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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:
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-12
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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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total Fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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(CBL & Associates Properties LOGO)
December 19, 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 Friday,
January 19, 2001, at 11:00 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 11.6
million SCUs (special common units) of our subsidiary Operating Partnership, CBL
& Associates Limited Partnership, to Jacobs and to certain outside partners
which own interests in the properties. Under certain circumstances, the number
of SCUs may be increased up to 13.94 million. 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, HAS 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.
(CBL LETTERHEAD)
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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,
/s/ Charles B. Lebovitz
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 December 19, 2000 and is first being mailed to
stockholders of CBL on or about December 19, 2000.
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(CBL & Associates Properties LOGO)
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 19, 2001
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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 January 19, 2001, at 11:00 a.m. local time, for
the following purposes:
1. To consider and vote upon a proposal to approve the issuance of
approximately 11.6 million SCUs (special common units) (and their
underlying shares of our common stock), which under certain
circumstances may be increased up to 13.94 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, as
amended (attached as Annex A to the accompanying proxy statement), and
the Terms of 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
(substantially in the form 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 and all adjournments and postponements of the
meeting.
Your Board of Directors has set the close of business on December 18, 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.
(CBL LETTERHEAD)
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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,
/s/ Stephen D. Lebovitz
Stephen D. Lebovitz
President and Secretary
December 19, 2000
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TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE
TRANSACTION AND THE CHARTER
AMENDMENT........................... 1
WHO CAN HELP ANSWER YOUR QUESTIONS?... 3
SUMMARY............................... 4
The Parties...................... 4
The Special Meeting.............. 5
Record Date; Outstanding Common
Stock Entitled to Vote and
Quorum......................... 5
Votes Required................... 5
Our Reasons for the Transaction
and Our Recommendation......... 6
Opinion of Merrill Lynch......... 6
The Acquisition and the Master
Contribution Agreement......... 7
Terms of the SCUs................ 8
Other Related Agreements......... 9
Amendments to our Certificate of
Incorporation.................. 9
Financing of the Transaction..... 10
The Properties................... 10
Security Ownership by
Management..................... 10
Interests of Certain Persons..... 11
Federal Income Tax Consequences
of the Acquisition............. 11
Summary Historical and Pro Forma
Financial Data................. 12
INFORMATION CONCERNING THE SPECIAL
MEETING............................. 17
Time, Date, Place and Purpose of
the Special Meeting............ 17
Record Date; Outstanding Common
Stock Entitled to Vote;
Quorum......................... 17
Votes Required................... 18
Voting of Proxies................ 18
Revoking Proxies................. 18
Proxy Solicitation............... 19
THE ACQUISITION AND RELATED MATTERS... 20
Background of the Acquisition.... 20
Recommendation of the Board of
Directors...................... 21
Factors Considered by the Board
of Directors................... 22
Opinion of Merrill Lynch......... 23
Financing of the Transaction..... 29
Interests of Certain Persons..... 30
Absence of Dissenters' Rights.... 30
Certain Federal Income Tax
Consequences................... 30
CBL Policies After the
Acquisition.................... 30
Regulatory Matters............... 30
Accounting Treatment............. 30
THE MASTER CONTRIBUTION AGREEMENT..... 31
General.......................... 31
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Structure of the Acquisition..... 31
Covenants........................ 33
Tax Protection................... 34
Conditions....................... 34
Termination and Termination
Fees........................... 34
Indemnification.................. 35
Expenses......................... 35
TERMS OF THE SCUs..................... 36
Distributions.................... 36
Liquidation Rights............... 36
Exchange and Conversion Rights... 37
Restrictions on Transfer......... 37
Redemption....................... 37
Consent Rights................... 37
OTHER RELATED AGREEMENTS.............. 38
Voting and Standstill
Agreement...................... 38
Registration Rights Agreement.... 40
Non-Competition Agreement........ 40
Transition Services Agreement.... 41
AMENDMENT TO CBL'S CHARTER............ 42
The Proposed Amendment........... 42
Modification of the Share
Ownership Limits............... 43
Share Ownership Agreement........ 43
Amendment to Stockholder Rights
Agreement...................... 44
Reasons for the Proposed
Amendment and Share Ownership
Agreement...................... 44
SELECTED HISTORICAL FINANCIAL DATA OF
CBL................................. 45
SELECTED HISTORICAL FINANCIAL DATA OF
THE PROPERTIES...................... 47
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL DATA...................... 48
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF THE PROPERTIES..... 53
THE PROPERTIES........................ 54
Malls............................ 54
Anchors.......................... 56
Mall Stores...................... 58
Additional Information Regarding
Hanes Mall..................... 59
Additional Information Regarding
the Associated Centers......... 60
Mortgages and Other
Encumbrances................... 61
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.... 62
DATE FOR SUBMISSION OF STOCKHOLDER
PROPOSALS........................... 64
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CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS.......... 65
INDEPENDENT AUDITORS.................. 66
WHERE YOU CAN FIND MORE INFORMATION... 66
INDEX TO FINANCIAL STATEMENT OF THE
RICHARD E. JACOBS GROUP COMBINED
PROPERTIES.......................... F-1
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ANNEXES
ANNEX A -- Master Contribution Agreement, as amended
ANNEX B -- Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
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) $123 million in cash, (2)
approximately $724 million in primarily fixed-rate non-recourse mortgage
indebtedness and (3) the issuance by our subsidiary Operating Partnership of
approximately 11.6 million SCUs (special common units), which under certain
circumstances may be increased up to 13.94 million SCUs. The SCUs may be
exchanged for shares of our common stock on a one-for-one basis or cash, at
our election.
