of the Board, President
and Chief Executive Officer
INCOMING LIMITED PARTNER:
CBL HOLDINGS II, INC.
/s/ Charles B. Lebovitz
By:__________________________________
Charles B. Lebovitz,
Chairman of the Board, President
and Chief Executive Officer
-3-
<PAGE>
LIMITED PARTNERS:
CBL & ASSOCIATES, INC.
/s/ Charles B. Lebovitz
By:__________________________________
Charles B. Lebovitz,
Chairman of the Board, President
and Chief Executive Officer
CBL EMPLOYEES PARTNERSHIP/CONWAY
By: CBL & Associates, Inc.,
Managing Partner
/s/ Charles B. Lebovitz
By:__________________________________
Charles B. Lebovitz,
Chairman of the Board, President
and Chief Executive Officer
COLLEGE STATION ASSOCIATES
/s/ Charles B. Lebovitz
By:__________________________________
Charles B. Lebovitz,
Managing Partner
FOOTHILLS PLAZA PARTNERSHIP
By: Mortgage Services, Inc.,
Managing Partner
/s/ John N. Foy
By:__________________________________
John N. Foy, President
/s/ John N. Foy
_____________________________________
John N. Foy
-4-
<PAGE>
GIRVIN ROAD PARTNERSHIP
By: CBL & Associates, Inc.,
Managing Partner
/s/ Charles B. Lebovitz
By:__________________________________
Charles B. Lebovitz,
Chairman of the Board, President
and Chief Executive Officer
_____________________________________
Ben S. Landress
_____________________________________
Alan L. Lebovitz
/s/ Charles B. Lebovitz
_____________________________________
Charles B. Lebovitz
/s/ Charles B. Lebovitz - P.O.A.
_____________________________________
Laurie Beth Lebovitz
_____________________________________
Michael I. Lebovitz
_____________________________________
Stephen D. Lebovitz
TRUST U/W MOSES LEBOVITZ F/B/O
CHARLES B. LEBOVITZ, ET AL
/s/ Charles B. Lebovitz
By:__________________________________
Charles B. Lebovitz,
Trustee
By:__________________________________
Faye L. Israel,
Trustee
By:__________________________________
Ralph Shumacker,
Trustee
-5-
<PAGE>
TRUST U/W MOSES LEBOVITZ F/B/O
FAYE L. ISRAEL, ET AL
/s/ Charles B. Lebovitz
By:__________________________________
Charles B. Lebovitz,
Trustee
By:__________________________________
Faye L. Israel,
Trustee
By:__________________________________
Ralph Shumacker,
Trustee
_____________________________________
Mark D. Mancuso
_____________________________________
Eric P. Snyder
/s/ Augustus N. Stephas
_____________________________________
Augustus N. Stephas
WAREHOUSE PARTNERSHIP
By: CBL & Associates, Inc.,
Managing Partner
/s/ Charles B. Lebovitz
By:__________________________________
Charles B. Lebovitz,
Chairman of the Board, President
and Chief Executive Officer
_____________________________________
Jay Wiston
_____________________________________
James L. Wolford
-6-
<PAGE>
EXHIBIT "A"
Percentage Share
of Profits or Other
Name of Partner By Way of Income
-7-
<PAGE>
MODIFICATION NO. TWO
TO THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
CBL & ASSOCIATES LIMITED PARTNERSHIP
THIS MODIFICATION NO. TWO to the Amended and Restated
Agreement of Limited Partnership of CBL & Associates Limited
Partnership, a Delaware limited partnership (the "Operating
Partnership"), is hereby entered into by the partners of the
Operating Partnership effective this 19th day of February, 1998.
WHEREAS, the Operating Partnership was formed by that
certain Agreement of Limited Partnership dated October 29, 1993, as
amended and restated by that certain Amended and Restated Agreement
of Limited Partnership dated November 3, 1993 as modified by
Modification No. One referred to below (the Agreement of Limited
Partnership and the Amended and Restated Agreement of Limited
Partnership and Modification No. One are herein referred to as the
"Partnership Agreement"); and
WHEREAS, the undersigned partners of the Operating
Partnership (the "Partners") desire to modify the Partnership
Agreement to make certain clarifications regarding the rights of
the Limited Partners pursuant to Article XI of the Partnership
Agreement; and
WHEREAS, pursuant to Modification No. One to the
Partnership Agreement, dated March 31, 1997 ("Modification No.
