<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-12
CBL & ASSOCIATES PROPERTIES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14(a)-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
____________________________________________________________________________
5) Total Fee paid:
____________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amounts Previously Paid:
____________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
____________________________________________________________________________
3) Filing Party:
____________________________________________________________________________
4) Date Filed:
____________________________________________________________________________
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PRELIMINARY PROXY STATEMENT -- SUBJECT TO COMPLETION
[CBL LOGO]
CBL & Associates Properties, Inc.
One Park Place
6148 Lee Highway, Suite 300
Chattanooga, Tennessee 37421-6511
__________ ___, 2000
Dear Stockholder:
You are cordially invited to attend a special meeting of the stockholders
of CBL & Associates Properties, Inc. to be held at the [Chattanooga Marriott at
the Convention Center, 2 Carter Plaza, Chattanooga, Tennessee], on ______,
______ __, 2000, at 10:00 a.m. local time.
Your Board of Directors has unanimously approved a transaction that would
result in our acquiring from Jacobs Realty Investors Limited Partnership and
certain of its affiliates and partners interests in a portfolio of up to 21
regional malls and two associated centers. This transaction is consistent with
our growth strategy of opportunistically acquiring shopping centers where we
believe we can create significant value through our development, leasing and
management expertise. In terms of size, it will make us the owner of the largest
number of shopping malls in the southeast and the owner of one of the largest
shopping mall portfolios in the United States.
Under the terms of the acquisition, we will issue approximately 11.71
million SCUs (special common units), which under certain circumstances may be
increased up to 13.95 million SCUs, of our subsidiary Operating Partnership, CBL
& Associates Limited Partnership, to Jacobs and to certain outside partners
which own interests in the properties. The SCUs may be exchanged for shares of
our common stock on a one-for-one basis, and will therefore represent an
interest in our Company ranging from approximately 24% to 27% (assuming that all
interests in our Operating Partnership not owned by our Company are exchanged
for our common stock). In accordance with the requirements of the New York Stock
Exchange and as contemplated in our agreement with Jacobs, we are seeking your
approval of the issuance of the SCUs (and their underlying shares of common
stock) in the transaction. In addition, as part of the transaction, we agreed to
seek your approval to amend our certificate of incorporation to permit Jacobs to
own a higher percentage of our shares than would otherwise be permitted under
our certificate of incorporation's current ownership limits. This special
meeting of stockholders is being called to consider and vote upon both of these
proposals.
The enclosed proxy statement provides you with detailed information about
the properties to be acquired, the conditions and other terms of the transaction
and the related amendment to our certificate of incorporation. We encourage you
to read this entire document (including the annexes) carefully.
Your Board of Directors has carefully considered the terms and conditions
of the transaction, declared the proposed amendment to be advisable and
unanimously recommends that you vote FOR each proposal.
Your vote is very important. Whether or not you plan to attend the special
meeting, I urge you to complete, date, sign and promptly return the enclosed
proxy card to ensure that your shares will be voted at the meeting. If you
attend the special meeting, you may vote in person, even though you have
previously returned your proxy card.
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If you have any questions regarding the transaction or the proposals,
please call Georgeson Shareholder Communications, our proxy solicitors,
toll-free at 1-800-223-8064 or our investors relations department at (423)
855-0001.
Sincerely,
Charles B. Lebovitz
Chairman of the Board
and Chief Executive Officer
The Securities and Exchange Commission has not approved or disapproved the
issuance of the SCUs in the transaction nor has the Commission passed upon the
fairness or merits of such issuance or upon the accuracy or adequacy of the
information contained in this document. Any representation to the contrary is
unlawful.
This proxy statement is dated ________ __, 2000 and is first being mailed to
stockholders of CBL on or about ________ __, 2000.
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[CBL LOGO]
CBL & ASSOCIATES PROPERTIES, INC.
One Park Place
6148 Lee Highway, Suite 300
Chattanooga, Tennessee 37421-6511
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Notice of Special Meeting of Stockholders
To Be Held ________ __, 2000
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To the Stockholders of
CBL & Associates Properties, Inc.
A special meeting of the stockholders of CBL & Associates Properties, Inc.
will be held at the [Chattanooga Marriott at the Convention Center, 2 Center
Plaza, Chattanooga, Tennessee] on _____ __, 2000, at 10:00 a.m. local time, for
the following purposes:
1. To consider and vote upon a proposal to approve the issuance of
approximately 11.71 million SCUs (special common units), which under
certain circumstances may be increased up to 13.95 million SCUs, of
our subsidiary Operating Partnership, CBL & Associates Limited
Partnership, which SCUs may be exchanged for shares of our common
stock on a one-for-one basis, subject to adjustments, as contemplated
under the Master Contribution Agreement, dated as of September 25,
2000 (attached as Annex A to the accompanying proxy statement) and the
Terms of the Special Common Units of the Operating Partnership
(attached as Annex C to the accompanying proxy statement);
2. To approve and adopt an amendment to our certificate of incorporation
(attached as Annex F to the accompanying proxy statement) which, among
other things, modifies our share ownership limits to permit the
Lebovitz Group (as defined in our certificate of incorporation) and
the Jacobs Group (as defined in the proposed amendment) to
beneficially or constructively own in the aggregate up to 37.99% of
our outstanding shares of common stock; and
3. To transact such other business as may be properly brought before the
special meeting or at any adjournment or postponement of the meeting.
Your Board of Directors has set the close of business on ________ __, 2000
as the record date to determine the stockholders entitled to notice of and to
vote at the special meeting or any meeting resulting from an adjournment or
postponement of the special meeting. A list of the stockholders entitled to vote
at the special meeting will be available for examination at our principal
offices for a period of ten days prior to the meeting.
Your Board of Directors unanimously recommends that you vote FOR approval
of each of the above proposals.
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You may vote in person or by proxy. We have included with this notice a
proxy statement to explain each of the proposals above and the transaction in
detail, and a proxy card for your use. Even if you expect to attend the special
meeting, please complete, date, sign and return the proxy card to ensure that
your shares will be voted at the meeting. If you attend the special meeting, you
may vote your shares in person, even if you have previously submitted a proxy in
writing.
By Order of the Board of Directors,
Stephen D. Lebovitz
President and Secretary
______ __, 2000
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TABLE OF CONTENTS
Page
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QUESTIONS AND ANSWERS ABOUT THE TRANSACTION AND THE CHARTER AMENDMENT..........1
WHO CAN HELP ANSWER YOUR QUESTIONS?............................................4
SUMMARY........................................................................5
The Parties...............................................................5
The Special Meeting.......................................................6
Record Date; Outstanding Common Stock Entitled to Vote and Quorum.........6
Votes Required............................................................7
Our Reasons for the Transaction and Our Recommendation....................7
Opinion of Merrill Lynch..................................................8
The Acquisition and the Master Contribution Agreement.....................8
Terms of the SCUs........................................................10
Other Related Agreements.................................................10
Amendments to our Certificate of Incorporation...........................11
Financing of the Transaction.............................................12
The Properties...........................................................12
Share Ownership by Management............................................13
Interests of Certain Persons.............................................13
Federal Income Tax Consequences of the Acquisition.......................13
Summary Historical and Pro Forma Financial Data..........................14
INFORMATION CONCERNING THE SPECIAL MEETING....................................20
Time, Date, Place and Purpose of the Special Meeting.....................20
Record Date; Outstanding Common Stock Entitled to Vote; Quorum...........21
Votes Required...........................................................21
Voting of Proxies........................................................21
Revoking Proxies.........................................................22
Proxy Solicitation.......................................................22
THE ACQUISITION AND RELATED MATTERS...........................................23
Background of the Acquisition............................................23
Recommendation of the Board of Directors.................................24
Factors Considered by the Board of Directors.............................25
Opinion of Merrill Lynch.................................................27
Financing of the Transaction.............................................33
Interests of Certain Persons.............................................34
Absence of Dissenters' Rights............................................34
Certain Federal Income Tax Consequences..................................34
CBL Policies After the Acquisition.......................................34
Regulatory Matters.......................................................35
Accounting Treatment.....................................................35
THE MASTER CONTRIBUTION AGREEMENT.............................................36
General..................................................................36
Structure of the Acquisition.............................................36
Covenants................................................................38
Tax Protection...........................................................39
Conditions...............................................................40
Termination and Termination Fees.........................................40
Indemnification..........................................................40
Expenses.................................................................41
Terms of the SCUs.............................................................42
Distributions............................................................42
Liquidation Rights.......................................................43
Exchange and Conversion Rights...........................................43
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Page
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Restrictions on Transfer.................................................43
Redemption...............................................................43
Consent Rights...........................................................43
OTHER RELATED AGREEMENTS......................................................44
Voting and Standstill Agreement..........................................44
Registration Rights Agreement............................................46
Non-Competition Agreement................................................47
Transition Services Agreement............................................47
AMENDMENT TO CBL'S CHARTER....................................................48
The Proposed Amendment...................................................48
Modification of the Share Ownership Limits...............................49
Share Ownership Agreement................................................49
Amendment to Shareholder Rights Agreement................................50
Reasons for the Proposed Amendment and Share Ownership Agreement.........50
SELECTED HISTORICAL FINANCIAL DATA OF CBL.....................................52
SELECTED HISTORICAL FINANCIAL DATA OF THE PROPERTIES..........................54
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA...............................55
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF THE PROPERTIES...............................................61
THE PROPERTIES................................................................62
Malls....................................................................62
Anchors..................................................................65
Mall Stores..............................................................66
Additional Information Regarding Hanes Mall..............................68
Additional Information Regarding the Associated Centers..................69
Mortgages and Other Encumbrances.........................................70
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................71
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS..................................74
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS....................74
INDEPENDENT AUDITORS..........................................................76
WHERE CAN YOU FIND MORE INFORMATION...........................................76
INDEX TO FINANCIAL STATEMENT OF THE PROPERTIES...............................F-1
ANNEXES
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ANNEX A -- Master Contribution Agreement
ANNEX B -- Opinion of Merrill Lynch
ANNEX C -- Terms of Special Common Units of the Operating Partnership
ANNEX D -- Amendment to the Limited Partnership Agreement of the Operating
Partnership
ANNEX E -- Voting and Standstill Agreement
ANNEX F -- Proposed Charter Amendment
ANNEX G -- Alternative Resolutions
ANNEX H -- Share Ownership Agreement
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QUESTIONS AND ANSWERS ABOUT THE TRANSACTION
AND THE CHARTER AMENDMENT
Q: What is the proposed transaction?
A: We have agreed to acquire from Jacobs Realty Investors Limited Partnership
and certain of its affiliates and partners interests in a portfolio of up
to 21 regional malls and two associated centers for an aggregate
consideration of approximately $1.2 billion, comprised of (1) $100 million
in cash, (2) approximately $734 million in primarily fixed-rate
non-recourse mortgage indebtedness and (3) the issuance by our subsidiary
Operating Partnership of approximately 11.71 million SCUs (special common
units), which under certain circumstances may be increased up to 13.95
million SCUs. The SCUs may be exchanged for shares of our common stock on a
one-for-one basis.
Q: Why is the special meeting being called?
A: The rules of the New York Stock Exchange, on which our common stock is
listed, require our stockholders to approve the issuance of the SCUs as
contemplated in the proposed transaction. In addition, in connection with
the transaction, you are being asked to approve an amendment to our
certificate of incorporation.
Q: Who is Jacobs?
A: Jacobs is a self-administered and self-managed, privately held enterprise
organized in 1991 to hold real estate projects developed by Richard E.
Jacobs and David H. Jacobs. The Jacobs brothers were among the earliest
developers of regional mall shopping centers and the enterprise they
established is currently among the largest shopping center owners in the
U.S.
Q: Why are we proposing to acquire this Jacobs property portfolio?
A: We believe that the transaction is an important step for our Company and
will benefit our stockholders for the following reasons:
o the transaction is consistent with our growth strategy of
opportunistically acquiring shopping centers where we believe we can
create significant value through our development, leasing and
management expertise;
o the transaction will make us the owner of the largest number of
shopping malls in the southeast and accelerate our expansion into the
midwest, which will enhance our retailer and customer relationships in
these markets;
o we believe that the transaction will generate both short and long-term
growth in our funds from operations (FFO) and, ultimately, our
dividends;
o the transaction will emphasize our focus on shopping malls and result
in our becoming one of the largest shopping mall REITs in the United
States, which we believe will enhance our presence in the capital
markets; and
o we believe the transaction will result in various leasing and
operational synergies.
1
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Q: Are there any possible risks to the transaction?
A: Although we believe that the transaction will benefit our stockholders, we
have considered the following possible risks:
o as a result of the transaction, our total indebtedness and leverage
ratios will initially increase and our coverage ratios will initially
be reduced. Approximately $367 million of the indebtedness on the
properties being acquired will mature during the next five years;
o we expect to invest $200 million in capital improvements to the
properties over the course of the next four years;
o if the expected benefits of the transaction are not realized, or are
not realized in a timely manner, our FFO growth could be adversely
affected;
o under the terms of the transaction, there will be significant
restrictions on our ability to dispose of or refinance the acquired
properties, which may limit our asset management and financing
flexibility; and
o the acquired properties will have a lower tax basis than our existing
properties, which may in the future reduce or eliminate the return of
capital component of our dividend. This may force us to increase our
distributions of cash to our stockholders, thereby potentially
limiting the amount of cash we might otherwise have been able to
retain for use in growing our business.
We do not, however, believe that these risks outweigh the expected benefits
of the transaction.
Q: What approvals does the transaction require?
A: Your approval of the issuance of the SCUs in the transaction is required.
However, since approval of the issuance is a condition to the transaction,
it is effectively a vote on the approval of the transaction. Additionally,
Jacobs must obtain the consent of certain lenders and partners for the
transaction to close.
Q: What is the expected timing of the transaction?
A: Assuming our stockholders approve the issuance of the SCUs in the
transaction, we expect the transaction to close on ________ __, 2001 with
respect to five "core" properties and at least nine other properties. If
all necessary third party consents have not been obtained for these
properties by such time, Jacobs may delay the initial closing until April
30, 2001. If lender and partner consents are not obtained prior to the
initial closing with respect to the remaining properties, the closings with
respect to these properties will be deferred or they will be dropped from
the transaction.
Q: How will CBL finance the cash portion of the transaction?
A: We have obtained a commitment from Wells Fargo Bank, N.A. to provide us
with an aggregate $212 million loan facility, up to $112 million of which
will be used to finance the cash consideration and related transaction
costs. We expect to use the remaining amount to finance certain expected
capital expenditures and improvements with respect to the properties.
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Q: What are the terms of the securities being issued to Jacobs in the
transaction?
A: The SCUs, or special common units, are limited partnership interests in our
Operating Partnership. Each SCU is initially entitled to receive a
quarterly distribution of $0.725625 (equivalent to an annual distribution
of $2.9025). This quarterly distribution will be increased together with
any increases in our quarterly common stock dividend above $0.725625 per
share. The distribution will be reduced proportionately to the extent by
which our quarterly common stock dividend falls below $0.4375 per share
(equivalent to a $1.75 per share annual dividend) but only if our common
stock dividend has been below $0.4375 per share for more than four
consecutive calendar quarters. Following the third anniversary of their
issuance, the SCUs will be exchangeable by their holders for shares of our
common stock on a one-for-one basis or cash, at our election, subject to
adjustments to reflect stock splits, reverse splits or similar
arrangements. Following the tenth anniversary of their issuance, we will
have the right to convert the SCUs into common units of our Operating
Partnership. See the section entitled "Terms of the SCUs."
Q: What are some of the other principal terms of the transaction?
A: As part of the transaction, we agreed to expand our Board of Directors from
seven to nine members and to nominate two of Jacobs' designees to fill
these places. Jacobs has agreed to a 12-year standstill agreement in which
it agreed not to seek control of our Company, nor to participate in a group
which seeks to acquire such control.
Q: How will I be affected by the transaction?
A: You will continue to own the same number of shares of our common stock that
you owned prior to the acquisition.
Q: What is the proposed charter amendment?
A: In connection with the transaction, we agreed to seek stockholder approval
of an amendment to our certificate of incorporation to enable Jacobs,
following an exchange of its SCUs for shares of our common stock, to own a
higher percentage of our shares than would otherwise be permitted under our
current ownership limits.
Q: What approvals are required of CBL's stockholders?
A: A majority of the shares voted at the meeting (assuming that a quorum of at
least 50% of our outstanding shares is present) must approve the issuance
of the SCUs in the transaction. Two-thirds of our outstanding shares must
vote in favor of the proposed amendment to our certificate of
incorporation.
Q: Is the approval of the amendment a condition to closing?
A: No. However, if our stockholders do not approve the amendment, our Board of
Directors has agreed to modify the share ownership limits in a manner which
does not require a stockholder vote. These modifications would entitle
Jacobs to own a lower percentage of our shares than if the proposed
amendment had been approved but a higher percentage of our shares than
would otherwise be permitted under our current ownership limits. Moreover,
we have agreed to resubmit the amendment to stockholder votes at future
annual meetings. See the section entitled "Amendment to CBL's Charter"
below.
Q: What do I need to do now?
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A: After carefully considering the information contained in this proxy
statement, please complete, date and sign your proxy card. Then mail your
proxy card in the postage paid envelope as soon as possible, so that your
shares may be voted in accordance with your instructions at the special
meeting. Our Board of Directors unanimously recommends that you vote FOR
approval of both proposals.
Q: What do I do if I want to change my vote?
A: You may change your vote:
o by sending a written notice stating that you would like to revoke your
proxy, which must be received by our transfer agent prior to the vote
at the special meeting;
o by signing a later dated proxy card and mailing it promptly so that it
is received by our transfer agent prior to the vote at the special
meeting; or
o by attending the special meeting and voting your shares in person.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Your broker will vote your shares only if you provide instructions on how
to vote to your broker. Please tell your broker how you would like him or
her to vote your shares. If you do not tell your broker how to vote, your
shares will not be voted, which will have the same effect as a vote against
the proposed charter amendment.
Q: What other matters will be voted on at the special meeting?
A: Delaware law and our bylaws do not permit any other matters to be presented
at the special meeting except related procedural matters, including
adjournment of the special meeting to a later date.
Q: Where can I find more information about CBL?
A: We file reports and other information with the Securities and Exchange
Commission. You may read and copy this information at the SEC's public
reference facilities. You may call 1-800-SEC-0330 for information about
these facilities. This information is also available at the Internet site
the SEC maintains at http://www.sec.gov. You may also request copies of
these documents from us. For more information, see the section below
entitled "Where You Can Find More Information."
WHO CAN HELP ANSWER YOUR QUESTIONS?
If you have any questions about the transaction or any of the specific
proposals or would like additional copies of this proxy statement, please call
Georgeson Shareholder Communications, our proxy solicitors, toll-free at
1-800-223-8064 or our investors relations department at (423) 855-0001.
4
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SUMMARY
This summary, together with the "Questions and Answers About the
Transaction and the Proposed Charter Amendment" on pages 1 through 4, highlights
certain of the information which is included in this proxy statement. It may not
contain all of the information that is important to you. We have included page
references directing you to a more complete description of each item presented
in this summary. To understand the proposals and the transaction fully and for a
more detailed description of the legal terms of the acquisition, you should read
carefully this entire proxy statement (including the annexes) and the other
documents to which we have referred you. For more information about CBL, see
"Where You Can Find More Information." The actual terms of the transaction are
summarized in the sections below entitled "The Master Contribution Agreement,"
"Terms of the SCUs," "Other Related Agreements" and "Amendment to CBL's Charter"
and are contained in the Master Contribution Agreement and the other documents
which are included in the annexes to this proxy statement.
All information contained in this proxy statement relating to Jacobs and
its affiliates, its respective actions, purposes, beliefs, intentions or plans
and to the Jacobs properties has been supplied by Jacobs for inclusion in this
proxy statement. While this proxy statement assumes that we will acquire each of
the properties, we may not acquire certain properties if Jacobs fails to satisfy
certain conditions or is unable to obtain certain consents. See "The Master
Contribution Agreement --- Structure of the Acquisition."
The Parties
CBL and the Operating Partnership. We are a self-managed,
self-administered, fully integrated real estate company. We own, operate,
market, manage, lease, expand, develop, redevelop, acquire and finance regional
malls and community and neighborhood centers. We have elected to be taxed as a
real estate investment trust. We currently own interests in 30 enclosed regional
malls, 16 associated centers, each of which is part of a regional shopping mall
complex, and 72 independent community and neighborhood shopping centers.
Additionally, we own two regional malls and two community centers which are
currently under construction and two other malls which are undergoing expansion.
We also own options to acquire certain shopping center development sites.
We conduct substantially all of our business through our subsidiary
Operating Partnership, CBL & Associates Limited Partnership. We currently own an
indirect 67.9% interest in the Operating Partnership, and one of our wholly
owned subsidiaries is its sole general partner. To comply with certain technical
requirements of the Internal Revenue Code which are applicable to REITs, our
property management and development activities, sales of peripheral land and
maintenance operations are carried out through a separate management company.
Our Operating Partnership owns 100% of the preferred stock of the management
company, which entitles the Operating Partnership to 95% of the management
company's earnings, and also owns 5% of its common stock. Several of our
officers and former officers hold the remaining 95% of the management company
common stock.
In order to maintain our qualification as a REIT for federal income tax
purposes, we must distribute each year at least 95% of our taxable income (to be
reduced to 90%, commencing January 1, 2001), computed without regard to net
capital gains or the dividends-paid deduction.
We were organized on July 13, 1993 as a Delaware corporation to acquire
substantially all of the real estate properties owned by our predecessor
company, CBL & Associates, Inc., and its affiliates. In this proxy statement,
the "Company," "CBL," "we" and "our" refer to CBL and its subsidiaries,
including the Operating Partnership. Our principal executive offices are located
at One Park Place, 6148 Lee Highway, Suite 300, Chattanooga, Tennessee
37421-6511, and our telephone number is (423) 885-0001.
5
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Jacobs Parties and Associates. Jacobs is a self-administered and
self-managed, privately held enterprise organized in 1991 to hold real estate
projects developed by Richard E. Jacobs and David H. Jacobs. The Jacobs brothers
were among the earliest developers of regional mall shopping centers and the
enterprise they established is currently among the largest shopping center
owners in the U.S. Jacobs Realty Investors Limited Partnership was formed in
1991 to consolidate the ownership of the Jacobs family within a single entity.
Jacobs Realty, together with the Richard E. Jacobs Revocable Living Trust and
the David H. Jacobs Marital Trust, currently own interests in a portfolio of
regional malls that includes the 21 regional malls and two associated centers to
be acquired by CBL in the transaction. In this proxy statement, the term
"Jacobs" refers to Jacobs Realty Investors Limited Partnership, together with
the two Jacobs trusts mentioned above and certain current and former associates
of Jacobs Realty who own interests in the properties. Jacobs Realty's principal
executive offices are located at 25425 Center Ridge Road, Cleveland, Ohio
44145-4122, and its telephone number is (440) 871-4800.
The Special Meeting (Page 20)
We will hold a special meeting of CBL stockholders on _____ __, 2000 at
10:00 a.m. local time, at the [Chattanooga Marriott at the Convention Center, 2
Carter Plaza, Chattanooga, Tennessee], subject to adjournments or postponements.
At the special meeting, we will ask you to approve the following proposals:
o the issuance by our Operating Partnership of approximately 11.71
million SCUs, which under certain circumstances may be increased up to
13.95 million SCUs, which SCUs may be exchanged on a one-for-one basis
(subject to adjustments) for shares of our common stock or other
interests in our Operating Partnership which are exchangeable for our
common stock. The 13.95 million SCUs will allow us to issue the
necessary number of SCUs to Jacobs as well as to any outside partners
which accept our offers to acquire their interests in the acquired
properties. Under the rules of the New York Stock Exchange, we require
stockholder approval to issue common stock (or securities convertible
into or exchangeable for common stock) representing more than 20% of
our current outstanding common stock. This approval is required for
the transaction to proceed.
o an amendment to our certificate of incorporation (attached as Annex F
to this proxy statement) which, among other things, modifies our share
ownership limits to permit the Lebovitz Group (as defined in our
certificate of incorporation) and the Jacobs Group (as defined in the
proposed amendment) to beneficially or constructively own in the
aggregate up to 37.99% of our outstanding shares of common stock.
Approval of this amendment is not a condition to the closing of the
transaction.
Our Board of Directors has carefully considered the terms and conditions of
the transaction, declared the proposed amendment to be advisable and unanimously
recommends that you vote FOR each proposal.
Record Date; Outstanding Common Stock Entitled to Vote and Quorum (Page 21)
You are entitled to vote at the special meeting if you owned shares of our
common stock at the close of business on ________ __, 2000. You will have one
vote to approve each of the proposals for each share of common stock that you
own on that date. The presence in person or by proxy of holders of record of a
majority of the outstanding shares of our common stock is required for a quorum
to transact business at a special meeting, but if a quorum should not be
present, the special meeting may be adjourned from time to time until a quorum
is obtained.
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On ____________, 2000, _________ shares of our common stock were
outstanding and held by __ record holders on behalf of approximately ______
beneficial holders.
Votes Required (Page 21)
A majority of the shares voted at the meeting (assuming that a quorum of at
least 50% of our outstanding shares is present) must approve the issuance of the
SCUs (and their underlying shares of common stock) in the transaction.
Two-thirds of our outstanding shares must vote in favor of the proposed
amendment to our certificate of incorporation.
We will generally not count abstentions and broker non-votes for any
purpose, except that abstentions with respect to the second proposal will have
the same effect as negative votes. Unless you indicate contrary instructions on
the accompanying proxy, the shares represented by the proxy will be voted in
accordance with the recommendations of our Board of Directors.
Our Reasons for the Transaction and Our Recommendation (Pages 25-27)
We believe that the transaction is an important step for our Company and
will benefit our stockholders for the following reasons:
o the transaction is consistent with our growth strategy of
opportunistically acquiring shopping centers where we believe we can
create significant value through our development, leasing and
management expertise;
o the transaction will make us the owner of the largest number of
shopping malls in the southeast and accelerate our expansion into the
midwest, which will enhance our retailer and customer relationships in
these markets;
o we believe that the transaction will generate both short and long-term
growth in our funds from operations (FFO) and, ultimately, our
dividends;
o the transaction will emphasize our focus on shopping malls and result
in our becoming one of the largest shopping mall REITs in the United
States, which we believe will enhance our presence in the capital
markets; and
o we believe the transaction will result in various leasing and
operational synergies.
We have considered possible risks including the following:
o as a result of the transaction, our total indebtedness and leverage
ratios will initially increase and our coverage ratios will initially
be reduced. Approximately $367 million of the mortgage indebtedness on
the properties being acquired will mature during the next five years;
o we expect to invest $200 million in capital improvements to the
properties over the course of the next four years;
o if the expected benefits of the transaction are not realized, or are
not realized in a timely manner, our growth in FFO (funds from
operations) could be adversely affected;
7
<PAGE>
o under the terms of the transaction, there will be significant
restrictions on our ability to dispose of or refinance the acquired
properties which may limit our asset management and financing
flexibility; and
o the acquired properties will have a lower tax basis than our existing
properties, which may in the future reduce or eliminate the return of
capital component of our dividend. This may force us to increase our
distributions of cash to our stockholders, thereby potentially
limiting the amount of cash we might otherwise have been able to
retain for use in growing our business.
Your Board of Directors considered the transaction and the terms of the
Master Contribution Agreement, the SCUs and related agreements and concluded
that the transaction was fair and in the best interests of our Company and its
stockholders.
Opinion of Merrill Lynch (Pages 27-33)
Merrill Lynch, Pierce, Fenner & Smith Incorporated, an independent
investment banking firm, rendered its opinion to our Board of Directors to the
effect that, as of the date of its opinion and based upon and subject to the
assumptions and limitations described in Merrill Lynch's written opinion, the
aggregate consideration to be paid by us in the transaction was fair to us from
a financial point of view. Merrill Lynch also acted as our financial advisor in
the negotiations with Jacobs concerning the price and structure of the
transaction. We have attached the opinion of Merrill Lynch as Annex B to this
proxy statement. Please read it carefully.
The Acquisition and the Master Contribution Agreement (Pages 36-41)
We have agreed to acquire Jacobs' interests in a portfolio of up to 21
regional malls and two associated centers for an aggregate consideration of
approximately $1.2 billion. The consideration is comprised of:
o $100 million in cash;
o approximately $734 million in primarily fixed-rate non-recourse
mortgage indebtedness; and
o the issuance by the Operating Partnership of approximately 11.71
million SCUs (which may be increased under certain circumstances up to
13.95 million SCUs).
The consideration was determined based on arm's length negotiations between
us and Jacobs, taking into account, among other things, Jacobs' tax and estate
planning considerations and our goal of achieving short and long-term growth in
our FFO (funds from operations) and, ultimately, our dividends to our
stockholders. The number of SCUs to be issued to Jacobs will be reduced if
certain of the properties are ultimately not acquired from Jacobs, but will not
vary as a result of changes in the market price of our common stock.
Outside Partners. We have agreed to extend offers to acquire the interests
held by outside partners in certain of the properties. If all of such offers
were to be accepted, the aggregate consideration would be increased by
approximately $131 million, with the increased aggregate consideration to be
comprised of (1) approximately $84 million of property indebtedness,
representing the proportionate share of such indebtedness associated with the
outside partners' interests being acquired, and (2) the issuance by our
Operating Partnership of up to an additional 1.5 million SCUs.
8
<PAGE>
Consideration Adjustments. Jacobs has the right to reallocate up to $10
million of the cash consideration in exchange for SCUs based on a price of
$32.25 per SCU. Additionally, certain adjustments to the consideration payable
which may result from debt refinancings and amortization will be settled by
increasing or decreasing the number of SCUs to be issued to Jacobs.
Tax Protection. We have agreed not to dispose of any of the acquired
properties in a transaction that would require Jacobs to recognize or be
allocated gain for federal income tax purposes until the twelfth anniversary of
the initial closing. We have also agreed to maintain specified minimum amounts
of non-recourse indebtedness on the acquired properties (or, in the event of a
shortfall, to provide Jacobs with alternative "bottom guaranty" arrangements)
until such anniversary and as long thereafter as is reasonably possible.
Conditions to Consummating the Transaction. The consummation of the
transaction is subject to the satisfaction of certain conditions by Jacobs,
including its obtaining consents from various parties, principally certain
outside partners which own interests in the properties as well as lenders who
hold mortgages on certain of the properties.
The consummation of the transaction is further subject to our satisfying
certain conditions, principally our obtaining stockholder approval of the
issuance of the SCUs in the transaction. We have agreed to seek our stockholder
approval of the proposed amendment to our certificate of incorporation; however,
such approval is not a condition to consummation of the transaction.
Each of the parties is also subject to closing conditions customary for
transactions of this nature.
Termination and Deferred Closings. We are not required to close under the
transaction if Jacobs is unable to satisfy its closing conditions with respect
to five "core" properties (Hanes Mall, Fayette Mall, West Towne Mall, Brookfield
Mall and Cary Towne Center) and at least nine of the other properties. If Jacobs
is unable to satisfy its conditions for this initial closing on ___________,
2001 (assuming approval of the issuance of the SCUs in the transaction by our
stockholders), Jacobs has the right to extend the initial closing until April
30, 2001. If Jacobs is unable to satisfy its conditions for the initial closing
by April 30, 2001, we may elect to terminate the transaction. Additionally, we
may terminate the transaction if Jacobs materially breaches any of its covenants
at any time, including its covenant not to actively attempt to sell any of the
properties to other persons or entities.
If Jacobs is unable to satisfy its conditions with respect to a particular
property by the initial closing, the aggregate consideration will be reduced by
an established release price, and the closing with respect to that property will
be deferred. If the closing with respect to this property does not occur by July
31, 2001 because of a failure to obtain required consents, or by October 31,
2001 for any other reason, that property will be dropped from the transaction.
If we are unable to obtain our stockholder approval of the issuance of the
SCUs in the transaction by January 20, 2001, we may extend the initial closing
until May 30, 2001, following which Jacobs may terminate the transaction if it
has not closed. Additionally, Jacobs may terminate the transaction if we
materially breach any of our representations or covenants, including our
undertaking not to engage in certain material transactions prior to the initial
closing.
Multiple Contributions. To preserve certain beneficial tax treatment of our
interests in properties which we will not wholly own, we are only permitted to
acquire a percentage interest in such properties, with the percentage interest
to be acquired by us to be less than the amount which would cause a deemed
termination of the property owner for tax purposes. Generally, we will acquire a
48% interest in the property owner at the initial closing and will hold an
option to acquire the balance of the Jacobs' interest
9
<PAGE>
15 months later. Jacobs will have a similar right to require us to purchase the
balance of its interest 15 months later. At the initial closing, we will acquire
all of Jacobs' voting and management rights, if any, in the property owner. At
the initial closing and each option closing, if such option is exercised, we
will pay the proportionate share of the cash consideration and SCUs allocated to
such property based on the interest being conveyed at that closing.
Termination Fees and Other Arrangements. If we terminate the transaction
because Jacobs is unable to satisfy its conditions for the initial closing or
otherwise breaches the agreement prior to the initial closing, Jacobs is
required to pay us an expense reimbursement of $15 million. If Jacobs terminates
because our stockholders have not approved the issuance of the SCUs, we are
required to pay Jacobs an expense reimbursement of $2.5 million. If Jacobs
terminates because we otherwise breach the agreement or fail to satisfy our
closing conditions prior to the initial closing, we are required to pay Jacobs
an expense reimbursement of $15 million. If the termination occurs after the
initial closing, the expense reimbursement liability of each party is increased
by approximately $1.4 million for each property subject to a deferred closing up
to a maximum termination fee of $25 million.
Terms of the SCUs (Pages 42-44)
The SCUs, or special common units, are limited partnership interests in our
Operating Partnership. Each SCU is initially entitled to receive a quarterly
distribution of $0.725625 (equivalent to an annual distribution of $2.9025).
This quarterly distribution will be increased together with any increases in our
quarterly common stock dividend above $0.725625 per share. The distribution will
be reduced proportionately to the extent by which our quarterly common stock
dividend falls below $0.4375 per share (equivalent to a $1.75 per share annual
dividend) but only if our common stock dividend has been below $0.4375 per share
for more than four consecutive calendar quarters. Following the third
anniversary of their issuance, the SCUs will be exchangeable by their holders
for shares of our common stock on a one-for-one basis or cash, at our election,
subject to adjustments to reflect stock splits, reverse splits or similar
arrangements. Following the tenth anniversary of their issuance, we will have
the right to convert the SCUs into common units of our Operating Partnership.
Other Related Agreements (Pages 44-47)
Jacobs' Board Representation. We have agreed, effective as of the initial
closing, to expand our Board of Directors from seven to nine members and to
nominate two of Jacobs' designees as members of our Board, one of whom must
qualify as "independent" under our certificate of incorporation. Jacobs will
continue to be entitled to nominate two Board members until the Jacobs family
beneficially owns fewer than 6.78 million SCUs and shares of common stock,
following which Jacobs will be entitled to nominate only one Board member.
Jacobs will no longer be entitled to nominate any Board members if the Jacobs
family beneficially owns fewer than 3.34 million SCUs and shares of common
stock. Certain of our executive officers and an affiliate of the Lebovitz family
have agreed to vote their shares in favor of Jacobs' designees until the twelfth
anniversary of the initial closing.
Voting and Standstill Arrangements. Jacobs Realty, the Jacobs trusts and
Martin J. Cleary, Jacobs Realty's chief operating officer, have generally agreed
not to:
o acquire beneficial ownership of any of our voting securities upon an
exchange of the SCUs or other interests in our Operating Partnership;
o solicit proxies or otherwise participate in an election contest with
respect to our Company;
10
<PAGE>
o seek to advise, encourage or influence any person (other than a Jacobs
associate or family member) with respect to the voting of our stock
for the purpose of exerting a controlling influence over our
management, Board of Directors or policies; or
o participate in or encourage the formation of any group which seeks to
affect control of our Company.
These standstill agreements continue until the twelfth anniversary of the
initial closing, subject to early termination under certain circumstances.
Jacobs Realty, the Jacobs trusts and Mr. Cleary have also agreed until the
twelfth anniversary of the initial closing to vote their shares in favor of the
election of nominees to our Board of Directors who are proposed by our Board and
who are running unopposed and uncontested.
Registration Rights Agreement. At the initial closing, we will enter into a
Registration Rights Agreement with Jacobs and the other holders of the SCUs
which grants them registration rights with respect to the shares of common stock
received in exchange for their SCUs. In general, we will bear all fees, costs
and expenses of such registrations (other than transfer taxes, underwriting
discounts and selling commissions applicable to sales of the shares and all fees
and disbursements of counsel for the holders).
Non-Competition Agreement. Subject to certain exceptions, Richard E. Jacobs
has agreed not to acquire, develop, manage, own, lease or invest in regional
mall shopping centers within 15 miles of certain "core" properties (Hanes Mall,
Fayette Mall, West Towne Mall, Brookfield Mall and Cary Towne Center) or within
12 miles of the other properties acquired from Jacobs or any of our existing
malls. This agreement will remain in effect until the earlier to occur of (1)
the tenth anniversary of the closing or (2) Jacobs ceases to be entitled to
nominate any members to our Board of Directors.
Amendments to our Certificate of Incorporation (Pages 48-51)
We have agreed to seek stockholder approval of an amendment to our
certificate of incorporation which, among other things, permits the Lebovitz
Group (as defined in our certificate of incorporation) and the Jacobs Group (as
defined in the proposed amendment) to beneficially and constructively own in the
aggregate 37.99% of our equity stock. This limit was designed to maximize the
permitted ownership of our common stock by the Jacobs Group, while ensuring that
we would continue to comply with the REIT rules and providing us with sufficient
flexibility to issue additional Operating Partnership interests exchangeable for
common stock in future transactions. Currently, our certificate of incorporation
permits the Lebovitz Group to beneficially and constructively own 23% of our
equity stock while generally limiting other persons to ownership of 6% of our
equity stock. The proposed charter amendment is designed to permit the Lebovitz
Group to own a higher percentage of our shares than would otherwise be permitted
under our current ownership limits. Approval of the amendment is not a condition
to closing of the transaction; however, in the event the amendment is not
adopted, our Board of Directors has resolved to modify the share ownership
limits in a manner which does not require a stockholder vote but which would
entitle the Lebovitz Group and the Jacobs Group to own in the aggregate 31.99%
of our equity stock. Moreover, if the amendment is not approved, we have agreed
to resubmit the amendment to a stockholder vote at our next three annual
meetings of stockholders.
Additionally, at the initial closing, we will enter into a Share Ownership
Agreement with representatives of the Lebovitz Group and the Jacobs Group
pursuant to which:
o the Lebovitz Group will be permitted to beneficially and
constructively own up to approximately 7.96 million shares of our
common stock (6.3 million shares if the
11
<PAGE>
proposed amendment is not adopted), subject to adjustments for
increases or decreases to our outstanding common share capital; and
o the Jacobs Group will be permitted to beneficially and constructively
own up to 6.35 million shares of our common stock (4.69 million shares
if the proposed amendment is not adopted), subject to adjustments for
increases or decreases to our outstanding common share capital.
The amendment to our certificate of incorporation, if adopted, may
generally not be further amended or modified in a manner adverse to the Lebovitz
Group or the Jacobs Group except with the unanimous prior approval of our Board
of Directors.
Financing of the Transaction (Pages 33-34)
We have obtained a commitment from Wells Fargo Bank, N.A. to provide us
with an aggregate $212 million loan facility, up to $112 million of which will
be a term loan to finance the cash consideration and related transaction costs.
The remaining amount will be a revolving loan which we expect to use to finance
certain expected capital expenditures and improvements with respect to the
properties. The loan facility will have an initial term of two years, which we
may extend for up to three additional years. The loan facility will require
payments of interest only during the first two loan years, but will require
scheduled amortization payments during each year that the loan repayment has
been extended. The loan facility will bear interest at a rate equal to the
bank's base rate or a LIBOR-based rate, at our option. The loan facility is
expected to be secured, among other things, by a pledge of our interests in the
entities owning the properties but not by a mortgage of the properties
themselves.
The Properties (Pages 62-71)
For a list of the properties to be acquired in the transaction, including
the percentage interest to be acquired in each property, and related
statistical, financial and other information relating to the properties, see
"The Properties."
Share Ownership by Management (Pages 71-74)
As of October 17, 2000, our directors, executive officers and vice
presidents were entitled to vote 1,874,821 shares of our common stock. These
shares represented approximately 7.5% of our outstanding shares of common stock.
Our directors, executive officers and vice presidents have agreed to vote their
shares in favor of the proposals. In addition to their shares of our common
stock, as of October 17, 2000, our directors, executive officers and vice
presidents held (1) stock options to acquire 1,776,550 shares of our common
stock, including stock options to acquire 1,093,500 shares that are currently
exercisable or are exercisable within the next 60 days, and (2) interests in the
Operating Partnership exchangeable, subject to the Company's ownership limits,
for 8,600,159 shares of our common stock.
Interests of Certain Persons
Under the proposed charter amendment, the Lebovitz Group will be permitted
to own shares of our common stock in excess of what is currently permitted under
our certificate of incorporation. See "Amendment to CBL's Charter -- Reasons for
the Proposed Amendment and Share Ownership Agreement."
12
<PAGE>
Federal Income Tax Consequences of the Acquisition (Page 34)
For U.S. federal income tax purposes, no income, gain or loss will be
recognized by our stockholders in connection with the acquisition. We expect to
continue to operate after the acquisition in a manner that will allow us to
continue to qualify as a REIT, but cannot assure you that we will be able to
maintain this qualification.
In general, we will assume the tax basis of the properties currently used
by Jacobs, which tax basis is considerably lower than the consideration being
paid by us for the properties. Accordingly, these properties will generate lower
depreciation deductions in the future, and as a result our taxable income
relative to our cash flow will be greater than if we had acquired the properties
for cash. Since under the Internal Revenue Code we are required to distribute to
our stockholders at least 95% of our taxable income (to be reduced to 90%,
commencing January 1, 2001) to maintain our qualification as a REIT, the low tax
basis in the properties may have the effect in the future of increasing the cash
amounts we are required to distribute as dividends, thereby potentially limiting
the amount of cash we might otherwise have been able to retain for use in
growing our business. This low tax basis may also have the effect of reducing or
eliminating the portion of distributions made by us that are treated as a
non-taxable return of capital.
13
<PAGE>
Summary Historical and Pro Forma Financial Data
(in thousands, except per share data)
Summary Historical Financial Data of CBL
The summary selected historical condensed consolidated financial data of
our Company for the five years ended December 31, 1999 set forth below have been
derived from audited financial statements. The selected historical condensed
consolidated financial data of our Company for the six months ended June 30,
2000 and June 30, 1999 set forth below have been derived from unaudited
financial statements. This condensed consolidated financial data should be read
in conjunction with the historical consolidated financial statements and related
notes thereto contained in our Annual Reports on Form 10-K and Quarterly Reports
on Form 10-Q, which are incorporated by reference in this proxy statement.
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
------------------------ ---------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total Revenues............ $174,866 $148,739 $317,603 $254,640 $177,604 $146,805 $131,727
Total Expenses............ 137,684 117,969 250,139 203,001 135,200 111,012 104,128
-------- -------- -------- -------- -------- -------- --------
Income From Operations.... 37,182 30,770 67,464 51,639 42,404 35,793 27,599
Gain on Sales of Real
Estate Assets......... 9,330 8,568 8,357 4,183 6,040 13,614 2,213
Equity in Earnings of
Unconsolidated Affiliates 1,651 1,741 3,263 2,379 1,916 1,831 1,450
Minority Interest in
Earnings:
Operating Partnership (14,358) (12,115) (23,264) (16,258) (13,819) (15,468) (10,527)
Shopping center
properties........... (726) (662) (1,225) (645) (508) (527) (386)
-------- -------- -------- -------- -------- -------- --------
Income Before Extraordinary
Item................... 33,079 28,302 54,595 41,298 36,033 35,243 20,349
Extraordinary Loss on
Extinguishment of Debt. (137) -- -- (799) (1,092) (820) (326)
-------- -------- -------- -------- -------- -------- --------
Net Income................ 32,942 28,302 54,595 40,499 34,941 34,423 20,023
Preferred Dividends....... (3,234) (3,234) (6,468) (3,234) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net Income Available to
Common Stockholders.... $29,708 $25,068 $48,127 $37,265 $34,941 $34,423 $20,023
Basic Earnings per Common
Share:
Income before
extraordinary item... $1.20 $1.02 $1.95 $1.58 $1.51 $1.69 $1.14
======== ======== ======== ======== ======== ======== ========
Net income........... $1.20 $1.02 $1.95 $1.55 $1.46 $1.65 $1.12
======== ======== ======== ======== ======== ======== ========
Weighted average
common shares
outstanding.......... 24,790 24,602 24,647 24,079 23,895 20,890 17,827
Diluted Earnings per Common
Share:
Income before
extraordinary item... $1.20 $1.01 $1.94 $1.56 $1.49 $1.68 $1.14
======== ======== ======== ======== ======== ======== ========
Net income........... $1.19 $1.01 $1.94 $1.53 $1.45 $1.64 $1.12
======== ======== ======== ======== ======== ======== ========
14
<PAGE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
------------------------ ---------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Weighted average
common shares and
potential dilutive
common shares
outstanding.......... 24,905 24,835 24,834 24,340 24,151 21,022 17,856
Dividends declared per
share................ -- -- $1.95 $1.86 $1.77 $1.68 $1.59
June 30, December 31,
--------------------- ---------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net investment in real
estate assets........ $1,990,365 $1,863,327 $1,960,554 $1,805,788 $1,142,324 $987,260 $758,938
Total assets......... 2,067,599 1,916,068 2,018,838 1,855,347 1,245,025 1,025,925 814,168
Total liabilities.... 1,444,352 1,322,622 1,424,989 1,208,204 741,413 590,295 392,754
Minority interest.... 179,171 169,330 170,750 168,040 123,897 114,425 113,692
Stockholders' equity. 441,456 419,310 419,887 415,782 330,853 272,804 270,892
Six Months Ended June 30, Year Ended December 31,
------------------------ ---------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Cash flows provided by
(used in):
Operating activities. $59,592 $52,754 $114,196 $89,123 $60,852 $54,789 $28,977
Investing activities. (61,497) (77,533) (212,140) (571,332) (245,884) (218,016) (99,690)
Financing activities. 3,998 27,163 99,191 484,912 183,858 164,496 71,689
Funds From
Operations (FFO)
(1) of the Operating
Partnership........ 64,416 54,026 117,947 93,614 76,514 63,044 52,212
FFO applicable to the
Company............ 43,426 36,411 79,495 65,026 54,833 43,498 34,218
----------
(1) We define FFO as net income (loss) before depreciation of real estate assets, other non-cash items, gains or
losses on sales of real estate assets and gains or losses on investments in marketable securities. FFO also
includes the Company's share of FFO in unconsolidated properties and excludes minority interests' share of
FFO in consolidated properties. The costs of interest rate caps and finance costs on our lines of credit are
amortized and included in interest expense and, therefore, reduce FFO. FFO does not represent cash flow from
operations as defined by accounting principles generally accepted in the United States and is not necessarily
indicative of the cash available to fund all cash requirements.
</TABLE>
15
<PAGE>
Summary Historical Financial Data of the Properties
The summary selected financial information for the acquired properties set
forth below was derived from financial information prepared in compliance with
Rule 3-14 of Regulation S-X of the Securities and Exchange Commission. As such,
certain revenues and expenses, which may not be directly attributable to the
revenues and expenses expected to be incurred in the future operations of the
acquired properties, have been excluded. Revenues exclude interest income and
realized gains and losses on marketable securities. Expenses excluded consist of
management, leasing, interest, income taxes, depreciation and amortization and
other costs not directly attributable to the future operations of the acquired
properties.
The results set forth below include properties that will be fully
consolidated as well as properties to be accounted for under the equity method
of accounting. Under the equity method of accounting revenues and expenses are
excluded from the consolidated results with only the owned share of those
properties net income recorded as equity in earnings of unconsolidated
affiliates.
Except for the information relating to the year ended December 31, 1999,
which was derived from the audited financial statement which is included in this
proxy statement and was prepared in compliance with Rule 3-14 of Regulation S-X,
the information set forth below was derived from unaudited financial
information.
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
------------------------ ---------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Certain Revenues.................. $ 99,587 $ 98,621 $204,464 $197,687 $188,163 $188,787 $187,678
Certain Expenses.................. 32,902 32,393 65,952 62,471 60,677 59,052 59,953
-------- -------- -------- -------- -------- -------- --------
Certain Revenues in Excess of
Certain Expenses.................. $ 66,685 $ 66,228 $138,512 $135,216 $127,486 $129,735 $127,725
======== ======== ======== ======== ======== ======== ========
Jacobs Share of Certain Revenues
in Excess of Certain Expenses.... $ 56,528 $ 55,789 $116,967 $114,450 $107,935 $110,192 $108,333
======== ======== ======== ======== ======== ======== ========
</TABLE>
16
<PAGE>
Summary Pro Forma Financial Data of CBL and the Properties
The following summary unaudited pro forma consolidated financial statements
are based on the historical consolidated financial statements of our Company and
the properties, consolidated and adjusted to give effect to the acquisition and
the transactions contemplated thereby (including any related financing), as
described in the notes to the pro forma consolidated financial statements, which
are included in this proxy statement. Certain amounts in the financial
statements of the properties have been reclassified to conform to our
presentation. These statements should be read in conjunction with the historical
financial statements and notes thereto of the Company and the properties which
are included or incorporated by reference in this proxy statement.
The unaudited pro forma consolidated statements of earnings for the six
months ended June 30, 2000 and for the year ended December 31, 1999 present the
results for our Company and the properties as if the acquisition had occurred at
the beginning of the earliest period presented. The accompanying unaudited pro
forma consolidated balance sheet as of June 30, 2000 gives effect to the
acquisition as of that date. The pro forma financial statements assume that the
closing of all interests in the properties occurs at such time, rather than over
a period of time as contemplated for certain properties. See "The Master
Contribution Agreement -- Structure of the Acquisition -- Multiple
Contributions."
The pro forma adjustments are based upon preliminary estimates, information
currently available and certain assumptions that management believes are
reasonable under the circumstances, including, among other things, the
acquisition of all 21 of the regional malls and the two associated centers
(other than the interests of the non-Jacobs partners). However, under certain
circumstances certain properties may be excluded from the acquisition and the
aggregate consideration adjusted accordingly. See "The Master Contribution
Agreement -- Structure of the Acquisition -- Consideration Allocations and
Adjustments."
CBL's actual consolidated financial statements will reflect the effects of
the acquisition on and after the applicable closing date rather than the dates
indicated above. The unaudited pro forma consolidated financial statements
neither purport to represent what the consolidated results of operations or
financial condition actually would have been had the acquisition and related
transactions in fact occurred on the assumed date, nor do they purport to
project the consolidated results of operations and financial position for any
future period.
The acquisition will be accounted for by the purchase method and,
therefore, assets and liabilities of the properties will be recorded at their
fair values. Allocations included in the pro forma statements are based on
analysis which is not yet completed. Accordingly, the final value of the
aggregate consideration and its allocation may differ, perhaps significantly,
from the amounts included in these pro forma statements.
17
<PAGE>
<TABLE>
CBL & ASSOCIATES PROPERTIES, INC.
SUMMARY PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Revenues:
Minimum rents............... $161,154 $302,316
Percentage rents............ 8,118 14,992
Other rents................. 3,177 6,795
Tenant reimbursements....... 72,633 134,886
Management development and
leasing fees.............. 2,892 9,521
Interest and other.......... 3,005 4,836
------- --------
Total revenues........... 250,979 473,346
------- --------
Expenses:
Property operating.......... 39,646 76,617
Depreciation and amortization 40,720 75,464
Real estate taxes........... 20,228 38,484
Maintenance and repairs..... 16,852 32,184
General and administrative.. 9,090 16,214
Interest.................... 79,844 147,160
Other....................... 31 1,674
------- --------
Total expenses............ 206,411 387,797
------- --------
Income from operations............. 44,568 85,549
Gain on sales of real estate assets 9,330 8,357
Equity in earnings of unconsolidated
affiliates.................. 3,660 8,683
Minority interest in earnings:
Operating partnership....... (26,159) (45,438)
Shopping center properties.. (912) (1,813)
-------- ---------
Income before extraordinary item... 30,487 55,338
Extraordinary loss on extinguishment
of debt..................... (137) -
------- --------
Net income......................... 30,350 55,338
Preferred dividends................ (3,234) (6,468)
------- --------
Net income available to common
shareholders................ $27,116 $48,870
======= ========
Basic Per Share Data:
Income before extraordinary
item........................ $1.10 $1.98
------- --------
Extraordinary loss on
extinguishment of debt.... (0.01) 0.00
------- --------
Net income.................. $1.09 $1.98
======= ========
Weighted average common shares
outstanding............... 24,790 24,647
Diluted per share data:
Income before extraordinary
item........................ $1.09 $1.97
======= ========
Extraordinary loss on
extinguishment of debt.... 0.00 0.00
------- --------
Net income.................. $1.09 $1.97
======= ========
Weighted average common shares
and potential dilutive
common shares outstanding. 24,905 24,834
</TABLE>
18
<PAGE>
<TABLE>
CBL & ASSOCIATES PROPERTIES, INC.
SUMMARY PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 2000
(in thousands)
<CAPTION>
Pro Forma
Consolidated
------------
<S> <C>
ASSETS
REAL ESTATE ASSETS:
Land................................... $ 488,312
Building and improvements.............. 2,723,221
-----------
3,211,533
Less: accumulated depreciation.... (249,064)
-----------
2,962,469
Developments in progress............... 108,192
-----------
Net investment in real estate
assets............................. 3,070,661
CASH AND CASH EQUIVALENTS................... 16,167
CASH IN ESCROW.............................. 14,543
RECEIVABLES:
Tenant, net of allowance for doubtful
accounts of $1,854..................... 23,538
Other.................................. 2,156
INVESTMENT IN UNCONSOLIDATED AFFILIATES..... 90,692
MORTGAGE NOTES RECEIVABLE................... 10,922
OTHER ASSETS................................ 20,108
-----------
$ 3,248,787
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
MORTGAGE AND OTHER NOTES PAYABLE............ $ 2,168,629
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES.... 63,792
-----------
Total liabilities.................. 2,232,421
-----------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST........................... 472,367
-----------
SHAREHOLDERS' EQUITY:
Preferred stock........................ 29
Common stock........................... 250
Additional paid-in capital............. 562,930
Accumulated deficit.................... (19,210)
-----------
Total shareholders' equity......... 543,999
-----------
$ 3,248,787
===========
</TABLE>
19
<PAGE>
INFORMATION CONCERNING THE SPECIAL MEETING
Time, Date, Place and Purpose of the Special Meeting
We are sending you this proxy statement in connection with the solicitation
of proxies by our Board of Directors for use at our special meeting of
stockholders that has been called to vote on the proposals described below,
including any meeting resulting from adjournments or postponements of the
special meeting. We are seeking your approval of these proposals in connection
with our acquisition of properties from Jacobs.
o The New York Stock Exchange rules require stockholder approval for a
listed company to issue common stock, or securities convertible into
or exchangeable for shares of common stock, if the number of shares of
common stock to be issued, or which would be issued on conversion or
exchange of the securities, is 20% or more of the number of shares of
common stock outstanding before the issuance. Therefore, we are
seeking your approval for the issuance by our Operating Partnership of
approximately 11.71 million SCUs, which under certain circumstances
may be increased up to 13.95 million SCUs, which SCUs may be exchanged
on a one-for-one basis (subject to adjustments) for shares of our
common stock or other common interests in our Operating Partnership
which are exchangeable for our common stock. The 13.95 million SCUs
will allow us to issue the necessary number of SCUs to Jacobs as well
as to any outside partners which accept our offers to acquire their
interests in the acquired properties. This stockholder approval is
required for the transaction to proceed.
o In connection with the transaction, we have agreed to seek your
approval of an amendment to our certificate of incorporation which,
among other things, permits the Lebovitz Group (as defined in our
certificate of incorporation) and the Jacobs Group (as defined in the
proposed amendment) to beneficially and constructively own in the
aggregate 37.99% of our equity stock. This limit was designed to
maximize the permitted ownership of our common stock by the Jacobs
Group, while ensuring that we will continue to comply with the REIT
rules and providing us with sufficient flexibility to issue additional
Operating Partnership interests exchangeable for common stock in
future transactions. Currently, our certificate of incorporation
permits the Lebovitz Group to beneficially and constructively own 23%
of our equity stock while generally limiting other persons to
ownership of 6% of our equity stock. The proposed amendment is
designed to permit the Jacobs Group to own a higher percentage of our
shares than would otherwise be permitted under our current ownership
limits. Approval of the amendment is not a condition to closing of the
transaction; however, in the event the amendment is not adopted, our
Board of Directors has resolved to modify the share ownership limits
in a manner which does not require a stockholder vote but which would
entitle the Lebovitz Group and the Jacobs Group to own in the
aggregate 31.99% of our equity stock. Moreover, if the amendment is
not approved, we have agreed to submit the amendment to a stockholder
vote at our next three annual meetings of stockholders.
Our Board of Directors has carefully considered the terms and conditions of
the transaction, declared the proposed amendment to be advisable and unanimously
recommends that you vote FOR each proposal.
We will hold the special meeting on ______ __, 2000 at 10:00 a.m. local
time, at the [Chattanooga Marriott at the Convention Center, 2 Carter Plaza,
Chattanooga, Tennessee].
20
<PAGE>
Record Date; Outstanding Common Stock Entitled to Vote; Quorum
The record date for the special meeting has been fixed as the close of
business on ________ __, 2000. Only holders of record of our common stock on the
record date are entitled to notice of and to vote at the special meeting. You
will have one vote on each of the proposals you are being asked to consider and
vote on at the special meeting for each share of common stock that you own on
that date.
On the record date, ___________shares of our common stock were outstanding
and were held by ___ record holders on behalf of approximately ______ beneficial
holders. The presence in person or by proxy of the holders of a majority of our
shares of outstanding common stock will constitute a quorum for the transaction
of business at the special meeting. If a quorum is not present at the special
meeting, or a quorum is present but additional time is desired to solicit
proxies, we expect that the meeting will be adjourned or postponed.
Votes Required
A majority of the shares voted at the meeting (assuming that a quorum of at
least 50% of our outstanding shares is present) must approve the issuance of the
SCUs in the transaction. Two-thirds of our outstanding shares must vote in favor
of the proposed amendment to our certificate of incorporation for the amendment
to be approved.
Voting of Proxies
You may vote your shares by attending the special meeting and voting your
shares in person or by completing, dating, signing and mailing the enclosed
proxy card in the enclosed, postage prepaid envelope. All proxy cards that are
properly executed and returned prior to the special meeting, and not properly
revoked, will be voted at the special meeting (or at any meeting resulting from
an adjournment or postponement of the special meeting) in accordance with the
instructions contained on the proxy card. If you sign a proxy card and return it
without instructions, the shares represented by the proxy will be voted FOR
approval of each of the proposals.
If your shares are held in the name of a broker, bank or other record
holder, you must either direct the record holder of your shares as to how to
vote your shares or obtain a proxy from the record holder to vote at the special
meeting.
Under applicable rules of the New York Stock Exchange, brokers who hold
shares in street name for customers are prohibited from voting, or submitting a
proxy to vote, those customers' shares in the absence of specific instructions
from the customer. A broker's failure to vote because of the absence of customer
instructions is commonly referred to as a "broker non-vote".
We will generally not count abstentions and broker non-votes for any
purpose, except that abstentions with respect to the proposal to amend our
certificate of incorporation will have the same effect as negative votes. Unless
you indicate contrary instructions on the accompanying proxy card, the shares
represented by your proxy will be voted in accordance with the recommendations
of our Board of Directors.
Delaware law and our bylaws do not permit any matters to be presented at
the special meeting other than those described in this proxy statement and
procedural matters relating to the meeting.
21
<PAGE>
Revoking Proxies
You may revoke your proxy at any time prior to the time your proxy is voted
at the special meeting by:
o giving written notice to our transfer agent, as provided below;
o mailing a signed, later dated proxy card that is received by our
transfer agent before the vote is taken at the special meeting; or
o voting in person at the special meeting.
Your attendance at the special meeting will not in and of itself constitute
a revocation of a proxy which you previously submitted.
Your written notice of revocation of your proxy must be sent so as to be
delivered before the vote is taken at the special meeting to the following
address:
CBL & Associates Properties, Inc.
One Park Place
6148 Lee Highway, Suite 300
Chattanooga, Tennessee 37421-6511
Attention: Corporate Secretary
If you require assistance in changing or revoking a proxy, please call or
write Georgeson Shareholder Communications, our proxy solicitors, toll-free at
1-800-223-8064 or our investors relations department at (423) 855-0001.
Proxy Solicitation
We will bear the expense of preparing, printing and mailing this proxy
statement and proxy card. In addition to the use of the mails, our directors,
officers and regular employees may solicit proxies, without additional
compensation, by personal interviews, written communications, telephone,
telegraph or facsimile transmission or via the Internet or other means of
communication. We also will request brokerage firms, nominees, custodians and
fiduciaries to forward proxy materials to beneficial owners and will, upon
request, reimburse those record holders for their costs of forwarding the
materials at customary rates.
We have retained Georgeson Shareholder Communications to assist in the
solicitation of proxies. Georgeson will receive a fee of $8,500 as compensation
for its services, reimbursement of its related out-of-pocket expenses and
additional payments for completed telephone calls with stockholders. We have
agreed to indemnify Georgeson against certain liabilities arising out of the
engagement.
22
<PAGE>
THE ACQUISITION AND RELATED MATTERS
Background of the Acquisition
In early January 2000, we were contacted by representatives of Goldman,
Sachs & Co., who were acting as Jacobs' financial advisors, and advised that
Jacobs was interested in exploring a transaction for the transfer of a portion
of its portfolio of regional malls. Goldman Sachs had acted as our financial
advisor in connection with certain previous transactions. We signed a
confidentiality agreement with Goldman Sachs and received from them certain
information which they had prepared regarding these assets. In subsequent
conversations with Goldman Sachs, we requested and received additional
information about the assets.
On January 20, 2000, we held an exploratory meeting at Goldman Sachs'
offices in New York with representatives of Goldman Sachs together with our
attorneys, Willkie Farr & Gallagher. At the meeting, we discussed the properties
which we were interested in acquiring as well as the feasibility of our
acquiring all of the Jacobs properties. We also discussed certain terms of a
possible transaction, including Jacobs' need for "tax protection" in the event
we sold or reduced the indebtedness on any of the acquired properties and the
possible rights to be associated with Jacobs' equity stake in our Company
following a transaction. We also discussed representation for Jacobs on our
Board of Directors and a possible role for Richard E. Jacobs within our
management which would not conflict with his plans to continue to pursue
personal real estate development opportunities.
On February 3, 2000, representatives of our Company met with Mr. Jacobs,
Martin J. Cleary, Jacobs' chief operating officer, and certain of Jacobs' other
representatives and a representative of Goldman Sachs at the Jacobs' offices in
Cleveland, Ohio. The primary purpose of the meeting was to provide them with
more information about our Company. We also discussed Mr. Jacobs' thoughts about
representation of Jacobs on our Board of Directors following a transaction.
We had subsequent telephonic discussions with Goldman Sachs regarding the
list of properties which we would acquire. We also agreed that we would submit a
non-binding "bid" letter to Goldman Sachs which would outline the general terms
of the transaction and that they would submit the letter on our behalf to
Jacobs.
During the months of February and March 2000, we prepared and submitted to
Goldman Sachs drafts of our proposed bid letter to which they offered
suggestions and comments. On March 3, 2000, we submitted our executed,
confidential bid letter.
At a meeting on March 14, 2000 at Goldman Sachs' offices with
representatives of our Company and Willkie Farr, Goldman Sachs suggested that we
attempt to simplify the bid letter and convert it into a more general
non-binding letter of intent setting forth a broad outline of the proposed
transaction. Accordingly, we exchanged drafts of a proposed letter of intent
with Goldman Sachs and Jacobs' legal advisors and participated in various
telephonic meetings. We and Jacobs executed the confidential letter of intent on
April 24, 2000.
Willkie Farr began an extensive review of Jacobs' property information at
Jacobs' offices in Cleveland. Members of our management participated in these
reviews and personally inspected each of the Jacobs properties. We also retained
Arthur Andersen to review Jacobs' leases and rent rolls to assist us in
constructing the necessary financial models. Our management personnel and
construction representatives prepared detailed budgets of the capital
expenditures which we would likely incur with respect to the properties over the
upcoming years. We also retained environmental engineers to conduct
environmental inspections of each of the properties. In April 2000, we began
consulting with Merrill
23
<PAGE>
Lynch, Pierce, Fenner & Smith Incorporated, and on May 31, 2000 we formally
engaged Merrill Lynch to act as our financial advisor and to render a fairness
opinion to our Board of Directors with respect to the transaction. See
"--Opinion of Merrill Lynch."
Beginning in May 2000, we and our legal and financial advisors began
holding regular and intensive meetings and conference calls with Jacobs and its
legal and financial advisors regarding various key issues in the transaction,
including, among other things, pricing, the terms and structure of the SCUs, the
properties to be included in the transaction, the circumstances under which
properties could be excluded from the transaction, the mechanism for acquiring
the interests of Jacobs' associates and other partners in the properties, the
scope of the parties' representations, warranties and indemnities, the terms of
Jacobs' standstill obligations and the tax implications of the transaction upon
Jacobs and our Company.
In particular, as we worked with Jacobs during August and September 2000 to
finalize the terms of the transaction, we engaged in extensive discussions
regarding the limitations under our certificate of incorporation and otherwise
on Jacobs' ability to exchange SCUs for shares of our common stock. These
discussions focused on maximizing the number of our shares that the Jacobs Group
could own, while ensuring that we would continue to comply with the REIT rules
and providing us with sufficient flexibility to issue additional Operating
Partnership interests exchangeable for common stock in future transactions. The
discussions culminated in the changes to the ownership limits set forth in the
proposed amendment to our certificate of incorporation and in the Share
Ownership Agreement and, if the proposed amendment is not approved by our
stockholders, a modification of the ownership limits which can be effected by
our Board without stockholder approval.
Our management discussed the proposed transaction with our Board of
Directors at Board meetings on May 4, 2000, June 9, 2000 and June 16, 2000. At a
special meeting of the Board on July 3, 2000, management discussed the
transaction's progress and gave an overview of the terms being discussed between
the parties. At a meeting of the Board held on July 27, 2000, Willkie Farr and
Merrill Lynch gave presentations to the Board concerning the terms of the
proposed transaction. Merrill Lynch gave an additional presentation to the Board
at a telephonic meeting on September 15, 2000. At a Board meeting held on
September 25, 2000, Merrill Lynch gave an additional presentation to our Board
of Directors, and rendered its oral opinion to the effect that, as of that date
and subject to the assumptions and limitations set forth in its written opinion,
the aggregate consideration to be paid by us in the transaction was fair to our
Company from a financial point of view. At that meeting Willkie Farr gave an
additional presentation regarding the terms of the transaction, the timetable
for obtaining stockholder approval of the transaction and the role and
responsibility of our directors in considering and approving the transaction,
and the Board unanimously voted to approve the transaction, including the
issuance of the SCUs and the proposed amendment to our certificate of
incorporation.
Following our Board's approval of the transaction, the Master Contribution
Agreement and the Voting and Standstill Agreement were executed on September 25,
2000.
Recommendation of the Board of Directors
Our Board of Directors has unanimously approved the transaction, including
the issuance of the SCUs (and their underlying shares of our common stock) and
the proposed amendment to our certificate of incorporation, has declared the
proposed amendment to be advisable and therefore recommends that the holders of
our common stock vote FOR the proposals to be submitted to a vote at the special
meeting.
24
<PAGE>
Factors Considered by the Board of Directors
Our Board of Directors considered the following factors, among others,
before deciding to approve the transaction:
o Part of our growth strategy has been to opportunistically acquire
shopping centers where we believe we can create significant value
through our development, leasing and management expertise. Our Board
of Directors considered, among other things, the higher average
vacancy rate of the Jacobs properties versus our properties and the
lower average occupancy costs as a percentage of sales at the Jacobs
properties versus our properties, as indicators of opportunity for
revenue growth at the Jacobs properties;
o Part of our geographic strategy has been to focus on our southeast
base and to gradually expand our scope into other regions and markets.
Our Board of Directors considered that the acquisition will make us
the owner of the largest number of shopping malls in the southeast,
which would limit the opportunities for competitors in our base
region. The acquisition will also accelerate our expansion into the
midwest which began with our acquisition of four malls during 1997
through 1999. The Board of Directors believes that our dominant
southeast and growing midwest presence will enhance our retailer and
customer relationships in these markets. The acquisition will also
afford our Company the opportunity to forge relationships with Jacobs'
tenant base. The Board of Directors also considered the uniqueness of
the Jacobs portfolio in terms of its size and concentration in the
Company's principal and targeted regions;
o Our goal as a company is to increase FFO as a means of ultimately
increasing dividends to our stockholders. Our Board of Directors
considered the operating projections for the Jacobs properties
prepared by our management, including opportunities for revenue
growth, economies of scale and operating efficiencies, and as a
result, believes that the transaction will increase our FFO over the
short term and will accelerate our FFO growth over the next few years.
Our Board of Directors believes that this additional FFO growth will
enable us to accelerate our dividend growth;
o Our Company's presence in the capital markets among institutional and
other investors is extremely important. The acquisition will result in
our Company deriving an increased percentage of its revenues from
malls and will therefore serve to emphasize to the capital markets our
focus on this property segment. The acquisition will also result in
our Company becoming one of the largest shopping mall REITs in the
United States, which the Board of Directors believes will enhance our
Company's presence among certain institutional investors;
o Our Board of Directors considered the various leasing and operational
synergies expected to be achieved as a result of the transaction;
o Our Board of Directors considered presentations by our Company's legal
counsel regarding the principal terms of the transaction and the
potential tax consequences of the transaction on our Company and its
stockholders; and
o Our Board of Directors considered presentations by Merrill Lynch and
the oral opinion of Merrill Lynch rendered on September 25, 2000,
which was subsequently confirmed in a written opinion dated as of such
date, to the effect that, as of that date and subject to the
assumptions and limitations set forth in the written opinion, the
aggregate consideration
25
<PAGE>
to be paid by us in the transaction was fair from a financial point of
view to our Company (see "-- Opinion of Merrill Lynch" below).
Our Board of Directors also considered several potential risks associated
with the transaction, including the following:
o Our Board of Directors considered that, as a result of the
transaction, our total indebtedness and debt-to-market-capitalization
would initially increase. Additionally, our Company's coverage ratios
would initially decrease. As part of its analysis, our Board of
Directors considered not only the indebtedness which our Company will
assume or incur as part of the transaction (including the indebtedness
to be used to finance the cash portion of the consideration and the
closing and transaction costs) but also the indebtedness anticipated
to be incurred by our Company over the next four years with respect to
our existing properties and to enhance and remodel certain of the
Jacobs properties. Our Board of Directors also considered that
approximately $367 million of the mortgage indebtedness on the Jacobs
properties will mature during the next four years, which will expose
us to increased risk of interest rate fluctuations;
o Our Board of Directors considered that the benefits anticipated to be
derived by our Company from the transaction are dependent in large
part upon our management's ability to implement in a timely manner
significant development, leasing and operational changes at the
properties. These include a four year capital expenditure program at
the properties (including tenant improvements, remodeling and
renovation) requiring an aggregate investment of $200 million, a
lease-up program designed to increase occupancy at the Jacobs
properties to a level similar to that at our existing properties and a
program for increasing occupancy costs as a percentage of sales at the
Jacobs properties to a level approximating that being experienced at
our existing properties. If management is unable to implement these
programs and achieve the expected results in a timely manner, our
growth in FFO (funds from operations) could be adversely affected;
o Our Board of Directors considered that there will be significant
restrictions on our ability to dispose of or refinance the Jacobs
properties, which may limit our asset management and financing
flexibility. We have agreed not to dispose of any of the acquired
properties in a transaction that would require Jacobs to recognize or
be allocated gain for federal income tax purposes until the twelfth
anniversary of the initial closing. We have also agreed to maintain
specified minimum amounts of nonrecourse indebtedness on the acquired
properties (or, in the event of a shortfall, to provide Jacobs with
alternative "bottom guaranty" arrangements) until such anniversary and
as long thereafter as is reasonably possible; and
o Our Board of Directors considered that we will assume the tax basis
currently used by Jacobs, which tax basis is considerably lower than
the consideration being paid by us for the properties. Accordingly, we
will be entitled to significantly lower depreciation deductions, and
our taxable income relative to our cash flow will be greater, than if
we had acquired the properties for cash. Since the REIT rules under
the Internal Revenue Code require that we distribute to our
stockholders at least 95% of our taxable income (to be reduced to 90%,
commencing January 1, 2001), the low tax basis in the properties may
have the effect of increasing the cash amounts we are required to
distribute as dividends rather than retaining such cash for use in
growing our business. This low tax basis may also have the effect of
reducing or eliminating the portion of our dividends that are treated
as a non-taxable return of capital.
26
<PAGE>
In view of the numerous factors, both positive and negative, considered by
our Board of Directors, the Board did not find it practical to, and did not,
quantify or otherwise assign relative weights to the specific factors
considered. In addition, individual members of our Board of Directors may have
given different weights to the various factors considered.
Following its deliberations concerning these factors and its review of the
presentation and fairness opinion of Merrill Lynch, our Board of Directors
concluded that the transaction was in the best interests of our Company and its
stockholders from both a financial and strategic perspective.
Opinion of Merrill Lynch
On September 25, 2000, Merrill Lynch delivered its oral opinion to our
Board of Directors, and subsequently confirmed in writing, to the effect that,
as of that date, and based upon and subject to the assumptions and limitations,
matters considered and limits of review all set forth in its written opinion,
the proposed consideration to be paid by us in the transaction was fair from a
financial point of view to our Company.
The Merrill Lynch opinion sets forth the assumptions made, matters
considered and certain limitations on the scope of review undertaken by Merrill
Lynch. You are urged to read this opinion in its entirety. The Merrill Lynch
opinion was intended for the use and benefit of our Board of Directors, was
directed only to the fairness of the aggregate consideration to be paid by our
Company from a financial point of view, did not address the merits of our
underlying decision to engage in the transaction and does not constitute a
recommendation to any stockholder of our Company as to how that stockholder
should vote. The aggregate consideration was determined on the basis of
negotiations between us and Jacobs and was approved by our Board of Directors.
The summary of the Merrill Lynch opinion is qualified in its entirety by
reference to the full text of the opinion attached as Annex B.
In arriving at its opinion, Merrill Lynch, among other things:
o reviewed certain publicly available business and financial information
relating to our Company which Merrill Lynch deemed to be relevant;
o reviewed certain information, including financial forecasts and
operating data, relating to the business, earnings, funds from
operations, adjusted funds from operations, cash flow, assets,
liabilities and prospects of our Company and the properties furnished
to Merrill Lynch by us and Jacobs respectively;
o conducted discussions with members of the senior management of our
Company and Jacobs concerning the matters described above in the two
preceding bullet points, as well as their respective businesses and
prospects, before and after giving effect to the transaction;
o reviewed the market prices and valuation multiples for shares of our
common stock and compared them with those of certain publicly traded
companies that Merrill Lynch deemed relevant;
o reviewed the results of operations of our Company and the properties
and compared them with those of certain publicly traded companies that
Merrill Lynch deemed to be relevant;
27
<PAGE>
o compared the proposed financial terms of the transaction with the
financial terms of certain other transactions that Merrill Lynch
deemed to be relevant;
o participated in certain discussions and negotiations among
representatives of our Company and Jacobs and our respective financial
and legal advisors;
o reviewed the potential pro forma impact of the transaction on our
Company;
o reviewed drafts dated September 25, 2000 of the Master Contribution
Agreement and the schedules and exhibits to that agreement, including
the Voting and Standstill Agreement, the proposed amendments to the
limited partnership agreement of our Operating Partnership (Annex D to
this proxy statement), the proposed amendments to the limited
partnership agreement of our Operating Partnership containing the
terms of the SCUs (Annex C to this proxy statement) and a draft of the
Registration Rights Agreement among our Company and the holders of the
SCUs; and
o reviewed such other financial studies and analyses and took into
account such other matters as Merrill Lynch deemed necessary,
including Merrill Lynch's assessment of general economic, real estate
market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch, or publicly
available. Merrill Lynch did not assume any responsibility for independently
verifying such information or undertake an independent evaluation or appraisal
of any of the assets or liabilities of our Company, our Operating Partnership,
Jacobs or the properties and was not furnished with any such evaluation or
appraisal. In addition, Merrill Lynch did not assume any obligation to conduct
any physical inspection of the properties or the properties and facilities of
our Company. With respect to the financial forecast information furnished to or
discussed with Merrill Lynch by us or Jacobs, Merrill Lynch assumed that they
were reasonably prepared and reflected the best then currently available
estimates and judgment of our or Jacobs' management as to the expected future
financial performance of our Company or the properties, as the case may be.
Merrill Lynch expressed no opinion as to such financial forecast information or
the assumptions on which they were based. Merrill Lynch also assumed that the
final form of the Master Contribution Agreement and the other transaction
documents would be substantially similar to the last drafts of such documents
reviewed by Merrill Lynch.
Merrill Lynch's opinion was necessarily based on market, economic and other
conditions as they existed and could be evaluated on, and on the information
made available to Merrill Lynch as of, the date of the Merrill Lynch opinion.
Merrill Lynch assumed that the representations and warranties of each party to
the Master Contribution Agreement and all related covenants or agreements
contained in the Master Contribution Agreement and the other transaction
documents were true and correct, that each party would perform all covenants and
agreements required to be performed by such party and that all conditions to the
consummation of the transaction would be satisfied without waiver of such
conditions. Merrill Lynch assumed that in the course of obtaining regulatory or
other consents or approvals (contractual or otherwise) for the transaction,
there will be no amendments or modifications to the transaction documents that
will have a material adverse effect on the contemplated benefits of the
transaction. Merrill Lynch also assumed that we would retain our status as a
real estate investment trust for federal income tax purposes under the Internal
Revenue Code.
Merrill Lynch's opinion was for the use and benefit of our Board of
Directors. Merrill Lynch's opinion did not address the merits of our underlying
decision to engage in the transaction, and did not constitute a recommendation
to any stockholder of our Company as to how such stockholder should vote.
28
<PAGE>
Merrill Lynch expressed no opinion as to the prices at which our shares of
common stock would trade following the announcement or consummation of the
transaction.
The following is a summary of the material portions of the financial and
comparative analyses performed by Merrill Lynch in connection with its opinion
delivered to our Board of Directors on September 25, 2000. The financial
analyses summarized below include information presented in tabular format. In
order to fully understand Merrill Lynch's financial analyses, the tables must be
read together with the text of each summary. The tables alone do not constitute
a complete description of the financial analyses. Considering the data set forth
below without considering the full narrative description of the financial
analyses, including the methodologies and assumptions underlying the analyses,
could create a misleading or incomplete view of Merrill Lynch's financial
analyses.
Valuation of the Property Interests
Analysis of Selected Comparable Publicly Traded Companies. Using publicly
available information and estimates of future financial results published by
First Call/Thompson Financial, Merrill Lynch compared certain financial and
operating information and ratios for the property interests being acquired with
the corresponding financial and operating information for a group of publicly
traded real estate investment trusts engaged primarily in the ownership,
management, operation and/or acquisition of regional shopping centers. For the
purposes of the analysis, the following companies were used as companies
comparable to the property interests being acquired:
o Simon Property Group, Inc.
o General Growth Properties, Inc.
o The Rouse Company
o Westfield America, Inc.
o The Macerich Company
o Urban Shopping Centers, Inc.
o Taubman Centers, Inc.
o JP Realty, Inc.
Merrill Lynch compared the common equity value per share of these companies
as a multiple of their respective estimated 2001 funds from operations per
share. Merrill Lynch's calculations resulted in the following relevant range of
multiples for the companies as of September 8, 2000 (disregarding the highest
and lowest multiples):
Common equity value per share as a multiple of
2001 funds from operations per share
------------------------------------
High 7.7x
Mean 7.0x
Low 6.6x
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Based on this analysis and an estimate of the projected funds from
operations from the property interests being acquired for the twelve months
ended January 31, 2002 provided by Jacobs' management and our management,
Merrill Lynch calculated an implied equity valuation of the property interests
being acquired which ranged from approximately $457.4 million to approximately
$533.6 million. This compares to a total equity value implied by the transaction
for the property interests being acquired of approximately $478.8 million, based
on the "face" value of the SCUs of $32.25, or approximately $412.7 million,
based on an estimate of the value of a SCU derived by adding the net present
value of the incremental dividends attributable to a SCU versus dividends
attributable to a share of our common stock to the value of a share of our
common stock, as of September 8, 2000.
Analysis of Selected Acquisition Comparables. Merrill Lynch also compared
certain financial ratios implied by the transaction with those of selected other
acquisitions involving real estate investment trusts. The comparable acquisition
transactions and the dates these transactions were announced are as follows:
o Heritage Property Investment Trust, Inc.'s acquisition of Bradley Real
Estate Inc. (May 2000)
o Kimco Corporation's acquisition of Price REIT Inc. (January 1998)
o New Plan Realty Trust, Inc.'s acquisition of Excel Realty Trust, Inc.
(May 1998)
o Regency Realty Corporation's acquisition of Pacific Retail Trust
(September 1998)
o Affiliates of Lazard Freres & Co. LLC's acquisition of Alexander
Haagen Properties, Inc. (June 1997)
o Simon Property Group, Inc.'s acquisition of DeBartolo Corp. (March
1996)
o Horizon Outlet Centers Inc.'s acquisition of McArthur/Glen Realty
Corp. (March 1995)
Using publicly available information and estimates of future financial
results published by First Call/Thompson Financial, Merrill Lynch calculated the
implied offer value per share for the acquired company (based on the acquirer's
stock price in the case of stock acquisitions), as of the day before the
announcement of the respective transaction as a multiple of the forward year,
estimated funds from operations per share for such company. Merrill Lynch's
calculations resulted in the following relevant range of multiples for the
selected acquisitions (disregarding the highest and lowest multiples):
Offer value per share as a multiple of
forward year funds from operations per share
--------------------------------------------
High 10.8x
Mean 10.0x
Low 9.4x
Based on this analysis and an estimate of the projected funds from
operations from the property interests being acquired for the twelve months
ended January 31, 2002, provided by Jacobs' management and our management,
Merrill Lynch calculated an implied valuation of the property interests being
acquired which ranged from approximately $651.4 million to approximately $748.4
million. This compares to a total equity value implied by the transaction for
the property interests being acquired of
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approximately $478.8 million, based on the "face" value of the SCUs, or
approximately $412.7 million, based on an estimate of the value of a SCU derived
by adding the net present value of the incremental dividends attributable to an
SCU versus dividends attributable to a share of our common stock to the value of
a share of our common stock, as of September 8, 2000.
Net Asset Valuation. Merrill Lynch performed a net asset valuation for the
property interests being acquired based upon an asset-by-asset real estate
valuation of the properties. This valuation was then adjusted to reflect
percentage share represented by the property interests being acquired of such
assets and estimated debt balances as of December 31, 2000. The valuation
utilized a range of average capitalization rates of from 9.50% to 10.50%, and
assumed that the projected net operating income for the twelve months ended
January 31, 2002, for the property interests being acquired would be
approximately $128.4 million. The projected net operating income was based upon
Jacobs' management projections which were reviewed by our management and
adjusted by Merrill Lynch real estate property valuation professionals. These
calculations indicated an implied equity valuation of the property interests
being acquired which ranged from approximately $489.3 million to approximately
$618.0 million. This compares to a total equity value implied by the transaction
for the property interests being acquired of approximately $478.8 million, based
on the "face" value of the SCUs, or approximately $412.7 million, based on an
estimate of the value of a SCU derived by adding the net present value of the
incremental dividends attributable to an SCU versus dividends attributable to a
share of our common stock to the value of a share of our common stock, as of
September 8, 2000.
Valuation of CBL
Analysis of Selected Comparable Publicly Traded Companies. Using publicly
available information and estimates of future financial results published by
First Call/Thompson Financial, Merrill Lynch compared certain financial and
operating information and ratios for our Company with the corresponding
financial and operating information for a group of publicly traded real estate
investment trusts engaged primarily in the ownership, management, operation
and/or acquisition of regional shopping centers. The companies used for this
analysis are the same as those listed under "-- Valuation of the Property
Interests -- Analysis of Selected Comparable Publicly Traded Companies" above.
Merrill Lynch compared the common equity value per share of these companies
as a multiple of their respective estimated 2001 funds from operations per
share. Merrill Lynch's calculations resulted in the following relevant range of
multiples for the companies as of September 8, 2000 (disregarding the highest
and lowest multiples):
Common equity value per share as a multiple of
2001 funds from operations per share
------------------------------------
High 7.7x
Mean 7.0x
Low 6.6x
Based on this analysis and the consensus of research analysts' estimates of
our projected 2001 funds from operations per share provided by First
Call/Thompson Financial, Merrill Lynch calculated an implied per share valuation
of our common stock which ranged from approximately $25.48 to approximately
$29.72. This compares to the $32.25 "face" value per SCU used to determine the
number of SCUs issued in the transaction and the $26.71 estimated value of an
SCU, which estimate was derived by adding the
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net present value of the incremental dividends attributable to an SCU versus
dividends attributable to a share of our common stock to the value of a share of
our common stock, as of September 8, 2000.
Net Asset Valuation. Merrill Lynch performed a net asset valuation for our
Company based upon a real estate valuation of our properties using our
management's estimates of 2000 net operating income, an estimation of the
current value of our other assets and liabilities and an estimation of our debt
balances as of June 30, 2000. The valuation utilized a range of blended average
capitalization rates from 8.96% to 9.45%. These calculations indicated an
implied per share valuation of our common stock which ranged from approximately
$28.14 to approximately $31.65. This compares to the $32.25 "face" value per SCU
used to determine the number of SCUs issued in the transaction and the $26.71
estimated value of an SCU, which estimate was derived by adding the net present
value of the incremental dividends attributable to an SCU versus dividends
attributable to a share of our common stock to the value of a share of our
common stock, as of September 8, 2000.
Pro Forma Merger Consequences. Merrill Lynch analyzed the pro forma effects
resulting from the transaction, including the anticipated accretion (i.e.,
incremental increase) to our funds from operations per share resulting from the
transaction. Merrill Lynch observed that the transaction would be accretive to
our projected funds from operations per share in each of the years 2000 through
2004, inclusive (assuming that the transaction had been consummated January
2000). Merrill Lynch also observed that the compound annual growth rate for
funds from operations per share for the years 2000 through 2004 exceeded the
comparable results for our Company on a standalone basis.
The summary of analyses performed by Merrill Lynch set forth above does not
purport to be a complete description of the analyses performed by Merrill Lynch
in arriving at its opinion. The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial or summary description.
Accordingly, Merrill Lynch believes that its analyses must be considered as a
whole and that selecting portions of its analyses and the factors considered by
Merrill Lynch, without considering all analyses and factors, could create an
incomplete view of the processes underlying the Merrill Lynch opinion. Merrill
Lynch did not assign relative weights to any of its analyses in preparing its
opinion. The matters considered by Merrill Lynch in its analyses were based on
numerous macroeconomic, operating and financial assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond our and Merrill Lynch's control and involve
the application of complex methodologies and educated judgment. Any estimates
contained in Merrill Lynch analyses are not necessarily indicative of actual
past or future results or values, which may be significantly more or less
favorable than the estimates. Estimated values do not purport to be appraisals
and do not necessarily reflect the prices at which businesses or companies may
be sold in the future, and the estimates are inherently subject to uncertainty.
No company or transaction utilized as a comparison in the analyses
described above is identical to us, the properties or property interests being
acquired or the transaction. Accordingly, a complete analysis of the results of
the above calculations cannot be limited to a quantitative review of such
results and involves complex considerations and judgments concerning differences
in financial and operating characteristics of the companies and the transactions
used in the comparable publicly traded companies analysis and the selected
acquisition comparables analysis and other factors that could affect the public
trading value of the companies used in the comparable publicly traded companies
analysis, as well as that of our Company and the property interests being
acquired. In addition, various analyses performed by Merrill Lynch incorporate
projections prepared by research analysts using only publicly available
information. These estimates may or may not prove to be accurate.
Our Board of Directors selected Merrill Lynch to act as its financial
advisor because of Merrill Lynch's reputation as an internationally recognized
investment banking firm with substantial experience
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in transactions similar to this transaction and because Merrill Lynch is
familiar with our Company and its business. As part of Merrill Lynch's
investment banking business, Merrill Lynch is continually engaged in the
valuation of public and private companies and their securities in connection
with mergers and acquisitions, leveraged buyouts, negotiated underwritings,
secondary distributions of listed and unlisted securities and private
placements.
Under the terms of a letter agreement between us and Merrill Lynch, dated
May 31, 2000, we agreed to pay Merrill Lynch a fee of $4,000,000, payable in
cash upon the closing of the transaction. We also agreed to reimburse Merrill
Lynch for its reasonable out-of-pocket expenses, including the reasonable fees
and disbursements of its legal counsel, and to indemnify Merrill Lynch and
certain related parties from and against certain liabilities, including
liabilities under the federal securities laws arising out of its engagement.
Merrill Lynch has, in the past, provided investment banking services to our
Company and may continue to do so and has received, and may receive, fees for
the rendering of those services. In addition, in the ordinary course of Merrill
Lynch's business, Merrill Lynch and its affiliates may actively trade in the
securities of our Company for their own accounts and for the accounts of
customers. Accordingly, Merrill Lynch and its affiliates may at any time hold a
long or short position in such securities.