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 (and
their underlying shares of our common stock) 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:
- 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;
- 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;
- we believe that the transaction will generate both short and long-term
growth in our funds from operations (FFO) per share and, ultimately,
our dividends;
- 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
- we believe the transaction will result in various leasing and
operational synergies.
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:
- as a result of the transaction, our total indebtedness and leverage
ratios will initially increase and our coverage ratios will initially
be reduced. Approximately $353.8 million of the indebtedness on the
properties being acquired will mature during the next five years;
- we expect to invest approximately $200 million in capital improvements
to the properties over the course of the next four years;
- 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;
- 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
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asset management and financing flexibility; and
- 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 or about January 31, 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, approximately $135 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.
Q: What are the terms of the securities being issued 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 period during which it
will not seek to acquire 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
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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.
However, approval of the charter amendment is contingent upon approval of
the issuance of the SCUs in the transaction.
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 (and their underlying shares of our common stock) 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, if the
amendment is not approved, we have agreed to resubmit it 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?
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:
- 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;
- 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
- 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.
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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 3, 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 all information relating 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.
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
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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 17)
We will hold a special meeting of CBL stockholders on January 19, 2001 at
11:00 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:
- the issuance by our Operating Partnership of approximately 11.6 million
SCUs (and the underlying shares of our common stock), which under
certain circumstances may be increased up to 13.94 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 13.94
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.
- an amendment to our certificate of incorporation (substantially in the
form 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. Approval of the charter amendment is
contingent upon approval of the issuance of the SCUs in the
transaction.
OUR BOARD OF DIRECTORS HAS CAREFULLY CONSIDERED THE TERMS AND CONDITIONS
OF THE TRANSACTION, HAS 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 (PAGES 17-18)
You are entitled to vote at the special meeting if you owned shares of our
common stock at the close of business on December 18, 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.
On December 18, 2000, 25,067,270 shares of our common stock were
outstanding and held by 598 record holders on behalf of approximately 7,100
beneficial holders.
VOTES REQUIRED (PAGE 18)
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
5
<PAGE> 13
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 proposed charter amendment
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 21-23)
We believe that the transaction is an important step for our Company and
will benefit our stockholders for the following reasons:
- 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;
- 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;
- we believe that the transaction will generate both short and long-term
growth in our funds from operations (FFO) per share and, ultimately,
our dividends;
- 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
- we believe the transaction will result in various leasing and
operational synergies.
We have considered possible risks including the following:
- as a result of the transaction, our total indebtedness and leverage
ratios will initially increase and our coverage ratios will initially
be reduced. Approximately $353.8 million of the mortgage indebtedness
on the properties being acquired will mature during the next five
years;
- we expect to invest approximately $200 million in capital improvements
to the properties over the course of the next four years;
- 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;
- 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
- 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 23-29)
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
6
<PAGE> 14
aggregate consideration to be paid by us in the transaction was fair from a
financial point of view to our Company. 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 Merrill Lynch
opinion was rendered on September 25, 2000, and it therefore does not address
the subsequent changes to the transaction which are embodied in the amendment to
the Master Contribution Agreement. The Company believes, however, that these
changes are not material to the overall transaction.
THE ACQUISITION AND THE MASTER CONTRIBUTION AGREEMENT (PAGES 31-35)
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:
- $123 million in cash;
- approximately $724 million in primarily fixed-rate non-recourse
mortgage indebtedness; and
- the issuance by the Operating Partnership of approximately 11.6 million
SCUs (which may be increased under certain circumstances up to 13.94
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) per share 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 $171 million, with the increased aggregate consideration to be
comprised of (1) approximately $114 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 1.8 million SCUs.
Consideration Adjustments. Jacobs has the right to reallocate up to $15
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 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.
7
<PAGE> 15
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 January 31, 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
non-core 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 March 2, 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 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 36-37)
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
8
<PAGE> 16
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 38-41)
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' initial
designees are Martin J. Cleary, the President and Chief Operating Officer of The
Richard E. Jacobs Group, Inc., and Gary L. Bryenton, Esq., Executive Partner of
Baker & Hostetler LLP, a national law firm. 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:
- acquire beneficial ownership of any of our voting securities except upon
an exchange of the SCUs or other interests in our Operating Partnership
received in exchange for the SCUs;
- solicit proxies or otherwise participate in an election contest with
respect to our Company;
- 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
- participate in or encourage the formation of any group which seeks to
affect control of our Company.
These standstill provisions 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. We will enter into registration rights
agreements with Jacobs and the other holders of the SCUs which grant 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 42-44)
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
9
<PAGE> 17
common stock by the Jacobs Group, while ensuring that we would continue to
comply with the REIT rules and be able 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 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 resubmit it 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:
- 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 for so long as the proposed amendment is not adopted),
subject to adjustments for increases or decreases to our outstanding
common share capital; and
- 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
for so long as 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 29-30)
We have obtained a commitment from Wells Fargo Bank, N.A. to provide us
with an aggregate $212 million loan facility, a portion of which will be a term
loan to finance the cash portion of the purchase price and the related
transaction costs. We expect this amount to be approximately $135 million. The
remaining amount will be a revolving loan to finance certain 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 an assignment of our direct and indirect equity interests
in the entities owning the properties, provided that such assignments are not
prohibited under any of the properties' existing loan or partnership documents.