One"), CBL & Associates Properties, Inc., in its capacity as
General Partner and Limited Partner, assigned its interest (i) as
the sole General Partner of the Operating Partnership to CBL
Holdings I, Inc., a Delaware corporation, and (ii) as a Limited
Partner of the Operating Partnership to CBL Holdings II, Inc., a
Delaware corporation; and
WHEREAS, the parties desire to further modify the
Partnership Agreement to recognize and document that the conversion
rights and other rights of the Limited Partners set forth in
-1-
<PAGE>
Article XI of the Partnership Agreement are with respect to the
equity stock of CBL & Associated Properties, Inc. regardless of the
assignment of its interests reflected in Modification No. One.
NOW, THEREFORE, in consideration of the premises and
mutual covenants and agreements contained herein, the Partnership
Agreement is hereby modified as follows:
1. Effective as of the date hereof, Article XI of the
Partnership Agreement is hereby amended by deleting the term
"General Partner" where it appears in Article XI and inserting
therefor the term "CBL & Associates Properties, Inc.".
2. It is the intent of the Partners that the
modifications to the Partnership Agreement pursuant to this
Modification No. Two are simply to clarify that if a Limited
Partner shall desire to exercise his/her/its rights pursuant to
Article XI of the Partnership Agreement, said conversion right, if
elected, shall be to the stock of CBL & Associates Properties, Inc.
and not CBL Holdings I, Inc., the current general partner of the
Operating Partnership. Likewise, the Partners agree that any other
provision of the Partnership Agreement where the term "General
Partner" is utilized, but the context obviously indicates that CBL
& Associates Properties, Inc. is being described in its capacity as
a publicly traded company rather than just in its capacity as the
former general partner, shall be and likewise is, by this
Modification No. Two, amended by deleting the term "General
Partner" and inserting therefor the term "CBL & Associates
Properties, Inc.".
IN WITNESS WHEREOF, the undersigned Partners have
executed this Modification No. Two effective as of the date
referenced above.
GENERAL PARTNER:
CBL HOLDINGS I, INC.
/s/ John N. Foy
By:__________________________________
Vice President
Title: ____________________________
-2-
<PAGE>
LIMITED PARTNERS:
CBL HOLDINGS II, INC.
/s/ John N. Foy
By:__________________________________
Vice President
Title: ____________________________
CBL & ASSOCIATES, INC.
/s/ John N. Foy
By:__________________________________
Vice President
Title: ____________________________
CBL EMPLOYEES PARTNERSHIP/CONWAY
By: CBL & Associates, Inc.,
Managing Partner
/s/ John N. Foy
By:__________________________________
Vice President
Title: ____________________________
COLLEGE STATION ASSOCIATES
/s/ Charles B. Lebovitz
By:__________________________________
Charles B. Lebovitz,
Managing Partner
FOOTHILLS PLAZA PARTNERSHIP
By: Mortgage Services, Inc.,
Managing Partner
/s/ John N. Foy
By:__________________________________
John N. Foy, President
/s/ John N. Foy
_____________________________________
John N. Foy, Limited Partner
-3-
<PAGE>
GIRVIN ROAD PARTNERSHIP
By: CBL & Associates, Inc.,
Managing Partner
/s/ John N. Foy
By:__________________________________
Vice President
Title: ____________________________
/s/ Ben S. Landress
_____________________________________
Ben S. Landress
/s/ Alan L. Lebovitz
_____________________________________
Alan L. Lebovitz
/s/ Charles B. Lebovitz
_____________________________________
Charles B. Lebovitz
/s/ Charles B. Lebovitz - P.O.A.