Financing of the Transaction
We have obtained a commitment from Wells Fargo Bank, N.A. to provide us
with an aggregate $212 million loan facility, up to $112 million of which will
be a term loan to finance the cash consideration and related transaction costs.
The remaining amount will be a revolving loan which we expect to use to finance
certain expected capital expenditures and improvements with respect to the
properties.
Term. The loan facility will have an initial term of two years which we may
extend for up to three additional years subject to payment of certain extension
fees. We may prepay the loan facility at any time, subject to our payment of the
bank's breakage costs in certain events.
Interest Rate. The loan facility will bear interest as determined by the
borrower at a rate equal to a "base rate" (defined as the greater of the bank's
prime rate or the applicable federal funds rate plus 0.5%) or LIBOR plus an
amount ranging from 1.3% to 2.0%, depending on our leverage ratios. The loan
facility will require payments of interest only during the first two loan years.
Interest will be payable monthly, computed based on the actual days elapsed in a
360-day year.
Amortization. The loan facility will not require any scheduled amortization
payments during the first two loan years, but will require scheduled
amortization payments of $25 million during each of the first two extension
years and $75 million during the third extension year. Amortization payments are
to be made quarterly. Amortization payments are applied first to the term loan
and then to the revolving loan. The balance of the loan facility ($87 million)
will be payable upon expiration of the third extension year.
Collateral. The loan facility is expected to be secured, among other
things, by a pledge of our direct and indirect interests in the entities owning
the properties, but not by a mortgage of the properties themselves, to the
extent permitted under existing loan documents and organizational documents of
the entities that own the properties.
Guarantee. The loan facility will be guaranteed by the entities owning
substantially all of our properties.
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Covenants. We will be prohibited from assigning or pledging our interests
in an entity which owns any of our properties without the bank's consent. We
will be prohibited from incurring any unsecured indebtedness in excess of $20
million other than accounts payable and certain short-term property acquisition
financing. This limit on incurring unsecured indebtedness will generally be
increased as the principal balance of the loan facility is reduced. The amount
of recourse indebtedness which we may incur will also be limited in a manner to
be determined.
Events of Default. Events of default under the loan facility will include
changes of control in our Company, unauthorized transfers of interests in our
Operating Partnership or violation of certain financial covenants.
Interests of Certain Persons
Under the proposed charter amendment, the Lebovitz Group will be permitted
to own shares of our common stock in excess of what is currently permitted under
our certificate of incorporation. See "Amendment to CBL's Charter -- Reasons for
the Proposed Amendment and Share Ownership Agreement."
Absence of Dissenters' Rights
We are incorporated in the State of Delaware and, accordingly, are governed
by the provisions of the Delaware General Corporation Law. Our stockholders are
not entitled to appraisal rights under the Delaware General Corporation Law with
respect to the transaction.
Certain Federal Income Tax Consequences
For U.S. federal income tax purposes, no income, gain or loss will be
recognized by our stockholders in connection with the acquisition. However,
after the acquisition of the properties, we will need to continue to comply with
the requirements of the Internal Revenue Code to maintain our qualification as a
real estate investment trust. We expect to continue to operate after the
acquisition in a manner that will allow us to continue to qualify as a REIT, but
we cannot assure you that we will be able to do so. For a description of the
requirements to qualify as a REIT under the Internal Revenue Code, see
"Qualification as a Real Estate Investment Trust" in our Annual Report on Form
10-K for the year ended December 31, 1999, which is incorporated by reference to
this proxy statement.
In general, we will assume the tax basis and depreciation schedules for the
properties currently used by Jacobs. This tax basis is considerably lower than
the consideration being paid by us in the transaction. Accordingly, we will be
entitled to significantly lower depreciation deductions than we would have been
entitled to had we acquired the properties for cash. As a result, our taxable
income relative to our cash flow will be greater than it would have been had we
acquired the properties for cash. Since the REIT rules under the Internal
Revenue Code require that we distribute to our stockholders at least 95% of our
taxable income (to be reduced to 90%, commencing January 1, 2001), the low tax
basis of the properties may have the effect of increasing the cash amounts we
are required to distribute as dividends, thereby potentially limiting the amount
of cash we might otherwise have been able to retain for use in growing our
business. This low tax basis may also have the effect of reducing or eliminating
the portion of distributions made by us that are treated as a non-taxable return
of capital.
CBL Policies After the Acquisition
We expect to continue operating in a similar manner as we have operated
prior to the acquisition.
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Regulatory Matters
We do not believe that any filing with or approval of any governmental
authority is necessary in connection with the consummation of the transaction.
Accounting Treatment
The transaction will be accounted for using the purchase method of
accounting in accordance with generally accepted accounting principles. Under
this method of accounting, the consideration will be allocated to the fair value
of the net assets acquired.
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THE MASTER CONTRIBUTION AGREEMENT
The following is a brief summary of the material provisions of the Master
Contribution Agreement, which is attached as Annex A and is incorporated in this
proxy statement by reference. Such summary is qualified in its entirety by
reference to the Master Contribution Agreement.
General
We have agreed to acquire from Jacobs its interests in a portfolio of up to
21 regional malls and two associated centers for an aggregate consideration of
approximately $1.2 billion. The consideration is comprised of:
o $100 million in cash;
o approximately $734 million in primarily fixed-rate non-recourse
mortgage indebtedness; and
o the issuance by the Operating Partnership of approximately 11.71
million SCUs, which under certain circumstances may be increased up to
13.95 million SCUs.
See "The Properties" for a list of the properties to be acquired in the
transaction, including the percentage interest to be acquired in each property,
and related statistical, financial and other information relating to the
properties.
Structure of the Acquisition
Timing of Closing
The Master Contribution Agreement provides for an initial closing, deferred
closings and multiple contributions.
The initial closing is currently scheduled to occur on __________, 2001
(assuming approval of the issuance of the SCUs in the transaction by our
stockholders). If Jacobs is unable to satisfy its closing conditions with
respect to five core properties (Hanes Mall, Fayette Mall, West Towne Mall,
Brookfield Mall and Cary Towne Center) and at least nine other properties by
that date, Jacobs will be entitled to extend the initial closing to the extent
reasonably necessary to satisfy the conditions to a date not later than April
30, 2001. If Jacobs is unable to satisfy its conditions for the initial closing
by this extended date, we will have the right to terminate the transaction.
If Jacobs is unable to satisfy its conditions with respect to a particular
non-core property at the initial closing, the aggregate consideration will be
reduced by an established release price, and the closing with respect to that
property will be deferred. If the deferred closing with respect to such property
does not occur by July 31, 2001 because of a failure to obtain required
consents, or by October 31, 2001 for any other reason, that property will be
dropped from the transaction.
100% Properties
Twelve of the Jacobs properties are owned by entities which are wholly
owned by Jacobs. Under the terms of the Master Contribution Agreement, Jacobs
will contribute its interests in each such property owner to the Operating
Partnership. If a Jacobs associate is unwilling to transfer its interest in such
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property owner, Jacobs will cause the property owner to transfer fee title to
the underlying property to the Operating Partnership.
Partially Owned Properties
The remaining nine properties are owned in part by outside partners who are
unaffiliated with Jacobs. We intend to make offers to certain of these outside
partners (other than the outside partners in Cary Towne Center, Kentucky Oaks
Mall and Cherryvale Mall) to acquire their interests in the properties. If all
of such offers were to be accepted, the aggregate consideration would be
increased by approximately $131 million, with the increased consideration to be
comprised of (i) approximately $84 million of property indebtedness,
representing the proportionate share of such indebtedness associated with the
outside partners' interests being acquired, and (ii) the issuance by our
Operating Partnership of up to an additional 1.5 million SCUs.
Multiple Contributions
To preserve certain beneficial tax treatment of our interests in properties
which we will not wholly own, we are only permitted to acquire a percentage
interest in such properties, with the percentage interest to be acquired by us
to be less than the amount which would cause a deemed termination of the
property owner for tax purposes. Generally, we will acquire a 48% interest in
the property owner at the initial closing and will hold an option to acquire the
balance of the Jacobs' interest 15 months later. Jacobs will have a similar
right to require us to purchase the balance of its interest 15 months later. If
the outside partner has transferred its interest to another party before or
during this period, we may only be permitted to exercise options to acquire the
additional interest in the property over a longer period. At the initial
closing, we will acquire all of Jacobs' voting and management rights, if any, in
the property owner. At the initial closing and each option closing, if such
option is exercised, we will pay the proportionate share of the cash
consideration and SCUs allocated to such property based on the interest being
conveyed at that closing.
Excluded Outparcels
Included in the properties which we will be acquiring are all of the
outparcels owned by Jacobs except for an aggregate of 28 outparcels (including
five at Randolph Mall) which will be retained by Jacobs. Jacobs will retain no
outparcels at six malls. We will generally have a one or three year fixed price
purchase option and a 12-year right of first offer to purchase these outparcels
retained by Jacobs.
Weston Management
We will acquire from Jacobs all of the interests in Weston Management
Company Limited Partnership. Weston Management's sole assets will be the
management and leasing contracts applicable to each of the properties (other
than Kentucky Oaks Mall, which is managed by a third party).
Consideration Allocations and Adjustments
Jacobs has the right to elect to receive up to $10 million of the cash
component of the consideration in exchange for SCUs at a rate of $32.25 per SCU.
In addition, the SCU component of the consideration will be increased for the
amortization of indebtedness on the properties occurring after December 31, 2000
through each property's closing. The SCU component of the consideration may also
be adjusted for refinancings of property indebtedness. See "-- Covenants --
Refinancings" below.
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The consideration will be reduced for certain capital expenditures that are
not completed prior to a property's closing. The consideration will also be
adjusted for customary apportionments of taxes, utilities, rents and other
charges.
Condemnation or Casualty
In the event of a substantial condemnation or casualty with respect to any
of the properties as described in the Master Contribution Agreement, we may
exclude such property from the closing. In the event of a non-substantial
condemnation or casualty, we will be required to close on the property but will
be entitled to receive any condemnation or insurance proceeds after collection
costs.
Covenants
Conduct of Business by Jacobs
Jacobs has agreed not to take certain material actions relating to the
management and operations of each property (other than Kentucky Oaks Mall, which
is managed by a third party) until the closing with respect to such property,
without our prior written consent.
Conduct of Our Business
We have agreed that, until the initial closing, we will not, without
Jacobs' prior written consent:
o engage in a merger or business combination in which we are not the
surviving entity;
o agree to acquire or sell assets having a gross value of $750 million
or more or a net value of $375 million or more; or
o issue preferred equity and/or incur additional indebtedness (excluding
the financing to be incurred in connection with the transaction and
any refinancings of existing debt to the extent that the refinancing
proceeds do not exceed the principal amount being refinanced) in
excess of $375 million in the aggregate.
Jacobs Employees
Jacobs will terminate all of its employees at the properties and will pay
all severance payments, if any, due in connection with these terminations. We
will offer employment to substantially all of Jacobs' mall managers, assistant
managers and/or marketing directors for base salaries and benefits comparable to
those being earned by our employees in comparable positions at our malls in
comparable markets.
Refinancings
Jacobs has agreed to refinance or extend the mortgage debt of three
properties whose debt matures prior to the scheduled initial closing. Jacobs
will also cause the mortgage indebtedness of Randolph Mall to be defeased.
Additionally, if the consent of a required lender is not obtained and a
refinancing of the loan is not prohibited by the terms of the related loan
documents, we and Jacobs will seek to refinance such loan on terms no less
favorable to us than the loan's existing terms, with Jacobs being responsible
for any prepayment premium or other fee payable to the prior lender as well as
any other costs in connection with the refinancing.
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If the principal balance of a new loan exceeds the principal balance of the
refinanced indebtedness, the consideration for such property will be reduced by
such excess. Similarly, if the principal balance of a new loan is less than the
principal balance of the refinanced indebtedness, the consideration for such
property will be increased by the difference. If the interest rate of a new loan
exceeds the interest rate of the refinanced indebtedness, Jacobs may buy down
the interest rate on the new loan or reduce the consideration of that property
by the net present value of the incremental interest payments on the new loan.
If the net present value of the incremental interest payments on the new loan is
less than that of the refinanced loan, the consideration for the property will
be increased by the difference. Increases in the consideration of a property as
a result of a refinancing will be paid by increasing the number of SCUs issuable
to Jacobs up to an aggregate maximum of 310,078 additional SCUs valued at $32.25
per SCU, with the balance of any adjustment to be paid by the entity owning the
property in the form of a promissory note. Such promissory note will be secured
by the property if permitted by the terms of the new loan and will mature
together with the new note.
Estoppel Certificates
Jacobs will prepare and deliver estoppel certificates to each major
department store or anchor tenant, as well as to other major tenants, outside
partners, lenders and ground lessors. However, except for estoppels from ground
lessors, receipt of estoppel certificates will not be a condition for the
closing of a property.
Assumption of Guaranties
We will assume Jacobs' guaranties and indemnity obligations with respect to
any property indebtedness.
No Shop
Until the Master Contribution Agreement has been terminated or a property
has been dropped from the transaction, Jacobs may not solicit or negotiate to
sell or otherwise dispose of such property or any interest in the property
without our prior consent.
Insurance
Jacobs has agreed to maintain all property and other insurance coverage
until the applicable closing.
Tax Protection
We have agreed not to dispose of any of the properties in a transaction
that would require Jacobs to recognize or be allocated gain for federal income
tax purposes until the twelfth anniversary of the initial closing.
Notwithstanding this prohibition, we may dispose of properties prior to the
twelfth anniversary of the initial closing if we indemnify Jacobs on an
after-tax basis against the federal, state and local taxes imposed on any gain
recognized as a result of the disposition. However, the amount of the indemnity
is likely to be prohibitively expensive. We have also agreed to maintain
specified minimum amounts of non-recourse indebtedness on the properties (or, in
the event of a shortfall, to provide Jacobs with alternative "bottom guaranty"
arrangements) until such anniversary and as long thereafter as is reasonably
possible and must indemnify Jacobs if we fail to maintain the required debt or
offer the required "bottom guaranty" arrangements.
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Conditions
The consummation of the transaction is subject to the satisfaction of
certain conditions by Jacobs, including its obtaining consents from various
parties, principally certain outside partners which own interests in the
properties as well as lenders who hold mortgages on the properties.
The consummation of the transaction is further subject to our satisfying
certain conditions, principally our obtaining stockholder approval of the
issuance of the SCUs in the transaction. We have agreed to seek our stockholder
approval of the proposed amendment to our certificate of incorporation; however,
such approval is not a condition to consummating the transaction.
Each of the parties is also subject to closing conditions customary for
transactions of this nature, including the performance of all covenants and the
absence of material breaches under the party's representations and warranties.
Termination and Termination Fees
If we terminate the transaction because Jacobs is unable to satisfy its
conditions for the initial closing or otherwise breaches the agreement prior to
the initial closing, Jacobs is required to pay us an expense reimbursement of
$15 million. If Jacobs terminates because our stockholders have not approved the
issuance of the SCUs, we are required to pay Jacobs an expense reimbursement of
$2.5 million. If Jacobs terminates because we otherwise breach the agreement or
fail to satisfy our closing conditions prior to the initial closing, we are
required to pay Jacobs an expense reimbursement of $15 million. If the
termination occurs after the initial closing, the expense reimbursement
liability of each party is increased by approximately $1.4 million for each
property subject to a deferred closing up to a maximum termination fee of $25
million.
The agreement does not provide for specific performance in the event of a
breach or default by any party except with respect to subsequent closings of a
multiple contribution closing.
Indemnification
CBL's Obligation. We will indemnify Jacobs for all costs, liabilities and
expenses resulting from a breach by us of any of our representations or
warranties.
We have also agreed to indemnify Jacobs for any claims relating to the
existence of hazardous materials at a property from and after its closing other
than third party claims relating to the existence of hazardous materials at a
property before its closing. We have waived any claims which we might otherwise
have had against Jacobs with respect to any such preexisting conditions. We have
obtained a commitment for environmental insurance with respect to our potential
liability for any such preexisting conditions.
Jacobs' Obligation. Jacobs Realty will indemnify us for all costs,
liabilities and expenses resulting from any breach by Jacobs of any of its
representation or warranties. This indemnity obligation is subject to certain
limitations. In general, we are not entitled to any recovery (a) if we know
about the breach but do not disclose it to Jacobs prior to the applicable
property closing, (b) unless and only to the extent by which our claims
aggregate more than $200,000 and (c) unless we give Jacobs written notice of our
claim on or prior to the 270th day following the applicable closing date. In any
event, the maximum liability for Jacobs' breaches of representations and
warranties is capped at $3 million in the aggregate for all properties.
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Jacobs Realty will also indemnify us for historical liabilities of the
property owners, which indemnity is capped at an amount of $3 million with
respect to any property. Jacobs Realty will also indemnify us for liabilities
arising in connection with the solicitation of the Jacobs associates with
respect to the transaction, other than liabilities arising from information
provided by us. These indemnity obligations will survive until the fifth
anniversary of the initial closing date, provided that we submit our claim to
Jacobs during this period and institute litigation or adjudication proceedings
within six months thereafter.
Jacobs Realty will indemnify us for Weston Management's historical
liabilities, any property owner's failure to file tax returns or make tax
payments and certain existing environmental litigation. These indemnity
obligations are unlimited in amount and duration.
Jacobs Realty has agreed to maintain a net worth of at least $25 million
until the fifth anniversary of the initial closing date. Richard E. Jacobs and
the corporate general partner of Jacobs Realty will personally commit not to
take any action, or permit others within their control to take any action, that
could reasonably have the effect of reducing Jacobs Realty's net worth below $25
million during such five year period and until the resolution of any claims
pending at the end of such five year period. However, this commitment does not
require them to contribute any funds to Jacobs Realty or otherwise guarantee
Jacobs Realty's indemnity obligations.
Expenses
Each party has agreed to pay its own expenses in connection with the
transaction. We have agreed to reimburse Jacobs for the lesser of (1) $1 million
and (2) 50% of Jacobs' aggregate transfer and recording taxes, title insurance
premiums, survey costs, filing fees and similar expenses.
41
<PAGE>
TERMS OF THE SCUS
The following is a brief summary of the material terms of the special
common units. Such summary is qualified in its entirety by reference to the
Terms of Special Common Units and the amendment to the limited partnership
agreement of the Operating Partnership, which are attached as Annex C and D
respectively and are incorporated in this proxy statement by reference.
In the transaction, our Operating Partnership will issue approximately
11.71 million special common units ("SCUs") to Jacobs. Additionally, we have
agreed to extend offers to acquire the interests held by outside partners in
certain of the properties. If all of such offers were to be accepted, our
Operating Partnership would issue up to an additional 1.5 million SCUs to these
outside partners. Finally, the Master Contribution Agreement provides for
certain circumstances under which additional SCUs may be issued, including
Jacobs' right to reallocate up to $10 million of the cash consideration in
exchange for SCUs and possible consideration adjustments resulting from debt
refinancings and amortization. See "The Master Contribution Agreement --
Structure of the Acquisition -- Consideration Allocations and Adjustments" and
"-- Covenants -- Refinancings." Accordingly, we anticipate that our Operating
Partnership could issue up to an aggregate of 13.95 million SCUs in connection
with the transaction.
Our Operating Partnership's limited partnership agreement will be amended
at the closing to reflect the terms of the SCUs.
Distributions
Holders of SCUs will be entitled to receive, from our Operating
Partnership's net cash flow distributed in any quarter, distributions equal to
the greater of:
(1) a basic distribution of $0.725625 per SCU (equivalent to an annual
distribution of $2.9025), and
(2) the quarterly distribution made with respect to a common unit of the
Operating Partnership.
If, however, the amount distributed with respect to a common Operating
Partnership unit is less than $0.4375 for four consecutive quarters (and until
such amount distributed equals or exceeds $0.4375 for four consecutive
quarters), the basic distribution for each SCU will be adjusted to be the
product of:
(1) $0.725625, and
(2) the quotient obtained by dividing the quarterly distribution with
respect to a common unit by $0.4375;
provided that the basic distribution will not be greater than $0.725625 per SCU.
Holders of SCUs will also be entitled to receive from net cash flow
distributed by our Operating Partnership in any quarter any shortfall in
required distributions on account of the SCUs prior to any distributions being
made to holders of our Operating Partnership's common units. The amounts set
forth above are to be adjusted, as appropriate, for any splits, combinations or
other similar events with respect to the SCUs or common units.
42
<PAGE>
Liquidation Rights
If we liquidate the Operating Partnership, holders of SCUs will be entitled
to be paid any shortfall in required distributions (described above) before any
distribution will be made to holders of our Operating Partnership's common
units, including the Company. After we pay any such shortfall, the SCUs will be
treated as if they were converted into common units of the Operating Partnership
as described below.
Exchange and Conversion Rights
At any time following the earlier of (1) the third anniversary of the
initial closing date and (2) the death of the beneficial owner of the SCU, the
SCU holder may exchange all or any portion of such holder's SCUs for cash,
shares of our common stock or any combination of cash and common stock, at our
election. The SCUs are exchangeable on a one-for-one basis into shares of common
stock, subject to adjustment for certain stock splits, dividends, combinations
and similar events. SCUs may, at the election of the holder, also be converted
into common units of the Operating Partnership, and the holder will have
exchange rights with respect to such common units similar to those he had with
respect to the SCUs.
Exchange rights may be exercised at any time after the initial lock-out
period described above provided that (1) no more than two exchange requests may
be delivered by a holder during any 12 month period and (2) the exchange request
must relate to SCUs having a minimum value of $250,000 (or, if less, all of the
SCUs then owned by such holder).
An SCU holder's exchange rights will be subject to the beneficial and
constructive share ownership limits in our certificate of incorporation.
Restrictions on Transfer
The limited partnership agreement of our Operating Partnership generally
restricts the transfer of the SCUs without our consent. SCUs may, however, be
transferred without our consent to any other initial holder of the SCUs, to any
immediate family member or other affiliate of an initial holder, to any
charitable organization or pursuant to a pledge to an institutional lender on
account of a bona fide obligation of the holder.
Redemption
Our Operating Partnership may redeem the SCUs at any time on or after the
tenth anniversary of the initial closing date by (1) paying the holders any
previous shortfall in distributions on account of such SCUs (as described
above), and (2) issuing to the holders the number of common units into which the
SCUs are convertible.
Consent Rights
As long as any SCUs remain outstanding, our Operating Partnership may not,
without the consent of the holders of two-thirds of the outstanding SCUs,
(1) engage in a recapitalization transaction unless:
(A) the SCUs will remain outstanding without any adverse amendment to
their terms or the SCUs are converted into or exchanged for securities
having terms no less favorable than the SCUs, and
43
<PAGE>
(B) each holder has the option to convert its SCUs into the
consideration receivable by a holder of common units in such
transaction; or
(2) amend the terms of the SCUs or amend the other provisions of the
Operating Partnership's partnership agreement in a manner that would adversely
affect the holders of the SCUs.
OTHER RELATED AGREEMENTS
Voting and Standstill Agreement
The following is a brief summary of the material provisions of the Voting
and Standstill Agreement, which is attached as Annex E and is incorporated in
this proxy statement by reference. Such summary is qualified in its entirety by
reference to the Voting and Standstill Agreement.
Concurrently with the execution of the Master Contribution Agreement, we
and Jacobs entered into a Voting and Standstill Agreement together with Charles
B. Lebovitz, our Chairman of the Board and Chief Executive Officer, Stephen D.
Lebovitz, our President and Secretary, John N. Foy, our chief financial officer,
and Martin J. Cleary, Jacobs' chief operating officer.
Jacobs' Board Designees. Under the Voting and Standstill Agreement, we have
agreed, effective as of the initial closing, to increase by two the number of
directors on our Board of Directors and to appoint two Jacobs designees to fill
such positions with terms expiring in 2003 and 2002, respectively. We have also
agreed to continue to nominate and recommend to our stockholders the re-election
of two Jacobs designees to our Board of Directors. At least one of the Jacobs
designees must be "independent" as defined in our certificate of incorporation.
Each of the designees must have experience and standing in the business
community comparable to other independent directors in the public REIT sector
generally and cannot be an officer, director, 10% or more partner, member or
stockholder or other controlling person of an entity (1) primarily in the
business of owning or operating malls or other shopping centers in the United
States (except for entities affiliated with Richard E. Jacobs or any of the
Jacobs family members, the ownership of which does not violate the terms of the
Non-Competition Agreement described below); or (2) that is an anchor or other
major tenant at any of our properties.
Jacobs will continue to be entitled to nominate two Board members until the
Jacobs family beneficially owns fewer than 6.78 million SCUs and shares of
common stock, following which Jacobs will be entitled to nominate only one Board
member. Jacobs will no longer be entitled to nominate any Board members if the
Jacobs family beneficially owns fewer than 3.34 million SCUs and shares of
common stock.
Standstill. Under the Voting and Standstill Agreement, Jacobs Realty, the
Jacobs trusts and Mr. Cleary have generally agreed that they will not, until the
twelfth anniversary of the closing:
o acquire beneficial ownership of any of our voting securities (except
upon an exchange of their SCUs or other interests of our Operating
Partnership or in a transaction in which any of them acquires a
controlling interest in an entity that owns less than 1% of our
Company);
o solicit, initiate or otherwise engage in any "solicitation" of
"proxies" or become a "participant" in an election contest (as those
terms are used in Regulation 14A under the Securities Exchange Act)
with respect to our Company, call any special meeting of our
stockholders or demand a copy of our stockholders list;
44
<PAGE>
o seek to advise, encourage or influence any person (other than a Jacobs
associate or family member) with respect to the voting of any of our
shares for the purpose of exerting a controlling influence over our
management, Board of Directors or policies;
o participate in or encourage the formation of any group which seeks to
affect control of our Company, to acquire our voting securities or for
the purpose of circumventing any provision of the Voting and
Standstill Agreement;
o otherwise act, alone or in connection with others, to seek to exercise
a controlling influence over our management, Board of Directors or
policies;
o make a request for us to amend or waive any provision of our charter,
stockholders' rights plan or the Voting and Standstill Agreement; or
o disclose any intention or plan inconsistent with the foregoing.
These standstill provisions are not intended to restrict Jacobs Realty, the
Jacobs trusts, Mr. Cleary or any member of the Jacobs family from (1) voting
their securities, provided they are otherwise in compliance with these
standstill provisions, (2) making any statements required under federal
securities or other applicable law or (3) with respect to any person serving as
a director of our Company, from taking actions or making statements solely in
his or her capacity as a director.
These standstill provisions will terminate at the earliest to occur of
o a person (other than Jacobs) initiates a takeover action against our
Company which is not contested by our Board of Directors;
o we enter into active negotiations with any person with respect to a
control transaction (a "control transaction" being defined as a sale
of substantially all of our assets, a transaction which would result
in a person or group beneficially owning 25% or more of the voting
power of our voting securities immediately prior to such transaction
unless such securities are subject to a standstill agreement, or a
transaction which would result in a change of 50% or more of our Board
members);
o we solicit proposals to acquire more than 75% of our assets or
initiate or participate in a control transaction;
o we announce a program or increase an existing program to acquire the
greater of seven million shares of our common stock or 28% or more of
our then outstanding shares of common stock;
o if Charles B. Lebovitz and members of his family no longer
beneficially own in the aggregate at least 3,384,023 of our shares of
common stock and interests in our Operating Partnership which are
exchangeable for common stock, as adjusted;
o the first date on which the provisions of the Share Ownership
Agreement described below have terminated with respect to the Jacobs
Group;
o an insolvency event with respect to our Company; or
o the 12th anniversary of the initial closing date.
45
<PAGE>
Jacobs Realty, the Jacobs trusts and Mr. Cleary further agreed to vote
their shares in favor of (1) the election of any director nominated by our Board
of Directors and running unopposed and uncontested, and (2) the appointment of
auditors proposed by our Board unopposed and uncontested.
Voting. Under this Agreement, Messrs. Lebovitz and Mr. Foy agreed to vote
their shares in our Company at the special meeting to approve the issuance of
the SCUs and to authorize all other acts necessary to effect the acquisition and
the other transactions contemplated by the Master Contribution Agreement.
Additionally, Messrs. Lebovitz, and Mr. Foy have agreed to vote their shares of
common stock in favor of Jacobs' designees to our Board of Directors until the
twelfth anniversary of the initial closing date.
Registration Rights Agreement
At the initial closing, we will enter into a Registration Rights Agreement
with Jacobs and the other holders of the SCUs which grants them registration
rights with respect to the shares of common stock received in exchange for their
SCUs. The registration rights may be exercised by the holders only following
delivery of a notice to our Company requesting conversion of their SCUs in
accordance with the terms of the SCUs, as described under "Terms of the SCUs"
above. Our obligation to file a registration statement is suspended during the
thirty day period during which we may elect to pay cash for such SCUs for which
a conversion request has been made. If we elect to pay cash for such SCUs, we
will not be obligated to register the shares into which such SCUs are
exchangeable.
The holders of the SCUs are entitled to request that we file a registration
statement (including a "shelf" registration statement) under the Securities Act
covering the sale of at least 50,000 shares of common stock (or such lesser
amount that the holder owns at such time), subject to certain conditions. Upon
any such request for registration, we must notify the other holders to give them
an opportunity to participate in such registration. If, at the time of the
request for registration, we had been contemplating a public offering, we may
delay the requested registration for a period of up to three months following
completion of such offering. In addition, we may suspend our registration
obligations for up to 60 days if the filing of a registration statement would
require us to disclose information the disclosure of which would have a material
adverse effect on our Company. However, such delays and suspension periods
cannot exceed 90 days in any 12-month period.
If we propose to register any of our common stock on a form and in a manner
that would permit registration of the shares of common stock into which the SCUs
are exchangeable, either for our own account or for the account of other
security holders, the holders of SCUs may require us to include all or a portion
of their shares in the registration and in any underwriting involved therein,
provided that the lead underwriter of such offering has the right under certain
conditions to limit the number of shares included in the registration. However,
we are not required to include such shares in (1) any registration on Form S-8
or in connection with any employee benefit plan; (2) any registration on Form
S-4 or in connection with any exchange offer; (3) in connection with a rights
offering exclusively to existing holders of common stock; (4) in connection with
an offering solely to our employees; or (5) any registration relating to a
transaction pursuant to Rule 145 under the Securities Act.
The registration rights with respect to any shares expire when (1) the
shares have been sold under an effective registration statement; (2) the shares
are permitted to be distributed pursuant to Rule 144(k) under the Securities
Act; or (3) the shares have been transferred in a transaction exempt from
registration under the Securities Act and the shares are freely transferable to
the public without registration under the Securities Act.
46
<PAGE>
In general, we will bear all fees, costs and expenses of such registrations
(other than transfer taxes, underwriting discounts and selling commissions
applicable to sales of the shares and all fees and disbursements of counsel for
the holders).
Non-Competition Agreement
Subject to certain exceptions, Richard E. Jacobs will not acquire, develop,
manage, own, lease or invest in regional mall shopping centers with two or more
department stores within 15 miles of the core properties (Hanes Mall, Fayette
Mall, West Towne Mall, Brookfield Mall and Cary Towne Center) or within 12 miles
of the other properties acquired from Jacobs or any other of our existing
regional enclosed malls. This agreement will remain in effect until the earlier
to occur of (1) the tenth anniversary of the closing or (2) Jacobs ceases to be
entitled to designate a member of our Board of Directors.
Transition Services Agreement
Jacobs will provide us with certain managerial and administrative services
with respect to the properties for a minimum period of 90 days from the initial
closing. Jacobs will be paid a fee for such services calculated as a percentage
of the gross receipts from the properties during such period.
47
<PAGE>
AMENDMENT TO CBL'S CHARTER
The following is a brief summary of the material provisions of the Proposed
Charter Amendment, the Alternative Resolutions and the Share Ownership
Agreement, which are attached as Annexes F, G and H, respectively, and are
incorporated in this proxy statement by reference. Such summary is qualified in
its entirety by reference to the Proposed Charter Amendment, the Alternative
Resolutions and the Share Ownership Agreement.
The Proposed Amendment
At the special meeting, CBL stockholders will be asked to vote upon and
approve an amendment to the current share ownership limits contained in our
certificate of incorporation.
Currently, our certificate of incorporation generally permits the following
maximum shareholdings in our Company:
o the Lebovitz Group (defined to include Charles B. Lebovitz and those
family members whose share ownership is attributed to him under the
Internal Revenue Code) is permitted to beneficially and constructively
own up to 23% of our outstanding equity stock; and
o all other persons (defined to include entities as well as groups as
such term is used for purposes of Section 13(d)(3) of the Securities
Exchange Act), are permitted to beneficially and constructively own up
to 6% of our outstanding equity stock.
These share ownership limits were implemented at the time of our initial
public offering in 1993, among other things, to ensure our ability to continue
to qualify as a REIT under the Internal Revenue Code.
We have agreed with Jacobs to propose to our stockholders to amend these
share ownership limits as follows:
o to permit the Lebovitz Group (as defined above) and the Jacobs Group
(defined as the David Jacobs Group and the Richard Jacobs Group,
collectively, as defined below) to beneficially and constructively own
in the aggregate 37.99% of our outstanding equity stock;
o to permit the Lebovitz Group and its members to own in the aggregate
25.4% of our outstanding equity stock; and
o to permit Jacobs' principals, the David Jacobs Group (defined to
include the widow and lineal descendents of David Jacobs as well as
those family members whose share ownership is attributed to them under
the Internal Revenue Code) and the Richard Jacobs Group (defined to
include Richard E. Jacobs as well as those family members whose share
ownership is attributed to them under the Internal Revenue Code) and
their respective members, to own in the aggregate 19.9% of our
outstanding equity stock.
Except with the unanimous prior approval of our Board of Directors, the
amendment to our certificate of incorporation, if adopted, may generally not be
further amended or modified in a manner adverse to the Lebovitz Group (except
with its consent) or the Jacobs Group (except with its consent). This provision
will lapse, however, with respect to either Group once the Share Ownership
Agreement
48
<PAGE>
described below has terminated with respect to that Group . We have also agreed
not to initiate or endorse any stockholder proposal to further amend our share
ownership limits in a manner adverse to the Lebovitz Group or the Jacobs Group
except with their prior written consent.
Stockholder approval of the proposed amendment is not a condition to the
transaction, but approval of the transaction is a condition to approval of the
proposed amendment.
Modification of the Share Ownership Limits
In the event the proposed amendment is not adopted, our Board of Directors
has resolved to modify the share ownership limits in accordance with the
provisions of our certificate of incorporation but in a manner which does not
require a stockholder vote. These modifications would:
o permit the Lebovitz Group and the Jacobs Group to own in the aggregate
31.99% of our outstanding equity stock;
o permit the Lebovitz Group and its members to own in the aggregate
21.4% of our outstanding equity stock; and
o permit the Jacobs' principals to own in the aggregate 15.5% of our
outstanding equity stock.
Our bylaws will provide that, until the proposed charter amendment has been
adopted, the Board's modification of our share ownership limits may not be
amended or repealed in a manner adverse to the Lebovitz Group (without its prior
written consent) or the Jacobs Group (without its prior written consent), except
with the unanimous approval of the Board. This provision will lapse, however,
with respect to either Group once the Share Ownership Agreement has terminated
with respect to that Group. Additionally, if our stockholders do not approve the
proposed amendment, we have agreed to resubmit the proposed amendment to a
stockholder vote at our next three annual meetings of stockholders.
Share Ownership Agreement
Whether or not the proposed amendment is adopted, at the initial closing we
will enter into a Share Ownership Agreement with the Lebovitz Group and Jacobs
pursuant to which:
o the Lebovitz Group will be permitted to beneficially and
constructively own up to 7.96 million shares of our common stock (6.3
million shares if the proposed amendment is not adopted), subject to
adjustments for increases or decreases to our outstanding common share
capital; and
o Jacobs and its principals will be permitted to beneficially and
constructively own up to 6.35 million shares of our common stock (4.69
million shares if the proposed amendment is not adopted), subject to
adjustments for increases or decreases to our outstanding common share
capital.
The Share Ownership Agreement provides that the number of shares of common
stock which the Lebovitz and Jacobs Groups are respectively permitted to own
will be increased by a percentage (18.995% if the proposed amendment is adopted,
15.995% if it is not) of the number of shares issued by our Company, other than
for issuances upon a conversion of the interests in our Operating Partnership by
the Lebovitz Group or the Jacobs Group. The Lebovitz and Jacobs Groups'
permitted shareholdings will similarly not be increased for issuances of
Operating Partnership interests to a seller in connection with
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<PAGE>
our acquisition of the seller's assets to the extent necessary (subject to
certain limitations) to allow the seller to exchange all of its Operating
Partnership interests for our shares. The number of shares of common stock which
the Lebovitz and Jacobs Groups are respectively permitted to own will be
similarly decreased to the extent we repurchase shares (other than for
repurchases from the Lebovitz or Jacobs Groups).
The Share Ownership Agreement will terminate with respect to the Lebovitz
Group and Jacobs Group, respectively, once such Group beneficially and
constructively owns shares of our equity stock (treating all interests in our
Operating Partnership which are exchangeable for our common stock as if they had
been exchanged) less than the share ownership limit generally applicable to all
stockholders (currently, 6% of the outstanding shares of our equity stock).
Amendment to Shareholder Rights Agreement
We have also agreed to amend at the initial closing the terms of our
Stockholders Rights Agreement to permit Jacobs to beneficially own shares of
common stock to the extent permitted under the proposed charter amendment (or
the modification, as applicable) and the Share Ownership Agreement.
Reasons for the Proposed Amendment and Share Ownership Agreement
The proposed amendment, the Board modification in the event our
stockholders do not approve the proposed amendment and the Share Ownership
Agreement are collectively designed to:
o permit Jacobs to own a higher percentage of our shares than would
otherwise be permitted under our current ownership limits, thus
affording Jacobs with the potential for greater liquidity with respect
to its equity interest in our Company. Under our certificate of
incorporation, the two Jacobs trusts would otherwise together have
been subject to the 6% ownership limits applicable to a single person.
This was a key issue for Jacobs during the transaction negotiations;
o preserve the share ownership entitlement of the Lebovitz Group in the
event the stockholders adopt the proposed amendment. To enable the
transaction to proceed, the Lebovitz Group agreed to forego a portion
of its share ownership entitlement in the event the stockholders do
not adopt the proposed amendment in order to create additional share
ownership capacity for Jacobs;
o preserve our Company's REIT status under the Internal Revenue Code;
and
o preserve our Company's flexibility to acquire assets in exchange for
Operating Partnership units by enabling us to provide an asset seller
with share ownership capacity under the Share Ownership Agreement.
The Lebovitz Group currently owns approximately 2.19 million shares of our
common stock (including certain management options) and approximately 8.50
million common Operating Partnership units. Under our current ownership limits,
the Lebovitz Group could exchange 4.79 million of those units for shares of
common stock. If the proposed amendment is adopted, the Lebovitz Group could,
under the terms of the Share Ownership Agreement, exchange units for
approximately 5.78 million shares of common stock (representing total ownership
of approximately 7.97 million shares of common stock). If
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the proposed amendment is not adopted, the Lebovitz Group could exchange units
for only approximately 4.113 million shares of common stock.
Assuming all of the properties are acquired, Jacobs would own approximately
11.71 million SCUs which are exchangeable for shares of our common stock on a
one-for-one basis. Under our current ownership limit of 6% generally applicable
to all persons other than the Lebovitz Group, Jacobs could exchange SCUs for
only 1.63 million shares of common stock. If the proposed amendment is adopted,
Jacobs could, under the terms of the Share Ownership Agreement, exchange SCUs
for approximately 6.35 million shares of common stock. If the proposed amendment
is not adopted (and instead the Board modifications are effected), Jacobs could
exchange SCUs for only approximately 4.69 million shares of common stock.
Our Board of Directors considers the proposed amendment to be advisable and
in the best interests of CBL and its stockholders and therefore unanimously
recommends that stockholders vote FOR its approval.
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SELECTED HISTORICAL FINANCIAL DATA OF CBL
(in thousands, except per share data)
The selected historical condensed consolidated financial data of our
Company for the five years ended December 31, 1999 set forth below have been
derived from audited financial statements. The selected historical condensed
consolidated financial data of our Company for the six months ended June 30,
2000 and June 30, 1999 set forth below have been derived from unaudited
financial statements. This condensed consolidated financial data should be read
in conjunction with the historical consolidated financial statements and related
notes thereto contained in our Annual Reports on Form 10-K and Quarterly Reports
on Form 10-Q, which are incorporated by reference in this proxy statement.
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
------------------------ ---------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total Revenues............ $174,866 $148,739 $317,603 $254,640 $177,604 $146,805 $131,727
Total Expenses............ 137,684 117,969 250,139 203,001 135,200 111,012 104,128
-------- -------- -------- -------- -------- -------- --------
Income From Operations.... 37,182 30,770 67,464 51,639 42,404 35,793 27,599
Gain on Sales of Real
Estate Assets......... 9,330 8,568 8,357 4,183 6,040 13,614 2,213
Equity in Earnings of
Unconsolidated Affiliates 1,651 1,741 3,263 2,379 1,916 1,831 1,450
Minority Interest in
Earnings:
Operating Partnership (14,358) (12,115) (23,264) (16,258) (13,819) (15,468) (10,527)
Shopping center
properties........... (726) (662) (1,225) (645) (508) (527) (386)
-------- -------- -------- -------- -------- -------- --------
Income Before Extraordinary
Item................... 33,079 28,302 54,595 41,298 36,033 35,243 20,349
Extraordinary Loss on
Extinguishment of Debt. (137) -- -- (799) (1,092) (820) (326)
-------- -------- -------- -------- -------- -------- --------
Net Income................ 32,942 28,302 54,595 40,499 34,941 34,423 20,023
Preferred Dividends....... (3,234) (3,234) (6,468) (3,234) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net Income Available to
Common Stockholders.... $29,708 $25,068 $48,127 $37,265 $34,941 $34,423 $20,023
======== ======== ======== ======== ======== ======== ========
Basic Earnings per Common
Share:
Income before
extraordinary item... $1.20 $1.02 $1.95 $1.58 $1.51 $1.69 $1.14
======== ======== ======== ======== ======== ======== ========
Net income........... $1.20 $1.02 $1.95 $1.55 $1.46 $1.65 $1.12
======== ======== ======== ======== ======== ======== ========
Weighted average
common shares
outstanding.......... 24,790 24,602 24,647 24,079 23,895 20,890 17,827
Diluted Earnings per Common
Share:
Income before
extraordinary item... $1.20 $1.01 $1.94 $1.56 $1.49 $1.68 $1.14
======== ======== ======== ======== ======== ======== ========
Net income........... $1.19 $1.01 $1.94 $1.53 $1.45 $1.64 $1.12
======== ======== ======== ======== ======== ======== ========
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Six Months Ended June 30, Year Ended December 31,
------------------------ ---------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Weighted average
common shares and
potential dilutive
common shares
outstanding.......... 24,905 24,835 24,834 24,340 24,151 21,022 17,856
Dividends declared per
share................ -- -- $1.95 $1.86 $1.77 $1.68 $1.59
June 30, December 31,
--------------------- ---------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net investment in real
estate assets........ $1,990,365 $1,863,327 $1,960,554 $1,805,788 $1,142,324 $987,260 $758,938
Total assets......... 2,067,599 1,916,068 2,018,838 1,855,347 1,245,025 1,025,925 814,168
Total liabilities.... 1,444,352 1,322,622 1,424,989 1,208,204 741,413 590,295 392,754
Minority interest.... 179,171 169,330 170,750 168,040 123,897 114,425 113,692
Stockholders' equity. 441,456 419,310 419,887 415,782 330,853 272,804 270,892
June 30, December 31,
--------------------- ---------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Cash flows provided by
(used in):
Operating activities. $59,592 $52,754 $114,196 $89,123 $60,852 $54,789 $28,977
Investing activities. (61,497) (77,533) (212,140) (571,332) (245,884) (218,016) (99,690)
Financing activities. 3,998 27,163 99,191 484,912 183,858 164,496 71,689
Funds From
Operations (FFO)
(1) of the Operating
Partnership........ 64,416 54,026 117,947 93,614 76,514 63,044 52,212
FFO applicable to the
Company............ 43,426 36,411 79,495 65,026 54,833 43,498 34,218
--------------
(1) We define FFO as net income (loss) before depreciation of real estate assets, other non-cash items, gains or
losses on sales of real estate assets and gains or losses on investments in marketable securities. FFO also
includes the Company's share of FFO in unconsolidated properties and excludes minority interests' share of
FFO in consolidated properties. The costs of interest rate caps and finance costs on our lines of credit are
amortized and included in interest expense and, therefore, reduce FFO. FFO does not represent cash flow from
operations as defined by accounting principles generally accepted in the United States and is not necessarily
indicative of the cash available to fund all cash requirements.
</TABLE>
53
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF THE PROPERTIES
(in thousands)
The selected financial information for the acquired properties set forth
below was derived from financial information prepared in compliance with Rule
3-14 of Regulation S-X of the Securities and Exchange Commission. As such,
certain revenues and expenses, which may not be directly attributable to the
revenues and expenses expected to be incurred in the future operations of the
acquired properties, have been excluded. Revenues exclude interest income and
realized gains and losses on marketable securities. Expenses excluded consist of
management, leasing, interest, income taxes, depreciation and amortization and
other costs not directly related to the future operations of the acquired
properties.
The results set forth below include properties that will be fully
consolidated as well as properties to be accounted for under the equity method
of accounting. Under the equity method of accounting revenues and expenses are
excluded from the consolidated results with only the owned share of those
properties net income recorded as equity in earnings of unconsolidated
affiliates.
Except for the information relating to the year ended December 31, 1999,
which was derived from the audited financial statement which is included in this
proxy statement and was prepared in compliance with Rule 3-14 of Regulation S-X,
the information set forth below was derived from unaudited financial
information.
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
------------------------ ---------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Certain Revenues................. $99,587 $98,621 $204,464 $197,687 $188,163 $188,787 $187,678
Certain Expenses................. 32,902 32,393 65,952 62,471 60,677 59,052 59,953
-------- -------- -------- -------- -------- -------- --------
Certain Revenues in Excess of
Certain Expenses................. $66,685 $66,228 $138,512 $135,216 $127,486 $129,735 $127,725
======== ======== ======== ======== ======== ======== ========
Jacobs Share of Certain Revenues
in Excess of Certain Expenses... $56,528 $55,789 $116,967 $114,450 $107,935 $110,192 $108,333
======== ======== ======== ======== ======== ======== ========
</TABLE>
54
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial statements are
based on the historical consolidated financial statements of CBL and the
properties, consolidated and adjusted to give effect to the acquisition and the
transactions contemplated thereby (including any related financing), as
described in the notes thereto. Certain amounts in the financial statements of
the properties have been reclassified to conform to CBL's presentation. These
statements should be read in conjunction with the historical financial
statements and notes thereto of the Company and the properties which are
included or incorporated by reference in this proxy statement.
The unaudited pro forma consolidated statements of earnings for the six
months ended June 30, 2000 and for the year ended December 31, 1999 present the
results for our Company and the properties as if the acquisition had occurred at
the beginning of the earliest period presented. The accompanying unaudited pro
forma consolidated balance sheet as of June 30, 2000 gives effect to the
acquisition as of that date. The pro forma financial statements assume that the
closing of all interests in the properties occurs at such time, rather than over
a period of time as contemplated for certain properties. See "The Master
Contribution Agreement -- Structure of the Acquisition -- Multiple
Contributions."
The pro forma adjustments are based upon preliminary estimates, information
currently available and certain assumptions that management believes are
reasonable under the circumstances, including among other things, the
acquisition of all 21 of the regional malls and two associated centers (other
than the interests of the non-Jacobs partners). However, under certain
circumstances certain properties may be excluded from the acquisition and the
aggregate consideration adjusted accordingly. See "The Master Contribution
Agreement -- Structure of the Acquisition -- Consideration Allocations and
Adjustments."
CBL's actual consolidated financial statements will reflect the effects of
the acquisition on and after the applicable closing date rather than the dates
indicated above. The unaudited pro forma consolidated financial statements
neither purport to represent what the consolidated results of operations or
financial condition actually would have been had the acquisition and related
transactions in fact occurred on the assumed date, nor do they purport to
project the consolidated results of operations and financial position for any
future period.
The acquisition will be accounted for by the purchase method and,
therefore, assets and liabilities of the properties will be recorded at their
fair values. Allocations included in the pro forma statements are based on
analysis which is not yet completed. Accordingly, the final value of the
aggregate consideration and its allocation may differ, perhaps significantly,
from the amounts included in these pro forma statements.
55
<PAGE>
<TABLE>
CBL & ASSOCIATES PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2000
(in thousands, except per share amounts)
<CAPTION>
CBL Jacobs Pro Forma Pro Forma
Historical Properties Adjustments (a) Adjustments (h) Consolidated
---------- ---------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Minimum rents............... $111,676 $65,700 ($16,222) $ - $161,154
Percentage rents............ 5,931 2,768 (581) - 8,118
Other rents................. 1,929 1,335 (87) - 3,177
Tenant reimbursements....... 50,758 29,041 (7,166) - 72,633
Management development and
leasing fees.............. 2,028 - - 864 (b) 2,892
Interest and other.......... 2,544 743 (282) - 3,005
--------- -------- -------- ------- --------
Total revenues........... 174,866 99,587 (24,338) 864 250,979
--------- -------- -------- ------- --------
Expenses:
Property operating.......... 26,929 16,056 (3,339) - 39,646
Depreciation and amortization 29,764 - - 10,956 (c) 40,720
Real estate taxes........... 14,872 8,273 (2,917) - 20,228
Maintenance and repairs..... 9,908 8,573 (1,629) - 16,852
General and administrative.. 9,090 - - - 9,090
Interest.................... 47,090 - - 32,754 (d) 79,844
Other....................... 31 - - - 31
--------- -------- -------- ------- --------
Total expenses............ 137,684 32,902 (7,885) 43,710 206,411
--------- -------- -------- ------- --------
Income from operations............. 37,182 66,685 (16,453) (42,846) 44,568
Gain on sales of real estate assets 9,330 - - - 9,330
Equity in earnings of unconsolidated
affiliates.................. 1,651 - 8,725 (6,716) (e) 3,660
Minority interest in earnings: -
Operating partnership....... (14,358) - - (11,801) (f) (26,159)
Shopping center properties.. (726) - (2,429) 2,243 (g) (912)
--------- -------- -------- ------- --------
Income before extraordinary item... 33,079 66,685 (10,157) (59,120) 30,487
Extraordinary loss on extinguishment
of debt..................... (137) - - - (137)
--------- -------- -------- ------- --------
Net income......................... 32,942 66,685 (10,157) (59,120) 30,350
Preferred dividends................ (3,234) - - - (3,234)
--------- -------- -------- ------- --------
Net income available to common
shareholders................ $ 29,708 $ 66,685 ($10,157) ($59,120) $ 27,116
========= ======== ======== ======= ========
Basic Per Share Data:
Income before extraordinary
item........................ $1.20 $1.10
========= ========
Extraordinary loss on
extinguishment of debt.... (0.00) (0.01)
--------- --------
Net income.................. $1.20 $1.09
========= ========
Weighted average common shares
outstanding............... 24,790 24,790
Diluted per share data:
Income before extraordinary
item........................ $1.20 $1.09
========= ========
Extraordinary loss on
extinguishment of debt.... (0.01) 0.00
--------- --------
Net income.................. $1.19 $1.09
========= ========
Weighted average common shares
and potential dilutive
common shares outstanding. 24,905 24,905
----------
(a) Reflects adjustments to record Jacobs' investments in certain joint ventures under the equity method of
accounting. These joint ventures include Eastgate Mall and Crossing, East Towne Mall, Kentucky Oaks Mall,
Midland Mall and West Towne Mall. The proportionate results of these properties is recorded in equity in
earnings of unconsolidated affiliates. Minority interest in earnings consists of the non-Jacobs partners'
interest in Cary Mall, Cherryvale Mall, Columbia Mall and Jefferson Mall.
(b) Represents management fees earned from properties accounted for under the equity method of accounting.
(c) Represents depreciation expense on acquired assets over 40 years.
56
<PAGE>
(d) Represents actual interest expense on $667.1 million of assumed debt, amortization of credit fees and interest
expense on the $112 million acquisition loan for the six months ended June 30, 2000. The average interest rate
for the period is assumed to be 7.8%. This balance sheet debt of $667.1 million, plus the share of debt
accounted for under the equity method of accounting of $99.9 million, less the share of debt of non-Jacobs
partners of $33.2 million, equals the $733.8 million of debt being assumed as part of the transaction.
(e) Represents adjustments to properties accounted for under the equity method of accounting for depreciation of
$2,103,000, management fees of $508,000 and interest expense of $4,105,000 on Jacobs' share of debt of $99.9
million.
(f) Represents pro forma minority interest in earnings of the Operating Partnership as if the SCUs were issued on
January 1, 2000.
(g) Represents minority interest in pro forma adjustments for depreciation of $499,000, management fees of $180,000
and interest expense of $1,564,000.
(h) The pro forma information does not include any incremental costs relating to the management and leasing of the
Jacobs properties.
</TABLE>
57
<PAGE>
<TABLE>
CBL & ASSOCIATES PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
(in thousands, except per share amounts)
<CAPTION>
CBL Jacobs Pro Forma Pro Forma
Historical Properties Adjustments (a) Adjustments (h) Consolidated
---------- ---------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Minimum rents........ $203,022 $132,955 ($33,661) $ - $302,316
Percentage rents..... 7,356 9,684 (2,048) - 14,992
Other rents.......... 5,442 1,794 (441) - 6,795
Tenant reimbursements 89,774 59,025 (13,913) - 134,886
Management development
and leasing fees... 7,818 - - 1,703 (b) 9,521
Interest and other... 4,191 1,006 (361) - 4,836
--------- -------- -------- ------- --------
Total revenues.... 317,603 204,464 (50,424) 1,703 473,346
--------- -------- -------- ------- --------
Expenses:
Property operating... 50,832 31,996 (6,211) - 76,617
Depreciation and
amortization......... 53,551 - - 21,913 (c) 75,464
Real estate taxes.... 27,580 16,630 (5,726) - 38,484
Maintenance and repairs 17,783 17,326 (2,925) - 32,184
General and
administrative....... 16,214 - - - 16,214
Interest............. 82,505 - - 64,655 (d) 147,160
Other................ 1,674 - - - 1,674
--------- -------- -------- ------- --------
Total expenses..... 250,139 65,952 (14,862) 86,568 387,797
--------- -------- -------- ------- --------
Income from operations...... 67,464 138,512 (35,562) (84,865) 85,549
Gain on sales of real estate
assets............... 8,357 - - 8,357
Equity in earnings of
unconsolidated
affiliates........... 3,263 - 18,944 (13,524) (e) 8,683
Minority interest in earnings:
Operating partnership (23,264) (22,174) (f) (45,438)
Shopping center
properties........... (1,225) - (4,927) 4,339 (g) (1,813)
--------- -------- -------- ------- --------
Net income.................. 54,595 138,512 (21,545) (116,224) 55,338
Preferred dividends......... (6,468) - - - (6,468)
--------- -------- -------- ------- --------
Net income available to common
shareholders......... $ 48,127 $138,512 ($21,545) ($116,224) $ 48,870
========= ======== ======== ======= ========
Basic Per Share data:
Net income........... $1.95 $1.98
========= ========
Weighted average common
shares outstanding. 24,647 24,647
Diluted per share data:
Net income........... $1.94 $1.97
========= ========
Weighted average common
shares and potential
dilutive common
shares outstanding. 24,834 24,834
--------------
(a) Reflects adjustments to record Jacobs' investments in certain joint ventures under the equity method of
accounting. These joint ventures include Eastgate Mall and Crossing, East Towne Mall, Kentucky Oaks Mall,
Midland Mall and West Towne Mall. The proportionate results of these properties is recorded in equity in
earnings of unconsolidated affiliates. Minority interest in earnings consists of the non-Jacobs partners'
interest in Cary Mall, Cherryvale Mall, Columbia Mall and Jefferson Mall.
(b) Represents management fees earned from properties accounted for under the equity method of accounting.
(c) Represents depreciation expense on acquired assets over 40 years.
(d) Represents actual interest expense on $667.1 million of assumed debt, amortization of credit fees and interest
expense on the $112 million acquisition loan for the year ended December 31, 1999. The average interest rate
for the period is assumed to be 7.0%. This balance sheet debt of $667.1 million, plus the share of debt
accounted for under the equity method of accounting of $99.9 million, less the share of debt of non-Jacobs
partners of $33.2 million, equals the $733.8 million of debt being assumed as part of the transaction.
58
<PAGE>
(e) Represents adjustments to properties accounted for under the equity method of accounting for depreciation of
$4,207,000, management fees of $1,001,000 and interest expense of $8,316,000 on Jacobs' share of debt of $76.8
million.
(f) Represents pro forma adjustment to minority interest in earnings of the Operating Partnership as if the SCUs
were issued on January 1, 1999.
(g) Represents minority interest in pro forma adjustments for depreciation of $998,000, management fees of $352,000
and interest expense of $2,989,000.
(h) The pro forma information does not include any incremental costs relating to the management and leasing of the
Jacobs properties.
</TABLE>
59
<PAGE>
<TABLE>
CBL & ASSOCIATES PROPERTIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 2000
(in thousands)
<CAPTION>
Pro Forma
CBL Adjustments Pro Forma
Historical (a) Consolidated
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
REAL ESTATE ASSETS:
Land................................... $ 283,334 $ 204,978 $ 488,312
Building and improvements.............. 1,847,903 875,318 2,723,221
------------ ------------ ------------
2,131,237 1,080,296 3,211,533
Less: accumulated depreciation.... (249,064) - (249,064)
------------ ------------ ------------
1,882,173 1,080,296 2,962,469
Developments in progress............... 108,192 - 108,192
------------ ------------ ------------
Net investment in real estate
assets............................. 1,990,365 1,080,296 3,070,661
CASH AND CASH EQUIVALENTS................... 9,167 7,000 16,167
CASH IN ESCROW.............................. 14,543 - 14,543
RECEIVABLES:
Tenant, net of allowance for doubtful
accounts of $1,854..................... 23,538 - 23,538
Other.................................. 2,156 - 2,156
INVESTMENT IN UNCONSOLIDATED AFFILIATES (2,620) 93,312 90,692
MORTGAGE NOTES RECEIVABLE................... 9,722 1,200 10,922
OTHER ASSETS................................ 18,108 2,000 20,108
------------ ------------ ------------
$ 2,064,979 $ 1,183,808 $ 3,248,787
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
MORTGAGE AND OTHER NOTES PAYABLE............ $ 1,389,560 $ 779,069 $ 2,168,629
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES.... 54,792 9,000 63,792
------------ ------------ ------------
Total liabilities.................. 1,444,352 788,069 2,232,421
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST........................... 179,171 293,196 472,367
------------ ------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock........................ 29 - 29
Common stock........................... 250 - 250
Additional paid-in capital............. 460,387 102,543 562,930
Accumulated deficit.................... (19,210) - (19,210)
------------ ------------ ------------
Total shareholders' equity......... 441,456 102,543 543,999
------------ ------------ ------------
$ 2,064,979 $ 1,183,808 $ 3,248,787
============ ============ ============
----------
(a) Represents the acquisition of the properties and allocation of the consideration to assets
acquired and liabilities assumed.
</TABLE>
60
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF THE PROPERTIES
The following discussion should be read together with the selected
historical combined financial data of the properties included in this proxy
statement.
Results of Operations
Six Months Ended June 30, 2000 vs. Six Months Ended June 30, 1999
Certain revenues increased by $1.0 million or 1% for the six month period
ended June 30, 2000 versus June 30, 1999. This increase was primarily
attributable to increased fixed rents.
Certain expenses increased $.5 million or 1.6% over the comparable period
in the prior year. Approximately $.1 million of the increase was related to new
food courts at Citadel Mall and Jefferson Mall which opened in late 1999.
Year Ended December 31, 1999 vs. Year Ended December 31, 1998
Certain revenues increased by $6.8 million or 3.4% in 1999. This increase
was comprised primarily of an increase in minimum rents of $4.4 million,
increased tenant recoveries of $2.1 million and increased percentage rent of $.3
million. The year-end occupancy percentage decreased from 88% in 1998 to 84% in
1999. This decrease was offset by increased average base rent and increased
revenues from temporary tenants of $1.6 million.
Certain expenses increased by $3.5 million or 5.6% in 1999. Certain
operating expenses increased $2.2 million, repairs and maintenance increased $.8
million and real estate taxes increased by $.5 million.
Year Ended December 31, 1998 vs. Year Ended December 31, 1997
Certain revenues increased by $9.5 million or 5.1% in 1998. This increase
was attributable to increased minimum rents of $4.6 million, increased
percentage rents of $1.4 million and increased tenant recoveries of $3.2 million
in 1998. The year-end occupancy percentage increased from 84% in 1998 to 88% in
1999, and rents from temporary tenants increased by $.9 million in 1999.
Certain expenses increased by $1.8 million or 2.9% in 1998. Certain
operating expenses increased $1.2 million, repairs and maintenance increased $.7
million and real estate taxes decreased $.1 million in 1998.
61
<PAGE>
THE PROPERTIES
Malls
We will acquire from Jacobs a portfolio comprised of interests in 21
enclosed regional shopping malls and two associated centers each of which is
part of a mall complex. The malls generally have four or more anchor stores
(department stores or other large retail stores) which own or lease their
stores. They also have numerous diversified smaller stores, known as mall
stores, each with gross leasable area generally of less than 20,000 square feet.
The mall stores are mostly occupied by national or regional retailers and are
located along enclosed malls connecting the anchor stores. At most of the malls
additional freestanding restaurants and retail stores are located on the
periphery of the complex. These freestanding stores are, in most cases, owned by
their occupants.
The total gross leasable area of the malls (including, in the case of
Eastgate Mall and West Towne Mall, their associated centers) is approximately
19.2 million square feet, or an average gross leasable area of approximately
914,000 square feet per mall. As of December 31, 1999, the gross leasable area
of the mall stores was approximately 5,929,000 square feet.
Following each closing, we will manage all of the properties (other than
Kentucky Oaks Mall, which is managed by a third party) acquired in that closing.
The properties are generally located in middle-markets. We believe that the
properties have strong competitive positions because they generally are the only
or largest enclosed malls within their respective trade areas. Trade areas are
identified 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 five largest income-producing properties are Hanes Mall, Fayette Mall,
Cary Towne Center, Brookfield Square Mall and West Towne Mall. These
represented, as of December 31, 1999, approximately 35.50% of total 1999
revenues from the Jacobs properties, 31.9% of the Jacobs properties' total gross
leasable area and 29.35% of total mall store gross leasable area.
<TABLE>
<CAPTION>
Percentage Percentage of
Percentage of Total Total
1999 Total 1999 Portfolio Mall Shop Portfolio
Property/Location Revenue Revenue Total GLA GLA GLA Mall Shop GLA
----------------- ------- ------- --------- --- --- -------------
<C> <S> <C> <C> <C> <C> <C>
Hanes Mall $21,568,000 10.6% 1,556,000 8.12% 555,000 9.36%
Winston-Salem, NC
Fayette Mall 13,321,000 6.5% 1,096,000 5.72% 309,000 5.21%
Lexington, KY
Cary Towne Center 12,684,000 6.2% 953,000 4.97% 296,000 4.99%
Cary, NC
Brookfield Square 12,472,000 6.1% 1,041,000 5.43% 317,000 5.35%
Brookfield, WI
West Towne Mall (1) 12,542,000 6.1% 1,468,000 7.66% 263,000 4.44%
Madison, WI
----------- -------- ---------- ------- --------- --------
Group Total 72,587,000 35.5% 6,114,000 31.90% 1,740,000 29.35%
Remaining Properties 131,877,000 64.5% 13,047,000 68.10% 4,189,000 70.65%
----------- -------- ---------- ------- --------- --------
Portfolio Total 204,464,000 100.00% 19,161,000 100.00% 5,929,000 100.00%
</TABLE>
----------
(1) Includes West Towne Crossing.
62
<PAGE>
Nineteen of the 21 malls have undergone an expansion or remodeling since
their opening, and sixteen have either been built or renovated in the last 10
years or are in the process of being renovated. We plan to renovate
substantially all of the properties (except Kentucky Oaks Mall) during the next
four to five years. We currently estimate the cost for these current and planned
renovations to be approximately $200 million, which we propose to finance from
our credit line and internally generated funds from these properties.
The land underlying the properties is owned in fee in all cases, except for
Wausau Center and a small portion of Eastgate Mall, which are subject to
long-term ground leases. In each case, we will have a right of first refusal to
purchase the fee interest.
We believe that the each of the properties is adequately covered by
customary insurance policies.
The table on the following page sets forth certain information for each of
the malls as of September 1, 2000:
<TABLE>
<CAPTION>
Year of
Most Mall Store
Recent Total Sales Per Percentage
Year of Expansion/ Proposed Mall Square Mall Store
Name of Mall/Location Opening Renovation Ownership Total GLA (1) Store GLA Foot(2) GLA Leased Anchors
--------------------- ------- ---------- --------- ------------- --------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Brookfield Square 1967 1997 100.00% 1,041,000 317,000 407 81% Boston
Brookfield, WI Store,
Sears,
JCPenney
Cary Towne Center 1979 1993 80.00% 953,000 296,000 352 94% Dillard's,
Cary, NC Hecht's,
Hudson
Belk,
JCPenney,
Sears
Cherryvale Mall 1973 1989 83.82% 714,000 305,000 307 86% Bergner's,
Rockford, IL Marshall
Fields,
Sears
Citadel Mall 1981 2000 100.00% 1,068,000 299,000 254 79% Parisian,
Charleston, SC Dillard's
Belk,
JCPenney,
Sears
Columbia Mall 1977 1997 79.00% 1,113,000 299,000 229 72% Dillard's,
Columbia, CS JCPenney,
Rich's,
Sears
Eastgate Mall (3) 1980 1995 53.85% 1,099,000 270,000 244 68% JCPenney,
Cincinnati, OH Kohl's
Dillard's,
Sears
East Towne Mall 1971 1997 65.00% 895,000 301,000 279 92% Boston
Madison, WI Store,
Younkers,
Sears,
JCPenney
Fashion Square 1972 1993 100.00% 786,000 289,000 293 87% Hudson's
Saginaw, MI JCPenney,
Sears
63
<PAGE>
<CAPTION>
Year of
Most Mall Store
Recent Total Sales Per Percentage
Year of Expansion/ Proposed Mall Square Mall Store
Name of Mall/Location Opening Renovation Ownership Total GLA (1) Store GLA Foot(2) GLA Leased Anchors
--------------------- ------- ---------- --------- ------------- --------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fayette Mall 1971 1993 100.00% 1,096,000 309,000 492 88% Lazarus,
Lexington, KY Dillard's,
JCPenney,
Sears
Hanes Mall 1975 1990 100.00% 1,556,000 555,000 335 94% Dillard's,
Winston-Salem, NC Belk,
Hecht's,
Sears,
JCPenney
Jefferson Mall 1978 1999 87.25% 936,000 276,000 262 83% Lazarus,
Louisville, KY Dillard's,
Sears,
JCPenney
Kentucky Oaks Mall 1982 1995 40.00% 878,000 278,000 257 91% Dillard's
Paducah, NY (5),
Elder-
Beerman,
JCPenney,
Sears,
ShopKo
Midland Mall 1991 - 40.00% 514,000 197,000 237 79% Elder-
Midland, MI Beerman,
JCPenney,
Sears,
Target
Northwoods Mall 1972 1995 100.00% 833,000 314,000 279 89% Dillard's,
Charleston, SC Belk,
JCPenney,
Sears
Old Hickory Mall 1967 1994 100.00% 556,000 161,000 308 90% Belk,
Jackson, TN Goldsmith's,
Sears,
JCPenney
Parkdale Mall 1986 1993 100.00% 1,411,000 475,000 250 86% Dillard's
Beaumont, TX (5),
JCPenney,
Montgomery
Ward, Sears
Randolph Mall 1982 1989 100.00% 376,000 147,000 232 80% Belk,
Asheboro, NC JCPenney,
Roses (4),
Sears
Regency Mall 1981 1999 100.00% 918,000 268,000 244 78% Boston
Racine, WI Store,
Younkers,
JCPenney,
Sears
Towne Mall 1977 - 100.00% 521,000 154,000 310 66% Elder-Beerman,
Franklin, OH Dillard's,
Sears
Wausau Center 1983 1999 100.00% 429,000 156,000 297 94% Younkers,
Wausau, WI JCPenney,
Sears
64
<PAGE>
<CAPTION>
Year of
Most Mall Store
Recent Total Sales Per Percentage
Year of Expansion/ Proposed Mall Square Mall Store
Name of Mall/Location Opening Renovation Ownership Total GLA (1) Store GLA Foot(2) GLA Leased Anchors
--------------------- ------- ---------- --------- ------------- --------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
West Towne Mall (3) 1970 1990 65.00% 1,468,000 263,000 355 93% Boston
Madison, WI Store,
Younkers,
Sears,
JCPenney
Total 19,161,000 5,929,000
---------------
(1) Includes improved outparcels owned by Jacobs that are not excluded outparcels and associated auto centers.
(2) Takes into account stores that have been in occupancy for at least one month.
(3) Includes associated center.
(4) Vacant anchor store.
(5) Represents two Dillard's stores.
</TABLE>
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 or large retail stores whose merchandise appeals
to a broad range of shoppers. Although the properties 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 properties 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 account for approximately 8% of
the total revenues from the properties. Anchors which own their own stores
generally are parties to reciprocal easement agreements covering, among other
things, operating covenants, reciprocal easements, property operations, initial
construction and future expansions. The properties have a total of 85 anchors.
Only one property (Randolph Mall) has an anchor vacancy, and negotiations are
currently underway to fill that vacancy. The following table indicates all mall
anchors and sets forth the aggregate number of square feet owned or leased by
anchors in the Jacobs properties as of July 31, 2000:
<TABLE>
<CAPTION>
Number of GLA Owned GLA Leased Total Occupied
Tenant Anchor Stores by Anchor by Anchor by Anchor
------ ------------- --------- --------- ---------
<S> <C> <C> <C> <C>
JCPenney 19 1,515,000 1,004,000 2,519,000
Sears 21 2,328,000 515,000 2,843,000
Dillard's 13 1,494,000 310,000 1,804,000
Saks:
Parisian 1 129,000 0 129,000
Boston Store 4 440,000 160,000 600,000
Bergner's 1 0 128,000 128,000
Younkers 4 401,000 101,000 502,000
-----------------------------------------------------------------------------------
Subtotal 10 970,000 389,000 1,359,000
Belk:
Belk 4 517,000 86,000 603,000
Hudson Belk 1 0 161,000 161,000
Belk Yates 1 65,000 0 65,000
-----------------------------------------------------------------------------------
Subtotal 6 582,000 247,000 829,000
65
<PAGE>
<CAPTION>
Number of GLA Owned GLA Leased Total Occupied
Tenant Anchor Stores by Anchor by Anchor by Anchor
------ ------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Federated:
Rich's 1 167,000 0 167,000
Goldsmith's 1 0 120,000 120,000
Lazarus 2 427,000 0 427,000
-----------------------------------------------------------------------------------
Subtotal 4 594,000 120,000 714,000
May Company:
Hecht's 2 254,000 0 254,000
-----------------------------------------------------------------------------------
Target Corp.:
Marshall Field's 1 0 148,000 148,000
Target 2 88,000 0 88,000
Hudson 1 121,000 0 121,000
-----------------------------------------------------------------------------------
Subtotal 4 209,000 148,000 357,000
Elder-Beerman 3 118,000 124,000 242,000
Kohl's 1 0 95,000 95,000
Montgomery Ward 1 164,000 0 164,000
Shop-ko 1 0 85,000 85,000
Roses (Vacant) 1 0 60,000 60,000
===================================================================================
Total 86 8,228,000 3097,000 11,325,000
</TABLE>
Mall Stores
The properties have in the aggregate approximately 2,500 mall stores.
National or regional chains (excluding individually franchised stores) lease
approximately 70% of the mall store gross leasable area. Although mall stores
occupy only 31% of total mall gross leasable area, the Jacobs properties derived
approximately 92% of their revenue from mall stores for the year ended December
31, 1999. Among the companies with the largest representation among mall stores
are:
<TABLE>
<CAPTION>
Percentage
Percentage of Gross
1999 of 1999 Number Square Leasable
Tenant Revenue Revenue of Stores Feet Area
------ ------- ------- --------- ---- ----
<S> <C> <C> <C> <C> <C>
The Limited $14,508,868 7.10% 72 536,459 2.80%
Venator Group 5,752,760 2.81% 81 266,863 1.39%
The Gap 5,740,546 2.81% 33 214,506 1.12%
Intimate Brands 4,401,466 2.15% 36 136,469 0.71%
Transworld 3,512,007 1.72% 28 113,102 0.59%
Border's 3,162,108 1.55% 24 104,702 0.55%
American Eagle 2,667,931 1.30% 16 74,338 0.39%
Musicland 2,666,520 1.30% 26 90,534 0.47%
Hallmark 2,621,021 1.28% 23 87,560 0.46%
Lenscrafters 2,174,320 1.06% 15 76,602 0.40%
------------ ------- ----- ---------- -------
Subtotal 47,207,547 23.1% 354 1,701,135 8.88%
All Others 157,256,453 76.9% 2,146 17,459,865 91.12%
------------ ------- ----- ---------- -------
Portfolio Total $204,464,000 100.00% 2,500 19,161,000 100.00%
</TABLE>
66
<PAGE>
No single mall store retailer accounted for more than 2.80% of total gross
leasable area and no single mall store retailer accounted for more than 7.1% of
total 1999 revenues from the Jacobs properties.
The following table illustrates the change in base rent generated through
renewals and newly executed tenant leases over the most recent base rent in
place for the same space during the year ended December 31, 1999:
<TABLE>
1999 Mall Shop Leasing Analysis
<CAPTION>
Prior Lease New Lease New Lease
Total Square Base Rent per Initial Year Increase per Average Base Increase per
Number of Leases Feet Square Foot Base Rent per Square Foot Rent Square
---------------- ---- ----------- ------------- ----------- ---- ------
<S> <C> <C> <C> <C> <C> <C>
230 617,679 $19.08 $22.63 18.61% $23.38 22.54%
</TABLE>
----------
Note: Table excludes Kentucky Oaks Mall.
The following table sets forth the total mall store gross leasable area,
the total square footage of leased mall store gross leasable area, the
percentage of mall store gross leasable area leased, the average base rent per
square foot of mall store gross leasable area and average mall store sales per
square foot for each of the past three years:
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Total Mall Store GLA 5,890,000 5,864,000 5,929,000
Total Mall Store GLA Leased 5,052,000 5,176,000 4,965,000
Percentage Leased 85.8% 88.3% 83.7%
Avg. Effective Rent (1) $20.74 $21.86 $22.60
Avg. Store Sales $281.01 $295.80 $303.55
</TABLE>
----------
(1) Excludes Kentucky Oaks Mall.
Lease Expirations. Scheduled lease expirations for the year 2000
represented 530,391 square feet and base rent of approximately $12.24 million.
The following table shows the scheduled lease expirations for the malls
(assuming that none of the tenants exercise renewal options) for the next five
calendar years for the mall stores:
67
<PAGE>
<TABLE>
<CAPTION>
Jacobs Mall Shop Expiration 2001-2005
2001 2002 2003 2004 2005
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Square Ft. Expiring 512,372 541,489 671,609 674,491 325,187
Base Rent Expiring* $11,690,347 $12,998,919 $10,807,000 $14,424,692 $7,368,909
----------
* The base rental values reflect the base rent that will be in-place at lease expiration and
have not been straight-lined.
</TABLE>
Cost of Occupancy. CBL believes that in order to maximize 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 mall store tenants the occupancy costs under
their leases as a percentage of total mall store sales for each of the last
three years:
1997 1998 1999
---- ---- ----
Average Occupancy Cost 10.13% 10.00% 9.99%
Additional Information Regarding Hanes Mall
Hanes Mall is the largest mall in the Carolinas with 1,556,000 square feet
of total gross leasable area. It will be the largest mall in the CBL portfolio.
It has five anchor tenants: Belk's with 236,000 square feet, JCPenney with
208,000 square feet, Sears with 212,000 square feet, Hecht's with 150,000 square
feet and Dillard's with 143,000 square feet. The anchor stores comprise
approximately 949,000 square feet or 61% of the mall's total gross leasable
area. Mall store tenants total approximately 555,000 square feet of the mall's
total gross leasable area.
The mall is situated on a 112-acre site and is the focal drawing point for
retail commerce in not only the Winston-Salem area, but in the bulk of the
northwestern portion of the state. The primary trade area encompasses much of 6
counties and has a population of approximately 329,000. The total trade area has
a population of approximately 566,000. The median household income in the
primary trade area in 1999 was approximately $55,974.
Hanes Mall offers the most extensive merchandise mix of any mall in the
Carolinas. There are 203 traditional retailers, 8 food court establishments, a
multiplex theatre, and many dynamic specialty and kiosk tenants. Additionally,
there are various sit-down restaurants and fast food establishments on the
periphery of the complex that complement the mall and the overall shopping and
entertainment experience. There is ample parking with over 7,800 parking spaces.
We believe that visibility and access to the property are excellent.
In 1990 Hanes Mall was expanded to its current size. In our capital
budgets, we have planned a renovation to this property in order to update its
aesthetics and maintain its dominant competitive position in the trade area. An
expansion opportunity also exists with a 4.436 acre vacant site that is adjacent
to the mall. We have acquired a 3-year option to purchase this property from
Jacobs to ensure it would be available to us should we choose to expand the
property even further.
68
<PAGE>
The closest competing malls are the 1,000,000 square foot Four Seasons
Mall, which is 28 miles to the east, the 950,000 square foot Oak Hollow Mall,
which is a CBL property located 20 miles to the southeast, and the 931,000
square foot Friendly Shopping Center mall which is 33 miles to the east. Each of
these malls has its own defined primary trade area which, we believe, is
separate and distinct from the Hanes Mall primary trade area. According to our
research, no new malls are planned for construction in the Hanes trade area in
the foreseeable future.
Following is information concerning the occupancy rates, rent levels,
retail sales and net income at the property during the past three years:
<TABLE>
<CAPTION>
Mall
Store Average Rent per Sales per Net Operating
Calendar Year Occupancy Square Foot Square Foot Income
------------- --------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
1997 89.27% $23.58 $305 $11,409,000
1998 93.90% 24.61 318 13,583,000
1999 92.25% 26.31 338 14,006,000
</TABLE>
In 1999, leases representing approximately 75,930 square feet of mall store
space at an average base rent of $23.17 per square foot expired and were
replaced with new or renewal leases having initial base rents of $26.26, a 13.3%
increase. The following table provides information with respect to scheduled
lease expirations at Hanes Mall over the next five years:
<TABLE>
<CAPTION>
Mall Store GLA Mall Store GLA of
Year Ended Number of Leases Annualized Base Rent of Expiring Leases Expiring Leases
December 31, Expiring of Expiring Leases (sq. ft.) (Percent of Total)
------------ ---------------- -------------------- -------------- -----------------
<S> <C> <C> <C> <C>
2001 52 $3,238,000 107,361 19.34%
2002 20 987,000 41,280 7.43%
2003 3 104,000 4,085 0.74%
2004 10 809,000 41,370 7.45%
2005 10 704,000 28,380 5.11%
</TABLE>
Additional Information Regarding the Associated Centers
Two of the malls being acquired from Jacobs, West Towne Mall in Madison,
Wisconsin and Eastgate Mall in Cincinnati, Ohio, have associated centers. The
associated centers are each part of the mall complex and increase the draw to
the total mall complex. We have incorporated associated centers in a substantial
number of the CBL malls as well.
West Towne Crossing is a 447,000 square foot power center located on the
periphery of West Towne Mall. West Towne Crossing is tenanted by ShopKo, Kohl's,
Cub Foods, Barnes & Noble, Best Buy, Gander Mountain, OfficeMax and Cost Plus.
Eastgate Crossing is a 194,000 square foot convenience center located
adjacent to Eastgate Mall. It is anchored by Kroger, Circuit City, Borders Books
and OfficeMax, and there is 48,000 square feet of small shop space.
Both of the associated centers were 100% occupied as of June 30, 2000.
69
<PAGE>
Mortgages and Other Encumbrances
The Jacobs properties are subject to certain mortgages and other liens and
encumbrances securing indebtedness of approximately $855 million in the
aggregate. The following table sets out the current principal amount outstanding
for each such material encumbrance, its interest and amortization provisions and
its maturity date. The data listed below includes all debt encumbering the
properties, even where we will own less than a 100% interest in a property, and
assumes certain expected refinancings occurring prior to closing. Except as
indicated below and for customary exceptions, the loans are non-recourse.
<TABLE>
Jacobs Portfolio Debt Summary
<CAPTION>
Remaining
Amortization
Principal Amount as Interest Term as of Maturity
Property of 12/31/2000 Rate 12/31/00 Date Lender
-------- ------------------- -------- ------------ -------- ------
<S> <C> <C> <C> <C> <C>
Brookfield Square $46,509,293 7.91% 312 months 10/01/05 TIAA
Cary Towne Center (1) 62,500,000 8.64% 360 months 12/01/03 CIGNA
Cherryvale Mall (1) 49,152,192 7.38% 247 months 07/10/06 NY Life
Citadel Mall 33,950,973 7.39% 257 months 05/01/07 CIGNA
8,500,000 (2) 8.63% (3) Interest Only 01/01/02 US Bank
Columbia Mall (1) 39,640,429 9.71% 214 months 10/01/01 TIAA
EastGate Mall & Crossing (1) 42,947,777 7.50% 217 months 01/01/01 CIGNA
East Towne Mall (1) 29,681,428 8.01% (4) 253 months 12/01/06 Principal
Fashion Square Mall 39,489,359 8.62% 189 months 09/01/06 TIAA
Fayette Mall 64,462,282 7.60% 277 months 12/31/00 CIGNA
Hanes Mall 118,430,537 7.31% 271 months 07/01/08 TIAA
Jefferson Mall (1) 35,144,080 8.83% 215 months 07/01/05 TIAA
Kentucky Oaks Mall (1) 33,971,357 9.00% 259 months 06/15/07 Northwestern
Midland Mall (1) 35,133,844 8.63% 270 months 05/01/03 TIAA
Northwoods Mall 42,331,134 11.22% (5) 245 months 01/01/19 (6) TIAA
Old Hickory Mall 22,206,411 8.25% 235 months 07/01/02 CIGNA
Parkdale Mall 45,189,952 8.08% 193 months 01/01/07 TIAA
Regency Mall 23,196,639 12.02% (5) 213 months 01/01/19 TIAA
4,000,000 (2) 8.38% (7) Interest Only 07/01/01 Wells Fargo
Towne Mall 17,685,082 8.00% 340 months 04/01/02 CIGNA
Wausau Center 14,502,885 6.70% 276 months 12/10/10 NY Life
West Towne Mall (1) 45,888,430 8.01% (4) 253 months 12/01/06 Principal
------------
Total $854,514,084
============
----------
(1) Properties with third party partners.
(2) Recourse loan.
(3) Rate is 200 basis points over LIBOR which was 6.625% as of October 3, 2000. Payments are interest only.
(4) Properties are cross-collateralized and cross-defaulted.
(5) Rate contains contractual and contingent interest components.
(6) Approximately $7.8 million matures on February 1, 2004.
(7) Rate is 175 basis points over LIBOR which was 6.625% as of October 3, 2000. Payments are interest only.
</TABLE>
The following table provides information relating to the principal amount
of property indebtedness maturing in each of the next five years, and the amount
of annual interest, the blended interest rate and the annual debt service
payments associated with such maturing indebtedness. The data listed below
includes all debt encumbering the properties, even where we will own less than a
100% interest in a property, and assumes certain expected refinancings occurring
prior to closing:
70
<PAGE>
<TABLE>
<CAPTION>
Year Ended Principal Amount Blended Interest Annual Debt
December 31, Due at Maturity Annual Interest Rate Service Payment
------------ ---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
2001 $150,150,000 $12,535,000 8.35% $15,435,000
2002 47,800,000 3,985,000 8.34% 4,465,000
2003 94,900,000 8,200,000 8.64% 9,390,000
2004 7,800,000 630,000 8.08% 825,000
2005 71,150,000 8,100,000 11.38% 8,750,000
------------ ----------- ------ -----------
Total $371,800,000 $33,450,000 9.00% $38,865,000
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information available to CBL as of October
17, 2000, with respect to the ownership of CBL's common stock by (i) each person
known to CBL to be the beneficial owner of more than 5% of its outstanding
common stock, (ii) each CBL director, (iii) each named CBL executive officer, as
defined below, and (iv) all directors and executive officers as a group. Except
as otherwise indicated, each person named below has sole investment and voting
power with respect to the securities shown. Except as otherwise indicated, the
address of each person is CBL's address.
<TABLE>
<CAPTION>
Number of Rule 13d- Fully Diluted
Shares(1) Percentage(1) Percentage(2)
---------- ------------- -------------
<S> <C> <C> <C>
FMR Corp.(3)
82 Devonshire Street
Boston, Massachusetts 02019................ 2,786,339 11.13% 7.53%
LaSalle Investment Management, Inc.(4)
100 East Pratt Street
Baltimore, Maryland 21202.................. 1,341,300 5.36 3.63
CBL & Associates, Inc.(5).................. 8,805,243 27.30 19.91
Charles B. Lebovitz(6)..................... 9,739,682 29.31 21.54
John N. Foy(7)............................. 399,002 1.58 1.07
Stephen D. Lebovitz(8)..................... 442,000 1.74 1.18
Eric P. Snyder(9).......................... 131,652 * *
Augustus N. Stephas(10).................... 86,636 * *
Claude M. Ballard(11)
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004................... 37,000 * *
William J. Poorvu(12)
c/o Investment Resource Group
44 Brattle Street
Cambridge, Massachusetts 02138............. 23,745 * *
71
<PAGE>
<CAPTION>
Number of Rule 13d- Fully Diluted
Shares(1) Percentage(1) Percentage(2)
---------- ------------- -------------
<S> <C> <C> <C>
Winston W. Walker(12)
13450 N. Kachina Drive
Tucson, Arizona 85737...................... 47,100 * *
Leo Fields(13)
c/o Weisberg & Fields, Inc.
Preston Commons East
8115 Preston Road
Dallas, Texas 75225........................ 62,800 * *
All executive officers and directors
as a group (17 persons) (14)............... 11,454,440 33.23 24.66
------------
* Less than 1%
(1) CBL conducts all of its business activities through the Operating Partnership. Pursuant to
the Second Amended and Restated Partnership Agreement of the Operating Partnership (the
"Partnership Agreement"), each of the partners of the Operating Partnership, which include,
among others, CBL and certain of the executive officers named in this proxy statement, has
the right ("CBL Rights") to (i) exchange all or a portion of its partnership interest in
the Operating Partnership for shares of common stock (on a one-for-one basis) until it owns
up to the applicable ownership limit ("Ownership Limit") as prescribed in CBL's certificate
of incorporation and (ii) sell to CBL part or all of its remaining partnership interest in
the Operating Partnership in exchange for shares of common stock or their cash equivalent
(based on the trading price of the common stock), at CBL's election. Under the terms of
Rule 13d-3 promulgated under the Securities Exchange Act, shares of common stock that may
be acquired within 60 days are deemed outstanding for purposes of computing the percentage
of common stock owned by a stockholder. Therefore, percentage ownership of the common stock
is computed based on the sum of (i) 25,012,707 shares of common stock actually outstanding
as of October 17, 2000, (ii) 8,600,159 shares of common stock that may be acquired upon
exercise of CBL Rights by the individual or entity whose percentage of share ownership is
being computed (but not taking account of the exercise of CBL Rights by any other person or
entity) and (iii) 853,800 shares of common stock that may be acquired within 60 days of
October 17, 2000 upon the exercise of outstanding options. Amounts shown were determined
without regard to applicable Ownership Limits.
(2) Calculated based on 25,012,707 shares of common stock outstanding and assuming full
exercise of all CBL Rights by all partners of the Operating Partnership (without regard to
applicable Ownership Limits) for an aggregate of 36,995,384 shares of common stock.
Calculation does not include 2,363,200 shares of common stock subject to outstanding stock
options other than, with respect to each person whose fully-diluted percentage is being
computed, shares which may be acquired within 60 days upon the exercise of outstanding
options.
(3) In a Schedule 13G/A filed on February 11, 2000 by FMR, Corp. and certain of its affiliates
("FMR"), FMR reported that as of December 31, 1999 it beneficially owned 2,786,339 shares
of common stock, or 11.14% of the total shares outstanding as of October 17, 2000. FMR
reported that it possesses (i) sole dispositive power with respect to 2,786,339 shares of
common stock and (ii) sole voting power with respect to 233,700 shares of common stock. The
Schedule 13G/A also states that FMR has not acquired CBL's shares for the purpose of
changing or influencing the control of CBL.
(4) In a Schedule 13G/A filed on February 10, 2000 by LaSalle Investment Management, Inc. and
certain of its affiliates ("LaSalle"), LaSalle reported that as of December 31, 1999 it
beneficially owned 1,341,300 shares of common stock, or 5.36% of the total shares
outstanding as of October 17, 2000. LaSalle reported that it possesses (i) sole dispositive
power with respect to 39,200
72
<PAGE>
shares of common stock, (ii) shared dispositive power with respect to 1,302,100 shares of
common stock, (iii) sole voting power with respect to 49,100 shares of common stock and
(iv) shared voting power with respect to 1,261,700 shares of common stock. The Schedule
13G/A also states that LaSalle has not acquired CBL's shares for the purpose of changing or
influencing the control of CBL.