THE PROPERTIES (PAGES 54-62)
For a list of the properties to be acquired in the transaction, including
the percentage interest in each property that we have agreed to acquire, and
related statistical, financial and other information relating to the properties,
see "The Properties."
SECURITY OWNERSHIP BY MANAGEMENT (PAGES 62-64)
As of December 5, 2000, our directors, executive officers and vice
presidents were entitled to vote approximately 1.9 million shares of our common
stock. These shares represented approximately 7.6% 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
10
<PAGE> 18
December 5, 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 -- The
Proposed Amendment" and " -- Share Ownership Agreement."
FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION (PAGE 30)
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 we 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.
11
<PAGE> 19
CBL & ASSOCIATES PROPERTIES INC.
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 nine months ended September
30, 2000 and September 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>
NINE MONTHS ENDED
SEPTEMBER 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..................... $263,487 $230,461 $317,603 $254,640 $177,604 $146,805 $131,727
TOTAL EXPENSES..................... 207,648 180,762 250,139 203,001 135,200 111,012 104,128
-------- -------- -------- -------- -------- -------- --------
INCOME FROM OPERATIONS............. 55,839 49,699 67,464 51,639 42,404 35,793 27,599
GAIN ON SALES OF REAL ESTATE
ASSETS........................... 13,275 9,505 8,357 4,183 6,040 13,614 2,213
EQUITY IN EARNINGS OF
UNCONSOLIDATED AFFILIATES........ 2,585 2,419 3,263 2,379 1,916 1,831 1,450
MINORITY INTEREST IN EARNINGS:
Operating Partnership.......... (21,346) (18,183) (23,264) (16,258) (13,819) (15,468) (10,527)
Shopping center properties..... (1,022) (941) (1,225) (645) (508) (527) (386)
-------- -------- -------- -------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM... 49,331 42,499 54,595 41,298 36,033 35,243 20,349
EXTRAORDINARY LOSS ON
EXTINGUISHMENT OF DEBT........... (221) -- -- (799) (1,092) (820) (326)
-------- -------- -------- -------- -------- -------- --------
NET INCOME......................... 49,110 42,499 54,595 40,499 34,941 34,423 20,023
PREFERRED DIVIDENDS................ (4,851) (4,851) (6,468) (3,234) -- -- --
-------- -------- -------- -------- -------- -------- --------
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS..................... $ 44,259 $ 37,648 $ 48,127 $ 37,265 $ 34,941 $ 34,423 $ 20,023
======== ======== ======== ======== ======== ======== ========
BASIC EARNINGS PER COMMON SHARE:
Income before extraordinary
item......................... $ 1.79 $ 1.53 $ 1.95 $ 1.58 $ 1.51 $ 1.69 $ 1.14
======== ======== ======== ======== ======== ======== ========
Net income..................... $ 1.78 $ 1.53 $ 1.95 $ 1.55 $ 1.46 $ 1.65 $ 1.12
======== ======== ======== ======== ======== ======== ========
Weighted average common shares
outstanding.................. 24,845 24,628 24,647 24,079 23,895 20,890 17,827
DILUTED EARNINGS PER COMMON SHARE:
Income before extraordinary
item......................... $ 1.78 $ 1.51 $ 1.94 $ 1.56 $ 1.49 $ 1.68 $ 1.14
======== ======== ======== ======== ======== ======== ========
Net income..................... $ 1.77 $ 1.51 $ 1.94 $ 1.53 $ 1.45 $ 1.64 $ 1.12
======== ======== ======== ======== ======== ======== ========
Weighted average common shares
and potential dilutive common
shares outstanding........... 24,983 24,869 24,834 24,340 24,151 21,022 17,856
Dividends declared per share... $ 1.53 $ 1.46 $ 1.95 $ 1.86 $ 1.77 $ 1.68 $ 1.59
</TABLE>
12
<PAGE> 20
<TABLE>
<CAPTION>
SEPTEMBER 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....... $2,012,846 $1,948,401 $1,960,554 $1,805,788 $1,142,324 $ 987,260 $758,938
Total assets.......... 2,086,572 2,006,600 2,018,838 1,855,347 1,245,025 1,025,925 814,168
Total liabilities..... 1,458,571 1,395,061 1,424,989 1,270,670 783,391 630,080 420,789
Minority interest..... 180,326 175,141 170,750 168,040 123,897 114,425 113,692
Stockholders'
equity.............. 444,089 432,537 419,887 415,782 330,853 272,804 270,892
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 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...... $ 87,263 $ 78,069 $ 114,196 $ 89,123 $ 60,852 $ 54,789 $ 28,977
Investing activities...... (87,888) (175,950) (212,140) (571,332) (245,884) (218,016) (99,690)
Financing activities...... (905) 98,596 99,192 484,912 183,858 164,496 71,689
Funds From Operations
(FFO)(1) of the
Operating Partnership... 97,060 85,009 117,947 93,614 76,514 63,044 52,212
FFO applicable to the
Company................. 65,480 57,312 79,495 65,026 54,833 43,498 34,218
</TABLE>
---------------
(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.
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. The financial data set forth below should be read in conjunction
with the financial statement for The Richard E. Jacobs Combined Properties and
the notes thereto included elsewhere in this proxy statement.