_____________________________________
Laurie Beth Lebovitz
/s/ Michael I. Lebovitz
_____________________________________
Michael I. Lebovitz
_____________________________________
Stephen D. Lebovitz
TRUST U/W MOSES LEBOVITZ F/B/O
CHARLES B. LEBOVITZ, ET AL
/s/ Charles B. Lebovitz
By:__________________________________
Charles B. Lebovitz,
Trustee
-4-
<PAGE>
TRUST U/W MOSES LEBOVITZ F/B/O
FAYE L. ISRAEL, ET AL
/s/ Charles B. Lebovitz
By:__________________________________
Charles B. Lebovitz,
Trustee
_____________________________________
Mark D. Mancuso
/s/ Eric P. Snyder
_____________________________________
Eric P. Snyder
/s/ Augustus N. Stephas
_____________________________________
Augustus N. Stephas
WAREHOUSE PARTNERSHIP
By: CBL & Associates, Inc.,
Managing Partner
/s/ John N. Foy
By:__________________________________
Vice President
Title: ____________________________
_____________________________________
Jay Wiston
_____________________________________
James L. Wolford
-5-
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
STATE OF
INCORPORATION OF
SUBSIDIARY FORMATION
- ----------------------------------------- -------------------------
Albemarle Partners Limited Partnership North Carolina
APWM, LLC Georgia
Arbor Place GP, Inc. Georgia
Arbor Place Limited Partnership Georgia
Asheville, LLC North Carolina
BJ/Portland Limited Partnership Maine
Bonita Lakes Mall Limited Partnership Mississippi
Brownwood Associates, L.P. Texas
Bursnville Minnesota, LLC Minnesota
Cadillac Associates Limited Partnership Tennessee
Capital Crossing Limited Partnership North Carolina
Cary Limited Partnership North Carolina
CBL & Associates Limited Partnership Delaware
CBL & Associates Management, Inc. Delaware
CBL/34th Street St. Petersburg Limited
Partnership Florida
CBL/Bartow Limited Partnership Florida
CBL/Brushy Creek Limited Partnership Florida
CBL/Buena Vista Limited Partnership Georgia
CBL/Cedar Bluff Crossing Limited Partnership Tennessee
CBL/Foothills Plaza, L.P. Tennessee
CBL/GP, Inc. Wyoming
CBL/GP II, Inc. Wyoming
CBL/GP III, Inc. Mississippi
CBL/GP IV, Inc. Connecticut
CBL/GP V, Inc. Tennessee
CBL/GP VI, Inc. Tennessee
CBL/GP Cary, Inc. North Carolina
CBL/GP Langley, Inc. Virginia
CBL/Karns Corner Limited Partnership Tennessee
CBL/Low Limited Partnership Wyoming
CBL Morristown, LTD. Tennessee
CBL/Nashua Limited Partnership New Hampshire
CBL/North Haven, Inc. Connecticut
CBL/Perimeter Place Limited Partnership Tennessee
CBL/Plant City Limited Partnership Florida
CBL/Plantation Plaza, L.P. Virginia
S-1
<PAGE>
STATE OF
INCORPORATION OF
SUBSIDIARY FORMATION
- ----------------------------------------- -------------------------
CBL/Rawlinson Place Limited Partnership Tennessee
CBL/Springs Crossing Limited Partnership Tennessee
CBL/Suburban, Inc. Tennessee
CBL/Tampa Keystone Limited Partnership Florida
CBL Terrace Limited Partnership Tennessee
CBL/Uvalde, Ltd. Texas
Chester Square Limited Partnership Virginia
College Station Partners, Ltd. Texas
CoolSprings Crossing Limited Partnership Tennessee
Cortlandt Town Center, Inc. New York
Cortlandt Town Center Limited Partnership New York
Cosby Station Limited Partnership Georgia
Crossville Associates Limited Partnership Tennessee
Development Options, Inc. Wyoming
East Ridge Partners, L.P. Tennessee
East Towne Crossing Limited Partnership Tennessee
Elkin Partners, Ltd. Tennessee
Fiddler's Run Limited Partnership North Carolina
Foothills Mall, Inc. Tennessee
Fifty-Eight Partners, L.P. Tennessee
Frontier Mall Associates Limited Partnership Wyoming
Georgia Square Associates, Ltd. Georgia
Georgia Square Partnership Georgia
Governor's Square Company Ohio
Green Cove Mall Limited Partnership Alabama
Greenville Plaza GP, Inc. North Carolina
Greenville Plaza Limited Partnership North Carolina
Henderson Square Limited Partnership North Carolina
High Point Development Limited Partnership North Carolina