(5) Includes (i) 1,470,054 shares of common stock owned directly, (ii) 7,237,823 shares of
common stock which may be acquired upon the exercise of CBL Rights and (iii) 97,366 shares
of common stock which may be acquired by four entities controlled by CBL & Associates, Inc.
(CBL Employees Partnership/Conway, Foothills Plaza Partnership, Girvin Road Partnership and
Warehouse Partnership) upon the exercise of CBL Rights.
(6) Includes (i) 41,445 shares of common stock owned directly, (ii) 2,981 shares owned by Mr.
Lebovitz' wife, 12,116 shares held in trusts for the benefit of his stepdaughter and
grandchildren (of which Mr. Lebovitz disclaims beneficial ownership) and 101,600 shares
which may be acquired upon the exercise of CBL Rights and held in trusts for the benefit of
Mr. Lebovitz and his sister, (iii) 352,903 shares of common stock which may be acquired
upon the exercise of CBL Rights, (iv) 195,200 shares of common stock subject to options
granted under the Stock Incentive Plan which are currently exercisable with respect to such
shares, (v) 8,805,243 shares of common stock beneficially owned by CBL, which Mr. Lebovitz
may be deemed to beneficially own by virtue of his control of CBL, and (vi) 228,194 shares
of common stock that may be acquired by College Station Associates, an entity controlled by
Mr. Lebovitz, upon the exercise of CBL Rights.
(7) Includes (i) 79,161 shares of common stock owned directly, (ii) 189,241 shares of common
stock which may be acquired upon the exercise of CBL Rights and (iii) 130,600 shares of
common stock subject to options granted under the Stock Incentive Plan which are currently
exercisable with respect to such shares.
(8) Includes (i) 59,664 shares owned directly, (ii) 238,936 shares of common stock which may be
acquired upon the exercise of CBL Rights and (iii) 143,400 shares of common stock subject
to options granted under the Stock Incentive Plan which are currently exercisable with
respect to such shares.
(9) Includes (i) 9,500 shares of common stock owned directly, (ii) 6,283 shares of common stock
owned by Mr. Snyder's wife and 830 shares of common stock owned by Mr. Snyder's children,
(iii) 48,439 shares of common stock which may be acquired upon the exercise of CBL Rights
and (iv) 66,600 shares of common stock subject to options granted under the Stock Incentive
Plan which are currently exercisable with respect to such shares.
(10) Includes (i) 3,135 shares of common stock owned directly, (ii) 31 shares of common stock
owned by Mr. Stephas' wife, (iii) 27,670 shares of common stock which may be acquired upon
the exercise of CBL Rights and (iv) 55,800 shares of common stock subject to options
granted under the Stock Incentive Plan which are currently exercisable with respect to such
shares.
(11) Includes (i) 20,000 shares of common stock owned jointly by Mr. Ballard and his wife, (ii)
6,500 shares of common stock owned by a limited partnership in which an entity controlled
by Mr. Ballard and his wife serves as the general partner, (iii) 7,500 shares of common
stock owned by the Ballard Family Foundation of which Mr. Ballard disclaims beneficial
ownership but maintains shared voting and dispositive powers and (iv) 3,000 shares of
common stock subject to immediately exercisable stock options granted under the Stock
Incentive Plan.
(12) Includes 3,000 shares of common stock subject to immediately exercisable stock options
granted to each Independent Director on December 31 of each of 1994, 1995, 1996, 1997, 1998
and 1999, in the amounts of 500 stock options per grant pursuant to the Stock Incentive
Plan.
73
<PAGE>
(13) Includes (i) 20,500 shares of common stock owned by a family limited partnership created by
Mr. Fields and his wife on January 1, 1997 and in which Mr. Fields serves as a general
partner, (ii) 40,300 shares of common stock held by members of Mr. Fields' family, with
respect to which Mr. Fields acts as investment adviser and of which Mr. Fields disclaims
beneficial ownership, and (iii) 2,000 shares of common stock subject to immediately
exercisable stock options granted under the Stock Incentive Plan.
(14) The named executive officers are the Company's Chief Executive Officer, Charles B.
Lebovitz, and the next four most highly compensated executive officers of the Company, John
N. Foy - Vice Chairman of the Board, Chief Financial Officer and Treasurer, Stephen D.
Lebovitz - President and Secretary, Eric P. Snyder - Senior Vice President and Director of
Corporate Leasing and Augustus N. Stephas - Senior Vice President-Accounting and
Controller. As used herein, an executive officer is an officer of the Company of the level
of senior vice president or higher. The group of all executive officers and directors of
the Company includes the named executive officers, the Company's directors and the
remaining executive officers who are not named executive officers. These remaining
executive officers are: Ben S. Landress - Executive Vice President-Management; Ronald L.
Fullam - Senior Vice President-Development; Ronald S. Gimple-Senior Vice President and
General Counsel; Michael I. Lebovitz - Senior Vice President-Mall Projects; Farzana K.
Mitchell - Senior Vice President-Finance; George R. (Buck) Sappenfield - Senior Vice
President-Asset Management; Jerry L. Sink - Senior Vice President-Mall Management, and R.
Stephen Tingle - Senior Vice President-Community Center Development.
</TABLE>
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
In accordance with the rules established by the Securities and Exchange
Commission, stockholder proposals to be included in our proxy statement with
respect to our 2001 annual meeting of stockholders must be received by us at our
executive offices located at Suite 300, 6148 Lee Highway, Chattanooga, Tennessee
37421 no later than by November 25, 2000.
In addition, our bylaws provide that any stockholder of record desiring to
have a stockholder proposal considered at an annual meeting must provide written
notice of such proposal and appropriate supporting documentation, as set forth
in the bylaws, to us at our principal executive offices not less than 60 days
nor more than 90 days prior to the anniversary date of the prior year's annual
meeting; provided, however, that stockholders will have additional time to
deliver the required notice in the event the annual meeting is advanced by more
than 30 days or delayed by more than 60 days from the anniversary date.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We have made statements in this proxy statement and in the documents that
are incorporated by reference in this proxy statement that constitute "forward-
looking statements." These statements relate, among other things, to information
or assumptions about earnings per share, capital and other expenditures,
dividends, financing plans, capital structure, cash flows, pending legal
proceedings and claims, future economic performance, operating income
improvements, cost savings and management's plans, goals and objectives for
future operations. These forward-looking statements generally may be identified
by their reference to a future period or periods or by the use of
forward-looking terminology such as "may," "will," "intend," "should," "expect,"
"anticipate," "believe," "estimate," "continue," the negatives of those terms or
similar expressions. You should understand that forward-looking statements are
necessarily estimates reflecting the judgment of our management, not guarantees
of future performance. Forward-looking statements are subject to a number of
assumptions, risks and uncertainties that could cause actual results to differ
materially from those expressed or implied in such statements and
74
<PAGE>
that are difficult to predict and beyond our control. Risks and other factors
that might cause these differences, some of which could be material, include,
among others:
o uncertainties associated with the acquisition, including without
limitation, the number of properties and which properties we
ultimately acquire and the scope of our ultimate interests in these
properties;
o uncertainties associated with the properties, including the scope of
the capital investment which we will ultimately make in the
properties, the interest cost associated with such investment and our
ability to recapture all or a portion of such costs from the
properties' tenants; our ability to increase occupancy and rental
rates at the properties; and our ability to generate increased income
and FFO from the properties;
o the increased debt obligations which we will be required to incur to
acquire and implement our capital program with respect to the
properties, inflationary trends and potential increases in interest
rates associated with such indebtedness, and the need to refinance a
significant portion of the debt encumbering the properties within the
next five years;
o general and local economic and business conditions, which will, among
other things, affect demand for retail space or retail goods,
availability and creditworthiness of prospective tenants and lease
rents;
o dependence on the retail industry;
o financial condition and bankruptcy of tenants, including rejection of
leases by bankrupt tenants;
o competitive nature of the real estate leasing market;
o limitation on availability of, and the cost of, debt and equity
financing;
o compliance with federal, state and local regulatory requirements;
o environmental and safety requirements;
o our qualification as a REIT, which will not be entirely within our
control;
o legislative, judicial and administrative changes to tax laws; and
o other changes and factors referenced in this proxy statement and the
documents incorporated into this proxy statement by reference.
Other examples of these factors include (without limitation) general
industry and economic conditions, interest rate trends, costs of capital and
capital requirements, availability of real estate properties, competition from
other companies and venues for the sale/distribution of goods and services,
shifts in customer demands, tenant bankruptcies, changes in operating expenses,
including employee wages, benefits and training, governmental and public policy
changes, changes in applicable laws, rules and regulations (including changes in
tax laws), the ability to obtain suitable equity and/or debt financing, and the
continued availability of financing in the amounts and on the terms necessary to
support our future business.
75
<PAGE>
Because forward-looking statements are subject to risks and uncertainties,
actual results may differ materially from these expressed or implied by
forward-looking statements. You should not place undue reliance on these
statements, which speak only as of the date of this proxy statement or, in the
case of a document incorporated by reference, the date of the document.
INDEPENDENT AUDITORS
The consolidated financial statements of CBL incorporated in this proxy
statement by reference from its Annual Report on Form 10-K for the year ended
December 31, 1999 have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto.
The financial statement of the Combined Properties of The Richard E. Jacobs
Group for the year ended December 31, 1999 included in this proxy statement have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein.
WHERE CAN YOU FIND MORE INFORMATION
As required by law, we file reports, proxy statements and other information
with the Securities and Exchange Commission. The SEC allows us to "incorporate
by reference" information into this proxy statement. This means that we can
disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered
to be part of this proxy statement, and later information filed with the SEC
will update and supersede the information in this proxy statement.
We incorporate by reference into this proxy statement the following
documents filed by us with the SEC (File No. 000-23089) pursuant to the Exchange
Act:
o Our Annual Report on Form 10-K for the year ended December 31, 1999;
o Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
2000, June 30, 2000 [and September 30, 2000];
o Our Current Reports on Form 8-K, dated February 3, 2000, April 27,
2000, July 27, 2000 and September 25, 2000; and
o The description of our common stock contained in our Registration
Statement on Form 8-A dated October 25, 1993.
The information relating to our Company contained in this proxy statement
should be read together with the information in the documents which we have
incorporated by reference in this proxy statement. You should rely only on the
information contained in (or incorporated by reference into) this proxy
statement.
All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this proxy statement and prior to the date of
the special meeting on ______, __ 2000, and any adjournment of that meeting,
shall be deemed to be incorporated by reference in and to be a part of this
proxy statement from the date we file such documents.
Any statement contained in a document which we incorporate by reference in
this proxy statement shall be deemed to be automatically modified or superseded
for purposes of this proxy
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<PAGE>
statement once we file another document which also is or is deemed to be
incorporated by reference in this proxy statement which modifies or supersedes
such statement.
We have not authorized anyone to give any information different from the
information contained in (or incorporated by reference into) this proxy
statement. This proxy statement is dated , 2000. You should not assume that the
information contained in this proxy statement is accurate as of any later date,
and the mailing of this proxy statement to stockholders shall not create any
implication to the contrary.
Documents incorporated by reference are available from us without charge,
excluding all exhibits (unless we have specifically incorporated by reference an
exhibit into this proxy statement). To receive a free copy of any of the
documents incorporated by reference in this proxy call or write CBL & Associates
Properties, Inc., Suite 300, 6148 Lee Highway, Chattanooga, Tennessee
37421-6511, Attention: Director of Investor Relations, Telephone (423) 855-0001.
If you would like to request documents from us, please do so by _________
____, 2000 in order to ensure timely receipt before the special meeting.
By Order of the Board of Directors,
Stephen D. Lebovitz
Secretary
__________ ____, 2000
77
<PAGE>
INDEX TO FINANCIAL STATEMENT OF THE
RICHARD E. JACOBS GROUP COMBINED PROPERTIES
Page
----
Independent Auditors' Report.................................................F-2
Combined Statement of Certain Revenues and Certain Expenses for the
Six Months Ended June 30, 2000 (unaudited) and the Year Ended
December 31, 1999..........................................................F-3
Notes to Combined Statement of Certain Revenues and Certain Expenses.........F-4
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Owners of The Richard E. Jacobs Group
Combined Properties
Cleveland, Ohio
We have audited the accompanying combined statement of certain revenues and
certain expenses of the Combined Properties (owned by The Richard E. Jacobs
Group and listed in Note 1 to the combined statement) for the year ended
December 31, 1999. These properties are under common ownership. This combined
statement is the responsibility of The Richard E. Jacobs Group's management. Our
responsibility is to express an opinion on the combined statement based on our
audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the combined
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the combined
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the combined statement. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying combined statement of certain revenues and certain
expenses was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission (for inclusion in the
filing of Form 8-K of CBL & Associates Properties, Inc. as a result of the
acquisition of the Combined Properties). Material amounts, described in Note 1
to the combined statement of certain revenues and certain expenses, that would
not be directly attributable to those resulting from future operations of the
acquired properties are excluded, and the combined statement is not intended to
be a complete presentation of the acquired properties' revenues and expenses.
In our opinion, such combined statement presents fairly, in all material
respects, the combined certain revenues and certain expenses described in Note 1
to the combined statement of certain revenues and certain expenses for the year
ended December 31, 1999 in conformity with accounting principles generally
accepted in the United States of America.
Deloitte & Touche LLP
Cleveland, Ohio
August 31, 2000
F-2
<PAGE>
THE COMBINED PROPERTIES OF THE RICHARD E. JACOBS GROUP
COMBINED STATEMENT OF CERTAIN REVENUES AND CERTAIN EXPENSES
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED) AND
YEAR ENDED DECEMBER 31, 1999
(Dollars in Thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended June
30, 2000 Year Ended
(unaudited) December 31, 1999
--------------------- ------------------
<C> <S> <S>
CERTAIN REVENUES:
Minimum rents $ 65,700 $132,955
Tenant recoveries 29,041 59,025
Percentage rents 2,768 9,684
Other rents 1,335 1,794
Other income 743 1,006
---------- ----------
Total certain revenues 99,587 204,464
---------- ----------
CERTAIN EXPENSES:
Property operating expenses (Notes 3 and 5) 16,056 31,996
Maintenance and repairs 8,573 17,326
Real estate taxes 8,273 16,630
---------- ----------
Total certain expenses 32,902 65,952
---------- ----------
CERTAIN REVENUES IN EXCESS OF CERTAIN EXPENSES $ 66,685 $138,512
========== ==========
</TABLE>
See notes to combined statement of certain revenues and certain expenses.
F-3
<PAGE>
THE COMBINED PROPERTIES OF THE RICHARD E. JACOBS GROUP
NOTES TO COMBINED STATEMENT OF CERTAIN REVENUES AND CERTAIN EXPENSES
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1999
(Dollars in Thousands)
--------------------------------------------------------------------------------
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization - The Richard E. Jacobs Group ("The Jacobs Group") is divesting its
interest in 21 enclosed regional malls (and two associated centers) in a
proposed sale to CBL & Associates Properties, Inc. ("CBL"), a self-managed,
self-administered, fully-integrated real estate investment trust company.
Basis of Presentation - The accompanying combined statement of certain revenues
and certain expenses includes information related to the operations of the 21
malls (and two associated centers) which are the subject of the CBL purchase for
the six months ended June 30, 2000 (unaudited) and the year ended December 31,
1999.
The accompanying combined statement of certain revenues and certain expenses was
prepared for the purpose of complying with Rule 3-14 of Regulation S-X of the
Securities and Exchange Commission. Accordingly, the combined statement is not
representative of the actual operations for the periods presented as certain
revenues and expenses, which may not be directly attributable to the revenues
and expenses expected to be incurred in the future operations of the acquired
properties, have been excluded. Revenues exclude interest income and realized
gains and losses on marketable securities. Expenses excluded consist of
management, leasing, interest, income taxes, depreciation and amortization and
other costs not directly attributable to the future operations of the acquired
properties.
The properties included in the combined statement and The Jacobs Group's
ownership interest in each entity are as follows:
<TABLE>
<CAPTION>
The Jacobs Group's %
Entity Property Ownership
------ -------- --------------------
<S> <C> <C>
Brookfield Square Joint Venture Brookfield Square Mall 100.00%
Cary Venture Limited Partnership Cary Towne Center 80.00
C.V. Investments CherryVale Mall 83.82
Charleston Joint Venture Citadel Mall 100.00
Columbia Joint Venture Columbia Mall 79.00
Eastgate Company Eastgate Mall and Crossings (a) 53.85
Madison Joint Venture East Towne Mall 65.00
West Towne Mall and Crossing (a) 65.00
JG Saginaw LLC Fashion Square Mall 100.00
Lexington Joint Venture Fayette Mall 100.00
JG Winston-Salem LLC Hanes Mall 100.00
Jefferson Mall Company Jefferson Mall 87.25
Kentucky Oaks Mall Company Kentucky Oaks Mall 40.00
Midland Venture Limited Partnership Midland Mall 40.00
North Charleston Joint Venture Northwoods Mall 100.00
Old Hickory Mall Venture Old Hickory Mall 100.00
F-4
<PAGE>
Parkdale Mall Associates Parkdale Mall 100.00
JG Randolph LLC Randolph Mall 100.00
Racine Joint Venture Regency Mall 100.00
Towne Mall Towne Mall 100.00
Wausau Joint Venture Wausau Center 100.00
</TABLE>
(a) Includes associated centers.
After giving effect to The Jacobs Group's ownership interest in the Combined
Properties, The Jacobs Group's share of Certain Revenues in Excess of Certain
Expenses is $56,528 for the six months ended June 30, 2000 (unaudited) and
$116,967 for the year ended December 31, 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition - Minimum rents are recognized on a straight line basis over
the terms of the related leases. Percentage rents, which are based upon the
level of sales achieved by the lessee, are recognized when the contractual sales
levels are achieved. Recoveries from tenants for common area maintenance, real
estate taxes, insurance and other shopping center operating expenses are
recognized as revenues in the period the applicable costs are incurred.
Property Operating Expenses - Property operating expenses consist primarily of
common area maintenance, utilities, insurance, advertising and promotion and
other operating expenses.
Concentration of Credit Risk - The combined properties' tenant base includes
primarily national and regional retail chains and local retailers and,
consequently, the combined properties' credit risk is concentrated in the retail
industry.
Use of Estimates - The preparation of the combined statement of certain revenues
and certain expenses requires management to make estimates and assumptions that
affect the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Interim Period - The unaudited combined statement of certain revenues and
certain expenses for the six months ended June 30, 2000 has been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included and
all of such adjustments were of a normal recurring nature. Operating results for
the period from January 1, 2000 to June 30, 2000 are not necessarily indicative
of future operating results.
3. TRANSACTIONS WITH AFFILIATES
Affiliated entities of The Jacobs Group provide accounting, legal,
architectural, engineering, tenant coordination and lease administration
services to 20 of the 21 combined properties as well as to the two associated
centers. Most services are based upon an hourly rate for the actual hours of
work performed by employees of the affiliates. Fees included in the combined
statement related to agreements with affiliates were $1,109 for the six months
ended June 30, 2000 (unaudited) and $3,031 for the year ended December 31, 1999.
F-5
<PAGE>
4. RENTAL INCOME UNDER OPERATING LEASES
As of December 31, 1999, future minimum rental income due on noncancelable
operating leases that expire at various dates through 2029 was as follows:
2000......................... $112,011
2001......................... 101,627
2002......................... 89,636
2003......................... 78,774
2004......................... 63,523
2005 and thereafter.......... 234,013
---------
$679,584
=========
In addition, substantially all of the retail leases include provisions for
percentage rent based on sales volume and reimbursements for certain real estate
taxes and operating costs.
5. GROUND LEASE COMMITMENTS
Certain of the combined properties lease land under noncancelable leases which
expire at various dates through 2022, with options to renew for additional
periods. The leases are accounted for as operating leases. Each of these leases
requires a base rent and one provides for additional rent based on a percentage
of cash flow. For the six months ended June 30, 2000 (unaudited), the base rent
and additional ground rent were $51 and $74, respectively. For the year ended
December 31, 1999, the base rent and additional ground rent were $103 and $127,
respectively.
The following is a schedule of future minimum rental payments under
noncancelable operating leases as of December 31, 1999:
2000.......................... $ 101
2001.......................... 100
2002.......................... 100
2003.......................... 100
2004.......................... 100
2005 and thereafter........... 1,442
-------
$1,943
=======
F-6
<PAGE>
ANNEX A
MASTER CONTRIBUTION AGREEMENT
dated as of September 25, 2000
among
JACOBS REALTY INVESTORS LIMITED PARTNERSHIP,
RICHARD E. JACOBS, solely as Trustee for the
Richard E. Jacobs Revocable Living Trust,
RICHARD E. JACOBS, solely as Trustee for the
David H. Jacobs Marital Trust,
CBL & ASSOCIATES PROPERTIES, INC.
and
CBL & ASSOCIATES LIMITED PARTNERSHIP
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
CONTRIBUTIONS OF INTERESTS AND MERGERS
1.1 Contributions of Interests..............................................3
1.2 Excluded Outparcels.....................................................9
1.3 No Representations.....................................................12
1.4 Release................................................................14
ARTICLE II
CONSIDERATION
2.1 Consideration..........................................................16
ARTICLE III
TITLE AND OTHER PROPERTY RELATED MATTERS
3.1 Title to the Properties................................................22
3.2 Title Defects..........................................................24
3.3 Condemnation...........................................................27
3.4 Destruction or Damage..................................................28
3.5 Insurance..............................................................30
ARTICLE IV
COVENANTS
4.1 Agreement to Explore a Potential Alternate Transaction.................30
4.2 Amendment to the OP Partnership Agreement..............................30
4.3 Existence..............................................................30
4.4 Commercially Reasonable Efforts........................................31
4.5 HSR Act Filings........................................................31
4.6 Conduct of Business....................................................31
4.7 Registration Rights Agreement..........................................35
4.8 Voting and Standstill Agreement........................................35
4.9 Department Store Issues................................................35
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<PAGE>
4.10 Amendment to Rights Agreement..........................................35
4.11 Jacobs Employees.......................................................36
4.12 Limitation on Actions by CBL...........................................37
4.13 Expenses...............................................................37
4.14 Partner Consents.......................................................38
4.15 Stockholder Approval...................................................39
4.16 Tax Treatment..........................................................41
4.17 Estoppel Certificates..................................................43
4.18 Reservation of REIT Stock..............................................44
4.19 Assumption of Guaranties...............................................44
4.20 Non-Competition Agreement..............................................45
4.21 Randolph Mall..........................................................45
4.22 Refinancings...........................................................45
4.23 Resignation of Officers................................................46
4.24 No Solicitation........................................................46
4.25 Transition Services Agreement..........................................47
4.26 Financial Statements...................................................47
4.27 Post-Closing Cooperation...............................................47
4.28 Environmental Insurance................................................47
4.29 Insurance Claims.......................................................48
4.30 Computer Leases........................................................48
4.31 Weston Management Options..............................................48
ARTICLE V
TAX PROTECTION
5.1 Section 704(c) Method..................................................48
5.2 Protection Period......................................................49
5.3 Certain Permitted Transactions.........................................49
5.4 Debt Protection Period.................................................50
5.5 Indemnity..............................................................53
5.6 Damages................................................................57
5.7 Towne Mall.............................................................57
5.8 Midland Mall...........................................................58
5.9 Initial Capital Accounts...............................................58
5.10 Third Party Beneficiaries..............................................58
5.11 Preservation of Tax Status.............................................59
5.12 Income Tax Reporting...................................................59
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<PAGE>
ARTICLE VI
CLOSING
6.1 Closing................................................................60
6.2 Closing Deliveries by JRI..............................................63
6.3 Closing Deliveries by the Operating Partnership........................69
6.4 Deferred Closings......................................................73
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
7.1 Conditions Precedent to Obligation of the REIT and the Operating
Partnership............................................................75
7.2 Conditions Precedent to Obligations of the Jacobs Parties..............78
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1 Representations and Warranties of CBL..................................80
8.2 Representations and Warranties of JRI..................................89
8.3 General Provisions....................................................102
8.4 Survival..............................................................105
ARTICLE IX
INDEMNIFICATION
9.1 Obligation of CBL to Indemnify........................................106
9.2 Obligation of JRI to Indemnify........................................106
9.3 Limitations on Recovery...............................................106
9.4 Indemnification for Certain Historical Liabilities....................109
9.5 Indemnification for Matters Relating to Weston Management and for
Certain Known Claims..................................................111
9.6 Covenant to Maintain Net Assets.......................................111
ARTICLE X
TERMINATION
10.1 Termination Rights....................................................111
10.2 Termination upon Default or a Failure of a Condition Precedent........113
-iii-
<PAGE>
ARTICLE XI
MISCELLANEOUS
11.1 Broker................................................................114
11.2 Expenses..............................................................115
11.3 Further Assurances....................................................115
11.4 Payment of Expenses...................................................115
11.5 Notices...............................................................115
11.6 Assignment............................................................117
11.7 Waiver................................................................117
11.8 Incorporation of Recitals and Schedules...............................117
11.9 Confidentiality; Press Releases.......................................118
11.10 Merger................................................................119
11.11 GOVERNING LAW.........................................................119
11.12 Jurisdiction..........................................................119
11.13 Captions..............................................................119
11.14 Counterparts..........................................................119
11.15 Severability..........................................................120
11.16 Prior Negotiations; Construction......................................120
11.17 Litigation Expenses...................................................120
11.18 No Recordation........................................................120
11.19 Competitive Activities................................................120
11.20 No Obligations of Property Owners.....................................121
11.21 WAIVER OF TRIAL BY JURY...............................................121
11.22 Relationship of JRI to the Jacobs Parties.............................121
11.23 General Limitation on Liabilities.....................................121
EXHIBITS
--------
EXHIBIT A PROPERTIES AND PROPERTY OWNERS
EXHIBIT B INTERESTS AND OUTSIDE PARTNERS
EXHIBIT C-1A FORM OF INTEREST CONTRIBUTION AGREEMENT (WITHOUT OPTION)
EXHIBIT C-1B FORM OF INTEREST CONTRIBUTION AND OPTION AGREEMENT
EXHIBIT C-2 FORM OF DEED CONTRIBUTION AGREEMENT
EXHIBIT C-3 FORM OF CONTRIBUTION AGREEMENT (WESTON MANAGEMENT)
EXHIBIT D-1 FORM OF JRI OPTION AGREEMENT
EXHIBIT D-2 FORM OF OP OPTION AGREEMENT
EXHIBIT E FORM OF OPTION INTEREST VOTING AGREEMENT
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<PAGE>
EXHIBIT F TITLE COMMITMENTS
EXHIBIT G FIRST AMENDMENT TO OP PARTNERSHIP AGREEMENT
EXHIBIT H-1 REGISTRATION RIGHTS AGREEMENT
EXHIBIT H-2 ADDENDUM TO REGISTRATION RIGHTS AGREEMENT
EXHIBIT I VOTING AND STANDSTILL AGREEMENT
EXHIBIT J FORM OF CONTINUING LOAN INDEMNITY AGREEMENT
EXHIBIT K NON-COMPETITION AGREEMENT
EXHIBIT L TRANSITION SERVICES AGREEMENT
EXHIBIT M REQUIRED DEBT ALLOCATIONS
EXHIBIT N FORM OF GUARANTY
EXHIBIT O FORM OF INDEMNIFICATION AGREEMENT
EXHIBIT P FORM OF OPINION OF COUNSEL TO JRI
EXHIBIT Q FORM OF LENDER CONSENTS
EXHIBIT R OUTSIDE PARTNER CONSENTS
EXHIBIT S-1 FORM OF OPINION OF COUNSEL TO CBL
EXHIBIT S-2 FORM OF TAX OPINION OF COUNSEL TO CBL
EXHIBIT T LEASE TERM SHEET
EXHIBIT U FORM OF RELEASE
EXHIBIT V ASSURANCE AGREEMENT
SCHEDULES
---------
SCHEDULE 1.2(a) EXCLUDED OUTPARCELS
SCHEDULE 2.1(a) RELEASE PRICING
SCHEDULE 2.1(b)(ii) OUTSIDE PARTNER INTERESTS
SCHEDULE 3.1(b)(i) INITIAL TITLE OBJECTIONS
SCHEDULE 3.1(b)(ii) DELIVERED SURVEYS
SCHEDULE 3.1(b)(v) RENT ROLLS
SCHEDULE 3.2(c) REMEDIAL ACTIONS
SCHEDULE 4.6(iii)(A) AMENDMENTS TO ORGANIZATIONAL DOCUMENTS
SCHEDULE 4.6(iii)(B) PERMITTED TRANSACTIONS
SCHEDULE 4.6(vi) APPROVED LEASES
SCHEDULE 4.9 DEPARTMENT STORE ISSUES
SCHEDULE 4.15(b)-1 SHARE OWNERSHIP LIMITATION AMENDMENT
SCHEDULE 4.15(b)-2 REIT BOARD RESOLUTION
SCHEDULE 4.15(b)-3 SHARE OWNERSHIP AGREEMENT
SCHEDULE 4.17-1 ANCHORS
SCHEDULE 4.17-2 FORM OF TENANT ESTOPPEL
SCHEDULE 4.17-3 GROUND LEASES
SCHEDULE 4.17-4 FORM OF GROUND LESSOR ESTOPPEL
SCHEDULE 4.17-5 REA PARTIES
SCHEDULE 4.17-6 FORM OF REA PARTY ESTOPPEL
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<PAGE>
SCHEDULE 4.17-7 FORM OF LENDER ESTOPPEL
SCHEDULE 4.17-8 FORM OF OUTSIDE PARTNER ESTOPPEL
SCHEDULE 4.19 GUARANTIES AND INDEMNITIES
SCHEDULE 4.28 ENVIRONMENTAL INSURANCE
SCHEDULE 5.7 REPRESENTATIONS AND WARRANTIES (TOWNE MALL)
SCHEDULE 7.1(j) RELATED PARTY LOANS
SCHEDULE 8.1(c) OUTSTANDING SUBSCRIPTIONS
SCHEDULE 8.1(d) CONSENT, APPROVAL AND NOTICE REQUIREMENTS
SCHEDULE 8.1(g) GOVERNMENTAL CONSENTS
SCHEDULE 8.1(i) OTHER LIABILITIES
SCHEDULE 8.1(p) OTHER MERGER AGREEMENTS
SCHEDULE 8.2(a)(ii) JACOBS THIRD PARTY CONSENTS
SCHEDULE 8.2(b)(i) CONSENTS TO PLEDGES OF INTERESTS
SCHEDULE 8.2(b)(ii) JACOBS PARTIES' ORGANIZATIONAL DOCUMENTS
SCHEDULE 8.2(c) PENDING CLAIMS
SCHEDULE 8.2(d) NON-COMPLIANCE WITH LAWS
SCHEDULE 8.2(e) INTELLECTUAL PROPERTY OF JACOBS PARTIES
SCHEDULE 8.2(f) PENDING TAX AUDITS
SCHEDULE 8.2(i)(iv) FORMATION DOCUMENTS
SCHEDULE 8.2(i)(vii) PARTNER LOANS
SCHEDULE 8.2(i)(viii) MANAGEMENT AND LEASING CONTRACTS
SCHEDULE 8.2(i)(x) CURRENT WESTON MANAGED PROPERTIES
SCHEDULE 8.2(k) ANCHOR DOCUMENTS
SCHEDULE 8.2(l) LEASING COMMISSIONS AND FEES
SCHEDULE 8.2(m) OPERATING CONTRACTS
SCHEDULE 8.2(n) CONTINUING LOANS
SCHEDULE 8.2(o) ENVIRONMENTAL REPORTS
SCHEDULE 8.2(p) CASUALTY INSURANCE POLICIES
SCHEDULE 8.2(s) OTHER LIABILITIES
SCHEDULE 8.2(y) OWNERSHIP OF CORPORATIONS
SCHEDULE 9.5 NON-EXCLUDED ENVIRONMENTAL LIABILITIES
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<PAGE>
INDEX OF DEFINED TERMS
Defined Term Section
------------ -------
Additional Filings.......................................................4.15(a)
Affected Interests.....................................................5.5(d)(i)
Agreement...............................................................Preamble
Aggregate Excess Cure Amount...........................................8.3(c)(i)
Anchors.....................................................................4.17
Anchor Documents..........................................................8.2(k)
Associate Interests.....................................................Preamble
Associates..............................................................Preamble
Business Day..........................................................2.1(a)(ii)
Cary Note.............................................................1.1(a)(vi)
CBL.....................................................................Preamble
CBL Material Adverse Effect...............................................8.1(a)
CBL's Representatives.....................................................8.3(b)
CIGNA.................................................................4.22(a)(i)
Claims....................................................................1.4(a)
Closing...................................................................6.1(a)
Closing Date..............................................................6.1(a)
Code.........................................................................5.1
commercially reasonable efforts...........................................1.1(a)
Commission................................................................8.1(l)
Commitment................................................................3.1(a)
Common Units...........................................................8.1(c)(i)
Condemnation..............................................................3.3(a)
Consent Solicitation Documentation.......................................4.14(b)
Consideration.........................................................2.1(a)(ii)
Continuing Loan.......................................................1.1(b)(ii)
Continuing Loan Guaranty....................................................4.19
Contributed Assets...........................................................5.1
Contribution Agreement (Weston Management).............................1.1(a)(v)
Contributor Party.........................................................1.4(a)
Contributors............................................................Preamble
Core Properties...........................................................6.4(a)
Cure Amount...............................................................8.3(c)
Cure Cutoff Date..........................................................6.4(b)
Deed Contribution Agreement............................................1.1(a)(i)
Defaulting Party............................................................10.2
Deferred Closing..........................................................6.4(b)
Deferred Closing Date.....................................................6.4(b)
Delivered Surveys.....................................................3.1(b)(ii)
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INDEX OF DEFINED TERMS
Defined Term Section
------------ -------
Delivery Date...............................................................5.12
De Minimis Cure Amount.................................................8.3(c)(i)
DHJ.....................................................................Preamble
Disposition..................................................................5.2
Encumbrance...............................................................3.2(a)
Environmental Law.........................................................8.2(o)
Environmental Reports.....................................................8.2(o)
Estoppel Certificate........................................................4.17
Excess Cure Amount.....................................................8.3(c)(i)
Exchange Act..............................................................8.1(l)
Exchange Rights..........................................................4.16(c)
Excluded Liability........................................................9.4(a)
Excluded Outparcels.......................................................1.2(a)
Excluded Property.........................................................6.4(a)
Excluded Property Manager...................................................4.31
Expense Reimbursement.......................................................10.1
Fee Owner.................................................................1.2(c)
Financial Statements......................................................8.2(r)
First Amendment..............................................................4.2
Foreign Owner.............................................................8.2(u)
Governmental Authority....................................................7.1(e)
Ground Lessor...............................................................4.17
Guarantor...................................................................4.19
Guaranty Opportunity......................................................5.4(c)
Hazardous Materials.......................................................1.4(a)
HSR Act...................................................................4.5(a)
ICOA Closing...........................................................2.1(c)(i)
ICOA Option Closing...................................................2.1(c)(ii)
ICOA Option Closing Date..............................................2.1(c)(ii)
Indemnitor................................................................5.4(d)
Individual Protected Party.............................................5.5(d)(i)
Initial Period...........................................................10.1(a)
Initial Scheduled Principal Closing Date..................................6.1(a)
Initial Title Objections...............................................3.1(b)(i)
Inquiry...................................................................9.3(b)
Interest Contribution Agreement.......................................1.1(a)(ii)
Interest Contribution Agreement (Without Option).......................1.1(a)(i)
Interest Contribution and Option Agreement............................1.1(a)(ii)
Interests...............................................................Preamble
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<PAGE>
INDEX OF DEFINED TERMS
Defined Term Section
------------ -------
Jacobs Interests........................................................Preamble
Jacobs-Managed Property...................................................3.2(a)
Jacobs Parties..........................................................Preamble
Jacobs Third Party Consents...........................................8.2(a)(ii)
Jacobs Trusts...........................................................Preamble
JG Realty.............................................................6.2(f)(ii)
JRI.....................................................................Preamble
JRI Option Agreement......................................................1.2(a)
JRI Partnership Agreement.............................................8.2(b)(ii)
Lease Term Sheet.........................................................4.6(vi)
Leasing Contracts...................................................8.2(i)(viii)
Mall Employees..............................................................4.11
Management Contracts................................................8.2(i)(viii)
Maximum Financing Adjustment Amount...............................1.1(b)(iii)(E)
New Entity..............................................................Preamble
New Loan..............................................................1.1(b)(ii)
New Units................................................................4.16(c)
Non-Competition Agreement...................................................4.20
OP Option Agreement.......................................................1.2(b)
OP Partnership Agreement.....................................................4.2
OP Units..................................................................8.1(a)
Operating Contracts.......................................................8.2(m)
Operating Partnership...................................................Preamble
Opinion of Counsel.......................................................4.16(c)
Option Interest Voting Agreement.......................................2.1(c)(i)
Other Exceptions..........................................................3.2(a)
Outside Partners........................................................Preamble
Partial Properties......................................................Preamble
Partial Property Owners.................................................Preamble
Partner Consent..........................................................4.14(a)
Permitted Exceptions......................................................3.1(b)
Person....................................................................1.3(a)
Principal Closing.........................................................6.1(a)
Principal Closing Date....................................................6.1(a)
Property................................................................Preamble
Property Material Adverse Effect......................................8.2(a)(ii)
Property Owner..........................................................Preamble
Property-Specific Monetizable Claim.......................................8.3(c)
Protected Parties............................................................5.1
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INDEX OF DEFINED TERMS
Defined Term Section
------------ -------
Protection Period............................................................5.2
Proxy Statement..........................................................4.15(a)
PTP......................................................................4.16(c)
Qualified Protection Opportunity..................................5.4(b), 5.4(c)
Ready to Mail Notice...................................................6.1(c)(i)
Registration Rights Agreement................................................4.7
REIT....................................................................Preamble
REIT Board Resolution....................................................4.15(b)
REIT Stock............................................................8.1(c)(ii)
REIT Stockholders Meeting................................................4.15(b)
REJ.....................................................................Preamble
Remaining Portfolio......................................................11.9(a)
Remove....................................................................3.2(b)
Rent Rolls................................................................8.2(j)
Response Period........................................................3.2(d)(i)
Richard Jacobs Group........................................................4.10
Rights...................................................................4.16(c)
Rights Agreement............................................................4.10
SCU Issuance Proposal....................................................4.15(b)
SCUs..................................................................2.1(a)(ii)
SEC Documents.............................................................8.1(l)
SEC Financial Statements..................................................8.1(l)
Securities Act.........................................................8.1(c)(i)
Share Ownership Limitation Amendments....................................4.15(b)
Subsequent Scheduled Principal Closing Date...............................6.1(b)
Subsequent Title Objections...............................................3.2(a)
Substantial Casualty......................................................3.4(a)
Substantial Condemnation..................................................3.3(a)
Tenant Note...............................................................6.2(s)
TIAA.....................................................................10.1(c)
Title Company.............................................................3.1(a)
Title Documents...........................................................3.1(a)
Title Objection...........................................................3.2(b)
Title Policies............................................................3.1(a)
Transfer..............................................................5.5(d)(ii)
Transferred Interest..................................................5.5(d)(ii)
Transferring Protected Party..........................................5.5(d)(ii)
Transition Services Agreement...............................................4.25
Unit Transfer............................................................4.16(c)
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INDEX OF DEFINED TERMS
Defined Term Section
------------ -------
Updated Survey............................................................3.2(c)
Voting and Standstill Agreement..............................................4.8
Weston Management.......................................................Preamble
100% Properties.........................................................Preamble
100% Property Owners....................................................Preamble
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MASTER CONTRIBUTION AGREEMENT
THIS MASTER CONTRIBUTION AGREEMENT (this "Agreement") is made as of the
25th day of September, 2000, by and among JACOBS REALTY INVESTORS LIMITED
PARTNERSHIP, a Delaware limited partnership, having an address at 25425 Center
Ridge Road, Westlake, Ohio 44145 ("JRI"), Richard E. Jacobs, solely as Trustee
for the Richard E. Jacobs Revocable Living Trust (the "REJ"), Richard E. Jacobs,
solely as trustee for the David H. Jacobs Marital Trust (the "DHJ" and, together
with the REJ, the "Jacobs Trusts"; JRI and the Jacobs Trusts are referred to
herein collectively as the "Jacobs Parties"), CBL & ASSOCIATES PROPERTIES, INC.,
a Delaware corporation (the "REIT"), and CBL & ASSOCIATES LIMITED PARTNERSHIP, a
Delaware limited partnership (the "Operating Partnership"; the Operating
Partnership and the REIT are referred to herein collectively as "CBL"), each
having an address at One Park Place, 6148 Lee Highway, Suite 300, Chattanooga,
Tennessee 37421.
W I T N E S S E T H:
--------------------
WHEREAS, the Jacobs Parties, directly or through affiliates, own
partnership or limited liability company interests in the owners of the
twenty-one (21) regional mall shopping centers identified on Exhibit A (each, a
"Property", and collectively, the "Properties").
WHEREAS, with the exception of East Towne Mall and West Towne Mall (which
are owned by the same partnership) and Wausau Center (which is owned by two
partnerships), each of the Properties is owned by a separate partnership or
limited liability company (each, a "Property Owner", and collectively, the
"Property Owners") as identified on Exhibit A.
WHEREAS, the ownership interests in each of the Property Owners owned
directly or indirectly by the Jacobs Parties are referred to as the "Jacobs
Interests".
WHEREAS, certain current or former associates and/or partners of affiliates
of JRI identified on Exhibit B hereto (the "Associates") also own, directly
and/or indirectly, partnership or limited liability company interests in the
Property Owners as more fully set forth on Exhibit B (such interests,
collectively, the "Associate Interests"; the Associate Interests, together with
the Jacobs Interests, are referred to herein collectively as the "Interests").
WHEREAS, certain institutional investors and other outside partners who
have thus far not expressed a willingness to participate in the contribution
transactions contemplated by this Agreement (such Persons who are also
identified on Exhibit B, the
<PAGE>
"Outside Partners") also own interests in the Property Owners of certain of the
Properties as identified on Exhibit B (such Properties, the "Partial
Properties", and the Property Owners thereof, the "Partial Property Owners");
and the Property Owners of the remaining Properties are owned by some
combination of the Jacobs Parties and the Associates as identified on Exhibit B
(such Properties, the "100% Properties", and the Property Owners thereof, the
"100% Property Owners").
WHEREAS, the percentage interests of the Jacobs Parties, the Associates and
the Outside Partners in each of the Property Owners are as set forth on Exhibit
B.
WHEREAS, the Jacobs Trusts own directly and/or indirectly all of the
partnership interests in Weston Management Company Limited Partnership, a
Delaware limited partnership ("Weston Management"), which partnership, at the
Principal Closing, will own the management and leasing contracts applicable to
each of the Properties (other than Kentucky Oaks Mall) being contributed to the
Operating Partnership at the Principal Closing and will not own any other
material assets.
WHEREAS, prior to the applicable Closing, the Jacobs Parties have agreed to
use commercially reasonable efforts to cause the Associates who own direct
Interests in each of the 100% Property Owners to contribute their Interests in
each such Property Owner to a separate newly-formed limited liability company
(each, a "New Entity").
WHEREAS, at the applicable Closing, the Jacobs Parties (a) have agreed to
contribute and to use commercially reasonable efforts to cause the New Entities
to contribute the Interests in the 100% Property Owners to the Operating
Partnership (or, if so requested by the Operating Partnership, to one or more
entities wholly-owned by the Operating Partnership whose separate existence from
the Operating Partnership is disregarded for federal income tax purposes), or,
if any Associate is unwilling to contribute its direct Interests in any 100%
Property to a New Entity, to cause the 100% Property Owner of that 100% Property
to transfer the 100% Property in the form of an outright deed/leasehold interest
transfer in lieu of the Interest contributions described above for such
Property, (b) have agreed to contribute, and to seek to cause the Associates to
contribute, their respective direct and/or indirect interests in each of the
Partial Property Owners to the Operating Partnership (or, if so requested by the
Operating Partnership, to one or more entities wholly-owned by the Operating
Partnership and whose separate existence from the Operating Partnership is
disregarded for federal income tax purposes), (c) have agreed to approach each
of the Outside Partners identified on Schedule 2.1(b)(ii) to determine whether
they are interested in contributing their respective interests in the Partial
Property Owners to the Operating Partnership (it being understood that the
Jacobs Parties are under no obligation to cause any such contributions), and (d)
have agreed to contribute all of their direct and/or indirect interests in
Weston Management to the REIT and/or the Operating Partnership or an affiliate
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thereof, as requested by the Operating Partnership, in each case in exchange for
cash and special partnership interests in the Operating Partnership on the terms
set forth below.
WHEREAS, JRI, the New Entities, the Associates that own direct Interests in
the Partial Property Owners, the affiliates of the Jacobs Parties that own
Interests in the Property Owners, any Outside Partners that contribute interests
in any of the Partial Property Owners and any Property Owners that contribute
Properties pursuant to Deed Contribution Agreements are collectively referred to
herein as the "Contributors".
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants, conditions and agreements contained herein, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
CONTRIBUTIONS OF INTERESTS AND MERGERS
1.1 Contributions of Interests. (a) Subject to and on the terms and
conditions hereinafter set forth, on the date and at the time and place provided
for in Section 6.1 or Section 6.4:
(i) Each of the Jacobs Parties agrees (A) to contribute, transfer,
assign and deliver all of its right, title and interest in and to its
Interests in each 100% Property Owner, and to cause its affiliates to
contribute, transfer, assign and deliver all of their right, title and
interest in and to their Interests in each 100% Property Owner, to the
Operating Partnership (or, if so requested by the Operating Partnership, to
one or more entities wholly-owned by the Operating Partnership whose
separate existence from the Operating Partnership is disregarded for
federal income tax purposes) pursuant to an Interest Contribution Agreement
(Without Option) for that Property in the form attached as Exhibit C-1A
hereto (each such agreement, an "Interest Contribution Agreement (Without
Option)") and (B) to use commercially reasonable efforts to cause each of
the Associates that owns a direct Interest in a 100% Property Owner to
contribute, transfer, assign and deliver all of its right, title and
interest in and to the relevant Interest in each 100% Property Owner, to a
New Entity, and, subsequently, to use commercially reasonable efforts to
cause each New Entity to contribute, transfer, assign and deliver all of
its right, title and interest in and to the Interests in each 100% Property
Owner to the Operating Partnership (or, if so requested by the Operating
Partnership, to one or more entities wholly-owned by the Operating
Partnership whose separate existence from the Operating Partnership is
disregarded for federal income tax purposes) pursuant to an Interest
Contribution Agreement (Without Option) for that Property, provided,
however, that in the event that any Associate
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<PAGE>
is unwilling to participate in the foregoing restructuring process, the
Jacobs Parties will, in lieu of such restructuring and contribution, cause
each 100% Property Owner in which such Associate holds any direct Interests
to transfer the relevant 100% Property in the form of an outright
deed/leasehold interest transfer to the Operating Partnership (or, if so
requested by the Operating Partnership, to one or more entities
wholly-owned by the Operating Partnership whose separate existence from the
Operating Partnership is disregarded for federal income tax purposes)
pursuant to a Deed Contribution Agreement for that 100% Property in the
form attached as Exhibit C-2 hereto (each such agreement, a "Deed
Contribution Agreement");
(ii) Each of the Jacobs Parties agrees to contribute all of its right,
title and interest in and to its Interests in each Partial Property Owner
to the Operating Partnership (or, if so requested by the Operating
Partnership, to one or more entities wholly-owned by the Operating
Partnership whose separate existence from the Operating Partnership is
disregarded for federal income tax purposes) pursuant to an Interest
Contribution Agreement (Without Option) or an Interest Contribution and
Option Agreement in the form of Exhibit C-1B hereto (each such agreement,
an "Interest Contribution and Option Agreement"; each Interest Contribution
Agreement (Without Option) and Interest Contribution and Option Agreement
is referred to herein as an "Interest Contribution Agreement") for that
Property;
(iii) JRI agrees to use commercially reasonable efforts to cause each
Associate that owns an Associate Interest in a Partial Property Owner to
enter into the Interest Contribution Agreement relating thereto and to
contribute the relevant Associate Interest to the Operating Partnership
(or, if so requested by the Operating Partnership, to one or more entities
wholly-owned by the Operating Partnership whose separate existence from the
Operating Partnership is disregarded for federal income tax purposes)
pursuant to the terms thereof;
(iv) JRI agrees to approach the Outside Partners identified on
Schedule 2.1(b)(ii) to determine whether any such Outside Partner is
interested in contributing its interests in any Property Owner that owns a
Property identified on such Schedule to the Operating Partnership (or, if
so requested by the Operating Partnership, to one or more entities
wholly-owned by the Operating Partnership and whose separate existence from
the Operating Partnership is disregarded for federal income tax purposes)
pursuant to an Interest Contribution Agreement for that Property, which
offer shall expire fifteen (15) days prior to the Principal Closing Date
(it being understood that the Jacobs Parties are under no obligation to
cause any of the Outside Partners to contribute their interests to the
Operating Partnership and that contributions by Outside Partners are not a
condition precedent to any Closing contemplated herein); and
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<PAGE>
(v) Each of the Jacobs Parties agrees to contribute all of its right,
title and interest in and to the outstanding partnership interests in
Weston Management to the REIT and/or the Operating Partnership (or an
affiliate thereof) pursuant to a Contribution Agreement (Weston Management)
in the form attached hereto as Exhibit C-3 (the "Contribution Agreement
(Weston Management)").
(vi) At the Closing with respect to Cary Towne Center, JRI agrees to
cause JG Cary Joint Venture to contribute to the Operating Partnership (or,
if so requested by the Operating Partnership, to one or more entities
wholly-owned by the Operating Partnership and whose separate existence from
the Operating Partnership is disregarded for federal income tax purposes)
the promissory note evidencing the capital improvements loan in the
original principal amount of $27,801,293.53 made by it to Cary Venture
Limited Partnership (the "Cary Note").
For purposes of this Agreement, and without intending to expand the meaning of
the phrase "commercially reasonable efforts," the parties hereto acknowledge
that commercially reasonable efforts will not be interpreted as requiring the
initiation or settlement of litigation, disproportionate payouts to any
partners, the payment of money (other than usual and customary expenses
associated with negotiating and closing transactions of the nature set forth
herein) or reallocations of the Consideration or any component thereof among
Properties or Contributors.
(b) (i) JRI agrees to use commercially reasonable efforts to obtain the
Outside Partner, lender and other third-party consents and waivers necessary to
facilitate the contributions described in Section 1.1(a) above. JRI also agrees
to update CBL periodically upon CBL's request on the status of its efforts to
obtain the foregoing consents and waivers. In the event that JRI, after using
commercially reasonable efforts, is unable to obtain any such consent or waiver
on or before the date that is thirty (30) days prior to the Initial Scheduled
Principal Closing Date, CBL shall have the right, after consultation with JRI,
to approach any such third-party directly in an effort to help JRI obtain such
consent or waiver; if CBL exercises this right, it will provide JRI copies of
all correspondence to and from CBL and/or its agents relating thereto and will
advise JRI promptly of all actions taken by it and the results thereof.
(ii) If any lender with a loan secured by any Property, which loan is
expected to remain outstanding following the Closing with respect to such
Property (such loan, a "Continuing Loan"; the parties currently expect that the
loans set forth on Schedule 8.2(n) will be Continuing Loans), is unwilling to
grant its consent to the contribution of that Property, or the contribution of
the Interests in the Property Owner of that Property, to CBL as contemplated in
this Agreement, and a refinancing of that Continuing Loan on or before the
Closing Date with respect to that Property is not prohibited by the terms of the
related loan documents, CBL and JRI agree to use
-5-
<PAGE>
commercially reasonable efforts to refinance such Continuing Loan at or before
the Closing for that Property on terms that comply with the next sentence and
that will permit its contribution to CBL (any such replacement financing, a "New
Loan"). JRI agrees to use commercially reasonable efforts to obtain a New Loan
on terms (including rate, maturity, principal amount, escrows, reserves,
indemnities and other material terms) no less favorable to CBL than the terms of
the loan being refinanced thereby and in compliance with the terms of Section
1.1(b)(iii)(G) below. In addition, JRI will pay the prepayment penalty or
premium due to the prior lender, if any, in connection with any such
refinancing, as well as the legal, due diligence and other costs (including,
without limitation, points, fees, lender's title insurance premium and mortgage
recording taxes) incurred by the borrower and, to the extent required, by the
lender in connection with each such refinancing.
(iii) If it becomes necessary for JRI to replace any existing loan with a
New Loan as contemplated above and, despite its efforts, JRI is not able to
obtain a New Loan with terms that are comparable to the relevant existing loan,
the differences between the two financings will be accounted for as follows:
(A) If the interest rate payable on any New Loan exceeds the interest
rate on the related existing loan (it being understood that when comparing
the rates of any two loans the parties will make such adjustments as are
necessary to compare the "effective interest rates" (e.g, to take into
account the effect of up-front points or exit fees and differences in
method of calculation such as 12/30/360 vs. actual/365, and in the case of
any loan for which the borrower makes contingent interest payments, the
effective interest rate for such loan will be determined based on the
assumption that contingent interest payable for each remaining year of the
loan would have been equal to the aggregate actual contingent interest
payments made during the twelve months preceding the refinancing) so that
the comparison can be made on an economically equivalent basis), JRI will
reduce the effective interest rate of the New Loan to the interest rate of
the relevant existing loan by, at JRI's election, (1) paying the lender an
up-front payment, (2) purchasing an interest rate cap or swap from a
counterparty, and pursuant to such documents as are, acceptable to CBL
(which acceptance will not be unreasonably withheld, conditioned or
delayed) or (3) reducing the number of SCUs to be delivered by CBL at the
Closing for the relevant Property by the quotient of (I) the present value
(determined using the interest rate on the existing loan as the discount
rate) of the difference between (x) the aggregate of all scheduled interest
payments to be paid by the borrower pursuant to the terms of the New Loan
during the period from the Closing Date for the relevant Property through
the scheduled maturity of the New Loan (which will match the maturity of
the existing loan) and (y) the aggregate of all
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scheduled interest payments (as determined and adjusted, in each case, in
accordance with principles set forth above) to be made by the borrower
pursuant to the terms of the existing loan during the period from the
Closing Date for the relevant Property through the scheduled maturity of
the existing loan and (II) 32.25.
(B) If the effective interest rate payable on a New Loan secured by
Columbia Mall or Regency Mall is less than the interest rate on the related
existing loan, CBL will increase the effective interest rate of the New
Loan for the remainder of the term of the relevant existing loan to the
interest rate of the relevant existing loan by increasing the number of
SCUs to be delivered by CBL at the Closing for the relevant Property by the
quotient of (I) the present value (determined using the interest rate on
the existing loan as the discount rate) of the difference between (x) the
aggregate of all scheduled interest payments to be made by the borrower
pursuant to terms of the existing loan during the period from the Closing
Date for the relevant Property through the scheduled maturity of the
existing loan and (y) the aggregate of all scheduled interest payments to
be paid by the borrower pursuant to the terms of the New Loan during the
period from the Closing Date for the relevant Property through the
scheduled maturity of the New Loan (which will match the maturity of the
existing loan) and (II) 32.25.
(C) The principal balance of a New Loan may not exceed the principal
balance of the related existing loan without CBL's prior consent, which
consent may be withheld in CBL's sole discretion. If, with CBL's approval,
the principal balance of the New Loan exceeds the principal balance of the
existing loan, then at the Closing for the relevant Property there will be
no change in the Consideration payable in respect of that Property, but CBL
will be entitled to a credit in the closing adjustments for that Property
in an amount equal to the amount by which the principal balance of the New
Loan exceeds the principal balance of the existing loan. For the purposes
of this clause (C), the principal balance of an existing loan will be the
expected principal balance of such existing loan on the Closing Date for
such Property, taking into account all scheduled amortization payments with
respect to such loan whether or not such payments are actually made.
(D) If the principal balance of the New Loan is lower than the
principal balance of the existing loan, then at the Closing for the
relevant Property the SCU component of Consideration will be increased (and
the increase will be allocated to the contributors of the relevant
Property) by a number of SCUs equal to the quotient of (I) the amount by
which the
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<PAGE>
principal balance of the existing loan exceeded the principal balance of
the New Loan and (II) 32.25. For the purposes of this clause (D), the
principal balance of an existing loan will be the expected principal
balance of such existing loan on the Closing Date for such Property, taking
into account all scheduled amortization payments with respect to such loan
whether or not such payments are actually made.
(E) The provisions of clauses (B) and (D) above are subject to the
limitation that if the sum of (x) the aggregate number of additional SCUs
that CBL would be required to deliver pursuant to those clauses in respect
of all New Loans plus (y) the aggregate number of additional SCUs that CBL
would be required to deliver pursuant to Section 4.22(b) exceeds 310,078
(such number, the "Maximum Financing Adjustment Amount"), then CBL may, in
its sole discretion, elect to cap the number of SCUs to be delivered in
respect of New Loans pursuant to clauses (B) and (D) above at the Maximum
Financing Adjustment Amount, and in that case, at the relevant Closing (or
Closings), CBL instead will be required to, or will cause the applicable
property owner (or, in the case of a Partial Property, the applicable CBL
entity receiving the Interests in the relevant Partial Property Owner) to,
deliver a promissory note to each Contributor whose aggregate number of
SCUs was limited by this clause (E). Any such promissory note will be
secured by a second mortgage on the applicable Property if permitted by the
lender of the New Loan, or, in the case of a Partial Property, a first
security interest in the interests in the applicable Property Owner
received by CBL pursuant to the terms of this Agreement, and will otherwise
be an unsecured obligation of the applicable Property Owner (or, in the
case of a Partial Property, the CBL entity receiving the related
Interests). The form of any such promissory notes will be mutually agreed
between CBL and JRI, each acting in a commercially reasonable manner, and
will incorporate the following terms: the principal amount will be the
product of 32.25 and the number of SCUs not delivered to the Contributor
beneficiary thereof because they exceed the Maximum Financing Adjustment
Amount, the scheduled maturity will be the scheduled maturity date of the
New Loan in respect of which the SCUs otherwise would have been delivered,
the interest rate will be the interest rate that was payable on the loan
that was refinanced and the covenants, defaults and other provisions of the
promissory note will be consistent with the terms of the New Loan insofar
as they relate to the maker of the note.
(F) If any substantive term or provision (other than the principal
amount or rate) of any New Loan differs from and is less favorable to the
borrower than the corresponding term or provision of the loan being
refinanced in any material respect, the less favorable term will be subject
to
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CBL's prior written approval, which approval will not be unreasonably
withheld, conditioned or delayed. For clarification, except as set forth in
clause (G) below, CBL will not be entitled to reject any such less
favorable term or provision if at the time of the refinancing the lender's
requirement of that term or provision is consistent with the practice of
lenders making loans of comparable size and with comparable security in the
mortgage financing market generally.
(G) No New Loan will be a "securitized" loan, although the terms and
conditions of a New Loan may include provisions customarily used by
securitization lenders if the maker of the New Loan so requires (and such
provisions are consistent with that lender's lending practice generally).
Each New Loan, if any, will be made by an institutional lender (i.e., a
bank, savings and loan association, commercial credit company, pension
fund, insurance company or another traditional whole-loan provider). In
addition, unless approved by CBL in its sole discretion, no New Loan will
require payment of contingent interest or any other similar participation
amounts, or any escrows, any debt service, leasing, capital expenditure or
other similar reserves or any escrow arrangements (other than reserves or
escrow arrangements for periodic payments such as insurance premiums and
real estate taxes or reserves or escrow arrangements comparable to those in
existence with respect to the related existing loan ) or any indemnities or
guaranties (other than indemnities/guaranties for fraud, misappropriation,
environmental matters and other traditional non-recourse carveouts) in
amounts in excess of the indemnities or guaranties supporting the related
existing loan.
(H) In the case of a Closing involving any Partial Property, the
adjustments described above for such Partial Property are subject to
further adjustment to account for the fact that less than all of the
outstanding interests in the Partial Property are being contributed to the
Operating Partnership in connection with the transactions contemplated
herein (i.e., the actual adjustment will be the product of the amount
described above and the aggregate percentage interests in the Partial
Property Owner that are being contributed to CBL in connection with the
transactions contemplated herein (assuming that all of the interests in
such Partial Property Owner that are subject to an Interest Contribution
Agreement are contributed)).
1.2 Excluded Outparcels. (a) The Properties and/or Interests to be
contributed to the Operating Partnership as contemplated in this Agreement do
not and will not include any of the parcels identified on Schedule 1.2(a) hereto
as an excluded parcel (such parcels, "Excluded Outparcels") unless, in the case
of any Excluded
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Outparcel, by the Closing in respect of the Property to which it relates, JRI
has been unable to obtain the consents or satisfy any of the other requirements
identified on Schedule 1.2(a) or Schedule 3.1(b)(i) for that Excluded Outparcel.
Accordingly, the Jacobs Parties will be entitled to take such actions, at their
sole cost and expense, as are necessary to transfer the Excluded Outparcels that
are currently owned by any Property Owner to a separate entity at or prior to
the Closing in respect of the Property to which it relates, including obtaining
subdivisions and releases of the relevant Excluded Outparcels from the documents
evidencing Continuing Loans and each of the required consents and satisfying the
other requirements identified on Schedule 1.2(a). If the Jacobs Parties are
unable to obtain the required consents or satisfy any of the other requirements
in respect of any Excluded Outparcel prior to the Closing for the Property to
which the Excluded Outparcel relates, the Excluded Outparcel will be included in
the assets contributed to the Operating Partnership at that Closing and CBL and
the applicable Property Owner will enter into an Option Agreement in favor of
JRI in the form of Exhibit D-1 hereto (each, a "JRI Option Agreement") by which
JRI will be entitled to require that the Property Owner distribute such Excluded
Outparcel to JRI (or its designee) upon request once JRI has obtained the
required consents and satisfied the other requirements for that Excluded
Outparcel identified on Schedule 1.2(a) and Schedule 3.1(b)(i). If the granting
or recording of a JRI Option Agreement is prohibited by the terms of the
relevant Continuing Loan or, in the case of a Partial Property, the terms of the
organizational documents of the Partial Property Owner, JRI will be responsible
for obtaining any required consent of the lender for that Continuing Loan or the
relevant Outside Partner, as the case may be, prior to the granting or recording
of such JRI Option Agreement, as applicable.
(b) For each Excluded Outparcel (other than (i) the Excluded Outparcels
identified on Schedule 1.2(a) hereto without an option price and (ii) in the
event that one or more of the potential transactions identified on Schedule
4.6(iii)(B) hereto closes, the Excluded Outparcels relating to such closed
transactions), at the Closing with respect to the Property to which it relates
(or, if applicable, upon the later distribution of such Excluded Outparcel to
JRI or its designee as contemplated above), the entity that will own that
Excluded Outparcel after such Closing (or, if applicable, after such later
distribution) and the Operating Partnership will enter into an Option Agreement
for such Excluded Outparcel in the form attached hereto as Exhibit D-2 (each, an
"OP Option Agreement") pursuant to which the JRI affiliate that owns the
Excluded Outparcel will grant the Operating Partnership (or its designee) an
option to purchase the relevant Excluded Outparcel for a stated price (as also
set forth in Schedule 1.2(a)) during the first year (or during the first three
(3) years with respect to the Dev. Add'l Parcel 1 at Hanes Mall and Dev. Add'l
Parcel 2 at Fashion Square Mall) following the Closing in respect of the
Property to which the Excluded Outparcel relates (or, if applicable, during the
first year (or the first three (3) years, as the case may be) following the
distribution of any such Excluded Outparcel to the Jacobs Parties or their
designee as contemplated above), and also will grant the Operating Partnership a
right of first offer on the Excluded Outparcel for an agreed period beyond the
first (or third, as the case may be) anniversary of Closing
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(or, if applicable, the first (or third, as the case may be) anniversary of the
distribution of such Excluded Outparcel to the Jacobs Parties or their designee
as contemplated above). Each such option will be senior to any encumbrance that
JRI or the optionee may place on the Excluded Outparcel.
(c) CBL and JRI confirm and agree that (x) with respect to each of the
Excluded Outparcels identified on Schedule 4.6(iii)(B), CBL has declined to
purchase such parcel on the terms available to JRI in the potential transaction
described on Schedule 4.6(iii)(B) for that parcel and that, notwithstanding the
provisions of the OP Option Agreement relating to that parcel, JRI will be
entitled to continue pursuing the transaction described on Schedule 4.6(iii)(B)
for that parcel for one (1) year from the date of this Agreement in the same
manner and on the same terms as would have applied if CBL or its designee had
declined to exercise its option pursuant to the relevant OP Option Agreement,
and (y) if any such proposed transaction has not been documented in a binding
purchase and sale agreement or has not closed by the time of the first Closing
that includes the Property to which that Excluded Outparcel relates, the OP
Option Agreement for that Excluded Outparcel shall include an express provision
confirming the rights described in this clause (c). In addition, if, at the
Closing for any Property for which there is a related Excluded Outparcel, JRI
has been unable to obtain all necessary consents or other items necessary to
exclude the Excluded Outparcel from the assets of the Property Owner the
Interests of which are being contributed to CBL, and at that time or at any time
during the two (2) years following that Closing JRI is able to negotiate a sale
of that Excluded Outparcel to another Person, (1) CBL agrees that it will
cooperate, and will cause the Property Owner of that Excluded Outparcel or any
other any entity designated by it to own the fee interest in the Excluded
Outparcel (as used herein, the "Fee Owner") to cooperate, with JRI in its
efforts to document and implement that sale, including providing potential
purchasers with access to the Excluded Outparcel, making any records in its
possession and relating to the Excluded Outparcel available to JRI and causing
the Fee Owner to execute such documents as JRI may reasonably request to
implement the proposed sale subject to JRI having obtained all of the consents
and approvals identified on Schedule 1.2(a) and Schedule 3.1(b)(i) relating to
such Excluded Outparcel, and that it will cause all proceeds from any such sale
to be delivered directly to JRI (for distribution by JRI to the relevant Persons
that owned interests in the Excluded Outparcel prior to the Closing for the
Property to which the Excluded Outparcel relates), and (2) JRI agrees that it
will be responsible for carrying out the negotiation and documentation of the
proposed sale, that it will reimburse CBL for all reasonable expenses incurred
by it directly or through the Property Owner or other owning entity in
connection with the proposed sale, and that it will indemnify and hold harmless
each of CBL and such Fee Owner from any and all costs and expenses incurred by
any of them in connection with the proposed sale and the documents signed by any
of them in connection therewith.
(d) The parties agree that, if the general partner of Kentucky Oaks Mall
Company elects to cause that entity to purchase the development parcel
identified on
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Schedule 1.2(a) as being in the vicinity of Kentucky Oaks Mall, that parcel will
be treated as an Excluded Outparcel and, at any time before the Closing with
respect to Kentucky Oaks Mall, that Property Owner will be entitled, in its
general partner's discretion, to transfer the parcel to an entity in which JRI
or one or more of its affiliates is an investor, and in the event of such a
transfer neither CBL nor any entity owned or controlled by CBL will be entitled
to participate in any proceeds from that transfer. Notwithstanding anything
herein to the contrary, if the requirements under Section 1.2(a) have not been
satisfied with respect to the Excluded Outparcels at Kentucky Oaks Mall by the
Closing in respect of Kentucky Oaks Mall, then such parcels shall not be
"Excluded Outparcels," and no JRI Option Agreement shall be entered into with
respect thereto.
1.3 No Representations. (a) EACH OF THE OPERATING PARTNERSHIP AND THE REIT
SPECIFICALLY ACKNOWLEDGES AND AGREES THAT (i) EXCEPT AS SET FORTH HEREIN OR IN
ANY INTEREST CONTRIBUTION AGREEMENT OR DEED CONTRIBUTION AGREEMENT, OR ANY
EXHIBIT OR SCHEDULE ATTACHED HERETO OR THERETO, OR ANY OTHER DOCUMENT REQUIRED
HEREIN OR THEREIN, THE JACOBS PARTIES AND THE OTHER CONTRIBUTORS ARE
CONTRIBUTING THE INTERESTS AND, INDIRECTLY, THE PROPERTIES "AS IS, WHERE IS AND
WITH ALL FAULTS" AND (ii) EXCEPT FOR THE REPRESENTATIONS EXPRESSLY SET FORTH
HEREIN AND IN THE INTEREST CONTRIBUTION AGREEMENTS OR DEED CONTRIBUTION
AGREEMENTS, IF APPLICABLE, NEITHER THE OPERATING PARTNERSHIP NOR THE REIT IS
RELYING ON ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, WHETHER
ORAL OR WRITTEN, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, FROM THE JACOBS
PARTIES OR ANY ASSOCIATE, OR ANY PARTNER, OFFICER, EMPLOYEE, AFFILIATE,
ATTORNEY, AGENT OR BROKER OF ANY OF THEM, AS TO ANY MATTER, CONCERNING THE
INTERESTS OR THE PROPERTIES, OR SET FORTH, CONTAINED OR ADDRESSED IN ANY DUE
DILIGENCE MATERIALS (INCLUDING WITHOUT LIMITATION, THE COMPLETENESS THEREOF),
INCLUDING WITHOUT LIMITATION: (i) the quality, nature, habitability,
merchantability, use, operation, value, marketability, adequacy or physical
condition of any Property or any aspect or portion thereof, including, without
limitation, structural elements, foundation, roof, appurtenances, access,
landscaping, parking facilities, electrical, mechanical, HVAC, plumbing, sewage,
water and utility systems, facilities and appliances, soils, geology and
groundwater, (ii) the dimensions or lot size of any Property or the square
footage of any of the improvements thereon or of any tenant space therein, (iii)
the development or income potential, or rights of or relating to, any Property,
or the fitness, suitability, value or adequacy of any Property for any
particular purpose, (iv) the zoning or other legal status of any Property or the
existence of any other public or private restrictions on the use of any
Property, (v) the compliance of any Property or its operation with any
applicable codes, laws, regulations, statutes, ordinances, covenants, conditions
and
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restrictions of any Governmental Authority or of any other person or entity
(including, without limitation, the Americans with Disabilities Act of 1990, as
amended), (vi) the ability of the Operating Partnership or the REIT or any
affiliate of either of them to obtain any necessary governmental approvals,
licenses or permits for the use or development of any Property, (vii) the
presence, absence, condition or compliance of any Hazardous Materials on, in,
under, above or about any Property or any adjoining or neighboring property,
(viii) the quality of any labor and materials used in any improvements at any
Property, (ix) the ownership of any Properties or Interests or any portion
thereof, (x) any leases, permits, warranties, service contracts or any other
agreements affecting any Property or the intentions of any party with respect to
the negotiation and/or execution of any lease or contract with respect to any
Property or (xi) the economics of, or the income and expenses, revenue or
expense projections or other financial matters, relating to the operation of,
any Property. Without limiting the generality of the foregoing, each of the
Operating Partnership and the REIT expressly acknowledges and agrees that,
except as set forth herein or in any Interest Contribution Agreement or Deed
Contribution Agreement, or any Exhibit or Schedule hereto or thereto, or any
other document required herein or therein, it is not relying on any
representation or warranty of the Jacobs Parties or any Associate, or any
partner, member, director, trustee, officer, employee, affiliate, attorney,
agent or broker of any of them, whether implied, presumed or expressly provided,
arising by virtue of any statute, regulation or common law right or remedy in
favor of either of them. Each of the Operating Partnership and the REIT further
acknowledges and agrees that none of the Jacobs Parties or any Associate or any
affiliate of any of them is under any duty to make any inquiry regarding any
matter that may or may not be known to any partner, officer, employee, attorney,
agent or broker of any of them. This Section shall survive the Principal Closing
and any Deferred Closing, or, if the Principal Closing does not occur, the
termination of this Agreement. In addition, each of the Operating Partnership
and the REIT acknowledges and agrees that no property (real, personal or
otherwise) owned by any tenant or any other Person is intended to be conveyed
hereunder unless said property is described and purported to be conveyed herein.
For the purposes of this Agreement, "Person" means any individual, corporation,
partnership, association, trust, limited liability company, or other entity or
organization.
(b) EACH OF THE OPERATING PARTNERSHIP AND THE REIT ACKNOWLEDGES AND AGREES
THAT ANY REPORTS OBTAINED BY IT OR ANY OF ITS AFFILIATES ARE THE SOLE
RESPONSIBILITY OF THE OPERATING PARTNERSHIP, AND, EXCEPT TO THE EXTENT EXPRESSLY
REQUIRED PURSUANT TO THIS AGREEMENT, NONE OF THE JACOBS PARTIES OR ANY ASSOCIATE
OR ANY OF THEIR RESPECTIVE AFFILIATES HAS ANY OBLIGATION TO MAKE ANY CHANGES,
ALTERATIONS OR REPAIRS TO ANY PROPERTY OR ANY PORTION THEREOF OR TO CURE ANY
VIOLATIONS OF LAW OR TO COMPLY WITH THE REQUIREMENTS OF ANY INSURER. EACH OF THE
OPERATING PARTNERSHIP AND THE REIT ACKNOWLEDGES AND AGREES THAT, EXCEPT AS
OTHERWISE EXPRESSLY
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PROVIDED IN THIS AGREEMENT, THE OPERATING PARTNERSHIP IS SOLELY RESPONSIBLE FOR
OBTAINING ANY APPROVAL OR PERMIT NECESSARY FOR ACCEPTANCE BY IT OF ANY
CONTRIBUTED INTEREST OR ANY PROPERTY DIRECTLY OR INDIRECTLY AND FOR ANY REPAIRS
OR ALTERATIONS NECESSARY TO OBTAIN THE SAME, ALL AT THE OPERATING PARTNERSHIP'S
SOLE COST AND EXPENSE.
1.4 Release. (a) Without limiting the provisions of Section 1.3, each of
the Operating Partnership and the REIT, for itself and any of its successors and
assigns and their affiliates, hereby irrevocably and absolutely waives its right
to recover from, and forever releases and discharges, and covenants not to file
or otherwise pursue any legal action against, any of the Jacobs Parties, New
Entities, New Entity Subsidiaries or Associates or other contributing Outside
Partners or their respective affiliates or any direct or indirect partner,
member, trustee, director, shareholder, controlling person, affiliate officer,
attorney, employee, agent or broker of any of the foregoing, and any of their
respective heirs, successors, personal representatives and assigns (each, a
"Contributor Party", and collectively, the "Contributor Parties") with respect
to any and all suits, actions, proceedings, investigations, demands, claims,
liabilities, fines, penalties, liens, judgments, losses, injuries, damages,
settlement expenses or costs of whatever kind or nature, whether direct or
indirect, known or unknown, contingent or otherwise (including any action or
proceeding brought or threatened or ordered by any Governmental Authority),
including, without limitation, attorneys' and experts' fees and expenses, and
investigation and remediation costs that may arise on account of or in any way
be connected with any Interest or any Property or any portion thereof
(collectively, "Claims"), including, without limitation, the physical,
environmental and structural condition of any Property or any law or regulation
applicable thereto, or any other matter relating to the use, presence, discharge
or release of Hazardous Materials on, under, in, above or about any of the
Properties; provided, however, that neither the Operating Partnership nor the
REIT waives its rights, if any, to recover from, or releases or discharges or
covenants not to bring any action against (i) any Contributor Party for any act
of that Contributor Party that constitutes fraud, (ii) JRI for any breach of the
representations or warranties set forth in Section 8.2, subject to the
limitations and conditions provided in Section 9.3, (iii) any Contributor for
any breach of representations or warranties set forth in any of the Interest
Contribution Agreements to which it is a party, subject to the limitations and
conditions provided therein, (iv) any 100% Property Owner for any breach of
representations or warranties set forth in any Deed Contribution Agreement to
which it is a party subject to the limitations and conditions provided therein
or (v) JRI for its obligations under Article IX hereof. In addition, CBL and its
successors and assigns covenant and agree to, and where applicable hereby do,
release, defend, indemnify and hold harmless each of the Contributor Parties and
their respective affiliates from and against any future Claims to the extent
relating to any Hazardous Materials that may be placed, located or released on
or at any Property after the Closing Date with respect to such Property. CBL's
indemnity set forth in the immediately preceding
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sentence will not require CBL, or its successors or assigns, to indemnify,
defend or hold harmless any Contributor Party from any claims arising out of or
related to any lawsuit or other proceeding or matter commenced against any
Contributor Party or any partners, beneficial owners, officers, directors,
employees or agents thereof by any other Person (including, without limitation,
any Governmental Authority) to the extent, if any, that such lawsuit or other
proceeding seeks recovery for harm suffered due to Hazardous Materials
contaminating or otherwise adversely affecting or migrating from any Property on
or before the Closing Date for such Property.
For purposes of the foregoing, the term "Hazardous Materials" means any
substance, chemical, compound, product, solid, gas, liquid, waste, byproduct,
pollutant, contaminant or other material that is hazardous, toxic, ignitable,
corrosive, carcinogenic or otherwise presents a risk of danger to human, plant
or animal life or the environment or that is defined, determined or identified
as such in any federal, state or local law, rule or regulation (whether now
existing or hereafter enacted or promulgated) and any judicial or administrative
order or judgment, in each case relating to the protection of human health,
safety and/or the environment, including, but not limited to, any materials,
wastes or substances that are included within the definition of (A) "hazardous
waste" in the federal Recourse Conservation and Recovery Act; (B) "hazardous
substances" in the federal Comprehensive Environmental Response, Comprehension
and Liability Act; (C) "pollutants" in the federal Clean Water Act; (D) "toxic
substances" in the federal Toxic Substances Control Act; and (E) "oil or
hazardous materials" in the laws or regulations of any State.
(b) In connection with this Section 1.4, each of the Operating Partnership
and the REIT expressly waives the benefits of any provision or principle of
federal or state law or regulation that may limit the scope or effect of the
foregoing waiver and release.
(c) This Section 1.4 shall survive the Principal Closing and any Deferred
Closing indefinitely.
ARTICLE II
CONSIDERATION
2.1 Consideration. (a) On the Principal Closing Date, assuming satisfaction
by JRI and/or waiver by CBL of all conditions set forth in Section 7.1 and
subject to Section 2.1(b), the Operating Partnership agrees to:
(i) deliver to the Jacobs Trusts and the Contributors One Hundred
Million Dollars ($100,000,000.00), payable in cash by wire transfer of
immediately
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available funds to the bank accounts designated by JRI in writing to the
Operating Partnership at least three (3) days prior to the Principal
Closing Date, and
(ii) admit the Contributors as additional limited partners of the
Operating Partnership and issue to them a total of 11,707,194 Series J
Special Common Units of the Operating Partnership ("SCUs") having the
rights and priorities set forth on Exhibit G hereto
(such cash and partnership interest consideration, as it may be adjusted as
provided for herein, the "Consideration"). Notwithstanding the foregoing, the
total Consideration (including the final number of SCUs deliverable in respect
of any Property) will be subject to increase or decrease in accordance with the
provisions of this Article II, and the provisions set forth in the Contribution
Agreement (Weston Management), the Interest Contribution Agreements and the Deed
Contribution Agreements, if applicable. The acquisition of Weston Management
shall be structured as an installment sale transaction, with the consideration
payable in cash. The Consideration allocated to and payable in respect of Weston
Management at each Closing will be determined as set forth in the Contribution
Agreement (Weston Management), and such amounts will be payable by CBL in
respect of Properties as they are contributed to CBL and regardless of whether
Weston Management exercises the purchase options referred to in Section 4.31
hereof. At the Principal Closing, the Consideration will be allocated among the
Properties and Weston Management in accordance with a schedule to be prepared by
JRI and delivered to CBL at least five (5) Business Days prior to the Principal
Closing and approved by CBL (such approval not to be unreasonably withheld,
conditioned or delayed). As used herein, the term "Business Day" means any day
of the year, other than a Saturday or Sunday or any other day that the Federal
Reserve Bank of New York recognizes as a federal holiday. If, at any Closing,
JRI has advised CBL in writing that JRI is prepared and able to Close on the
related Closing Date, and CBL wire transfers funds to or for the accounts
designated by JRI on that Closing Date, and the Closing fails to occur on that
Closing Date because of a failure by JRI to meet one or more conditions
precedent to CBL's obligation to close, JRI will reimburse CBL for the lost
interest on the funds so wired until the sooner of the date on which JRI returns
the funds to CBL or the relevant Closing occurs. The lost interest shall be
computed at the overnight funds rate then available to JRI for short term
deposits of that nature (and regardless of whether or not JRI actually earned
that rate on CBL's funds).
Notwithstanding the allocations referred to in the foregoing paragraph, if
less than all of the Properties is included in the Principal Closing, the
Consideration to be delivered by CBL at the Principal Closing will be reduced by
the sum of the amounts set forth on Schedule 2.1(a) hereto opposite the names of
the Excluded Properties (as defined below) or as otherwise agreed between JRI
and CBL, and preliminary allocations of that Consideration among the Properties
and the Interests to be contributed at the Principal Closing and Weston
Management, will be made in accordance with a schedule of
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preliminary allocations specified by JRI in writing no fewer than five (5)
Business Days before the Principal Closing and approved by CBL (such approval
not to be unreasonably withheld, conditioned or delayed). At each Deferred
Closing, if any, the total Consideration payable with respect to the Properties
being contributed at such Closing and the additional consideration payable in
respect of Weston Management will be the sum of the amounts set forth on
Schedule 2.1(a) with respect to those Properties (including both cash and SCUs)
or as otherwise agreed between JRI and CBL, and, notwithstanding the amounts on
Schedule 2.1(a), preliminary allocations of that Consideration among the
Properties and the Interests to be contributed at such Closing and Weston
Management will be made in accordance with a schedule of preliminary allocations
specified by JRI in writing no fewer than five (5) Business Days before the
applicable Closing and approved by CBL (such approval not to be unreasonably
withheld, conditioned or delayed). The parties acknowledge that the schedules of
preliminary allocations referred to in the preceding sentences with respect to
the Principal Closing and each Deferred Closing, if any, may be subject to
further adjustment or reallocation by JRI based on the aggregate Consideration
delivered by CBL with respect to all Closings and approved by CBL (such approval
not to be unreasonably withheld, conditioned or delayed). JRI agrees that it
will notify CBL of the final allocations in writing as promptly as practicable
after the last to occur of the Principal or Deferred Closings, as the case may
be, or the expiration of the dates by which such Closings are required to occur
as provided in this Agreement, and in no event later than November 30, 2001. In
no event shall the allocations or reallocations of the Consideration determined
by JRI among the Properties or the Interests affect the aggregate Consideration
to be paid by CBL hereunder or the stated amounts set forth in the Interest
Contribution Agreements, the Contribution Agreement (Weston Management) and the
Deed Contribution Agreements, if applicable.
(b) The Consideration allocated to any Property pursuant to a preliminary
schedule prepared by JRI in accordance with Section 2.1(a) will be adjusted in
each of the following circumstances and the total Consideration will be adjusted
accordingly:
(i) JRI, in its discretion, may elect to reallocate up to $10 million
in the aggregate for all Closings and ICOA Option Closings of the cash
component of Consideration to the SCU component of Consideration at a
conversion rate of one SCU for each $32.25 of cash so reallocated. JRI may
make this election by delivering written notice thereof to CBL at least
fifteen (15) days prior to the Closing to which the reallocation will
relate.
(ii) if any Outside Partner set forth on Schedule 2.1(b)(ii) hereto
elects to participate in the contribution transactions set forth herein
with respect to any Property identified on Schedule 2.1(b)(ii) in which it
has an ownership interest, the Consideration will be increased by the
number of
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SCUs set forth on Schedule 2.1(b)(ii) hereto for that Outside Partner or as
otherwise agreed between JRI and CBL.
(iii) if it becomes necessary for JRI to arrange the refinancing of
any Continuing Loan as set forth in Section 1.1(b), the SCU component of
the Consideration allocable to the related Property may be adjusted as
provided in Section 1.1(b)(iii).
(iv) if any capital expenditure scheduled on the 2000 or 2001 business
plan to be completed prior to the Closing Date with respect to any Property
is not completed by such Closing Date, the total Consideration payable in
respect of that Property will be reduced as set forth in Section 4.6(i).
(v) the aggregate Consideration will be increased by increasing the
SCU component of the Consideration payable in respect of any Property to
account for any regular scheduled amortization payments actually made in
respect of any related Continuing Loan and/or New Loans for such Property
during the period after December 31, 2000 through and including the Closing
Date (or the ICOA Closing Date, if applicable, for such Property), in which
case the number of SCUs will be increased at the rate of one SCU for each
$32.25 of amortization payments made during such period, provided, however,
that if such adjustment is being made with respect to a Partial Property,
the total number of SCUs will be increased by an amount equal to the
quotient of (x) the product of (A) the total amortization payments made
during such period with respect to such Partial Property and (B) the
percentage of the total interests in the Partial Property Owner of that
Partial Property being contributed to the Operating Partnership in
connection with the transactions contemplated herein (assuming that all of
the interests in such Partial Property Owner that are subject to an
Interest Contribution Agreement are contributed) divided by (y) 32.25.
(vi) if Cary Towne Center is included in the relevant Closing, the
aggregate Consideration will be increased by increasing the cash component
of the Consideration payable at that Closing by an amount equal to twenty
percent (20%) of the then-outstanding principal balance of the Cary Note,
provided, however, that if the cash payable with respect to the Cary Note
would cause the cash component of the aggregate Consideration to exceed
$100 million, the portion in excess of $100 million will be payable in SCUs
instead of cash at a rate of one SCU for each $32.25 of such excess amount.
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(c) The parties agree that the contributions by the Jacobs Parties and the
Associates (and any Outside Partners electing to participate in the contribution
transactions contemplated herein) of the interests in each Partial Property
Owner (other than the owner of Kentucky Oaks Mall and Midland Mall, unless the
percentage interest to be transferred hereunder exceeds 49%, or unless there
have been transfers of other interests in the owner of Kentucky Oaks Mall or
Midland Mall within twelve (12) months prior to the Closing with respect to
either such Property and the other interests transferred, when taken together
with the interests of the Jacobs Parties and the Associates (and any Outside
Partners electing to participate in the contribution transactions contemplated
herein) in such Partial Property Owner, represent in the aggregate a greater
than 49% capital and profits interest in such Partial Property Owner for federal
income tax purposes, in which case that Property also will be included in the
foregoing list), will occur in multiple contributions (the contributions after
the first contribution being contingent on exercise of one or more of the
options described in clauses (ii) and (iii) below) as set forth below:
(i) ICOA Closing: At the first Closing with respect to any Partial
Property (the "ICOA Closing"), the Associates will contribute all of the
Associate Interests, if any, in the Partial Property Owner, the Outside
Partner(s) for such Partial Property participating in the Closing, if any,
will contribute their interests in the Partial Property Owner and the
Contributors controlled by any of the Jacobs Parties will contribute a
portion of the Jacobs Interests in the Partial Property Owner, so that in
the aggregate the Associate Interests, the Outside Partner Interests and
such portion of the Jacobs Interests then contributed represent 48% of the
total ownership interests in such Partial Property Owner (or such lesser
percentage (rounded down to the nearest full percent) of the total
partnership interests in the Partial Property Owner as may be transferred
without causing a termination of the Partial Property Owner pursuant to
Section 708(b) of the Code), to the Operating Partnership (or, if so
requested by the Operating Partnership, to one or more entities
wholly-owned by the Operating Partnership whose separate existence from the
Operating Partnership is disregarded for federal income tax purposes), and
the Operating Partnership will deliver to those Contributors an appropriate
portion of the total Consideration allocated to that Partial Property given
the interests actually contributed (as determined between JRI and CBL) in
accordance with the Interest Contribution and Option Agreement for that
Partial Property. At each ICOA Closing, the contributing partners or
members of the relevant Partial Property Owner that continue to own
interests in such Partial Property Owner after such ICOA Closing will enter
into a voting agreement with the Operating Partnership in the form of
Exhibit E hereto (an "Option Interest Voting Agreement") with respect to
the interests in that Partial Property Owner that are subject to an option.
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(ii) ICOA Option Closings: Each Interest Contribution and Option
Agreement will grant each of CBL and JRI an option to cause the other to
require the Contributors of interests in the relevant Partial Property
Owner controlled by any of the Jacobs Parties, to contribute the remaining
Interests in the Partial Property Owner to which the agreement relates (or
such lesser portion of the remaining Interests in the Partial Property
Owner to which the agreement relates as may be transferred on the date of
the ICOA Option Closing without causing a termination of the Partial
Property Owner pursuant to Section 708(b) of the Code (rounding down to the
nearest full percent)) to the Operating Partnership (or, if so requested by
the Operating Partnership, to one or more entities wholly-owned by the
Operating Partnership whose separate existence from the Operating
Partnership is disregarded for federal income tax purposes) at a date not
less than thirteen (13) months after the ICOA Closing, and, assuming that
the relevant representations and warranties of the relevant Contributors in
that Interest Contribution and Option Agreement are true and correct in all
material respects as of such date, the Operating Partnership will accept
the contributions and deliver to the Contributors the SCUs and cash in
amounts determined after taking into account amounts paid pursuant to (i)
above, as determined by CBL and JRI. CBL will be entitled to exercise the
foregoing option at any time during the first fourteen (14) days of the
thirteenth (13th) calendar month following the month in which the related
ICOA Closing occurred by written notice to JRI, and JRI will be entitled to
exercise the foregoing option at any time during the first fourteen (14)
days of the fourteenth (14th) calendar month following the month in which
the related ICOA Closing occurred by written notice to CBL. If either party
exercises its option with respect to any Property, the closing with respect
to the contribution of such interests will take place on the first Business
Day of the fifteenth (15th) calendar month following the month in which the
related ICOA Closing occurred in accordance with and subject to the
conditions set forth in the applicable Interest Contribution and Option
Agreement. The closing with respect to the contribution of interests in any
Partial Property Owner pursuant to this Section 2.1(c)(ii) or Section
2.1(c)(iii) below is referred to herein as an "ICOA Option Closing"; and
the date on which an ICOA Option Closing is to occur is referred to herein
as an "ICOA Option Closing Date").