13
<PAGE> 21
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- --------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Certain Revenues........ $151,263 $147,976 $204,464 $197,687 $188,163 $188,787 $187,678
Certain Expenses........ 49,646 48,509 65,952 62,471 60,677 59,052 59,953
-------- -------- -------- -------- -------- -------- --------
Certain Revenues in
Excess of Certain
Expenses.............. $101,617 $ 99,467 $138,512 $135,216 $127,486 $129,735 $127,725
======== ======== ======== ======== ======== ======== ========
Jacobs Share of Certain
Revenues in Excess of
Certain Expenses...... $ 87,096 $ 94,904 $118,259 $115,716 $109,106 $111,320 $109,470
======== ======== ======== ======== ======== ======== ========
</TABLE>
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 nine
months ended September 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 September 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 certain 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 -- Timing of Closing" and
"-- 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 based on
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.
14
<PAGE> 22
SUMMARY PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ -----------------
<S> <C> <C>
Revenues:
Minimum rents.................................. $243,850 $302,316
Percentage rents............................... 10,651 14,992
Other rents.................................... 3,995 6,795
Tenant reimbursements.......................... 111,975 134,886
Management, development and leasing fees....... 4,227 9,283
Interest and other............................. 4,254 4,836
-------- --------
Total revenues............................... 378,952 473,108
-------- --------
Expenses:
Property operating............................. 61,185 76,617
Depreciation and amortization.................. 61,437 75,340
Real estate taxes.............................. 30,640 38,484
Maintenance and repairs........................ 25,078 32,184
General and administrative..................... 13,120 16,214
Interest....................................... 120,507 146,984
Other.......................................... 62 1,674
-------- --------
Total expenses............................... 312,029 387,497
-------- --------
Income from operations.............................. 66,923 85,611
Gain on sales of real estate assets................. 13,275 8,357
Equity in earnings of unconsolidated affiliates..... 5,991 8,655
Minority interest in earnings:
Operating partnership.......................... (39,342) (45,610)
Shopping center properties..................... (1,073) (1,489)
-------- --------
Net Income before extraordinary item................ 45,774 55,524
Preferred dividends................................. (4,851) (6,468)
-------- --------
Net Income before extraordinary item available to
common shareholders............................... $ 40,923 $ 49,056
======== ========
Basic Per Share Data:
Net income..................................... $ 1.65 $ 1.99
======== ========
Weighted average common shares outstanding..... 24,845 24,647
Diluted per share data:
Net income..................................... $ 1.64 $ 1.98
======== ========
Weighted average common shares and potential
dilutive common shares outstanding........... 24,983 24,834
</TABLE>
15
<PAGE> 23
SUMMARY PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(in thousands)
<TABLE>
<S> <C>
ASSETS
REAL ESTATE ASSETS:
Land................................................... $ 489,742
Building and improvements.............................. 2,729,126
----------
3,218,868
Less: accumulated depreciation....................... (259,467)
----------
2,959,401
Developments in progress............................... 129,982
----------
Net investment in real estate assets................. 3,089,383
CASH AND CASH EQUIVALENTS................................... 12,544
CASH IN ESCROW.............................................. 9,751
RECEIVABLES:
Tenant, net of allowance for doubtful accounts of
$1,854................................................ 27,904
Other.................................................. 3,296
INVESTMENT IN UNCONSOLIDATED AFFILIATES..................... 91,005
MORTGAGE NOTES RECEIVABLE................................... 8,694
OTHER ASSETS................................................ 20,537
----------
$3,263,114
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
MORTGAGE AND OTHER NOTES PAYABLE............................ $2,183,050
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES.................... 68,245
----------
Total liabilities.................................... 2,251,295
----------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST........................................... 465,063
----------
SHAREHOLDERS' EQUITY:
Preferred stock........................................ 29
Common stock........................................... 250
Additional paid-in capital............................. 563,872
Accumulated deficit.................................... (17,395)
----------
Total shareholders' equity........................... 546,756
----------
$3,263,114
==========
</TABLE>
16
<PAGE> 24
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.
- 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 11.6 million SCUs (and their underlying shares of our
common stock), 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. Under certain circumstances, the number of SCUs may be
increased up to 13.94 million. The 13.94 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.
- 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 be able
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, HAS DECLARED THE PROPOSED AMENDMENT TO BE ADVISABLE AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR EACH PROPOSAL.
We will hold the special meeting on January 19, 2001 at 11:00 a.m. local
time, at the Chattanooga Marriott at the Convention Center, 2 Carter Plaza,
Chattanooga, Tennessee.
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 December 18, 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.
17
<PAGE> 25
On the record date, 25,067,270 shares of our common stock were outstanding
and were held by 598 record holders on behalf of approximately 7,100 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.
REVOKING PROXIES
You may revoke your proxy at any time prior to the time your proxy is
voted at the special meeting by:
- giving written notice to our transfer agent, as provided below;
- mailing a signed, later dated proxy card that is received by our
transfer agent before the vote is taken at the special meeting; or
- 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.
18
<PAGE> 26
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.
19
<PAGE> 27
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 Mr. Jacobs
and his representatives with more information about our Company. We also
discussed Mr. Jacobs' thoughts about representation for 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 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."
20
<PAGE> 28
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.
Certain provisions of the Share Ownership Agreement were only agreed upon
in principal at the time the Master Contribution Agreement was signed.
Subsequently, the parties agreed to formally incorporate these provisions into
the Share Ownership Agreement, and the form of Share Ownership Agreement
appearing in Annex H to this proxy statement includes these provisions. The
parties also agreed to amend the Master Contribution Agreement, which amendment
is included in Annex A to this proxy statement.