High Point Development Limited Partnership II North Carolina
Hudson Plaza Limited Partnership New York
Jarnigan Road Limited Partnership Tennessee
Joplin-Low Limited Partnership Missouri
Kiln Creek Limited Partnership Virginia
Kingston Overlook Limited Partnership Tennessee
LaGrange Commons Limited Partnership New York
Lakeshore Gainesville Limited Partnership Georgia
Lakeshore/Sebring Limited Partnership Florida
Langley Square Limited Partnership Virginia
Leaseco, Inc. New York
S-2
<PAGE>
STATE OF
INCORPORATION OF
SUBSIDIARY FORMATION
- ----------------------------------------- -------------------------
Lebcon Associates Tennessee
Lebcon I, Ltd. Tennessee
Lee Partners Tennessee
Lee Warehouse Limited Partnership Tennessee
Longview Associates Limited Partnership North Carolina
Lunenburg Crossing Limited Partnership Massachusetts
Madison Plaza Associates, Ltd. Alabama
Madison Square Associates, Ltd. Alabama
Mall Shopping Center Company, L.P. Texas
Maryville Department Stores, Ltd. Tennessee
Maryville Partners, L.P. Tennessee
Montgomery Partners, L.P. Tennessee
Massard Crossing Limited Partnership Arkansas
Naugatuck Limited Partnership Connecticut
NewLease Corp. Tennessee
North Haven Crossing Limited Partnership Connecticut
Oak Ridge Associates Limited Partnership Tennessee
Park Village Limited Partnership Florida
Parham Limited Partnership Virginia
Portland/HQ Limited Partnership Maine
Post Oak Mall Associates Limited Partnership Texas
RC Strawbridge Limited Partnership Virginia
Salem Crossing Limited Partnership Virginia
Sand Lake Corners, LC Florida
Sand Lake Corners Limited Partnership Florida
Scottsboro Associates, Ltd. Alabama
Seacoast Shopping Center Limited Partnership New Hampshire
Shared Appreciation I, LTD. Tennessee
Shopping Center Finance Corp. Wyoming
Springdale/Mobile Limited Partnership Alabama
Springdale/Mobile Limited Partnership II Alabama
Springhurst Limited Partnership Kentucky
St. Clair Square GP, Inc. Illinois
St. Clair Square Limited Partnership Illinois
Sterling Creek Commons Limited Partnership Virginia
Stone East Partners, Ltd. Tennessee
Suburban Plaza Limited Partnership Tennessee
Sutton Plaza GP, Inc. New Jersey
Sutton Plaza Limited Partnership New Jersey
The Galleria Associates, L.P. Tennessee
Turtle Creek Limited Partnership Mississippi
S-3
<PAGE>
STATE OF
INCORPORATION OF
SUBSIDIARY FORMATION
- ----------------------------------------- -------------------------
Twin Peaks Mall Associates, Ltd. Colorado
Valley Crossing Associates Limited Partnership North Carolina
Vicksburg Mall Associates, Ltd. Mississippi
Walnut Square Associates Limited Partnership Wyoming
West Broad Street Limited Partnership Virginia
Westgate Crossing Limited Partnership North Carolina
Westgate Mall Limited Partnership South Carolina
S-4
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K, into
CBL & Associates Properties, Inc.'s previously filed Registration
Statements on Form S-3 (File No. 3333-47041) and Form S-8 (File
No. 33-73376).
ARTHUR ANDERSEN LLP
Chattanooga, Tennessee
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at December 31, 1997 (audited) and the
Consolidated Statement of Operations for the year ended
December 31, 1997 (unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,124
<SECURITIES> 0
<RECEIVABLES> 14,012
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 145,641
<TOTAL-ASSETS> 1,245,025
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 241
<OTHER-SE> 330,612
<TOTAL-LIABILITY-AND-EQUITY> 1,245,025
<SALES> 0
<TOTAL-REVENUES> 177,604
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 97,370
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,830
<INCOME-PRETAX> 36,032
<INCOME-TAX> 0
<INCOME-CONTINUING> 36,032
<DISCONTINUED> 0
<EXTRAORDINARY> 1,092
<CHANGES> 0
<NET-INCOME> 34,941
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 1.45