(iii) If less than all of the remaining interests in a Partial
Property Owner are transferred in an ICOA Option Closing, then the Interest
Contribution and Option Agreement will grant each of CBL and JRI options to
cause the other to require the Contributors of interests in the relevant
Partial Property Owner controlled by any of the Jacobs Parties to
contribute the remaining Interests in the Partial Property Owner (or such
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lesser portion of the remaining Interests in the Partial Property Owner to
which the agreement relates as may be transferred on the ICOA Option
Closing Date without causing a termination of the Partial Property Owner
pursuant to Section 708(b) of the Code (rounding down to the nearest full
percent)) to the Operating Partnership (or, if so requested by the
Operating Partnership, to one or more entities wholly-owned by the
Operating Partnership whose separate existence from the Operating
Partnership is disregarded for federal income tax purposes), and, assuming
that the relevant representations and warranties of the relevant
Contributors in that Interest Contribution and Option Agreement are true
and correct in all material respects on such date, the Operating
Partnership will accept the contributions and deliver to the Contributors
the SCUs and cash in amounts determined after taking into account amounts
paid pursuant to clauses (i), (ii) and (iii) of this Section 2.1(c), as
determined by CBL and JRI. CBL will be entitled to exercise the foregoing
option at any time during the first fourteen (14) days of the thirteenth
(13th) calendar month following the month in which the most recent related
ICOA Option Closing occurred by written notice to JRI, and JRI will be
entitled to exercise the foregoing option at any time during the first
fourteen (14) days of the fourteenth (14th) calendar month in which the
most recent related ICOA Option Closing occurred by written notice to CBL.
If either party exercises its option with respect to any Property, the
closing with respect to the contribution of such interests will take place
on the first Business Day of the fifteenth (15th) calendar month following
the calendar month in which the most recent related ICOA Option Closing
occurred, all in accordance with and subject to the conditions set forth in
the applicable Interest Contribution and Option Agreement.
ARTICLE III
TITLE AND OTHER PROPERTY RELATED MATTERS
3.1 Title to the Properties. (a) JRI has caused Chicago Title Insurance
Company (the "Title Company") to prepare and deliver to CBL, and CBL hereby
acknowledges receipt of (i) the title commitments attached as Exhibit F hereto
(each a "Commitment" and, collectively, the "Commitments"), pursuant to which
the Title Company agrees to issue ALTA title insurance policies (collectively,
the "Title Policies") for each of the Properties with the endorsements and
affirmative coverages referenced therein, which Title Policies shall name, as
the insured, the entity to which (x) the Interests are to be transferred
pursuant to an Interest Contribution Agreement for such Property (i.e., a
partner or member of the applicable Property Owner) or (y) the Property is to be
transferred pursuant to a Deed Contribution Agreement (i.e., a Property
transferee) and shall insure the applicable Property Owner's (or Property
transferee's, if applicable) fee
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simple (and, in the case of Eastgate Mall and Wausau Center, its leasehold)
title to its respective Property to be good and indefeasible, subject only to
the Permitted Exceptions and the other terms set forth therein and (ii)
photocopies of the documents (the "Title Documents") evidencing or describing
all title exceptions shown on the Commitments.
(b) As used herein, the term "Permitted Exceptions" means, with respect to
each Property:
(i) Each of the title matters set forth in the Commitment for that
Property and any additional liens or related title exceptions securing or
relating to indebtedness incurred by the applicable Property Owner after
the date of the relevant Commitment and in accordance with the terms of
this Agreement, but excluding those exceptions to title described in
Schedule 3.1(b)(i), the items marked "omit" on the Commitments
(collectively, the "Initial Title Objections") and any exceptions in the
Commitments that evidence or relate to indebtedness that has been repaid at
or prior to the Closing with respect to such Property, which exceptions JRI
agrees to use commercially reasonable efforts to Remove (as defined below)
prior to or concurrently with, and as a condition to, the Closing under the
Interest Contribution Agreement or Deed Contribution Agreement, as
applicable, with respect to such Property;
(ii) The state of facts set forth in the land survey of such Property
described on Schedule 3.1(b)(ii) (such surveys for the Properties,
collectively, the "Delivered Surveys") but excluding any items shown on the
Delivered Surveys that also are identified as Initial Title Objections, and
the state of facts set forth in the Updated Survey for such Property and
not objected to by CBL as provided in Section 3.2;
(iii) All laws, regulations and ordinances including, without
limitation, all environmental, building and zoning restrictions affecting
the Property or the ownership, use or operation thereof adopted by any
Governmental Authority having jurisdiction over the Property or the
ownership, use or operation thereof, and all amendments or additions
thereto now in effect or which may be in force and effect on the Closing
Date with respect to such Property;
(iv) All unpaid personal property, real estate and excise taxes, and
all water, sewer, utility, trash and other similar charges, in each case
that are not yet due and payable as of the Closing with respect to such
Property but may become or give rise to a lien on all or any portion of the
Property (it being understood that such items may be subject to
apportionment at such Closing as provided in the relevant Interest
Contribution Agreement or Deed Contribution Agreement);
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(v) Each lease and other agreement for the present or future use or
occupancy of any space in the Property listed on the rent roll for the
Property attached hereto as Schedule 3.1(b)(v), as such Schedule may be
amended, supplemented or otherwise modified from time to time through the
Closing Date with respect to such Property to reflect additional leases
entered into by the Property Owner and not prohibited by Section 4.6
hereof;
(vi) Each of the equipment leases by which the related Property Owner
holds the right to possess and use any of the equipment, furniture,
machinery, furnishings, tools, spare parts, supplies and other articles of
personal property located on or in the Property that is used by the
Property Owner in the ordinary course of business;
(vii) Each and every Encumbrance of the type referred to in Section
3.2 below identified to CBL prior to the Closing with respect to such
Property as contemplated therein and not objected to by CBL in writing
within the time allowed in that Section or otherwise waived by CBL as
provided in Section 3.2;
(viii) Any public record filings by mechanics and other workmen
employed by any tenant at its own expense to provide services at the
Property (to the extent, if any, that such filings constitute an
Encumbrance), so long as they are omitted from the relevant Title Policy
(provided, however, that if the aggregate of all such liens exceeds $5
million, JRI has bonded over the portion of such liens that exceeds $5
million with security acceptable to CBL acting reasonably); and
(ix) Any liens, encumbrances or other defects or exceptions to title
insurance coverage caused by CBL, by any of its affiliates, by any of their
respective agents, employees or other representatives or by any of the
Jacobs Parties or any of their respective agents, employees or other
representatives at CBL's prior written request.
3.2 Title Defects.
(a) Certain Exceptions to Title. If any update of a Commitment or any
Updated Survey for a Property other than Kentucky Oaks Mall (each, a
"Jacobs-Managed Property") discloses any new mortgage, lien, restriction,
option, conditional sales agreement, pledge, security interest, or other
encumbrance, adversely affecting the relevant Property in any material respect
(each, an "Encumbrance") or any encroachment, change in the boundary of a
Property (as compared to the boundary shown on the Delivered Survey) or other
survey defect, in either case that is not a Permitted Exception and that
adversely affects in any material respect (i) the applicable Property Owner's
title to such Property or (ii) the current or future use of any portion of such
Property in a
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manner consistent with such Property Owner's use of such Property as of the date
of this Agreement (all such Encumbrances and other new encroachments, changes
and other survey defects are collectively referred to herein as "Other
Exceptions"), then within ten (10) Business Days after CBL first receives notice
thereof or such lesser time as remains between such receipt and the Closing Date
with respect to such Property, CBL will have the right to object in writing to
such Other Exception. Unless CBL notifies JRI in writing that it objects to an
Other Exception with respect to a Jacobs-Managed Property within the foregoing
time period, each such Other Exception automatically will constitute an
additional Permitted Exception. Other Exceptions to which CBL timely objects (in
the case of Jacobs-Managed Properties within the time-frame set forth in this
Section 3.2(a) and in the case of Kentucky Oaks Mall within the time-frame set
forth in Section 3.2(d)(i)) are collectively referred to herein as "Subsequent
Title Objections".
(b) Discharge of Title Objections. At or prior to the Closing Date with
respect to such Property, as the same may be extended as permitted herein, JRI
agrees to Remove or cause the applicable Property Owner to Remove any and all
Title Objections. As used in this Agreement the term "Title Objection" refers to
and includes any Initial Title Objection and any Subsequent Title Objection, and
the term "Remove" means that JRI in its discretion and at its sole cost and
expense will either (a) take such actions as are necessary to eliminate (of
record or otherwise, as appropriate) the Title Objection, (b) cause the Title
Company to remove the Title Objection as an exception to title in the Title
Policy and affirmatively insure against the same, in each case without any
additional cost to CBL, whether such insurance is made available in
consideration of payment, bonding, indemnity of JRI or otherwise, provided that
this clause (b) will only be available to remove mechanics' liens for claims
that do not exceed $5 million in the aggregate, or (c) deliver its own funds to
the Title Company with instructions for the Title Company to apply such funds to
discharge fully the Title Objection, together with such instruments, in
recordable form, as are necessary to enable the Title Company to discharge the
Title Objection of record and funds necessary to cover the fees and expenses of
the Title Company for discharging the claim and recording or filing such
instruments. In addition, to Remove a Subsequent Title Objection relating to an
Updated Survey, the applicable Survey must be revised to indicate the Removal if
the same is of a nature that is capable of being reflected on a survey and is of
a type that customarily would be so reflected. Notwithstanding anything herein
to the contrary, any Title Objection that arises because of an incorrect or
over-inclusive tax lot or block designation or a need to subdivide any parcel or
property from any other property must be Removed in accordance with all legal
requirements for obtaining a proper tax lot designation or subdivision, as
applicable.
(c) Updated Surveys. CBL acknowledges that it has received and reviewed
each of the Delivered Surveys and hereby confirms that, except to the extent of
items that are identified as Initial Title Objections on Schedule 3.1(b)(i), the
conditions shown on the Delivered Surveys are acceptable to CBL. Notwithstanding
the foregoing, JRI agrees that it will use commercially reasonable efforts to
take the remedial actions
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outlined on Schedule 3.2(c) in respect of the Delivered Surveys and, where
relevant, to obtain revised surveys reflecting such actions, although the
parties also agree that completion of the actions outlined on Schedule 3.2(c)
are not conditions precedent to Closing with respect to any of the Properties.
Within seventy-five (75) days of the date of this Agreement, JRI shall deliver
to CBL for its review an updated survey for each of Columbia Mall, Randolph Mall
and Parkdale Mall (each, an "Updated Survey"). Subject to clause (iii) below,
CBL will have the right to object to new matters set forth in any Updated Survey
or any revised survey delivered in connection with, or otherwise relating to the
process of, confirming completion of an item identified on Schedule 3.2(c) or
required by the Title Company as a condition to the issuance of the applicable
Title Policy, in each case in accordance with the provisions of Section 3.2(a)
above, except that CBL will not have the right to object to any new matters
unless they constitute Other Exceptions and were not set forth in the Delivered
Surveys.
(d) Special Provisions Relating to Kentucky Oaks Mall. (i) Notwithstanding
the foregoing, JRI agrees to use commercially reasonable efforts to obtain and
deliver to CBL a current survey for Kentucky Oaks Mall as soon as practical and
in any event within forty-five (45) days of the date of this Agreement. Upon
receipt of the current survey, CBL will have up to ten (10) days but in any
event, no later than the fiftieth (50th) day following the date of this
Agreement if the survey is delivered to CBL by the forty-fifth (45th) day
following the date of this Agreement and, if the survey is delivered to CBL
after the forty-fifth (45th) day following the date of this Agreement, CBL will
have five (5) days (such period, the "Response Period") to notify JRI in writing
of any Other Exception shown on or otherwise arising from the new survey of
Kentucky Oaks Mall. If CBL does not deliver written notice of any such Other
Exception within the Response Period, CBL will be deemed to have accepted the
new survey and each such Other Exception automatically will constitute an
additional Permitted Exception. If CBL notifies JRI in writing of any such Other
Exception, JRI will have five (5) days from receipt of the notice to determine
whether it is willing and able to Remove the Other Exception and, if JRI
determines that it is unwilling or unable to Remove any such Other Exception as
a condition to Closing on Kentucky Oaks Mall, JRI will notify CBL of that
determination in writing. If JRI does not notify CBL of such a determination
within the allotted five (5) days, the Other Exception will constitute a
Subsequent Title Objection. If, on the other hand, JRI notifies CBL of its
determination within the allotted five (5) days, CBL will have three (3)
Business Days from receipt of the notice to respond in writing withdrawing the
Other Exception (in which case the other exception will become an additional
Permitted Exception). If CBL does not withdraw the Other Exception within that
three (3) Business Day period, then JRI will be entitled to terminate this
Agreement by delivering to CBL a written notice of termination within three (3)
Business Days from the expiry of the CBL withdrawal period. If JRI does not
exercise the foregoing termination right, the Other Exception will constitute a
Subsequent Title Exception. If JRI exercises the foregoing termination right,
neither party will be required to pay the other any Expense Reimbursement or
other amount, and thereafter no party to
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this Agreement will have any further rights or obligations hereunder except
pursuant to those provisions of this Agreement that provide, by their terms,
that they survive termination.
(ii) At the earlier to occur of (A) such time as JRI has Removed all Title
Objections with respect to Kentucky Oaks Mall and has delivered a current survey
of Kentucky Oaks Mall as required above and CBL has confirmed to JRI in writing
that all of the items identified on that survey constitute Permitted Exceptions
and JRI has confirmed to CBL that it has obtained all consents with respect to
Kentucky Oaks Mall identified on Exhibit R and (B) November 30, 2000, CBL will
have the right to approach the general partner of Kentucky Oaks Mall Company to
request that (x) it deliver to JRI and CBL an estoppel certificate with respect
to Kentucky Oaks Mall and (y) CBL be permitted to solicit estoppel certificates
from the tenants at Kentucky Oaks Mall, provided, that, CBL agrees that it will
not make any such approach to the general partner or any person on its behalf
until the earlier of (A) such time as CBL has delivered the written confirmation
required above and JRI has confirmed that it has obtained the consents and
amendments identified on Exhibit R and (B) November 30, 2000.
(iii) In addition, the parties agree that (x) JRI will only be responsible
for Removing the Initial Title Objections with respect to Kentucky Oaks Mall and
exceptions to title identified by CBL to JRI in writing during the forty-five
(45) day period following the date hereof as described in (i) above, (y) CBL
will not be entitled to raise any further or additional objections to title
after the expiration of the initial forty-five (45) day period, and (z) any
objections first identified to JRI after the initial forty-five (45) day period
will be disregarded in determining whether JRI has satisfied the conditions
precedent to CBL's obligation to acquire interests in Kentucky Oaks Mall
Company.
(iv) JRI agrees that, from the date hereof until the Closing Date with
respect to Kentucky Oaks Mall, it will not cause or permit Paducah Development
Company to affirmatively consent to any matter regarding which Paducah
Development Company's consent is required pursuant to the organizational
documents of Kentucky Oaks Mall Company, without CBL's prior written consent
(which consent will not be unreasonably withheld, conditioned or delayed).
3.3 Condemnation. (ai Right to Terminate. In the event that any
Governmental Authority commences any condemnation action or any taking by power
of eminent domain (such action, a "Condemnation") against any Property or
threatens in writing to do so prior to the Closing with respect to that Property
(or the ICOA Closing with respect to any Partial Property subject to Section
2.1(c)), JRI agrees to notify the Operating Partnership of such action or
threatened action promptly upon obtaining knowledge thereof. If any Property or
portion thereof is taken in a Condemnation or a transfer in lieu thereof and the
action (i) deprives the Property Owner of 20% or more of the gross leasable area
owned and/or ground leased by the Property Owner at the
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Property, (ii) deprives the affected Property of access to public roads in a
manner that materially and adversely affects the value of the Property taken as
a whole, (iii) permits any Anchor at that Property to terminate its operating
covenant with respect to that Property under the applicable Anchor Documents and
the Anchor does not affirmatively waive its right to terminate the operating
covenant, (iv) constitutes or causes an event of default under the terms of the
mortgage loan then encumbering the Property which the applicable lender is
unwilling to waive or (v) deprives the Property of parking area such that the
Property is no longer in compliance with the parking count requirements of any
of the Anchor Documents in force at the Property or any applicable laws (any
such Condemnation, a "Substantial Condemnation"), and following such occurrence
the Jacobs Parties and the relevant Property Owner are unwilling or unable to
restore the Property to at least as good a condition (including leasable square
footage) as existed on the date of this Agreement (or, in the case of a
reduction in parking area, to at least as good a condition and number of spaces
as is required by the relevant Anchor Documents and applicable law) by the
Principal Closing Date, the Operating Partnership will have the right to decline
to include that Property in the Principal Closing as contemplated in, and
subject to JRI's cure obligations as set forth in Section 6.4 below. If any
Condemnation does not constitute a Substantial Condemnation, then this Agreement
will remain in full force and effect with respect to the affected Property, and
the Operating Partnership will acquire the Interests (or fee and/or leasehold
interests) in that Property on the terms and conditions set forth in this
Agreement and the related Interest Contribution Agreement or Deed Contribution
Agreement, as applicable. If any Condemnation occurs with respect to any
Property and this Agreement is not terminated with respect to that Property, JRI
agrees that it will allow CBL to participate in the negotiations regarding the
settlement of any claim for proceeds resulting from that Condemnation and will
not settle any such claim without obtaining CBL's prior consent, which consent
will not be unreasonably withheld, conditioned or delayed. In addition, JRI
agrees that, without obtaining CBL's prior consent, which consent will not be
unreasonably withheld, conditioned or delayed, it will not make any repairs to,
or otherwise restore, any Property subject to a Condemnation, other than repairs
required to protect the health or safety of any person or property at the
Property and except as required by the terms of any lease, reciprocal easement
or other Anchor agreement, loan document or other agreement to which the
relevant Property Owner is a party or which is otherwise applicable to the
affected Property.
(b) Credit for Distributed Proceeds. If a Condemnation occurs with respect
to a Property and (i) the Condemnation constitutes a Substantial Condemnation
but the Operating Partnership does not decline to accept the Property as
permitted in Section 6.4 or (ii) the Condemnation does not constitute a
Substantial Condemnation, then in either case the Operating Partnership will
acquire the Interests (or, if applicable, the fee and/or leasehold interests) in
that Property on the terms and conditions set forth herein, provided, that, at
the Closing with respect to that Property (or if the Property is a Partial
Property subject to Section 2.1(c), at the ICOA Closing for that Property), the
Operating Partnership will be entitled to a credit against the Consideration
allocable to that Property
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in an amount equal to the Condemnation proceeds, if any, received by the
Property Owner and distributed to the partners or members owning interests in
that Property Owner after the date of this Agreement and prior to that Closing,
and the proceeds of any rent insurance paid in respect of the Condemnation will
be apportioned between the Operating Partnership and the Contributors of that
Property as if the same were rent, as and when received. If the proceeds of any
Condemnation award in respect of any Property are paid directly to any Jacobs
Party or any entity controlled by a Jacobs Party (other than or in addition to
the relevant Property Owner), the Jacobs Party will deliver the proceeds or
cause the proceeds to be delivered (in each case net of any costs of collection)
to the relevant Property Owner for adjustment as contemplated above and in the
relevant Interest Contribution Agreement or Deed Contribution Agreement. The
provisions of this Section 3.3(b) shall survive the Closing with respect to that
Property.
3.4 Destruction or Damage. (a) If any Property or portion thereof is
destroyed or damaged by any casualty in a manner that: (i) deprives the Property
Owner of 20% or more of the gross leasable area owned and/or ground leased by
the Property Owner at the Property, (ii) deprives the affected Property of
access to public roads in a manner that materially and adversely affects the
value of the Property taken as a whole, (iii) permits any Anchor at that
Property to terminate its operating covenant with respect to that Property under
the applicable Anchor Documents and the Anchor does not affirmatively waive its
right to terminate the operating covenant, (iv) constitutes or causes an event
of default under the terms of the mortgage loan then encumbering the Property
which the applicable lender is unwilling to waive or (v) deprives the Property
of parking area such that the Property is no longer in compliance with the
parking count requirements of any of the Anchor Documents in force at the
Property or any applicable laws (any such casualty, a "Substantial Casualty"),
and following such occurrence the Jacobs Parties and the relevant Property Owner
are unwilling or unable to restore the Property to at least as good a condition
(including leasable square footage) as existed on the date of this Agreement
(or, in the case of a reduction in parking area, to at least as good a condition
and number of spaces as is required by the relevant Anchor Documents and
applicable law) by the Principal Closing Date, the Operating Partnership will
have the right to decline to include that Property in the Principal Closing as
contemplated in, and subject to JRI's cure obligations as set forth in Section
6.4 below. If any Substantial Casualty (or any other casualty in respect of
which settlement of the related insurance claim requires a lender's consent)
occurs with respect to any Property and this Agreement is not terminated with
respect to that Property, JRI agrees that it will allow CBL to participate in
the negotiations regarding the settlement of any claim for insurance proceeds
payable in respect of that casualty and will not compromise or settle any such
claim without obtaining CBL's prior consent, which consent will not be
unreasonably withheld, conditioned or delayed. In addition, JRI agrees that,
without obtaining CBL's prior consent, which consent will not be unreasonably
withheld, conditioned or delayed, JRI will not make any repairs to, or otherwise
restore, any Property subject to a casualty described in the immediately
preceding sentence, other than repairs required to protect the health or
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safety of any person or property at the Property and except as required by the
terms of any lease, reciprocal easement or other Anchor agreement, loan document
or other agreement to which the relevant Property Owner is a party or which is
otherwise applicable to the affected Property.
(b) Credit for Distributed Proceeds. If (i) any Substantial Casualty occurs
at a Property and the Operating Partnership does not elect to exclude the
affected Property from the Principal Closing as contemplated in Section 6.4
below, or (ii) damage or destruction occurs at a Property that does not
constitute a Substantial Casualty, then in either case the Operating Partnership
will acquire the Interests (or, if applicable, the fee and/or leasehold
interests) in that Property on the terms and conditions set forth herein,
provided, that, at the Closing with respect to that Property (or, if the
Property is a Partial Property subject to Section 2.1(c), at the ICOA Closing
for that Property), the Operating Partnership will be entitled to a credit
against the Consideration allocable to that Property in an amount equal to the
insurance proceeds, if any, received by the Property Owner and distributed to
the partners or members owning interests in that Property Owner after the date
of this Agreement and prior to that Closing, and the proceeds of any rent
insurance paid in respect of the casualty will be apportioned between the
Operating Partnership and the Contributors of that Property as if the same were
rent, as and when received. If the proceeds of any casualty insurance claim in
respect of any Property are paid directly to any Jacobs Party or any entity
controlled by a Jacobs Party (other than and instead of the relevant Property
Owner), the Jacobs Party will deliver the proceeds or cause the proceeds to be
delivered (in either case net of costs of collection) to the relevant Property
Owner for adjustment as contemplated above and in the relevant Interest
Contribution Agreement or Deed Contribution Agreement and will reimburse CBL, or
cause CBL to be reimbursed, for the amount of any deductibles. The provisions of
this Section 3.4(b) shall survive the Closing with respect to that Property.
3.5 Insurance. JRI shall cause each Property Owner (other than the owner of
Kentucky Oaks Mall, regarding which JRI will use commercially reasonable efforts
to cause the Property Owner) to maintain, or, if applicable, to renew or replace
with comparable coverage, the insurance coverages currently in effect for itself
and its Property through the Closing with respect to such Property (or, if the
Property is a Partial Property subject to Section 2.1(c), the ICOA Closing with
respect to that Property) and will cause Weston Management to maintain, or, if
applicable, to renew or replace with comparable coverage, the insurance
coverages currently in effect with respect to Weston Management through the
Principal Closing.
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ARTICLE IV
COVENANTS
4.1 Agreement to Explore a Potential Alternate Transaction. Notwithstanding
the provisions of Article II above, CBL agrees to cooperate with the Jacobs
Parties in good faith to explore a variation of the transaction contemplated
herein whereby the Operating Partnership would deliver community centers to one
or more of the Property Owners (or their designees) in a tax-free exchange as
part of the Consideration and in lieu of a number of SCUs having equivalent
value; provided, however, that the Operating Partnership will not be required to
participate in any such transaction unless the price for its community centers
and other terms of its involvement are satisfactory to CBL in its sole
discretion, and consummation of such a transaction is not a condition to Closing
(or any ICOA Option Closing). Notwithstanding the foregoing, the Jacobs Parties
acknowledge and agree that CBL also may undertake transactions of the type
contemplated by this Section 4.1 or other transactions with respect to its
community centers with parties other than the Jacobs Parties.
4.2 Amendment to the OP Partnership Agreement. At the Principal Closing,
the Operating Partnership agrees to amend the Operating Partnership's Second
Amended and Restated Agreement of Limited Partnership, dated as of July 30, 1998
(the "OP Partnership Agreement") in the form of the amendment (such amendment,
the "First Amendment"). At each Deferred Closing, the Operating Partnership
agrees to amend the OP Partnership Agreement in a form of amendment to be agreed
between CBL and JRI, acting reasonably.
4.3 Existence. At all times prior to December 1, 2002, each of the REIT and
the Operating Partnership agrees to take all steps within its power to preserve
and continue the corporate existence of the REIT and the partnership existence
of the Operating Partnership.
4.4 Commercially Reasonable Efforts. Each of CBL and each of the Jacobs
Parties agrees to use commercially reasonable efforts to take or cause to be
taken all actions and to do or cause to be done all things necessary or
appropriate to consummate and make effective the transactions contemplated by
this Agreement, the Interest Contribution Agreements, the Deed Contribution
Agreements, if any, and the other agreements being signed concurrently herewith
or pursuant hereto. Each of the Jacobs Parties agrees to use commercially
reasonable efforts to help the Operating Partnership obtain any approvals,
licenses or permits necessary for the acceptance by the Operating Partnership of
the Interests and directly or indirectly the Properties, all at the Operating
Partnership's sole cost and expense.
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4.5 HSR Act Filings. (a) As soon as practicable after the date hereof, CBL
and JRI agree to make such filings, if any, and use commercially reasonable
efforts to obtain such requisite approvals as may be required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
with respect to the consummation of the transactions contemplated by this
Agreement, and shall thereafter file or cause to be filed as promptly as
practicable with the United States Federal Trade Commission and the United
States Department of Justice any supplemental information which may be requested
pursuant to the HSR Act and/or to secure the expiration or early termination of
applicable waiting periods under the HSR Act. Each of JRI and CBL will cause any
filings referred to in this Section 4.5 to comply in all material respects with
the requirements of the respective laws pursuant to which they are made.
(b) Without limiting the generality or effect of Section 4.5(a), if such an
HSR Act filing is required, each of CBL and JRI agrees to (a) use its
commercially reasonable efforts to comply as expeditiously as possible with all
lawful requests of Governmental Authorities for additional information and
documents pursuant to the HSR Act, (b) not extend any waiting period under the
HSR Act or enter into any agreement with any Governmental Authority not to
consummate the transactions contemplated by this Agreement, except with the
prior consent of the other party (or parties) hereto, and (c) cooperate with the
other and use commercially reasonable efforts to cause the lifting or removal of
any temporary restraining order, preliminary injunction or other judicial or
administrative order which may be entered into in connection with the
transactions contemplated by this Agreement, provided, that, neither party shall
be required to divest itself of any assets, and, prior to or after the Principal
Closing, pursue the underlying litigation or administrative proceeding
diligently and in good faith.
4.6 Conduct of Business. (a) With respect to each Jacobs-Managed Property
and its related Property Owner, the Jacobs Parties agree that during the period
from the date hereof to the Closing Date with respect to such Property to the
extent within their control they will:
(i) cause the Property Owner to operate its Property in the ordinary
course and in a manner consistent with its prior practice and in accordance
with the year 2000 business plan for that Property that JRI previously
provided to CBL, as the same may be modified by JRI with CBL's written
consent, which consent will not be unreasonably withheld, conditioned or
delayed (including, without limitation, to continue to perform and complete
the capital expenditures that have been budgeted and scheduled in such
business plan and conduct customary repairs and maintenance) and, in the
case of operations in 2001, in accordance with the year 2001 business plan
for that Property developed by JRI, which 2001 business plan will be
developed as follows: (1) on or before November 15, 2000, JRI will submit
to CBL for approval, which approval will not be unreasonably withheld,
conditioned or delayed, a proposed 2001 business plan
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for each Jacobs-Managed Property prepared in a format and with a level of
detail comparable to the year 2000 business plan referred to above, (2) if
CBL objects to any proposed business plan it will notify JRI of the
objection in writing including an explanation in reasonable detail of each
line item to which it is objecting within thirty (30) days of the date on
which JRI delivers the proposed business plan to CBL (and if CBL fails to
deliver any such objection notice within that period the proposed business
plan will be deemed approved), (3) if CBL delivers an objection notice
meeting the requirements described above, JRI and CBL will cooperate in
good faith to resolve the source of the objection before the end of 2000,
(4) if, despite good faith efforts, JRI and CBL are unable to resolve a
dispute with respect to one or more items in a proposed 2001 business plan,
the Property Owner will operate the Property in accordance with the 2000
business plan and will not make any capital expenditures, other than
capital expenditures required to protect the health or safety of any person
or property at the Property and except as required by the terms of any
lease, reciprocal easement or other Anchor agreement, loan document or
other agreement to which the Property Owner is a party or which is
otherwise applicable to the Property, until the capital expenditure
component of the 2001 business plan or the specific capital expenditure
line item has been approved and (5) if any capital expenditure scheduled on
the 2000 or 2001 business plan to be completed prior to the Closing Date
with respect to the Property is not completed by such Closing Date, the
total Consideration payable by CBL in respect of that Property will be
reduced by an amount equal to the product of (x) the remaining cost to
complete the capital expenditure multiplied by (y) the percentage of the
total interests in the Property Owner being contributed to the Operating
Partnership in connection with the transactions contemplated herein
(assuming that all of the options with respect to the Interests in such
Partial Property Owner are exercised), which reduction will be allocated
between the SCU and cash components of the Consideration as determined by
JRI;
(ii) use commercially reasonable efforts to maintain, for the benefit
of the Operating Partnership following the Closing with respect to such
Property, the goodwill of the Outside Partners and other Persons having
business relations with such Property Owner that could reasonably be
expected to continue following the Closing with respect to that Property;
and
(iii) not (A) modify, amend or supplement any loan documents with
respect to any Continuing Loan (except as permitted or required in this
Agreement), any ground lease with respect to such Property or any
organizational documents of such Property Owner, or authorize or cause such
Property Owner to issue additional interests in such Property Owner, to the
extent it has any control over such actions (except, in the case of such
organizational documents, as may be outlined on Schedule 4.6(iii)(A) or
otherwise necessary in order to implement the transactions contemplated
herein or in the Interest Contribution Agreements or
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Deed Contribution Agreements, if applicable), (B), except as set forth on
Schedule 4.6(iii)(B), sell, transfer, assign, groundlease or otherwise
dispose of, or grant any right or interest in, the Property (other than the
Excluded Outparcels, if any, relating to such Property and other than
leasing activity in the ordinary course of business and in compliance with
the restrictions described below in this Section 4.6) or the Interests in
such Property Owner, or (C) except as set forth on Schedule 4.6(iii)(B),
sell, transfer, assign, groundlease or otherwise dispose of or grant any
right or interest in an Excluded Outparcel for which an option price is
provided on Schedule 1.2(a) hereto, unless JRI first offers CBL the
opportunity to purchase such Excluded Outparcel in the same manner and on
the same terms as would have applied if such Excluded Outparcel were
subject to an OP Option Agreement with the Closing to be conditioned on and
occur concurrently with the Closing (or, if applicable, the ICOA Closing)
for the related Property, and if the Master Contribution Agreement is
terminated with respect to such related Property then CBL's right and
obligation to buy such Excluded Outparcel shall also terminate without
penalty, and provided that CBL shall not be obligated for any expenses with
respect to such Excluded Outparcel prior to the Closing Date with respect
to such Excluded Outparcel;
(iv) not (x) authorize or cause the related Property Owner to incur
any additional indebtedness for borrowed money, (y) grant any additional
liens on the Property or Interests in the related Property Owner that will
encumber the Property or the Interests in such Property Owner following the
Closing with respect to such Property (other than Permitted Exceptions) or
(z) authorize or cause such Property Owner to enter into any equipment
lease that will continue to encumber the Property following the Closing
with respect to such Property (unless the equipment lease is on
commercially reasonable terms and either (1) will not require total
payments in excess of $150,000 per annum and is terminable by the Property
Owner without penalty on one year's notice or less or (2) is terminable by
the Property Owner without penalty on ninety (90) days' notice or less), in
each case except as permitted by Sections 1.1(b) and 4.22 hereof;
(v) not, in each case without the prior written consent of the
Operating Partnership, which consent will not be unreasonably withheld,
conditioned or delayed and will be deemed to have been given if the
Operating Partnership fails to approve or disapprove any such action within
three (3) Business Days following JRI's written request therefor: (1) enter
into any new Anchor Document, (2) amend, modify, or cancel any lease or
Anchor Document, (3) grant any consents under, or waive any provisions of,
any lease or Anchor Document or (4) institute litigation or eviction
proceedings against any Anchor;
(vi) not authorize, cause or permit the Property Owner of such
Property to enter into any lease except pursuant to the following
procedures:
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(1) before finalizing any lease, JRI will submit a Jacobs Group Lease Deal
Sheet for the lease in the form attached hereto as Exhibit T (a "Lease Term
Sheet"), containing the terms of the lease to CBL for its approval, which
approval will not be unreasonably withheld, conditioned or delayed, (2)
upon receipt of the completed Lease Term Sheet for a proposed lease, CBL
will notify JRI promptly and in any event within three (3) Business Days of
receipt thereof (or, in the event that CBL requests additional information
of a commercially reasonable nature regarding a proposed lease during that
initial period, within three (3) Business Days of receipt by CBL of such
additional information) of any objection CBL may have to any of the terms
of the lease (and any failure to respond in writing within such three (3)
Business Day period will be deemed approval) and (3) once CBL has approved
or been deemed to have approved the Lease Term Sheet for a proposed lease,
the Jacobs Parties will be fully entitled to cause the relevant Property
Owner to enter into the proposed lease on the terms outlined in the
approved Lease Term Sheet, provided, that, except as outlined in the Lease
Term Sheet the lease will be on the standard form then being used by that
Property Owner (or such alternative standard form as was included with the
Lease Term Sheet submitted to CBL as described above); CBL hereby confirms
that it has already approved the Lease Term Sheets for the potential leases
listed on Schedule 4.6(vi);
(vii) not authorize, cause or permit the related Property Owner to
enter into (1) any contract or other agreement with any of its affiliates
that is not on arms' length terms, (2) any employment agreement or (3) any
other contract or agreement (including a renewal of an existing agreement)
unless that contract or agreement (x) will not require total payments in
excess of $150,000 per annum and is terminable by the Property Owner
without penalty on one year's notice or less or (y) is terminable by the
Property Owner without penalty on ninety (90) days' notice or less (or
unless it is an agreement implementing the transactions contemplated by
this Agreement, an agreement that will expire or be terminated at or before
the Closing with respect to the applicable Property or an agreement
consented to by CBL in writing);
(viii) cause the related Property Owner to allow CBL's representatives
to be present at such entity's weekly internal leasing meetings so that CBL
can stay abreast of that entity's leasing activity, maintain an open line
of communication between CBL and JRI and facilitate and expedite JRI's
ability to obtain any approvals or consents from CBL contemplated in this
Agreement. CBL and JRI also agree to establish transition teams that will
begin meeting as soon as possible to coordinate CBL's efforts to develop
the necessary personnel, policies and procedures it will need to assume
full operation of each of the Properties and to identify and resolve any
administrative issues that may arise in the transition process.
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(b) The parties hereby agree that the REIT and JRI may mutually agree to
modify the terms of Section 4.6(a), and that any such modification shall be
effective against all parties if evidenced in writing signed by both the REIT
and JRI.
4.7 Registration Rights Agreement. At the Principal Closing, the REIT
agrees to enter into and deliver a registration rights agreement, in the form
attached hereto as Exhibit H-1 (the "Registration Rights Agreement") with and
for the benefit of each of the Persons receiving or entitled to receive any SCUs
as a result of the contributions contemplated by this Agreement, the Interest
Contribution Agreements and any Deed Contribution Agreements. At each Deferred
Closing the REIT will enter into and deliver an addendum to the Registration
Rights Agreement in the form attached hereto as Exhibit H-2.
4.8 Voting and Standstill Agreement. Concurrently with the execution of
this Agreement, CBL and the Jacobs Parties agree to execute the Voting and
Standstill Agreement in the form attached hereto as Exhibit I (the "Voting and
Standstill Agreement"), CBL agrees to cause each of the CBL Principals (as
defined in the Voting and Standstill Agreement) to execute the Voting and
Standstill Agreement and JRI agrees to cause Martin J. Cleary to execute the
Voting and Standstill Agreement.
4.9 Department Store Issues. JRI agrees to use commercially reasonable
efforts to accomplish the actions outlined on Schedule 4.9 with respect to the
Properties and Anchors identified on such schedule; provided, that, JRI's
ability to accomplish the foregoing actions will not be a condition precedent to
CBL's obligations to close with respect to such Properties.
4.10 Amendment to Rights Agreement. At or prior to the Principal Closing
Date, the REIT agrees to amend the Rights Agreement dated April 30, 1999 between
the REIT and SunTrust Bank, as successor to BankBoston, N.A. (the "Rights
Agreement") in form and substance reasonably acceptable to JRI to provide that
the term "Acquiring Person" as defined therein does not include the Jacobs Group
or any of its members unless such Person Beneficially Owns or Constructively
Owns REIT Stock in excess of the Jacobs Permitted Ownership Amount (as defined
in the Share Ownership Agreement to be entered into at such Closing as
contemplated in Section 4.15 and Schedule 4.15(b)-1 or Schedule 4.15(b)-2, as
applicable). The REIT agrees that, until termination of the Share Ownership
Agreement in accordance with Article VIII thereof, the Rights Agreement will not
be further amended in any manner that would impair the benefit to the Jacobs
Group and any of its members of the amendment required in the immediately
preceding sentence without, in any such case, the prior written consent of JRI
on behalf of the Jacobs Group and its members. For purposes of this Section and
the amendment to the Rights Agreement, the terms "Beneficially Own,"
Constructively Own" and "Share Ownership Agreement" shall be as defined in
accordance with the definitions in Schedule 4.15(b)-1 and/or Schedule 4.15(b)-2,
as applicable. For purposes of this
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Section and the amendment to the Rights Agreement, the term "Jacobs Group" shall
be defined in accordance with the definitions in Schedules 4.15(b)-1 and/or
4.15(b)-2, as applicable, except that such term shall not be deemed to include
any entity unless (i) at least 51% of the economic interests in such entity are
beneficially owned (as that term is defined in Rule 13d-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934) by
one or more Jacobs Family Members, and (ii) such entity is controlled
exclusively by one or more Jacobs Family Members, provided, however, that each
of the Richard E. Jacobs Revocable Living Trust and the David H. Jacobs Marital
Trust shall be deemed to be a member of the Jacobs Group so long as it satisfies
the conditions of clause (i) above regardless of how it is controlled. For
purposes of this Section, the term "Jacobs Family Member" shall mean each of
Richard E. Jacobs, any spouse or lineal descendant of Richard E. Jacobs or David
H. Jacobs, and any spouse or lineal descendant of any of the foregoing.
4.11 Jacobs Employees. At and effective as of the Closing with respect to
any Property, the Jacobs Parties agree to cause the Property Owner of each 100%
Property and each Partial Property controlled by any of them to terminate all
mall managers, leasing directors and other employees located at the Property or
Properties owned by it (such persons, the "Mall Employees") and JRI will pay all
severance payments, if any, due in connection with the employee terminations
referred to in this Section. At the Closing with respect to any Property, the
Operating Partnership agrees that it will offer employment to substantially all
of the Mall Employees who are managers, assistant managers and/or marketing
directors for base salaries and benefits comparable to the base salaries and
benefits being earned by persons employed by CBL and/or its affiliates in
comparable positions at regional malls owned directly or indirectly by CBL in
comparable markets. The foregoing covenant is made to and solely for the benefit
of the Jacobs Parties, and no Mall Employee is entitled or shall be deemed to be
entitled to make any claim against CBL or any of its affiliates, or any other
Person based on this paragraph or any other provision of this Agreement.
4.12 Limitation on Actions by CBL. During the period from the date hereof
to the Principal Closing, without JRI's prior written consent each of the REIT
and the Operating Partnership agrees that it will not participate in any merger
or other business combination in which it is not the surviving entity, and the
REIT and the Operating Partnership together agree that, except as necessary to
consummate the transactions contemplated in this Agreement (it being agreed that
the value of any securities issued to raise funding to effect the transactions
contemplated by this Agreement, including, without limitation, the SCUs to be
issued to the Contributors, will be excluded when determining compliance with
this Section 4.12), they will refrain from acquiring or selling, or committing
to acquire or sell, assets (including by merger or other business combination)
having gross value of $750 million or more or net value of $375 million or more,
or issuing preferred equity and/or incurring any additional indebtedness
(excluding any refinancing of existing debt to the extent that the refinancing
proceeds do not exceed the
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principal amount being refinanced) in excess of $375 million in the aggregate;
provided, however, that if JRI is unwilling to consent to any such prohibited
transaction, CBL will notify JRI of its determination to proceed and the reasons
therefor and, upon receipt of such notice, JRI will have the right to either
waive its initial objection or terminate this Agreement (together with its
rights and obligations under any of the other agreements or other documents
relating to this Agreement) by delivering written notice of termination to CBL.
If JRI exercises this right to terminate, CBL agrees that it will pay JRI an
Expense Reimbursement in the same amount that CBL would have been required to
pay to JRI if at that time CBL were electing to terminate the Agreement pursuant
to Section 10.1. This Section 4.12 shall not be deemed to limit in any way the
issuance by the REIT of common stock upon the exercise by any holder of Common
Units of its exchange rights pursuant to the OP Partnership Agreement. In
addition, during the period from the date hereof through the Principal Closing
Date, the Operating Partnership will not, in any transaction involving assets
with a net value of $100 million or more, issue or sell any Common Units or any
instrument convertible into Common Units for consideration less than the fair
value of such Common Units, with matters of value being determined in each such
case by the board of directors of the REIT, in consultation with the Operating
Partnership's professional advisers, and under no circumstances will the
Operating Partnership declare any Common Unit dividend, Common Unit split,
Common Unit distribution or the like unless fair and equitable arrangements are
provided, to the extent necessary, to fully adjust, and to avoid any dilution
in, the rights or value of the SCUs to be delivered as part of the
Consideration.
4.13 Expenses. Each party agrees to pay its own expenses (including the
fees and expenses of its own attorneys, accountants and other advisers) in
connection with its due diligence activities, negotiating this Agreement and any
related agreements, obtaining any required approvals and otherwise preparing for
the Principal Closing, any Deferred Closing or any ICOA Option Closing. In
addition, CBL agrees to reimburse the Jacobs Parties in an amount equal to the
lesser of (x) $1 million and (y) 50% of the aggregate transfer and recording
taxes, title insurance premiums, survey costs, filing fees (including any filing
fees incurred in connection with any filings made pursuant to the HSR Act) and
expenses, and other similar closing expenses arising in connection with the
contributions contemplated by this Agreement (other than expenses relating to
the items described in the next sentence), it being understood that (i) the
costs and expenses arising in connection with any ICOA Option Closing or
Deferred Closing will be viewed on a cumulative basis for determining the amount
CBL is required to pay pursuant to this sentence and (ii) JRI will pay the
remainder of any such expenses. Notwithstanding the foregoing, CBL shall
reimburse the Jacobs Parties for 100% of the costs of any endorsements,
affirmative coverages and reinsurance agreements (other than endorsements or
affirmative coverages that are obtained by JRI to Remove any Subsequent Title
Objections, the cost of which shall be included in clause (y) of the preceding
sentence) that CBL may request and that are not provided for in the Commitments,
and none of the Jacobs Parties shall be responsible for any portion of such
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expenses; it being understood that any amounts required to be paid by CBL
pursuant to this sentence shall be in addition to any amounts required to be
paid by CBL pursuant to the preceding sentence. The parties agree to cooperate
with one another to prepare and file with the relevant authorities all transfer
tax returns, affidavits and other similar instruments, if any, required in
connection with the payment of the foregoing expenses.
4.14 Partner Consents. (a) JRI agrees to use commercially reasonable
efforts to obtain, prior to the Closing with respect to any Property, each of
the Outside Partner consents with respect to such Property set forth on Exhibit
R (each, a "Partner Consent").
(b) As soon as practicable after the date hereof, JRI and CBL agree to
cooperate and prepare the documentation for use by JRI in soliciting the
Associates and Outside Partners to contribute their respective Interests as
contemplated in this Agreement, which documentation shall be mutually agreed to
by CBL and JRI, such approval not to be unreasonably withheld by either party
(such documentation, as amended from time to time as necessary or appropriate,
the "Consent Solicitation Documentation"); JRI agrees to use commercially
reasonable efforts to deliver or cause to be delivered such Consent Solicitation
Documentation to the Associates and to the Outside Partners set forth on
Schedule 2.1(b)(ii) hereto desiring to participate in the transactions described
herein, with respect to the Properties identified on such schedule. Each of JRI,
on the one hand, and CBL, on the other hand, represents that the information
provided by it for inclusion in the Consent Solicitation Documentation and each
amendment or supplement thereto, at the time of transmittal thereof to an
Associate or Outside Partner, will not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. JRI and CBL agree to cooperate to cause the
Consent Solicitation Documentation to comply in all material respects with all
applicable requirements of law including applicable securities laws. Whenever
JRI or CBL becomes aware that an event has occurred that is required to be set
forth in an amendment or supplement to the Consent Solicitation Documentation,
JRI on the one hand, and CBL on the other hand, shall promptly inform the other
of the occurrence of such event, and thereafter they will cooperate in causing
the delivery to the Associates and Outside Partners desiring to participate in
the transactions described herein, the required amendment or supplement. In the
Consent Solicitation Documentation, JRI will (i) disclose that it (and not CBL)
determined the allocation of the Consideration among the various Properties and
Weston Management as well as among the partners or members of each Property
Owner, (ii) state that in its opinion the price and terms of the proposed
transaction are fair to the Associates with respect to each Property and the
management and leasing activities relating thereto and (iii) recommend that each
Associate consent to the proposed transaction and agree to contribute its
Interests to a New Entity or the Operating Partnership (or its designee), as
applicable.
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4.15 Stockholder Approval. (a) As soon as practicable after the date
hereof, CBL and JRI agree to cooperate to prepare (and JRI agrees to provide to
CBL the information regarding the Properties and Weston Management required to
be included therein) and CBL agrees that it will file with the SEC a proxy
statement with respect to the meeting of the stockholders of the REIT in
connection with the issuance of the SCUs as contemplated herein (the "Proxy
Statement"), which shall be mutually agreed to by CBL and JRI, such approval not
to be unreasonably withheld by either party. The parties agree to cooperate and
promptly prepare and file with the SEC as soon as practicable any other filings
required under the Exchange Act (the "Additional Filings") to facilitate
obtaining the consents sought in the Proxy Statement. Each of JRI, on the one
hand, and CBL, on the other hand, agrees that the information provided by it for
inclusion in the Proxy Statement, the Additional Filings, and each amendment or
supplement thereto, at the time of filing and mailing thereof and at the time of
the REIT Stockholders Meeting in respect of the matters addressed in the Proxy
Statement, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. CBL will use commercially reasonable efforts, and JRI will
cooperate with CBL in that regard, to (i) file a preliminary Proxy Statement
with the SEC and (ii) cause the Proxy Statement to be mailed to the REIT's
stockholders, in each case, as promptly as practicable (including clearing the
Proxy Statement with the SEC); provided, however, that CBL will not be required
to mail the Proxy Statement to the REIT's stockholders until the later of (x)
expiry of the Initial Period and (y) JRI has advised CBL in writing that JRI has
received consent from TIAA to the transactions contemplated by this Agreement.
CBL will notify JRI promptly of the receipt of any comments from the SEC and of
any request by the SEC for amendments or supplements to the Proxy Statement or
the Additional Filings or for additional information and will supply JRI with
copies of all correspondence between such party or any of its representatives
and the SEC, with respect to the Proxy Statement or the Additional Filings. CBL
and JRI agree to cooperate to cause the Proxy Statement and any Additional
Filings to comply in all material respects with all applicable requirements of
law. Whenever any event has occurred that is required to be set forth in an
amendment or supplement to the Proxy Statement or the Additional Filings, CBL on
the one hand, and JRI on the other hand, will promptly inform the other of such
occurrence and thereafter the parties will cooperate in filing with the SEC
and/or mailing to the stockholders of the REIT such amendment or supplement to
the Proxy Statement and/or the Additional Filing.
(b) The REIT agrees to duly call, give notice of, convene and hold a
meeting of its stockholders (the "REIT Stockholders Meeting"), such meeting to
be held at the REIT's election, but in any event no sooner than twenty (20)
Business Days nor later than forty-five (45) days following the date the Proxy
Statement is mailed to the REIT's stockholders, for the purpose of obtaining the
approval of the REIT's stockholders to (i) the issuance of the SCUs as
contemplated in this Agreement (the "SCU Issuance Proposal"), and (ii) the
amendments to the REIT's certificate of incorporation set
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forth on Schedule 4.15(b)-1 (the "Share Ownership Limitation Amendments"). The
REIT covenants and agrees to affirmatively recommend that its stockholders
approve the SCU Issuance Proposal and the Share Ownership Limitation Amendments
and provide any other approvals necessary to facilitate the transactions
contemplated herein, all in accordance with the terms of the Voting and
Standstill Agreement being entered into concurrently herewith. For the avoidance
of doubt, if the REIT or its board of directors does not affirmatively recommend
the SCU Issuance Proposal or the Share Ownership Limitation Amendments to its
stockholders in the Proxy Statement and at the REIT Stockholders Meeting, or if
at any time the REIT or its board of directors withdraws that recommendation or
recommends against either such proposal, whether for reasons of fiduciary duty
or otherwise, the same will constitute a material default by CBL under this
Agreement and will entitle JRI to terminate this Agreement and receive the $15
million Expense Reimbursement as provided in Section 10.2. The REIT agrees to
use commercially reasonable efforts (including the retention of proxy
solicitors) to ensure that all such approvals are obtained at the REIT
Stockholders Meeting. The REIT further agrees that if the REIT's stockholders
approve the SCU Issuance Proposal, but do not approve the Share Ownership
Limitation Amendments at the REIT Stockholders Meeting, then at or before the
Principal Closing the REIT's board of directors will instead adopt the
resolution set forth on Schedule 4.15(b)-2 (the "REIT Board Resolution") and
will make such corresponding modifications to the Ownership Limits (as defined
in the REIT's certificate of incorporation) as are necessary to implement the
provisions set forth in the REIT Board Resolution. In addition, in such event
the REIT agrees that it will, through its board of directors, re-submit and
recommend the Share Ownership Limitation Amendments to its stockholders for
approval at each of the next three annual meetings of the REIT's stockholders
following the REIT Stockholders Meeting, and will in each such instance use
commercially reasonable efforts (including the retention of proxy solicitors) to
obtain the requisite shareholder vote to approve the Share Ownership Limitation
Amendments.
(c) If, on the date for the REIT Stockholders Meeting established pursuant
to Section 4.15(b), the REIT has not received duly executed proxies which, when
added to the number of votes represented in person at the meeting by Persons who
intend to vote in favor of the SCU Issuance Proposal, will constitute a
sufficient number of votes to adopt such proposal (but less than a majority of
the outstanding REIT Stock have indicated their intention to vote against, or
have submitted duly executed proxies voting against, each such proposal), then
the REIT agrees to recommend the adjournment of the REIT Stockholders Meeting
until the date not more than ten (10) days after the originally scheduled date
of the REIT Stockholders Meeting to enable the REIT to take further action to
solicit the proxies and affirmative votes required for approval of such
proposal.
4.16 Tax Treatment. (a) Each of the REIT and the Operating Partnership
agrees to cooperate with, and to use commercially reasonable efforts to assist,
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the Contributors to ensure that the contributions of Interests and/or the
Properties to the Operating Partnership (whether by contribution, merger or
otherwise) do not result in the recognition of any taxable income or gain, or in
tax terminations under Section 708(b)(1)(B) of the Code or other adverse
consequences, for federal income tax purposes to the direct and indirect
contributors thereof. Each of the REIT and the Operating Partnership covenants
that any entity other than the Operating Partnership to which the Operating
Partnership requests contributions be made pursuant to the provisions of Section
1.1 hereof (other than contributions with respect to interests in Weston
Management) will be an entity whose separate existence from the Operating
Partnership is disregarded for federal income tax purposes at the time of the
relevant contribution.
(b) The REIT and the Operating Partnership agree that they will act for
federal and state income tax purposes, including with respect to filing tax
returns or taking other actions relating to tax matters in a manner consistent
with (i) the allocation of Consideration among the direct and indirect interests
in the Properties, the Cary Note and Weston Management established pursuant to
Section 2.1(a) hereof, (ii) the treatment of the portion of the cash
Consideration so designated by JRI as reimbursements of preformation
expenditures within the meaning of Treasury Regulations Section 1.707-4(d),
(iii) the treatment of the assets of Weston Management as goodwill for federal
income tax purposes and (iv) the allocation of depreciation or amortization
attributable to an adjustment to the fair market value under Section 743 of the
Code of the federal income tax basis of the Operating Partnership assets
(including adjustments made prior to the contribution of the relevant assets to
the Operating Partnership) to the direct or indirect partner, or such partner's
successor, the transfer of whose direct or indirect interest gave rise to the
adjustments, except to the extent that such allocations would not be valid as a
result of a change in tax law occurring after the date hereof. The REIT and the
Operating Partnership agree that for tax purposes they will treat the Operating
Partnership as not having acquired beneficial ownership of, and as having
acquired only the legal title to, any direct or indirect interest in any
Excluded Outparcel subject to a JRI Option Agreement as to which JRI exercises
the rights provided in the JRI Option Agreement.
(c) The REIT and the Operating Partnership agree that throughout the
Protection Period (i) they will take all commercially reasonable efforts to
ensure that the Operating Partnership is not treated, as a "publicly traded
partnership" as that term is used in Section 7704(b) of the Code (a "PTP"), (ii)
the "Rights" (as that term is defined in the OP Partnership Agreement)
associated with the OP Units outstanding as of the date of this Agreement will
not be amended unless the REIT and the Operating Partnership receive an opinion
of nationally recognized independent tax counsel (an "Opinion of Counsel") to
the effect that exercises of the Rights as amended will not cause the Operating
Partnership to be treated as a PTP, (iii) OP Units issued by the Operating
Partnership after the date of this Agreement other than in connection with the
transactions provided for in this Agreement ("New Units") will not have terms
with respect to exchanges for REIT shares
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or cash ("Exchange Rights") that differ from the terms associated with the OP
Units outstanding as of the date of this Agreement unless the REIT and the
Operating Partnership have received an Opinion of Counsel to the effect that the
exercise of the exchange features of the New Units by holders thereof will not
cause the Operating Partnership to be treated as a PTP, (iv) neither the REIT
nor the Operating Partnership will waive any restrictions with respect to the
exercise of any Right or Exchange Right unless the waiver is with respect to
either (a) a transaction that qualifies as a "private transfer" described in
Treasury Regulations ss. 1.7704-1(e), or (b) a transaction with respect to which
the REIT and the Operating Partnership have received an Opinion of Counsel
concluding that the transaction will not cause the Operating Partnership to be
treated as a PTP, (v) the Operating Partnership will not allow a transfer of OP
Units other than pursuant to an exercise of Rights or Exchange Rights (a "Unit
Transfer") unless either (a) the Unit Transfer qualifies as a "private transfer"
described in Treasury Regulations ss. 1.7704-1(e), (b) the REIT and the
Operating Partnership have received an Opinion of Counsel to the effect that the
Unit Transfer will not cause the Operating Partnership to be treated as a PTP or
(c) the transfer occurs within twelve (12) months of the death of a person that
held a direct or indirect interest in the OP Units at the time of death,
provided that the transferor may not make more than two transfers under this
clause (c) that are not described in clause (a) during such twelve (12) month
period and (vi) to the extent that an Opinion of Counsel received by the
Operating Partnership in connection with the requirements of this Section
4.16(c) is based upon assumptions regarding subsequent transfers of interests in
the Operating Partnership, whether pursuant to Rights, Exchange Rights or
otherwise, the Operating Partnership will not permit transfers other than in
accordance with such assumptions unless the Operating Partnership obtains a new
Opinion of Counsel to the same effect as the original Opinion of Counsel, taking
into account the variations from such assumptions.
4.17 Estoppel Certificates. Commencing promptly after the date hereof, JRI
agrees to prepare and deliver to (i) each major department store or other
so-called "anchor" listed on Schedule 4.17-1 (the "Anchors") at each
Jacobs-Managed Property, an estoppel certificate in the form attached hereto as
Schedule 4.17-2 and/or Schedule 4.17-6, as applicable, or with respect to any
Anchor such other form as is currently in use by the Anchor in other similar
circumstances, (ii) each tenant at each Jacobs-Managed Property that is a party
to a lease conveying the right to occupy more than 2,000 square feet of gross
leasable area, an estoppel certificate in the appropriate form attached hereto
as Schedule 4.17-2, (iii) each landlord under a ground lease pursuant to which
any Property Owner has access to space at any Property that is listed on
Schedule 4.17-3 (each such landlord, a "Ground Lessor"), an estoppel certificate
in the form attached hereto as Schedule 4.17-4, or, with respect to any
particular Ground Lessor, such other form as is currently in use by the Ground
Lessor in other similar circumstances (so long as the form is adequate to enable
the Title Company to deliver the coverage contemplated in the Commitments), (iv)
to the extent not covered above, each entity identified on Schedule 4.17-5 that
is a party to a so-called "reciprocal easement agreement" encumbering and or
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benefitting any Jacobs-Managed Property, an estoppel certificate in the form
attached hereto as Schedule 4.17-6 or in the form as is currently in use by such
entity in other similar circumstances, (v) each lender of a Continuing Loan
secured by a Jacobs-Managed Property, an estoppel certificate in the form
attached hereto as Schedule 4.17-7, and (vi) each Outside Partner that owns an
interest in the Property Owner of a Jacobs-Managed Property, an estoppel
certificate in the form attached hereto as Schedule 4.17-8, (each such estoppel
certificate, an "Estoppel Certificate"), in each case completed to reflect the
relevant terms of the lease, ground lease, reciprocal easement agreement, loan
documents or organizational documents to which it relates. JRI agrees to use
commercially reasonable efforts, but without being required to incur any
material expense (other than the administrative expense customarily incurred in
preparing, distributing and collecting such certificates), to obtain signed
Estoppel Certificates from each of the above-referenced tenants, landlords,
parties, lenders and partners on or before the applicable Closing Dates;
provided, however, that, in the case of the Ground Lessor estoppels, if a
different form of estoppel certificate is attached to or otherwise prescribed in
a particular ground lease document or is currently in use by the Ground Lessor
in other similar circumstances that form will be deemed to be acceptable to CBL
in the event that any Ground Lessor is unwilling to sign the relevant Estoppel
Certificate in the form attached hereto, so long as, in either case, the form is
adequate to enable the Title Company to deliver the coverage contemplated in the
Commitments; and provided, further, that JRI will not be required to deliver an
Estoppel Certificate to (a) any lender until JRI has received a consent from
such lender in substantially the form of Exhibit Q hereto and (b) any Outside
Partner until JRI has received the consents outlined on Exhibit R from such
Outside Partner. CBL acknowledges that (i) JRI's only obligations under the
foregoing provisions of this Section 4.17 are to prepare and deliver the
Estoppel Certificates as described above, to employ commercially reasonable
efforts as described above, and to obtain a completed Estoppel Certificate from
each Ground Lessor, (ii) except as set forth in clause (i) above with respect to
the Ground Lessor estoppels, the failure to obtain any completed Estoppel
Certificates will not give rise to a failure of a condition precedent to Closing
and (iii) no new information revealed in any such Estoppel Certificate will give
CBL any right of termination hereunder or other rights hereunder except as
specifically set forth in Article VII hereof. JRI hereby agrees to give CBL such
information from JRI's database as is necessary to enable CBL to prepare and
deliver Estoppel Certificates in the form attached hereto as Schedule 4.17-2 to
each tenant at the Jacobs-Managed Properties that is a party to a lease
conveying the right to occupy 2,000 or fewer square feet of gross leasable area
and to cooperate with CBL in processing the same.
4.18 Reservation of REIT Stock.The REIT agrees that commencing on or prior
to the Principal Closing and at all times thereafter it will reserve and keep
available, free from preemptive rights, out of its authorized but unissued
common stock, solely for the purpose of issuance upon conversion or exchange of
SCUs or Common Units received upon exchange of the SCUs, the full number of
shares of REIT Stock then
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deliverable upon conversion or exchange of all of the SCUs (and Common Units
received upon exchange of the SCUs, if any) then outstanding. The REIT covenants
and agrees that at or prior to the Principal Closing it will obtain all
consents, approvals, authorizations, orders, registrations, clearances and
qualifications of any Governmental Authority or body or stock exchange
authorities for the issuance of the REIT Stock issuable upon conversion of the
SCUs and that it will maintain all such consents, approvals, authorizations,
orders registrations, clearances and qualifications for the issuance of the REIT
Stock issuable upon conversion or exchange of the SCUs.
4.19 Assumption of Guaranties. At the Closing with respect to any Property,
the Operating Partnership agrees to assume all obligations of each of the Jacobs
Parties, each Associate, each Outside Partner that contributes interests in any
Property Owner to the Operating Partnership, and any affiliates of any of the
foregoing (each such Person, a "Guarantor") accruing from and after such Closing
Date pursuant to each guaranty and other indemnity agreement identified on
Schedule 4.19 with respect to such Property and each other guaranty and/or
indemnity agreement entered into by any of them in connection with any New Loan
entered into as contemplated, and subject to the limitations, in Section 1.1(b),
to the extent the same do not constitute Excluded Liabilities (each, a
"Continuing Loan Guaranty") on such terms and pursuant to such documentation as
the lender or other beneficiary thereof may reasonably require. CBL also agrees
to use commercially reasonable efforts to cooperate with the efforts of the
Jacobs Parties to cause the lender of each Continuing Loan and each New Loan to
fully release and discharge each Guarantor from all obligations under each
Continuing Loan Guaranty to which it is a party or by which it is bound,
including by executing documents reasonably requested by the lenders, so long as
the same do not expand the scope of CBL's obligations under this Agreement or
expand CBL's obligations under such Continuing Loan Guaranty beyond those of the
Guarantor, and, if any lender is unwilling to release and discharge any
Guarantor from any Continuing Loan Guaranty, CBL agrees to indemnify the
Guarantor against any liability under that Continuing Loan Guaranty based on a
matter accruing from and after such Closing Date pursuant to an indemnity
agreement in the form of Exhibit J hereto. CBL and JRI agree to cooperate and
use commercially reasonable efforts to include in the terms of any assumption of
a Continuing Loan Guaranty a provision to the effect that the general partner of
the Operating Partnership is expressly exculpated from any liability under any
such Continuing Loan Guaranty.
4.20 Non-Competition Agreement. At the Principal Closing, JRI agrees to
cause Richard E. Jacobs to enter into and deliver a non-competition agreement in
the form attached hereto as Exhibit K (the "Non-Competition Agreement") with and
for the benefit of the Operating Partnership.
4.21 Randolph Mall. JRI agrees to take such steps as are commercially
reasonable to cause the Property Owner of Randolph Mall to defease the principal
balance
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of the Capital America financing secured by Randolph Mall. In addition, if,
following such defeasance, JRI is unable to transfer responsibility for the
defeased loan to another JRI affiliate in a manner that terminates the loan as a
liability of JG Randolph LLC or any then owner of Randolph Mall (including,
without limitation, for purposes of GAAP as determined by CBL's independent
auditors, acting reasonably), then JRI will cause JG Randolph LLC to contribute
its interests in Randolph Mall to the Operating Partnership by way of a deed
transfer pursuant to a Deed Contribution Agreement in the same manner as
contemplated in Section 1.1(a)(i) above.
4.22 Refinancings. (a) JRI agrees to use commercially reasonable efforts to
(i) cause the mortgage encumbering Cary Towne Center to be refinanced prior to
the Closing with respect to Cary Towne Center on the terms set forth in the term
sheet with CIGNA Investments, Inc. ("CIGNA") dated May 9, 2000, (ii) obtain
CIGNA's consent to the transactions contemplated by this Agreement and (iii)
obtain Belk's consent to the related mortgage in favor of CIGNA to the extent
that it encumbers the fee interest under Belk's leasehold interest. JRI will pay
all of its own, the borrowing Property Owner's and, to the extent required, the
lender's costs incurred in connection with the refinancing described in this
Section 4.22(a).
(b) JRI agrees to use commercially reasonable efforts, and CBL agrees to
cooperate with and to use commercially reasonably efforts to assist Jacobs in
its efforts, to extend the maturity date of the existing loan secured by Fayette
Mall to a date that is at least ninety (90) days and not more than one hundred
and eighty (180) days following the last permitted Subsequent Scheduled
Principal Closing Date (as provided in Section 6.1(b)) without any other
material change in the terms of the loan and to extend the maturity date of the
existing loan secured by Eastgate Mall to a date that is at least ninety (90)
and not more than one hundred and eighty (180) days following the Closing Date
for that Property. In the event that JRI is unable to obtain either such
extension, JRI will be responsible for refinancing the indebtedness presently
secured by Fayette Mall or Eastgate Mall, as applicable. Any such refinancing
will be on a short-term basis and the principal economic terms and the other
terms and conditions (including without limitation the transfer restrictions,
recourse provisions and financial covenants) of any such refinancing will be
consistent with the requirements of a New Loan as described in clause (G) of
Section 1.1(b)(iii) and will be subject to CBL's prior written consent, which
consent will not be unreasonably withheld, conditioned or delayed. For
clarification, CBL will not be entitled to disapprove any such term or condition
if at the time of the refinancing the lender's requirement of that term or
condition is consistent with the practice of lenders making loans of comparable
size and with comparable security in the mortgage financing market generally.
JRI will pay all of its own, the borrowing Property Owner's and, to the extent
required, the lender's costs in connection with extending or refinancing the
loans secured by Eastgate Mall and Fayette Mall as described above. In the event
that the Closing with respect to either such Property occurs before the closing
of such extension or refinancing, JRI will make arrangements for such extension
or refinancing to be made
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available to CBL. If the interest rate for any such refinancing for either of
Fayette Mall or Eastgate Mall differs from the rate for the financings presently
secured by these Properties, the change will not result in any change to the
Consideration payable in respect of that Property. In addition, if the net
refinancing proceeds from either Property exceeds or is less than the principal
amount of the financing presently secured by that Property, the Consideration
payable in respect of that Property will be adjusted as set forth in clauses
(C), (D) and (E) of Section 1.1(b)(iii), except that if the net reduction in
principal balance after these two refinancings below the combined principal
balance of the loans securing Eastgate Mall and Fayette Mall just before the
refinancings is more than $5 million, the excess above $5 million will be paid
by CBL in the form of a promissory note in the manner described in clause (E) of
Section 1.1(b)(iii).
4.23 Resignation of Officers. At or prior to the Closing with respect to
any Property being contributed by means of an interest transfer, JRI agrees to
cause (i) Richard E. Jacobs to resign as manager from the related Property Owner
if he currently serves as manager of such Property Owner, (ii) Richard E.
Jacobs, each affiliate or family member of Richard E. Jacobs and each Associate
or affiliate of an Associate that is then an officer of the related Property
Owner to resign from such position, and (iii) the related Property Owner, if it
is controlled by the Jacobs Parties, to change the signatories on such Property
Owner's bank accounts to such individuals as may be so designated in writing by
CBL.
4.24 No Solicitation. Each Jacobs Party agrees that it will not, directly
or indirectly, and it will not authorize or direct any of its representatives
to, solicit or negotiate to sell or otherwise dispose of, or deliver non-public
information designed to facilitate a potential bid to acquire, any Property or
any direct or indirect interest in any Property in any transaction except as
contemplated in this Agreement without CBL's prior written consent until such
time, if ever, as this Agreement has been terminated with respect to that
Property. Each Jacobs Party agrees to notify CBL in writing promptly upon
receipt by such Jacobs Party of any offer or proposal to acquire any Property or
any direct or indirect equity interest in any Property (including the terms and
conditions thereof and the identity of the person making the offer or proposal).
4.25 Transition Services Agreement. At the Principal Closing, JRI and CBL
will enter into and deliver a transition services agreement in the form attached
hereto as Exhibit L (the "Transition Services Agreement").
4.26 Financial Statements. JRI agrees that, as soon as CBL has executed and
delivered the engagement letter required by Deloitte & Touche LLP in connection
therewith, JRI, at CBL's expense, will commission and provide CBL with (i) a
combined statement of operations that will include the operations of each
Property Owner for the year ended December 31, 1999, audited by Deloitte &
Touche LLP, (ii) a combined statement of operations that will include the
operations of each Property Owner
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for (x) the years ended December 31, 1995, 1996, 1997 and 1998 and (y) the six
(6) months ended June 30, 1999 and June 30, 2000 (or alternatively, if required,
the nine (9) months ended September 30, 1999 and September 30, 2000) (it being
understood that such six or nine month statements will have been reviewed by
Deloitte & Touche LLP), and (iii) a "management's discussion and analysis"
comparing and explaining specific line items in the foregoing statements. The
foregoing statements and analysis will be delivered in a form and format that
will facilitate their inclusion in the Proxy Statement.
4.27 Post-Closing Cooperation. JRI agrees that, to the extent it has
persons available with such information, it will cooperate with CBL for a
reasonable period after each Closing by, where practical, providing CBL with
information that JRI, its affiliates or their officers, directors or employees
may have with respect to circumstances and the current status of litigation and
insurance claims relating to the Properties included in that Closing to the
extent the litigations or underlying circumstances arose prior to that Closing.
4.28 Environmental Insurance. CBL agrees that, concurrently with the
Principal Closing or earlier, CBL will acquire environmental hazard insurance on
the terms outlined on Schedule 4.28. JRI agrees to contribute $160,000 toward
the cost of such insurance, and CBL agrees to provide JRI with an opportunity to
review the terms of the policies before they are issued and agrees to cooperate
with JRI to ensure that the policies are issued in a form and to such
beneficiaries as are reasonably requested by JRI.
4.29 Insurance Claims. The Jacobs Parties confirm to CBL that it is their
intention, and CBL hereby agrees that a Property Owner, the Interests of which
have been contributed to CBL as contemplated in this Agreement, will continue to
be entitled to make claims in respect of the insurance policies identified on
Schedule 8.2(p) (as renewed as required pursuant to this Agreement) applicable
to itself and its Property following the Closing with respect to such Property
if, and to the extent that, the claims accrued prior to such Closing. Although
the parties fully expect that the Property Owners will be entitled to continue
making the above-referenced insurance claims without any further assistance from
JRI or any other Person, JRI also agrees to cooperate with CBL, and to use
commercially reasonable efforts to assist CBL, to enforce any such Property
Owner's right to make and recover in respect of any such claims.
4.30 Computer Leases. JRI agrees to use commercially reasonable efforts to
cause Ameritech Corp. or SBC Communications Inc. to consent to the assumption by
CBL or its designee of the rights and obligations of The Richard E. Jacobs
Group, Inc. pursuant to such of those leases of on-site computer equipment at
each Property as are requested by CBL, provided, however, that CBL's obligation
to accept the contribution of the Interests in any Property Owner (or the deed
to any Property) will not be conditioned upon JRI's ability to obtain any of the
foregoing consents.
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4.31 Weston Management Options. At the Principal Closing, JRI shall have
caused each of the entities (each, an "Excluded Property Manager") then managing
and or leasing each of the Excluded Properties, if any, other than Kentucky Oaks
Mall, and their related Property Owners to have entered into an option
agreement, in form and substance acceptable to CBL, acting reasonably, granting
Weston Management the option to purchase all of the Excluded Property Manager's
rights and privileges under the leasing and management agreements by which that
Excluded Property Manager is servicing the Excluded Property. Each such option
will only be exercisable at the first Closing in which the related Excluded
Property is contributed to CBL, and the option exercise price with respect to
each such leasing and management agreement will be $1.00 and will be payable at
such first Closing.
ARTICLE V
TAX PROTECTION
5.1 Section 704(c) Method. For the benefit of the direct and indirect
beneficial owners of the SCUs issued at the Principal Closing, any Deferred
Closing or any ICOA Option Closing and their successors and assigns (the
"Protected Parties"), CBL agrees that the Operating Partnership and any entity
in which the Operating Partnership holds a direct or indirect interest, other
than Kentucky Oaks Mall Company, shall, with respect to the Interests
contributed to the Operating Partnership pursuant to this Agreement and the
Properties (the "Contributed Assets"), use the "traditional method" under
Section 704(c) of the Internal Revenue Code of 1986, as amended (the "Code") and
the regulations thereunder with no curative or remedial allocations under
Section 704(c) of the Code other than, to the extent permitted under Treasury
Regulations Section 1.704-3(c), curative allocations of gain recognized on a
disposition of an interest in a Contributed Asset. CBL agrees to cause any
entity that is treated as a partnership for federal income tax purposes to which
any of the Contributed Assets are transferred in a transaction that is wholly or
partially nontaxable (a) to use the traditional method without curative
allocations or remedial allocations, other than the curative allocations of gain
described above, under Section 704(c) of the Code with respect to such
Contributed Asset and (b) to agree, for the benefit of the Protected Parties, to
be bound by the provisions of this Section 5.1 as though such entity were CBL.
5.2 Protection Period. CBL agrees with the Jacobs Parties (for their own
benefit and also for the benefit of each of the other Protected Parties), that
neither the Operating Partnership nor any entity in which the Operating
Partnership holds a direct or indirect interest will, directly or indirectly,
sell, transfer or otherwise dispose of any of the Contributed Assets or any
direct or indirect interest therein (a "Disposition") prior to the twelfth
(12th) anniversary of the Principal Closing Date (the period from the Principal
Closing Date through such anniversary, the "Protection Period"). For the
avoidance of doubt, any transaction or event (other than an action by a
Protected Party, which for these
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purposes will not include the REIT or any entity in which the REIT holds a
direct or indirect interest) which would cause any Protected Party to recognize
or be allocated gain (including gain subject to the recapture provisions of the
Code) for federal income tax purposes with respect to any of the Contributed
Assets or a direct or indirect interest therein will be treated as a Disposition
by the Operating Partnership for purposes of this Section 5.2. Replacement
Assets (as defined below) received in connection with a transaction described in
Section 5.3 hereof and any other assets received as "substituted basis property"
(as such term is used in Section 7701(a)(42) of the Code) with respect to a
Contributed Asset shall be treated as Contributed Assets for purposes of the
provisions of this Article V.
5.3 Certain Permitted Transactions. The restrictions set forth in Section
5.2 hereof shall not apply to a transaction involving a Contributed Asset to the
extent (i) that such transaction qualifies as a like-kind exchange under Section
1031 of the Code in which no income or gain is recognized by or allocated to any
of the Protected Parties as a result of the exchange (including as a result of
Section 1031(f) of the Code or any successor provision) provided that all of the
requirements of Section 1031(f), including the two-year period of Section
1031(f)(1)(c) of the Code or any successor provision are satisfied, (ii)(A) the
transaction is treated for federal income tax purposes as either (x) a transfer
to an entity whose separate existence from the Operating Partnership is
disregarded for federal income tax purposes or (y) a transfer to an entity that
is treated as a partnership for federal income tax purposes, and (B) no gain is
recognized by or allocable to the Operating Partnership or any or the Protected
Parties as a result of the transaction or (iii) such transaction is a
nonrecognition transaction giving rise to no recognition of income or loss for
federal income tax purposes. The property or interests in a transferee received
by the Operating Partnership or any entity in which the Operating Partnership
holds a direct or indirect interest in exchange for the Contributed Asset is
referred to herein as the Replacement Asset.
5.4 Debt Protection Period.
(a) (1) CBL covenants and agrees to and for the benefit of the Jacobs
Parties, each of the Associates, each of the Outside Partners that contributes
any interests to the Operating Partnership as contemplated herein, their
respective permitted successors and assigns and each other Protected Party, that
at all times during the Protection Period (and for so long thereafter as is
reasonably possible) the Operating Partnership will maintain, and will cause
each entity in which the Operating Partnership holds a direct or indirect
interest to maintain, sufficient nonrecourse indebtedness so that the
liabilities of the Operating Partnership that are allocated under Treasury
Regulations Section 1.752-3(a)(1), (2) and (3) to the entities indicated on
Exhibit M (or their successors or assigns), together with allocations of
Operating Partnership liabilities resulting from guaranty opportunities
previously provided pursuant to this Article V, shall be in each case not less
than the amounts specified on Exhibit M. For the avoidance of doubt, the parties
agree
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that the Operating Partnership's obligations under this Article V to provide
sufficient allocations of indebtedness and guaranty opportunities shall continue
through the Protection Period and for so long thereafter as is reasonably
possible.
(2) The parties acknowledge and agree that prior to the delivery by JRI of
final required debt allocations for Exhibit M, the amounts set forth in Exhibit
M shall be an estimate only of the required debt allocations, and during the
period described in the next sentence, the Operating Partnership shall be
responsible for maintaining, and causing the entities in which the Operating
Partnership holds a direct or indirect interest to maintain, sufficient
nonrecourse indebtedness so that the liabilities of the Operating Partnership
that are allocated under Treasury Regulations Section 1.752-3(a)(1), (2) and (3)
and as a result of Qualified Protection Opportunities offered pursuant to this
Article V to the entities indicated on Exhibit M (or their successors or
assigns) shall be, in each case, not less than 110% of the amounts specified in
the estimates specified on Exhibit M. JRI will be required to provide the final
required debt allocations with respect to a Property within (i) ninety (90) days
of the date of the Closing with respect to that Property and (ii) in the case of
a Property that is subject to the multiple stage closing mechanics described in
Section 2.1, ninety (90) days of the date of the final ICOA Option Closing.
(3) The parties further agree that the aggregate final required debt
allocations provided by JRI may not exceed the aggregate estimated required debt
allocations included in Exhibit M by more than 10%.
(b) An event or transaction, including, without limitation, a refinancing,
any debt reduction, a like-kind exchange described in Section 5.3 hereof or an
amortization payment on outstanding indebtedness shall not cause CBL to be in
breach of Section 5.4(a) hereof if the Operating Partnership provides, in
accordance with the requirements described in Section 5.4(c), each of the
applicable entities indicated on Exhibit M (and their successors and assigns)
with a "Qualified Protection Opportunity" to guaranty, indemnify or enter into
other contractual arrangements that have an effect that is similar to a guaranty
for purposes of Section 752 of the Code and the Treasury Regulations thereunder
(with the choice between using a guaranty, indemnity or other contractual
arrangement to be made by the entities indicated on Exhibit M (and their
successors or assigns)) with respect to a sufficient portion of the Operating
Partnership's nonrecourse indebtedness so that, after such event or transaction
and assuming that each such entity provides a guaranty, indemnity or enters into
such other contractual arrangements, pursuant to the guaranty opportunity, the
aggregate amount of the Operating Partnership indebtedness allocated to each of
the applicable entities indicated on Exhibit M (and their successors and
assigns, as appropriate) as a result of the guaranty, indemnity or other
contractual arrangement and as a result of allocations of nonrecourse
liabilities of the Operating Partnership under Treasury Regulations Section
1.752-3(a)(1), (2) and (3) shall be not less than the amounts specified on
Exhibit M. Offers to guaranty the Operating Partnership indebtedness, provide
indemnities or enter into other similar
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contractual arrangements that are not Qualified Protection Opportunities shall
be disregarded in determining whether there has been a breach of the
requirements of Section 5.4(a).
(c) A guaranty opportunity, indemnification opportunity or opportunity to
enter into other similar contractual arrangements (a "Guaranty Opportunity")
will be treated as a "Qualified Protection Opportunity" only if the requirements
set forth in clauses (1), (2) and (3) below are satisfied.
(1) A written notice regarding the Guaranty Opportunity must be provided to
the entities listed on Exhibit M (and their successors and assigns as
appropriate) that would, upon the occurrence of the relevant transaction or
event in the absence of a guaranty, be allocated an amount of the Operating
Partnership liabilities that is less than the amount specified for the relevant
entity on Exhibit M. Such notice must (i) be sent at least sixty (60) days prior
to the occurrence of the relevant transaction or event, (ii) specify the
transaction or event that would cause the amount of the Operating Partnership
indebtedness allocated to the recipient of the notice under Treasury Regulations
Section 1.752-3(a)(1), (2) and (3), and as a result of guaranties provided by
such recipient, to fall below the amount specified on Exhibit M and (iii)
specify, with respect to each entity or its successor, the amount by which such
entity's allocation of the Operating Partnership nonrecourse indebtedness under
Treasury Regulations Section 1.752-3(a)(1), (2) and (3) and Operating
Partnership indebtedness with respect to which such entity has previously
provided a guaranty would be less than the amount specified on Exhibit M
following the event or transaction. The notice must include all transactions or
events which are expected to occur within one hundred eighty (180) days of the
date on which the notice is sent which would have the consequences described in
the first sentence of this Section 5.4(c)(l). Each party provided a Guaranty
Opportunity shall use commercially reasonable efforts to inform CBL within fifty
(50) days after receipt of written notice thereof whether it is willing to enter
into the guaranty; provided, that, failure to so advise CBL within such fifty
(50) day period will not be deemed to be a refusal to enter into such guaranty
so long as the party delivers its signed guaranty at least 5 days before the
closing of the related financing or the occurrence of such other event as gave
rise to the Guaranty Opportunity.
(2) The Guaranty Opportunity must be with respect to indebtedness of the
Operating Partnership that is treated as a "nonrecourse liability" for purposes
of Section 752 of the Code and the Treasury Regulations thereunder. The guaranty
must be a "bottom-tier" guaranty or, at the option of the entity being provided
the Guaranty Opportunity, an indemnity agreement, in substantially the form
attached as Exhibit N or Exhibit O, respectively. If an indemnity agreement is
used, the amount of the indemnity obligation will be adjusted to reflect the
entity's ownership interest in the Operating Partnership and any pari passu
indemnity obligations entered into pursuant to this Article V. If an entity
being provided with a Guaranty Opportunity chooses to enter
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into an indemnity agreement in the form attached as Exhibit O (as opposed to a
guaranty) with respect to such opportunity, then, provided that the requirements
of Section 5.4(d) are satisfied with respect to the indemnified indebtedness,
such entity shall bear the risk that such indemnity agreement is not effective
to cause an allocation for federal income tax purposes of Operating Partnership
indebtedness to such entity in an amount equal to the indemnified amount. If the
guarantied indebtedness is secured by any property or other asset, the guaranty
must be a guaranty of the most senior indebtedness secured by that property or
asset and the property securing the indebtedness with respect to which the
opportunity is offered must have a fair market value, at the time that the
Guaranty Opportunity is offered, at least equal to (i) 333% of the aggregate
amount of the guaranty and (ii) 133% of the aggregate amount of all indebtedness
secured by such property. In addition, there can be no guaranties that are prior
to the guaranty.
(3) A Guaranty Opportunity will not be a Qualified Protection Opportunity
to the extent that the amount of the Guaranty Opportunity together with all
other guaranty opportunities in the aggregate provided pursuant to the
provisions of this Article V, exceeds 50% of the aggregate final required debt
allocations provided by JRI pursuant to Section 5.4(a) hereof. Only the
aggregate final required debt allocations for the Properties with respect to
which Closings occur are to be taken into account for purposes of the preceding
sentence. A Guaranty Opportunity will not be a Qualified Protection Opportunity
unless CBL has given the proposed guarantors at least sixty (60) days' advance
written notice of the closing of the transaction or occurrence of the event to
which such Guaranty Opportunity relates.
(4) A Guaranty Opportunity will not be a Qualified Protection Opportunity
to the extent that the opportunity would not have been required to be provided
pursuant to this Article V had the Operating Partnership allocated its "excess
nonrecourse liabilities" under Treasury Regulations Section 1.752-3(a)(3), or
any successor provision, pursuant to a method that allocates, in the aggregate,
to the entities indicated on Exhibit M (or their successors or assigns) an
amount of such "excess nonrecourse liabilities" that is equal to the aggregate
amount of such excess nonrecourse liabilities those entities would have been
allocated had the Operating Partnership allocated its "excess nonrecourse
liabilities" pro rata among the holders of SCUs and Common Units (treating
holders of SCUs as holding the number of Common Units into which their SCUs can
be converted or redeemed). A Guaranty Opportunity will not be a Qualified
Protection Opportunity unless the Operating Partnership, in the written notice
provided pursuant to Section 5.4(c)(3) hereof, represents, for the benefit of
the Protected Parties, that the amount of the Guaranty Opportunity has been
determined by taking into account allocations of the Operating Partnership's
"excess nonrecourse liabilities" pursuant to a method that satisfies the
requirements for a Qualified Protection Opportunity described in the immediately
preceding sentence.
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(d) The Operating Partnership shall be responsible for ensuring that only
entities providing guaranties (or entering into other contractual arrangements,
as described above) pursuant to this Section 5.4 bear the "risk of loss" (as
such term is used for purposes of the regulations under Section 752 of the Code)
with respect to the guarantied portion of the indebtedness and, in the case of
other contractual arrangements, the indebtedness subject to such other
arrangements; provided, however, that the Operating Partnership shall be
entitled to assume that the entity (the "Indemnitor") providing the guaranty or
indemnity or entering into the contractual arrangements and the affiliates of
the Indemnitor (not including, for this purpose, the REIT, any entity in which
the REIT holds a direct or indirect interest or any shareholder of the REIT or
partner in the Operating Partnership that is not otherwise affiliated with the
Indemnitor) have not entered into any arrangement that would reduce or eliminate
the risk of loss (as determined under Treasury Regulations Section 1.752-2) that
such entity would have absent such arrangement.
(e) The Operating Partnership, to the extent reasonably possible, will
provide any of the entities specified on Exhibit M (or their successors and
assigns) that so requests with the opportunity to enter at the end of the
Protection Period into indemnity agreements in the form attached as Exhibit O.
The entities specified on Exhibit M (and their successors and assigns) will not
be obligated to enter into such an agreement and, if they choose to enter into
such an agreement, may set the amount of the indemnification at any amount not
in excess of the amount specified for such entity (or its predecessor) on
Exhibit M.
5.5 Indemnity. (a) Sections 5.1, 5.2 and 5.4 hereof shall not apply to any
transaction or event if (x) in the case of the use of any allocation method
other than permitted by Section 5.1 hereof, concurrently with the consummation
of such transaction or the occurrence of such event, the Operating Partnership
pays to each of the Protected Parties an amount equal to the aggregate federal,
state and local income taxes payable by such Protected Party as a result of, or
in connection with, the use of such allocation method (including, for the
avoidance of doubt, all taxes imposed in respect of items allocated to Protected
Parties as a result of curative allocations not permitted by Section 5.1,
allocations of remedial items or similar allocations by the Operating
Partnership or an entity in which the Operating Partnership owns a direct or
indirect interest) plus an amount equal to the aggregate federal, state and
local income taxes payable by the Protected Parties as a result of the receipt
of the payments required by this Section 5.5 (including for this purpose all
taxes on payments hereunder intended to compensate or indemnify the recipient
hereof for tax liability); (y) in the case of a transaction or event that would
otherwise have been prohibited by Section 5.2 hereof, concurrently with the
consummation of such transaction or the occurrence of such event, the Operating
Partnership pays to each of the Protected Parties an amount equal to the lesser
of (i) the aggregate federal, state and local income taxes payable by such
Protected Party as a result of, or in connection with, such transaction or
event, and (ii) the aggregate
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federal, state and local income taxes that would have been payable by such
Protected Party if the Contributed Assets that are the direct or indirect
subject of the disposition had been sold on the Closing Date with respect to
such Contributed Assets for their fair market value determined in a manner
consistent with the final allocations of Consideration made pursuant to Section
2.1 hereof; plus, in the case of both (i) and (ii), an amount equal to the
aggregate federal, state and local income taxes payable by the Protected Party
as a result of the receipt of the payments required by this Section 5.5
(including for this purpose all taxes on payments hereunder intended to
compensate or indemnify the recipient thereof for tax liability) and (z) in the
case of any transaction or event that would otherwise have been prohibited by
Section 5.4 hereof or constitutes a breach of Section 5.11 hereof, concurrently
with the consummation of such transaction or the occurrence of such event, the
Operating Partnership pays to each of the Protected Parties an amount equal to
the aggregate federal, state and local taxes payable by such Protected Party as
a result of such transaction or event plus an amount equal to the aggregate
federal, state and local income taxes payable by the Protected Party as a result
of the receipt of the payments required by this Section 5.5 (including for this
purpose all taxes on payments hereunder intended to compensate or indemnify the
recipient thereof for tax liability). For purposes of the preceding sentence,
(a) all income arising from the transaction or event that is treated as ordinary
income under the applicable provisions of the Code and all payments provided for
in this Section 5.5 shall be treated as subject to federal, state and local
income tax at the effective tax rate imposed on ordinary income of individuals
residing in Cleveland, Ohio, determined using the maximum federal, Ohio and
Cleveland rates on ordinary income then in effect, (b) all other income arising
from the transaction or event shall be treated as subject to federal, state and
local income tax at the effective tax rate imposed on long-term capital gains of
individuals residing in Cleveland, Ohio, determined using the maximum federal,
Ohio and Cleveland rates on long-term capital gains then in effect, (c) any
amounts payable pursuant to the indemnity provided for in this Section will be
determined assuming that the transaction or event giving rise to CBL's
indemnification obligation was the only transaction or event reported on the
Protected Party's tax return (and, for clarity, without giving effect to any
loss carry forwards or other deductions available to the Protected Party) and
(d) any amounts payable under the indemnity with respect to state and local
income taxes shall be assumed to be deductible for federal income tax purposes.