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.
21
<PAGE> 29
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS
Our Board of Directors considered the following factors, among others,
before deciding to approve the transaction:
- 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;
- 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;
- Our goal as a company is to increase FFO per share 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;
- 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;
- Our Board of Directors considered the various leasing and operational
synergies expected to be achieved as a result of the transaction;
- 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
- 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 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:
- 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
22
<PAGE> 30
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 $353.8 million of the
mortgage indebtedness on the Jacobs properties will mature during the
next five years, which will expose us to increased risk of interest
rate fluctuations;
- 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 approximately $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;
- 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 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; and
- 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 is treated as a
non-taxable return of capital.
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.
23
<PAGE> 31
The Merrill Lynch opinion was rendered on September 25, 2000, and it
therefore does not address the subsequent changes to the transaction which are
embodied in the amendment to the Master Contribution Agreement. The Company
believes, however, that these changes are not material to the overall
transaction.
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:
- reviewed certain publicly available business and financial information
relating to our Company which Merrill Lynch deemed to be relevant;
- 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;
- 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;
- 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;
- 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;
- compared the proposed financial terms of the transaction with the
financial terms of certain other transactions that Merrill Lynch deemed
to be relevant;
- participated in certain discussions and negotiations among
representatives of our Company and Jacobs and our respective financial
and legal advisors;
- reviewed the potential pro forma impact of the transaction on our
Company;
- 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
- 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
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<PAGE> 32
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.
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:
- Simon Property Group, Inc.
- General Growth Properties, Inc.
- The Rouse Company
- Westfield America, Inc.
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<PAGE> 33
- The Macerich Company
- Urban Shopping Centers, Inc.
- Taubman Centers, Inc.
- 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):
<TABLE>
<CAPTION>
Common equity value per share as a multiple of
2001 funds from operations per share
----------------------------------------------
<S> <C>
High 7.7x
Mean 7.0x
Low 6.6x
</TABLE>
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 an 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.
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:
- Heritage Property Investment Trust, Inc.'s acquisition of Bradley Real
Estate Inc. (May 2000)
- Kimco Realty Corporation's acquisition of Price REIT Inc. (January
1998)
- New Plan Realty Trust, Inc.'s acquisition of Excel Realty Trust, Inc.
(May 1998)
- Regency Realty Corporation's acquisition of Pacific Retail Trust
(September 1998)
- Affiliates of Lazard Freres & Co. LLC's acquisition of Alexander Haagen
Properties, Inc. (June 1997)
- Simon Property Group, Inc.'s acquisition of DeBartolo Corp. (March
1996)
- 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
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<PAGE> 34
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):
<TABLE>
<CAPTION>
Offer value per share as a multiple of
forward year funds from operations per share
--------------------------------------------
<S> <C>
High 10.8x
Mean 10.0x
Low 9.4x
</TABLE>
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 $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 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):
<TABLE>
<CAPTION>
Common equity value per share as a multiple of
2001 funds from operations per share
----------------------------------------------
<S> <C>
High 7.7x
Mean 7.0x
Low 6.6x
</TABLE>
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<PAGE> 35
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 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 in
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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, a portion of which will be a term
loan to finance the cash portion of the purchase price and related transaction
costs. We expect this amount to be approximately $135 million. The remaining
amount will be a revolving loan 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 1.125% 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 an assignment of our direct and indirect equity interests in the
entities owning the properties, provided that such assignments are not
prohibited under any of the properties' existing loan or partnership documents.
Guarantee. The loan facility will be guaranteed by our Operating
Partnership and the entities owning direct or indirect interests in the acquired
properties unless such guarantees are restricted or prohibited by the
properties' existing loan or partnership documents.
Covenants. We will be prohibited from assigning our interests in any
subsidiary or pledging our equity or our subsidiaries' equity in any owned real
estate property without the bank's consent. This will not preclude us from
refinancing any of our properties provided that we and the bank agree upon
acceptable arrangements for any excess refinancing proceeds. 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
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the principal balance of the loan facility is reduced. The amount of recourse
indebtedness which we and our guarantors may collectively incur will also be
limited to 25% of our gross asset value.
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, violation of certain financial covenants, cross defaults
with other accelerating indebtedness (excluding non-recourse indebtedness of
less than $10 million in the aggregate) and other customary defaults.
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 in
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.
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 net assets
acquired based upon their relative fair values.
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<PAGE> 38
THE MASTER CONTRIBUTION AGREEMENT
The following is a brief summary of the material provisions of the Master
Contribution Agreement, as amended, 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:
- $123 million in cash;
- approximately $724 million in primarily fixed-rate non-recourse mortgage
indebtedness; and
- the issuance by the Operating Partnership of approximately 11.6 million
SCUs, which under certain circumstances may be increased up to 13.94
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 or about January
31, 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.
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
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.
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 March 2, 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.
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
property owner, Jacobs will cause the property owner to transfer fee title to
the underlying property to the Operating Partnership.
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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 to the outside partners in Cary Towne Center and
Cherryvale Mall and to the managing partner of Kentucky Oaks 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 $171 million,
with the increased consideration to be comprised of (i) approximately $114
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 1.8
million SCUs. In the case of Cherryvale Mall, Jacobs will cause the property
owner to transfer fee title to the underlying property to the Operating
Partnership.