(b) Notwithstanding the foregoing, the Operating Partnership shall not be
required to indemnify any Protected Party pursuant to Section 5.5(a) hereof, and
shall not be liable for damages for a breach of Section 5.2 hereof, as a result
of the occurrence of any transaction or event prohibited by Section 5.2 hereof
with respect to a Partial Property at any time if, based on the terms of the
organizational documents for the relevant Property Owner in force on the date
hereof or, if more favorable to CBL (i.e., giving more control to CBL), the
organizational documents in force at that time, the action is one that cannot
ultimately be prevented directly or indirectly by the Operating Partnership (or
any successor to the Operating Partnership's indirect interest in a Partial
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Property); provided, however, that the Operating Partnership (and any such
successor) shall have used commercially reasonable efforts to prevent the
occurrence of such transaction or event by exercising all of its rights under
the organizational documents for such Partial Property Owner to block such
transaction or event; it being understood that, in the event that the
organizational documents for such Property Owner provide for a buy-sell right,
right of first refusal or right of first offer, the Operating Partnership (and
any such successor) shall not be required pursuant to this Section 5.5(b) to
initiate any buy-sell proceedings or purchase the interests in question, but, in
the event that it does not want to purchase such interests, the Operating
Partnership (and any such successor) shall be required to offer the opportunity
to purchase such interests to JRI, either directly or through back-to-back
transactions, in order for the Operating Partnership's failure to purchase the
interests in question to not be treated as a failure to use commercially
reasonable efforts to prevent the occurrence of the relevant transaction or
event.
(c) Notwithstanding the foregoing, the Operating Partnership shall not be
required to indemnify any Protected Party under Section 5.5(a) hereof, and shall
not be liable for a breach of Section 5.2 hereof, as a result of a casualty to
or condemnation of a Contributed Asset where (i) the lender with respect to
indebtedness secured by that Contributed Asset does not allow the proceeds from
the casualty or condemnation to be used for repair of or improvements to the
Contributed Asset or acquisition of a replacement asset and (ii) the Operating
Partnership uses commercially reasonable efforts to qualify to the greatest
extent consistent with such efforts for nonrecognition of gain for federal
income tax purposes with respect to the casualty or condemnation.
(d) (i) If a Protected Party (the "Individual Protected Party") dies, then
any subsequent owner of the direct or indirect interests in the Operating
Partnership owned (or treated as owned for federal income tax purposes) by the
Individual Protected Party (the "Affected Interests") and each Protected Party
through which the Individual Protected Party owned (or was treated as owning for
federal income tax purposes) an indirect interest in the Operating Partnership
at death will not, with respect to the Affected Interests, be eligible with
respect to events occurring subsequent to such death to receive an indemnity
payment under Section 5.5(a) hereof, or to recover damages for a breach of
Section 5.2 or 5.4 hereof, unless (x) the Operating Partnership or an entity
treated as a partnership for federal income tax purposes in which the Operating
Partnership holds a direct or indirect interest was not able (whether as a
result of a failure to make a Section 754 election or otherwise) as a result of
the death to adjust to fair market value under Section 754 of the Code the
federal income tax basis of the portion of the Operating Partnership's or such
entity's assets corresponding to the Affected Interests and (y) the Operating
Partnership's or such other entity's failure to be able to make such adjustment
was not solely the result of either (I) the failure of a Protected Party through
which the Individual Protected Party owned an indirect interest in the Operating
Partnership at death to make a Section 754 election that such Protected Party
was eligible to make or (II) a Protected Party through which the Individual
Protected Party owned an indirect interest in
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the Operating Partnership being ineligible to make a Section 754 election where
(i) the indirect interest was not owned through such Protected Party immediately
following the transactions provided for in this Agreement and (ii) such
Protected Party was not eligible to make a Section 754 election at the time that
the indirect interest in the Operating Partnership came to be owned through such
Protected Party.
(ii) If a Protected Party (the "Transferring Protected Party") transfers
(the "Transfer") a direct or indirect interest in the Operating Partnership (the
"Transferred Interest") in a transaction that is fully taxable for federal
income tax purposes, then any subsequent owner of the Transferred Interests and
each Protected Party through which the Transferring Protected Party owned (or
was treated as owning for federal income tax purposes) the Transferred Interest
will not, with respect to the Transferred Interests, be eligible with respect to
events occurring subsequent to the Transfer to receive an indemnity payment
under Section 5.5(a) hereof, or to recover damages for a breach of Section 5.2
or 5.4 hereof, unless (x) the Operating Partnership or an entity treated as a
partnership for federal income tax purposes in which the Operating Partnership
holds a direct or indirect interest was not able (whether as a result of a
failure to make a Section 754 election or otherwise) to adjust to fair market
value under Section 754 of the Code the federal income tax basis of the portion
of the Operating Partnership's or such other entity's assets corresponding to
the Transferred Interests as a result of the Transfer and (y) the Operating
Partnership's or such other entity's failure to be able to make such adjustment
was not solely the result of either (I) the failure of a Protected Party through
which the Transferring Protected Party owned an indirect interest in the
Operating Partnership to make a Section 754 election that such Protected Party
was eligible to make or (II) the fact that a Protected Party through which the
Transferring Protected Party owned an indirect interest in the Operating
Partnership was not eligible to make a Section 754 election where (i) the
indirect interest was not owned through such Protected Party immediately
following the transactions provided for in this Agreement and (ii) such
Protected Party was not eligible to make Section 754 election at the time that
the indirect interest in the Operating Partnership came to be owned through such
Protected Party.
(iii) An indemnity payment will not be required to be made pursuant to this
Section 5.5 to the extent that, given Sections 5.5(d)(i) and (ii) hereof, the
requirement that such payment be made would be inconsistent with 53% of the SCUs
having been held, immediately following the transactions provided for in this
Agreement pursuant to which such SCUs were issued (and assuming that all of the
contributions and transfers provided for in this Agreement occur), under
arrangements such that the Protected Parties holding such SCUs, as of such
date(s) and under the law in effect on the date hereof, would be eligible to
make a Section 754 election.
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5.6 Damages. CBL acknowledges and agrees that damages for a breach of
Section 5.1, 5.2, 5.4 or 5.11 will be determined in accordance with the
provisions of Section 5.5 hereof.
5.7 Towne Mall. Notwithstanding any provision of Article V to the contrary,
the provisions of Sections 5.2 and 5.4 hereof shall not apply with respect to
any transfer or other disposition to the lender or its designee following, and
in connection with, a willful default by the Operating Partnership in the
payment of interest or principal when due on the indebtedness secured by Towne
Mall as of the Closing Date with respect to such Property, and the Operating
Partnership will not be required to indemnify the Protected Parties pursuant to
Section 5.5(a) hereof with respect to such transfer or other disposition, so
long as the Operating Partnership has, at least sixty (60) and not more than
ninety (90) days prior to such transfer or other disposition, provided JRI (or
its designee, it being understood that references in this Section to JRI shall
be deemed to include any such designee) a meaningful and unconditional
opportunity outlined in a specific written notice to JRI to purchase Towne Mall
for nominal consideration and on the other terms set forth below. In order to
qualify for the foregoing exception from its general indemnity obligation, (a)
the Operating Partnership shall have given JRI at least thirty (30) days'
advance notice prior to any willful default on the indebtedness, adequate access
to information about Towne Mall and the Property's status vis-a-vis the lender,
and an opportunity to participate in any negotiations or other substantive
discussions between the Operating Partnership and its affiliates and their
advisers, on the one hand, and the lender, on the other hand, about the
indebtedness and/or the default thereon, (b) the Operating Partnership shall
have used commercially reasonable efforts to obtain all lender and other third
party consents necessary to facilitate the transfer of Towne Mall to JRI, and
(c) upon the transfer of Towne Mall to JRI, the Operating Partnership and the
then-owner of the Property, shall have made to JRI (or, if JRI declines to
accept the proposed transfer, shall have been willing and able to have made)
each of the representations and warranties set forth on Schedule 5.7 hereto and
given indemnification comparable in scope and duration to the indemnity given by
JRI in Sections 9.2 and 9.4, provided, however, that claims based thereon will
be subject to limitations comparable in duration and amount to those provided in
Sections 9.3 and 9.4 as applicable. Notwithstanding anything herein to the
contrary, once JRI receives an unconditional written offer to purchase Towne
Mall it shall, within forty-five (45) days of its receipt of the offer, (a)
accept the offer in writing in which event JRI agrees to pay and indemnify CBL
for (i) the net carrying costs of the Property from such date until closing or,
if earlier, termination by JRI of the proposed purchase and (ii) all transfer
costs (other than CBL's attorneys' fees) or (b) decline the offer. In the event
that JRI does not accept the offer within the forty-five (45) day period, JRI
shall be deemed to have declined the offer. If JRI declines or is deemed to have
declined the foregoing offer within the forty-five (45) day period, the
provisions of Section 5.2 and 5.4 hereof will not apply with respect to any
transfer or other disposition to the lender or its designee following, and in
connection with, the willful default referred to in the first sentence of this
Section 5.7 that gave rise to the offer, and the Operating
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Partnership will not be required to indemnify the Protected Parties pursuant to
Section 5.5(a) with respect to such transfer or other disposition (it being
understood, however, that if CBL does not so dispose of Towne Mall as a result
of the default, but instead is able to refinance the defaulted indebtedness or
otherwise negotiate a settlement with the lender that does not involve a
transfer of Towne Mall, the Protected Parties will continue to be fully entitled
to the benefits of this Article V with respect to Towne Mall). If JRI accepts
the foregoing offer, at closing of the transfer back to JRI, JRI or its
designated transferee shall assume and indemnify CBL against any and all
liabilities first accruing from and after the date of such transfer pursuant to
any Continuing Loan Guaranties that CBL assumed at the Closing for Towne Mall.
5.8 Midland Mall. In the event that JRI is not able to cause Frankel
Midland Limited Partnership to contribute its 40% interest in the Property Owner
of Midland Mall to the Operating Partnership, the parties agree that the
provisions of Section 5.7 applicable to Towne Mall also will be applicable with
respect to Midland Mall, mutatis mutandis, except that the transfer to a JRI
designee, if any, shall be of the interests in the entity that then owns Midland
Mall that correspond to the Interests that were contributed to CBL in respect of
Midland Mall as contemplated herein, and not of the fee interests in Midland
Mall.
5.9 Initial Capital Accounts. CBL agrees that the initial capital accounts
of the Contributors in the Operating Partnership shall be determined based on a
valuation of $32.25 per SCU.
5.10 Third Party Beneficiaries. CBL acknowledges, agrees and confirms that
each of the Protected Parties is an intended third party beneficiary of the
provisions of this Article V and that the provisions of this Article V are
enforceable by any of them.
5.11 Preservation of Tax Status. CBL agrees with the Jacobs Parties (for
their own benefit and also for the benefit of each of the other Protected
Parties) that (i) at no time during the Protection Period will the REIT or the
Operating Partnership take any action that would cause the Operating Partnership
to be treated as a corporation for federal income tax purposes and (ii) during
the Protection Period the REIT and the Operating Partnership will use
commercially reasonable efforts to maintain the REIT's REIT status, provided
that the REIT may voluntarily terminate its REIT status if such action is taken
with the affirmative consent of 75% or more of the members of the REIT's Board
of Directors.
5.12 Income Tax Reporting. (a)Except as otherwise provided in the next
sentence, from and after the Principal Closing, and continuing for so long as
JRI or any of its affiliates owns any SCUs, CBL will cause its accountants to
prepare and submit to JRI for review as soon as reasonably possible, but, in the
case of items described in clause (i) below, in no event later than July 1 of
each year, and, in the case of items
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described in clause (ii) below, in no event later than August 1 of each year:
(i) draft K-1s (and corresponding state tax documents) for the Operating
Partnership and state tax apportionment information for the Operating
Partnership and (ii) federal and state tax returns for the Operating Partnership
and each Partial Property Owner as to which an option remained outstanding under
an Interest Contribution and Option Agreement at any point during the preceding
tax year. In the case of Partial Property Owners described in the preceding
sentence where the Partial Property Owner's partnership agreement requires that
partners receive a copy of the Partial Property Owner's tax return or K-1 on a
date (the "Delivery Date") prior to September 1, references to August 1 in the
preceding sentence shall be deemed to be references to the date that is thirty
(30) days prior to the Delivery Date. If JRI determines that any modifications
to the tax returns of the Operating Partnership or any Partial Property
Partnership should be considered, JRI will, within fifteen (15) Business Days
following receipt of such tax returns from CBL or the Operating Partnership's
accountants, indicate to the accountants or to the Operating Partnership to
advise the Partial Property Partnership's accountants of the suggested revisions
to the tax returns, which returns will be resubmitted to JRI for its further
review (but not approval). JRI will complete its review of the resubmitted
returns within ten (10) days after receipt thereof from the accountants or CBL.
CBL will consult in good faith with JRI regarding any proposed modifications to
the tax returns of the Operating Partnership or any Partial Property
Partnership.
(b) The Operating Partnership agrees to (i) consult in good faith with JRI
regarding the filing of a Code Section 6227(b) administrative adjustment request
with respect to the Operating Partnership or any property directly or indirectly
owned by it before filing such request, (ii) consult in good faith with JRI
regarding the filing of a petition for judicial review of an administrative
adjustment request under Section 6228 of the Code, or a petition for judicial
review of a final partnership administrative judgment under Section 6226 of the
Code relating to the Operating Partnership before filing such petition, (iii)
give JRI prompt notice of the receipt of any written notice that the Internal
Revenue Service or any state or local taxing authority intends to examine income
tax returns of the Operating Partnership or any subsidiary for any year, receipt
of written notice of the beginning of an administrative proceeding at the
Operating Partnership level relating to the Operating Partnership under Section
6223 of the Code, receipt of written notice of the final partnership
administrative adjustment relating to the Operating Partnership pursuant to
Section 6223 of the Code, and receipt of any request from the Internal Revenue
Service for waiver of any applicable statute of limitations with respect to the
filing of any tax return by the Operating Partnership or any subsidiary, and
(iv) notify JRI if the Operating Partnership does not intend to file for
judicial review with respect to the Operating Partnership. In addition, the
Operating Partnership agrees to afford JRI the same rights with respect to any
Property Partnership tax matters as are afforded to JRI under this paragraph
with respect to the Operating Partnership.
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(c) CBL agrees to provide the entities described on Exhibit M hereto (and
their successors or assigns) with such information as is reasonably available to
CBL regarding allocations of the Operating Partnership's indebtedness under
Section 752 of the Code and the Treasury Regulations thereunder, as such
entities may reasonably request.
(d) JRI agrees that, upon request by CBL and upon being furnished by CBL
with a description of a proposed transaction that would require a payment under
Section 5.5 hereof, JRI will work in good faith with CBL to prepare an estimate
of the amounts that would be payable under Section 5.5 hereof in connection with
such transaction based on such information as is then reasonably available to
JRI. The parties acknowledge and agree that JRI shall have no liability with
respect to any such estimate and that no payment required under Section 5.5
hereof will be limited by any such estimate.
ARTICLE VI
CLOSING
6.1 Closing. (a) Subject to the terms and conditions of this Agreement, the
Principal Closing shall take place at the office of Sullivan & Cromwell, 125
Broad Street, New York, New York 10004, at and as of 9:00 A.M., E.S.T. on the
earlier of the tenth (10th) Business Day following the date on which the REIT's
stockholders vote to approve the issuance of the SCU's as contemplated in this
Agreement and January 31, 2001, or at such other place, time and date as may
hereafter be mutually agreed between JRI and CBL (the "Initial Scheduled
Principal Closing Date"). As used in this Agreement, the term "Principal
Closing" means the transfer and assignment of the Interests with respect to,
and/or the contribution to the Operating Partnership of, each of the Core
Properties and at least nine (9) other Properties, the transfer and assignment
of the partnership interests in Weston Management to the Operating Partnership
and the performance by each party hereto of the obligations on its part then to
be performed under and in accordance with this Agreement, and the term
"Principal Closing Date" means the date on which the Principal Closing is to
occur as provided in the preceding sentences, as the same may be extended by JRI
or CBL pursuant to this Agreement. JRI and CBL will conduct a "pre-closing"
commencing on the third (3rd) Business Day preceding the Principal Closing Date,
and will use commercially reasonable efforts to finalize the closing statement
for the Principal Closing at least forty-eight (48) hours prior to the Principal
Closing Date. As used in this Agreement, the term "Closing" means the transfer
and assignment of the Interests with respect to and/or the contribution of, one
or more Properties to the Operating Partnership and the performance by each
party of the obligations on its part then to be performed under and in
accordance with this Agreement (including, in the case of a transfer of
Interests with respect to a Property that is to occur in stages as set forth in
Section 2.1(c) hereof, the first stage of such transfer and not any ICOA Option
Closing), and the term "Closing Date" means the date on which
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the Closing with respect to any Property or Properties is to occur as the same
may be extended by JRI or CBL pursuant to this Agreement.
(b) JRI Extension Rights. JRI shall have the right, exercisable in one or
more increments by delivering written notice to CBL as soon as practical, but in
no event less than five (5) Business Days prior to the Initial Scheduled
Principal Closing Date (or, in the event of a prior extension by virtue of this
Section, five (5) Business Days prior to the then applicable Subsequent
Scheduled Principal Closing Date), to extend or adjourn the Principal Closing
Date to a date (the "Subsequent Scheduled Principal Closing Date") not later
than April 30, 2001 if JRI determines in its good faith judgment that such
adjournment is reasonably necessary to enable the Jacobs Parties to satisfy the
conditions to Closing set forth in Section 7.1, and the Interest Contribution
Agreements and Deed Contribution Agreements, if applicable, with respect to each
of the Core Properties and at least nine (9) other Properties (and CBL has not
waived the failed conditions and proceeded to Closing with the Core Properties
and at least nine (9) other Properties), such right being in addition to any
other adjournment right provided for in this Agreement. On or before the
twentieth (20th) day preceding the Initial Scheduled Principal Closing Date, JRI
agrees to provide CBL with a good faith assessment of whether the Jacobs Parties
will be unable to satisfy any of the conditions to Closing set forth in Section
7.1 and the Interest Contribution Agreement or Deed Contribution Agreement with
respect to any Property, and the circumstances surrounding such potential
inability; provided, however, that JRI's estimate shall not in any way impair
JRI's right to close on the Initial Scheduled Principal Closing Date or to
extend or adjourn the Principal Closing beyond the Initial Scheduled Principal
Closing Date. If JRI extends the Principal Closing Date as permitted above, JRI
will advise CBL on a regular basis of its progress in satisfying the yet unmet
conditions to the Principal Closing. In addition, if thereafter JRI determines
in good faith that it can satisfy the conditions to the Principal Closing as set
forth in Section 7.1 or CBL has waived all unmet conditions and is willing to
proceed, evidenced by written notice to JRI, with respect to each of the Core
Properties and at least nine (9) other Properties sooner than the Subsequent
Scheduled Principal Closing Date, JRI agrees to notify CBL of that determination
in writing and to cooperate with CBL to schedule the Principal Closing on the
earlier of the Subsequent Scheduled Principal Closing Date and the date that is
thirty (30) days following the day on which JRI first determined that it could
satisfy the conditions precedent to the Principal Closing (or, if such thirtieth
(30th) day is not a Business Day, the next succeeding Business Day thereafter).
The foregoing will not be interpreted as imposing any obligation on JRI to
schedule the Principal Closing Date or to participate in the Principal Closing
if for any reason CBL is unwilling to accept the contribution of each of the
Core Properties and at least nine (9) other Properties. The parties agree that
time is of the essence with respect to the dates and time periods referred to in
this paragraph (b) and in paragraph (c) below.
(c) CBL Extension Rights. (i) If after expiration of the Initial Period (as
hereinafter defined) CBL delivers written notice to JRI that it is ready
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and able to mail the Proxy Statement and related materials to the REIT's
stockholders as contemplated in Section 4.15 (such notice, the "Ready to Mail
Notice"), and at that time JRI has not yet obtained the lender consent from TIAA
as required by Section 4.14(a), then at the time JRI first notifies CBL in
writing that it has obtained the requisite consent from TIAA, CBL will have an
option, exercisable by delivering written notice to JRI within ten (10) Business
Days of receipt of the foregoing notice from JRI, to extend the Principal
Closing Date one day for each day beyond the date on which JRI received the
Ready to Mail Notice; provided, that, if CBL does not exercise the foregoing
option within that time period it will expire.
(ii) If, despite commercially reasonable efforts, CBL is unable to hold the
REIT Stockholders' Meeting on or before January 20, 2001 because it was unable
to obtain approval from the SEC to mail the Proxy Statement and related
materials to the REIT's stockholders as contemplated in Section 4.15 on or
before December 1, 2000, then CBL will have the right, exercisable by delivering
notice to JRI as soon as practical, but in no event later than January 10, 2001,
to extend the Principal Closing Date to a date not later than the earlier of (x)
the sixtieth (60th) day after the date on which CBL actually mails the Proxy
Statement to the REIT's stockholders (or, if such day is not a Business Day, the
next succeeding Business Day) and (y) April 30, 2001.
(iii) In addition, CBL shall have the right, exercisable by delivering
written notice to JRI as soon as practical but in no event less than two (2)
Business Days prior to the Initial Scheduled Principal Closing Date or any
Subsequent Scheduled Principal Closing Date, if applicable, to extend the
applicable Closing Date to a date not later than thirty (30) days after the
Initial Scheduled Principal Closing Date or Subsequent Scheduled Principal
Closing Date, as applicable, if CBL determines in its good faith judgment that
such adjournment is reasonably necessary to enable CBL to satisfy the conditions
to Closing set forth in Section 7.2 and the Interest Contribution Agreements and
Deed Contribution Agreements, if applicable (and JRI has not waived any of the
conditions in issue), such right being in addition to any other adjournment
right provided for in this Agreement.
(d) Staggered Contributions. JRI and CBL agree that if, with respect to any
Closing, JRI so requests, the contributions of Interests and/or Properties to be
included in that Closing or any portion of such contributions specified by JRI
will be staggered in time by fifteen (15) minutes. In the event that JRI
requests staggered contributions for any Closing, the Closing Deliveries
relating to that Closing will be delivered into escrow with the Title Company,
or another escrow agent acceptable to both CBL and JRI, and will only be
released from the escrow on terms consistent with this Agreement and the
Interest Contribution Agreements and Deed Contribution Agreements,
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if applicable, and as otherwise agreed between JRI and CBL, each acting
reasonably. At the relevant Closing, the escrow agent will deliver the Interests
relating to each Property being included in that Closing to the Operating
Partnership and will deliver the Consideration relating to such Interests in
fifteen (15) minute increments, and will date and time stamp the instruments of
transfer to verify the timing and sequence of the deliveries.
6.2 Closing Deliveries by JRI. At the Principal Closing and at each
Deferred Closing, the Jacobs Parties will execute, acknowledge where appropriate
and deliver, or cause to be delivered, each of the following instruments and
documents:
(a) Interest Contribution Agreements. (i) For each Property with respect to
which Interests are being contributed to the Operating Partnership, if any, an
Interest Contribution Agreement in substantially the form attached as Exhibit
C-1A or Exhibit C-1B and providing for the contribution of each of the Interests
in the related Property Owner, (ii) for each Property the fee and/or leasehold
interests of which are being contributed, if any, a Deed Contribution Agreement
in substantially the form attached as Exhibit C-2 hereto and providing for the
contribution of the interests in that Property, (iii) in the case of the
Principal Closing, for Weston Management, a Contribution Agreement (Weston
Management) in substantially the form attached as Exhibit C-3 and providing for
the contribution of all of the outstanding interests in Weston Management, and,
in each of the foregoing instances, all certificates, agreements and other
documents required to be delivered thereunder, each duly executed by the
Contributors identified therein.
(b) First Amendment to OP Partnership Agreement. In the case of the
Principal Closing, the First Amendment to the OP Partnership Agreement in the
form attached hereto as Exhibit G, or, in the case of a Deferred Closing, an
amendment to the OP Partnership Agreement in form and substance to be agreed
between CBL and JRI, acting reasonably.
(c) Registration Rights Agreement. In the case of the Principal Closing,
the Registration Rights Agreement, in the form attached hereto as Exhibit H-1,
duly executed by each of the Persons to be a recipient of any SCUs on the
Principal Closing Date (or, if authorized, by JRI on its behalf), or, in the
case of a Deferred Closing, an addendum to the Registration Rights Agreement in
the form attached hereto as Exhibit H-2, duly executed by each of the Persons to
be a recipient of any SCUs on such Closing Date (or, if authorized, by JRI on
its behalf).
(d) Voting Agreement for Option Interests. In the case of an ICOA Closing
with respect to one or more Partial Properties subject to Section
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2.1(c), an Option Interest Voting Agreement in substantially the form attached
hereto as Exhibit E for each such Partial Property, duly executed by each
Contributor identified in the Interest Contribution and Option Agreement
relating thereto.
(e) Assignment of Management Agreements. In the case of any Deferred
Closing, an assignment of the management and leasing agreements in form and
substance reasonably acceptable to CBL with respect to the Properties that are
the subject of such Deferred Closing to the entity designated by Weston
Management, duly executed by the property manager(s) of such Properties on such
Closing Date.
(f) Certificates.
(i) A certificate, issued by the Secretary of State of the State of
Delaware and dated not earlier than thirty (30) Business Days prior to such
Closing Date, certifying as to the good standing of JRI under the laws of
Delaware.
(ii) A duly executed certificate of JG Realty Investors Corp., a
general partner of JRI ("JG Realty"), dated as of such Closing Date,
certifying:
(A) that the board of directors of JG Realty, in its capacity as
a general partner of JRI, has adopted resolutions approving the
transactions contemplated hereunder and authorizing JG Realty to
execute and deliver, for and on behalf of JRI this Agreement, the
Interest Contribution Agreements and each other agreement and other
instrument necessary for the consummation of the transactions
contemplated by this Agreement and the Interest Contribution
Agreements and Deed Contribution Agreements, if applicable, (which
resolutions shall be attached to or incorporated in such certificate),
that such action by such board of directors and JG Realty constitutes
the only authorization required for such execution, delivery and
consummation by JG Realty, and it has not been revoked or otherwise
withdrawn and remains in full force and effect.
(B) as to a true and complete copy of JRI's partnership agreement
and certificate of limited partnership, that the same have not been
amended (except as noted
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therein) and that they are in full force and effect as of such Closing
Date, and also certifying as to the incumbency of the officers of JG
Realty executing and delivering this Agreement and the other documents
and instruments provided herein to be executed and delivered by JRI.
(iii) A duly executed certificate of JRI, dated as of such Closing
Date, certifying that each of the representations and warranties of JRI
contained in this Agreement is true and correct in all material respects as
if remade on and as of such Closing Date (with appropriate modifications of
those representations and warranties to reflect actions taken by or on
behalf of JRI in accordance with the provisions of Article IV or
identifying any representation or warranty which is not or no longer is
true and correct and explaining the state of facts giving rise to the
change); provided, however, that to the extent that the representations and
warranties in Section 8.2 relate to Interests, Properties or Property
Owners, for purposes of the certificate referred to above those references
will be deemed to be references only to the Interests, Properties and
Property Owners being included in the Closing at hand, and those
representations and warranties specifically need not be remade at such
Closing with respect to any Interest, Property or Property Owner that is
not being included in such Closing as permitted or required by the terms of
Section 6.4. In no event shall JRI be deemed to be in default hereunder by
reason of any breach of representation or warranty that results from any
exception that is identified in reasonable detail on the certificate
described in this Subsection 6.2(f)(iii) and arose by virtue of actions on
JRI's or the Operating Partnership's part that were taken or not taken in
accordance with the provisions of Article IV or was not caused by any
voluntary and direct action by JRI in violation of JRI's covenants in
Article IV; provided, however, that the occurrence of any such change that
does not result in a JRI default, if sufficiently adverse to the Operating
Partnership, may constitute the non-fulfillment of the condition set forth
in Section 7.1(b) and give rise to a claim by the Operating Partnership
pursuant to Article IX. JRI's liability under such certificate shall be
subject to the limitations and time restraints set forth in Section 8.3 and
in Article IX.
(iv) A duly executed certificate of JRI, dated as of such Closing Date
certifying:
(A) as to a true and complete copy of the organizational
documents (including all documents filed of record in the jurisdiction
of organization, if any, certified by the appropriate authority in
such jurisdiction, if available) of
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each Property Owner that is being included in such Closing, that the
same have not been amended (except as noted therein) and that they are
in full force and effect as of such Closing Date.
(B) in the case of the Principal Closing, as to a true and
complete copy of Weston Management's partnership agreement and
certificate of limited partnership (certified by the appropriate
authority in the jurisdiction of its organization, if available), that
the same have not been amended (except as noted therein) and that they
are in full force and effect as of such Closing.
(g) Estoppels. A completed Estoppel Certificate dated not earlier than
ninety (90) days prior to the applicable Closing from each Ground Lessor, if
any, in respect of each Property being contributed to the Operating Partnership
on such Closing Date and each of the other Estoppel Certificates sent out as
required in Section 4.17 and received back by JRI from the related Anchor,
tenant, party to a reciprocal easement agreement, lender or Outside Partner,
prior to such Closing Date (to the extent not previously delivered to CBL). In
the event that JRI is unable to deliver a Ground Lessor Estoppel Certificate
dated not earlier than thirty (30) days prior to the applicable Closing Date,
JRI also will supplement the certificate being delivered by it at that Closing
pursuant to Section 6.2(f)(iii) to include a representation, made as of such
Closing Date, as to each of the statements made by the Ground Lessor in the
Estoppel Certificate being delivered pursuant to this Section 6.2(g), with such
changes as are necessary to reflect the fact that the certificate is being
delivered on a later date than the date of the Ground Lessor Estoppel
Certificate being delivered therewith.
(h) Opinions. An opinion of counsel to JRI as to the matters identified on
Exhibit P attached hereto.
(i) Lender Consents. The consent of each lender of a Continuing Loan in
respect of each Property being contributed to the Operating Partnership on such
Closing Date, which consents will be in substantially the form of Exhibit Q
hereto or as otherwise acceptable to CBL acting reasonably.
(j) Outside Partner Consents. The consents and amendments to the
organizational documents of the Property Owners outlined on Exhibit R attached
hereto, in respect of each Property being contributed to the Operating
Partnership on such Closing Date, which consents will be in substantially the
form of Exhibit R hereto or as otherwise acceptable to CBL acting reasonably.
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(k) Excluded Outparcels. The approvals, consents and other documentation
outlined on Schedule 1.2(a) hereof for each of the Excluded Outparcels that
relates to any Property being contributed to the Operating Partnership on such
Closing Date.
(l) OP Option Agreement. An OP Option Agreement for each Excluded Outparcel
subject to Section 1.2(b) hereof that is retained by a Jacobs Party or an
affiliate thereof and relates to a Property being contributed to the Operating
Partnership on such Closing Date, duly executed by the owner of such Excluded
Outparcel.
(m) Non-Competition Agreement. The Non-Competition Agreement in the form
attached hereto as Exhibit K, duly executed by Richard E. Jacobs.
(n) Weston Management Releases. A Release in substantially the form
attached as Exhibit U hereto executed by each entity identified on Schedule
8.2(i)(x) and covering each of the properties identified on that schedule as
being managed or previously managed by Weston Management for that entity.
(o) Transition Services Agreement. The Transition Services Agreement in
substantially the form attached hereto as Exhibit L, duly executed by JRI.
(p) Assignment of Interest Rate Cap. If JRI has purchased an interest rate
cap or swap agreement as contemplated in Section 1.1(b)(iii)(A)(2) above with
respect to a New Loan secured by any of the Properties to be included in that
Closing, and the interest rate protection was purchased in the name of any
Person other than the relevant Property Owner (or if the protection was
purchased in the name of the Property Owner, but the Property Owner is
transferring the related Property to CBL pursuant to a Deed Contribution
Agreement), then, for each such interest rate cap or swap, an assignment of
interest rate protection agreement, in form and substance reasonably acceptable
to CBL, by which the owner of that interest rate protection assigns all of its
rights thereunder to CBL or its designee (and, if required by the terms of the
interest rate protection agreement, confirmation that the counterparty thereto
has consented to the transfer).
(q) Assurance Agreement. The Assurance Agreement in the form attached
hereto as Exhibit V, duly executed by Richard E. Jacobs, on his own behalf and
as trustee of each of the Jacobs Trusts.
(r) Cary Note. In the case of the Closing with respect to Cary Towne
Center, (i) the original Cary Note, (ii) an allonge evidencing the assignment
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of such note to CBL or its designee and (iii) a certificate of JG Cary Joint
Venture certifying as to the outstanding principal balance of the Cary Note and
the date through which interest has been paid as of such Closing Date.
(s) Tenant Notes. In the case of the Closing with respect to any Property
whose Property Owner is the holder of one or more promissory notes (each, a
"Tenant Note") made by one or more tenants at such Property in favor of the
Property Owner, (i) the original of each Tenant Note held by such Property
Owner, if available or a copy of such note and a lost note affidavit and (ii)
the addition to the bring-down certificate to be delivered by JRI at that
Closing of an additional paragraph with respect to each such Tenant Note
certifying as of the date thereof, (A) as to the outstanding principal balance
of the Tenant Note as of such Closing Date and the date through which interest
has been paid, (B) that there is no default with respect to the indebtedness
evidenced by the Tenant Note, (C) that it owns the Tenant Note free and clear of
all rights, liens, claims and encumbrances and (D) that there is no undisclosed
agreement or document that modifies the terms or provisions of the indebtedness
evidenced by the Tenant Note (it being understood that such certification will
be subject to the limitations in Section 9.3).
(t) Share Ownership Agreement. In the case of the Principal Closing, the
Share Ownership Agreement, in the form attached hereto as Schedule 4.15(b)-3,
duly executed by the Jacobs Parties.
(u) Other Documents, etc. All other instruments and documents, if any,
required to be executed, acknowledged and/or delivered by JRI to the Operating
Partnership and/or the REIT pursuant to and in accordance with any of the other
provisions of this Agreement or the Interest Contribution Agreements or Deed
Contribution Agreements, if applicable, and such other documents or instruments
as the Operating Partnership or the REIT may reasonably request to effect the
transactions contemplated in this Agreement and the Interest Contribution
Agreements and Deed Contribution Agreements, if applicable.
6.3 Closing Deliveries by the Operating Partnership. At the Principal
Closing and at each Deferred Closing, CBL will execute, acknowledge where
appropriate and deliver, or cause to be delivered, each of the following
instruments, documents and payments:
(a) Consideration. The Consideration or portion thereof allocated to the
Properties being contributed at such Closing as provided for in Section 2.1 of
this Agreement, in the case of the Principal Closing, the portion of the
Consideration allocated to Weston Management and, in the case of the Closing
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with respect to Cary Towne Center, the portion of the Consideration allocated to
the Cary Note, each as set forth on the closing statement for such Closing to be
prepared by JRI and delivered to CBL at least forty-eight (48) hours prior to
such Closing.
(b) Interest Contribution Agreements. Counterparts of the Interest
Contribution Agreements and Deed Contribution Agreements, if applicable, and any
other instrument, agreement and/or certificate required to be delivered by the
Operating Partnership under the Interest Contribution Agreements or Deed
Contribution Agreements, each duly executed by the Operating Partnership and, if
applicable, the REIT; and, in the case of the Principal Closing, counterparts of
the Contribution Agreement (Weston Management) for the interests in Weston
Management, and any other instrument, agreement and/or certificate required to
be delivered by the Jacobs Trusts under the Contribution Agreement (Weston
Management) for interests in Weston Management, each duly executed by the
Operating Partnership (and its designee, if applicable).
(c) First Amendment to OP Partnership Agreement. In the case of the
Principal Closing, the First Amendment to the OP Partnership Agreement in the
form attached hereto as Exhibit G, or, in the case of a Deferred Closing, an
amendment to the OP Partnership Agreement, in form and substance to be agreed
between CBL and JRI, acting reasonably, duly executed by CBL Holdings I, Inc.
and the REIT and any limited partners whose consents are required by the terms
of the OP Partnership Agreement.
(d) Registration Rights Agreement. In the case of the Principal Closing,
the Registration Rights Agreement in the form attached hereto as Exhibit H-1,
or, in the case of a Deferred Closing, an addendum to the Registration Rights
Agreement in the form attached hereto as Exhibit H-2, duly executed by the REIT
and the Operating Partnership granting registration rights to the SCU holders.
(e) Amendment to Rights Agreement. An amendment to the Rights Agreement
executed by each of the REIT and SunTrust Bank, implementing the changes
required in Section 4.10.
(f) Share Ownership Limitation Amendments. If the REIT's stockholders have
approved the Share Ownership Limitation Amendments, a certificate of amendment
to the REIT's certificate of incorporation setting forth the Share Ownership
Limitation Amendments, and, if the REIT's stockholders have not approved the
Share Ownership Limitation Amendments, a certified copy of the REIT Board
Resolution contemplated in Section 4.15(b).
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(g) Transition Services Agreement. The Transition Services Agreement in
substantially the form attached hereto as Exhibit L, duly executed by the REIT
and the Operating Partnership.
(h) Assumption of Management Agreements. In the case of any Deferred
Closing, an assumption of the management and leasing agreements (in a form
reasonably acceptable to CBL) with respect to the Properties that are the
subject of such Deferred Closing, duly executed by Weston Management or its
designee.
(i) Certificates.
(i) A certificate issued by the Secretary of State of the State of
Delaware and dated not earlier than thirty (30) days prior to such Closing
Date, certifying as to the good standing of the REIT and the Operating
Partnership under the laws of the State of Delaware.
(ii) A duly executed certificate of the Secretary of CBL Holdings I,
Inc., dated as of such Closing Date, certifying:
(A) that the board of directors of CBL Holdings I, Inc. has
adopted resolutions approving the transactions contemplated hereunder
and authorizing CBL Holdings I, Inc. on its own behalf and as general
partner of the Operating Partnership to execute and deliver this
Agreement, the Interest Contribution Agreements, any Deed Contribution
Agreement and each other agreement and other instrument necessary for
the consummation of the transactions contemplated by this Agreement
and the Interest Contribution Agreements and Deed Contribution
Agreements, if applicable (which resolutions shall be attached to or
incorporated in such certificate), that such action by CBL Holdings I,
Inc.'s board of directors, together with any other authorization as
set out in such certificate, constitutes the only authorization
required for such execution, delivery and consummation by the
Operating Partnership, and it has not been revoked or otherwise
withdrawn and remains in full force and effect.
(B) as to a true and complete copy of the OP Partnership
Agreement, the certificate of limited partnership of the Operating
Partnership and the certificate of incorporation and by-laws of CBL
Holdings I, Inc. and that
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each of the same has not been amended (except as noted therein) and is
in full force and effect as of such Closing Date, and also certifying
as to the incumbency of the officers of CBL executing and delivering
this Agreement, the Interest Contribution Agreements and Deed
Contribution Agreements, if applicable, and the other documents and
instruments provided herein to be executed and delivered by the
Operating Partnership.
(iii) A duly executed certificate by the Secretary of the REIT, dated
as of such Closing Date, certifying:
(A) that the board of directors of the REIT has adopted
resolutions approving the transactions contemplated hereunder,
authorizing and implementing the Share Ownership Limitation
Amendments, in the event that the stockholders of the REIT vote to
approve such amendments or adopting the REIT Board Resolution, in the
event that the stockholders of the REIT do not approve the Share
Ownership Limitation Amendments and, in either case, authorizing the
REIT to execute and deliver this Agreement, and each other agreement
and other instrument necessary for the consummation of the
transactions contemplated by this Agreement and the Interest
Contribution Agreements and Deed Contribution Agreements, if
applicable (which resolutions, including the REIT Board Resolution, if
applicable, shall be attached to or incorporated in such certificate),
that such action by the REIT's Board of Directors, together with any
other authorization as set out in such certificate, constitutes the
only authorization required for such execution, delivery and
consummation by the REIT, and it has not been revoked or otherwise
withdrawn and remains in full force and effect.
(B) as to a true and complete copy of the certificate of
incorporation and by-laws of the REIT and that each of the same has
not been amended (except as noted therein) and is in full force and
effect as of such Closing Date, and also certifying as to the
incumbency of the officers of the REIT executing and delivering this
Agreement, and the other documents and instruments provided herein to
be executed and delivered by the REIT.
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(iv) A duly executed certificate of the Operating Partnership, dated
as of such Closing Date, certifying that each of the representations and
warranties of the Operating Partnership contained in this Agreement and the
Interest Contribution Agreements and Deed Contribution Agreements, if
applicable, is true and correct in all material respects as if remade on
and as of such Closing Date.
(v) A duly executed certificate of the REIT, dated as of such Closing
Date, certifying that each of the representations and warranties of the
REIT contained in this Agreement is true and correct in all material
respects as if remade on and as of such Closing Date.
(j) Opinions. An opinion of counsel to CBL as to the matters identified on
Exhibit S-1 hereto and an opinion in substantially the form attached as Exhibit
S-2 regarding the REIT's status as a real estate investment trust, the Operating
Partnership's status as a partnership and not a publicly-traded partnership and
the status of each entity other than the Operating Partnership to which direct
or indirect interests in the Properties are transferred pursuant to Section 1.1
or 2.1 hereof as an entity whose separate existence from the Operating
Partnership is disregarded for federal income tax purposes.
(k) JRI Option Agreement. A JRI Option Agreement for each Excluded
Outparcel being contributed to the Operating Partnership on such Closing Date,
duly executed by the Operating Partnership and the applicable Property Owner (or
in the case of a deed transfer, the CBL entity taking title to the Excluded
Outparcel).
(l) Share Ownership Agreement. In the case of the Principal Closing, the
Share Ownership Agreement, in the form attached hereto as Schedule 4.15(b)-3
duly executed by the REIT, CBL & Associates, Inc., Charles B. Lebovitz and
Stephen D. Lebovitz.
(m) Other Documents, Etc. All other instruments and documents, if any,
required to be executed, acknowledged and/or delivered by the Operating
Partnership and/or the REIT to JRI pursuant to and in accordance with any of the
other provisions of this Agreement or the Interest Contribution Agreements or
the Deed Contribution Agreements, if applicable, and such other documents or
instruments as JRI may reasonably request to effect the transactions
contemplated in this Agreement and the Interest Contribution Agreements and Deed
Contribution Agreements, if applicable.
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6.4 Deferred Closings.
(a) Property Removal. If, at the Principal Closing,
(1) the Jacobs Parties have been unable to obtain the lender
consents required by Section 6.2(i), the Outside Partner consents
required by Section 6.2(j) or any other third party consents necessary
for the contribution of any Property or the Interests in any Property
Owner, or JRI has not been able to cause each Associate that owns an
Associate Interest in a Partial Property Owner to enter into an
Interest Contribution Agreement with respect to that Partial Property,
(2) JRI is no longer able to make one or more of the
representations or warranties contained in Section 8.2 with respect to
any Property in the manner that such representation or warranty is
being made concurrently herewith,
(3) any Property has been the subject of a Substantial Casualty
or Substantial Condemnation and JRI has been unable to restore the
Property to at least as good a condition as existed on the date of
this Agreement,
(4) JRI has been unable to Remove a Title Objection affecting any
Property as required by Section 3.2(b), or
(5) JRI is otherwise unable to satisfy the conditions precedent
to Closing with respect to any Property,
and, in any such case, CBL is not willing to waive the foregoing condition or
circumstance for the Property in question and include that Property in the
Principal Closing (any such Property, an "Excluded Property"), then, so long as
JRI can still satisfy the conditions or circumstances described in Section
7.1(d) (i.e., it is able to contribute and is contributing each of Hanes Mall,
Fayette Mall, West Towne Mall, Brookfield Mall and Cary Towne Center
(collectively, the "Core Properties") and at least nine (9) of the remaining
Properties by the latest date permitted pursuant to Section 6.1(b)), each of JRI
and CBL will have the right to remove each Excluded Property from the Properties
being delivered at the Principal Closing and require the other to proceed with
the Principal Closing with the remainder of the Properties on the terms set
forth herein.
(b) Jacobs Obligation to Cure. Following the Principal Closing, the Jacobs
Parties will use commercially reasonable efforts to cure the condition or
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circumstance that caused any Property to be an Excluded Property and if, on or
before July 31, 2001, in the case of a Property that is an Excluded Property
because of a circumstance described in clause (1) above, or October 31, 2001, in
the case of a Property that is an Excluded Property because of a circumstance
described in clause (2), (3), (4) or (5) above that is not also described in
clause (1) above (such date, as applicable, the "Cure Cutoff Date"), the Jacobs
Parties have caused the condition to be cured such that the Property would have
qualified to have been included in the Principal Closing, each of JRI and CBL
will be entitled to require the other to close with respect to such Excluded
Property and the management and leasing contracts in respect thereof pursuant to
the terms and conditions of this Agreement and the applicable Interest
Contribution Agreement or Deed Contribution Agreement in a separate Closing to
be held at a date to be mutually agreed between JRI and CBL, but not later than
thirty (30) days after the relevant Cure Cutoff Date (any such separate Closing,
or with respect to a Partial Property subject to Section 2.1(c) hereof, any such
separate ICOA Closing, a "Deferred Closing"; and the date on which a Deferred
Closing is to occur is referred to herein as a "Deferred Closing Date") at a
price determined pursuant to Section 2.1(a) above. If any Property is excluded
from the Principal Closing as permitted above, JRI will advise CBL on a regular
basis of its progress in satisfying the yet unmet conditions to the Deferred
Closing for that Excluded Property. In addition, if thereafter but prior to the
applicable Cure Cutoff Date JRI determines in good faith that it can satisfy the
conditions to the Deferred Closing as set forth in Section 7.1 with respect to
any Excluded Property, JRI agrees to notify CBL of that determination in writing
and to cooperate with CBL to schedule a Deferred Closing Date for that Excluded
Property on the date that is thirty (30) days following the day on which JRI
first determined that it could satisfy the conditions precedent to the Deferred
Closing (or, if the thirtieth (30th) day is not a Business Day, the next
succeeding Business Day thereafter). Similarly, if at any time prior to the
applicable Cure Cutoff Date, CBL determines that it is willing to waive any
condition or circumstance giving rise to a failure of condition precedent to the
Deferred Closing for any Excluded Property, CBL will notify JRI of that
determination and the parties will cooperate to schedule a Deferred Closing for
that Excluded Property on the date that is thirty (30) days following the date
on which CBL delivers the notice of waiver to JRI (or if the thirtieth (30th)
day is not a Business Day, the next succeeding Business Day thereafter). The
parties agree that time is of the essence with respect to the dates and time
periods referred to in this paragraph (b) and in paragraph (c) below.
Notwithstanding the foregoing, in the event that JRI determines in its judgment
exercised in good faith that it will not be able to cure any condition or
circumstance that caused a Property to be an Excluded Property, the Jacobs
Parties may notify CBL in writing of such determination and, unless CBL notifies
JRI in writing within ten (10) days of its receipt of JRI's notice that it has
elected to waive such circumstance or condition (it being understood that CBL
will not be entitled to waive the failure to obtain any required third-party
consents) and to close on the Excluded Property, this Agreement automatically
will terminate with respect to that Excluded Property and neither CBL nor the
Jacobs Parties will have any further obligation hereunder in respect of that
Excluded Property.
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(c) CBL Extension Right. CBL shall have the right, exercisable by
delivering written notice to JRI as soon as practical but in no event less than
two (2) Business Days prior to a scheduled Deferred Closing Date, to extend the
applicable Closing Date to a date not later than thirty (30) days after the
scheduled Deferred Closing Date if CBL determines in its good faith judgment
that such adjournment is reasonably necessary to enable CBL to satisfy the
conditions to Closing set forth in Section 7.2 and the Interest Contribution
Agreements and Deed Contribution Agreements, if applicable, with respect to the
Properties in such Deferred Closing (and JRI has not waived any of the
conditions in issue).
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
7.1 Conditions Precedent to Obligation of the REIT and the Operating
Partnership. The obligation of the REIT and the Operating Partnership to
consummate the transactions contemplated herein shall be subject to the
fulfillment on or before the Principal Closing Date or any Deferred Closing
Date, as applicable, of all of the following conditions, any or all of which may
be waived by the REIT and/or the Operating Partnership in their sole discretion:
(a) Delivery of Documents. The Jacobs Parties shall have delivered all of
the items required to be delivered to CBL pursuant to Section 6.2 for such
Closing (other than the items described in Section 6.2(k) which are governed by
Section 1.2).
(b) Accuracy of Representations and Warranties. Subject to Section 8.3(c),
the representations and warranties of JRI in Section 8.2 of this Agreement shall
be true and correct in all material respects as originally made and, if
applicable, as remade on and as of the Closing Date (or, if made as of a
specified date, as of such date), with appropriate modifications of those
representations and warranties to reflect actions taken or not taken by or on
behalf of JRI in accordance with the provisions of Article IV; provided,
however, that to the extent that the representations and warranties in Section
8.2 relate to Interests, Properties or Property Owners, for purposes of this
condition precedent to Closing, those references will be deemed to be references
only to the Interests, Properties and Property Owners being included at the
Closing at hand, and those representations and warranties specifically need not
be true and correct as originally made with respect to any Interest, Property or
Property Owner that is not being included in such Closing as permitted or
required by the terms of Section 6.4. Each of the Operating Partnership and the
REIT covenants and agrees that it will advise JRI of any respect in which it
believes any of JRI's representations and warranties is or becomes incorrect in
any material respect promptly after it first learns thereof.
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(c) Observance of Covenants. The Jacobs Parties shall have performed and
observed, in all material respects, all covenants and agreements in this
Agreement to be performed and observed by the Jacobs Parties as of the
applicable Closing Date.
(d) Closing Under the Interest Contribution Agreements. In the case of the
Principal Closing, the conditions precedent to be satisfied by the Contributors
under the Interest Contribution Agreements or of the applicable Property Owners
under the Deed Contribution Agreements, if applicable, with respect to each of
the Core Properties and at least nine (9) of the other Properties shall have
been satisfied or waived and all instruments, agreements, documents and
certificates required to be delivered by JRI and any other party thereunder
shall have been duly executed and delivered by JRI and any other party thereto
and, in the case of a Deferred Closing, the conditions precedent of the
Contributors under the Interest Contribution Agreements or of the applicable
Property Owners under the Deed Contribution Agreements, if applicable, with
respect to each of the Properties being contributed on such Closing Date shall
have been satisfied or waived and all instruments, agreements, documents and
certificates required to be delivered by JRI and any other party thereunder
shall have been duly executed and delivered by JRI and any other party thereto.
(e) No Injunction. No action, suit or legal or administrative proceedings
shall have been instituted by or before any agency, bureau, commission, court,
department, official, political subdivision, tribunal or other instrumentality
of any government, whether federal, state or local, domestic or foreign
(referred to herein as "Governmental Authority"), seeking to enjoin the
transactions contemplated by this Agreement and intended to occur at the related
Closing, other than any such proceeding initiated by or on behalf of CBL or any
of its affiliates.
(f) Transactions Not Prohibited. No statute, rule, regulation, temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation by the Jacobs Parties or any of the Property Owners
or holders of Interests therein of the transactions contemplated by this
Agreement and the Interest Contribution Agreements and Deed Contribution
Agreements, if applicable, to occur at the related Closing shall be in effect
or, if applicable, have been threatened by any Governmental Authority or any
third party, other than any such order or other legal restraint or prohibition
or threat thereof obtained or instituted by or on behalf of CBL or any of its
affiliates.
(g) CBL Stockholder Approval. The SCU Issuance Proposal shall have been
submitted for stockholder approval and approved by the holders of
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a majority of the shares of the REIT voted thereon in a meeting at which votes
are cast by holders of more than 50% of all outstanding shares entitled to vote
thereon.
(h) HSR Act. JRI and CBL shall have mutually concluded that no filing under
the HSR Act is required with respect to the transactions contemplated hereby,
or, if applicable, any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the United States
Department of Justice or the United States Federal Trade Commission challenging
or seeking to enjoin the consummation of the transactions contemplated hereby,
which action shall not have been withdrawn or terminated.
(i) Voting and Standstill Agreement. Each of the Jacobs Parties and Martin
J. Cleary shall have performed and observed, in all material respects, all
covenants and agreements to be performed and observed by them pursuant to the
Voting and Standstill Agreement as of the applicable Closing Date.
(j) Related Party Loans. JRI shall have provided CBL with written
confirmation from the lender of each related party loan or other obligation
(other than the Cary Note) identified on the financial statements for the six
(6) month period ended June 30, 2000 of any Property Owner being included in the
relevant Closing confirming that each such related party loan or other
obligation has been repaid in full or is being repaid in full at that Closing
from the cash portion of the Consideration being delivered by CBL at that
Closing.
(k) Refinancings. With respect to a Closing that involves any of Cary Towne
Center, Eastgate Mall or Fayette Mall, JRI shall have taken the actions and
received the consents outlined in Section 4.22 with respect to that Property.
7.2 Conditions Precedent to Obligations of the Jacobs Parties. The
obligation of the Jacobs Parties to consummate the transactions contemplated
herein shall be subject to the fulfillment on or before the Principal Closing
Date and each Deferred Closing Date of all of the following conditions, any or
all of which may be waived by the Jacobs Parties in their sole discretion:
(a) Receipt of Consideration. CBL shall have delivered the Consideration,
as adjusted pursuant to and payable in the manner provided for in this Agreement
and the Interest Contribution Agreements and Deed Contribution Agreements, if
applicable.
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(b) Delivery of Documents. CBL shall have delivered all of the items
required to be delivered to the Jacobs Parties pursuant to Section 6.3.
(c) Accuracy of Representations and Warranties. The representations and
warranties of CBL contained in Section 8.1 of this Agreement shall be true and
correct in all material respects as originally made and as remade on and as of
such Closing Date (or, if made as of a specified date, as of that date) as the
same may be modified to reflect any actions taken by or on behalf of CBL as
permitted herein.
(d) Observance of Covenants. CBL shall have performed and observed, in all
material respects, all covenants and agreements in this Agreement to be
performed and observed by CBL as of such Closing Date.
(e) Closing Under Interest Contribution Agreements. The conditions
precedent to be satisfied by the Operating Partnership in the Interest
Contribution Agreements and Deed Contribution Agreements, if applicable, with
respect to each of the Properties being contributed on such Closing Date shall
have been satisfied or waived and all instruments, agreements, documents and
certificates required to be delivered by the Operating Partnership thereunder
shall have been duly executed and delivered by the Operating Partnership.
(f) No Injunction. No action, suit or legal or administrative proceedings
shall have been instituted by or before any court or Governmental Authority
seeking to enjoin the transactions contemplated by this Agreement and intended
to occur at the related Closing, other than any such proceeding initiated by or
on behalf of the Jacobs Parties or any of their affiliates.
(g) Transactions Not Prohibited. No statute, rule, regulation, temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation by CBL of the transactions contemplated by this
Agreement to occur at the related Closing shall be in effect, or, if applicable,
have been threatened by any Governmental Authority or by any third party, other
than any such order or other legal restraint or prohibition or threat thereof
obtained or initiated by or on behalf of the Jacobs Parties or any of their
affiliates.
(h) CBL Approval. The board of directors of the REIT and the board of
directors of CBL Holdings I, Inc., as general partner of the Operating
Partnership, shall have duly and validly authorized each of the REIT and the
Operating Partnership to deliver the Consideration required hereunder and to
consummate each of the transactions contemplated hereby to occur at the related
Closing and such authorization shall not have been revoked or withdrawn.
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(i) CBL Stockholder Approval. The SCU Issuance Proposal shall have been
submitted for stockholder approval and approved by the holders of a majority of
the outstanding shares of the REIT voted thereon in a meeting at which votes are
cast by holders of more than 50% of all outstanding shares entitled to vote
thereon.
(j) REIT Stock. The board of directors of the REIT shall have reserved for
issuance and made available, free from preemptive rights, out of the REIT's
authorized but unissued common stock, solely for the purpose of issuance upon
conversion or exchange of the SCUs or the Common Units received upon exchange of
the SCUs into REIT Stock, the full number of shares of REIT Stock deliverable
upon conversion or exchange of all of the SCUs or the Common Units received upon
exchange of the SCUs and caused the REIT to pay any and all franchise tax with
respect thereto; and the REIT Stock issuable upon conversion of the SCUs shall
have been approved for listing on the New York Stock Exchange, subject only to
official notice of issuance.
(k) HSR Act. JRI and CBL shall have mutually concluded that no filing under
the HSR Act is required with respect to the transactions contemplated hereby,
or, if applicable, any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the United States
Department of Justice or the United States Federal Trade Commission challenging
or seeking to enjoin the consummation of the transactions contemplated hereby,
which action shall not have been withdrawn or terminated.
(l) REIT Qualification. At the time of such Closing, (i) the REIT shall not
have revoked its prior election pursuant to Section 856(c)(1) of the Code to be
taxed as a real estate investment trust, and shall be in compliance with all
applicable federal income tax laws, rules and regulations, including the Code,
necessary to permit it to be taxed as a real estate investment trust, (ii) the
REIT shall not have taken any action or have failed to take any action which,
alone or in conjunction with other factors, would reasonably be expected to
result in the loss of its status as a real estate investment trust for federal
income tax purposes, and (iii) neither the REIT nor the Operating Partnership
shall have taken any action or have failed to take any action which, alone or in
conjunction with other factors, would reasonably be expected to result in (A)
the loss of the Operating Partnership's treatment as a partnership for federal
income tax purposes, (B) the Operating Partnership being treated as a "publicly
traded partnership" within the meaning of such term as used in Section 7704(b)
of the Code or (C) the failure of any entity other than the Operating
Partnership to which direct or indirect interests in the Properties are
transferred pursuant to Section 1.1 or 2.1 hereof to be treated
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for federal income tax purposes as an entity whose separate existence from the
Operating Partnership is disregarded at the time of the relevant transfer.
(m) Voting and Standstill Agreement. Each of the CBL Principals (as defined
in the Voting and Standstill Agreement), the REIT and the Operating Partnership
shall have performed and observed, in all material respects, all covenants and
agreements to be performed and observed by it pursuant to the Voting and
Standstill Agreement as of the applicable Closing Date.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1 Representations and Warranties of CBL. In order to induce the Jacobs
Parties, the Associates and the participating Outside Partners, and their
respective affiliates, to carry out the transactions contemplated by this
Agreement, as of the date of this Agreement, each of the REIT and the Operating
Partnership, jointly and severally, represents and warrants to, and agrees with,
each of the Jacobs Parties, for their own benefit and for the benefit of each of
the other contributing entities, as follows:
(a) Organization, Good Standing and Authority. The Operating Partnership is
a limited partnership and the REIT is a corporation, each of which is duly
organized, validly existing and in good standing under the laws of the State of
Delaware, is duly qualified to do business in all jurisdictions where such
qualification is necessary to carry on its business as now conducted, except
where failure to do so would not interfere in any material respect with CBL's
ability to complete any of the transactions contemplated in this agreement or
otherwise have a material adverse effect on all of the following collectively
taken as a whole: the assets, liabilities, financial condition, earnings,
operations and prospects of the REIT, the Operating Partnership and their
respective subsidiaries, or the OP Units of the Operating Partnership (the "OP
Units") and the capital stock of the REIT, determined either (i) without giving
effect in whole or in part to the transactions contemplated herein, or (ii)
after giving such effect (any such interference or adverse effect, a "CBL
Material Adverse Effect"), and/or each of Operating Partnership's designees, as
applicable, is or will be prior to the applicable Closing duly qualified to
conduct business in the respective states in which such designee is acquiring a
Property except where failure to do so would not have a CBL Material Adverse
Effect, and each of the Operating Partnership and the REIT is authorized to
consummate the transactions contemplated hereby and to fulfill all of its
respective obligations hereunder and under all documents contemplated hereunder
to be executed by the Operating Partnership and/or the REIT, and has all
necessary power to execute and deliver this Agreement and all documents
contemplated hereunder to be executed by the Operating Partnership and/or the
REIT including,
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without limitation, the Interest Contribution Agreements and Deed Contribution
Agreements, if applicable, and to perform all of its respective obligations
hereunder and thereunder. CBL has delivered to JRI true, correct and complete
copies of the OP Partnership Agreement as currently in effect, the certificate
of limited partnership of the Operating Partnership, the certificate of
incorporation of the REIT and the bylaws of the REIT.
(b) CBL's Authorization and Binding Effect. This Agreement has, and all
documents contemplated hereunder to be executed by the Operating Partnership
and/or the REIT including, without limitation, the Interest Contribution
Agreements and Deed Contribution Agreements, if applicable, when executed and
delivered will have been duly authorized by all requisite partnership or
corporate action on the part of the Operating Partnership and the REIT and each
is, or will be, upon execution and delivery, as applicable, the valid and
legally binding obligation of the Operating Partnership and the REIT, as the
case may be, enforceable in accordance with its respective terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity (including concepts of
materiality, reasonableness, good faith and fair dealing), regardless of whether
considered in a proceeding in equity or at law. Neither the execution and
delivery of this Agreement and all documents contemplated hereunder to be
executed by the Operating Partnership or the REIT, nor the performance of the
obligations of the Operating Partnership or the REIT hereunder or thereunder
will result in the violation of any provision of the OP Partnership Agreement,
the certificate of limited partnership of the Operating Partnership or the
certificate of incorporation or bylaws of the REIT, or will conflict with any
order or decree of any court or governmental instrumentality of any nature by
which the Operating Partnership or the REIT is bound or to which it is subject.
(c) Capitalization.
(i) OP Units. The capitalization of the Operating Partnership is as
set forth in Exhibit A of the OP Partnership Agreement. As of the date
hereof, an aggregate of 39,857,984 OP Units are issued and outstanding, of
which 2,875,000 are 9.0% Series A Cumulative Redeemable Preferred Units and
36,982,984 are common units (the common units of the Operating Partnership
are referred to herein as "Common Units"). There are no restrictions on the
transfer of the SCUs to be issued hereunder other than those contained in
the OP Partnership Agreement or the First Amendment, and those arising from
federal and applicable state securities laws. All currently issued and
outstanding OP Units were, and all of the SCUs to be issued in connection
with the transactions contemplated herein and all of the Common Units
issuable upon exchange of the
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SCUs issued hereunder or under the Interest Contribution Agreements or Deed
Contribution Agreements, if applicable, will be, duly authorized and
validly issued in accordance with the terms of the OP Partnership Agreement
and in compliance with federal and applicable state securities laws, and,
are, or will be in connection with the transactions contemplated herein, as
the case may be, fully paid and non-assessable with no pre-emptive rights
and the SCUs to be issued in connection with the transactions contemplated
herein will be issued upon the terms provided in the OP Partnership
Agreement, as the same is to be amended as permitted or required hereunder.
Except as set forth on Schedule 8.1(c) and in the SEC Documents and except
as created by this Agreement, as of the date hereof, there are no
outstanding subscriptions, options, warrants, preemptive or other rights or
other arrangements or commitments obligating the Operating Partnership to
issue any OP Units. At each Closing (or ICOA Option Closing), upon receipt
of the Interests or Properties being contributed in exchange for SCUs, the
Operating Partnership will issue the SCUs to be issued hereunder free and
clear of all liens other than those suffered or permitted or granted by the
Contributors and, as of such Closing, each of the Contributors or its
respective partners and shareholders, as the case may be, will be admitted
as a limited partner of the Operating Partnership. The issuance of the SCUs
to the Contributors at each Closing (or ICOA Option Closing) will not
require any approval or consent of any Person except any such approval as
shall have been obtained on or prior to the Principal Closing Date.
Assuming each of the Contributors, or its respective partners and
shareholders, as the case may be, is either an "accredited investor" as
defined in Rule 501 under the Securities Act of 1933, as amended (the
"Securities Act"), or a person who is not an accredited investor but was
advised by a qualified purchaser's representative (and there are no more
than thirty-five (35) such non-accredited investors), the issuance of the
SCUs hereunder is exempt from registration under the Securities Act and the
applicable state securities laws. The issuance of Common Units upon the
exchange of the SCUs delivered under this Agreement or under the Interest
Contribution Agreements or Deed Contribution Agreements, if applicable, (a)
will be free and clear of all liens other than those suffered or permitted
or granted by the Contributors, as the case may be, (b) will not require
any approval or consent of any Person except any such approval or consent
that shall have been obtained on or prior to the Principal Closing Date,
and (c) assuming each of the Contributors, or its respective partners and
shareholders, as the case may be, is either an "accredited investor" as
defined in Rule 501 under the Securities Act or a person who is not an
accredited investor but was advised by a qualified purchaser's
representative (and there are no more than thirty-five (35) such
non-accredited investors), will be exempt from registration under the
Securities Act and applicable state securities laws.
(ii) Stock. Schedule 8.1(c) and the SEC Documents set forth as of
August 31, 2000 (i) the authorized capital stock of the REIT, (ii) the
total
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number of shares of such capital stock outstanding, which number is
27,875,307, of which 2,875,000 are preferred shares and 25,000,307 are
common shares (the common shares of the REIT are referred to herein as the
"REIT Stock") and (iii) for each class and series of capital stock of the
REIT, the total number of options and warrants to acquire such capital
stock and any commitments to issue or grant any of the foregoing. All of
the outstanding shares of REIT Stock are duly and validly issued, fully
paid and non-assessable and not subject to any preemptive rights. If and
when issued, the REIT Stock issuable upon exchange of the SCUs delivered
under this Agreement or under the Interest Contribution Agreements or Deed
Contribution Agreements, if applicable, pursuant to the OP Partnership
Agreement will be duly authorized, validly issued, fully paid and
non-assessable and not subject to any preemptive rights. The issuance of
REIT Stock upon exchange of the SCUs delivered under this Agreement or
under the Interest Contribution Agreements or Deed Contribution Agreements,
if applicable, (a) will be free and clear of all liens and other claims
other than those suffered or permitted or granted by the Contributors
(including, for example, the potential restrictions contained in the OP
Partnership Agreement and the Voting and Standstill Agreement), as the case
may be, (b) will not require any approval or consent of any Person except
any such approval or consent that shall have been obtained on or prior to
the Principal Closing Date, and (c) assuming each of the Contributors, or
its respective partners and shareholders, as the case may be, is either an
"accredited investor" as defined in Rule 501 under the Securities Act or a
person who was advised by a qualified purchaser's representative (and there
are no more than 35 of such non-accredited investors), will be exempt from
registration under the Securities Act and applicable state securities laws.
(d) Conflicting Agreements and Other Matters. None of the REIT, the
Operating Partnership or any of their affiliates is a party to any contract or
agreement or subject to any articles of incorporation or other corporate
restriction compliance which could reasonably be expected to have a CBL Material
Adverse Effect. Neither the execution and delivery of the documents relating to
the transactions contemplated herein nor fulfillment of nor compliance with the
terms and provisions thereof, nor the issuance of the SCUs to be issued to the
Contributors pursuant to this Agreement and the Interest Contribution Agreements
and Deed Contribution Agreements, if applicable, will (i) violate any provision
of any law presently in effect having applicability to the REIT or the Operating
Partnership or any of their properties, except such violations as could not
reasonably be expected to have a CBL Material Adverse Effect, (ii) except for
the First Amendment contemplated in this Agreement, conflict with or result in a
breach of or constitute a default under the OP Partnership Agreement, charter or
bylaws or any other organizational document of either the REIT or the Operating
Partnership, (iii) except as set forth in Schedule 8.1(d), require any consent,
approval or notice under, or conflict with or result in a breach of, constitute
a
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default or accelerate any right under, any note, bond, mortgage, license,
indenture or loan or credit agreement, or any other agreement or instrument, to
which the REIT or the Operating Partnership is a party or by which any of its
respective properties is bound, except such consents, approvals, notices,
conflicts, breaches or defaults as could not reasonably be expected to have a
CBL Material Adverse Effect or impair or interfere with consummation of the
transactions contemplated herein, or (iv) result in, or require the creation or
imposition of, any lien upon or with respect to any of the properties now owned
or hereafter acquired by the REIT or the Operating Partnership. In addition,
neither the REIT nor the Operating Partnership has any knowledge of any facts or
circumstances that, individually or in the aggregate, could reasonably be
expected to have a CBL Material Adverse Effect or to impair or interfere with
consummation of the transactions contemplated herein.
(e) Litigation; Proceeding, Etc. Except as set forth in the SEC Documents,
there is no action, suit, notice of violation, proceeding or investigation
pending or, to the best knowledge of the REIT and the Operating Partnership,
threatened against or affecting the REIT or the Operating Partnership or any of
their respective properties before or by any Governmental Authority which (i)
challenges the legality, validity or enforceability of the transactions
contemplated herein or of any of the documents relating to the transactions
contemplated herein or (ii) could (individually or in the aggregate) reasonably
be expected to have a CBL Material Adverse Effect or (iii) would (individually
or in the aggregate) impair the ability of either the REIT or the Operating
Partnership to perform fully on a timely basis any obligations which it has
under any of the documents relating to the transactions contemplated herein.
(f) No Default or Violation. Except as set forth in the SEC Documents,
neither the Operating Partnership nor the REIT has received written notice that
it is (i) in default under or in violation of any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound, except such defaults or violations
as could not reasonably be expected to have a CBL Material Adverse Effect, (ii)
in violation of any order of any Governmental Authority, which could reasonably
be expected to have a CBL Material Adverse Effect or (iii) in violation of any
law which could reasonably be expected to (A) adversely affect the legality,
validity or enforceability of the documents relating to the transactions
contemplated herein, (B) have a CBL Material Adverse Effect, or (C) adversely
impair either the REIT's or the Operating Partnership's ability or obligation to
perform fully on a timely basis any obligation which it has under any of the
documents relating to the transactions contemplated herein.
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(g) Governmental Consents, Etc. Except as may be required under any federal
or applicable state securities laws in connection with the performance by CBL of
its obligations under the OP Partnership Agreement with respect to certain
registration rights granted thereunder and assuming the accuracy of the
representations and warranties of, and the performance of the agreements of, the
Contributors set forth herein and under the applicable Interest Contribution
Agreement or Deed Contribution Agreement, no authorization, consent, approval,
waiver, license, qualification or formal exemption from, nor any filing,
declaration, qualification or registration with, any Governmental Authority or
any securities exchange is required in connection with (a) the execution,
delivery or performance by CBL of this Agreement, (b) the issuance of the SCUs
pursuant to this Agreement and the Interest Contribution Agreements and Deed
Contribution Agreements, if applicable, or (c) the issuance of REIT Stock or
Common Units upon the exchange of any such SCUs, except for those that (i) have
been made or obtained by CBL as of the date hereof or (ii) are set forth in
Schedule 8.1(g) and by the Principal Closing shall be made or received by CBL.
At the Principal Closing Date, CBL will have made all filings and given all
notices to Governmental Authorities and obtained all necessary registrations,
declarations, approvals, orders, consents, qualifications, franchises,
certificates, permits and authorizations from any Governmental Authorities, to
own or lease its properties and to conduct its businesses as currently owned,
leased or conducted, except where failure to do so could not reasonably be
expected to have a CBL Material Adverse Effect. Assuming that the SCU Issuance
Proposal is approved by the REIT's stockholders, at the Principal Closing Date,
all such registrations, declarations, approvals, orders, consents,
qualifications, franchises, certificates, permits and authorizations, the
failure of which to file, give notice of or obtain could reasonably be expected
to have a CBL Material Adverse Effect or to impair or interfere with the
consummation of the transactions contemplated herein, will have been filed,
notified or obtained and, to the extent applicable, will be in full force and
effect.
(h) Private Offering. Neither the Operating Partnership nor the REIT nor
any person acting on their behalf has taken or will take any action (including,
without limitation, any offering of any securities of the Operating Partnership
or the REIT under circumstances which would require the integration of such
offering with the issuance of the SCUs under the Securities Act) which might
subject the SCUs or the issuance of REIT Stock or Common Units, in exchange for,
or upon redemption of, any such SCUs to the registration requirements of Section
5 of the Securities Act.
(i) No Other Liabilities. Neither the REIT nor any of its subsidiaries or
affiliates (including the Operating Partnership) has any material liability,
whether absolute, accrued, contingent or otherwise, except liabilities
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(i) reflected on the consolidated balance sheet of the REIT as of June 30, 2000
or in the SEC Documents, or (ii) that (A) were incurred by the REIT or its
subsidiaries or affiliates after June 30, 2000 in the ordinary course of their
business and in compliance with Section 4.12 hereof or (B) were incurred before
June 30, 2000, but are not required by generally accepted accounting principles
consistently applied to be reflected on such balance sheet and (C) in either
event, could not reasonably be expected to have a CBL Material Adverse Effect.
(j) Status of OP Partnership Agreement; Taxes and REIT Status. The OP
Partnership Agreement is in full force and effect; a true, complete and correct
copy thereof has been delivered to JRI; and there are no dissolution,
termination or liquidation proceedings pending or contemplated with respect to
the REIT or the Operating Partnership. The Operating Partnership is, and has
been since the date of its formation, taxable as a "partnership" as defined in
Section 7701(a) of the Code and is not, and has not been since the date of its
formation, a "publicly traded partnership" within the meaning of such term as
used in Section 7704(b) of the Code. The Operating Partnership intends to
continue to operate in a manner that does not cause it to be treated as a
publicly traded partnership within the meaning of Section 7704(b) of the Code.
Each of the entities to which direct or indirect interests in the Properties
will be transferred pursuant to Section 1.1 or 2.1 hereof will be, as of the
date of the relevant Closing, an entity whose separate existence from the
Operating Partnership is disregarded for federal income tax purposes. Each of
the Operating Partnership and the REIT has filed all tax returns that are
required to be filed with any Governmental Authority (or has obtained valid
extensions of the filing deadlines therefor which extensions have not yet
expired) and has paid all taxes due pursuant to the tax returns or any
assessment received by it or otherwise required to be paid, except taxes being
contested in good faith by appropriate proceedings and for which adequate
reserves or other provisions are maintained, and except for the filing of tax
returns as to which the failure to file could not, individually or in the
aggregate, have a CBL Material Adverse Effect. The REIT (i) has elected to be
taxed as a REIT commencing with its taxable year ending December 31, 1993 and
such election has not been terminated or revoked, (ii) qualified for federal
income taxation as a REIT for the year ended December 31, 1999, and will
continue to so qualify for its current taxable year, (iii) operates, and intends
to continue to operate, in a manner so as to qualify as a REIT, and (iv) has not
sold or otherwise disposed of any assets which could give rise to a material
amount of tax pursuant to any election made by the REIT under Notice 88-19,
1988-1 CB 486 and does not expect to effect any such sale or other disposition.
(k) Compliance with Laws. To the knowledge of CBL, neither the Operating
Partnership nor the REIT has been in or is in, and neither of them has received
written notice of, violation of or default with respect to any law or
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any decision, ruling, order or award of any arbitrator applicable to it or its
business, properties or operations, except for violations or defaults that,
individually or in the aggregate, could not reasonably be expected to have a CBL
Material Adverse Effect or impair or interfere with the consummation of the
transactions contemplated herein.
(l) SEC Documents. The REIT has filed with the Securities and Exchange
Commission (the "Commission") all reports, schedules, forms, statements and
other documents required by the Securities Act or the Securities Exchange Act of
1934, as amended (the "Exchange Act") or the rules or regulations promulgated
thereunder to be filed by the REIT in each case in the form and with the
substance prescribed by either such Act or such rules or regulations
(collectively, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, the "SEC Documents") including,
without limitation, proxy information and solicitation materials, in each case
in the form and with the substance prescribed by either such Act or such rules
or regulations. CBL has delivered or made available to JRI all SEC Documents. As
of their respective filing dates (or if amended, revised or superseded by a
subsequent filing with the Commission then on the date of such subsequent
filing), the SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the Commission promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to the SEC
Documents and none of the SEC Documents (including any and all financial
statements included therein) as of such dates contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The consolidated
financial statements of the REIT, the Operating Partnership and, if any, all
affiliates of CBL included in all SEC Documents, including any amendments
thereto (the "SEC Financial Statements"), complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto and, as at the dates as of
which the same were prepared and for the periods then ended, fairly presented
the financial condition and results of operations of CBL and its affiliates on a
consolidated basis in accordance with generally accepted accounting principles
consistently applied throughout all such periods.
(m) No Material Adverse Change. Since December 31, 1999, no CBL Material
Adverse Effect has occurred or exists except as may be disclosed in any SEC
Documents filed subsequent to such date.
(n) No Undisclosed Events or Circumstances. No event or circumstance has
occurred or exists with respect to the REIT, the Operating
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Partnership or their subsidiaries or affiliates or their respective businesses,
properties, prospects, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by CBL but which has not been so publicly announced or
disclosed.
(o) Material Contracts. The SEC Documents include a correct and complete
list of the following with respect to the Operating Partnership and the REIT
which are required to be disclosed in the SEC Documents: (1) voting or other
agreements with any unit holder or shareholder having beneficial ownership of 5%
or more of the OP Units of the Operating Partnership or of the shares of REIT
Stock issued and outstanding prior to the transactions contemplated by this
Agreement or with any director or officer of the Operating Partnership or the
REIT or of any material subsidiary or affiliate thereof and all shareholders'
agreements and voting trusts; and (2) agreements not made in the ordinary course
of business which would reasonably be expected to result in a CBL Material
Adverse Effect.
(p) No Merger Agreements. As of the date hereof, except as set forth in
Schedule 8.1(p), neither the REIT nor the Operating Partnership has entered into
any agreement with any person or Governmental Authority, which has not been
terminated as of the date of this Agreement and under which there remains any
material liability or obligation thereof with respect to a merger or
consolidation with either the REIT or the Operating Partnership, or any other
acquisition of a substantial amount of the assets of the REIT or the Operating
Partnership, which would reasonably be expected to result in a CBL Material
Adverse Effect.
(q) Certain Actions by CBL. None of the Operating Partnership, the REIT or
any material subsidiary or affiliate thereof has (i) made a general assignment
for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or
suffered the filing of any involuntary petition by such entity's creditors,
(iii) suffered the appointment of a receiver to take possession of all or
substantially all of such entity's assets, (iv) suffered the attachment or other
judicial seizure of all, or substantially all, of such entity's assets, (v)
admitted in writing CBL's inability to pay its debts as they come due, or (vi)
made an offer of settlement, extension, or composition to its creditors
generally.
(r) CBL's Knowledge. As used in this Agreement, the words "to the knowledge
of CBL" and other words of similar tenor mean only the current, actual,
conscious (and not constructive, imputed or implied) knowledge of the following
designees of CBL, without having made a review of files or other inquiry:
Charles B. Lebovitz, Stephen D. Lebovitz, John N. Foy and Keith Honnold.
Anything herein to the contrary notwithstanding, no such designee shall
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have any personal liability or obligation whatsoever with respect to any of the
matters set forth in this Agreement, the Interest Contribution Agreements, the
Deed Contribution Agreements, and any other agreements, documents related
thereto or contemplated hereunder or thereunder or any of the representations
made by CBL being or becoming untrue, inaccurate or incomplete in any respect.
(s) CBL's Acknowledgment. Each of the REIT and the Operating Partnership
fully understands the nature and significance of the transactions provided for
in this Agreement and the limitations provided in Section 1.3 and elsewhere
herein.
8.2 Representations and Warranties of JRI. In order to induce CBL to carry
out the transactions contemplated by this Agreement, as of the date of this
Agreement, JRI represents and warrants to and agrees with CBL, as follows:
(a) Organization, Good Standing and Authority; Binding Effect.
(i) JRI is a limited partnership duly organized, validly existing and
in good standing under the laws of the State of Delaware, and is duly
qualified to do business in all jurisdictions where such qualification is
necessary to carry on its business as now conducted, except where failure
to do so would not have a material adverse effect on the ability of JRI to
fulfill its responsibilities under this Agreement. Each of the Jacobs
Trusts is a trust, duly organized, validly existing and in good standing
under the laws of the state of its organization, and is duly qualified to
do business in all jurisdictions where such qualification is necessary to
carry on its business as now conducted, except where failure to do so would
not have an adverse effect on the trust's ability to fulfill its
responsibilities under this Agreement. Each of the Jacobs Parties has full
power and authority to enter into this Agreement and all documents
contemplated hereunder to be executed by the Jacobs Parties, to consummate
the transactions contemplated hereby and thereby and to fulfill all of its
obligations hereunder and the documents contemplated hereunder to be
executed by the Jacobs Parties. This Agreement has been, and all documents
contemplated hereunder to be executed by the Jacobs Parties, including,
without limitation, the Interest Contribution Agreements, when executed and
delivered will have been, duly authorized and approved by all necessary
action of the Jacobs Parties, has been or will be upon execution and
delivery duly executed and delivered by each of the Jacobs Parties and
constitutes, or will, upon execution and delivery, constitute a legal,
valid and binding obligation of each such Jacobs
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Party, enforceable against each of the Jacobs Parties in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws relating to or
affecting creditors' rights generally from time to time in effect and to
general principles of equity (including concepts of materiality,
reasonableness, good faith and fair dealing), regardless whether considered
in a proceeding in equity or at law.
(ii) The execution, delivery, and performance by each of the Jacobs
Parties of this Agreement and the consummation of the transactions
contemplated hereby (including the transfer of the Interests to the
Operating Partnership) will not (A) subject to clause (B), violate any
provision of the governing documents of any of the Jacobs Parties; (B)
require any of the Jacobs Parties to obtain any consent, approval, or
action of, or make any filing with or give any notice to, any Governmental
Authority or any other Person except the consents set forth on Schedule
8.2(a)(ii) attached hereto (the "Jacobs Third Party Consents") and filings
under the HSR Act; (C) subject to clause (B), conflict with, result in the
breach of or constitute a default under any lease, note, mortgage, or other
binding agreement to which any of the Jacobs Parties is a party or by or to
which any of the Jacobs Parties or any Property Owners or Properties may be
bound; (D) violate any order or decree of any court, arbitrator or other
Governmental Authority against or binding upon any of the Jacobs Parties or
any of the Property Owners or Properties; (E) violate any law or regulation
of any Governmental Authority to which any of the Jacobs Parties or any of
the Interests or Properties is subject; or (F) result in, or require the
creation or imposition of, any lien upon or with respect to any of the
Properties or Interests, other than as contemplated herein; except, in the
case of the preceding clauses (B), (C), (D) and (E), where the failure to
obtain a consent, approval or action or where the occurrence of such a
conflict, breach, default or violation, individually or in the aggregate,
would not have a material adverse effect on the business, results of
operations or financial operation of a Property Owner and/or its related
Property (a "Property Material Adverse Effect") or impair or interfere in
any material respect with the consummation of the transactions contemplated
herein. In addition, to JRI's knowledge, no facts or circumstances exist
that, individually or in the aggregate, could reasonably be expected to
have a Property Material Adverse Effect or impair or interfere in any
material respect with the consummation of the transactions contemplated
herein.
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(b) Title to Interests and Interests in Weston Management.
(i) The Interests have been duly authorized and validly issued in
accordance with the constituent organizational documents of the issuers
thereof and applicable law. To JRI's knowledge, the Contributors,
immediately preceding each Closing, will own 100% of the Interests to be
contributed to the Operating Partnership in such Closing (and, in the case
of an ICOA Closing, will own 100% of the Interests to be contributed to the
Operating Partnership in such Closing and in the related ICOA Option
Closing(s)), free and clear of all rights, liens, claims and encumbrances
other than claims or encumbrances arising pursuant to the organizational
documents of the relevant issuer of those Interests and claims arising
pursuant to this Agreement, and subject to restrictions on transfer under
federal and state securities laws. Except as set forth on Schedule
8.2(b)(i), none of the Jacobs Parties or the Property Owners controlled
directly or indirectly by any of the Jacobs Parties has pledged its
Interests or consented to the pledge or encumbrance of any of the
Interests. The outstanding partnership interests in Weston Management have
been duly authorized and validly issued in accordance with the certificate
of limited partnership and partnership agreement of Weston Management and
applicable law. The Jacobs Trusts, immediately preceding the Principal
Closing, will own directly or indirectly all of the outstanding partnership
interests in Weston Management, free and clear of all rights, liens, claims
and encumbrances other than claims or encumbrances arising pursuant to the
certificate of limited partnership or partnership agreement of Weston
Management and applicable law and pursuant to this Agreement and
restrictions on transfer under federal and state securities laws.
(ii) All documents comprising the partnership agreement of JRI
(including, without limitation, all amendments, supplements and
modifications thereof and all assignments with respect thereto, the "JRI
Partnership Agreement") and all documents comprising the constituent
organizational documents of each of the other Jacobs Parties (including,
without limitation, all amendments, supplements and modifications thereof
and all assignments with respect thereto) are described on Schedule
8.2(b)(ii) attached hereto, and, prior to the date hereof, a true, correct
and complete copy of the JRI Partnership Agreement has been delivered to
the Operating Partnership or its counsel. The JRI Partnership Agreement and
each of the constituent organizational documents of the other
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Jacobs Parties identified on Schedule 8.2(b)(ii) is in full force and
effect.
(c) Adverse Claims, Litigation and Proceedings. Except as set forth on
Schedule 8.2(c) hereto or on any other disclosure schedules heretofore delivered
to the Operating Partnership, there are, to JRI's knowledge, no actions, claims,
suits, investigations, arbitrations or other proceedings pending or threatened
against or affecting any of the Jacobs Parties, the Property Owners, Weston
Management or any of the Properties other than those which, individually or in
the aggregate with other such actions, claims, suits, investigations and
proceedings not disclosed, would not impair or interfere in any material respect
with the consummation of the transactions contemplated herein or have a Property
Material Adverse Effect. JRI has received no written notice that it is (i) in
default under or in violation of any indenture, loan or credit agreement or any
other agreement or instrument to which it or any Property Owner is a party or by
which it, any Property Owner or any Property is bound, (ii) in violation of any
order of any Governmental Authority, or (iii) in violation of any law which
could reasonably be expected to (A) adversely affect the legality, validity or
enforceability of the documents relating to the transactions contemplated
herein, or (B) adversely impair any of the Jacobs Parties' ability or obligation
to perform fully on a timely basis any obligation which it has under the
documents relating to the transactions contemplated herein. To JRI's knowledge,
(x) none of the Property Owners is in breach of, or default under, any
indenture, loan or credit agreement or any other material agreement or
instrument to which such Property Owner is a party or by which it or its
respective Property is bound and (y) no event has occurred that, with the giving
of notice or the passage of time, or both, would constitute a default under any
such agreement or instrument.
(d) Compliance with Laws.
(i) To the knowledge of JRI, none of the Jacobs Parties or Property
Owners is in violation of any material law, regulation, order or decree of
any Governmental Authority, court order, decision, ruling, order or award
of any arbitration other than a violation which, individually or in the
aggregate with other such violations, would not impair or interfere in any
material respect with the consummation by it of the transactions
contemplated herein or have a Property Material Adverse Effect. Except as
set forth on Schedule 8.2(d) hereto, JRI has not received any notice of
violation or claimed violation of any such law, regulation or decree, or
pending regulatory proceeding, action or investigation with respect
thereto, or any threat by any Governmental Authority to take regulatory
action against JRI or any of the Properties by reason of any such violation
or claimed violation other than such of the foregoing as, individually or
in the aggregate, would not impair or interfere in any material respect
with the consummation of the transactions contemplated herein or have a
Property
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Material Adverse Effect. To JRI's knowledge, except as set forth on
Schedule 8.2(d), no Property Owner has received any written notice, within
the twelve (12) months preceding the date hereof, from any Governmental
Authority having jurisdiction over such Property Owner or its Property,
asserting that such Property Owner or Property or any part thereof is in
violation of any law, ordinance or regulation applicable to such Property,
which individually or in the aggregate would have a Property Material
Adverse Effect.
(ii) Except as set forth on Schedule 8.2(d) hereto or on any other
disclosure schedules heretofore delivered to the Operating Partnership, JRI
has not received any written or other actual notice within the past twelve
(12) months from any Governmental Authority having jurisdiction over any of
the Jacobs Parties or the Property Owners of any violation of any
employment or other regulatory law, order, regulation or requirement
relating to the management of the Properties that remains uncured and
which, individually or in the aggregate with other such violations which
remain uncured, would impair or interfere in any material respect with the
consummation of the transactions contemplated herein or have a Property
Material Adverse Effect.
(e) Intellectual Property of Jacobs Parties. Except as set forth in
Schedule 8.2(e), to the knowledge of JRI, none of the Jacobs Parties or the
Property Owners is infringing upon any intellectual property rights of any other
Person nor, to the knowledge of JRI, is any other Person infringing on any of
the Jacobs Parties' or any Property Owner's rights in respect of the
intellectual property owned and used by any of such entities.
(f) Taxes.
(i) To the knowledge of JRI, except for such matters as, individually
or in the aggregate with other such matters, would not have a Property
Material Adverse Effect, (A) all tax returns required to be filed on or
before the date hereof (including any valid extensions of time to file such
tax returns) by or on behalf of each Property Owner have been filed through
the date hereof or will be filed on or before the Closing Date with respect
to its related Property in accordance with all applicable laws; (B) except
as set forth on Schedule 8.2(f), there is no action, suit or proceeding
pending against, or with respect to, any of the Property Owners for any
taxes, nor has any claim for additional taxes been asserted by any such
authority; and (C) all taxes reflected upon or required to be reflected
upon a tax return so filed or so to be filed on or before the applicable
Closing Date have been paid or will be paid on or before such Closing
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Date, unless such taxes are being contested in good faith and adequate
reserves for the payment of such taxes have been established by the
applicable Property Owner.
(ii) As of the date hereof, and except as set forth on Schedule 8.2(f)
hereto or any other disclosure schedules heretofore delivered to the
Operating Partnership, there is no pending or, to JRI's knowledge,
threatened tax audit of any tax return filed by or on behalf of any
Property Owner or with respect to any of any Property Owner's income,
operations, properties or assets or any tax return by or on behalf of any
other Person as to which any Property Owner may have liability for any such
Person's taxes (whether by operation of law or by contract).
(g) Permits. To the knowledge of JRI, each of the Property Owners and
Weston Management has all permits that are necessary for the ownership, use,
operation and licensing of the management of its Properties (or, in the case of
Weston Management, the Properties) and is not in violation of any such permit,
except to the extent the failure to possess or the violation of such permit
would not, individually or in the aggregate, have a Property Material Adverse
Effect or prevent the transactions contemplated herein.
(h) Insolvency. There are no attachments, executions or assignments for the
benefit of creditors, or voluntary or involuntary proceedings in bankruptcy, or
under any other debtor relief laws, contemplated by or pending or, to the
knowledge of JRI, threatened against any of the Jacobs Parties or the Property
Owners or Weston Management.
(i) Property Owners and Weston Management.
(i) Each of the Property Owners and Weston Management is duly
organized and validly existing under the laws of its jurisdiction of
organization and has the power and authority to carry on its business as
now being conducted;
(ii) each Property Owner and Weston Management is duly qualified to do
business and is in good standing in each jurisdiction in which the nature
of its business or the ownership and/or leasing of its properties makes
such qualification necessary, other than in such jurisdictions where the
failure to be so qualified or licensed, individually or in the aggregate,
could not reasonably be expected to have a material adverse effect on the
entity's business or operations as currently conducted;
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(iii) none of the Property Owners has conducted or currently conducts
any business or has owned or owns any assets other than cash and investment
securities and direct or indirect interests in a Property and assets
relating thereto;
(iv) Schedule 8.2(i)(iv) attached hereto identifies for each Property
Owner and Weston Management the relevant certificate of limited partnership
or certificate of formation, as applicable, the relevant partnership or
operating agreement, as applicable, and in each case all amendments thereto
through the date of this Agreement, and JRI has delivered to the Operating
Partnership complete and correct copies of each of such instruments,
agreements and amendments;
(v) to JRI's knowledge, none of the Property Owners is in breach of,
or default under, the constituent organizational documents of such Property
Owner, no partner or member of any Property Owner is in breach of, or
default under, the organizational documents of such Property Owner and no
event has occurred that, with the giving of notice or the passage of time,
or both, would constitute a default under the constituent organizational
documents of any of the Property Owners;
(vi) Exhibit B sets forth the name and percentage interest of each of
the partners or members, as applicable, in each of the Property Owners as
of the date of this Agreement;
(vii) Except as identified on Schedule 8.2(i)(vii) or Schedule 7.1(j),
no partner or member or other affiliate of any of the Property Owners has
made a loan to such Property Owner that is still outstanding on the date
hereof and none of the Contributors has any outstanding capital commitments
to any of the Property Owners;
(viii) Schedule 8.2(i)(viii) attached hereto identifies the management
contracts (the "Management Contracts") and the leasing contracts (the
"Leasing Contracts") related to each of the Properties, and in each case
all amendments thereto through the date of this Agreement, and JRI has
delivered to the Operating Partnership complete and correct copies of each
of such agreements and amendments;
(ix) the Management Contracts and the Leasing Contracts comprise all
of the management and leasing agreements between the Property Owners and
any other Persons, and other than the parties to the Management Contracts
and the Leasing Contracts, there is no property
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manager, leasing manager, developer or entity engaged in a similar capacity
with respect to any Property Owner;
(x) Schedule 8.2(i)(x) attached hereto identifies each Person for whom
Weston Management is presently performing or has previously performed
management and/or leasing services and the property or properties to which
those services relate;
(xi) immediately before the Principal Closing, the Management
Contracts and Leasing Contracts with respect to each of the Properties
being included in the Principal Closing will be owned by Weston Management
free and clear of all liens, claims, rights or encumbrances of any kind,
and at or prior to the Principal Closing JRI will cause Weston Management
to terminate or assign to another Person any management and/or leasing
contracts to which Weston Management is a party that do not relate to the
Properties being contributed at the Principal Closing, so that at the
Principal Closing the management and leasing contracts with respect to the
Properties being included in the Principal Closing will be the only
material assets, other than working capital and assets relating to the
fulfillment of its responsibilities pursuant to such management contracts
and leasing contracts, owned by Weston Management; and
(xii) to JRI's knowledge, none of the Property Owners or Weston
Management is in default under, or in breach of, any of the Management
Contracts or Leasing Contracts, and no event has occurred which, with the
giving of notice or the passage of time or both, would constitute a default
under any of the Management Contracts of Leasing Contracts.
(j) Rent Roll. To JRI's knowledge, the rent rolls for the Properties
attached hereto as Schedule 3.1(b)(v) (the "Rent Rolls") are true, correct and
complete as of the date of such Rent Rolls, which date is not more than thirty
(30) days prior to the date hereof, except to the extent the omission of a lease
on such Rent Rolls could not, individually or in the aggregate, have a Property
Material Adverse Effect, and there are no renewal and extension options other
than those indicated on such Rent Rolls, except in each case to the extent any
inaccuracies would not, individually or in the aggregate, have a Property
Material Adverse Effect. The parties hereto acknowledge that such Rent Rolls may
not list (and, to the extent that such Rent Rolls do not list, JRI makes no
representation with respect to) subleases, concessions, or license agreements
which may have been entered into by tenants or subtenants, or license or
concession agreements that have terms not in excess of sixty (60) days or are
terminable by the landlord without penalty, or kiosks or pushcarts occupied
under agreements that are terminable by the landlord without penalty upon not
more than thirty (30) days' notice.
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(k) Anchors. Attached hereto as Schedule 8.2(k) is a true, correct and
complete list of the leases/reciprocal easement agreements, all amendments
thereto and all material agreements currently in effect between the relevant
Property Owners and each Anchor with respect to each Property (collectively, the
"Anchor Documents"), and true, correct and complete copies of each Anchor
Document have been delivered or made available to CBL. To JRI's knowledge, each
Anchor Document is in full force and effect. Except as set forth on Schedule
8.2(k), JRI is not aware that any of the Property Owners has received any
written notice that such Property Owner is in material breach or default under
any Anchor Document to which it is a party, which breach or default remains
uncured on the date hereof. Within the twelve (12) month period preceding the
date hereof, no Property Owner has sent any written notice to any of its
respective Anchors asserting that such Anchor is in material breach or default
under any Anchor Document to which it is a party, which breach or default
remains uncured on the date hereof.
(l) Leasing Commissions, Fees and Tenant Improvement Allowances. To JRI's
knowledge, all leasing commissions, fees and tenant improvement allowances due
with respect to the current unexpired term of each lease listed on Schedule
3.1(b)(v) have been paid in full except as set forth on Schedule 8.2(l).
Schedule 8.2(l) contains a true and complete list of all leasing commissions,
fees and tenant improvement allowances that may become due under any lease
listed on Schedule 3.1(b)(v) upon a renewal, extension, expansion or early
termination of such lease.
(m) Operating Contracts. To JRI's knowledge, except as set forth on
Schedule 8.2(m) ("Operating Contracts"), and other than the leases listed on
Schedule 3.1(b)(v) and Permitted Exceptions, there are no management, service,
operating, listing, brokerage, supply and maintenance agreements, equipment
leases, or other contracts or agreements between any Property Owner or any of
its affiliates and any other party relating to operations at the Property owned
by it as of the date hereof, other than those that (i) involve total payment of
no more than $150,000 per annum and are terminable by the relevant Property
Owner without penalty upon one (1) year's prior written notice or less or (ii)
are terminable by the relevant Property Owner without penalty upon the sale of
the Property or upon ninety (90) days' prior written notice or less. To JRI's
knowledge, each of the Operating Contracts is in full force and effect and,
except as set forth on Schedule 8.2 (m), has not been amended, modified or
supplemented. JRI will not cause any Property Owner to modify, terminate or
accept early surrender of any of the Operating Contracts, except as set forth on
Schedule 8.2 (m), without the prior written consent of the Operating
Partnership, which consent shall not be unreasonably withheld, conditioned or
delayed, and JRI will not cause any Property Owner to enter into a new service
contract for such Property Owner's Property or any portion thereof without the
prior written consent of the Operating Partnership (which consent will not be
unreasonably withheld, conditioned or delayed), if such contract would be
prohibited by Section 4.6(vii).
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(n) Continuing Loans. Attached hereto as Schedule 8.2(n) is a true, correct
and complete list of the material loan documents relating to each of the
Continuing Loans and all amendments thereto through the date of this Agreement,
and JRI has delivered or otherwise made available to the Operating Partnership
complete and correct copies of each of such documents and amendments. The
applicable Property Owners are current in all payments of principal and interest
due under each Continuing Loan through the most recent scheduled payment date.
Schedule 8.2(n) accurately sets forth the unpaid principal balance of the
Continuing Loans as of the most recent scheduled payment date, and the principal
amount of any deposits or escrows held or established in connection therewith as
of the most recent scheduled payment date.
(o) Environmental Reports. Schedule 8.2(o) contains a list of certain
environmental and hazardous waste reports relating to the Properties
(collectively, the "Environmental Reports"). A true, correct and complete copy
of each Environmental Report (other than the reports identified under the
caption "CBL Reports" which were commissioned by CBL) has been delivered or made
available to CBL. To JRI's knowledge, except as disclosed in the Environmental
Reports, and other than (i) cleaning fluids and other similar substances used by
any tenant or Property Owner in the routine use, operation or maintenance of any
of the Properties in compliance with the applicable laws, regulations, codes,
licenses, permits, orders, judgments, decrees or injunctions promulgated by any
Governmental Authority for the protection of the environment (including air,
water, soil and natural resources) (the "Environmental Law") and (ii)
asbestos-containing building materials previously removed from any Property in
compliance with Environmental Law, no hazardous materials have been used or
stored at any Property, and to JRI's knowledge there has been no material
release of Hazardous Materials in, on or under any Property. Except as set forth
in the Environmental Reports, no Property Owner has received any written notice
from any Governmental Authority asserting that a condition exists at the
Property that constitutes or has resulted in a violation of any Environmental
Law, or that any claim is being asserted against such Property Owner by reason
of any such violation. Except as set forth in the Environmental Reports, Weston
Management has not received any written notice from any Governmental Authority
asserting that a condition exists at any property that was at the time or at any
prior time to which such notice relates managed by Weston Management that
constitutes or has resulted in a violation of any Environmental Law, or that any
claim is being asserted against Weston Management by reason of any such
violation.
(p) Insurance. Schedule 8.2(p) contains a true, correct and complete list
of all casualty, commercial liability, employment, professional liability and
crime insurance policies maintained by the Jacobs-Managed Property Owners with
respect to the Properties and all such insurance policies maintained by Weston
Management with respect to any properties managed by it. To the knowledge of
JRI, these policies are in full force and effect.
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(q) Purchase Options. Except as set forth in the Anchor Documents, and
except for the Permitted Exceptions, no Property Owner has granted any existing
options to purchase any of its Properties.
(r) Financial Statements. The financial statements for each Property Owner
as of and for the year ended December 31, 1999, and as of and for the six-month
period ended June 30, 2000 (the "Financial Statements"), which were previously
made available to CBL, were prepared in accordance with generally accepted
accounting principles, consistently applied, and fairly present in all material
respects and in accordance with applicable accounting principles the financial
position and results of operations of such Property Owner at or as of the date
or period specified therein. Since June 30, 2000, each Property Owner has, to
JRI's knowledge, conducted its business in the ordinary course consistent in all
material respects with past practice. The financial statements for Weston
Management as of and for the year ended December 31, 1999, which were previously
made available to CBL, were prepared in accordance with generally accepted
accounting principles, consistently applied, and fairly present in all material
respects and in accordance with applicable accounting principles the financial
position and results of operations of Weston Management at or as of the date or
period specified therein. Since December 31, 1999, Weston Management has
conducted its business in the ordinary course consistent in all material
respects with past practice.
(s) No Other Liabilities. None of the Property Owners has incurred any
material liability, whether absolute, accrued, contingent or otherwise, except
(i) liabilities reflected in the Financial Statements or separately disclosed on
Schedule 8.2(s) or elsewhere in the Schedules to this Agreement and (ii)
liabilities that were incurred by a Property Owner after June 30, 2000 in the
ordinary course of business or were incurred before June 30, 2000, but are not
required by generally accepted accounting principles to be reflected on such
statements and, in either event, could not reasonably be expected to have a
Property Material Adverse Effect. Except as set forth in Schedule 8.2(s) and
other than pursuant to the Management Contracts and the Leasing Contracts,
Weston Management is not subject to any material liability, whether absolute,
accrued, contingent or otherwise, except as set forth in the financial
statements for Weston Management, which were previously made available to CBL,
and except for liabilities incurred in the ordinary course of business or that
are not required by generally accepted accounting principles consistently
applied to be reflected on such financial statements.
(t) Employees. None of Weston Management or any Property Owner has any
employees or maintains any "employee benefit plan" as that term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended,
none of the Property Owners has ever had any employees or maintained any
"employee benefit plan" as so defined, and Weston Management has had no
employees since January 1, 1997.
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(u) No Foreign Owners. None of the Jacobs Parties or New Entities or New
Entity Subsidiaries is or will become, directly or indirectly, a Foreign Owner
(as hereinafter defined) in the Operating Partnership as a result of the
transactions contemplated by this Agreement. "Foreign Owner" as used herein,
means a foreign person or a person that is directly or indirectly owned, in
whole or in part, by a foreign person as determined in accordance with Section
897(h)(4) of the Code and the regulations promulgated thereunder.
(v) Section 708(b)(1)(B) Terminations. The transfers of the interests in
the Partial Properties described in Section 2.1(c) hereof will not, taking into
account solely transfers to be made pursuant to Section 2.1(c) hereof, result in
a termination of the Partial Property Owners under Section 708(b)(1)(B) of the
Code for federal income tax purposes.
(w) No Private Restrictions on Use. Other than Permitted Exceptions, there
are no unrecorded agreements restricting the use of any Property as a regional
shopping center in a manner that could reasonably be expected to have a Property
Material Adverse Effect.
(x) Private Offering. None of the Jacobs Parties nor any person acting on
their behalf has taken, or will prior to the applicable Closing Date take, any
action that could reasonably be expected to subject the SCUs issued on such
Closing Date, or the issuance of REIT Stock or Common Units in exchange for any
such SCUs, to the registration requirements of Section 5 of the Securities Act.
(y) Partnership Status; Ownership of Corporations. All of the Property
Owners are treated as partnerships for federal income tax purposes. Except as
separately disclosed on Schedule 8.2(y), none of the Property Owners owns any of
the stock of any entity that is treated as a corporation or an association taxed
as a corporation for federal income tax purposes. The stock described in
Schedule 8.2(y), if any, does not represent more than 9.9% of the voting power
or value of the outstanding stock of any issuer of stock described in Schedule
8.2(y). The parties agree that this representation shall not be treated as
breached or having been breached if any listing of additional stock is added to
Schedule 8.2(y) after the date of signing of this document, so long as the stock
described in Schedule 8.2(y) at Closing does not represent, at the time of
Closing, more than 9.9% of the voting power or value of the outstanding stock of
any issuer of stock described in Schedule 8.2(y).
(z) Cary Note. Other than the Cary Note itself and the First Amended and
Restated Cary Venture Limited Partnership Agreement of Limited Partnership,
dated March 11, 1993, true, correct and complete copies of which have previously
been delivered to CBL, there is no agreement to which the Property Owner of Cary
Towne Center or any Jacobs Party is a party modifying or supplementing the terms
of the
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indebtedness evidenced by the Cary Note. The original principal balance of the
Cary Note was $27,801,293.53, of which $6,114,942.84 remained outstanding as of
August 31, 2000. As of the date hereof neither Cary Venture Limited Partnership
nor JG Cary Joint Venture is in default with respect to the indebtedness
evidenced by the Cary Note. JG Cary Joint Venture owns the Cary Note free and
clear of all rights, liens, claims and encumbrances.
(aa) Disclaimer; Limitation on Scope of Representations Relating to
Kentucky Oaks Mall. No Jacobs Party directly or indirectly manages or controls
Kentucky Oaks Mall Company, the owner of Kentucky Oaks Mall, and accordingly,
except for the representation in Section 8.2(b)(i) with respect to the ownership
by the Contributors of the Interests in Kentucky Oaks Mall Company and the
representation in the last sentence of this Section 8.2(aa), JRI is not making
any representation or warranty about Kentucky Oaks Mall or Kentucky Oaks Mall
Company in this Agreement. In furtherance of the foregoing, as used in this
Section 8.2, the terms Property and Partial Property are specially defined to
exclude Kentucky Oaks Mall and the terms Property Owner and Partial Property
Owner are specially defined to exclude Kentucky Oaks Mall Company.
Notwithstanding the foregoing, JRI represents to CBL that to its knowledge no
circumstances exist that would cause any of the foregoing representations and
warranties to be incorrect with respect to Kentucky Oaks Mall or Kentucky Oaks
Mall Company if the foregoing exclusions had not been made to this Section 8.2.
The parties agree that if JRI is unable to remake the foregoing representation
at the Closing in which Kentucky Oaks Mall is proposed for inclusion (other than
(1) because JRI had actual knowledge as of the date hereof that such
representation was not accurate and failed to disclose the inaccuracy to CBL or
(2) because of an affirmative action taken by JRI in contravention of its
obligations pursuant to this Agreement that caused the representation to no
longer be accurate), JRI's inability will not constitute a basis for a failure
of a condition precedent to CBL's obligation to accept the Interests in Kentucky
Oaks Mall.
(bb) JRI's Knowledge. As used in this Agreement, the words "to the
knowledge of JRI", "to JRI's knowledge", and other words of similar tenor mean
only the current, actual, conscious (and not constructive, imputed or implied)
knowledge of the following designees of JRI, without having made a review of
files or other inquiry: Richard E. Jacobs, Martin Cleary, Anthony Weigand,
Judson Smith and David Pancoast. Anything herein to the contrary
notwithstanding, no such designee shall have any personal liability or
obligation whatsoever with respect to any of the matters set forth in this
Agreement, the Interest Contribution Agreements, the Deed Contribution
Agreements, and any other agreements, documents or instruments related thereto
or contemplated hereunder or thereunder or any of the representations made by
JRI being or becoming untrue, inaccurate or incomplete in any respect.
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8.3 General Provisions.
(a) JRI's Right to Amend Representations. JRI shall have the right from
time to time prior to the Principal Closing or any Deferred Closing by notice to
the Operating Partnership, and without liability therefor, to amend or
supplement its qualifications to the representations and warranties in Section
8.2, by amendment of the Schedules hereto or otherwise, to reflect changes in
facts or to correct any immaterial factual inaccuracies; provided, however, that
any such amendment or supplement, taken alone or together with all other
amendments or supplements, if sufficiently adverse to the Operating Partnership,
may constitute the nonfulfillment of the condition set forth in Section 7.1(b).
(b) Contributor's Representations Deemed Modified. To the extent that CBL
actually knows at or prior to the Principal Closing or any Deferred Closing that
any of JRI's or the Contributors' representations and warranties that are
required to be made on such Closing Date are inaccurate, untrue or incorrect in
any way, such representations and warranties shall be deemed modified to reflect
CBL's knowledge; provided, however, that any such modification, taken alone or
together with all other amendments, supplements or modifications, if
sufficiently adverse to the Operating Partnership, may constitute the
nonfulfillment of the condition set forth in Section 7.1(b). Except with respect
to Property-Specific Monetizable Claims, which are addressed in Section 8.3(c)
below, JRI shall not have any liability for a breach of representation or
warranty pursuant to Section 9.2 by reason of any inaccuracy of a representation
or warranty if and to the extent that such inaccuracy has been identified by JRI
to CBL in writing or otherwise is actually known by CBL at the time of the
applicable Closing and CBL elects, nevertheless, to consummate such Closing. For
purposes of this Agreement, CBL shall be deemed to actually know that a
representation or warranty is untrue, inaccurate or incorrect if and to the
extent that this Agreement, any exhibit or Schedule attached hereto, any
estoppel certificate executed by any tenant of the Property and delivered to
CBL, or any study, test, report, or analyses delivered to or prepared by or for
CBL or any of its employees, agents, representatives or attorneys (all of the
foregoing being herein collectively called the "CBL's Representatives") or
otherwise obtained by CBL or CBL's Representatives contains information which is
inconsistent with such representation or warranty.
(c) Notice of Breach; JRI's Right to Cure; Survival of Claims for
Property-Specific Monetizable Claims . If, after the date hereof and prior to
the Principal Closing or any Deferred Closing, CBL becomes aware or is deemed to
know that any of the representations or warranties made herein by JRI and
required to be made again by JRI at such Closing are untrue, inaccurate or
incorrect in any material respect (other than as a result of receipt of written
notice thereof from JRI pursuant to the requirement of the next sentence), CBL
shall give JRI written notice thereof promptly after obtaining such knowledge.
If, at or prior to the Principal Closing or any Deferred Closing, JRI actually
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knows that any of the representations or warranties made herein by JRI and
required to be made again by JRI at such Closing is untrue, inaccurate or
incorrect in any material respect, JRI will give CBL written notice thereof
promptly after obtaining such knowledge. In either such event, if such breach or
inaccuracy arising out of facts or circumstances relating to any Property Owner
or the related Property, and all other breaches or inaccuracies relating to such
Property Owner and/or Property, can be cured or corrected by payment in the
aggregate of $50,000 or less, then all such breaches and/or inaccuracies shall
be deemed to have been waived and the provisions of Section 7.1(b) shall be
deemed to have been satisfied without the payment by the Jacobs Parties of any
such amounts, provided, that, if the aggregate amount waived pursuant to this
sentence in respect of such breaches and inaccuracies for all Properties exceeds
$500,000, CBL will be entitled to bring post-closing claims against JRI for the
breaches relating to the amounts that exceed $500,000 pursuant to Section 9.2.
In the event that any such breaches or inaccuracies are not deemed immaterial
and therefore are not waived by operation of the preceding sentence, JRI will
have the right to cure or correct the underlying circumstances as necessary to
eliminate the adverse effect on CBL of the breaches and/or inaccuracies. JRI
agrees to notify CBL in writing within ten (10) Business Days after JRI's or
CBL's receipt of a notice of such breach or inaccuracy pursuant to this Section
8.3 or sooner if the relevant Closing is scheduled to occur sooner whether or
not JRI intends to cure or correct the circumstances giving rise thereto, and
JRI's failure to provide such notice will be deemed notice to CBL that JRI does
not intend to attempt any cure.
Notwithstanding the foregoing or any other provisions of this Agreement or any
Interest Contribution Agreement or Deed Contribution Agreement to the contrary,
if any of the representations or warranties made by JRI in Section 8.2 with
respect to any particular Property is determined to have been inaccurate in any
material respect (either when made or when remade at a Closing) and the
inaccuracy is of a nature that it can be cured by the payment of money in an
amount that is readily determinable (any such claim, a "Property-Specific
Monetizable Claim", and the dollar amount that would be necessary to cure, the
"Cure Amount"), and either:
(i) the total Cure Amount for all Property-Specific Monetizable Claims
relating to that Property exceeds $50,000 (the first $50,000 of any such
Cure Amount, the "De Minimis Cure Amount", and the excess Cure Amount above
$50,000, if any, the "Excess Cure Amount") but the sum of (1) the Excess
Cure Amount for that Property and all other Excess Cure Amounts arising in
connection with the other Properties to be included in that Closing and not
cured by JRI at or prior to the Closing, (2) the aggregate of any uncured
Excess Cure Amounts relating to any Properties that were subject to prior
Closings and (3) the excess of (I) the aggregate of all De Minimis Cure
Amounts not cured by JRI at or prior to the Closing
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in question and all prior Closings over (II) $500,000 (such sum, the
"Aggregate Excess Cure Amount"), does not exceed $3 million, or
(ii) the De Minimis Cure Amount for the Property Specific Monetizable
Claims at that Property and the other Properties to be included in the
Closing in question, when taken together with all De Minimis Cure Amounts
not cured by JRI in connection with all prior Closings, exceeds $500,000,
but the Aggregate Excess Cure Amount, does not exceed $3 million,
then, in either case, the existence of the Property-Specific Monetizable Claims
in respect of that Property will not entitle CBL to raise the Property-Specific
Monetizable Claims relating to that Property as a failure of any condition
precedent to CBL's obligation to accept the contribution of the affected
Property, but instead CBL will be entitled to bring a post-Closing claim against
JRI pursuant to Section 9.2 (and subject to the limitations in Section 9.3) for
the aggregate Excess Cure Amount for that Property and/or for the portion of the
De Minimis Cure Amount for that Property in excess of the $500,000 maximum
aggregate De Minimis Cure Amount.
If, on the other hand, either (A) the Cure Amount for the Property-Specific
Monetizable Claims at any Property proposed for inclusion in a particular
Closing exceeds $50,000 and the Aggregate Excess Cure Amount exceeds $3 million
or (B) the De Minimis Cure Amount for the Property Specific Monetizable Claims
at that Property, when taken together with all De Minimis Cure Amounts not cured
by JRI and relating to the Properties that have been the subject of a prior
Closing and the Properties proposed for inclusion in the Closing in question
exceeds $500,000 and the Aggregate Cure Amount exceeds $3 million, then, in
either case, the existence of the Property-Specific Monetizable Claim for that
Property, if not cured by JRI, will constitute a failure of a condition
precedent to CBL's obligation to accept the contribution of that Property at the
Closing in question.
(d) CBL's Right to Amend Representations. CBL shall have the right from
time to time prior to the Principal Closing or any Deferred Closing by notice to
JRI, and without liability therefor, to amend or supplement its qualifications
to the representations and warranties in Section 8.1, by amendment of the
Schedules hereto or otherwise, to reflect changes in facts or to correct any
immaterial factual inaccuracies; provided, however, that any such amendment or
supplement, taken alone or together with all other amendments or supplements, if
sufficiently adverse to the Jacobs Parties, may constitute the nonfulfillment of
the condition set forth in Section 7.2(c).
(e) CBL's Representations Deemed Modified. To the extent that JRI actually
knows at or prior to the Principal Closing or any Deferred Closing that any of
CBL's representations and warranties that are required to be made on such
Closing Date
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are inaccurate, untrue or incorrect in any way, such representations and
warranties shall be deemed modified to reflect JRI's knowledge. CBL shall not
have any liability in connection with this Agreement by reason of any inaccuracy
of a representation or warranty if and to the extent that such inaccuracy has
been identified by CBL to JRI in writing or otherwise is actually known by JRI
at the time of the applicable Closing and JRI elects, nevertheless, to
consummate such Closing. For purposes of this Agreement, JRI shall be deemed to
actually know that a representation or warranty is untrue, inaccurate or
incorrect if and to the extent that this Agreement or any Exhibit or Schedule
attached hereto contains information that is inconsistent with such
representation or warranty.
8.4 Survival. The representations and warranties in this Article VIII shall
survive the applicable Closing, subject to the limitations set forth in Article
IX.
ARTICLE IX
INDEMNIFICATION
9.1 Obligation of CBL to Indemnify. CBL hereby agrees to indemnify, defend
and hold harmless each of the Jacobs Parties and each of the other Contributors
and their respective affiliates from and against all costs, damages, liabilities
and expenses (including, without limitation, reasonable attorneys' fees and
disbursements but excluding consequential and other indirect damages) imposed
upon, incurred by (whether by way of judgment, award, decree, settlement payment
or otherwise) or suffered by any of them by reason of any (i) breach or
inaccuracy of any representation or warranty of CBL contained in Section 8.1, as
such representation or warranty may have been modified or deemed modified by
Section 8.3(e) or in any certificate delivered pursuant to Section 6.3 or (ii)
breach of any covenant of CBL contained herein or in any Interest Contribution
Agreement or Deed Contribution Agreement, if applicable. The Jacobs Parties
acknowledge that the indemnification provisions in this Section 9.1 are the sole
and exclusive remedies available to them with respect to any and all claims
arising from any breach of any representation or warranty in Section 8.1 of this
Agreement; provided, that, the foregoing limitation will not be interpreted as
interfering with either party's right to recover the Expense Reimbursement
following a termination as provided in Article X.
9.2 Obligation of JRI to Indemnify. JRI hereby agrees to indemnify, defend
and hold harmless CBL from and against all costs, liabilities, damages and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements but excluding consequential and other indirect damages) imposed
upon, incurred by (whether by way of judgment, award, decree, settlement payment
or otherwise) or suffered by CBL by reason of any (i) breach or inaccuracy of
any representation or warranty of JRI contained in Section 8.2, as such
representation or warranty may have been modified or deemed modified by Section
8.3(b) or in any certificate delivered by JRI pursuant to Section 6.2, or (ii)
breach of any covenant of JRI contained herein which covenant is required to be
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performed or observed after the Principal Closing or any Deferred Closing, as
applicable. CBL acknowledges that the indemnification and other provisions in
this Section 9.2 are the sole and exclusive remedies available to CBL with
respect to any and all claims arising from any breach of any representation or
warranty in Section 8.2 of this Agreement; provided, that, the foregoing
limitation will not be interpreted as interfering with either party's right to
recover the Expense Reimbursement following a termination as provided in Article
X.
9.3 Limitations on Recovery. (a) Notwithstanding anything to the contrary
in this Article IX, it is expressly understood and agreed by the parties that,
without limiting or affecting any other obligation of either party to defend and
indemnify contained in this Article IX or otherwise in this Agreement, CBL shall
not be entitled to any claim for indemnification pursuant to Section 9.2(i), (x)
if the breach or inaccuracy of representation or warranty in question results
from or is based on a condition, state of facts or other matter that was
actually known to CBL prior to the applicable Closing, except in the case of a
Property-Specific Monetizable Claim to the extent provided in Section 8.3(c)
hereof, (y) unless the valid claims of CBL for all such breaches collectively
aggregate more than $200,000, it being understood and agreed that CBL shall only
be entitled to indemnification for amounts in excess of the foregoing threshold,
and (z) unless CBL has given JRI written notice of such claim (stating the
representation or warranty alleged to have been breached, an explanation in
reasonable detail of the circumstances giving rise to the claim, and CBL's good
faith estimate of the total dollar amount of the harm suffered and likely to be
suffered as a result of the alleged breach) on or prior to the 270th day
following the Principal Closing Date (or, if the claim in question relates to
the Interests in a Property Owner or the related Property that were included in
a Deferred Closing, the 270th day following the Deferred Closing Date relating
thereto), it being understood and agreed that JRI shall have no further
liability under or in respect of such warranties and representations after the
270th day following the applicable Closing Date, except to the extent of any
breach thereof of which CBL gives JRI written notice on or prior to such 270th
day. Accordingly, on the 271st day following the applicable Closing Date, JRI
shall be fully discharged and released (without the need for any separate
release or other documentation) from any and all liability or obligation to CBL
or any successor or assign with respect to Claims arising out of JRI's
representations and warranties, except solely for those matters that are then
the subject of a pending notice of claim delivered by CBL to JRI on or prior to
such date. Any claim that CBL may have at any time against JRI for a breach of
any representation or warranty, whether known or unknown, with respect to which
a notice of claim has been delivered to JRI within the applicable survival
period established above may only be the subject of subsequent litigation
brought by CBL against JRI if such litigation is commenced against JRI on or
prior to the last Business Day of the 18th calendar month following the
applicable Closing Date. Accordingly, on the day following the last Business Day
of the 18th calendar month following the applicable Closing Date, JRI shall be
fully discharged and released (without the need for separate releases or other
documentation) from any liability or obligation to
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CBL and/or its successors and assigns with respect to any Claims CBL may have
against JRI for a breach of any representation or warranty contained herein or
in any certificate delivered by JRI at the relevant Closing pursuant to Section
6.2, except solely for those matters that are the subject of a litigation by CBL
(or its successor or assign) against JRI that is pending on the last Business
Day of the 18th calendar month following the applicable Closing Date.
Notwithstanding anything to the contrary contained herein, in no event shall JRI
be liable under Section 9.2 for any amount in excess of $3,000,000 in the
aggregate for all claims for indemnification thereunder.
(b) In the case of any claim asserted by a third party against CBL,
including without limitation, any claim by a Governmental Authority and any
request by such Governmental Authority to audit or otherwise inquire into or
examine (an "Inquiry") any matters as to which a claim might arise hereunder,
CBL shall notify JRI for the purpose of representing their collective interests
in the event of a claim against CBL promptly after CBL has actual knowledge of
any claim as to which indemnity may be sought or as to any such Inquiry, and CBL
shall permit JRI to assume the defense of any claim or any litigation resulting
therefrom or administer such Inquiry, provided, that, (i) counsel to JRI, who
shall conduct the defense of such claim or litigation or the administration of
such Inquiry, shall be reasonably satisfactory to CBL, and CBL may participate
in such defense at CBL's expense, and (ii) the omission by CBL to give notice as
provided herein shall not relieve JRI of its indemnification obligation under
this Agreement except to the extent that such omission results in a failure of
actual notice to JRI and JRI is materially damaged as a result of such failure
to give notice. JRI, in the defense of any such claim or litigation, shall not,
except with the consent of CBL (x) consent to entry of any judgment or enter
into any settlement that provides for injunctive or other non-monetary relief
affecting CBL or that does not include as a term thereof the giving by the
claimant or plaintiff to CBL of an unconditional release from all liability with
respect to such claim or litigation or (y) pursue any course of defense of any
claim subject to indemnification hereunder, if CBL shall reasonably and in good
faith determine that the conduct of such defense might be expected to affect
adversely CBL's tax liability or ability to conduct its business or adversely
affect the use of the Properties in any material respect. In the event that CBL
shall reasonably and in good faith determine that any proposed settlement of any
claim subject to indemnification hereunder by JRI might be expected to affect
adversely CBL's tax liability or ability to conduct its business or that CBL may
have available to it one or more defenses or counterclaims that are inconsistent
with one or more of those that may be available to JRI in respect of such claims
or litigation relating thereto, CBL shall have the right at all times to take
over and assume control over the settlement, negotiations and litigation
relating to any such claim at the sole cost of JRI, provided, that, if CBL does
so take over and assume control, CBL shall not settle such claim or litigation
without the written consent of JRI, such consent not to be unreasonably
withheld, and the liability of JRI with respect to such claim or litigation
shall in no event exceed the amount JRI would have paid in settlement thereof,
and provided, further, that the provisions of clause (x) above shall control
with respect to
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the defense of any claim arising out of any tax audit or assessment. In the
event that JRI does not accept the defense of any matter as above provided, CBL
shall have the full right to defend against any such claim or demand, and shall
be entitled to settle or agree to pay in full such claim or demand, in its sole
discretion. In any event, JRI and CBL shall cooperate in the defense of any
action or claim subject to this Agreement and the records of each shall be
available to the other with respect to such defense. Acceptance of the defense
of any claim or litigation or of the administration of any Inquiry by JRI shall
be without prejudice to JRI's right to assert at any time before or after
accepting such defense or administration that they are not obligated to provide
indemnity, either in whole or in part, with respect to such claim or litigation
for which such defense is accepted or which might subsequently arise from such
Inquiry.
9.4 Indemnification for Certain Historical Liabilities. (a) In addition to
the foregoing, JRI agrees to indemnify, defend and save harmless CBL from and
against all direct costs, liabilities, damages and expenses (including, without
limitation, reasonable attorneys' fees and disbursements but excluding
consequential and other indirect damages) imposed upon, incurred by (whether by
way of judgment, award, decree, settlement payment or otherwise) or suffered by
CBL as a result of: (i) any entity-level liability (including, without
limitation, liabilities of the types identified in sub-clauses (1) through (4)
of clause (ii) below), other than an Excluded Liability, that accrued to a
Property Owner the Interests of which were contributed to CBL as contemplated in
Article I above prior to the Closing at which the Interests in that Property
Owner were contributed to CBL (i.e., where the specific event or circumstances
upon which the claim is based occurred prior to that Closing), whether arising
from the Property owned by that Property Owner or from any other assets or
activities of that Property Owner (but expressly excluding any portion of such
costs, liabilities, damages or expenses that are incurred or suffered by CBL in
respect of interests in any Partial Property Owner or Partial Property acquired
pursuant to any transactions other than the transactions contemplated in this
Agreement) and (ii) in the case of any Property that is contributed to CBL by
way of a Deed Contribution Agreement, any liabilities that accrued in respect of
that Property prior to the applicable Closing in the nature of any of the
following (to the extent not accounted for in the post-Closing apportionment
process): (1) percentage rent overcharges or common area maintenance
overcharges, (2) claims by tenants, Anchors or other Persons set forth in any
estoppel certificates obtained in connection with the transactions contemplated
in this Agreement that the contributing Property Owner breached any contractual
obligations relating to the Property, (3) contingent interests that accrued on
any Continuing Loans or New Loans prior to the applicable Closing and (4)
entity-level liabilities (including, without limitation, any litigation or
claims pending and any tax liabilities) that accrued to the contributing
Property Owner prior to the applicable Closing. The indemnification set forth in
this clause (a) is in addition to the indemnification set forth in Section 9.2
and is not subject to the limitations set forth in Section 9.3. In lieu of the
limitations in Section 9.3, however, CBL agrees that the indemnity is subject to
the limitations in Section 9.4(c), that the indemnity is being given only on a
Property-by-
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Property basis and that in no event will JRI be liable pursuant to this
indemnification for any amounts in excess of $3 million in the aggregate with
respect to any one Property and its related Property Owner. As used herein, the
term "Excluded Liability" means any cost, liability, damage or expense
(including, without limitation, any attorneys' fees or expenses) owing by any
Property Owner, Weston Management or any affiliate of any of the foregoing
consisting of, arising out of or relating to (i) any environmental matter
(including, without limitation, any liabilities or obligations relating to
Hazardous Materials located at, on, under, in or adjacent to any Property or
migrating from any Property) (it being understood that JRI is providing separate
indemnification for certain such matters, to the extent they constitute a breach
of a representation by JRI, in Section 9.2 above, and for the matters identified
on Schedule 9.5 hereof in Section 9.5 below), (ii) any leasing fees or
commissions owed by any Property Owner to Weston Management and (iii) any
transfer, recording or other taxes (including state and local taxes) owing as a
result of the transactions contemplated in this Agreement (it being understood
that such taxes are to be paid as described in Section 4.13).
(b) In addition to the foregoing, JRI agrees to indemnify, defend and save
harmless CBL from and against all direct costs, liabilities, damages and
expenses (including without limitation, reasonable attorneys' fees and
disbursements but excluding consequential and other indirect damages) imposed
upon, incurred by (whether by way of judgment award, decree, settlement payment
or otherwise) or suffered by CBL, (1) with respect to any Property or related
Property Owner, as a result of any claim by any Associate or Outside Partner
against CBL arising out of the Consent Solicitation Documentation relating
thereto or the Jacobs Parties' handling of the consent solicitation process
relating thereto as contemplated in Section 4.14(b), other than any such claim
based on an action taken by CBL or an allegation that information provided by
CBL for inclusion therein included any untrue statement of a material fact or
omitted to state a material fact required to be stated therein to make the
statement therein, in the light of the circumstances under which they were made,
not misleading and (2) as a result of the improper discharge, if any, of
perchloroethylene or any Hazardous Material currently or historically used in
dry cleaning processes, including, without limitation, perchloroethylene, and
any compound resulting from the degradation thereof, by Burnette's Cleaners or
any predecessor or successor in interest thereto on or under the real property
comprising Columbia Mall. The indemnification set forth in this clause (b) is in
addition to the indemnification set forth in Section 9.2 and is not subject to
the limitations set forth in Section 9.3. In lieu of the limitations in Section
9.3, however, CBL agrees that the indemnity is subject to the limitations in
Section 9.4(c).
(c) The indemnity in clauses (a) and (b) above will only survive the
Principal Closing until the fifth (5th) anniversary of the Principal Closing
Date and, with respect to any written claim delivered to JRI within such five
(5) year period, until final unappealable adjudication or settlement thereof,
provided litigation is, or adjudication proceedings are, instituted within six
(6) months following JRI's receipt of CBL's written
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notice of the claim under this indemnity. In addition, it is expressly agreed
that (x) CBL shall not be entitled to any claim for indemnification pursuant to
Section 9.4(b)(2) unless the aggregate of all valid claims under that clause
collectively exceed $25,000, it being understood and agreed that CBL will only
be entitled to indemnification for amounts collectively in excess of $25,000,
and (y) in no event shall JRI be liable pursuant to Section 9.5(b)(2) for any
amounts collectively in excess of $475,000. For the avoidance of doubt, on the
day following the fifth (5th) anniversary of the Principal Closing Date JRI will
be fully discharged and released (without the need for any separate release or
other documentation) from any and all liability or obligation to CBL and any
other Person with respect to claims arising out of the foregoing indemnity,
whether known or unknown, with respect to which a notice of claim was not
delivered to JRI on or before that date. Any claim that CBL may have at any time
against JRI arising out of the foregoing indemnity with respect to which notice
of claim under this indemnity has been delivered to JRI on or before the fifth
(5th) anniversary of the Principal Closing Date may only be subject to
subsequent litigation or other adjudication proceedings by CBL against JRI if
the litigation or other proceeding is commenced against JRI on or prior to the
last Business Day of the sixth (6th) month following the fifth (5th) anniversary
of the Principal Closing Date. All of the provisions of Section 9.3(b) of this
Agreement apply equally to the indemnity provided in this Section 9.4.
9.5 Indemnification for Matters Relating to Weston Management and for
Certain Known Claims. In addition to the foregoing, JRI agrees to indemnify,
defend and save harmless CBL from and against all costs, liabilities, damages
and expenses (including, without limitation, reasonable attorneys' fees and
disbursements but excluding consequential and other indirect damages) imposed
upon, incurred by (whether by way of judgment, award, decree, settlement payment
or otherwise) or suffered by CBL or any entity in which it holds any direct or
indirect ownership interest (i) as a result of the existence of any entity-level
liability whatsoever that accrued to Weston Management prior to the Principal
Closing Date (i.e., where the specific event or circumstances upon which the
claim is based occurred prior to that Closing) and was not taken into account in
the closing apportionments relating to the contributions of the partnership
interests in Weston Management or the apportionments relating to any contributed
Property, (ii) resulting from or otherwise relating to any of the pending
actions or claims described on Schedule 9.5 hereto or the underlying subject
matter of any such actions or claims or (iii) as a result of the failure by
Weston Management or any Property Owner the Interests of which were contributed
to CBL, prior to the Closing in which such Interests were contributed to CBL, to
have filed any tax returns or made any payments in respect of outstanding tax
liabilities when due. JRI further agrees that the foregoing indemnity obligation
is not subject to any limitation in amount or duration set forth in this Article
IX or elsewhere in this Agreement.
9.6 Covenant to Maintain Net Assets. JRI covenants to CBL that from the
Principal Closing Date through the fifth (5th) anniversary thereof it will at
all times
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maintain consolidated net worth (determined by taking into account the current
market values of its assets at the time of any determination of its net worth)
of at least $25 million.
ARTICLE X
TERMINATION
10.1 Termination Rights. JRI will be entitled to terminate this Agreement
pursuant to the terms of Section 3.2(d) above. In addition, each of CBL and JRI
may terminate this Agreement by paying the other party a non-accountable expense
reimbursement payment (such payment, the "Expense Reimbursement") and thereafter
no party to this Agreement shall have any further rights or obligations
hereunder except pursuant to those provisions of this Agreement that provide, by
their terms, that they survive termination. The amount of the Expense
Reimbursement payable will be determined as follows:
(a) General Termination Right. If the terminating party gives notice of
termination at any time during (x) the first 45 days following the date of this
Agreement or (y) such shorter period of at least 14 days from the date of this
Agreement as JRI shall elect in its sole and absolute discretion by delivering
written notice of such election to CBL (the "Initial Period"), the Expense
Reimbursement will be $2.5 million. If the termination occurs after the Initial
Period but before the Principal Closing, the Expense Reimbursement will be $15
million, unless the circumstances set forth in either of clauses (b) or (c)
below exist. If the termination occurs after the Principal Closing, the Expense
Reimbursement will be $25 million minus the product of (x) $1,428,571.43
multiplied by (y) the sum of (i) the number of Properties in excess of fourteen
(14) contributed to CBL at the Principal Closing and (ii) the number of Excluded
Properties that have been contributed to CBL through the date of determination.
If the Expense Reimbursement is payable to CBL, it shall be payable over a
period not to exceed five (5) years as follows: the portion payable each year
shall equal the amount that CBL may receive without violating the REIT
requirements set forth in Section 856 of the Code, less $1 million. On December
20 of each year in such five (5) year period, CBL's independent public
accountants shall certify to JRI the amount payable for such year, and JRI shall
pay such amount to CBL by December 31 of such year. Any portion of the Expense
Reimbursement not paid by the end of the fifth (5th) year shall be forfeited and
JRI will have no further obligation to pay such Expense Reimbursement.
(b) Negative Shareholder Vote. Notwithstanding the provisions of clause (a)
above, if despite the REIT and its board of directors having (w) fulfilled their
obligations under Section 4.15 hereof and (x) convened a meeting of the
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REIT's stockholders to consider the SCU Issuance Proposal and the Share
Ownership Limitation Amendments, and (y) achieved participation at that meeting
by proxy and/or in person by a sufficient number of stockholders to constitute a
quorum, a majority of the shares of the REIT voted against the issuance of the
SCUs comprising the SCU component of the Consideration or the REIT was unable to
obtain the affirmative vote of the holders of at least a majority of the shares
of stock represented at that meeting, then either of JRI or CBL will be entitled
to terminate this Agreement by written notice to the other and upon such
termination CBL will only be required to pay the Jacobs Parties an Expense
Reimbursement of $2.5 million.
(c) TIAA's Consent. Notwithstanding the provisions of clause (a) above, if
CBL has given JRI the Ready to Mail Notice and, on or before the forty-fifth
(45th) day following the date JRI receives CBL's notice, JRI has not received
the consent from Teachers Insurance and Annuity Association of America ("TIAA")
to the transactions contemplated by this Agreement and JRI has used its
commercially reasonable efforts to obtain the same as required under this
Agreement, then CBL will have the right, exercisable by delivering written
notice to JRI at any time following that forty-fifth (45th) day, to terminate
this Agreement and upon such termination JRI will only be required to pay CBL an
Expense Reimbursement of $2.5 million.
10.2 Termination upon Default or a Failure of a Condition Precedent. (a) In
addition to and without limiting the termination rights set forth in Section
10.1, if either CBL, on the one hand, or any of the Jacobs Parties, on the other
hand (such party, the "Defaulting Party"), has defaulted in any material respect
in the fulfilment of any of its covenant obligations herein or has not satisfied
all of the conditions precedent to the other party's obligation to participate
in the Principal Closing on or before the Initial Scheduled Principal Closing
Date (or, if either of CBL or JRI has exercised an extension right as permitted
in Section 6.1, the Subsequent Scheduled Principal Closing Date established as a
result of such exercise) and the non-defaulting party is unwilling to waive the
default or unmet conditions, the non-defaulting party's sole and exclusive
remedy will be to terminate this Agreement, and upon such termination JRI (if
any Jacobs Party is the Defaulting Party) or the Operating Partnership (if CBL
is the Defaulting Party) will be required to pay the non-defaulting party the
Expense Reimbursement of $15 million, and thereafter no party to this Agreement
will have any further rights or obligations hereunder other than any arising
under any section herein that expressly provides that it survives the
termination of this Agreement. Notwithstanding the foregoing, (x) if CBL elects
to terminate this Agreement pursuant to the preceding sentence of this Section
10.2(a), and the CBL termination right arises because, among other things,
despite commercially reasonable efforts JRI was not able to obtain TIAA's
consent to one or more of the transactions contemplated by this Agreement, then
the Expense Reimbursement payable by JRI will only be $2.5 million, and (y) if
both of CBL
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and the Jacobs Parties have defaulted in any material respect in the fulfilment
of covenant obligations in this Agreement or have not satisfied all of the
conditions precedent to the other's obligation to participate in the Principal
Closing on or before April 30, 2001, or any combination of the foregoing, and
either of them is unwilling to waive the other's defaults and unmet conditions,
then each of them will be entitled to terminate this Agreement, and upon such
termination neither party will be required to pay the other any Expense
Reimbursement.
(b) In addition, if a Defaulting Party has defaulted in any material
respect in the fulfillment of any of its covenant obligations herein or has not
satisfied all of the Closing conditions precedent to the other party's
obligation to participate in a Deferred Closing on or prior to the applicable
Cure Cutoff Date, then the Defaulting Party shall pay the non-Defaulting Party
an Expense Reimbursement in the amount of $25 million minus the product of (x)
$1,428,571.43 multiplied by (y) the sum of (i) the number of Properties in
excess of fourteen (14) contributed to CBL at the Principal Closing and (ii) the
number of Excluded Properties that have been contributed to CBL through the date
of determination; provided, however, that if, after using commercially
reasonable efforts, JRI fails to obtain or cure any of items (1) through (4) set
forth in Section 6.4(a) with respect to any Excluded Property, JRI shall not be
required to pay the Expense Reimbursement to CBL for failing to satisfy all of
the conditions precedent to CBL's obligation to participate in a Deferred
Closing with respect to such Excluded Property. Notwithstanding anything herein
to the contrary, no party hereunder shall be required to pay an Expense
Reimbursement more than once.
(c) For certainty, each of CBL and each Jacobs Party agrees that the
foregoing provisions (a) and (b) set forth the only remedy available for default
under this Agreement prior to the Principal Closing and any Deferred Closing and
more particularly that, except as necessary to enforce its right to collect the
applicable Expense Reimbursement as set forth above, no party shall be entitled
to bring any claim for damages or specific performance or any other remedy at
law or in equity against the other for any breach or violation of this
agreement. Each of CBL, on the one hand, and the Jacobs Parties, on the other
hand, confirms that it was represented by counsel that explained, at the time
this Agreement was made, the consequences of the liquidated damages provisions
contained in this Article X.
(d) Notwithstanding anything herein to the contrary, if a Defaulting Party
has defaulted in any material respect in the fulfillment of any of its covenant
obligations for an ICOA Option Closing contained in any Interest Contribution
and Option Agreement or has not satisfied all of the closing conditions
precedent to the other Party's obligations to participate in an ICOA Option
Closing on or prior to the applicable ICOA Option Closing Date, the
non-Defaulting Party shall be entitled to sue for specific performance and, if
for any reason specific performance is not available to such non-
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Defaulting Party, the Defaulting Party shall pay the non-Defaulting Party an
Expense Reimbursement in the amount of $15 million.
ARTICLE XI
MISCELLANEOUS
11.1 Broker. JRI and CBL expressly acknowledge that Goldman, Sachs & Co.
has acted as JRI's exclusive broker with respect to the transaction contemplated
herein and with respect to this Agreement, and that JRI shall pay any brokerage
commission due to Goldman, Sachs & Co. in accordance with the separate agreement
between JRI and Goldman, Sachs & Co. JRI and CBL expressly acknowledge that
Merrill Lynch & Co., Inc. has acted as CBL's exclusive broker with respect to
the transaction contemplated herein and with respect to this Agreement, and that
CBL shall pay any brokerage commission due to Merrill Lynch & Co., Inc. in
accordance with the separate agreement between CBL and Merrill Lynch & Co., Inc.
Each of JRI and CBL represents and warrants to the other that it has not dealt
with any other broker in this transaction and each agrees to hold harmless the
other and indemnify the other from and against any and all damages, costs or
expenses (including, but not limited to, reasonable attorneys' fees and
disbursements) suffered by the indemnified party as a result of acts of the
indemnifying party that would constitute a breach of its representation and
warranty in this Section. The provisions of this Section 11.1 shall survive the
Principal Closing and any Deferred Closing.
11.2 Expenses. JRI hereby acknowledges and agrees that it will be
responsible for paying any severance payments to its employees and any fees
payable to Goldman, Sachs & Co. or any other consultant retained by it in
connection with the contributions contemplated herein. In addition, JRI agrees
to pay (except as specifically set forth herein) any prepayment penalties or
premiums or other payments to lenders, ground lessors, outside investors or
other third parties in connection with refinancing any indebtedness secured by
any of the Properties at or prior to the applicable Closing or obtaining any
Required Consents.
11.3 Further Assurances. The Jacobs Parties and CBL agree, at any time and
from time to time after the Principal Closing, to execute, acknowledge where
appropriate and deliver such further instruments and documents and to take such
other action as the other party may reasonably request in order to carry out the
intent and purpose of this Agreement, at the expense of the party making such
request, provided, however, that neither the Jacobs Parties nor CBL shall, in
connection with the foregoing, be obligated to incur any liabilities or
obligations in addition to their respective liabilities or obligations otherwise
contemplated in this Agreement. The provisions of this Section 11.3 shall
survive the Closing.
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11.4 Payment of Expenses. Each party will pay the expenses provided for in
this Agreement to be paid by it (including pursuant to Section 4.13 above) and
the fees and disbursements of its attorneys, accountants and other professionals
and experts incurred in connection with the negotiation of this Agreement and in
preparation for any Closing (or any ICOA Option Closing).
11.5 Notices. All notices, demands, consents, requests or other
communications provided for or permitted to be given hereunder by a party hereto
must be in writing and shall be deemed to have been properly given or served (x)
on the fifth (5th) Business Day after deposit in the United States mail
addressed to such party by registered or certified mail, postage prepaid, return
receipt requested, (y) on the day after delivery to a reputable national
overnight air courier service, prepaid and addressed to such party, or (z) if
not deposited in the United States mail or delivered to a national overnight air
courier service as aforesaid, shall be deemed to be properly given or served
upon actual receipt (with rejection of delivery by addressee to constitute
receipt), as follows:
If to any of the Jacobs Parties:
Jacobs Realty Investors Limited Partnership
25425 Center Ridge Road
Westlake, Ohio 44145
Attention: Richard E. Jacobs
with a copy sent simultaneously to JRI's attorneys:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Benjamin R. Weber
and
Thompson Hine & Flory LLP
3900 Key Center
127 Public Square
Cleveland, Ohio 44114-1216
Attention: Donald H. Messinger
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If to CBL:
CBL & Associates Properties, Inc.
Watermill Center
800 South Street, Suite 395
Waltham, Massachusetts 02453
Attention: Stephen D. Lebovitz
and
CBL & Associates Properties, Inc.
One Park Place
6148 Lee Highway, Suite 300
Chattanooga, Tennessee 37421
Attention: Charles B. Lebovitz and
H. Jay Wiseman, Jr.
with a copy sent simultaneously to CBL's attorneys:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Attention: Eugene A. Pinover and
Yaacov M. Gross
and
Shumacker & Thompson, P.C.
Suite 103, One Park Place
6148 Lee Highway
Chattanooga, Tennessee 37421
Attention: Jeffery V. Curry
Any of the aforementioned parties may change its address for the receipt of
notices, demands, consents, requests and other communications by giving written
notice to the others in the manner provided for above.
11.6 Assignment. None of the parties to this Agreement shall have the right
to assign, transfer, convey and/or otherwise sell (or enter into any agreement
to do the same), directly or indirectly, any interest it may have in or under
this Agreement without first having obtained the written consent of the other
parties, which consent may be withheld in such party's sole and absolute
discretion.
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The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns, but shall not inure to the benefit of, or be
enforceable by, the Title Company or (unless otherwise expressly provided
herein) any other Person.
11.7 Waiver. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom the enforcement of the change, waiver,
discharge or termination is sought or, in the case of a default, by the
non-defaulting party or parties.
11.8 Incorporation of Recitals and Schedules. The Recitals to this
Agreement and the Exhibits and Schedules attached hereto are hereby incorporated
by reference into the body of this Agreement and made a part hereof.
11.9 Confidentiality; Press Releases.
(a) Agreement. Each of CBL and the Jacobs Parties agrees that it will not
disclose the contents of this Agreement to any third parties or issue any press
release with respect thereto or any Closing hereunder without the consent of the
other parties, except (i) as may be required or, based on the advice of counsel,
advisable to ensure compliance with any applicable laws, rules or regulations of
any Governmental Authority having jurisdiction over such party, (ii) as is
expressly authorized or required by the terms of this Agreement (e.g., in
connection with soliciting any stockholder or partner consents or obtaining any
required third-party consents or approvals) or (iii) if and to the extent such
contents have already been placed in the public domain (other than by the party
seeking to disclose and in a manner not permitted by this Section 11.9(a)).
Nothing contained in this Section 11.9 shall be construed as prohibiting (x) the
Jacobs Parties from disclosing the contents of this Agreement (A) on a
confidential basis to the Jacobs Parties' counsel, accountants, consultants,
property managers and other agents, or (B) (if necessary or appropriate in JRI's
reasonable judgment) to regulatory authorities having jurisdiction over the
Jacobs Parties (which authorities, by law, may not be bound by any
confidentiality restrictions), or (C) to parties from which it is seeking
financing or (y) CBL from disclosing the contents of this Agreement (A) on a
confidential basis to its counsel, accountants, consultants, property managers
and other agents, or (B) (if necessary or appropriate in CBL's reasonable
judgment) to regulatory authorities having jurisdiction over CBL (which
authorities, by law, may not be bound by any confidentiality restrictions), or
(C) to parties from which it seeks financing. The Jacobs Parties and CBL each
agree (I) to consult with and cooperate with the other parties on the content
and timing of all press releases and other public announcements relating to the
transactions contemplated by this Agreement and (II) that the initial press
release to be issued with respect to the transactions contemplated by this
Agreement will be in the form agreed to by the parties hereto prior to the
execution of this Agreement. Notwithstanding the foregoing, in connection with
the disposition of the remaining retail shopping center
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properties owned by the Jacobs Parties and their affiliates (the "Remaining
Portfolio"), the Jacobs Parties may disclose the contents of this Agreement with
any potential buyer of the Remaining Portfolio, provided such potential buyer
agrees to keep the same confidential on terms similar to the terms contained
herein.
(b) Property Information. In the event this Agreement is terminated, CBL
and CBL's representatives shall promptly deliver to the Jacobs Parties all
originals and copies of the information relating to the Interests and the
Properties supplied by, or at the direction of, the Jacobs Parties in the
possession of CBL and CBL's representatives. In addition to the foregoing, CBL
shall remain obligated and bound pursuant to the terms and provisions of that
certain Confidentiality Agreement by and between The Richard E. Jacobs Group,
Inc. and the REIT, dated January 4, 2000, except to the extent that the
requirements of that agreement are inconsistent with the provisions of this
Section 11.9.
11.10 Merger. Subject to the last sentence of Section 11.9(b) above, all
understandings and agreements heretofore had between the parties hereto are
merged in this Agreement and the instruments and documents referred to herein,
which fully and completely express their agreements with respect to the
transactions contemplated herein, and supersede all prior agreements, written or
oral, with respect thereto.
11.11 GOVERNING LAW. AS PERMITTED BY SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK, THE PARTIES HERETO AGREE THAT THIS
AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
11.12 Jurisdiction. Each of the Jacobs Parties and CBL hereby irrevocably
and unconditionally submits to the jurisdiction of any New York State Court or
Federal Court of the United States of America sitting in the borough of
Manhattan, and any appellate court from any such court, in any suit, action or
proceeding arising out of or relating to this Agreement, or for recognition or
enforcement of any judgment, and each hereby irrevocably and unconditionally
agrees that all claims in respect of any such suit, action or proceeding shall
be brought in and may be heard and determined in such New York State Court or,
to the extent permitted by law, in such Federal Court. Each of JRI and CBL
agrees that a final judgment in any such suit, action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Each of the Jacobs Parties and CBL hereby
irrevocably and unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement in any New York State Court or Federal Court sitting in the
borough of Manhattan. Each of the Jacobs Parties and CBL hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such suit, action or proceeding in any such
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court. Nothing contained in this Section 11.12 shall be construed as preventing
any of the Jacobs Parties and CBL, or any of their respective affiliates, from
(i) objecting to the jurisdiction of any New York State Court on the ground that
the matter involved exceeds the statutory jurisdiction of such court or (ii)
from seeking to remove any suit, action or proceeding from a New York State
Court to a Federal Court sitting in the borough of Manhattan, or vice versa.
11.13 Captions. The captions and Article headings included in this
Agreement and the table of contents are for convenience only, do not constitute
part of this Agreement and shall not be considered or referred to in
interpreting the provisions of this Agreement.
11.14 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument. The submission of a signature page
transmitted by facsimile (or similar electronic transmission facility) shall be
considered as an "original" signature page for purposes of this Agreement so
long as the original signature page is thereafter transmitted by mail or by
other delivery service and the original signature page is substituted for the
facsimile signature page in the original and duplicate originals of this
Agreement.
11.15 Severability. If any provision hereof is held invalid or not
enforceable to its fullest extent, such provision shall be enforced to the
extent permitted by law, and the validity of the remaining provisions hereof
shall not be affected thereby.
11.16 Prior Negotiations; Construction. No negotiations concerning or
modifications made to prior drafts of this Agreement shall be construed in any
manner to limit, reduce or impair the rights, remedies, duties and obligations
of the parties under this Agreement or to restrict or expand the meaning of any
of the provisions of this Agreement or to construe any of the provisions of this
Agreement in any party's favor. The parties acknowledge that each party and its
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendment, Schedule or Exhibit hereto.
11.17 Litigation Expenses. In the event that either the Jacobs Parties or
CBL is required to employ an attorney because any litigation arises out of this
Agreement between the parties hereto, the non-prevailing party shall pay the
prevailing party all reasonable fees and expenses, including attorneys' fees and
expenses, incurred in connection with such litigation.
11.18 No Recordation. The Jacobs Parties and CBL each agree that neither
this Agreement nor any memorandum or notice hereof shall be recorded and CBL
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agrees (a) not to file any notice of pendency or other instrument (other than a
judgment or lis pendens filed by CBL in connection with CBL's enforcement of its
rights hereunder) against any of the Properties or any portion thereof in
connection herewith and (b) to indemnify the Jacobs Parties against all costs,
expenses and damages, including, without limitation, reasonable attorneys' fees
and disbursements, incurred by the Jacobs Parties by reason of the filing by CBL
of such notice of pendency or other instrument.
11.19 Competitive Activities. Nothing herein shall be construed as
restricting or limiting in any way the Jacobs Parties, their principals,
affiliates, or any partner, member or shareholder of any of them, from engaging
in activities that may be deemed to be competitive with the Properties or any
other business activities currently conducted or to be conducted by CBL or any
of their affiliates on or after the date hereof. This Section 11.19 shall not,
however, be construed as releasing Richard Jacobs from the provisions of the
Non-Competition Agreement.
11.20 No Obligations of Property Owners. It is expressly acknowledged that
none of the Property Owners shall have any obligations whatsoever under this
Agreement or under the terms of any Interest Contribution Agreement or Deed
Contribution Agreement to which they are not a party, and each Property Owner
shall only be bound by the terms and provisions of the applicable Interest
Contribution Agreement or Deed Contribution Agreement relating to its Property
if, as and when fully executed and delivered and not otherwise.
11.21 WAIVER OF TRIAL BY JURY. THE JACOBS PARTIES AND CBL HEREBY WAIVE, TO
THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM FILED BY THE JACOBS PARTIES OR CBL, WHETHER IN
CONTRACT, TORT OR OTHERWISE, WHICH RIGHT OR CLAIM RELATES DIRECTLY OR INDIRECTLY
TO THIS AGREEMENT, ANY DOCUMENTATION RELATED THERETO, OR ANY ACTS OR OMISSIONS
IN CONNECTION WITH THIS AGREEMENT. THIS WAIVER HAS BEEN AGREED TO AFTER
CONSULTATION WITH LEGAL COUNSEL SELECTED BY CBL AND THE JACOBS PARTIES.
11.22 Relationship of JRI to the Jacobs Parties. Each Jacobs Party agrees
(and CBL acknowledges) that JRI alone will represent and act on behalf of all of
the Jacobs Parties for the purpose of giving any required notice or consent
hereunder and for the purpose of determining whether the conditions precedent to
the Jacobs Parties' obligations hereunder have been satisfied.
11.23 General Limitation on Liabilities. The parties acknowledge and agree
that (i) neither the Jacobs Trusts nor any other owner of interests in or
affiliate of JRI will have any liability to CBL for any breach by JRI of any of
its representations,
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<PAGE>
warranties, covenants or other obligations contained in or pursuant to this
Agreement, and (ii) no stockholder of the REIT and no holder of limited
partnership interests in the Operating Partnership will have any liability to
the Jacobs Parties for any breach by the REIT or the Operating Partnership of
any of its representations, warranties, covenants or other obligations contained
in or pursuant to this Agreement, provided, however, that the foregoing shall
not preclude the Jacobs Parties or CBL from making any claims against any direct
or indirect partner, member or other equity owner of the other pursuant to
Section 17-607 of the Delaware Revised Uniform Limited Partnership Act to the
extent the partner, member or other equity owner has received a distribution or
other payment in violation of that Section or other similar law to which such
Person is subject.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
JRI:
JACOBS REALTY INVESTORS LIMITED
PARTNERSHIP
By: JG Realty Investors Corp.
By: /s/ Martin J. Cleary
------------------------------
Name: Martin J. Cleary
Title: President
JACOBS TRUSTS:
solely with respect to its express
obligations pursuant to Section 1.1(a),
Article IV and Article XI hereof,
By: /s/ Richard E. Jacobs
------------------------------
Richard E. Jacobs, solely as trustee
for the Richard E. Jacobs Revocable
Living Trust
solely with respect to its express
obligations pursuant to Section 1.1(a),
Article IV and Article XI hereof,
By: /s/ Richard E. Jacobs
------------------------------
Richard E. Jacobs, solely as trustee
for the David H. Jacobs Marital
Trust
<PAGE>
OPERATING PARTNERSHIP:
CBL & ASSOCIATES LIMITED PARTNERSHIP
By: CBL Holdings I, Inc.
By: /s/ Charles B. Lebovitz
------------------------------
Name: Charles B. Lebovitz
Title: Chairman of the Board and
Chief Executive Officer
REIT:
CBL & ASSOCIATES PROPERTIES, INC.
By: /s/ Charles B. Lebovitz
------------------------------
Name: Charles B. Lebovitz
Title: Chairman of the Board and
Chief Executive Officer
<PAGE>
ANNEX B
[letterhead of Merrill Lynch]
September 25, 2000
Board of Directors
CBL & Associates Properties, Inc.
6148 Lee Highway
Suite 300
Chattanooga, TN 37421
Members of the Board of Directors:
CBL & Associates Properties, Inc. (the "REIT"), CBL & Associates Limited
Partnership (the "Operating Partnership" and together with the REIT, "CBL"),
Jacobs Realty Investors Limited Partnership, Richard E. Jacobs, solely as
Trustee for the Richard E. Jacobs Revocable Living Trust, and Richard E. Jacobs,
solely as Trustee for the David H. Jacobs Marital Trust (collectively the
"Jacobs Parties"), propose to enter into a Master Contribution Agreement, dated
as of September 25, 2000 (the "Agreement"), pursuant to which CBL will acquire
the direct and/or indirect interests (the "Interests") of the Jacobs Parties and
the other Contributors (as defined in the Agreement) in up to 21 properties (the
"Properties") set forth in Exhibits A and B of the Agreement in a transaction
(the "Transaction") in which the Interests and certain other assets will be
transferred to the Operating Partnership in exchange for aggregate consideration
equal to $100.0 million in cash, 11,707,194 Series J Special Common Units
("SCUs") of the Operating Partnership and the assumption of certain debt
associated with the Properties (the "Consideration"). The Consideration is
subject to adjustment and/or reallocation in the circumstances set forth in the
Agreement, including in the event that certain Properties and/or certain
Interests of potential Contributors are excluded from the Transaction in
circumstances permissible under the Agreement. The terms and conditions of the
Transaction are set forth in more detail in the Agreement (including the
schedules and exhibits thereto) and the other Transaction Documents (as defined
below).
Each holder of SCUs shall have certain rights to request from either the
REIT or the Operating Partnership an exchange of all or any portion of such
holder's SCUs for Exchange Consideration (as defined below). Subject to the
limitations and adjustments described in the Transaction Documents, "Exchange
Consideration" paid by the REIT in exchange for each SCU shall, in the sole
discretion of the REIT, consist of (i) common stock, par value $.01 per share,
of the REIT ("Common Stock") at an initial ratio of one share of Common Stock
for
<PAGE>
each SCU, (ii) cash equal to the value of Common Stock into which such SCU is
exchangeable or (iii) a combination of Common Stock and cash equal to the value
of Common Stock into which such SCU is exchangeable. Subject to the limitations
and adjustments described in the Transaction Documents, "Exchange Consideration"
paid by the Operating Partnership in exchange for each SCU shall consist of
common units of the Operating Partnership at an initial ratio of one common unit
of the Operating Partnership for each SCU.
You have asked us whether, in our opinion, the Consideration to be paid in
the Transaction is fair from a financial point of view to the REIT.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to CBL which we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts and
operating data, relating to the business, earnings, funds from
operations, adjusted funds from operations, cash flow, assets,
liabilities and prospects of CBL and the Properties furnished to us by
CBL and the Jacobs Parties, respectively;
(3) Conducted discussions with members of senior management of CBL and the
Jacobs Parties concerning the matters described in clauses (1) and (2)
above, as well as their respective businesses and prospects before and
after giving effect to the Transaction;
(4) Reviewed the market prices and valuation multiples for the shares of
Common Stock and compared them with those of certain publicly traded
companies that we deemed relevant;
(5) Reviewed the results of operations of CBL and the Properties and
compared them with those of certain publicly traded companies that we
deemed to be relevant;
(6) Compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions which we deemed to be
relevant;
(7) Participated in certain discussions and negotiations among
representatives of CBL and the Jacobs Parties and their financial and
legal advisors;
(8) Reviewed the potential pro forma impact of the Transaction on CBL;
(9) Reviewed a draft dated September 25, 2000 of the Agreement and the
schedules and exhibits to the Agreement, including a draft dated
September 25,
2
<PAGE>
2000 of the Voting and Standstill Agreement among CBL, the CBL
Principals named therein, the Jacobs Parties and Martin J. Cleary, a
draft dated September 25, 2000 of the First Amendment to the Second
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, a draft dated September 25, 2000 of the Terms of the
Series J Special Common Units of the Operating Partnership and a draft
dated September 25, 2000 of the Registration Rights Agreement among
the REIT and the holders of the SCUs (collectively the "Transaction
Documents"); and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, real estate market and monetary
conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the REIT, the Operating Partnership, the Interests or the
Properties or been furnished with any such evaluation or appraisal. In addition,
we have not assumed any obligation to conduct any physical inspection of the
Properties or the properties and facilities of CBL. With respect to the
financial forecast information furnished to or discussed with us by CBL or the
Jacobs Parties, we have assumed that they have been reasonably prepared and
reflect the best currently available estimates and judgment of CBL's or the
Jacobs Parties' management as to the expected future financial performance of
CBL or the Properties, as the case may be. We express no opinion as to such
financial forecast information or the assumptions on which they were based. We
have also assumed that the final form of the Agreement and other Transaction
Documents will be substantially similar to the last drafts thereof reviewed by
us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that the representations and
warranties of each party to the Agreement and all related covenants or
agreements contained therein or in the other Transaction Documents are true and
correct, that each party will perform all covenants and agreements required to
be performed by such party and that all conditions to the consummation of the
Transaction will be satisfied without waiver thereof. We have assumed that in
the course of obtaining any regulatory or other consents or approvals
(contractual or otherwise) for the Transaction, there will be no amendments or
modifications to the Transaction Documents that will have a material adverse
effect on the contemplated benefits of the Transaction. We have also assumed
that the REIT will retain its status as a Real Estate Investment Trust for
federal income tax purposes under the Internal Revenue Code of 1986, as amended.
3
<PAGE>
We are acting as financial advisor to the REIT in connection with the
Transaction and will receive a fee from the REIT for our services, all of which
is contingent upon the consummation of the Transaction. In addition, the REIT
has agreed to indemnify us for certain liabilities arising out of our
engagement. We have, in the past, provided investment banking services to CBL
and may continue to do so and have received, and may receive, fees for the
rendering of such services. In addition, in the ordinary course of our business,
we may actively trade the securities of the REIT, for our own account and for
the accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
REIT. Our opinion does not address the merits of the underlying decision by the
REIT to engage in the Transaction and does not constitute a recommendation to
any shareholder of the REIT as to how such shareholder should vote on the
proposed Transaction.
We are not expressing any opinion herein as to the prices at which the
shares of the Common Stock will trade following the announcement or consummation
of the Transaction.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Consideration to be paid in the Transaction is fair
from a financial point of view to the REIT.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
4
<PAGE>
ANNEX C
To be provided by the General Partner pursuant to the terms of the Agreement.
TERMS
OF
SERIES J SPECIAL COMMON UNITS
OF
CBL & ASSOCIATES LIMITED PARTNERSHIP
(the "Operating Partnership")
Pursuant to Article 4.4 of the
Second Amended and Restated Partnership Agreement of
the Operating Partnership
WHEREAS, Article 4.4 of the Second Amended and Restated Partnership
Agreement of the Operating Partnership (as amended through _______, 2001, and as
the same may hereafter be amended as permitted therein and herein, the
"Partnership Agreement") grants CBL Holdings I, Inc., the general partner of the
Operating Partnership (the "General Partner"), authority to cause the Operating
Partnership to issue interests in the Operating Partnership to persons other
than the General Partner in one or more classes or series, with such
designations, preferences and relative, participating, optional or other special
rights, powers and duties as may be determined by the General Partner in its
sole and absolute discretion. (For ease of reference, capitalized terms used
herein and not otherwise defined have the meanings assigned to them in the
Partnership Agreement.)
NOW THEREFORE, the General Partner hereby designates a series of priority
units and fixes the designations, powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, of such priority units, as follows:
1. Designation and Amount. The units of such series shall be designated
"Series J Special Common Units" (the "SCUs") and the number of units
constituting such series shall initially be _________. The Operating Partnership
may not issue any additional SCUs unless (i) the issuance is required to deliver
additional consideration as required by the terms of the Master Contribution
Agreement, dated as of September ___, 2000, among the Company, the Operating
Partnership, Jacobs Realty Investors Limited Partnership ("JRI") and certain
other persons named therein (the "Master Contribution Agreement") or any
Interest Contribution Agreement or Deed Contribution Agreement (as those terms
are defined in the Master Contribution
<PAGE>
Agreement) or (ii) it has obtained the prior written consent of JRI. The rights
and obligations of the SCUs shall be as set forth herein (to the extent not
inconsistent with the Partnership Agreement) and in the Partnership Agreement.
Nothing in the foregoing shall be deemed to limit the right and power of the
General Partner to cause the Operating Partnership to issue securities otherwise
designated to the fullest extent permitted under the terms of the Partnership
Agreement and this Exhibit E.
2. Distribution Rights. (a) Holders of SCUs shall be entitled to receive,
when, as and if declared by the General Partner distributions with respect to
the SCUs in the manner and to the fullest extent set forth in the Partnership
Agreement.
(b) Distributions with respect to the SCUs shall be payable on the dates
designated by the General Partner for the payment of distributions to the
holders of Common Units. Any distribution payable on the SCUs for the quarter in
which the SCUs are first issued will be prorated and computed on the basis of a
360-day year consisting of twelve 30-day months. Distributions will be payable
to holders of record as they appear in the records of the Operating Partnership
at the close of business on the applicable record date, which shall be the
record date designated by the General Partner for the payment of distributions
for such quarter to the holders of Common Units.
(c) At such time, if any, as there is any distribution shortfall as
described in Section 6.2(a)(iii) of the Partnership Agreement, none of the
Operating Partnership, the General Partner or the REIT will redeem, purchase or
otherwise acquire for any consideration (or any moneys be paid to or made
available for any sinking fund for the redemption of any such units) any Common
Units or any other units of interest in the Partnership by their terms ranking
junior as to distributions to the rights of the SCUs (except by conversion into
or exchange for shares of Common Stock of the REIT or other units of the
Operating Partnership ranking junior to the SCUs as to distributions).
(d) Distributions with respect to the SCUs are intended to qualify as
permitted distributions of cash that are not treated as a disguised sale within
the meaning of Treasury Regulation 1.707-4, and the provisions of this Exhibit E
shall be construed and applied consistent with such Treasury Regulations.
3. Special Distribution Upon Liquidation. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Operating
Partnership, the holders of SCUs shall be entitled to be paid out of the assets
of the Operating Partnership legally available for distribution to its unit
holders an amount equal to any distribution shortfall described in Section
6.2(a)(iii) of the Partnership Agreement, before any distribution or payment
shall be made to holders of Common Units. In the event that, upon such voluntary
or involuntary liquidation, dissolution or winding-up, the available assets of
the Operating Partnership are insufficient to pay such amount on all outstanding
SCUs, then the holders of the SCUs shall share ratably in any such
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<PAGE>
distribution of assets, based on the number of SCUs held by each such holder.
Holders of SCUs shall be entitled to written notice of any such liquidation. In
addition, upon any voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the Operating Partnership, after any such
distribution shortfall on account of the SCUs shall have been paid in cash, the
SCUs shall be treated as if they had been exchanged for Common Units pursuant to
the terms of Paragraph 7(b) hereof. The consolidation or merger of the Operating
Partnership with or into any partnership, limited liability company,
corporation, trust or other entity shall not be deemed to constitute a
liquidation, dissolution or winding-up of the Operating Partnership.
4. Redemption. (a) SCUs shall not be redeemable by the Operating
Partnership prior to __________, 2011 [to be the tenth (10th) anniversary of the
Principal Closing Date]. Except as provided below in Paragraph 4(c), on or after
__________, 2011, the Operating Partnership, at its option upon not less than
thirty (30) nor more than sixty (60) days' written notice, may redeem the SCUs,
in whole or in part, on the first Business Day following any record date
established for the determination of parties entitled to receive any
distributions being made to holders of SCUs, by (i) paying in cash to the
holders of SCUs with respect to their SCUs being redeemed, any distribution
shortfall described in Section 6.2(a)(iii) of the Partnership Agreement
outstanding on the date of redemption (whether or not declared) and (ii) issuing
to the holders thereof a number of Common Units equal to the Common Unit Amount
(as defined in Paragraph 7 below). If fewer than all of the outstanding SCUs are
to be redeemed, the units of SCUs to be redeemed shall be redeemed pro rata (as
nearly as may be practicable without creating fractional units) or by lot or by
any other equitable method determined by the Operating Partnership. Holders of
SCUs to be redeemed shall surrender the certificates evidencing such SCUs, if
any, at the place designated in the Operating Partnership's notice and shall be
entitled to the distribution payments and Common Units described in the second
sentence of this Paragraph 4(a) prior to or concurrently with such surrender. If
notice of redemption of any SCUs has been given and if the funds and Common
Units necessary for such redemption have been set aside by the Operating
Partnership in trust for the benefit of the holders of any SCUs so called for
redemption, then from and after the redemption date distributions shall cease to
be payable with respect to such SCUs, such SCUs shall no longer be deemed
outstanding and all rights of the holders of such units will terminate, except
the right to receive the distribution payments and Common Units described in the
second sentence of this Paragraph 4(a).
(b) Notwithstanding the provisions of Paragraph 4(a) above, unless full
cumulative dividends on all SCUs shall have been or contemporaneously are
declared and paid in cash or declared and a sum sufficient for the payment
thereof in cash set apart for payment for all past dividend periods and the then
current dividend period or portion thereof, no SCUs shall be redeemed unless all
outstanding units of SCUs are simultaneously redeemed, and the Operating
Partnership shall not purchase or otherwise acquire directly or indirectly any
SCUs.
-3-
<PAGE>
(c) Notice of redemption shall be mailed by the Operating Partnership,
postage prepaid, not less than thirty (30) nor more than sixty (60) days prior
to the redemption date, addressed to the respective holders of record of the
units of SCUs to be redeemed at their respective addresses as they appear on the
records of the Operating Partnership. Failure to give such notice or any defect
thereto or in the mailing thereof shall not affect the validity of the
proceedings for the redemption of any SCUs. Each notice shall state (i) the
redemption date; (ii) the total number of SCUs to be redeemed and the number of
SCUs held by such holder to be redeemed; (iii) the Common Unit Amount; (iv) the
place or places where SCUs are to be surrendered for payment of the distribution
shortfall described in Section 6.2(a)(iii) of the Partnership Agreement
outstanding thereon and the issuance of a number of Common Units equal to the
Common Unit Amount; and (v) that distributions on the SCUs to be redeemed shall
cease to be payable on such redemption date.
(d) All SCUs redeemed pursuant to this Paragraph 4 shall be deemed retired
and terminated.
(e) The SCUs shall have no stated maturity and shall not be subject to any
sinking fund or mandatory redemption except as otherwise provided in this
Section 4.
5. Voting Rights. (a) Holders of the SCUs shall have the voting rights set
forth herein and in the Partnership Agreement.
(b) So long as any SCUs remain outstanding, the Operating Partnership shall
not, without the affirmative vote or consent of the holders of two-thirds of the
SCUs outstanding at the time, given in person or by proxy, either in writing or
at a meeting (such series voting separately as a class):
(i) undertake, consent to, or otherwise participate in or acquiesce to
any recapitalization transaction (including, without limitation, an initial
public offering, a merger, consolidation, other business combination,
exchange, self-tender offer for all or substantially all of the Common
Units, or sale or other disposition of all or substantially all of the
Operating Partnership's assets) (each of the foregoing being referred to
herein as a "Recapitalization Transaction") unless in connection with such
a Recapitalization Transaction (x) either each SCU outstanding prior to the
Recapitalization Transaction will (A) remain outstanding following the
consummation of such Recapitalization Transaction without any amendment of
any of the provisions of this Exhibit E or the other terms of the
Partnership Agreement establishing the rights and obligations of holders of
the SCUs in any manner adverse to the holders of SCUs or (B) be converted
into or exchanged for securities of the surviving entity having
preferences, conversion and other rights, voting powers, restrictions,
distribution rights and terms and
-4-
<PAGE>
conditions of redemption thereof no less favorable than those of a SCU
under this Exhibit E and the Partnership Agreement, and (y) each holder of
SCUs shall have the option to convert its SCUs into the amount and type of
consideration and/or securities receivable by a holder of the number of
Common Units into which such holder's SCUs could have been exchanged
immediately prior to the consummation of the Recapitalization Transaction
pursuant to Paragraph 7(b) hereof upon the consummation of the
Recapitalization Transaction, and (z) the holders of the SCUs will be
treated no less favorably than the holders of the Common Units;
(ii) amend, alter or repeal the provisions of this Exhibit E or
Sections 6.2(a)(iii), 6.2(a)(iv), 6.2(a)(v), 6.2(d) or 6.2(e) of the
Partnership Agreement, the provisions of Section 9.2(a) as they apply to
holders of SCUs or Common Units issued in respect thereof or the provisions
of Section 9.2(c), in each case whether by merger, consolidation or
otherwise; or
(iii) otherwise amend, alter or repeal the provisions of the
Partnership Agreement in a manner that would adversely affect in any
material respect the holders of the SCUs disproportionately with respect to
the rights of holders of the Common Units; it being understood that nothing
in this Exhibit E, shall be deemed to limit the right of the Operating
Partnership to issue securities to holders of any interests in the
Operating Partnership that rank on a parity with or prior to the SCUs with
respect to distribution rights and rights upon dissolution, liquidation or
winding-up of the Operating Partnership or to amend, alter or repeal the
terms of any such securities.
(c) The holders of the SCUs shall have the right to vote with the holders
of Common Units, as a single class, on any matter on which the holders of Common
Units are entitled to vote.
(d) The foregoing voting provisions of this Paragraph 5 shall not apply if,
at or prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding units of SCUs shall
have been redeemed or called for redemption upon proper notice and sufficient
funds, in cash, shall have been deposited in trust to effect such redemption.
(e) In any matter in which the SCUs may vote as a class (as expressly
provided herein or as may be required by law), each SCU shall be entitled to one
vote. In any matter in which the SCUs may vote with the Common Units as a single
class, each SCU shall be entitled to the number of votes equal to the number of
Common Units issuable upon the exchange of one SCU pursuant to Paragraph 7(b)
hereof.
-5-
<PAGE>
6. Notice of Extraordinary Transaction of the Company. The Company shall
notify the holders of SCUs of its intention to make any extraordinary
distributions of cash or property to its shareholders or effect a merger
(including, without limitation, a triangular merger), a sale of all or
substantially all of its assets or any other similar transaction outside of the
ordinary course of business at least thirty (30) days prior to the record date,
if any, to determine shareholders eligible to receive such distribution or to
vote upon the approval of such merger, sale or other transaction (or, if no such
record date is applicable, at least thirty (30) days before consummation of such
merger, sale or other transaction). This provision for such notice shall not be
deemed (i) to permit any transaction that otherwise is prohibited by this
Exhibit E or the Partnership Agreement or requires the approval of the holders
of SCUs or (ii) to require a vote of the holders of SCUs to a transaction that
does not otherwise require such a vote under this Exhibit E and the Partnership
Agreement or (iii) to effect the validity of any transaction if such notice is
not given. Each holder of SCUs, as a condition to the receipt of the notice
pursuant hereto, shall be obligated to keep confidential the information set
forth therein until such time as the Company has made public disclosure thereof
and to use such information during such period of confidentiality solely for
purposes of determining whether or not to exercise its Series J Exchange Rights;
provided, however, that a holder of SCUs may disclose such information to its
attorney, accountant and/or financial advisor for purposes of obtaining advice
with respect to such exercise so long as such attorney, accountant and/or
financial advisor agrees to receive and hold such information subject to this
confidentiality requirement.
7. Exchange.
(a) At any time following the earlier to occur of (x) ______, ___ 2004 [to
be the third (3rd) anniversary of the Principal Closing Date] or (y) the death
of the direct or indirect holder or beneficial owner thereof, and in either case
subject to the remainder of this Paragraph 7, a holder of SCUs shall have the
right (the "Series J Exchange Right") to exchange all or any portion of such
holder's SCU's (the "Series J Offered Units") for Series J Exchange
Consideration (as defined below), subject to the limitations contained in
Paragraphs 7(c) and 7(d) below. Any such Series J Exchange Right shall be
exercised pursuant to an exchange notice comparable to the Exchange Notice
required under Exhibit D to the Partnership Agreement (such notice, a "Series J
Exchange Notice") delivered, at the election of the holder exercising the Series
J Exchange Right (the "Series J Exercising Holder"), to the Company or to the
Operating Partnership, by the Series J Exercising Holder.
(b) The exchange consideration (the "Series J Exchange Consideration")
payable by the Company or the Operating Partnership, as applicable, to each
Series J Exercising Holder shall be equal to the product of (x) the Common Stock
Amount with respect to the Series J Offered Units multiplied by (y) the Current
Per Share Market Price, each computed as of the date on which the Series J
Exchange Notice was
-6-
<PAGE>
delivered to the Company. In connection with a Series J Exchange Notice
delivered to the Company, the Series J Exchange Consideration shall, in the sole
and absolute discretion of the Company, be paid in the form of (A) cash, or
cashier's or certified check, or by wire transfer of immediately available funds
to the Series J Exercising Holder's designated account or (B) subject to the
applicable Ownership Limit, by the issuance by the Company of a number of shares
of its Common Stock equal to the Common Stock Amount with respect to the Series
J Offered Units or (C) subject to the applicable Ownership Limit, any
combination of cash and Common Stock (valued at the Current Per Share Market
Price). In connection with a Series J Exchange Notice delivered to the Operating
Partnership, the Series J Exchange Consideration shall be paid by the Operating
Partnership by the issuance by the Operating Partnership of a number of Common
Units equal to the Common Unit Amount. In addition to the Series J Exchange
Consideration, concurrently with any exchange pursuant to this Paragraph 7, the
Operating Partnership shall pay the Series J Exercising Holder cash in an amount
equal to any distribution shortfall described in Section 6.2(a)(iii) of the
Partnership Agreement with respect to the Series J Offered Units outstanding on
the date of the exchange.
As used herein, the term "Common Unit Amount" shall mean, with respect to
any number of SCUs, the number of Common Units equal to such number of SCUs
multiplied by the Common Unit Conversion Factor; provided, however, that in the
event that the Operating Partnership issues to all holders of Common Units
rights, options, warrants or convertible or exchangeable securities entitling
such holders to subscribe for or purchase additional Common Units, or any other
securities or property of the Operating Partnership (collectively, "Common Unit
Additional Rights"), other than a right to receive Common Units pursuant to a
Distribution of Common Units in Lieu of Cash (as defined below), then the Common
Unit Amount shall also include (other than with respect to any Common Units or
SCUs "beneficially owned" by an "Acquiring Person" (as those terms are defined
in the Company's Rights Agreement, dated as of April 30, 1999, as amended as of
the Principal Closing Date (as defined in the Master Contribution Agreement) and
as it may be further amended from time to time, and any successor agreement
thereof (collectively, the "Rights Agreement"))), such Common Unit Additional
Rights that a holder of that number of Common Units would be entitled to
receive. As used herein, the term "Common Unit Conversion Factor" shall mean
1.0, provided, that, in the event that the Operating Partnership (i) makes a
distribution to all holders of its Common Units in Common Units (other than a
distribution of Common Units pursuant to an offer to all holders of Common Units
and SCUs permitting each to elect to receive a distribution in Common Units in
lieu of a cash distribution (such a distribution of Common Units is referred to
herein as a "Distribution of Common Units in Lieu of Cash")), (ii) subdivides or
splits its outstanding Common Units (which shall expressly exclude any
Distribution of Common Units in Lieu of Cash), or (iii) combines or reverse
splits its outstanding Common Units into a smaller number of Common Units (in
each case, without making a comparable distribution, subdivision, split,
combination or reverse split with respect to the SCUs), the Common Unit
Conversion Factor in effect immediately preceding such event shall be adjusted
by
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<PAGE>
multiplying the Common Unit Conversion Factor by a fraction, the numerator of
which shall be the number of Common Units issued and outstanding on the record
date for such distribution, subdivision, split, combination or reverse split
(assuming for such purposes that such distribution, subdivision, split,
combination or reverse split occurred as of such time), and the denominator of
which shall be the actual number of Common Units (determined without the above
assumption) issued and outstanding on the record date for such distribution,
subdivision, split, combination or reverse split. Any adjustment to the Common
Unit Conversion Factor shall become effective immediately after the record date
for such event in the case of a distribution or the effective date in the case
of a subdivision, split, combination or reverse split.