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 $15 million of the cash
component of the consideration in the form of 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. See "-- Covenants -- Refinancings" below.
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
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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:
- engage in a merger or business combination in which we are not the
surviving entity;
- 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
- 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, and
CBL will cause the mortgage indebtedness on Towne Mall to be paid off.
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 (except that CBL will pay 50%
of any lender fees (subject to certain limitations) in connection with the
extension on the mortgages on Fayette Mall and Eastgate Mall).
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 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.
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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.
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 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 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
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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
involving multiple contributions.
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
representations 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.
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.
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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
11.6 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 1.8 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 $15 million of the cash consideration in
exchange for SCUs and possible consideration adjustments resulting from debt
amortization. See "The Master Contribution Agreement -- Structure of the
Acquisition -- Consideration Allocations and Adjustments." Accordingly, we
anticipate that our Operating Partnership could issue up to an aggregate of
13.94 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.
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 but after distributions with respect to our
Operating Partnership's preferred units (which represent our Company's preferred
stock). 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.
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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
(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.
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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' initial designees are Martin J. Cleary and Gary L. Bryenton, Esq.
Mr. Cleary has been the President and Chief Operating Officer of The Richard E.
Jacobs Group, Inc. since August 1981. Prior to joining the Jacobs Group, Mr.
Cleary was associated with Teachers Insurance & Annuity Association in New York
for 28 years, most recently as Senior Vice President responsible for all
mortgages and real estate. Mr. Cleary serves on the boards of directors of The
Guardian Life Insurance Company of America and The Lamson & Sessions Co. He also
served as the President of the International Council of Shopping Centers in the
year 1983-1984.
Gary L. Bryenton is Executive Partner of Baker & Hostetler LLP, a national
law firm, and is Chairman of its Policy Committee. Prior to being named
Executive Partner, he served as Chief Operating Officer of the firm and Managing
Partner of the firm's Cleveland office. He has served as a trustee of the
Cleveland Bar Association, a member of its Professional Ethics Committee and
Editor of the Cleveland Bar Journal. He also serves on the boards of directors
of many corporations and on the boards of trustees of numerous charitable and
civic organizations. He presently serves as Chairman of the Board of Trustees of
Heidelberg College and is a board member of the Cleveland Orchestra, the
National Conference for Community and Justice, Cleveland Tomorrow and the Rock
and Roll Hall of Fame and Museum.
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:
- acquire beneficial ownership of any of our voting securities (except
upon an exchange of their SCUs or other interests of our Operating
Partnership received in exchange for the SCUs or in a transaction in
which any of them acquires a controlling interest in an entity that
owns less than 1% of our Company);
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- 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;
- 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;
- 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;
- otherwise act, alone or in connection with others, to seek to exercise
a controlling influence over our management, Board of Directors or
policies;
- make a request for us to amend or waive any provision of our charter,
stockholders' rights plan or the Voting and Standstill Agreement; or
- 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
- a person (other than Jacobs) initiates a takeover action against our
Company which is not contested by our Board of Directors;
- 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);
- we solicit proposals to acquire more than 75% of our assets or initiate
or participate in a control transaction;
- 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;
- 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;
- the first date on which the provisions of the Share Ownership Agreement
described below have terminated with respect to the Jacobs Group;
- an insolvency event with respect to our Company; or
- the 12th anniversary of the initial closing date.
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.
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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 AGREEMENTS
At the initial closing, we will enter into registration rights agreements
with Jacobs and the other holders of the SCUs which grant 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 Jacobs holders of the SCUs are entitled to request that we file a
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.
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).
We may enter into registration rights agreements with different terms in
the context of acquiring the interests of non-Jacobs parties in the acquired
properties.
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
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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 may 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.
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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:
- 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
- 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:
- 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;
- to permit the Lebovitz Group and its members to own in the aggregate
25.4% of our outstanding equity stock; and
- 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 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 issuance of the SCUs in the transaction is a
condition to approval of the proposed amendment.
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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:
- permit the Lebovitz Group and the Jacobs Group to beneficially and
constructively own in the aggregate 31.99% of our outstanding equity
stock;
- permit the Lebovitz Group and its members to beneficially and
constructively own in the aggregate 21.4% of our outstanding equity
stock; and
- permit the Jacobs' principals to beneficially and constructively 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 it 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:
- 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
- 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
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).
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AMENDMENT TO STOCKHOLDER RIGHTS AGREEMENT
We have also agreed to amend at the initial closing the terms of our
Stockholder 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:
- 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;
- 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;
- preserve our Company's REIT status under the Internal Revenue Code; and
- 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 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 be deemed to
beneficially and constructively own approximately 11.6 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.