(c) Notwithstanding anything herein to the contrary, any Series J Exchange
Right with respect to the Company may only be exercised to the extent that, upon
exercise of the Series J Exchange Right, assuming payment by the Company of the
Series J Exchange Consideration in shares of Common Stock, the Series J
Exercising Holder will not, on a cumulative basis, Beneficially Own or
Constructively Own shares of Common Stock, including shares of Common Stock to
be issued upon exercise of the Series J Exchange Right, in excess of the
applicable Ownership Limit. If a Series J Exchange Notice is delivered to the
Company but, as a result of the applicable Ownership Limit or as a result of
restrictions contained in the certificate of incorporation of the Company, the
Series J Exchange Right cannot be exercised in full as aforesaid, the Series J
Exchange Notice shall be deemed to be modified to provide that the Series J
Exchange Right shall be exercised only to the extent permitted under the
applicable Ownership Limit under the certificate of incorporation of the
Company, and the Series J Exchange Notice with respect to the remainder of such
Series J Exchange Right shall be deemed to have been withdrawn.
(d) Series J Exchange Rights may be exercised at any time after the date
set forth in Paragraph 7(a) above and from time to time, provided, however,
that, except as set forth below in Paragraph 7(f) or with the prior written
consent of the General Partner, (x) only two (2) Series J Exchange Notices may
be delivered to the Company or the Operating Partnership by each holder of SCUs
during any consecutive twelve (12) month period; and (y) no Series J Exchange
Notice may be delivered with respect to SCUs either (i) having a value of less
than $250,000 calculated by multiplying the Common Stock Amount with respect to
such SCUs by the Current Per Share Market Price or (ii) if a holder does not own
SCUs having a value of $250,000 or more, constituting less than all of the SCUs
owned by such holder.
(e) Within thirty (30) days after receipt by the Company or the Operating
Partnership of any Series J Exchange Notice delivered in accordance with the
requirements of Paragraph 7(a) hereof, the Company or the Operating Partnership,
as applicable, shall deliver to the Series J Exercising Holder a notice (a
"Series J Election Notice"), which Series J Election Notice shall set forth the
computation of the Series J
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Exchange Consideration and, in the case of a Series J Election Notice delivered
by the Company, shall specify the form of the Series J Exchange Consideration
(which shall be in accordance with Paragraph 7(b) hereof), to be paid by the
Company or the Operating Partnership, as applicable to such Series J Exercising
Holder and the date, time and location for completion of the purchase and sale
of the Series J Offered Units, which date shall, to the extent required, in no
event be more than (A) in the case of Series J Offered Units with respect to
which (x) the Operating Partnership is required to pay the Series J Exchange
Consideration by issuance of Common Units or (y) the Company has elected to pay
the Series J Exchange Consideration by issuance of shares of Common Stock, ten
(10) days after the delivery by the Company or the Operating Partnership, as
applicable, of the Series J Election Notice for the Series J Offered Units or
(B) in the case of Series J Offered Units with respect to which the Company has
elected to pay the Series J Exchange Consideration in cash, sixty (60) days
after the initial date of receipt by the Company of the Series J Exchange Notice
for such Series J Offered Units; provided, however, that such sixty (60) day
period may be extended for an additional sixty (60) day period to the extent
required for the Company to cause additional shares of its Common Stock to be
issued to provide financing to be used to acquire the Series J Offered Units.
Notwithstanding the foregoing, each of the Company and the Operating Partnership
agrees to use its reasonable efforts to cause the closing of the exchange
hereunder to occur as quickly as possible. If the Company or the Operating
Partnership, as applicable, has delivered a Series J Election Notice to the
Series J Exercising Holder with respect to a Series J Exchange Notice, the
Series J Exchange Notice may not be withdrawn or modified by the Series J
Exercising Holder (except to the extent of any deemed modification required by
Section 7(c) above) without the consent of the General Partner. Similarly, if
the Company or the Operating Partnership delivers a Series J Election Notice to
a Series J Exercising Holder, the Company or the Operating Partnership, as
applicable, may not modify the Series J Election Notice without the consent of
the Series J Exercising Holder.
(f) Notwithstanding the limitation set forth in clause (x) of Paragraph
7(d), in the event that the Company provides notice to the holders of SCUs,
pursuant to Paragraph 6 hereof, the Series J Exchange Rights shall be
exercisable by each holder of SCUs at any time after the date set forth in
Paragraph 7(a) that is during the period commencing on the date on which the
Company provides such notice and ending on the earlier to occur of thirty (30)
days from receipt of the Company's aforesaid notice and the record date, if any,
to determine shareholders eligible to receive such distribution or to vote upon
the approval of such merger, sale or other extraordinary transaction (or, if no
such record date is applicable, the date that is thirty (30) days after the date
the Company provides the notice pursuant to Paragraph 6 hereof). In the event
that a Series J Exercising Holder delivers to the Company a Series J Exchange
Notice pursuant to this Paragraph 7(f), the Company shall be required to deliver
a Series J Election Notice before the earlier of (1) the tenth (10th) Business
Day after the Company receives the Series J Exchange Notice or (2) one (1)
Business Day before the record date to determine
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<PAGE>
shareholders eligible to receive a distribution or vote on approval and such
Series J Election Notice shall, among other things, set the date for the
purchase and sale of the Series J Offered Units, which date shall, to the extent
required, in no event be more than (A) in the case of Series J Offered Units
with respect to which the Company has elected to pay the Series J Exchange
Consideration by issuance of shares of Common Stock, one (1) Business Day prior
to the record date, if any, to determine shareholders eligible to receive such
distribution or to vote upon the approval of such merger, sale or other
extraordinary transaction or (B) in the case of Series J Offered Units with
respect to which the Company has elected to pay the Series J Exchange
Consideration in cash, sixty (60) days after the initial date of receipt by the
Company of the Series J Exchange Notice for such Series J Offered Units;
provided, however, that such sixty (60) day period may be extended for an
additional sixty (60) day period to the extent required for the Company to cause
additional shares of its Common Stock to be issued to provide financing to be
used to acquire the Series J Offered Units. Notwithstanding the foregoing, the
Company shall use its reasonable efforts to cause the closing of the exchange
hereunder to occur as quickly as possible.
(g) At the closing of the purchase and sale of Series J Offered Units,
payment of the Series J Exchange Consideration shall be accompanied by proper
instruments of transfer and assignment and by the delivery of (i)
representations and warranties of (A) the Series J Exercising Holder with
respect to (x) its due authority to sell all of the right, title and interest in
and to such Series J Offered Units to the Company or the Operating Partnership,
as applicable, (y) the status of the Series J Offered Units being sold, free and
clear of all Liens and (z) its intent to acquire the Common Stock or Common
Units, as applicable, for investment purposes and not for distribution, and (B)
the Company or the Operating Partnership, as applicable, with respect to due
authority for the purchase of such Series J Offered Units, and (ii) to the
extent that any shares of Common Stock or Common Units are issued in payment of
the Series J Exchange Consideration or any portion thereof, (A) an opinion of
counsel for the Company or the Operating Partnership, as applicable, reasonably
satisfactory to the Series J Exercising Holder, to the effect that (I) such
shares of Common Stock or Common Units, as applicable, have been duly
authorized, are validly issued, fully-paid and non-assessable and (II) if shares
of Common Stock are issued, that the issuance of such shares will not violate
the applicable Ownership Limit, and (B) a stock certificate or certificates
evidencing the shares of Common Stock to be issued and registered in the name of
the Series J Exercising Holder or its designee, with an appropriate legend
reflecting that such shares or units are not registered under the Securities Act
of 1933, as amended, and may not be offered or sold unless registered pursuant
to the provisions of such act or an exemption therefrom is available as
confirmed by an opinion of counsel satisfactory to the Company or the Operating
Partnership, or an executed amendment to the Partnership Agreement reflecting
the Series J Exercising Holder as a holder of the applicable number of Common
Units, as applicable.
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<PAGE>
(h) To facilitate the Company's ability to fully perform its obligations
hereunder, the Company covenants and agrees, for the benefit of the holders from
time to time of SCUs, as follows:
(i) At all times during the pendency of the Series J Exchange Rights,
the Company shall reserve for issuance such number of shares of Common
Stock as may be necessary to enable the Company to issue such shares in
full payment of the Series J Exchange Consideration in regard to all SCUs
which are from time to time outstanding.
(ii) As long as the Company shall be obligated to file periodic
reports under the Exchange Act, the Company will timely file such reports
in such manner as shall enable any recipient of Common Stock issued to
holders of SCUs hereunder in reliance upon an exemption from registration
under the Securities Act to continue to be eligible to utilize Rule 144
promulgated by the SEC pursuant to the Securities Act, or any successor
rule or regulation or statute thereunder, for the resale thereof.
(iii) Each holder of SCUs, upon request, shall be entitled to receive
from the Operating Partnership in a timely manner all reports filed by the
Company with the SEC and all other communications transmitted from time to
time by the Company to its shareholders generally.
(iv) Other than as contemplated under the terms of the Rights
Agreement, issuances of stock pursuant to the Company's dividend
reinvestment plan (as described in the Company's prospectus dated August
15, 1995) or any customary dividend reinvestment plan adopted by the
Company after that date and other than the issuance of deferred stock
awards or the grant of stock options to officers, directors and employees
of the Company, the Company shall not issue or sell any shares of Common
Stock or other equity securities or any instrument convertible into any
equity security for a consideration less than the fair value of such Common
Stock or other equity security, as determined in each case by the Board of
Directors of the Company, in consultation with the Company's professional
advisors, and under no circumstances shall the Company declare any stock
dividend, stock split, stock distribution or the like, unless fair and
equitable arrangements are provided, to the extent necessary, to fully
adjust, and to avoid any dilution in, the rights of holders of the SCUs
under this Exhibit E and the Partnership Agreement.
(i) To facilitate the Operating Partnership's ability to fully perform its
obligations hereunder, the Operating Partnership covenants and agrees, for the
benefit of the holders from time to time of SCUs, as follows:
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<PAGE>
(i) At all times during the pendency of the Series J Exchange Rights,
the Operating Partnership shall reserve for issuance such number of Common
Units as may be necessary to enable the Operating Partnership to issue such
units in full payment of the Series J Exchange Consideration in regard to
all SCUs which are from time to time outstanding.
(ii) Other than partnership interests issuable to the Company which
correspond to issuances by the Company pursuant to the Rights Agreement,
its current dividend reinvestment plan (as described in the Company's
prospectus dated August 15, 1995) or any customary dividend reinvestment
plan adopted by the Company after that date, or issuances by the Company of
deferred stock awards or the grant of stock options, to officers, directors
and employees of the Company, the Operating Partnership shall not issue or
sell any Common Units or any instrument convertible into Common Units for a
consideration less than the fair value of such Common Units, as determined
in each case by the Board of Directors of the Company, in its sole
discretion, and under no circumstances shall the Operating Partnership
declare any Common Unit dividend, Common Unit split, Common Unit
distribution or the like, unless fair and equitable arrangements are
provided, to the extent necessary, to fully adjust, and to avoid any
dilution in, the rights of holders of the SCUs under this Exhibit E and the
Partnership Agreement.
(j) All Series J Offered Units tendered to the Company or to the Operating
Partnership, as applicable, in accordance with the exercise of Series J Exchange
Rights shall be delivered to the Company or to the Operating Partnership, as
applicable, free and clear of all Liens and should any Liens exist or arise with
respect to such Units, the Company or the Operating Partnership, as applicable,
shall be under no obligation to acquire the same unless, in connection with such
acquisition, the Company or the Operating Partnership, as applicable, has
elected to pay such portion of the Series J Exchange Consideration in the form
of cash consideration in circumstances where such consideration will be
sufficient to cause such existing Lien to be discharged in full upon application
of all or a part of such consideration, and the Company or the Operating
Partnership, as applicable, is expressly authorized to apply such portion of the
Series J Exchange Consideration as may be necessary to satisfy any indebtedness
in full and to discharge such Lien in full. In the event any state or local
property transfer tax is payable as a result of the transfer of Series J Offered
Units to the Company, the transferring holder thereof shall assume and pay such
transfer tax.
(k) Subject to the restrictions on transfer set forth in the Partnership
Agreement and Paragraph 8 hereof, the Assignee of any holder of SCUs may
exercise the rights of such holder of SCUs pursuant to this Paragraph 7, and
such holder of SCUs shall be deemed to have assigned such rights to such
Assignee and shall be bound by the exercise of such rights by such holder's
Assignee. In connection with any exercise of such rights by such Assignee on
behalf of such holder, the Series J Exchange Consideration
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<PAGE>
shall be paid by the Company or the Operating Partnership. as applicable,
directly to such Assignee and not to such holder.
(l) In the event that the Company shall be a party to any transaction
(including, without limitation, a merger, consolidation or statutory share
exchange with respect to the Common Stock), in each case as a result of which
shares of Common Stock are converted into the right to receive shares of capital
stock, other securities or other property (including cash or any combination
thereof), the Series J Exchange Consideration payable thereafter by the Company
pursuant to clauses (B) and (C) of Paragraph 7(b) in lieu of a share of Common
Stock shall be the kind and amount of shares of capital stock and other
securities and property (including cash or any combination thereof) that was
received upon consummation of such transaction in return for one share of Common
Stock, and the Series J Exchange Consideration payable by the Operating
Partnership pursuant to the last sentence of Paragraph 7(b) shall be adjusted
accordingly; and the Company may not become a party to any such transaction
unless the terms thereof are consistent with the foregoing.
(m) As of the date hereof (i) the Conversion Factor is 1.0 and (ii) the
Common Unit Conversion Factor is 1.0.
(n) The provisions of Article XI and Exhibit D of the Partnership Agreement
shall not apply to the SCUs or to any Common Units received in exchange for, or
upon the conversion of, any SCUs in accordance with the terms of this Exhibit E.
Exhibit F of the Partnership Agreement sets forth the exchange rights of the
Common Units received in exchange for, or upon the conversion of, SCUs in
accordance with the terms of this Exhibit E.
8. Restrictions on Transfer. In addition to Transfers permitted pursuant to
Article IX of the Partnership Agreement, but subject to Section 9.3 of the
Partnership Agreement, the General Partner hereby consents to (i) all Transfers
of SCUs which are described in clauses (a)-(d) of this Paragraph 8 (any such
Transfer, an "Approved Transfer") and (ii) the admission of any transferee of a
SCU pursuant to any Approved Transfer as a Substituted Limited Partner (and the
conditions set forth in Section 9.2 of the Partnership Agreement for such
admission will be deemed satisfied) upon the filing with the Operating
Partnership of (A) a duly executed and acknowledged instrument of assignment
between the transferor and the transferee specifying the SCUs being assigned,
setting forth the intention of the transferor that such transferee succeed to
the transferor's interest as a Limited Partner with respect to the SCUs being
assigned and agreement of the transferee assuming all of the obligations of a
Limited Partner under the Partnership Agreement with respect to such transferred
SCUs accruing from and after the date of transfer, (B) a duly executed and
acknowledged instrument by which the transferee confirms to the Operating
Partnership that it accepts and adopts the provisions of the Partnership
Agreement applicable to a Limited Partner and (C) any other instruments
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<PAGE>
reasonably required by the General Partner and payment by the transferor of a
transfer fee to the Operating Partnership sufficient to cover the reasonable
expenses of the transfer, if any.
For the purposes of this Paragraph 8, all of the following Transfers shall
be considered Approved Transfers:
(a) any transfer by an initial holder of any SCU or any permitted
transferee thereof to one or more of the initial holders of SCUs or to the
designated holding entity (as contemplated in the Master Contribution
Agreement) of one or more of the initial holders of SCUs, which holders and
designated holding entities are identified on the Exhibit A attached as
Attachment 2 to the First Amendment to Second Amended and Restated
Agreement of Limited Partnership of the Partnership, dated as of _________,
2001 (each, an "Initial Holder");
(b) any transfer to any Immediate Family Member of any Initial Holder
or of any initial beneficial owner of any interest in any Initial Holder of
SCUs, or any trust for the benefit of any Initial Holder or initial
beneficial owner of any interest in any Initial Holder of SCUs or any
Immediate Family Member thereof;
(c) any transfer to any Affiliate of any Initial Holder or initial
beneficial owner of any interest in any Initial Holder of SCUs or to any
charitable organization; and
(d) any pledge by an Initial Holder or any permitted transferee
thereof to an institutional lender as security for a bona fide obligation
of the holder, and any transfer to any such pledgee or any designee thereof
or purchaser therefrom following a default in the obligation secured by
such pledge.
9. Headings of Subdivisions. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
10. Severability of Provisions. If any rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications or terms or
conditions of redemption of the SCUs set forth in the Partnership Agreement and
this Exhibit E are invalid, unlawful or incapable of being enforced by reason of
any rule of law or public policy, all other preferences or other rights, voting
powers, restrictions, limitations as to distributions, qualifications or terms
or conditions of redemption of SCUs set forth in the Partnership Agreement which
can be given effect without the invalid, unlawful or unenforceable provision
thereof shall, nevertheless, remain in full force and effect and no rights,
voting powers, restrictions, limitations as to dividends or other
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<PAGE>
distributions, qualifications or terms or conditions of redemption of the SCUs
herein set forth shall be deemed dependent upon any other provision thereof
unless so expressed therein.
11. No Preemptive Rights. No holder of SCUs shall be entitled to any
preemptive rights to subscribe for or acquire any unissued units of the
Operating Partnership (whether now or hereafter authorized) or securities of the
Operating Partnership convertible into or carrying a right to subscribe to or
acquire units of the Operating Partnership.
SIGNATURE APPEARS ON NEXT PAGE
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IN WITNESS WHEREOF, CBL Holdings I, Inc., solely in its capacity as the
general partner of the Operating Partnership, has caused this Terms of Series J
Special Common Units to be duly executed by its _________________ this _____ day
of ___________, 2001.
CBL Holdings I, Inc.
By:
-------------------------------
Name:
Title:
Acknowledged and Agreed:
CBL & Associates Properties, Inc.
By:
-------------------------------
Name:
Title:
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<PAGE>
ANNEX D
FIRST
AMENDMENT
TO
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CBL & ASSOCIATES LIMITED PARTNERSHIP
---------------------------------------------
Dated as of ____________, 2001
---------------------------------------------
THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF CBL & ASSOCIATES LIMITED PARTNERSHIP (this "Amendment") is hereby
adopted by CBL Holdings I, Inc., a Delaware corporation (the "General Partner"),
as the general partner of CBL & Associates Limited Partnership, a Delaware
limited partnership (the "Partnership"). For ease of reference, capitalized
terms used herein and not otherwise defined have the meanings assigned to them
in the Second Amended and Restated Agreement of Limited Partnership of CBL &
Associates Limited Partnership as the same may be amended, the "Agreement").
WHEREAS, the General Partner desires to establish and set forth the terms
of a new series of Partnership Units designated as Series J Special Common Units
(the "SCUs").
WHEREAS, Section 4.4(a) of the Agreement grants the General Partner
authority to cause the Partnership to issue Partnership Units in the Partnership
to any Person in one or more classes or series, with such designations,
preferences and relative, participating, optional or other special rights,
powers and duties as may be determined by the General Partner in its sole and
absolute discretion so long as the issuance does not violate Section 9.3 of the
Agreement.
WHEREAS, the General Partner has determined that the establishment and
issuance of the SCUs will not violate Section 9.3 of the Agreement.
WHEREAS, the General Partner desires to amend the Agreement to, among other
things, set forth the terms of the SCUs.
<PAGE>
WHEREAS, Sections 4.4(a) and 14.7(b) of the Agreement grant the General
Partner power and authority to amend the Agreement (including, without
limitation, the distribution and allocation provisions thereof) without the
consent of any of the Partnership's Limited Partners to evidence any action
taken by the General Partner pursuant to Section 4.4(a) and to set forth the
rights, powers and duties of the holders of any Additional Units issued pursuant
to Section 4.4(a).
NOW, THEREFORE, the General Partner hereby amends the Agreement as follows:
1. Section 1.1 of the Agreement is hereby amended and supplemented as set
forth below:
(a) The following definitions are hereby added to Section 1.1 of the
Agreement:
"Basic Distribution Amount" shall mean $0.725625; provided, however, that
such amount will be adjusted appropriately to account for any unit splits,
combinations or other similar events with respect to the SCUs.
"Beneficial Ownership" shall have the meaning set forth in the certificate
of incorporation of the Company.
"Constructive Ownership" shall have the meaning set forth in the
certificate of incorporation of the Company.
"Common Unit Conversion Factor" shall mean 1.0, provided, that, in the
event that the Partnership (i) makes a distribution to all holders of its
Common Units in Common Units (other than a distribution of Common Units
pursuant to an offer to all holders of Common Units and SCUs permitting
each to elect to receive a distribution in Common Units in lieu of a cash
distribution (such a distribution of Common Units is referred to herein as
a "Distribution of Common Units in Lieu of Cash")), (ii) subdivides or
splits its outstanding Common Units (which shall expressly exclude any
Distribution of Common Units in Lieu of Cash), or (iii) combines or reverse
splits its outstanding Common Units into a smaller number of Common Units
(in each case, without making a comparable distribution, subdivision,
split, combination or reverse split with respect to the SCUs), the Common
Unit Conversion Factor in effect immediately preceding such event shall be
adjusted by multiplying the Common Unit Conversion Factor by a fraction,
the numerator of which shall be the number of Common Units issued and
outstanding on the record date for
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such distribution, subdivision, split, combination or reverse split
(assuming for such purposes that such distribution, subdivision, split,
combination or reverse split occurred as of such time), and the denominator
of which shall be the actual number of Common Units (determined without the
above assumption) issued and outstanding on the record date for such
distribution, subdivision, split, combination or reverse split. Any
adjustment to the Common Unit Conversion Factor shall become effective
immediately after the record date for such event in the case of a
distribution or the effective date in the case of a subdivision, split,
combination or reverse split.
"Common Unit Distribution Amount" shall mean the product of (i) the
quarterly distribution paid with respect to one Common Unit for that
quarter pursuant to Section 6.2(a)(v) hereof multiplied by (ii) the Common
Unit Conversion Factor.
"Distribution of Common Units in Lieu of Cash" shall have the meaning set
forth in the definition of Common Unit Conversion Factor above.
"Floor Distribution" shall mean, with respect to any quarter, $0.4375.
"Jacobs Limited Partner Representative" shall have the meaning set forth in
Section 7.12 hereof.
"Jacobs Property" shall have the meaning set forth in Section 6.2(b)
hereof.
"JRI" shall mean Jacobs Realty Investors Limited Partnership, a Delaware
limited partnership.
"Gross Income" shall mean, for each fiscal year or other applicable period,
an amount equal to the Partnership's gross income for such year or period
as determined for federal income tax purposes, with the following
adjustments: (a) by including as an item of gross income any tax-exempt
income received by the Partnership; (b) gain resulting from any disposition
of Partnership property with respect to which gain is recognized for
federal income tax purposes shall be computed by reference to the Gross
Asset Value of such property rather than its adjusted tax basis; (c) in the
event of an adjustment of the Gross Asset Value of any Partnership asset
which requires that the Capital Accounts of the Partnership be adjusted
pursuant to Regulation Section 1.704-1(b)(2)(iv)(e), (f) or (m), the amount
of such positive adjustment is to be taken into account as additional Gross
Income
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<PAGE>
pursuant to Exhibit C; and (d) excluding any items specially allocated
pursuant to Section 2 of Exhibit C.
"Master Contribution Agreement" shall mean the Master Contribution
Agreement, dated as of September __, 2000, among the Company, the
Partnership, JRI and certain other persons named therein.
"Net Capital Gain" shall mean, for any taxable year, the excess of
recognized gains with respect to dispositions of Property over recognized
losses with respect to dispositions of Property, in each case as determined
by reference to Gross Asset Value.
"Reduction Factor" shall mean the lesser of (i) the quotient of the Common
Unit Distribution Amount for such quarter divided by the Floor Distribution
and (ii) one.
"Safe Harbor Rate" shall have the meaning set forth in Section 6.2(e)
hereof.
"SCUs" shall have the meaning set forth in Exhibit E.
"Series J Exchange Notice" shall have the meaning set forth in Exhibit E.
"Series J Exchange Rights" shall have the meaning set forth in Exhibit E.
"Series J Offered Units" shall have the meaning set forth in Exhibit E.
(b) The following sentence is hereby added to the end of the definition of
"Capital Account" in the Agreement:
"For the avoidance of doubt, distributions pursuant to an exercise of an
option set forth in a JRI Option Agreement entered into in connection with
the Master Contribution Agreement shall not result in any reduction in
Capital Accounts. "
(c) The definition of "Common Stock Amount" is hereby deleted and replaced
in its entirety with the following:
"Common Stock Amount" shall mean, with respect to any number of Common
Units or SCUs, the number of shares of Common Stock equal to such number of
Common Units or SCUs, as the case may be, multiplied by the Conversion
Factor; provided, however, that in the event that the
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<PAGE>
Company issues to all holders of Common Stock rights, options, warrants or
convertible or exchangeable securities entitling the shareholders to
subscribe for or purchase additional Common Stock, or any other securities
or property of the Company, the value of which is not included in the first
sentence of the definition of Closing Price of the shares of Common Stock
(collectively, "additional rights"), other than a right to receive a
dividend or other distribution of Common Stock that corresponds to Common
Units issued to the Company pursuant to a Distribution of Common Units in
Lieu of Cash, then the Common Stock Amount shall also include, other than
with respect to any Common Units or SCUs "beneficially owned" by an
"Acquiring Person" (as such terms are defined in the Company's Rights
Agreement, dated as of April 30, 1999, as amended as of the Principal
Closing Date (as defined in the Master Contribution Agreement) and as it
may be further amended from time to time, and any successor agreement
thereto), such additional rights that a holder of that number of shares of
Common Stock would be entitled to receive.
(d) The definition of "Consent of the Limited Partners" is hereby deleted
and replaced in its entirety with the following:
"Consent of the Limited Partners" shall mean the written consent of a
Majority-In-Interest of the Limited Partners, which consent shall be
obtained prior to the taking of any action for which it is required by this
Agreement and may be given or withheld by a Majority-In-Interest of the
Limited Partners, unless otherwise expressly provided herein, in their sole
and absolute discretion.
(e) The definition of "Conversion Factor" is hereby deleted and replaced in
its entirety with the following:
"Conversion Factor" shall mean 1.0, provided that in the event that the
Company (i) pays a dividend on its outstanding shares of Common Stock in
shares of Common Stock or makes a distribution to all holders of its
outstanding Common Stock in shares of Common Stock (in either case other
than a dividend or other distribution of shares of Common Stock that
corresponds to Common Units issued to the Company pursuant to a Dividend of
Common Units in Lieu of Cash), (ii) subdivides or splits its outstanding
shares of Common Stock, or (iii) combines or reverse splits its outstanding
shares of Common Stock into a smaller number of shares of Common Stock (in
each case, without making a comparable dividend, distribution, subdivision,
split, combination or reverse split with respect to the Common Units and
the SCUs), the Conversion Factor in effect
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<PAGE>
immediately preceding such event shall be adjusted by multiplying the
Conversion Factor by a fraction, the numerator of which shall be the number
of shares of Common Stock issued and outstanding on the record date for
such dividend, distribution, subdivision, split, combination or reverse
split (assuming for such purposes that such dividend, distribution,
subdivision, split, combination or reverse split occurred as of such time),
and the denominator of which shall be the actual number of shares of Common
Stock (determined without the above assumption) issued and outstanding on
the record date for such dividend, distribution, subdivision, split,
combination or reverse split. Any adjustment to the Conversion Factor shall
become effective immediately after the record date for such event in the
case of a dividend or distribution or the effective date in the case of a
subdivision, split, combination or reverse split.
(f) The definition of "Limited Partner Representatives" is hereby deleted
and replaced in its entirety with the following:
"Limited Partner Representative" shall mean, with respect to any Limited
Partner, the representative appointed by such Limited Partner pursuant to
the first sentence of Section 7.12 or, if none, such Limited Partner.
(g) The definition of "Limited Partners" is hereby deleted and replaced in
its entirety with the following:
"Limited Partners" shall mean (i) those Persons listed under the heading
"Limited Partners" on Exhibit A hereto in their respective capacities as
limited partners of the Partnership, their permitted successors and assigns
and (ii) all Additional Partners and Substituted Limited Partners.
(h) The definition of "Ownership Limit" is hereby deleted and replaced in
its entirety with the following:
"Ownership Limit" shall have the meaning set forth in the certificate of
incorporation of the Company, as the same may be modified by the Board of
Directors of the Company as permitted therein.
(i) The definition of "Partnership Units" is hereby deleted and replaced in
its entirety with the following:
"Partnership Units" shall mean the Common Units, the Preferred Units and
the SCUs.
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<PAGE>
(j) The definition of "Substituted Limited Partner" is hereby deleted and
replaced in its entirety with the following:
"Substituted Limited Partner" shall mean any Person admitted to the
Partnership as a limited partner pursuant to the terms of Section 9.2.
(k) The definition of "Transfer" is hereby deleted and replaced in its
entirety with the following:
"Transfer" as a noun, shall mean any sale, assignment, conveyance, pledge
hypothecation, gift, encumbrance or other transfer, including, without
limitation, a transfer by operation of law or through the laws of
inheritance and succession, and as a verb, shall mean to sell, assign,
convey, pledge, hypothecate, give, encumber or otherwise transfer,
including, without limitation, by operation of law or through the laws of
inheritance and succession.
2. Pursuant to Sections 4.5 and 7.8 of the Agreement, upon execution of a
Limited Partner Acceptance of the Partnership Agreement in the form attached
hereto as Attachment 1 (a "Limited Partner Acceptance") or by causing a Limited
Partner Acceptance to be executed on its behalf, each initial holder of SCUs
automatically will be admitted as an Additional Partner of the Partnership,
without any further action or approval and the General Partner hereby agrees to
cause the names of such recipients to be recorded on the books and records of
the Partnership on the date of such admission. In addition, upon the transfer by
an initial recipient of SCUs to its designated holding entity as contemplated by
the Master Contribution Agreement, and upon execution of a Limited Partner
Acceptance by or on behalf of such designated holding entity, such designated
holding entity automatically will be admitted as a Substituted Limited Partner
of the Partnership with respect to the transferred SCUs (and all of the
conditions set forth in Section 9.2 of the Agreement for such admission will be
deemed satisfied), without any further action or approval, and the General
Partner hereby agrees to cause the name of such designated holding entity to be
recorded on the books and records of the Partnership on the date of such
admission.
3. The second sentence of Section 6.2(a) is hereby deleted and replaced in
its entirety with the following:
"All such distributions shall be made in accordance with the following
order of priority:"
4. Section 6.2(a)(iii) of the Agreement is hereby deleted and replaced in
its entirety with the following:
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<PAGE>
"(iii) Third, to the extent that the amount of Net Cash Flow distributed to
the holders of SCUs for any prior quarter was (for any reason, including as
a result of Section 6.2(e), a lack of legally available funds or a decision
by the General Partner not to make distributions for such quarter) less
than the amount required to be distributed for such quarter on account of
the SCUs pursuant to subparagraph (a)(iv) below, and such shortfall has not
been subsequently distributed pursuant to this Section 6.2(a)(iii), Net
Cash Flow shall be distributed to the holders of SCUs ratably until they
have received an amount per SCU necessary to satisfy such shortfall for all
prior quarters of the current and all prior Partnership taxable years;"
5. The following paragraphs are hereby added to the end of Section 6.2(a):
"(iv) Fourth, Net Cash Flow shall be distributed to the holders of SCUs
ratably until they have received for the quarter to which the distribution
relates an amount for each outstanding SCU equal to the Basic Distribution
Amount, provided, however, that in the event that the Common Unit
Distribution Amount with respect to each of the four consecutive calendar
quarters immediately preceding the calendar quarter to which the
distribution under this subparagraph (a)(iv) relates is not equal to or
greater than the Floor Distribution, then the amount required to be
distributed under this subparagraph (a)(iv) for each outstanding SCU shall
be equal to the product of the Reduction Factor and the Basic Distribution
Amount; and
(v) Fifth, the balance of the Net Cash Flow to be distributed, if any,
shall be distributed to holders of SCUs and Common Units, pro rata in
accordance with their proportionate ownership of the aggregate number of
SCUs and Common Units outstanding (counting each SCU as the number of
Common Units into which it is convertible pursuant to the terms of Exhibit
E), provided, however, that such distribution to the holders of SCUs shall
be reduced by the amount of the distribution made to them on account of
their SCUs with respect to such quarter pursuant to subparagraph (a)(iv)
above and the reduction will be allocated among the holders of SCUs pro
rata in accordance with their respective percentage interests in the total
number of SCUs then outstanding.
For the avoidance of doubt, set forth below are illustrations of the
distributions payable to the holders of SCUs and Common Units pursuant to
subparagraphs (a)(iv) and (a)(v) above: (I) if the Common Unit Distribution
Amount is $0.8750, then the amount payable with respect to
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<PAGE>
each outstanding SCU for that quarter is $0.8750; (II) if the Common Unit
Distribution Amount is $0.725625, then the amount payable with respect to
each outstanding SCU for that quarter is $0.725625; (III) if the Common
Unit Distribution Amount is $0.5875, then the amount payable with respect
to each outstanding SCU for that quarter is $0.725625; (IV) if the Common
Unit Distribution Amount is $0.4375, then the amount payable with respect
to each outstanding SCU for that quarter is $.725625; (V) if the Common
Unit Distribution Amount is $0.21875, then the amount payable with respect
to each outstanding SCU for that quarter is $0.725625 (unless the Common
Unit Distribution Amount with respect to each of the four consecutive
quarters immediately preceding such quarter was less than the Floor
Distribution, in which case the amount payable with respect to each
outstanding SCU for that quarter would be $0.3628125); and (VI) if the
Common Unit Distribution Amount is $0.00, then the amount payable with
respect to each outstanding SCU for that quarter is $0.725625 (unless the
Common Unit Distribution Amount with respect to each of the four
consecutive quarters immediately preceding such quarter was less than the
Floor Distribution, in which case the amount payable with respect to each
outstanding SCU for that quarter would be $0.00).
6. The second sentence of Section 6.2(b) of the Agreement is hereby
deleted.
7. Clause (b) of the third sentence of Section 6.2(b) of the Agreement is
hereby deleted and replaced in its entirety with the following:
"(b) in the event of a sale of a Property or an interest in a Property
Partnership (other than a direct or indirect interest in a Property set
forth in Exhibit A of the Master Contribution Agreement (a "Jacobs
Property"), and other than a Property constituting "substituted basis
property" (as defined in Section 7701(a)(42) of the Code) with respect to a
Jacobs Property) giving rise to a special allocation of taxable income or
gain to a Limited Partner or Partners pursuant to Section 3(c) of Exhibit
C, the General Partner shall cause the Partnership to distribute the Net
Sale Proceeds therefrom up to an amount sufficient to enable such Limited
Partner or Partners to pay any income tax liability with respect to the
income or gain so specially allocated (or, if any such Limited Partner is a
partnership or S corporation, to enable such Limited Partner to distribute
sufficient amounts to its equity owners to enable such owners to pay any
income tax liability with respect to their share of such taxable income or
gain)."
-9-
<PAGE>
8. The last sentence of Section 6.2(b) of the Agreement is hereby deleted.
9. Section 6.2(d) of the Agreement is hereby deleted and replaced in its
entirety with the following:
"(d) Notwithstanding the foregoing, all distributions pursuant to this
Section 6.2 shall remain subject to the provisions of (i) the Certificate
of Designation for each class or series of Preferred Units set forth in
Exhibit B hereto and (ii) Exhibit E hereto with respect to the SCUs."
10. The following paragraph is hereby added as Section 6.2(e) of the
Agreement:
"(e) Notwithstanding the provisions of Section 6.2(a) above, if the
distributions with respect to the SCUs made on or prior to the second
anniversary of the issuance of the SCUs would result in any holder of a SCU
receiving an annual return on such holder's "unreturned capital" (as
defined for purposes of Treasury Regulation Section 1.707-4(a)) for a
Partnership tax year (treating the Partnership tax year in which such
second anniversary occurs as ending on such date) in excess of the Safe
Harbor Rate (as defined below), then the distributions to such holder in
excess of such Safe Harbor Rate will be deferred, will continue to cumulate
and will be payable on the earlier to occur of (i) the disposition of the
SCUs to which such deferred distributions relate in a transaction in which
the disposing holder recognizes taxable gain thereon or (ii) the first
distribution payment date with respect to the SCUs following the second
anniversary of the issuance of the SCUs. For purposes of the foregoing, the
"Safe Harbor Rate" shall equal 150% of the highest applicable Federal rate,
based on quarterly compounding, in effect for purposes of Section 1274(d)
of the Code at any time between the date of the issuance of the SCUs and
the date on which the relevant distribution payment is made."
11. The following paragraph is hereby added as Section 6.2(f) of the
Agreement:
"(f) Distributions to Common Units and SCUs may be made by offering the
holders of Common Units and SCUs the opportunity to make an election to
take a portion of such distribution in cash or additional Common Units;
provided that such an offer may not be made unless (i) holders of SCUs and
holders of Common Units received on a conversion
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<PAGE>
or redemption of SCUs will receive the full amount of the distribution in
cash to the extent that such holders elect to receive cash, including an
election to receive 100% of the distribution in cash, (ii) with respect to
distributions made within two years of the final Closing provided for in
the Master Contribution Agreement, such distributions will not cause the
aggregate distributions to a holder of SCUs or a holder of Common Units
received on a conversion or redemption of SCUs, other than distributions to
such holder in respect of the Basic Distribution Amount, to exceed the
product of (x) the lesser of such holder's percentage interest in
Partnership profits for the year in which the distribution is made or such
holder's percentage interest in Partnership profits for the life of the
Partnership (as determined for purposes of Treasury Regulations Section
1.707-4(b)) and (y) the Partnership's net cash flow from operations for the
year in which the distribution is made (as determined for purposes of
Treasury Regulations Section 1.707-4(b)) and (iii) holders of SCUs that
elect to receive 100% of the distribution in cash will have received in
respect of the quarter to which such distribution relates an amount per
SCU, in cash, pursuant to Section 6.2(a)(iv), equal to the Basic
Distribution Amount. Any such election will be made pro rata between the
Common Units and SCUs, i.e., the same amount of cash or Common Units shall
be offered with respect to each Common Unit and SCU. Holders of Common
Units or SCUs shall in no event be required to elect to receive additional
Common Units."
12. Section 6.6 of the Agreement is hereby deleted and replaced in its
entirety with the following:
"All elections required or permitted to be made by the Partnership under
any applicable tax law shall be made by the General Partner in its sole
discretion; provided, however, the General Partner shall, if requested by a
transferee, file an election on behalf of the Partnership pursuant to
Section 754 of the Code to adjust the basis of the Partnership property in
the case of a Transfer of a Partnership Unit, including Transfers made in
connection with the exercise of Rights (or Series J Exchange Rights), made
in accordance with the provisions of this Agreement. The General Partner
shall cause the Accountants to prepare and file all state and federal tax
returns on a timely basis."
13. Section 7.12 of the Agreement is hereby deleted and replaced in its
entirety with the following:
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<PAGE>
"Upon written notice to the General Partner, any Limited Partner or group
of Limited Partners may appoint a representative to act on its or their
behalf with respect to all Partnership matters, including exercising all
voting rights of the Partnership Units owned by such Limited Partner.
Whenever, under the terms of this Agreement, matters require the Consent of
the Limited Partners, the same shall mean the consent of Limited Partner
Representatives entitled to exercise voting rights with respect to a
majority of the Partnership Units entitled to vote thereon, and any action
taken by the Limited Partner Representatives shall be fully binding on the
Limited Partners; it being the intention of the Limited Partners that the
Limited Partner Representatives shall have full power and authority, to
take all action, or to authorize all action, which the Limited Partners are
entitled to take or authorize under the provisions of this Agreement. Any
appointments of Limited Partner Representatives made pursuant to this
Section 7.12 shall remain effective until rescinded in a written notice to
the General Partner, and the General Partner shall have the right and
authority to rely (and shall be fully protected in so doing) on the actions
taken and directions given by such Limited Partner Representatives without
any further evidence of their authority or further action by the Limited
Partners that appointed them. Each of the Limited Partners identified on
Exhibit G hereto) hereby appoints JRI (or any person or entity appointed by
JRI upon written notice to the General Partner; JRI, or such person or
entity appointed by JRI upon written notice to the General Partner, is
referred to herein as the "Jacobs Limited Partner Representative") as his,
her or its Limited Partner Representative with respect to all of the
Partnership Units now or hereafter owned by such Limited Partner and such
appointment shall remain effective with respect to each such Limited
Partner and each transferee of the Partnership Units of each such Limited
Partner until rescinded with respect to such Limited Partner or transferee
in a written notice from that Limited Partner or transferee to the General
Partner."
14. The last sentence of Section 8.2 of the Agreement is hereby deleted and
replaced in its entirety with the following:
"Notwithstanding the foregoing, all distributions pursuant to this Section
8.2 shall remain subject to the provisions of (i) the Certificate of
Designation for each class or series of Preferred Units set forth in
Exhibit B hereto and (ii) Exhibit E hereto with respect to the SCUs."
15. Section 9.2(a) of the Agreement is hereby deleted and replaced in its
entirety with the following:
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<PAGE>
"Subject to the provisions of Section 9.3 hereof, each Limited Partner
shall have the right to Transfer all or a portion of its Partnership Units
to any Person that is the Immediate Family of such Limited Partner, an
Affiliate of such Limited Partner, another Limited Partner, an
institutional lender as security for a bona fide obligation of such Limited
Partner, a bona fide pledgee after a default in the obligation secured by
the pledge (or to a bona fide purchaser for value from such pledgee),
provided in each such case that prior written notice of the proposed
Transfer is delivered to the General Partner. Any transfer of Partnership
Units permitted by the first sentence of this Section 9.2(a) or by any
other provision of this Agreement (including, for example, Section 9.2(c)
and Paragraph 8 of Exhibit E) automatically will be admitted as a
Substituted Limited Partner upon the filing with the Partnership of (A) a
duly executed and acknowledged instrument of assignment between the
transferor and the transferee specifying the Partnership Units being
assigned, setting forth the intention of the transferor that such
transferee succeed to the transferor's interest as a Limited Partner with
respect to the Partnership Units being assigned and agreement of the
transferee assuming all of the obligations of a Limited Partner under this
Agreement with respect to such transferred Partnership Units accruing from
and after the date of transfer, (B) a duly executed and acknowledged
instrument by which the transferee confirms to the Partnership that it
accepts and adopts the provisions of this Agreement applicable to a Limited
Partner and (C) any other instruments reasonably required by the General
Partner and payment by the transferor of a transfer fee to the Partnership
sufficient to cover the reasonable expenses of the transfer, if any."
16. Section 9.2(b) of the Agreement is hereby deleted and replaced in its
entirety with the following:
"Except as set forth in Section 9.2(a) above, or elsewhere in this
Agreement (including Section 9.2(c) and Paragraph 8 of Exhibit E), no
Transfer of a Limited Partner's Partnership Units may be effected without
the consent of the General Partner, which consent may be given, withheld or
conditioned in the General Partner's sole and absolute discretion. A
transferee of Partnership Units shall be deemed to be an Assignee with
respect to such Partnership Units, but shall not become or be admitted to
the Partnership as a Substituted Limited Partner without the consent of the
General Partner, which consent may be given or withheld in the General
Partner's sole and absolute discretion. An Assignee shall be entitled as a
result of such Transfer only to receive the economic benefits of the
Partnership Units to which the transferor Limited Partner would otherwise
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<PAGE>
be entitled, along with such transferor Limited Partner's rights with
respect to the Rights or such other exchange rights as are applicable to
the Transferred Partnership Units (although any transferee of any
Transferred Partnership Units shall be subject to any and all ownership
limitations contained in the corporate charter of the Company as may be
amended from time to time), and such Assignee shall have no right (i) to
participate in the management of the Partnership or to vote on any matter
requiring the consent or approval of the Limited Partners, (ii) to demand
or receive any account of the Partnership's business, or (iii) to inspect
the Partnership's books and records, unless and until such Assignee is
admitted to the Partnership as a Substituted Limited Partner. In addition,
unless and until a transferee is admitted to the Partnership as a
Substituted Limited Partner, the transferor Limited Partner shall not be
relieved of its obligations under this Agreement (except in the case of a
Transfer pursuant to a statutory merger or consolidation wherein all
obligations and liabilities of the transferor Limited Partner are assumed
by a successor corporation or other Entity by operation of law). A
transferee of Partnership Units may become a Substituted Limited Partner
only upon the satisfaction of the following conditions: (A) the filing with
the Partnership of a duly executed and acknowledged written instrument of
assignment between the transferor and the transferee in a form approved by
the General Partner specifying the Partnership Units being assigned,
setting forth the intention of the transferor that such transferee succeed
to the transferor's interest as a Limited Partner with respect to the
Partnership Units being assigned and agreement of the transferee assuming
all of the obligations of a Limited Partner under this Agreement with
respect to such transferred Partnership Units accruing from and after the
date of transfer, (B) execution and acknowledgment by the transferor
Limited Partner and such transferee of any other instruments required in
the sole and absolute discretion of the General Partner, including the
acceptance and adoption by such transferee of the provisions of this
Agreement; (C) obtaining the written consent of the General Partner as
provided in the second sentence of this Section 9.2(b); and (D) payment of
a transfer fee to the Partnership, sufficient to cover the reasonable
expenses of the substitution, if any. Any transferee, whether or not
admitted as a Substituted Limited Partner, shall take its rights to the
transferred Partnership Units subject to the obligations of the transferor
Limited Partner hereunder."
17. The following paragraph is added as Section 9.2(c) of the Agreement:
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<PAGE>
"(c) The Approved Transfers permitted in Paragraph 8 of Exhibit E hereto
shall also be available, mutatis mutandis, to holders of any Common Units
issued in exchange for or upon the redemption of SCUs."
18. Clause (x) of Section 9.3 of the Agreement is hereby deleted and
replaced in its entirety with the following:
"(x) if such Transfer would result in (i) the transferor or the transferee
owning Common Units having a value (computed as of the date of such
proposed Transfer by multiplying the Common Stock Amount with respect to
such Common Units by the Current Per Share Market Price) less than
$250,000, unless the transferee is an existing Limited Partner, or (ii) the
transferee owning Common Units having a value (computed as of the date of
such proposed Transfer by multiplying the Common Stock Amount with respect
to such Common Units by the Current Per Share Market Price) less than
$250,000, unless such Common Units constitute all of the Common Units then
owned by such transferor;"
19. Clause (xiv) of Section 9.3 of the Agreement is hereby deleted and
replaced in its entirety with the following:
"(xiv) except with the express written consent of the General Partner, if
such Transfer, in the opinion of counsel to the General Partner, would
result in either the Partnership having more than one hundred Partners or
in the Partnership being classified as a "publicly traded partnership"
within the meaning of the Code and the Regulations;"
20. In Section 9.3 of the Agreement the word "or" before clause (xv)
thereof is hereby deleted and the following additional clause is hereby added
prior to the period at the end of Section 9.3 of the Agreement:
"or (xvi) except with respect to (A) Transfers qualifying as "private
Transfers" for purposes of Treasury Regulations Section 1.7704-1(e) or any
successor provision or (B) up to two Transfers (excluding for this purpose,
transfers qualifying as "private transfers") of interests directly or
indirectly held by the estate of, or other successor to, a person that has
died within the preceding twelve (12) months, if the General Partner
determines in its reasonable discretion that if it permitted such transfer
the Partnership would be unable to obtain an opinion of counsel of
recognized standing to the effect that the Partnership should not be
treated as a "publicly traded partnership" within the meaning of Section
7704(b) of the Code."
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<PAGE>
21. The following sentence is hereby added to the end of Section 11.1 of
the Agreement:
"Notwithstanding the foregoing, the Rights in respect of the Common Units
issued upon the redemption or exchange of SCUs shall be subject to the
terms, conditions and restrictions set forth in Exhibit F hereto."
22. The following sentence is hereby added to the end of Section 11.2 of
the Agreement:
"Notwithstanding the foregoing, the terms and provisions applicable to the
Rights in respect of the Common Units issued upon the redemption or
exchange of SCUs shall be as set forth in Exhibit F hereto."
23. Exhibit A of the Agreement is hereby deleted and is replaced in its
entirety by new Exhibit A attached hereto as Attachment 2.
24. Exhibit C of the Agreement is hereby deleted and is replaced in its
entirety by new Exhibit C attached hereto as Attachment 3.
25. The exhibit attached to this Amendment as Attachment 4 is hereby added
to the Agreement as Exhibit E thereof.
26. The exhibit attached to this Amendment as Attachment 5 is hereby added
to the Agreement as Exhibit F thereof.
27. The exhibit attached to this Amendment as Attachment 6 is hereby added
to the Agreement as Exhibit G thereof.
28. Except as expressly amended hereby, the Agreement shall remain in full
force and effect.
Signature on following page
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<PAGE>
IN WITNESS WHEREOF, the General Partner has executed this Amendment as of
the date first written above.
CBL HOLDINGS I, INC.
By:
------------------------------
Name:
Title:
Accepted and Agreed:
CBL & ASSOCIATES PROPERTIES, INC.
By:
------------------------------
Name:
Title:
<PAGE>
Attachment 1
LIMITED PARTNER ACCEPTANCE OF
PARTNERSHIP AGREEMENT
This Limited Partner Acceptance of Partnership Agreement (this
"Acceptance") is made as of ______, 2001, by _________, [a ________ organized
under the laws of the State of ____] (the "Limited Partner"), to and for the
benefit of CBL & Associates Limited Partnership, a Delaware limited partnership
(the "Partnership").
Capitalized terms used and not defined herein shall have the meaning set
forth in the Second Amended and Restated Agreement of Limited Partnership of the
Partnership, dated as of June 30, 1998, as amended through the date hereof (the
"Partnership Agreement").
WHEREAS, on the date hereof, [the Partnership has agreed to issue to the
Limited Partner [_______] SCUs (the "Units") in connection with the closing of
the transactions contemplated by the Master Contribution Agreement, dated as of
_______, 2000, among the Partnership, CBL & Associates Properties, Inc., Jacobs
Realty Investors Limited Partnership and Richard E. Jacobs, solely as Trustee of
the Richard E. Jacobs Revocable Living Trust and the David H. Jacobs Marital
Trust] [______ received [______] SCUs (the "Units") in connection with the
closing of the transactions contemplated by the Master Contribution Agreement,
dated as of _______, 2000 (the "Master Contribution Agreement"), among the
Partnership, CBL & Associates Properties, Inc., Jacobs Realty Investors Limited
Partnership and Richard E. Jacobs, solely as Trustee of the Richard E. Jacobs
Revocable Living Trust and the David H. Jacobs Marital Trust and transferred all
of such Units to the Limited Partner, its designated holding entity, as
contemplated in the Master Contribution Agreement]; and
WHEREAS, in connection with the acceptance of the Units by the Limited
Partner, the Limited Partner has agreed to affirm its obligations as a limited
partner under the Partnership Agreement with respect to the Units and to confirm
the additional agreements set forth herein;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Limited Partner hereby
confirms that it has been given the opportunity to review the terms of the
Partnership Agreement and affirms and agrees that it is bound by each of the
terms and conditions of the Partnership Agreement applicable to a holder of
SCUs, including, without limitation, the provisions thereof relating to
limitations and restrictions on the transfer of SCUs.
<PAGE>
IN WITNESS WHEREOF, the Limited Partner has caused this Acceptance to be
duly executed and delivered as of the date first written above.
[Insert Name of Limited Partner]
By:
------------------------------
Name:
Power of Attorney
Acknowledged and accepted:
CBL & Associates Limited Partnership
By: CBL Holdings I, Inc.,
General Partner
By:
------------------------------
Name:
Title:
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<PAGE>
Attachment 3
------------
EXHIBIT C
Allocations
-----------
1. Allocations of Gross Income, Net Income and Net Loss.
(a) Except as otherwise provided herein, in each tax year in which there is
sufficient Gross Income and Net Income to make all of the allocations described
in clauses (i) through (iii) below, Gross Income, Net Income and Net Loss of the
Partnership for such tax year shall be allocated among the Partners in the
following order and priority:
(i) First, Net Income shall be allocated to the relevant Partner, on
account of the Preferred Units, in an amount equal to the excess of (A) the
amount of Net Cash Flow distributed to such Partner pursuant to Sections
6.2(a)(i) and (ii) and Section 6.2(c) (but only to the extent of the
Preferred Distribution Requirement and Preferred Distribution Shortfalls)
for the current and all prior Partnership tax years over (B) the amount of
Net Income previously allocated to such Partner pursuant to this paragraph
(a)(i) or pursuant to paragraph (b)(i);
(ii) Second, for any Partnership tax year ending on or after a date on
which Preferred Units are redeemed, Net Income (or Net Losses) shall be
allocated to the relevant Partner, on account of the Preferred Units, in an
amount equal to the excess (or deficit) of the sum of the applicable
Preferred Redemption Amounts for the Preferred Units that have been or are
being redeemed during such Partnership tax year over the Preferred Unit
Issue Price of such Preferred Units;
(iii) Third, Gross Income shall be allocated to the relevant Partner,
on account of SCUs or Common Units received on a conversion or redemption
of SCUs in an amount equal to the amount of cash distributed to such
Partner in respect of such SCUs or Common Units pursuant to Sections
6.2(a)(iii), (iv) and (v) (the "Target Amount"). The character of the items
of Gross Income allocated to the relevant Partners pursuant to this clause
(iii) shall proportionately reflect the relative amounts of the
Partnership's Gross Income having such character for such year, excluding
from such Gross Income Net Capital Gain allocated pursuant to Section 1(c)
below; provided, however, that such items shall not include items described
in section (e) of the definition of Net Income or Net Loss, it being the
intention of the parties that the tax items allocated under Section 3(a)
corresponding to the items of Gross Income allocated pursuant to this
Section 1(a)(iii) will equal the Target Amount. If the amount of such items
differs from the Target Amount, the items of Gross Income allocated
pursuant to this Section 1(a)(iii) shall be adjusted to cause the amount of
such tax items to equal the Target
<PAGE>
Amount. For purposes of determining the amount of cash distributed to such
Partners, Special Tax Distributions shall not be taken into account, and
Extraordinary Return of Capital Distributions shall be taken into account
only to the extent that the amount of such Extraordinary Return of Capital
Distributions exceed the aggregate of the Excess Allocations made to such
Partners. For this purpose, "Excess Allocations" mean the excess of the Tax
Net Capital Gain allocated under Section 3(a) to holders of SCUs and
holders of Common Units received on a conversion or redemption of SCUs in
connection with allocations of Net Capital Gain under Section 1(c) over the
Special Tax Distribution made to such Partners. A distribution shall be
treated as an Extraordinary Return of Capital Distribution to the extent
that such distribution is reasonably attributable to (x) Net Financing
Proceeds or (y) proceeds allocable to a transaction generating Net Capital
Gain allocated pursuant to Section 1(c); in either case limited to the
excess of the Tax Net Capital Gain allocated under Section 3(a) to holders
of SCUs and holders of Common Units received on a conversion or redemption
of SCUs in connection with allocations of Net Capital Gain under Section
1(c) over the Special Tax Distributions made to such Partners.
(iv) Fourth, any remaining Net Income and Net Losses, taking into
account in determining such Net Income or Net Losses the allocation of
Gross Income provided for in paragraph (a)(iii) above, shall be allocated
among the Partners, on account of their Common Units other than Common
Units received on a conversion or redemption of SCUs, in accordance with
their proportionate ownership of Common Units other than Common Units
received on a conversion or redemption of SCUs (except as otherwise
required by the Regulations).
(b) Except as otherwise provided herein, in each tax year in which there is
not sufficient Gross Income and Net Income to make all of the allocations
described in clauses (a)(i) through (a)(iii) above, Gross Income, Net Income and
Net Loss of the Partnership for such tax year shall be allocated among the
Partners in the following order and priority:
(i) First, Net Income shall be allocated to the relevant Partner, on
account of the Preferred Units, in an amount equal to the excess of (A) the
amount of Net Cash Flow distributed to such Partner pursuant to Sections
6.2(a)(i) and (ii) and Section 6.2(c) (but only to the extent of the
Preferred Distribution Requirement and Preferred Distribution Shortfalls)
for the current and all prior Partnership tax years over (B) the amount of
Net Income previously allocated to such Partner pursuant to this paragraph
(b)(i) or pursuant to paragraph (a)(i)
(ii) Second, for any Partnership tax year ending on or after a date on
which Preferred Units are redeemed, Net Income (or Net Losses) shall be
allocated\
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<PAGE>
to the relevant Partner, on account of the Preferred Units, in an amount
equal to the excess (or deficit) of the sum of the applicable Preferred
Redemption Amounts for the Preferred Units that have been or are being
redeemed during such Partnership tax year over the Preferred Unit Issue
Price of such Preferred Units;
(iii) Third, Gross Income, to the extent not previously taken into
account in making the allocations required under paragraph (a)(i) and
(a)(ii), shall be allocated to the relevant Partner, on account of SCUs or
Common Units received on a conversion or redemption of SCUs in an amount
equal to the amount of cash distributed to such Partner in respect of such
SCUs or Common Units pursuant to Sections 6.2(a)(iii), (iv) and (v) (the
"Target Amount"). The character of the items of Gross Income allocated to
the relevant Partners pursuant to this clause (iii) shall proportionately
reflect the relative amounts of the Partnership's Gross Income having such
character for such year, excluding from such Gross Income Net Capital Gain
allocated pursuant to Section 1(c) below; provided, however, that such
items shall not include items described in section (e) of the definition of
Net Income or Net Loss, it being the intention of the parties that the tax
items allocated under Section 3(a) corresponding to the items of Gross
Income allocated pursuant to this Section 1(b)(iii) will equal the Target
Amount. If the amount of such items differs from the Target Amount, the
items of Gross Income allocated pursuant to this Section 1(b)(iii) shall be
adjusted to cause the amount of such tax items to equal the Target Amount.
For purposes of determining the amount of cash distributed to such
Partners, Special Tax Distributions shall not be taken into account, and
Extraordinary Return of Capital Distributions shall be taken into account
only to the extent that the amount of such Extraordinary Return of Capital
Distributions exceed the aggregate of the Excess Allocations made to such
Partners. For this purpose, "Excess Allocations" mean the excess of the Tax
Net Capital Gain allocated under Section 3(a) to holders of SCUs and
holders of Common Units received on a conversion or redemption of SCUs in
connection with allocations of Net Capital Gain under Section 1(c) over the
Special Tax Distribution made to such Partners. A distribution shall be
treated as an Extraordinary Return of Capital Distribution to the extent
that such distribution is reasonably attributable to (x) Net Financing
Proceeds or (y) proceeds allocable to a transaction generating Net Capital
Gain allocated pursuant to Section 1(c); in either case limited to the
excess of the Tax Net Capital Gain allocated under Section 3(a) to holders
of SCUs and holders of Common Units received on a conversion or redemption
of SCUs in connection with allocations of Net Capital Gain under Section
1(c) over the Special Tax Distributions made to such Partners.
(iv) Fourth, any remaining Net Income and Net Losses, taking into
account in determining such Net Income or Net Losses the allocation of
Gross
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<PAGE>
Income provided for in paragraph (b)(iii) above, shall be allocated among
the Partners, on account of their Common Units other than Common Units
received on a conversion or redemption of SCUs, in accordance with their
proportionate ownership of Common Units other than Common Units received on
a conversion or redemption of SCUs (except as otherwise required by the
Regulations).
(c) Notwithstanding clauses (a)(iii) and (a)(iv), and clauses (b)(iii) and
(b)(iv), above, holders of SCUs and holders of Common Units received upon a
conversion or redemption of SCUs may be allocated their proportionate share of
Net Capital Gain recognized by the Partnership in a taxable year (in accordance
with their proportionate ownership of the aggregate number of SCUs and Common
Units, counting each SCU as the number of Common Units into which it is
convertible in accordance with Exhibit E), in addition to the amount specified
in clause (a)(iii) above and clause (b)(iii) above, if each of the following
requirements is satisfied:
(i) the Partnership shall have distributed to each holder of SCUs in
cash pursuant to Section 6.2(a)(iv) for the last quarter of such taxable
year an amount equal to the Basic Distribution Amount (determined without
taking into account any Special Tax Distribution);
(ii) during such taxable year, the Partnership has recognized Net
Capital Gain in connection with a sale of, condemnation of, or disposition
of one or more Properties;
(iii) the Partnership has made or will make prior to January 30, of
the following tax year a cash distribution (a "Special Tax Distribution")
to the Partners, and the portion of such Special Tax Distribution made to
the holders of SCUs and holders of Common Units received upon a conversion
or redemption of SCUs equals or exceeds the product of the maximum combined
federal, Ohio and Cleveland rates imposed on net capital gains of the
applicable holding period (taking into account recapture, if applicable,
and the deductibility of state and local taxes) multiplied by the amount of
Tax Net Capital Gain allocated under Section 3(a) to holders of SCUs and
holders of Common Units received upon a conversion or redemption of SCUs in
connection with the allocation under this Section 1(c) of Net Capital Gain
to such holders. For these purposes, Tax Net Capital Gain means net capital
gain, as determined for federal income tax purposes, which is governed by
Section 3(a) and not Section 3(c) hereof. For the avoidance of doubt, no
portion of any Special Tax Distribution will be taken into account when
determining whether the Partnership has satisfied the distribution
requirement of Section 6.2(a)(iii) or 6.2(a)(iv) ;
(iv) with respect to Special Tax Distributions to be made within two
years of the final Closing provided for in the Master Contribution
Agreement, the Special Tax
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<PAGE>
Distribution will not cause the aggregate distributions to a holder of SCUs
or a holder of Common Units received on a conversion or redemption of SCUs,
other than distributions to such holder in respect of the Basic
Distribution Amount, to exceed the product of (x) the lesser of such
holder's percentage interest in Partnership profits for the year in which
the Special Tax Distribution is made or such holder's percentage interest
in Partnership profits for the life of the Partnership (as determined for
purposes of Treasury Regulations Section 1.707-4(b)) and (y) the
Partnership's net cash flow from operations for the year in which the
Special Tax Distribution is made (as determined for purposes of Treasury
Regulations Section 1.707-4(b)).
(d) Notwithstanding paragraphs (a), (b) and (c), Net Income and Net Losses
from a Liquidation Transaction shall be allocated as follows:
(i) First, Net Income (or Net Losses) from the Liquidation Transaction
shall be allocated to the relevant Partner, in connection with the
Preferred Units, in an amount equal to the excess (or deficit) of the sum
of the applicable Preferred Redemption Amounts of the Preferred Units which
have been or will be redeemed with the proceeds of the Liquidation
Transaction over the Preferred Unit Issue Price of such Preferred Units;
(ii) Second, Net Income (or Net Losses) from the Liquidation
Transaction shall be allocated among the Partners owning SCUs or Common
Units so that the Capital Accounts of the Partners (excluding from the
Capital Account of any Partner the amount attributable to such Partner's
Preferred Units) are proportional to the number of Common Units held by
each Partner. For purposes of this clause (ii), each SCU shall be treated
as the number of Common Units into which the SCU is convertible pursuant to
the terms of Exhibit E to the Agreement.
(iii) Third, any remaining Net Income or Net Losses from the
Liquidation Transaction shall be allocated among the Partners owning SCUs
or Common Units in accordance with their proportionate ownership of Common
Units. For purposes of this clause (iii), each SCU shall be treated as the
number of Common Units into which the SCU is convertible pursuant to the
terms of Exhibit E to the Agreement.
2. Special Allocations.
Notwithstanding any provisions of paragraph 1 of this Exhibit C, the
following special allocations shall be made in the following order:
(a) Minimum Gain Chargeback (Nonrecourse Liabilities). If there is a net
decrease in Partnership Minimum Gain for any Partnership fiscal year (except
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<PAGE>
as a result of conversion or refinancing of Partnership indebtedness, certain
capital contributions or revaluation of the Partnership property as further
outlined in Regulation Sections 1.704-2(d)(4), (f)(2) or (f)(3) , each Partner
shall be specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to that Partner's share
of the net decrease in Partnership Minimum Gain. The items to be so allocated
shall be determined in accordance with Regulation Section 1.704-2(f). This
paragraph (a) is intended to comply with the minimum gain chargeback requirement
in said section of the Regulations and shall be interpreted consistently
therewith. Allocations pursuant to this paragraph (a) shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto.
(b) Minimum Gain Attributable to Partner Nonrecourse Debt. If there is a
net decrease in Minimum Gain Attributable to Partner Nonrecourse Debt during any
fiscal year (other than due to the conversion, refinancing or other change in
the debt instrument causing it to become partially or wholly nonrecourse,
certain capital contributions, or certain revaluations of Partnership property
as further outlined in Regulation Section 1.704-2(i)(4), each Partner shall be
specially allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to that Partner's share of the
net decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt. The
items to be so allocated shall be determined in accordance with Regulation
Sections 1.704-2(i)(4) and (j)(2). This paragraph (b) is intended to comply with
the minimum gain chargeback requirement with respect to Partner Nonrecourse Debt
contained in said sections of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this paragraph (b) shall be made
in proportion to the respective amounts required to be allocated to each Partner
pursuant thereto.
(c) Qualified Income Offset. In the event a Limited Partner unexpectedly
receives any adjustments, allocations or distributions described in Regulation
Sections 1.704-1(b)(2)(ii)(d)(4), (5), or (6), and such Limited Partner has an
Adjusted Capital Account Deficit, items of Partnership income and gain shall be
specially allocated to such Partner in an amount and manner sufficient to
eliminate the Adjusted Capital Account Deficit as quickly as possible. This
paragraph (c) is intended to constitute a "qualified income offset" under
Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
(d) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or
other applicable period shall be allocated to the Partners in accordance
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<PAGE>
with their proportionate ownership of Common Units other than Common Units
issued on a redemption or conversion of SCUs.
(e) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any
fiscal year or other applicable period shall be specially allocated to the
Partner that bears the economic risk of loss for the debt (i.e., the Partner
Nonrecourse Debt) in respect of which such Partner Nonrecourse Deductions are
attributable (as determined under Regulation Sections 1.704-2(b)(4) and (i)(1).
(f) Curative Allocations. The Regulatory Allocations (as defined below)
shall be taken into account in allocating other items of income (including Gross
Income), gain, loss, and deduction among the Partners so that, to the extent
possible, the cumulative net amount of allocations of Partnership Items under
paragraphs 1 and 2 of this Exhibit C shall be equal to the net amount that would
have been allocated to each Partner if the Regulatory Allocations had not
occurred. To the extent that there is an allocation under Section 2(a) or (b)
hereof of Partnership income or gain to a holder of SCUs or Common Units issued
on a redemption or conversion of SCUs, there will be a correspondingly smaller
allocation of Gross Income to such holder under Section 1(a)(ii) or 1(b)(ii)
hereof. This subparagraph (f) is intended to minimize to the extent possible and
to the extent necessary any economic distortions which may result from
application of the Regulatory Allocations and shall be interpreted in a manner
consistent therewith. For purposes hereof, "Regulatory Allocations" shall mean
the allocations provided under this paragraph 2.
3. Tax Allocations.
(a) Generally. Subject to paragraphs (b) and (c) hereof, items of income,
gain, loss, deduction and credit to be allocated for income tax purposes
(collectively, "Tax Items") shall be allocated among the Partners on the same
basis as their respective book items.
(b) Sections 1245/1250 Recapture. If any portion of gain from the sale of
property is treated as gain which is ordinary income by virtue of the
application of Code Section 1245 or 1250 ("Affected Gain"), then (A) such
Affected Gain shall be allocated among the Partners in the same proportion that
the depreciation and amortization deductions giving rise to the Affected Gain
were allocated and (B) other Tax Items of gain of the same character that would
have been recognized, but for the application of Code Section 1245 and/or 1250,
shall be allocated away from those Partners who are allocated Affected Gain
pursuant to Clause (A) so that, to the extent possible, the other Partners are
allocated the same amount, and type, of capital gain that would have been
allocated to them had Code
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<PAGE>
Section 1245 and/or 1250 not applied. For purposes hereof, in order to determine
the proportionate allocations of depreciation and amortization deductions for
each fiscal year or other applicable period, such deductions shall be deemed
allocated on the same basis as Net Income and Net Loss for such respective
period.
(c) Allocations Respecting Section 704(c) and Revaluations:
Curative Allocations Resulting from the Ceiling Rule. Notwithstanding
paragraph (b) hereof, Tax Items with respect to Partnership property that is
subject to Code Section 704(c) and/or Regulation Section 1.704-1(b)(2)(iv)(f)
(collectively, "Section 704(c) Tax Items") shall be allocated in accordance with
said Code section and/or Regulation Section 1.704-1(b)(4)(i), as the case may
be. The allocation of Tax Items shall be subject to the ceiling rule stated in
Regulation Section 1.704-1(c) and Regulation Section 1.704-3. The General
Partner will not specially allocate Tax Items (other than the Section 704(c) Tax
Items) to cure for the effect of the ceiling rule, except that with respect to
the properties contributed to the Partnership pursuant to the Master
Contribution Agreement (the "Master Contribution Agreement") dated September __,
2000 among Jacobs Realty Investors Limited Partnership, CBL & Associates
Properties, Inc., CBL & Associates Limited Partnership and others (the "Jacobs
Properties"), curative allocations of gain recognized on a disposition of a
direct or indirect interest in a Jacobs Property may be made to the extent
permitted in Regulation Section 1.704-3(c). The Partnership shall allocate items
of income, gain, loss and deduction allocated to it by a Property Partnership to
the Partner or Partners contributing the interest or interests in such Property
Partnership, so that, to the greatest extent possible, such contributing Partner
or Partners are allocated the same amount and character of items of income,
gain, loss and deduction with respect to such Property Partnership that they
would have been allocated had they contributed undivided interests in the assets
owned by such Property Partnership to the Partnership in lieu of contributing
the interest or interests in the Property Partnership to the Partnership.
Notwithstanding the above, with respect to property contributed to the
Partnership after the date hereof, such Section 704(c) Tax Items may be
allocated under such method selected by the General Partner that is consistent
with the Section 704(c) Regulations.
4. Certain Allocations of Depreciation and Loss. Notwithstanding anything
in this Exhibit C to the contrary, depreciation, amortization, gain and loss
attributable to an adjustment under Section 743 or Section 734 of the Code of
the federal income tax basis of Partnership assets (including adjustments made
prior to or after the contribution of the relevant assets or indirect interests
therein to the Partnership) shall be allocated to the direct or indirect
partner, or such partner's successor or assign, whose death or acquisition of a
direct or indirect interest gave rise to the adjustments, except to
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<PAGE>
the extent such allocations would not be valid as a result of a change in tax
law occurring after the date of the Master Contribution Agreement.
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Attachment 5
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EXHIBIT F
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Exchange Rights of Common Units
-------------------------------
Issued In Exchange For or Upon Redemption of SCUs
-------------------------------------------------
1. At any time, subject to the remainder of this Exhibit F, a holder of
Common Units issued in exchange for or upon the redemption of SCUs (such Common
Units are referred to herein as "JCUs") shall have the right to exchange all or
any portion of such holder's JCUs (the "JCU Offered Units") for JCU Exchange
Consideration (as defined below), subject to the limitations contained in
Paragraphs 3 and 4 below. Any such JCU Exchange Right shall be exercised
pursuant to an exchange notice comparable to the Exchange Notice required under
Exhibit D to the Partnership Agreement (such notice, a "JCU Exchange Notice")
delivered by the holder exercising the JCU Exchange Right (the "JCU Exercising
Holder") to the Company.
2. The exchange consideration (the "JCU Exchange Consideration") payable by
the Company to each JCU Exercising Holder shall be equal to the product of (x)
the Common Stock Amount with respect to the JCU Offered Units multiplied by (y)
the Current Per Share Market Price, each computed as of the date on which the
JCU Exchange Notice was delivered to the Company. The JCU Exchange Consideration
shall, in the sole and absolute discretion of the Company, be paid in the form
of (A) cash, or cashier's or certified check, or by wire transfer of immediately
available funds to the JCU Exercising Holder's designated account or (B) subject
to the applicable Ownership Limit, by the issuance by the Company of a number of
shares of its Common Stock equal to the Common Stock Amount with respect to the
JCU Offered Units or (C) subject to the applicable Ownership Limit, any
combination of cash and Common Stock (valued at the Current Per Share Market
Price).
3. Notwithstanding anything herein to the contrary, any JCU Exchange Right
may only be exercised to the extent that, upon exercise of the JCU Exchange
Right, assuming payment by the Company of the JCU Exchange Consideration in
shares of Common Stock, the JCU Exercising Holder will not, on a cumulative
basis, Beneficially Own or Constructively Own shares of Common Stock, including
shares of Common Stock to be issued upon exercise of the JCU Exchange Right, in
excess of the applicable Ownership Limit. If a JCU Exchange Notice is delivered
to the Company but, as a result of the applicable Ownership Limit or as a result
of restrictions contained in the certificate of incorporation of the Company,
the JCU Exchange Right cannot be exercised in full as aforesaid, the JCU
Exchange Notice shall be deemed to be modified to provide that the JCU Exchange
Right shall be exercised only to the extent permitted under the applicable
<PAGE>
Ownership Limit under the certificate of incorporation of the Company, and the
JCU Exchange Notice with respect to the remainder of such JCU Exchange Right
shall be deemed to have been withdrawn.
4. JCU Exchange Rights may be exercised at any time and from time to time,
provided, however, that, except as set forth below in Paragraph 6 or with the
prior written consent of the General Partner, (x) only two (2) JCU Exchange
Notices may be delivered to the Company by each holder of JCUs during any
consecutive twelve (12) month period; and (y) no JCU Exchange Notice may be
delivered with respect to JCUs either (i) having a value of less than $250,000
calculated by multiplying the Common Stock Amount with respect to such JCUs by
the Current Per Share Market Price or (ii) if a holder does not own JCUs having
a value of $250,000 or more, constituting less than all of the JCUs owned by
such holder.
5. Within thirty (30) days after receipt by the Company of any JCU Exchange
Notice delivered in accordance with the requirements of Paragraph 1 hereof, the
Company shall deliver to the JCU Exercising Holder a notice (a "JCU Election
Notice"), which JCU Election Notice shall set forth the computation of the JCU
Exchange Consideration and shall specify the form of the JCU Exchange
Consideration (which shall be in accordance with Paragraph 2 hereof), to be paid
by the Company to such JCU Exercising Holder and the date, time and location for
completion of the purchase and sale of the JCU Offered Units, which date shall,
to the extent required, in no event be more than (A) in the case of JCU Offered
Units with respect to which the Company has elected to pay the JCU Exchange
Consideration by issuance of shares of Common Stock, ten (10) days after the
delivery by the Company of the JCU Election Notice for the JCU Offered Units or
(B) in the case of JCU Offered Units with respect to which the Company has
elected to pay the JCU Exchange Consideration in cash, sixty (60) days after the
initial date of receipt by the Company of the JCU Exchange Notice for such JCU
Offered Units; provided, however, that such sixty (60) day period may be
extended for an additional sixty (60) day period to the extent required for the
Company to cause additional shares of its Common Stock to be issued to provide
financing to be used to acquire the JCU Offered Units. Notwithstanding the
foregoing, the Company agrees to use its reasonable efforts to cause the closing
of the exchange hereunder to occur as quickly as possible. If the Company has
delivered a JCU Election Notice to the JCU Exercising Holder with respect to a
JCU Exchange Notice, the JCU Exchange Notice may not be withdrawn or modified by
the JCU Exercising Holder without the consent of the General Partner. Similarly,
if the Company delivers a JCU Election Notice to a JCU Exercising Holder, the
Company may not modify the JCU Election Notice without the consent of the JCU
Exercising Holder.
6. Notwithstanding the limitation set forth in clause (x) of Paragraph 4,
in the event that the Company provides notice to the holders of JCUs, pursuant
to Paragraph 8(v) hereof, the JCU Exchange Rights shall be exercisable by each
holder of
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<PAGE>
JCUs at any time that is during the period commencing on the date on which the
Company provides such notice and ending on the earlier to occur of thirty (30)
days from receipt of the Company's aforesaid notice and the record date, if any,
to determine shareholders eligible to receive such distribution or to vote upon
the approval of such merger, sale or other extraordinary transaction (or, if no
such record date is applicable, the date that is thirty (30) days after the date
the Company provides the notice pursuant to Paragraph 8(v) hereof). In the event
that a JCU Exercising Holder delivers to the Company a JCU Exchange Notice
pursuant to this Paragraph 6, the Company shall be required to deliver a JCU
Election Notice before the earlier of (1) the tenth (10th) Business Day after
the Company receives the JCU Exchange Notice or (2) one (1) Business Day before
the record date to determine shareholders eligible to receive a distribution or
vote on approval and such JCU Election Notice shall, among other things, set the
date for the purchase and sale of the JCU Offered Units, which date shall, to
the extent required, in no event be more than (A) in the case of JCU Offered
Units with respect to which the Company has elected to pay the JCU Exchange
Consideration by issuance of shares of Common Stock, one (1) Business Day prior
to the record date, if any, to determine shareholders eligible to receive such
distribution or to vote upon the approval of such merger, sale or other
extraordinary transaction or (B) in the case of JCU Offered Units with respect
to which the Company has elected to pay the JCU Exchange Consideration in cash,
sixty (60) days after the initial date of receipt by the Company of the JCU
Exchange Notice for such JCU Offered Units; provided, however, that such sixty
(60) day period may be extended for an additional sixty (60) day period to the
extent required for the Company to cause additional shares of its Common Stock
to be issued to provide financing to be used to acquire the JCU Offered Units.
Notwithstanding the foregoing, the Company shall use its reasonable efforts to
cause the closing of the exchange hereunder to occur as quickly as possible.
7. At the closing of the purchase and sale of JCU Offered Units, payment of
the JCU Exchange Consideration shall be accompanied by proper instruments of
transfer and assignment and by the delivery of (i) representations and
warranties of (A) the JCU Exercising Holder with respect to (x) its due
authority to sell all of the right, title and interest in and to such JCU
Offered Units to the Company, (y) the status of the JCU Offered Units being
sold, free and clear of all Liens and (z) its intent to acquire the Common Stock
for investment purposes and not for distribution, and (B) the Company with
respect to due authority for the purchase of such JCU Offered Units, and (ii) to
the extent that any shares of Common Stock are issued in payment of the JCU
Exchange Consideration or any portion thereof, (A) an opinion of counsel for the
Company reasonably satisfactory to the JCU Exercising Holder, to the effect that
(I) such shares of Common Stock have been duly authorized, are validly issued,
fully-paid and non-assessable and (II) that the issuance of such shares will not
violate the applicable Ownership Limit, and (B) a stock certificate or
certificates evidencing the shares of Common Stock to be issued and registered
in the name of the JCU Exercising Holder or
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<PAGE>
its designee, with an appropriate legend reflecting that such shares or units
are not registered under the Securities Act of 1933, as amended, and may not be
offered or sold unless registered pursuant to the provisions of such act or an
exemption therefrom is available as confirmed by an opinion of counsel
satisfactory to the Company.
8. To facilitate the Company's ability to fully perform its obligations
hereunder, the Company covenants and agrees, for the benefit of the holders from
time to time of JCUs, as follows:
(i) At all times during the pendency of the JCU Exchange Rights, the
Company shall reserve for issuance such number of shares of Common Stock as
may be necessary to enable the Company to issue such shares in full payment
of the JCU Exchange Consideration in regard to all JCUs which are from time
to time outstanding.
(ii) As long as the Company shall be obligated to file periodic
reports under the Exchange Act, the Company will timely file such reports
in such manner as shall enable any recipient of Common Stock issued to
holders of JCUs hereunder in reliance upon an exemption from registration
under the Securities Act to continue to be eligible to utilize Rule 144
promulgated by the SEC pursuant to the Securities Act, or any successor
rule or regulation or statute thereunder, for the resale thereof.
(iii) Each holder of JCUs, upon request, shall be entitled to receive
from the Operating Partnership in a timely manner all reports filed by the
Company with the SEC and all other communications transmitted from time to
time by the Company to its shareholders generally.
(iv) Other than as contemplated under the terms of the Rights
Agreement, dated April 30, 1999, as amended from time to time, and any
successor agreement thereof, issuances of stock pursuant to the Company's
dividend reinvestment plan (as described in the Company's prospectus dated
August 15, 1995) or any customary dividend reinvestment plan adopted by the
Company after that date and other than the issuance of deferred stock
awards or the grant of stock options to officers, directors and employees
of the Company, the Company shall not issue or sell any shares of Common
Stock or other equity securities or any instrument convertible into any
equity security for a consideration less than the fair value of such Common
Stock or other equity security, as determined in each case by the Board of
Directors of the Company, in consultation with the Company's professional
advisors, and under no circumstances shall the Company declare any stock
dividend, stock split, stock distribution or the like, unless fair and
equitable arrangements are provided, to the extent necessary, to fully
adjust, and to avoid
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any dilution in, the rights of holders of the JCUs under this Exhibit F and
the Agreement.
(v) The Company shall notify the holders of JCUs of its intention to
make any extraordinary distributions of cash or property to its
shareholders or effect a merger (including, without limitation, a
triangular merger), a sale of all or substantially all of its assets or any
other similar transaction outside of the ordinary course of business at
least thirty (30) days prior to the record date, if any, to determine
shareholders eligible to receive such distribution or to vote upon the
approval of such merger, sale or other transaction (or, if no such record
date is applicable, at least thirty (30) days before consummation of such
merger, sale or other transaction). This provision for such notice shall
not be deemed (i) to permit any transaction that otherwise is prohibited by
the Agreement or requires the approval of the holders of JCUs or (ii) to
require a vote of the holders of JCUs to a transaction that does not
otherwise require such a vote under the Agreement or (iii) to effect the
validity of any transaction if such notice is not given. Each holder of
JCUs, as a condition to the receipt of the notice pursuant hereto, shall be
obligated to keep confidential the information set forth therein until such
time as the Company has made public disclosure thereof and to use such
information during such period of confidentiality solely for purposes of
determining whether or not to exercise its JCU Exchange Rights; provided,
however, that a holder of JCUs may disclose such information to its
attorney, accountant and/or financial advisor for purposes of obtaining
advice with respect to such exercise so long as such attorney, accountant
and/or financial advisor agrees to receive and hold such information
subject to this confidentiality requirement.
9. All JCU Offered Units tendered to the Company in accordance with the
exercise of JCU Exchange Rights shall be delivered to the Company free and clear
of all Liens and should any Liens exist or arise with respect to such Units, the
Company shall be under no obligation to acquire the same unless, in connection
with such acquisition, the Company has elected to pay such portion of the JCU
Exchange Consideration in the form of cash consideration in circumstances where
such consideration will be sufficient to cause such existing Lien to be
discharged in full upon application of all or a part of such consideration, and
the Company is expressly authorized to apply such portion of the JCU Exchange
Consideration as may be necessary to satisfy any indebtedness in full and to
discharge such Lien in full. In the event any state or local property transfer
tax is payable as a result of the transfer of JCU Offered Units to the Company,
the transferring holder thereof shall assume and pay such transfer tax.
10. Subject to the restrictions of transfer set forth in the Agreement, the
Assignee of any holder of JCUs may exercise the rights of such holder of JCUs
pursuant to this Exhibit F, and such holder of JCUs shall be deemed to have
assigned such rights to
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such Assignee and shall be bound by the exercise of such rights by such holder's
Assignee. In connection with any exercise of such rights by such Assignee on
behalf of such holder, the JCU Exchange Consideration shall be paid by the
Company directly to such Assignee and not to such holder.
11. In the event that the Company shall be a party to any transaction
(including, without limitation, a merger, consolidation or statutory share
exchange with respect to the Common Stock), in each case as a result of which
shares of Common Stock are converted into the right to receive shares of capital
stock, other securities or other property (including cash or any combination
thereof), the JCU Exchange Consideration payable thereafter by the Company
pursuant to clauses (B) and (C) of Paragraph 2 in lieu of a share of Common
Stock shall be the kind and amount of shares of capital stock and other
securities and property (including cash or any combination thereof) that was
received upon consummation of such transaction in return for one share of Common
Stock; and the Company may not become a party to any such transaction unless the
terms thereof are consistent with the foregoing.
12. The provisions of Article XI and Exhibit D of the Agreement shall not
apply to the JCUs.
13. Capitalized terms used herein and not otherwise defined have the
meanings assigned to them in the Agreement.
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<PAGE>
ANNEX E
VOTING AND STANDSTILL AGREEMENT
Dated as of September 25, 2000
among
CBL & ASSOCIATES PROPERTIES, INC.,
CBL & ASSOCIATES LIMITED PARTNERSHIP,
THE CBL PRINCIPALS,
JACOBS REALTY INVESTORS LIMITED PARTNERSHIP,
RICHARD E. JACOBS, SOLELY AS TRUSTEE FOR THE
RICHARD E. JACOBS REVOCABLE LIVING TRUST,
RICHARD E. JACOBS, SOLELY AS TRUSTEE FOR
THE DAVID H. JACOBS MARITAL TRUST,
AND
MARTIN J. CLEARY
<PAGE>
VOTING AND STANDSTILL AGREEMENT
VOTING AND STANDSTILL AGREEMENT, dated as of September 25, 2000, among CBL
& ASSOCIATES PROPERTIES, INC., a Delaware corporation (the "REIT"), CBL &
ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership (the "Operating
Partnership"; the Operating Partnership and the REIT are referred to herein
collectively as "CBL"), each of the persons listed on Schedule A hereto (each a
"CBL Principal", and, collectively, the "CBL Principals"), JACOBS REALTY
INVESTORS LIMITED PARTNERSHIP, a Delaware limited partnership, ("JRI"), Richard
E. Jacobs, solely as trustee for the Richard E. Jacobs Revocable Living Trust
(the "REJ"), and Richard E. Jacobs, solely as trustee for the David H. Jacobs
Marital Trust (the "DHJ" and, together with the REJ, the "Jacobs Trusts") and
Martin J. Cleary ("Cleary"); JRI, the Jacobs Trusts and Cleary are referred to
herein collectively as the "Jacobs Parties".
WHEREAS, concurrently herewith, CBL and the Jacobs Parties are executing a
Master Contribution Agreement (the "Master Contribution Agreement"). Capitalized
terms used but not defined herein have the meanings given to them in the Master
Contribution Agreement.
WHEREAS, the CBL Principals own beneficially and of record certain OP Units
and shares of REIT Stock as set forth on Schedule A.
WHEREAS, the Master Contribution Agreement requires the REIT to call a
meeting of its stockholders to vote to approve the issuance of the securities
contemplated by and in accordance with the terms of the Master Contribution
Agreement and to take certain other actions related thereto.
WHEREAS, the parties hereto desire to execute and deliver this Agreement
for the purpose of regulating certain aspects of the relationship between CBL,
the Jacobs Parties and the CBL Principals prior to and following the Closing
under the Master Contribution Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements contained herein, the receipt and sufficiency of which
are hereby acknowledged, the parties covenant and agree as follows:
Section 1. Stockholders Meeting; Board of Directors; Voting of REIT Stock.
(a) At the Stockholders Meeting, each of the CBL Principals agrees that it
will vote or cause to be voted all of the REIT Stock beneficially owned by such
CBL Principal to (i) approve the issuance of the SCUs as contemplated in the
Master
<PAGE>
Contribution Agreement, and (ii) authorize and approve such other acts,
documents and transactions as may be contemplated by, or reasonably necessary or
desirable in order to give effect to the consummation of the transactions
contemplated by, the Master Contribution Agreement, this Agreement and the other
transaction documents identified in any of the foregoing documents. For the
purposes of this Agreement, "beneficial ownership" means, with respect to any
security, the power, directly or indirectly, to vote or direct the voting of
that security.