44
<PAGE> 52
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 nine months ended September
30, 2000 and September 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>
NINE MONTHS ENDED
SEPTEMBER 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............... $263,487 $230,461 $317,603 $254,640 $177,604 $146,805 $131,727
TOTAL EXPENSES............... 207,648 180,762 250,139 203,001 135,200 111,012 104,128
-------- -------- -------- -------- -------- -------- --------
INCOME FROM OPERATIONS....... 55,839 49,699 67,464 51,639 42,404 35,793 27,599
GAIN ON SALES OF REAL ESTATE
ASSETS..................... 13,275 9,505 8,357 4,183 6,040 13,614 2,213
EQUITY IN EARNINGS OF
UNCONSOLIDATED
AFFILIATES................. 2,585 2,419 3,263 2,379 1,916 1,831 1,450
MINORITY INTEREST IN
EARNINGS:
Operating Partnership.... (21,346) (18,183) (23,264) (16,258) (13,819) (15,468) (10,527)
Shopping center
properties............. (1,022) (941) (1,225) (645) (508) (527) (386)
-------- -------- -------- -------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY
ITEM....................... 49,331 42,499 54,595 41,298 36,033 35,243 20,349
EXTRAORDINARY LOSS ON
EXTINGUISHMENT OF DEBT..... (221) -- -- (799) (1,092) (820) (326)
-------- -------- -------- -------- -------- -------- --------
NET INCOME................... 49,110 42,499 54,595 40,499 34,941 34,423 20,023
PREFERRED DIVIDENDS.......... (4,851) (4,851) (6,468) (3,234) -- -- --
-------- -------- -------- -------- -------- -------- --------
NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS........ $ 44,259 $ 37,648 $ 48,127 $ 37,265 $ 34,941 $ 34,423 $ 20,023
======== ======== ======== ======== ======== ======== ========
BASIC EARNINGS PER COMMON
SHARE:
Income before
extraordinary item..... $ 1.79 $ 1.53 $ 1.95 $ 1.58 $ 1.51 $ 1.69 $ 1.14
======== ======== ======== ======== ======== ======== ========
Net income............... $ 1.78 $ 1.53 $ 1.95 $ 1.55 $ 1.46 $ 1.65 $ 1.12
======== ======== ======== ======== ======== ======== ========
Weighted average common
shares outstanding..... 24,845 24,628 24,647 24,079 23,895 20,890 17,827
DILUTED EARNINGS PER COMMON
SHARE:
Income before
extraordinary item..... $ 1.78 $ 1.51 $ 1.94 $ 1.56 $ 1.49 $ 1.68 $ 1.14
======== ======== ======== ======== ======== ======== ========
Net income............... $ 1.77 $ 1.51 $ 1.94 $ 1.53 $ 1.45 $ 1.64 $ 1.12
======== ======== ======== ======== ======== ======== ========
Weighted average common
shares and potential
dilutive common shares
outstanding............ 24,983 24,869 24,834 24,340 24,151 21,022 17,856
Dividends declared per
share.................. $ 1.53 $ 1.46 $ 1.95 $ 1.86 $ 1.77 $ 1.68 $ 1.59
</TABLE>
45
<PAGE> 53
<TABLE>
<CAPTION>
SEPTEMBER 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......... $2,012,846 $1,948,401 $1,960,554 $1,805,788 $1,142,324 $ 987,260 $758,938
Total assets..... 2,086,572 2,006,600 2,018,838 1,855,347 1,245,025 1,025,925 814,168
Total
liabilities.... 1,458,571 1,395,061 1,424,989 1,270,670 783,391 630,080 420,789
Minority
interest....... 180,326 175,141 170,750 168,040 123,897 114,425 113,692
Stockholders'
equity......... 444,089 432,537 419,887 415,782 330,853 272,804 270,892
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 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........ $ 87,263 $ 78,069 $ 114,196 $ 89,123 $ 60,852 $ 54,789 $ 28,977
Investing
activities........ (87,888) (175,950) (212,140) (571,332) (245,884) (218,016) (99,690)
Financing
activities........ (905) 98,596 99,192 484,912 183,858 164,496 71,689
Funds From
Operations
(FFO)(1) of the
Operating
Partnership....... 97,060 85,009 117,947 93,614 76,514 63,044 52,212
FFO applicable to
the Company....... 65,480 57,312 79,495 65,026 54,833 43,498 34,218
</TABLE>
---------------------------------------
(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.
46
<PAGE> 54
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. The financial data set forth below should be read in conjunction
with the financial statement for The Richard E. Jacobs Combined Properties and
the notes thereto included elsewhere in this proxy statement.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Certain Revenues................... $151,263 $147,976 $204,464 $197,687 $188,163 $188,787 $187,678
Certain Expenses................... 49,646 48,509 65,952 62,471 60,677 59,052 59,953
-------- -------- -------- -------- -------- -------- --------
Certain Revenues in Excess of
Certain Expenses................. $101,617 $ 99,467 $138,512 $135,216 $127,486 $129,735 $127,725
======== ======== ======== ======== ======== ======== ========
Jacobs Share of Certain Revenues in
Excess of Certain Expenses....... $ 87,096 $ 94,090 $118,259 $115,716 $109,106 $111,320 $109,470
======== ======== ======== ======== ======== ======== ========
</TABLE>
47
<PAGE> 55
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 nine
months ended September 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 September 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 certain 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 -- Timing of Closing" and
"-- 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 based on
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.