(b) Effective at and as of the Principal Closing, the REIT agrees to (i)
take all corporate and other actions necessary to increase the number of
directors on the REIT's board of directors (the "Board of Directors") to add at
least two directors to the Board of Directors in accordance with the REIT's
certificate of incorporation and by-laws and (ii) cause Martin J. Cleary or, if
he is unwilling or unable to serve, another person nominated by JRI prior to the
Principal Closing (and qualifying as a JRI Representative in accordance with the
criteria established below) to be appointed to the class of directors of the
Board of Directors whose term expires in 2003, and a second to-be-named person
nominated by JRI prior to the Principal Closing or such other date on which the
REIT is required to appoint a second JRI Representative, if applicable, (and
qualifying as a JRI Representative in accordance with the criteria established
below) to be appointed to the class of directors of the Board of Directors whose
term expires in 2002. If it becomes necessary for JRI to replace any such
nominee or nominees, JRI will use good faith efforts to provide the REIT with
notice of such replacement at least five (5) Business Days prior to the
Principal Closing or such other date on which the REIT is required to appoint a
second JRI Representative, if applicable. Each of such persons and any persons
as JRI, in accordance with the remainder of this Section 1(b), may hereafter
designate as replacements for either of them, is referred to herein as a "JRI
Representative" and such persons, together, are referred to herein as the "JRI
Representatives". Notwithstanding anything in the foregoing to the contrary, in
the event that, at the Principal Closing, the total number of SCUs issued to the
Jacobs Persons (directly or through entities on their behalf) in accordance with
the terms of the Master Contribution Agreement is fewer than 6,742,423 SCUs, the
REIT will only be required to cause one JRI Representative, selected by JRI, to
be appointed to the Board of Directors, which JRI Representative will be
appointed to the class of directors of the Board of Directors whose term expires
in 2003; provided, however, that in the event that at any time the Jacobs
Persons (directly or through entities on their behalf) are issued additional
SCUs in accordance with the terms of the Master Contribution Agreement or any
Interest Contribution Agreement or Deed Contribution Agreement, and as a result
the Jacobs Persons beneficially own 6,742,423 or more SCUs, then the REIT will
cause an additional JRI Representative to be appointed to the Board of
Directors, which JRI Representative will be appointed to the class of directors
whose term expires in 2002. At the time of his or her nomination and appointment
to the Board of Directors and throughout his or her term, any JRI Representative
must qualify as Independent, as defined in the REIT's Amended and
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Restated Certificate of Incorporation of the REIT, dated November 2, 1993, as
amended by the Certificate of Amendment to the Amended and Restated Certificate
of Incorporation, dated May 2, 1996, as supplemented by the Certificate of
Designation, dated June 25, 1998, and the Certificate of Designation, dated
April 30, 1999, and as modified as contemplated in Section 4.15 of the Master
Contribution Agreement (the "REIT's Charter"), with such changes to the
definition as have been consented to by JRI, unless the other JRI Representative
then serving as a Director already qualifies as an Independent director.
Additionally, each replacement JRI Representative shall (i) be a person having
experience and standing in the business community comparable to the experience
and standing of independent directors in the public real estate investment trust
sector generally; it being understood that any proposed JRI Representative will
be deemed acceptable unless the Independent directors of the REIT (other than
the JRI Representative) determine, in their reasonable judgment exercised in
good faith (and without any personal liability on the part of any such director
to any Jacobs Party), and so advise JRI in writing that the proposed JRI
Representative does not, in their judgment, satisfy the requirements of this
Section 1(b)(i), and (ii) not be an officer, director, 10% or more partner,
member or shareholder or other controlling person of (A) any entity whose
business consists primarily of owning or operating regional enclosed mall and/or
other shopping centers in the United States or (B) any entity that is an anchor
tenant or other major tenant (i.e., occupying, directly or together with its
affiliates, 35,000 square feet or more of gross leasable area) of any regional
enclosed mall or other shopping center then owned or controlled directly or
indirectly by the Operating Partnership, unless (in the case of (A) above) the
entity in question is an entity owned or controlled directly or indirectly by
Richard E. Jacobs or either of the Jacobs Trusts or any Jacobs Family Member and
that ownership and/or control does not constitute a violation of the
Non-Competition Agreement entered into between Mr. Jacobs and CBL at the
Principal Closing. If at any time either the REIT or JRI determines that neither
of the JRI Representatives qualifies as an Independent director (as defined in
the REIT's Charter), the determining party will notify the other in writing of
such determination and the basis therefor. Upon making such determination (or
receiving notice thereof from the REIT), JRI promptly will designate a
replacement JRI Representative and the REIT and JRI will cooperate to take such
actions as are necessary to cause an existing JRI Representative selected by JRI
to resign from, and the qualifying replacement JRI Representative to be elected
to, the REIT's Board of Directors as soon as reasonably practical.
(c) Subject to Section 1(e), the REIT hereby agrees to nominate each of the
JRI Representatives for re-election to the Board of Directors (and recommend
each of them to the stockholders of the REIT) at each subsequent meeting of the
stockholders of the REIT held to consider a vote on such JRI Representative's
board seat and not to take any action designed to interfere with the election or
re-election of the JRI Representatives to the Board of Directors. Subject to
Section 1(e), if at any time a vacancy occurs on the Board of Directors with
respect to a seat occupied by a JRI
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Representative (by reason of such JRI Representative's death, disability,
resignation or otherwise), the REIT hereby agrees to cause a replacement JRI
Representative to be appointed to fill such vacancy promptly following his or
her designation by JRI.
(d) Subject to Section 1(e) and through the twelfth (12th) anniversary of
the Principal Closing Date, each of the CBL Principals hereby agrees to vote all
shares of capital stock of the REIT beneficially owned by it, and entitled to
vote thereon, in favor of the election or re-election, as the case may be, of
the JRI Representatives to the Board of Directors at each meeting of the
stockholders of the REIT held to consider a vote on a seat on the Board of
Directors held or proposed to be held by a JRI Representative.
(e) Notwithstanding any other provision in this Section 1:
(i) if the aggregate number of all SCUs and other interests in the
REIT and the Operating Partnership issued in respect of SCUs owned directly
and/or beneficially by any of JRI, any Jacobs Trust or any Jacobs Family
Member, taken together as a group (each a "Jacobs Person" and,
collectively, the "Jacobs Persons") is at least 33% but fewer than 67% of
10,113,635 (such number of SCUs and other interests in the Operating
Partnership to be calculated on the basis of the number of shares in the
REIT receivable upon the conversion or exchange thereof), the obligations
of the REIT and the CBL Principals pursuant to paragraphs (b) through (d)
of this Section 1 will terminate with respect to the JRI Representative
next scheduled for re-election and at the expiry of such JRI
Representative's then current term, he or she will tender his or her
resignation to the Board of Directors; as used herein, "Jacobs Family
Member" means each of Richard E. Jacobs, any spouse or lineal descendant of
Richard E. Jacobs or David H. Jacobs, and any spouse or lineal descendent
of any of the foregoing; and
(ii) if the aggregate number of all SCUs and other interests in the
REIT and the Operating Partnership issued in respect of SCUs owned directly
and/or beneficially by the Jacobs Persons, taken together as a group, is
fewer than 33% of 10,113,635 (such number of SCUs and other interests in
the Operating Partnership to be calculated on the basis of the number of
shares in the REIT receivable upon the conversion or exchange thereof), the
obligations of the REIT and the CBL Principals under paragraphs (b) through
(d) of this Section 1 will terminate and at the expiry of the remaining JRI
Representative's then current term he or she will tender his or her
resignation to the Board of Directors.
(f) In the event that any CBL Principal transfers (including by way of
proxy, by operation of law or through succession, but expressly excluding by way
of a proxy given to a representative appointed or designated by the REIT in
connection with a particular stockholder meeting) beneficial ownership of any
shares of REIT Stock (or
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beneficial ownership of any interests in the Operating Partnership exchangeable
into REIT Stock) to any member of the Lebovitz Family (other than to a member of
the Lebovitz Family who is an original signatory of this Agreement), the CBL
Principal (or, in the case of death, such deceased CBL Principal's legal
representatives), concurrently with such transfer, will cause the transferee to
execute and deliver a counterpart of this Agreement to each Jacobs Party by
which the transferee agrees to be bound by the provisions of this Agreement as
if it were a CBL Principal. Notwithstanding any provision of the Master
Contribution Agreement or the OP Partnership Agreement to the contrary, from the
date hereof until the twelfth (12th) anniversary of the Principal Closing Date
or such earlier date on which the obligations of the CBL Principals under
Section 1(d) terminate pursuant to the terms of Section 1(e)(ii), no transfer of
beneficial ownership of any shares of REIT Stock (or any interests in the
Operating Partnership convertible into or exchangeable for REIT Stock) from any
CBL Principal to any member of the Lebovitz Family (including, without
limitation, transfers by succession or operation of law) shall be effective
unless the transferee executes a counterpart of this Agreement and agrees to be
bound by the terms hereof (including this sentence) as contemplated in the
immediately preceding sentence.
(g) Notwithstanding anything to the contrary in this Agreement, the
obligations of the CBL Principals pursuant to this Agreement shall apply only to
actions to be taken or not to be taken in their capacities as stockholders of
the REIT, and without limiting the obligations of any CBL Principal pursuant to
this Section 1, nothing in this Section 1 shall prohibit, or be deemed to limit
in any manner any CBL Principal who is serving as an officer or director, solely
in his or her capacity as such officer or director, from (1) taking any action
or making any statement at any meeting of the Board of Directors of the REIT or
any committee thereof, (2) making any statement to any officer, director or
agent of the REIT or (3) otherwise taking any action solely in his or her
capacity as an officer or director of the REIT.
Section 2. Jacobs Party Standstill and Voting Agreements. Each Jacobs Party
covenants and agrees for the benefit of the REIT and each of the individuals
named as CBL Principals that, prior to the twelfth (12th) anniversary of the
Principal Closing Date:
(a) Without the express prior written consent of the REIT and, if then
wholly-owned and controlled exclusively by Charles B. Lebovitz, Stephen D.
Lebovitz, another member of the Lebovitz Family who is an executive officer of
the REIT or any two or more of them together, LebFam, Inc., a Tennessee
corporation, (it being understood and agreed that at such time, if ever, as the
foregoing entity ceases to be wholly-owned and controlled exclusively by Charles
B. Lebovitz, Stephen D. Lebovitz, another member of the Lebovitz Family who is
then an executive officer of the REIT or any two or more of the foregoing acting
together, the consent right provided to that entity in this Section 2(a)
automatically will expire), it will not, and it will cause each Person
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<PAGE>
controlled by it to not, singly or as part of a partnership, limited
partnership, syndicate or other group (as such terms are used within the meaning
of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), directly or indirectly:
(i) acquire beneficial ownership of any voting securities of the REIT
(other than (w) upon the exchange of SCUs or Common Units or any other
securities issued in respect of SCUs into securities of the REIT, (x) as a
result of a stock split, stock dividend or other recapitalization by the
REIT or the exercise of rights or warrants distributed to the REIT's
stockholders, (y) as a result of transfers from any Jacobs Party, Jacobs
Family Member, Associate or any of their respective affiliates, or (z) in a
transaction in which such Person acquires a controlling interest in a
previously non-affiliated business entity that owns less than 1% of the
outstanding voting securities of the REIT and whose business purpose is not
primarily the ownership of securities of the REIT), or otherwise
participate in or encourage the formation of any group that owns or seeks
to acquire beneficial ownership of voting securities of the REIT or rights
to acquire such securities,
(ii) solicit, initiate or otherwise engage in any "solicitation" of
"proxies" or become a "participant" in an "election contest" (as those
terms are defined or used in Regulation 14A promulgated pursuant to the
Exchange Act) with respect to the REIT, call any special meeting of
stockholders of the REIT or demand a copy of the REIT's stock ledger or a
list of its stockholders,
(iii) seek to advise, encourage or influence any Person with respect
to the voting of any REIT Stock (other than the REIT Stock beneficially
owned by a Jacobs Party, a Jacobs Family Member or an Associate) for the
purposes of exerting a controlling influence over the management, Board of
Directors or policies of the REIT (it being understood that this provision
will not be deemed to prohibit private casual conversations that are not
initiated with a view toward exerting any such influence),
(iv) participate in or encourage the formation of any group which
seeks or offers to affect control of the REIT or for the purpose of
circumventing any provision of this Agreement,
(v) otherwise act, alone or in concert with others (including by
providing financing for another party), to seek to exercise a controlling
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<PAGE>
influence over the management, Board of Directors or policies of the REIT,
(vi) make a request to the REIT (or its directors, officers or
stockholders) to amend or waive any provision of this Agreement, the REIT's
Charter or the REIT's by-laws or the REIT's Shareholder Rights Agreement
(in each case, other than as contemplated by this Agreement or the Master
Contribution Agreement), including, without limitation, any request to
permit any Jacobs Party or any other person to take any action prohibited
by this Section 2, or
(vii) disclose any intention, plan or arrangement inconsistent with
the foregoing;
provided, however, that, except as provided in the third to last and penultimate
sentences of Section 2(a) hereof and in Section 2(d) hereof, nothing in this
Section 2 shall prohibit, or be deemed to limit in any manner, any Jacobs Party
or Jacobs Family Member from voting any shares of capital stock of the REIT held
by it for or against any matter presented to stockholders of the REIT, and
nothing in this Section 2 shall prohibit, or be deemed to limit in any manner,
any person or entity from making any statement or disclosure required under the
federal securities laws or other applicable laws or regulations, or any person
who is serving as a director, solely in his or her capacity as such director,
from (1) taking any action or making any statement at any meeting of the Board
of Directors of the REIT or any committee thereof, (2) making any statement to
any officer, director or agent of the REIT, or (3) otherwise taking any action
solely in his or her capacity as an officer or director of the REIT; and
provided, further, that nothing in this Section 2 shall prohibit any Jacobs
Party or any affiliate thereof from discussing any matter with any Jacobs Party,
Jacobs Family Member, Associate or any of their respective affiliates. If any
Jacobs Party is determined by a court of competent jurisdiction (after a hearing
or other proceeding at which such Jacobs Party had notice and an opportunity to
be present, to be prepared, to participate fully and to defend its position) to
have violated the restrictions in clause (a)(i) above, such Jacobs Party shall
not be entitled to vote any of the voting securities that formed the basis of
the breach until the restrictions in Section 2(a) are terminated in accordance
with the terms of Section 2(b). If any Jacobs Party is determined by a court of
competent jurisdiction after such a hearing to have violated the restrictions in
any of clauses (a)(ii) through (a)(v) or (a)(vii) above with respect to any
proposal being submitted, or proposed by such Jacobs Party to be submitted, to a
vote of stockholders of the REIT or partners of the Operating Partnership,
shares of REIT Stock or partnership interests, as applicable, held by that
Jacobs Party will not be entitled to any vote on the proposal to which the
violation related. Nothing in the foregoing shall be deemed to limit any other
remedy available to the REIT, the Operating Partnership or the CBL Principals at
law or in equity.
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(b) The restrictions in paragraph (a) above will terminate at the earliest
to occur of the following:
(i) other than as a result of a breach by a Jacobs Party of the
provisions of paragraph (a) above, any Person, other than a Jacobs Person
or a Person controlled by a Jacobs Person, initiates or commences any
takeover bid or tender, exchange or other similar offer to holders of any
class or series of stock of the REIT or interests in the Operating
Partnership in which such Person seeks to effect a Control Transaction or
any solicitation of any such holders in furtherance of any of the foregoing
(any such action, a "Takeover Action") and the Board of Directors of the
REIT or the general partner of the Operating Partnership, as applicable,
either (A) does not publish, send or give to such holders a statement
recommending rejection of the Takeover Action within ten (10) Business Days
of the date notice of the Takeover Action was first published or sent or
given to such holders or (B) having given a notice rejecting the proposed
Takeover Action, the board subsequently publishes, sends or gives such
holders a statement recommending acceptance of, or indicating that the REIT
or the Operating Partnership, as applicable, expresses no opinion and is
remaining neutral toward, the Takeover Action,
(ii) the REIT or the Operating Partnership, or any representative on
behalf of either of them, enters into active negotiations with any Person
with respect to any Control Transaction, provided, that, no Jacobs Party
will take any action prohibited by paragraph (a) above in reliance on this
clause (ii) unless a representative of the Jacobs Parties has first given
the REIT twenty-four (24) hours' prior written notice that the standstill
restrictions in paragraph (a) above have been terminated pursuant to this
clause (ii),
(iii) the REIT or the Operating Partnership, or any representative on
behalf of either of them, solicits proposals or offers from any Person or
Persons to acquire all or a substantial portion (i.e., more than 75% by
value) of the assets of the REIT or the Operating Partnership or initiate
or participate in a Control Transaction with respect to the REIT or the
Operating Partnership (it being understood that this provision will not be
deemed to include preliminary exploratory conversations that do not rise to
the level of soliciting proposals or offers), provided, that, no Jacobs
Party will take any action otherwise prohibited by paragraph (a) above in
reliance on this clause (iii) unless a representative of the Jacobs Parties
has first given the REIT twenty-four (24) hours' prior written notice that
the standstill restrictions in paragraph (a) above have been terminated
pursuant to this clause (iii),
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(iv) the REIT announces a program (or an increase in an existing
program) to acquire the greater of (1) seven (7) million or more
shares of REIT Stock in the aggregate (such number to be adjusted for
stock splits, reverse stock splits, stock dividends, combinations and
the like) or (2) 28% or more of the then-outstanding shares of REIT
Stock,
(v) any Insolvency Event occurs with respect to the REIT or the
Operating Partnership,
(vi) members of the Lebovitz Family no longer beneficially own as
a group, directly or indirectly, at least 3,384,023 shares of REIT
Stock (such number to be adjusted for stock splits, reverse stock
splits, stock dividends, combinations and the like) (treating, for
this purpose, any interests in the Operating Partnership that are by
their terms exchangeable for or otherwise convertible into REIT Stock
as if such interests have been fully exchanged or converted in
accordance with their terms),
(vii) the first date on which the provisions of the Share
Ownership Agreement (as set forth in Schedule 4.15(b)-1 or Schedule
4.15(b)-2 of the Master Contribution Agreement, as applicable) have
terminated with respect to the Jacobs Group and its members in
accordance with the provisions of Article VIII thereof, and
(viii) the twelfth (12th) anniversary of the Principal Closing
Date.
As used herein:
(A) "Control Transaction" means any transaction that involves: (I)
(a) a sale of all or substantially all of the assets of the REIT or
the Operating Partnership, or
(b) a merger or other business combination of the REIT or the
Operating Partnership with or into any other Person, a recapitalization of
the REIT or the Operating Partnership, or a sale or issuance of voting
securities of the REIT or any securities of the REIT or the Operating
Partnership that are convertible or exchangeable into voting securities of
the REIT, if, immediately following the transaction, a Person (other than a
member of the Lebovitz Family) or group (for purposes of the definition of
"Control Transaction" the term "group" means a group as defined in Rule
13d-5 under the Exchange Act), other than a group consisting solely of
members of the Lebovitz Family, would beneficially own voting securities
representing 25% or more of the voting power of the voting securities of
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the REIT that existed immediately prior to such transaction (assuming, for
purposes of this determination, that any securities issued in connection
with such transaction that are exchangeable for or otherwise convertible
into voting securities of the REIT have been fully exchanged or converted,
but specifically excluding for this purpose (1) the portion, if any, of any
such securities that (x) by the express provisions of their exchange or
conversion terms are not convertible or exchangeable into voting securities
of the REIT at any time when conversion or exchange would cause that Person
or group to beneficially own a number of voting securities of the REIT
representing 25% (or such lower percentage as CBL may elect) or more of the
voting power of the voting securities of the REIT that existed immediately
prior to the transaction in question without JRI's prior written consent,
or (y) are not able to be exchanged, exercised or otherwise converted into
voting securities of the REIT because doing so would result in a violation
of the share ownership limitations in the REIT's Charter (and the REIT has
undertaken to the Jacobs Persons in writing that it will not waive the
application of those ownership limitations to such Person or group in a
manner that would enable the Person or group to beneficially own a number
of voting securities of the REIT that would represent 25% or more of the
voting power of the voting securities of the REIT that existed immediately
prior to the transaction in question without JRI's prior written consent
(unless, at that time, the Jacobs Persons are no longer subject to the
standstill provisions of this Agreement, in which case JRI's prior written
consent shall not be required for any such waiver)) and (2) the securities
issued to any such Person if that Person is subject to a standstill
agreement that imposes standstill restrictions on that Person or group
comparable in scope to, or more restrictive than, the restrictions imposed
on the Jacobs Parties pursuant to this Agreement for the remainder of the
standstill period contemplated in this Agreement (or such longer period as
CBL may elect), and the REIT has undertaken to the Jacobs Persons in
writing that it will not waive or terminate the standstill restrictions
imposed on that Person or group without JRI's prior written consent
(unless, at that time, the Jacobs Persons are no longer subject to or are
in breach of the standstill provisions of this Agreement, in which case
JRI's prior written consent shall not be required for any such waiver or
termination); for clarification, as used in this Section 2(b), references
to the REIT, the Operating Partnership and the general partner of the
Operating Partnership shall be interpreted to include, in the case of a
merger or other similar transaction in which any such entity is not the
surviving entity, the successor(s) thereto as appropriate; or
(II) (a) a change in the composition of the Board of Directors of the REIT
or of the general partner of the Operating Partnership if, following
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the completion of such transaction, 50% or more of the seats on the Board
of Directors of the REIT or of the general partner of the Operating
Partnership are held or, pursuant to the terms of such transaction, are
planned to be held by persons that were not directors of such entity
immediately prior to such transaction, or
(b) the granting to any Person or group the right to nominate or
appoint directors to the Board of Directors of the REIT or of the general
partner of the Operating Partnership, if the total number of board seats in
respect of which such rights have been granted, when taken together with
the number of new directors appointed to the board as part of that
particular transaction, represents 50% or more of the number of directors
on that board immediately following the completion of such transaction;
(B) "Insolvency Event" means, with respect to any Person, (a) a proceeding
under Title 11 of the United States Code or any other similar insolvency,
liquidation, rehabilitation, reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution or similar law of any jurisdiction, whether now
or hereafter in effect, is commenced by the Person or by any other Person
against the Person, (b) a trustee is appointed or takes charge of all or
substantially all of the assets of the Person, (c) the Person is adjudicated
insolvent or bankrupt, (d) the Person makes a general assignment for the benefit
of its creditors, or (e) the Person admits in writing its inability to pay, or
ceases to pay, its debts generally as they become due; provided, however, that
in the case of an involuntary proceeding, appointment, or action described in
clause (a), clause (b) and clause (d), an "Insolvency Event" shall only occur if
the Person is unable to cause such involuntary proceeding, appointment or action
to be dismissed, withdrawn or stayed by the sixtieth (60th) day after the
commencement thereof; and
(C) "Lebovitz Family" means each of Charles B. Lebovitz, Stephen D.
Lebovitz, any spouse, sibling (including by adoption) or descendant of any of
the foregoing, and any spouse, sibling (including by adoption) or descendent of
any of the foregoing.
(c) If the standstill restrictions in Section 2 (a) above terminate because
of circumstances described in any of clauses (i) through (iii) of Section 2(b)
above (and not because of any of the circumstances described in clauses (iv)
through (vii) of Section 2(b)), and in the case of Section 2(b)(i) the Takeover
Action fails by its terms or is terminated or withdrawn by the bidder, or in the
case of Section 2(b)(ii) or 2(b)(iii) the REIT and/or the Operating Partnership
discontinues its active negotiations or withdraws its solicitation of proposals
or offers, and, in any such case, none of the other circumstances described in
clauses (i) through (vii) of Section 2(b) above is then occurring or in
existence, then from the date on which the REIT notifies JRI (as representative
of the Jacobs Parties) in writing of such failure, termination, withdrawal or
discontinuance, the
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<PAGE>
standstill restrictions automatically will be reinstated, provided, however, in
the event of such a reinstatement, the Jacobs Parties will not be considered to
be in violation of the restrictions in Section 2(a) above because of any actions
taken prior to reinstatement, or for any actions taken by any of them following
such reinstatement pursuant to, or in satisfaction of, any contractual
obligations undertaken by them during the unrestricted period, but excluding,
for this purpose, (1) any contractual obligation that may be terminated by the
Jacobs Parties as of right and without incurring any fee, penalty or other
liability, contingent or otherwise and (2) any contractual obligation that may
be terminated by the Jacobs Party as of right solely by the payment of a fixed
cash amount in the nature of a fee or reimbursement, so long as CBL has paid the
full amount of that fee or reimbursement in cash to the Person or Persons
entitled thereto and also has paid each relevant Jacobs Party an amount equal to
the aggregate federal, state and local income taxes payable by such Jacobs Party
as a result of, or in connection with, CBL's having paid the break-up fee or
expense reimbursement on that Jacobs Party's behalf plus an amount equal to the
aggregate federal, state and local income taxes payable by the Jacobs Party as a
result of the payment by CBL of amounts payable to the Jacobs Party pursuant to
this sentence (including for this purpose all taxes on payments hereunder
intended to compensate the recipient for tax liability). It is further agreed
that (x) the foregoing tax reimbursement payments will be determined in
accordance with the principles stated in the last sentence of Section 5.5(a) of
the Master Contribution Agreement and (y) if the amount of the fee or
reimbursement referred to above, by the terms of the relevant document, is
determined in a manner that expressly discriminates against CBL (i.e., if the
amount payable is higher if made by CBL or if made in connection with the
reinstatement of the Jacobs Parties' standstill obligations than it generally
would be in other circumstances), then the relevant Jacobs Party will be
required to pay the excess portion of such payment directly and will not be
entitled to any payment or reimbursement from CBL in respect thereof.
(d) Each Jacobs Party hereby agrees that at each meeting of the
stockholders of the REIT held to consider a vote on such matter the Jacobs Party
will vote all shares of capital stock of the REIT beneficially owned by it and
entitled to vote thereon in favor of (i) the election of any person nominated by
the REIT's Board of Directors to serve as a director on the REIT's Board of
Directors and running for the position unopposed and uncontested and (ii) the
appointment as auditors for the REIT of any nationally recognized public
accounting firm proposed by the REIT's Board of Directors and being proposed
unopposed and uncontested.
(e) In the event that any Jacobs Party transfers (including by way of
proxy, by operation of law or through succession, but expressly excluding by way
of a proxy given to a representative appointed or designated by the REIT in
connection with a particular stockholder meeting) beneficial ownership of any
shares of voting stock of the REIT (or beneficial ownership of any interests in
the Operating Partnership exchangeable into REIT Stock) to any Jacobs Family
Member, the Jacobs Party (or, in the case of death,
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such deceased Jacobs Party's legal representatives), concurrently with such
transfer, will cause the Jacobs Family Member to execute and deliver a
counterpart of this Agreement to each CBL Principal by which the transferee
agrees to be bound by the provisions of this Agreement as if it were a Jacobs
Party. Notwithstanding any provision of the Master Contribution Agreement, the
OP Partnership Agreement or Exhibit E thereto to the contrary, from the date
hereof until any of clause (iv), (v), (vi) or (vii) of Section 2(b) occurs, no
transfer of beneficial ownership of any shares of REIT Stock (or any interests
in the Operating Partnership convertible or exchangeable into REIT Stock) from
any Jacobs Party to any Jacobs Family Member (including, without limitation,
transfers by succession or operation of law) shall be effective unless the
transferee executes a counterpart of this Agreement and agrees to be bound by
the terms hereof as contemplated in the immediately preceding sentence.
Section 3. Representations, Warranties and Covenants of the Jacobs Parties.
Each Jacobs Party hereby represents, warrants and covenants to CBL and the CBL
Principals as follows:
(a) Authority. Such Jacobs Party has full legal power, authority and right
to execute and deliver, and to perform its obligations under, this Agreement.
This Agreement (i) has been duly executed by such Jacobs Party and (ii)
constitutes a valid and binding agreement of such Jacobs Party enforceable
against such Jacobs Party in accordance with its terms, subject to (1)
bankruptcy, insolvency, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (2) general
principles of equity, regardless of whether considered in a proceeding at law or
in equity.
(b) Conflicting Instruments. Neither the execution and delivery of this
Agreement nor the performance by such Jacobs Party of its obligations hereunder
will violate or result in any breach or violation of or be in conflict with or
constitute a default under any term of (i) the constitutive or organizational
documents of such Jacobs Party or (ii) any agreement, judgment, injunction,
order, decree, law or regulation to which such Jacobs Party is a subject or by
which such Jacobs Party (or any of its assets) is bound.
(c) Right to Vote. Such Jacobs Party has full legal power, authority and
right to take the actions required by this Agreement without the consent or
approval of, or any other action on the part of, any other Person. Without
limiting the generality of the foregoing, such Jacobs Party has not entered into
any voting agreement with respect to any REIT Stock, granted any person any
proxy (revocable or irrevocable) or power of attorney with respect to any REIT
Stock, deposited any REIT Stock in a voting trust or entered into any
arrangement or agreement limiting or affecting such Jacobs Party's legal power,
authority or right to vote REIT Stock as required by this Agreement (it being
understood, however, that as of the date hereof no Jacobs Party beneficially
owns any shares of REIT Stock, but that Richard E. Jacobs personally owns fifty
(50) shares of
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<PAGE>
REIT Stock). From and after the date hereof and continuing for so long, if ever,
as such Jacobs Party beneficially owns REIT Stock, that Jacobs Party will not
commit any act that could impose additional restrictions on, or otherwise
affect, the Jacobs Party's legal power, authority and right to vote all of its
REIT Stock as required by this Agreement. Without limiting the generality of the
foregoing, from and after the date hereof, such Jacobs Party will not enter into
any voting agreement with any Person with respect to any REIT Stock hereafter
owned by it, grant any Person (other than a representative appointed or
designated by the REIT in connection with a particular stockholder meeting and
other than in connection with a pledge of REIT Stock as security for a bona fide
debt or other obligation) any proxy (revocable or irrevocable) or power of
attorney with respect to any of REIT Stock hereafter owned by it, deposit any
REIT Stock owned by it in a voting trust or otherwise enter into any agreement
or arrangement restricting or affecting such Jacobs Party's legal power,
authority or right to vote as required by this Agreement without, in each case,
(i) causing such Person to agree to be bound by the provisions of this Agreement
that impose limitations and/or voting obligations on the Jacobs Parties or (ii)
the prior written consent of the REIT and, if it is then wholly-owned and
controlled exclusively by Charles B. Lebovitz, Stephen D. Lebovitz, another
member of the Lebovitz Family who is then an executive officer of the REIT or
any two or more of them together, LebFam, Inc. (it being understood and agreed
that if the foregoing entity ceases to be wholly-owned and controlled
exclusively by Charles B. Lebovitz, Stephen D. Lebovitz, another member of the
Lebovitz Family who is then an executive officer of the REIT or any two or more
of the foregoing acting together, the consent right provided to that entity in
this Section 3(c) automatically will expire). The provisions of this Agreement
are not intended to and do not impair any Jacobs Party's right, power or
authority to sell or otherwise dispose of all or any portion of any REIT Stock
hereafter owned by any Jacobs Party and, except as set forth in Section 2, any
transferee of a Jacobs Party's REIT Stock will not be bound by the provisions of
this Agreement.
Section 4. Representations, Warranties and Covenants of the CBL Principals.
Each CBL Principal hereby represents, warrants and covenants to each of the
Jacobs Parties as follows:
(a) Title. As of the date hereof, such CBL Principal owns beneficially and
of record the shares of REIT Stock and interests in the Operating Partnership
set forth opposite its name on Schedule A, such CBL Principal has the sole right
to vote its REIT Stock, and there are no restrictions on rights of disposition
or other liens, claims, options, charges or other encumbrances pertaining to its
REIT Stock other than as set forth in the REIT's charter and the OP Partnership
Agreement, as applicable.
(b) Right to Vote. Such CBL Principal has full legal power, authority and
right to vote its REIT Stock in favor of approval of the issuance of the SCUs as
contemplated in the Master Contribution Agreement and the transactions herein
and
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therein contemplated (including voting for the JRI Representatives as directors)
and to take the other actions required by this Agreement without the consent or
approval of, or any other action on the part of, any other Person. Without
limiting the generality of the foregoing, such CBL Principal has not entered
into any voting agreement with respect to any of its REIT Stock, granted any
person any proxy (revocable or irrevocable) or power of attorney with respect to
any of its REIT Stock, deposited any of its REIT Stock in a voting trust or
entered into any arrangement or agreement limiting or affecting such CBL
Principal's legal power, authority or right to vote its REIT Stock as required
by this Agreement. As of the date of the Stockholders Meeting, such CBL
Principal will have full legal power, authority and right to vote all of its
REIT Stock as required by this Agreement without the consent or approval of, or
any other action on the part of, any other Person. From and after the date
hereof and continuing for so long as any CBL Principal continues to beneficially
own REIT Stock, that CBL Principal will not commit any act that could impose
additional restrictions on, or otherwise affect, such legal power, authority and
right to vote all of its REIT Stock as required by this Agreement. Without
limiting the generality of the foregoing, from and after the date hereof, such
CBL Principal will not enter into any voting agreement with any Person with
respect to any of its REIT Stock, grant any Person (other than a representative
appointed or designated by the REIT in connection with a particular stockholder
meeting and other than in connection with a pledge of REIT Stock as security for
a bona fide debt or other obligation) any proxy (revocable or irrevocable) or
power of attorney with respect to any of its REIT Stock, deposit any of its REIT
Stock in a voting trust or otherwise enter into any agreement or arrangement
restricting or affecting such CBL Principal's legal power, authority or right to
vote as required by this Agreement without, in each case, (i) causing such
Person to agree to be bound by the provisions of this Agreement which impose
voting obligations on the CBL Principals or (ii) the prior written consent of
JRI. The provisions of this Agreement are not intended to and do not impair any
CBL Principal's right, power or authority to sell or otherwise dispose of any
REIT Stock and, except as set forth in Section 1(f), any transferee of a CBL
Principal's REIT Stock will not be bound by the provisions of this Agreement.
(c) Authority. Such CBL Principal has full legal power, authority and right
to execute and deliver, and to perform its obligations under, this Agreement.
This Agreement (i) has been duly executed by such CBL Principal and (ii)
constitutes a valid and binding agreement of such CBL Principal enforceable
against such CBL Principal in accordance with its terms, subject to (1)
bankruptcy, insolvency, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally, and (2) general
principles of equity (regardless of whether considered in a proceeding at law or
in equity).
(d) Conflicting Instruments. Neither the execution and delivery of this
Agreement nor the performance by such CBL Principal of its obligations hereunder
will violate or result in any breach or violation of or be in conflict with or
constitute a default
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<PAGE>
under any term of (i) the constitutive or organizational documents of such CBL
Principal or the REIT or the Operating Partnership or (ii) any agreement,
judgment, injunction, order, decree, law or regulation to which the CBL
Principal, the REIT or the Operating Partnership is a party or by which any such
Person (or any of its assets) is bound.
Section 5. CBL Principal Agreement to Vote. Each CBL Principal hereby
irrevocably and unconditionally agrees to vote and to cause to be voted all the
REIT Stock beneficially owned by it at each meeting of the stockholders of the
REIT held prior to the final closing of the transactions contemplated by the
Master Contribution Agreement where such matters arise (x) in favor of the
matters for which it has agreed to vote in Section 1 above and (y) against (i)
approval of any proposals made in opposition to or in competition with the
Master Contribution Agreement and the transactions contemplated by the Master
Contribution Agreement and this Agreement and (ii) any transaction in which CBL
is prohibited from engaging under the terms of the Master Contribution Agreement
or any other action that would, in each case, impede, interfere with, delay,
postpone or attempt to discourage the transactions contemplated by the Master
Contribution Agreement or this Agreement or result in a breach of any of the
covenants, representations, warranties or other obligations or agreements of CBL
or any CBL Principal in the Master Contribution Agreement or this Agreement.
Section 6. Severalty of Obligations. (a) The obligations under this
Agreement of each Jacobs Party are the separate and several obligations of that
Jacobs Party and are not joint obligations with respect to any other Person. No
failure by any Jacobs Party to perform its obligations under this Agreement
shall relieve any other Person of any of its obligations hereunder, and no
Jacobs Party shall be responsible or liable for the obligations of, or any
action taken or omitted by, any other Jacobs Party hereunder.
(b) The obligations under this Agreement of each CBL Principal are the
separate and several obligations of such CBL Principal, and are not joint
obligations with respect to any other Person. No failure by any CBL Principal to
perform its obligations under this Agreement shall relieve any other Person of
any of its obligations hereunder, and no CBL Principal shall be responsible or
liable for the obligations of, or any action taken or omitted by, any other CBL
Principal hereunder.
Section 7. Specific Enforcement. The parties hereto recognize and agree
that, in the event that any of the terms or the provisions of this Agreement are
not performed or complied with in accordance with their specific terms or are
otherwise breached, immediate irreparable injury would be caused for which there
is no adequate remedy at law. Accordingly, it is agreed that in the event of a
failure by a party to perform its obligations hereunder, the other parties shall
be entitled to specific performance through injunctive relief to prevent
breaches of the terms hereof and specifically to enforce this Agreement and the
terms and provisions hereof in any action instituted in any court of
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the United States or any state thereof having subject matter jurisdiction, in
addition to any other remedy to which such other parties may be entitled, at law
or in equity.
Section 8. Termination. This Agreement will automatically terminate in the
event that the Master Contribution Agreement is terminated in accordance with
its terms prior to the Principal Closing.
Section 9. Miscellaneous.
(a) Notices. All notices, demands, consents, requests or other
communications provided for or permitted to be given hereunder by a party hereto
must be in writing and shall be deemed to have been properly given or served (x)
on the fifth (5th) Business Day after deposit in the United States mail
addressed to such party by registered or certified mail, postage prepaid, return
receipt requested, (y) on the day after delivery to a reputable national
overnight air courier service, prepaid and addressed to such party, or (z) if
not deposited in the United States mail or delivered to a national overnight air
courier service as aforesaid, shall be deemed to be properly given or served
upon actual receipt (with rejection of delivery by addressee to constitute
receipt), as follows:
If to any of CBL or any CBL Principal, to that party c/o:
CBL & Associates Properties, Inc.
Watermill Center
800 South Street, Suite 395
Waltham, Massachusetts 02453
Attention: Stephen D. Lebovitz
and
CBL & Associates Properties, Inc.
One Park Place
6148 Lee Highway, Suite 300
Chattanooga, Tennessee 37421
Attention: Charles B. Lebovitz and H. Jay Wiseman, Jr.
with a copy sent simultaneously to CBL's attorneys:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Attention: Yaacov M. Gross and Eugene A. Pinover
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<PAGE>
and
Shumacker & Thompson, P.C.
Suite 103, One Park Place
6148 Lee Highway
Chattanooga, Tennessee 37421
Attention: Jeffery V. Curry
If to any Jacobs Party, to that party c/o:
Jacobs Realty Investors Limited Partnership
25425 Center Ridge Road
Westlake, Ohio 44154
Attention: Richard E. Jacobs
with copies sent simultaneously to JRI's attorneys:
Sullivan & Cromwell
125 Broad Street
New York, N.Y. 10004
Attention: Benjamin R. Weber
and
Thompson Hine & Flory LLP
3900 Key Center
127 Public Square
Cleveland, Ohio 44114-1216
Attention: Donald H. Messinger
Any of the aforementioned parties may change its address for the receipt of
notices, demands, consents, requests and other communications by giving written
notice to the others in the manner provided for above.
(b) Waivers and Amendments; Noncontractual Remedies, Preservation of
Remedies. This Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by all the parties hereto or, in the case of a waiver, by the party
waiving compliance who will be burdened or bound thereby. No delay on the part
of any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party of any such
right, power or privilege, nor any single or partial exercise of any such right,
power or privilege, preclude any further exercise thereof or the exercise of any
other such right, power or privilege. The rights and remedies herein provided
are
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cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity. The rights and remedies of any party based
upon, arising out of or otherwise in respect of any breach of any provision of
this Agreement shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such breach is
based may also be the subject matter of any other provision of this Agreement
(or of any other agreement between the parties) as to which there is no breach.
(c) GOVERNING LAW. AS PERMITTED BY SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK, THE PARTIES HERETO AGREE THAT THIS
AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT ANY
PROVISIONS HEREOF MODIFY OR AFFECT RIGHTS OR OBLIGATIONS ARISING EXCLUSIVELY
UNDER THE CORPORATION LAWS OF THE STATE OF DELAWARE, IN WHICH CASE THE
RESPECTIVE LAWS OF SUCH JURISDICTION SHALL GOVERN WITH RESPECT TO SUCH
PROVISIONS, BUT ONLY TO THE EXTENT NECESSARY TO GIVE EFFECT THERETO.
(d) Jurisdiction. Each of the Jacobs Parties, CBL and each of the CBL
Principals each hereby irrevocably and unconditionally submits to the
jurisdiction of any New York State Court or Federal Court of the United States
of America sitting in the borough of Manhattan, and any appellate court from any
such court, in any suit, action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each hereby
irrevocably and unconditionally agrees that all claims in respect of any such
suit, action or proceeding shall be brought in and may be heard and determined
in such New York State Court or, to the extent permitted by law, in such Federal
Court. Each of JRI, CBL and each of the CBL Principals each agrees that a final
judgment in any such suit, action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Each of the Jacobs Parties, CBL and each of the CBL Principals
each hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or hereafter have
to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement in any New York State Court or Federal Court sitting
in the borough of Manhattan. Each of the Jacobs Parties, CBL and each of the CBL
Principals each hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such suit,
action or proceeding in any such court. Nothing contained in this Section 10(d)
shall be construed as preventing any of the Jacobs Parties, CBL and the CBL
Principals, or any of their respective affiliates, from (i) objecting to the
jurisdiction of any New York State Court on the ground that the matter involved
exceeds the statutory jurisdiction of such court or
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(ii) from seeking to remove any suit, action or proceeding from a New York State
Court to a Federal Court sitting in the borough of Manhattan, or vice versa.
(e) Severability. If any provision of this Agreement or the applicability
of any such provision to any Person or circumstance shall be determined by any
court of competent jurisdiction to be invalid or unenforceable to any extent,
the remainder of this Agreement or the application of such provision to Persons
or circumstances other than those for which it is so determined to be invalid
and unenforceable, shall not be affected thereby, and each provision of this
Agreement shall be valid and shall be enforced to the fullest extent permitted
by law. To the extent permitted by applicable law, each party hereto hereby
waives any provision or provisions of law which would otherwise render any
provision of this Agreement invalid, illegal or unenforceable in any respect.
(f) Successors and Assigns. This Agreement shall be binding upon, and shall
inure to the benefit of the parties hereto and their respective successors,
assigns and personal representatives.
(g) Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts and when so executed shall constitute one Agreement,
notwithstanding that all parties are not signatories to the same counterpart.
(h) Headings; Sections; Schedules. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
References to Sections and Schedules contained in this Agreement are references
to the Sections hereof and the Schedules hereto.
(i) Changes in Capitalization. Without duplication of any other provision
of this Agreement, if any stock dividend, stock split, recapitalization,
combination or exchange of shares, merger, consolidation, acquisition of
property or stock, reorganization, liquidation or other similar change or
transaction of or by CBL occurs as a result of which shares of any class of any
corporation are issued in respect of outstanding securities of the REIT, or
outstanding securities of the Operating Partnership are changed into the same or
a different number of shares of the same or another class or classes, all
references to CBL's securities hereunder shall be deemed to be references to the
securities received by holders of CBL's securities in exchange for or in respect
of their CBL securities pursuant to such transaction.
(j) No Inconsistent Action. None of the Jacobs Parties, the CBL Principals
or CBL shall take any action that would render performance by such person of its
obligations hereunder impossible or unreasonably impractical.
[Reminder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
OPERATING PARTNERSHIP:
CBL & ASSOCIATES LIMITED
PARTNERSHIP
By: CBL Holdings I, Inc.
By: /s/ Charles B. Lebovitz
----------------------------------------
Name: Charles B. Lebovitz
Title: Chairman of the Board and
Chief Executive Officer
REIT:
CBL & ASSOCIATES PROPERTIES, INC.
By: /s/ Charles B. Lebovitz
--------------------------------------------
Name: Charles B. Lebovitz
Title: Chairman of the Board and
Chief Executive Officer
CBL PRINCIPALS:
CBL & ASSOCIATES, INC.
By: /s/ Charles B. Lebovitz
--------------------------------------------
Name: Charles B. Lebovitz
Title: Chairman of the Board and
Chief Executive Officer
/s/ Charles B. Lebovitz
---------------------------------
Charles B. Lebovitz
/s/ Stephen D. Lebovitz
---------------------------------
Stephen D. Lebovitz
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/s/ John N. Foy
---------------------------------
John N. Foy
JRI:
JACOBS REALTY INVESTORS LIMITED
PARTNERSHIP
By: JG Realty Investors Corp.
By: /s/ Martin J. Cleary
----------------------------------------
Name: Martin J. Cleary
Title: President
JACOBS TRUSTS:
/s/ Richard E. Jacobs
-----------------------------------------------
Richard E. Jacobs, solely as trustee for the
Richard E. Jacobs Revocable Living Trust
/s/ Richard E. Jacobs
-----------------------------------------------
Richard E. Jacobs, solely as trustee for the
David H. Jacobs Marital Trust
/s/ Martin J. Cleary
-----------------------------------------------
Martin J. Cleary
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Schedule A(1)
CBL Principals
Shares Equivalents
Shares of Common of the Operating
Stock of the REIT Partnership
Name Direct/Indirectly Owned Direct/Indirectly Owned
--------------------- ----------------------- -----------------------
Charles B. Lebovitz 1,526,597(2) 6,017,886(2)
Stephen D. Lebovitz 59,664(3) 238,936(3)
John N. Foy 79,161 189,241
CBL & Associates, Inc. 1,470,054(4) 7,237,823(4)
------------------
(1) Schedule includes stock and interests owned or controlled by named person
but does not include stock deemed owned solely by attribution under the
Internal Revenue Code.
(2) Includes stock and interests owned or controlled by Charles Lebovitz,
includes interests owned by CBL & Associates, Inc.
(3) Includes stock and interests owned or controlled by Stephen Lebovitz only.
(4) Includes stock and interests owned or controlled by CBL & Associates, Inc.
only.
<PAGE>
ANNEX F
PROPOSED CHARTER AMENDMENT
--------------------------
The Amended and Restated Certificate of Incorporation of the REIT, dated
November 2, 1993, as amended by the Certificate of Amendment to the Amended and
Restated Certificate of Incorporation, dated May 2, 1996, as supplemented by the
Certificate of Designation, dated June 25, 1998, and the Certificate of
Designation, dated April 30, 1999, shall be further amended as follows:
1. The definition of "Beneficial Ownership Limit" shall be amended to read
as follows:
"Beneficial Ownership Limit" shall mean (A) with respect to any Person
other than a Family Group or a member thereof, 6% of the outstanding Equity
Stock of the Corporation, (B) with respect to the Family Groups and their
members in the aggregate, 37.99% of the outstanding Equity Stock of the
Corporation, (C) with respect to the Lebovitz Group and its members in the
aggregate, 25.4% of the outstanding Equity Stock of the Corporation, (D) with
respect to any single member of the David Jacobs Group or the Richard Jacobs
Group that is an Individual, 13.9% of the outstanding Equity Stock of the
Corporation, (E) with respect to any two members of the David Jacobs Group or
the Richard Jacobs Group that are Individuals, 19.9% of the outstanding Equity
Stock of the Corporation and (F) with respect to Jacobs Group and its members in
the aggregate, 19.9% of the outstanding Equity Stock of the Corporation; in each
case, determined by number of shares outstanding, voting power (disregarding, in
the case of the Jacobs Group and its members, any power to designate nominees to
the Corporation's Board of Directors pursuant to the Voting and Standstill
Agreement dated September ___, 2000 among the Corporation, CBL & Associates
Limited Partnership, Jacobs Realty Investors Limited Partnership and others (the
"Voting and Standstill Agreement")) or value (as determined by the Board of
Directors), whichever produces the smallest holding of Equity Stock and computed
taking into account all outstanding shares of Equity Stock and, to the extent
provided by the Code in connection with the determination required by Section
856(a)(6) of the Code, all shares of Equity Stock issuable under existing
Options and Exchange Rights that have not been exercised or Deferred Stock that
has not vested; provided, however, that (i) in no event shall the Lebovitz Group
or any Person composed of one or more members of the Lebovitz Group be treated
as Beneficially Owning Equity Stock in excess of the limitations set forth in
clauses (B) or (C) above to the extent that the Lebovitz Group Beneficially Owns
not more than the Lebovitz Permitted Ownership Amount and (ii) in no event shall
the Jacobs Group, the David Jacobs Group, the Richard Jacobs Group or any Person
composed of one or more members of any such group be treated as Beneficially
Owning Equity Stock in excess of the limitations set forth in clauses (B) or (F)
above to the extent that the Jacobs Group Beneficially Owns not more than the
Jacobs Permitted Ownership Amount.
<PAGE>
2. The definition of "Constructive Ownership Limit" shall be amended to
read as follows:
"Constructive Ownership Limit" shall mean (A) with respect to any Person
other than a Family Group or a member thereof, 6% of the outstanding Equity
Stock of the Corporation and (B) with respect to the Family Groups and their
members in the aggregate, 37.99% of the outstanding Equity Stock of the
Corporation; in each case, determined by number of shares outstanding, voting
power (disregarding, in the case of the Jacobs Group and its members, any power
to designate nominees to the Corporation's Board of Directors pursuant to the
Voting and Standstill Agreement) or value (as determined by the Board of
Directors), whichever produces the smallest holding of Equity Stock and computed
taking into account all outstanding shares of Equity Stock and, to the extent
provided by the Code in connection with the determination required by Section
856(d)(2)(B) of the Code, all shares of Equity Stock issuable under existing
Options and Exchange Rights that have not been exercised or Deferred Stock that
has not vested; provided, however, that (I) except as provided in clause (II)
hereof, (i) in no event shall the Lebovitz Group or any Person composed of one
or more members of the Lebovitz Group be treated as Constructively Owning Equity
Stock in excess of the Constructive Ownership Limit to the extent that the
Lebovitz Group Constructively Owns not more than the Lebovitz Permitted
Ownership Amount and (ii) in no event shall the Jacobs Group, the David Jacobs
Group, the Richard Jacobs Group or any Person composed of one or more members of
any such group be treated as Constructively Owning Equity Stock in excess of the
Constructive Ownership Limit to the extent that the Jacobs Group and its members
Constructively Own not more than the Jacobs Permitted Ownership Amount and (II)
a member of the Lebovitz Group or the Jacobs Group (but not the Lebovitz Group
or the Jacobs Group themselves) will be subject to a Constructive Ownership
Limit of 9.9% of the outstanding Equity Stock of the Corporation at all times
that (x) such member, together with other members of the Lebovitz Group or the
Jacobs Group, as the case may be, each of whom Constructively Owns at least 10%
of the outstanding Equity Stock of the Corporation, Constructively Own, in the
aggregate (a) 10% or more of the total voting power, number of outstanding
shares or value of the outstanding shares of any Tenant that is treated as a
corporation for federal income tax purposes or (b) an interest of 10% or more in
the assets or net profits of any Tenant that is not treated as a corporation for
federal income tax purposes, (y) such member Constructively Owns an equity
interest in such Tenant and (z) the aggregate amount of gross income derived by
the Corporation in its immediately preceding taxable year from the Tenants whose
ownership is described in clause (x) (taking into account only ownership by such
member and other members of the Group that includes such member) exceeded
$750,000.
3. The definition of "Wolford Group" and all references thereto shall be
deleted.
4. Subparagraph (D)(9) of Article IV is amended by substituting "result in
violation of Section 856(h) of the Code or the receipt of nonqualified income
under Section 856(d)(2)(B) of the Code" for "violate the applicable Ownership
Limit" on the fourth-to-last line thereof.
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<PAGE>
5. The following definitions shall be added to Article IV(D)(1):
"David Jacobs Group" shall mean (i) the widow of David Jacobs, (ii) the
lineal descendants of David Jacobs and (iii) all Persons that would
Constructively Own or Beneficially Own shares of Equity Stock Constructively
Owned or Beneficially Owned by individuals described in (i) or (ii).
"Family Groups" shall mean the Lebovitz Group, the David Jacobs Group and
the Richard Jacobs Group.
"Individuals" shall mean Persons that are treated as "individuals" for
purposes of Section 542(a)(2) of the Code.
"Jacobs Group" shall mean the David Jacobs Group, the Richard Jacobs Group
and the members of such groups.
"Jacobs Permitted Ownership Amount" shall be defined and adjusted as in the
Share Ownership Agreement.
"Lebovitz Permitted Ownership Amount" shall be defined and adjusted as in
the Share Ownership Agreement.
"Richard Jacobs Group" shall mean (i) Richard Jacobs and each member of his
family for purposes of Section 318(a) or 544 of the Code and (ii) all Persons
that would Constructively Own or Beneficially Own shares of Equity Stock
Constructively Owned or Beneficially Owned by individuals described in (i).
"Share Ownership Agreement" shall mean the Share Ownership Agreement, dated
as of [ ] by and between the Corporation, CBL & Associates, Inc., Charles B.
Lebovitz, Stephen D. Lebovitz, Jacobs Realty Investors Limited Partnership,
Richard E. Jacobs, solely as trustee for the Richard E. Jacobs Revocable Living
Trust and Richard E. Jacobs, solely as trustee for the David H. Jacobs Marital
Trust, as such may be amended from time to time by the parties thereto.
6. The following subparagraph is added to Article IV(D)(3):
(c) If the Lebovitz Group or a member thereof or the Jacobs Group or a
member thereof would otherwise Beneficially Own or Constructively Own shares of
Capital Stock in excess of the Lebovitz Permitted Ownership Amount, in the case
of the Lebovitz Group and its members, or the Jacobs Permitted Ownership Amount,
in the case of the Jacobs Group and its members, then the shares of Equity Stock
that otherwise would be so Beneficially Owned or Constructively Owned shall be
designated Shares-in-Trust hereunder and, in accordance with subparagraph E of
this Article IV, transferred automatically and by operation of law to a Trust;
provided, however, that this clause (c) will not apply where the Beneficial and
Constructive Ownership of shares of Equity Stock by the Jacobs Group and its
members, or the Lebovitz Group and its members, as the case may be, would not
violate the limitations that would be
3
<PAGE>
imposed upon such group and its members if there were no special references to
such group and its members in this Certificate of Incorporation.
7. A new subparagraph (D)(14) shall be added to read as follows:
No amendment to this Article IV or modification of the Ownership Limits
pursuant to Article IV(D)(10) or any successor provision shall be effective
if such amendment is adverse to the Jacobs Group or any of its members
(unless Jacobs Realty Investors Limited Partnership, a Delaware limited
partnership, consents) or to the Lebovitz Group or any of its members
(unless LebFam, Inc., a Tennessee corporation, consents) and is not
undertaken with unanimous prior approval of the Corporation's Board of
Directors. For the avoidance of doubt, a decrease in the Standard
Beneficial Ownership Limit or a modification of the Beneficial Ownership
Limit in accordance with Article III of the Share Ownership Agreement shall
not be treated as adversely affecting the Jacobs Group or its members or
the Lebovitz Group or its members. References in this subparagraph (D)(14)
to the Jacobs Group or any of its members shall be deemed deleted after the
Share Ownership Agreement has terminated with respect to the Jacobs Group
and its Members. References in this subparagraph (D)(14) to the Lebovitz
Group or any of its members shall be deemed deleted after the Share
Ownership Agreement has terminated with respect to the Lebovitz Group and
its Members.
8. A new subparagraph (I) for Article IV shall be added to read as follows:
Copies of the Voting and Standstill Agreement and the Share Ownership
Agreement will be furnished by the Corporation without charge to each
shareholder who so requests.
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<PAGE>
ANNEX G
ALTERNATIVE RESOLUTIONS
-----------------------
The undersigned, being all of the directors of CBL & Associates Properties,
Inc., a Delaware corporation (the "Corporation"), do hereby consent to the
adoption of and hereby adopt the following resolutions and direct that this
consent be filed with the minutes of the proceedings of the Board of Directors:
WHEREAS, the Corporation is the general partner of CBL & Associates Limited
partnership, a Delaware limited partnership (the "Operating Partnership");
WHEREAS, the Corporation and the Operating Partnership have entered into
that certain Master Contribution Agreement dated September 25, 2000 (the "Master
Contribution Agreement") with JACOBS REALTY INVESTORS LIMITED PARTNERSHIP, a
Delaware limited partnership ("JRI"), Richard E. Jacobs, solely as trustee for
the Richard E. Jacobs Revocable Living Trust (the "REJ"), and Richard E. Jacobs,
solely as trustee for the David H. Jacobs Marital Trust (the "DHJ") and,
together with the REJ, the "Jacobs Trusts"); JRI and the Jacobs Trusts are
referred to herein as the "Jacobs Parties").
WHEREAS, Article IV(D)(10) of the Corporation's Certificate of
Incorporation grants the Corporation's board of directors the authority to
modify the Ownership Limits in the manner set forth below.
WHEREAS, the Master Contribution Agreement requires the Corporation's board
of directors to make the modifications set forth below to the Ownership Limits,
and the directors have determined that the board of directors has the authority
to implement the changes without any shareholder approval, and the directors
acknowledge that the foregoing requirement and the board's willingness to adopt
these resolutions was a material inducement to the willingness of the Jacobs
Parties to enter into and be bound by the Master Contribution Agreement.
NOW, THEREFORE, BE IT RESOLVED as follows: Pursuant to the authority
provided in Article IV (D)(10) of the Corporation's Amended and Restated
Certificate of
<PAGE>
Incorporation (the "Certificate"), the board of directors hereby modifies the
Ownership Limits as they relate to the Jacobs Group (as defined below) and its
members and the Lebovitz Group (as such term is defined in the Certificate of
Incorporation) and its members as follows:
1. "Beneficial Ownership Limit" shall mean (A) with respect to the Family
Groups and their members in the aggregate, 31.99% of the outstanding Equity
Stock of the Corporation, (B) with respect to the Lebovitz Group and its
members, both individually and in the aggregate, 21.4% of the outstanding Equity
Stock of the Corporation, (C) with respect to any single member of the David
Jacobs Group or the Richard Jacobs Group that is an Individual, 9.5% of the
outstanding Equity Stock of the Corporation, (D) with respect to any two members
of the David Jacobs Group or the Richard Jacobs Group that are Individuals,
15.5% of the outstanding Equity Stock of the Corporation and (E) with respect to
Jacobs Group and its members, both individually and in the aggregate, 15.5% of
the outstanding Equity Stock of the Corporation; in each case, determined by
number of shares outstanding, voting power (disregarding, in the case of the
Jacobs Group and its members, any power to designate nominees to the
Corporation's Board of Directors pursuant to the Voting and Standstill Agreement
dated September 25, 2000 among the Corporation and the Jacobs Parties (the
"Voting and Standstill Agreement")) or value (as determined by the Board of
Directors), whichever produces the smallest holding of Equity Stock and computed
taking into account all outstanding shares of Equity Stock and, to the extent
provided by the Code in connection with the determination required by Section
856(a)(6) of the Code, all shares of Equity Stock issuable under existing
Options and Exchange Rights that have not been exercised or Deferred Stock that
has not vested.
2. "Constructive Ownership Limit" shall mean, with respect to the Family
Groups and their members, both individually and in the aggregate, 31.99% of the
outstanding Equity Stock of the Corporation; in each case, determined by number
of shares outstanding, voting power (disregarding, in the case of the Jacobs
Group and its members, any power to designate nominees to the Corporation's
Board of Directors pursuant to the Voting and Standstill Agreement) or value (as
determined by the Board of Directors), whichever produces the smallest holding
of Equity Stock and computed taking into account all outstanding shares of
Equity Stock and, to the extent provided by the Code in connection with the
determination required by Section 856(d)(2)(B) of the Code, all shares of Equity
Stock issuable under existing Options and Exchange Rights that have not been
exercised or Deferred Stock that has not vested; provided, however, that (I)
except as provided in clause (II) hereof, (i) in no event shall the Lebovitz
Group or any Person composed of one or more members of the Lebovitz Group be
treated as Constructively Owning Equity Stock in excess of the Constructive
Ownership Limit set forth above to the extent that the Lebovitz Group
Constructively Owns not more than the Lebovitz Permitted Ownership Amount and
(ii) in no event shall the Jacobs Group, the David Jacobs Group, the Richard
Jacobs Group or any Person composed of one or more members of any such group be
treated as Constructively Owning Equity Stock in excess of the Constructive
Ownership Limit set forth above to the extent that the Jacobs Group and its
members Constructively Own not more than the Jacobs Permitted Ownership Amount
and (II) a member of the Lebovitz Group or the Jacobs Group (but not the
Lebovitz Group or the Jacobs Group themselves) will be subject to a Constructive
Ownership Limit of 9.9% of the outstanding Equity Stock of the Corporation at
all times that (x) such member, together with other members of the Lebovitz
Group or the Jacobs Group, as the case may be, each of whom Constructively Owns
at least 10% of the outstanding
2
<PAGE>
Equity Stock of the Corporation, Constructively Own, in the aggregate (a) 10% or
more of the total voting power, number of outstanding shares or value of the
outstanding shares of any Tenant that is treated as a corporation for federal
income tax purposes or (b) an interest of 10% or more in the assets or net
profits of any Tenant that is not treated as a corporation for federal income
tax purposes, (y) such member Constructively Owns an equity interest in such
Tenant and (z) the aggregate amount of gross income derived by the Corporation
in its immediately preceding taxable year from the Tenants whose ownership is
described in clause (x) (taking into account only ownership by such member and
other members of the Group that includes such member) exceeded $ 750,000.
3. The Beneficial Ownership Limit with respect to the Wolford Group shall
be reduced to the Standard Beneficial Ownership Limit.
4. For purposes of this Resolution, the following definitions shall be
added to Article IV(D)(1):
"David Jacobs Group" shall mean (i) the widow of David Jacobs, (ii) the
lineal descendants of David Jacobs and (iii) all Persons that would
Constructively Own or Beneficially Own shares of Equity Stock Constructively
Owned or Beneficially Owned by individuals described in (i) or (ii).
"Family Groups" shall mean the Lebovitz Group, the David Jacobs Group and
the Richard Jacobs Group.
"Individuals" shall mean Persons that are treated as "individuals" for
purposes of Section 542(a)(2) of the Code.
"Jacobs Group" shall mean the David Jacobs Group, the Richard Jacobs Group
and the members of such groups.
"Jacobs Permitted Ownership Amount" shall be defined and adjusted as in the
Share Ownership Agreement.
"Lebovitz Permitted Ownership Amount" shall be defined and adjusted as in
the Share Ownership Agreement.
"Richard Jacobs Group" shall mean (i) Richard Jacobs and each member of his
family for purposes of Section 318(a) or 544 of the Code and (ii) all Persons
that would Constructively Own or Beneficially Own shares of Equity Stock
Constructively Owned or Beneficially Owned by individuals described in (i).
"Share Ownership Agreement" shall mean the Share Ownership Agreement, dated
as of [ ] by and between the Corporation, CBL & Associates, Inc., Charles B.
Lebovitz, Stephen D. Lebovitz, Jacobs Realty Investors Limited Partnership,
Richard E. Jacobs, solely as trustee for the Richard E. Jacobs Revocable Living
Trust and Richard E. Jacobs, solely as trustee for the David H. Jacobs Marital
Trust, as such may be amended from time to time by the parties thereto.
3
<PAGE>
5. The following shall apply with respect to the modifications to the
Ownership Limits set forth in this Resolution:
If the Lebovitz Group or a member thereof or the Jacobs Group or a member
thereof would otherwise Beneficially Own or Constructively Own shares of
Capital Stock in excess of the Lebovitz Permitted Ownership Amount, in the
case of the Lebovitz Group and its members, or the Jacobs Permitted
Ownership Amount, in the case of the Jacobs Group and its members, then the
shares of Equity Stock that otherwise would be so Beneficially Owned or
Constructively Owned shall be designated Shares-in-trust and, in accordance
with subparagraph E of this Article IV, transferred automatically and by
operation of law to a Trust; provided, however, that this paragraph 5 will
not apply where the Beneficial and Constructive Ownership of shares of
Equity Stock by the Jacobs Group and its members, or the Lebovitz Group and
its members, as the case may be, would not violate the limitations that
would be imposed upon such group and its members if there were no special
references to such group and its members in the Certificate of
Incorporation or this Resolution.
FURTHER RESOLVED, that Section 3.6 of the Corporation's By-Laws be, and it
hereby is, amended and restated in its entirety to read as follows:
Section 3.6 Quorum. (a) A whole number of directors equal to at least a
majority of the Whole Board shall constitute a quorum for the transaction
of business, but if at any meeting of the Board of Directors there shall be
less than a quorum present, a majority of the directors present may adjourn
the meeting from time to time without further notice. Except as provided in
the following Section 3.6(b), (i) the act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the
Board of Directors, and (ii) the directors present at a duly organized
meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a
quorum.
(b) Unless and until the Share Ownership Limitation Amendment, as
described in Section 4.15 of the Master Contribution Agreement, dated as of
September 25, 2000, by and among the Corporation, CBL & Associates Limited
Partnership and the Jacobs Parties (as defined therein), is approved by the
requisite vote of the Corporation's shareholders and the amendment has been
adopted by the Corporation and is in full force and effect, the resolutions
adopted on September 25, 2000 and attached as Schedule 4.15(b)-2 to such
Master Contribution Agreement (the "Board Resolution"), and this Section
3.6(b) of the Corporation's By-Laws, shall not be repealed, amended or
otherwise modified in any respect, and the Board of Directors shall not
take any other action that would have the same effect, in each case without
the unanimous approval of the Board of Directors given at a time when no
vacancies exist on such Board, (A) in any respect that would adversely
affect the Jacobs Group or any member thereof, unless the Corporation has
obtained the prior written consent of Jacobs Realty
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<PAGE>
Investors Limited Partnership, a Delaware limited partnership, thereto, and
(B) in any respect that would adversely affect the Lebovitz Group or any
member thereof unless, unless the Corporation has obtained the prior
written consent of LebFam, Inc., a Tennessee corporation, thereto. For the
avoidance of doubt, a decrease in the Standard Beneficial Ownership Limit
or a modification of the Beneficial Ownership Limit as expressly permitted
in the Board Resolution and in accordance with the terms of the Share
Ownership Agreement shall not be treated as adversely affecting the Jacobs
Group or any of its members or the Lebovitz Group or any of its members.
References in this Section 3.6(b) to the Jacobs Group or any of its members
shall be deemed deleted, and the benefits thereof withdrawn, once the Share
Ownership Agreement has terminated with respect to the Jacobs Group and its
members as contemplated in Article VIII thereof. References in this Section
3.6(b) to the Lebovitz Group or any of its members shall be deemed deleted,
and the benefits thereof withdrawn, once the Share Ownership Agreement has
terminated with respect to the Lebovitz Group and its members as
contemplated in Article VIII thereof. Capitalized terms used in this
Section 3.6(b) and not otherwise defined in these By-Laws shall have the
meaning accorded such terms in the Board Resolution. The Corporation will
furnish copies of the Board Resolution and the Share Ownership Agreement
without charge to each stockholder who so requests.
FURTHER RESOLVED, that these resolutions are being adopted as required
under Section 4.15 of the Master Contribution Agreement, and shall not be
repealed, amended or otherwise modified in any respect except in accordance with
the provisions of the terms of the preceding resolution.
5
<PAGE>
ANNEX H
SHARE OWNERSHIP AGREEMENT
-------------------------
WHEREAS, the Master Contribution Agreement dated September 25, 2000 between
among Jacobs Realty Investors Limited Partnership, Richard E. Jacobs, solely as
Trustee for the Richard E. Jacobs Revocable Living Trust, Richard E. Jacobs,
solely as Trustee for the David H. Jacobs Marital Trust, CBL & Associates, Inc.
and CBL & Associates Limited Partnership (the "Master Contribution Agreement")
requires that the Board of Directors of CBL & Associates Properties, Inc. (the
"Corporation") adopt a Resolution in the form set forth in Schedule 4.15(b)-1 to
the Master Contribution Agreement (the "Resolution");
WHEREAS, the Master Contribution Agreement requires that the Corporation
seek to have its Amended and Restated Certificate of Incorporation, dated
November 2, 1993, as amended by the Certificate of Amendment to the Amended and
Restated Certificate of Incorporation, dated May 2, 1996, as supplemented by the
Certificate of Designation, dated June 25, 1998, and the Certificate of
Designation, dated April 30, 1999 (the "Certificate of Incorporation") further
amended in the manner set forth in Schedule 4.15(b)-1 to the Master Contribution
Agreement (the "Charter Amendment");
WHEREAS, the Resolution and the Charter Amendment provide that if the
Lebovitz Group or a member thereof or the Jacobs Group or a member thereof would
otherwise Beneficially Own or Constructively Own shares of Capital Stock in
excess of the Lebovitz Permitted Ownership Amount, in the case of the Lebovitz
Group and its members, or the Jacobs Permitted Ownership Amount, in the case of
the Jacobs Group and its members, then such excess shares of Equity Stock shall
be designated Shares-in-trust and, in accordance with subparagraph E of Article
IV of the Certificate of Incorporation, transferred automatically and by
operation of law to a Trust; provided, however, that such rule will not apply
where the Beneficial and Constructive Ownership of shares of Equity Stock by the
Jacobs Group and its members, or the Lebovitz Group and its members, as the case
may be, would not violate the limitations that would be imposed upon such group
and its members if there were no special references to such group and its
members in the Certificate of Incorporation or the Resolution;
WHEREAS, the parties hereto desire, for purposes of the Resolution and the
Charter Amendment, to specify the initial Lebovitz Permitted Ownership Amount
and Jacobs Permitted Ownership Amount and to specify how such amounts shall be
adjusted;
NOW THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. The following terms shall have the following meanings when used in
this Agreement.
<PAGE>
"Jacobs Permitted Ownership Amount" shall mean 4,690,000 shares of Common
Stock, as adjusted pursuant to the provisions of Article II hereof.
"Lebovitz Permitted Ownership Amount" shall mean 6,300,000 shares of Common
Stock, as adjusted pursuant to the provisions of Article II hereof.
"Standard Beneficial Ownership Limit" shall mean the percentage of the
outstanding Equity Stock of the Corporation referred to in clause (A) of the
definition of "Beneficial Ownership Limit" set forth in the Certificate of
Incorporation.
"Units" shall mean interests in CBL & Associates Limited Partnership, or
any successor thereto, or any similar entity, which interests are, by their
terms or the terms of the governing instruments of such entity, convertible into
or exchangeable for shares of Common Stock of the Corporation.
1.2. Terms used but not defined in this Agreement have the meanings given
such terms in the Resolution and Charter Amendment or, if no meaning is given
such terms in the Resolution or Charter Amendment, the meanings given such term
in the Corporation's Certificate of Incorporation as of the date hereof.
ARTICLE II
ADJUSTMENTS
2.1. The Jacobs Permitted Ownership Amount and the Lebovitz Permitted
Ownership Amount shall be increased as appropriate to reflect stock splits and
similar changes to the Common Stock and shall be decreased as appropriate to
reflect reverse stock splits and similar changes to the Common Stock.
2.2. In the event of an issuance of Common Stock by the Corporation other
than an issuance of Common Stock (i) to the extent described in Section 2.3
below or (ii) to a member of the Lebovitz Group or the Jacobs Group upon the
conversion or exchange of Units, the Jacobs Permitted Ownership Amount and the
Lebovitz Permitted Ownership Amount will each be increased by 15.995% of the
number of shares of Common Stock issued.
2.3. The Jacobs Permitted Ownership Amount and the Lebovitz Permitted
Ownership Amount shall not be increased in the event of an issuance of Common
Stock other than for cash, to the extent that (i) in connection with such
issuance (or the earlier issuance of Units or securities convertible into Common
Stock) the Corporation agrees that the Person (who is not a member of the Jacobs
Group or the Lebovitz Group) to whom the Common Stock is issued shall be subject
to a Beneficial Ownership Limit in excess of the Standard Beneficial Ownership
Limit, (ii) such special Beneficial Ownership Limit is necessary to permit the
Person to Beneficially Own at such times as may be agreed all of the shares of
Common Stock issued or to be issued to such Person (treating all Units held by
such Person as converted or exchanged for shares of Common Stock) and (iii) the
increases in the Jacobs Permitted Ownership Amount and
2
<PAGE>
the Lebovitz Permitted Ownership Amount that would otherwise be required by
Section 2.2 would have precluded the creation of such special Beneficial
Ownership Limit.
2.4. In the event of a repurchase of Common Stock by the Corporation other
than from a member of the Lebovitz Group or Jacobs Group, the Jacobs Permitted
Ownership Amount shall be reduced by 15.995% of the number of shares of Common
Stock repurchased; provided that if prior to such repurchase a portion of the
Jacobs Permitted Ownership Amount has been reallocated to the Lebovitz Permitted
Ownership Amount pursuant to subparagraph Section 2.10 hereof, then the
repurchase will not result in a reduction of the Jacobs Permitted Ownership
Amount to the extent that the Jacobs Permitted Ownership Amount would otherwise
have been reduced below an amount equal to the lesser of 4,690,000 shares of
Common Stock or the total number of shares of Common Stock Beneficially Owned or
Constructively Owned by the Jacobs Group at the time of the repurchase (treating
all Units Beneficially or Constructively Owned by the Jacobs Group as exchanged
for shares of the Corporation's Common Stock), but instead the repurchase will
cause a reduction in the Lebovitz Permitted Ownership Amount in an amount, not
to exceed the capacity previously reallocated to the Lebovitz Permitted
Ownership Amount pursuant to subparagraph 2.10 hereof, by the amount that the
Jacobs Permitted Ownership Amount would but for this proviso otherwise have been
reduced.
2.5. In the event of a repurchase of Common Stock by the Corporation other
than from a member of the Jacobs Group or Lebovitz Group, the Lebovitz Permitted
Ownership Amount shall be reduced by 15.995% of the number of shares of Common
Stock repurchased; provided that if prior to such repurchase a portion of the
Lebovitz Permitted Ownership Amount has been reallocated to the Jacobs Permitted
Ownership Amount pursuant to subparagraph Section 2.11 hereof, then the
repurchase will not result in a reduction of the Lebovitz Permitted Ownership
Amount to the extent that the Lebovitz Permitted Ownership Amount would
otherwise have been reduced below an amount equal to the lesser of 6,300,000
shares of Common Stock or the total number of shares of Common Stock
Beneficially or Constructively Owned by the Lebovitz Group at the time of the
repurchase (treating all Units Beneficially Owned or Constructively Owned by the
Lebovitz Group as exchanged for shares of the Corporation's Common Stock), but
instead the repurchase will cause a reduction in the Jacobs Permitted Ownership
Amount in an amount, not to exceed the capacity previously reallocated to the
Jacobs Permitted Ownership Amount pursuant to Section 2.11 hereof, by the amount
that the Lebovitz Permitted Ownership Amount would but for this proviso
otherwise have been reduced.
2.6. In the event of a repurchase of Common Stock by the Corporation from a
member of the Jacobs Group, the Jacobs Permitted Ownership Amount shall be
reduced by 31.99% of the number of shares of Common Stock repurchased.
2.7. In the event of a repurchase of Common Stock by the Corporation from a
member of the Lebovitz Group, the Lebovitz Permitted Ownership Amount shall be
reduced by 31.99% of the number of shares of Common Stock repurchased.
2.8. If Beneficial Ownership or Constructive Ownership by the Jacobs Group
of shares of Common Stock equal to the Jacobs Permitted Ownership Amount would
otherwise result in either (i) a violation of clause (A) or clause (E) of the
definition of "Beneficial
3
<PAGE>
Ownership Limit" in the Resolution or (ii) a violation of the definition of
"Constructive Ownership Limit" in the Resolution, then, to the extent that such
result would not occur but for acquisitions of Beneficial Ownership or
Constructive Ownership of Equity Shares by the Lebovitz Group or its members
pursuant to a transaction or event occurring after September [ ], 2000 that did
not result in an increase in the number of shares of Equity Stock deemed
outstanding for purposes of applying Section 856(a)(6) of the Code ("Lebovitz
Open Market Transactions"), the Lebovitz Permitted Ownership Amount shall be
reduced to the extent necessary to permit Beneficial Ownership by the Jacobs
Group of the Jacobs Permitted Ownership Amount without violating the Beneficial
Ownership Limit or the Constructive Ownership Limit in the manner described
above. The reduction in the Lebovitz Permitted Ownership Amount described in the
preceding sentence shall be deemed to occur immediately before the acquisition
by the Jacobs Group or a member thereof of Beneficial Ownership or Constructive
Ownership of Common Stock that would otherwise have violated the limitations
described above. The number of shares of Equity Stock which the Lebovitz Group
shall be treated as having acquired in Lebovitz Open Market Transactions for
purposes of this Section 2.8 shall be reduced to reflect transactions and other
events occurring after September [ ], 2000 which decrease the number of shares
of Equity Stock Beneficially or Constructively Owned by the Lebovitz Group and
its members.
2.8A. If Beneficial Ownership or Constructive Ownership by the Jacobs Group
of shares of Common Stock equal to the Jacobs Permitted Ownership Amount would
result in either (i) a violation of clause (B) or clause (F) of the definition
of "Beneficial Ownership Limit" in the Certificate of Incorporation but for the
proviso set forth in the such definition or (ii) a violation of clause (B) of
the definition of "Constructive Ownership Limit" but for the proviso set forth
in such definition, then, to the extent that such result would not have occurred
but for Lebovitz Open Market Transactions, the Lebovitz Permitted Ownership
Amount shall be reduced to the extent necessary to permit Beneficial Ownership
by the Jacobs Group of the Jacobs Permitted Ownership Amount without violating
the Beneficial Ownership Limit or the Constructive Ownership Limit in the manner
described above. The reduction in the Lebovitz Permitted Ownership Amount
described in the preceding sentence shall be deemed to occur immediately before
the acquisition by the Jacobs Group or a member thereof of Beneficial Ownership
or Constructive Ownership of Common Stock that would otherwise have violated the
limitations described above. The number of shares of Equity Stock which the
Lebovitz Group shall be treated as having acquired in Lebovitz Open Market
Transactions for purposes of this Section 2.8A shall be reduced to reflect
transactions and other events occurring after September [ ], 2000 which decrease
the number of shares of Equity Stock Beneficially or Constructively Owned by the
Lebovitz Group and its members.
2.9. If Beneficial Ownership or Constructive Ownership by the Lebovitz
Group of shares of Common Stock equal to the Lebovitz Permitted Ownership Amount
would otherwise result in either (i) a violation of clause (A) or clause (B) of
the definition of "Beneficial Ownership Limit" in the Resolution or (ii) a
violation of the definition of "Constructive Ownership Limit" in the Resolution,
then, to the extent that such result would not occur but for acquisitions of
Beneficial Ownership or Constructive Ownership of Equity Shares by the Jacobs
Group or its members pursuant to a transaction or event occurring after
September [ ], 2000 that did not result in an increase in the number of shares
of Equity Stock deemed outstanding for
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purposes of applying Section 856(a)(6) of the Code ("Jacobs Open Market
Transactions"), the Jacobs Permitted Ownership Amount shall be reduced to the
extent necessary to permit Beneficial Ownership by the Lebovitz Group of the
Lebovitz Permitted Ownership Amount without violating the Beneficial Ownership
Limit or the Constructive Ownership Limit in the manner described above. The
reduction in the Jacobs Permitted Ownership Amount described in the preceding
sentence shall be deemed to occur immediately before the acquisition by the
Lebovitz Group or a member thereof of Beneficial Ownership or Constructive
Ownership of Common Stock that would otherwise have violated the limitations
described above. The number of shares of Equity Stock which the Jacobs Group
shall be treated as having acquired in Jacobs Open Market Transactions for
purposes of this Section 2.9 shall be reduced to reflect transactions and other
events occurring after September [ ], 2000 which decrease the number of shares
of Equity Stock Beneficially or Constructively Owned by the Jacobs Group and its
members.
2.9A. If Beneficial Ownership or Constructive Ownership by the Lebovitz
Group of shares of Common Stock equal to the Lebovitz Permitted Ownership Amount
would result in either (i) a violation of clause (B) or clause (C) of the
definition of "Beneficial Ownership Limit" in the Certificate of Incorporation
but for the proviso set forth in the such definition or (ii) a violation of
clause (B) of the definition of "Constructive Ownership Limit" but for the
proviso set forth in such definition, then, to the extent that such result would
not have occurred but for Jacobs Open Market Transactions, the Jacobs Permitted
Ownership Amount shall be reduced to the extent necessary to permit Beneficial
Ownership by the Lebovitz Group of the Lebovitz Permitted Ownership Amount
without violating the Beneficial Ownership Limit or the Constructive Ownership
Limit in the manner described above. The reduction in the Jacobs Permitted
Ownership Amount described in the preceding sentence shall be deemed to occur
immediately before the acquisition by the Lebovitz Group or a member thereof of
Beneficial Ownership or Constructive Ownership of Common Stock that would
otherwise have violated the limitations described above. The number of shares of
Equity Stock which the Jacobs Group shall be treated as having acquired in
Jacobs Open Market Transactions for purposes of this Section 2.9A shall be
reduced to reflect transactions and other events occurring after September [ ],
2000 which decrease the number of shares of Equity Stock Beneficially or
Constructively Owned by the Jacobs Group and its members.
2.10. To the extent that the Jacobs Permitted Ownership Amount exceeds the
total number of shares of Common Stock Beneficially Owned or Constructively
Owned by the members of the Jacobs Group, treating all Units Beneficially or
Constructively Owned by such members as exchanged for shares of the
Corporation's Common Stock, then the Jacobs Permitted Ownership Amount will be
reduced by the amount of such excess and there shall be a corresponding increase
in the Lebovitz Permitted Ownership Amount.
2.11. To the extent that the Lebovitz Permitted Ownership Amount exceeds
the total number of shares of Common Stock Beneficially Owned or Constructively
Owned by the members of the Lebovitz Group, treating all Units Beneficially or
Constructively Owned by such members as exchanged for shares of the
Corporation's Common Stock, and such excess has existed for at least one year,
then the Lebovitz Permitted Ownership Amount will be reduced by the amount of
such excess and there shall be a corresponding increase in the Jacobs Permitted
Ownership Amount.
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2.12. Adjustments to the Lebovitz Permitted Ownership Amount and the Jacobs
Permitted Ownership Amount under this Article II shall be computed from
September [ ], 2000.
2.13. Notwithstanding anything in this Article II to the contrary, in no
event shall any adjustment hereunder result in the Lebovitz Permitted Ownership
Amount being less than that permitted by the Standard Beneficial Ownership Limit
and in no event shall any adjustment hereunder result in the Jacobs Permitted
Ownership Amount being less than 200% of the Standard Beneficial Ownership
Limit.
ARTICLE III
MODIFICATIONS
3.1. The Corporation and the other parties agree that Clauses (A) through
(E) of the definition of "Beneficial Ownership Limit" in the Resolution may be
modified by the Board of Directors of the Corporation pursuant to subparagraph
D(10) of Article IV of the Certificate of Incorporation without the consent of
the parties hereto only in accordance with the restrictions set forth in this
Article III.
3.2. The Corporation and the other parties hereto agree that in no event
may any of clauses (A) through (E) of the definition of "Beneficial Ownership
Limit" in the Resolution be modified, or there be any modification to the
definition of "Beneficial Ownership Limit" in the Certificate of Incorporation
in such a manner that, immediately following such modification and assuming that
any Person or group added to a joint ownership limit with the Jacobs Group or
the Lebovitz Group Beneficially or Constructively Owns the maximum amount of
shares of Common Stock they are permitted to Beneficially or Constructively Own
(or would be allowed to Constructively Own or Beneficially Own if such Person or
group converted the Units that such Person or members of such group Beneficially
or Constructively Owned), the Lebovitz Group and the Jacobs Group together or
either the Lebovitz Group or members thereof or the Jacobs Group or members
thereof would be in violation of such modified limit if the Lebovitz Group and
the members thereof Beneficially Owned shares of Common Stock equal to the
Lebovitz Permitted Ownership Amount and the Jacobs Group and the members thereof
Beneficially Owned shares of Common Stock equal to the Jacobs Permitted
Ownership Amount.
3.3. The Corporation agrees that where modifications to clauses (A) through
(E) of the definition of "Beneficial Ownership Limit" in the Resolution are
permitted by Section 3.2 above, such modifications shall be made only in
accordance with the following restrictions:
(i) the decrease in the percentage referred to in clause (A) shall be
split equally in decreasing the percentages referred to in clause (B) and
(E);
(ii) the percentage referred to in clause (C) will always be less than
the percentage referred to in clause (D) by an amount equal to the amount
of the Standard Beneficial Ownership Limit;
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(iii) the percentage referred to in clause (E) may never be higher
than the percentage referred to in clause (B); and
(iv) the percentage referred to in clause (A) may never be less than
300% of the Standard Beneficial Ownership Limit, the percentages referred
to in clauses (B) and (E) may never be less than 200% of the Standard
Beneficial Ownership Limit, the percentage referred to in clause (C) may
never be less than the Standard Beneficial Ownership Limit and the
percentage referred to in clause (D) may never be less than 200% of the
Standard Beneficial Ownership Limit.
3.4. The Corporation agrees that no modification of the definition of
"Constructive Ownership Limit" adverse to the Jacobs Group or its members or the
Lebovitz Group or its members will be permitted without the consent of Jacobs
Realty Investors Limited partnership, a Delaware limited partnership ("JRI") and
LebFam, Inc., a Tennessee corporation ("LebFam"); provided that the Equity Stock
ownership percentage referred in the definition of "Constructive Ownership
Limit" may be modified so that such percentage is the same as or greater than
the percentage referred to in clause (A) of the definition of "Beneficial
Ownership Limit" in the Resolution.
3.5. Notwithstanding anything in the foregoing to the contrary, the
Beneficial Ownership Limit and the Constructive Ownership Limit under the
Certificate of Incorporation or the Resolution (including, without limitation,
clauses (A) through (E) of the definition of "Beneficial Ownership Limit" may be
modified by the Corporation's Board of Directors pursuant to subparagraph
(D)(10) of Article IV of the Certificate of Incorporation with the prior written
consent of JRI, on behalf of the Jacobs Group and its members, and LebFam, on
behalf of the Lebovitz Group and its members.
3.6. The Corporation agrees not to initiate or endorse any proposal to
shareholders to amend, in a manner adverse to the Jacobs Group or any member
thereof or the Lebovitz Group or any member thereof, any of the provisions or
definitions in (i) the amendment to its Certificate of Incorporation approved at
the shareholders meeting contemplated under Section 4.15 of the Master
Contribution Agreement dated September __, 2000 among JRI, Richard E. Jacobs,
solely as Trustee for the Richard E. Jacobs Revocable Living Trust, Richard E.
Jacobs, solely as Trustee for the David H. Jacobs Marital Trust, the Corporation
and CBL & Associates Limited Partnership or (ii) the Resolution except with the
prior written consent of JRI, on behalf of the Jacobs Group and its members, and
LebFam, on behalf of the Lebovitz Group and its members.
ARTICLE IV
ADOPTION OF CHARTER AMENDMENT
4.1. Once the Charter Amendment been approved by the requisite vote of the
Corporation's stockholders and has been adopted and become effective, the
following references in this Agreement will be modified as follows:
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(i) references to "15.995%" shall become references to 18.995%;
(ii) references to "31.99%" shall become references to "37.99%";
(iii) references to 4,690,000 shall become references to 6,350,000;
(iv) references to 6,300,000 shall become references to 7,960,000;
(v) references to clauses (A), (B), (C), (D) and (E) of the definition
of "Beneficial Ownership Limit" in the Resolution shall become references
to clauses (B) through (F) of the definition of "Beneficial Ownership
Limit" in the Certificate of Incorporation; and
(vi) references to the "Constructive Ownership Limit" in the
Resolution shall become references to the "Constructive Ownership Limit" as
set forth in the Certificate of Incorporation.
4.2. For periods prior to the adoption of the Charter Amendment, Sections
2.8 and 2.9 (and not Sections 2.8A and 2.9A) hereof shall be effective.
Following the adoption of the Charter Amendment, Sections 2.8A and 2.9A (and not
Sections 2.8 and 2.9) shall be effective.
4.3. For periods following the adoption of the Charter Amendment, the
Jacobs Permitted Ownership Amount and the Lebovitz Permitted Ownership Amount
shall be calculated from September [ ], 2000 as though the modifications set
forth in Section 4.1 hereof had always been in effect.
ARTICLE V
AMENDMENTS
5.1. This Agreement may not be amended or modified other than in writing
executed by JRI on behalf of the Jacobs Group and its members and by LebFam on
behalf of the Lebovitz Group and its members.
ARTICLE VI
ACKNOWLEDGMENT
6.1. The parties hereto acknowledge and agree that Paragraph 5 of the
Resolution shall have the effect of causing shares Beneficially or
Constructively Owned by (i) the Lebovitz Group or its members in excess of the
Lebovitz Permitted Ownership Amount or (ii) the Jacobs Group or its members in
excess of the Jacobs Permitted Ownership Amount to become Shares-in-Trust
pursuant to Article V of the Certificate of Incorporation.
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ARTICLE VII
THIRD PARTY BENEFICIARIES
7.1. The members of the Jacobs Group and the Lebovitz Group shall be third
party beneficiaries of the agreements set forth in Article III hereof.
ARTICLE VIII
TERMINATION
8.1. This Agreement will terminate with respect the Lebovitz Group and its
members, or the Jacobs Group and its members, at such time as such group and its
members Beneficially Own and Constructively Own shares of the Company's Equity
Stock (treating all Units held by such group and its members as converted or
exchanged) representing, in the aggregate, less than the Standard Beneficial
Ownership Amount.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the [ ]
day of _______, 200[1].
CBL & Associates Properties, Inc.
By:
------------------------------
Name:
Title:
CBL & Associates, Inc.
By:
------------------------------
Name:
Title:
-----------------------------
Charles B. Lebovitz
-----------------------------
Stephen D. Lebovitz
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Jacobs Realty Investors Limited
Partnership
By: JG Realty Investors Corp.
By:
------------------------------
Name:
Title:
-----------------------------
Richard E. Jacobs, solely as trustee for
the Richard E. Jacobs Revocable Living
Trust
-----------------------------
Richard E. Jacobs, solely as trustee for
the David H. Jacobs Marital Trust
10