48
<PAGE> 56
CBL & ASSOCIATES PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
CBL JACOBS PRO FORMA PRO FORMA
HISTORICAL PROPERTIES ADJUSTMENTS(a) ADJUSTMENTS(b) CONSOLIDATED
---------- ---------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Minimum rents.............................. $167,806 $100,975 $(24,931) $ -- $243,850
Percentage rents........................... 7,458 4,025 (832) -- 10,651
Other rents................................ 2,668 1,440 (113) -- 3,995
Tenant reimbursements...................... 78,757 43,793 (10,575) -- 111,975
Management, development and leasing fees... 3,135 -- -- 1,092(c) 4,227
Interest and other......................... 3,663 1,030 (439) -- 4,254
-------- -------- -------- -------- --------
Total revenues........................... 263,487 151,263 (36,890) 1,092 378,952
-------- -------- -------- -------- --------
Expenses:
Property operating......................... 41,698 24,342 (4,855) -- 61,185
Depreciation and amortization.............. 45,002 -- -- 16,435(d) 61,437
Real estate taxes.......................... 22,501 12,558 (4,419) -- 30,640
Maintenance and repairs.................... 14,703 12,746 (2,371) -- 25,078
General and administrative................. 13,120 -- -- -- 13,120
Interest................................... 70,562 -- -- 49,945(e) 120,507
Other...................................... 62 -- -- -- 62
-------- -------- -------- -------- --------
Total expenses........................... 207,648 49,646 (11,645) 66,380 312,029
-------- -------- -------- -------- --------
Income from operations......................... 55,839 101,617 (25,245) (65,288) 66,923
Gain on sales of real estate assets............ 13,275 -- -- -- 13,275
Equity in earnings of unconsolidated
affiliates................................... 2,585 -- 13,454 (10,048)(f) 5,991
Minority interest in earnings:
Operating partnership...................... (21,346) -- -- (17,996)(g) (39,342)
Shopping center properties................. (1,022) -- (2,730) 2,679(h) (1,073)
-------- -------- -------- -------- --------
Net Income before extraordinary item........... 49,331 101,617 (14,521) (90,653) 45,774
Preferred dividends............................ (4,851) -- -- -- (4,851)
-------- -------- -------- -------- --------
Net Income before extraordinary item available
to common shareholders....................... $ 44,480 $101,617 $(14,521) $(90,653) $ 40,923
======== ======== ======== ======== ========
Basic Per Share Data:
Net income................................. $ 1.79 $ 1.65
======== ========
Weighted average common shares
outstanding.............................. 24,845 24,845
Diluted per share data:
Net income................................. $ 1.78 $ 1.64
======== ========
Weighted average common shares and
potential dilutive common shares
outstanding.............................. 24,983 24,983
</TABLE>
---------------------------------------
(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,
Columbia Mall and Jefferson Mall.
(b)The pro forma information does not include any incremental costs relating to
the management and leasing of the Jacobs properties.
(c) Represents management fees earned from properties accounted for under the
equity method of accounting.
(d) Represents depreciation expense on acquired assets over 40 years.
(e) Represents actual interest expense on $648.7 million of assumed debt,
amortization of credit fees and interest expense on the $135 million
acquisition financing for the nine months ended September 30, 2000. The
average interest rate for the period is assumed to be 7.9%. This balance
sheet debt of $648.7 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 $25.2 million, equals the $723.4 million of debt
being assumed as part of the transaction.
(f) Represents adjustments to properties accounted for under the equity method
of accounting for depreciation of $3,155,000, management fees of $747,000
and interest expense of $6,146,000 on Jacobs' share of debt of $99.9
million.
(g) Represents pro forma minority interest in earnings of the Operating
Partnership as if the SCUs were issued on January 1, 2000.
(h) Represents minority interest in pro forma adjustments for depreciation of
$557,000, management fees of $193,000 and interest expense of $1,929,000.
49
<PAGE> 57
CBL & ASSOCIATES PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
CBL JACOBS PRO FORMA PRO FORMA
HISTORICAL PROPERTIES ADJUSTMENTS(a) ADJUSTMENTS(b) 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 -- -- 1,465(c) 9,283
Interest and other.......... 4,191 1,006 (361) -- 4,836
-------- -------- -------- ---------- --------
Total revenues............ 317,603 204,464 (50,424) 1,465 473,108
-------- -------- -------- ---------- --------
Expenses:
Property operating.......... 50,832 31,996 (6,211) -- 76,617
Depreciation and
amortization.............. 53,551 -- -- 21,789(d) 75,340
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 -- -- 64,479(e) 146,984
Other....................... 1,674 -- -- -- 1,674
-------- -------- -------- ---------- --------
Total expenses............ 250,139 65,952 (14,862) 86,268 387,497
-------- -------- -------- ---------- --------
Income from operations.......... 67,464 138,512 (35,562) (84,803) 85,611
Gain on sales of real estate
assets........................ 8,357 -- -- -- 8,357
Equity in earnings of
unconsolidated affiliates..... 3,263 -- 18,944 (13,552)(f) 8,655
Minority interest in earnings:
Operating partnership....... (23,264) -- -- (22,346)(g) (45,610)
Shopping center
properties................ (1,225) -- (3,635) 3,371(h) (1,489)
-------- -------- -------- ---------- --------
Net income...................... 54,595 138,512 $(20,253) (117,330) 55,524
Preferred dividends............. (6,468) -- -- -- (6,468)
-------- -------- -------- ---------- --------
Net income available to common
shareholders.................. $ 48,127 $138,512 $(20,253) $ (117,330) $ 49,056
======== ======== ======== ========== ========
Basic Per Share data:
Net income.................. $ 1.95 $ 1.99
======== ========
Weighted average common
shares outstanding........ 24,647 24,647
Diluted per share data:
Net income.................. $ 1.94 $ 1.98
======== ========
Weighted average common
shares and potential
dilutive common shares
outstanding............... 24,834 24,834
</TABLE>
---------------------------------------
(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,
Columbia Mall and Jefferson Mall.
50
<PAGE> 58
(b)The pro forma information does not include any incremental costs relating to
the management and leasing of the Jacobs properties.
(c) Represents management fees earned from properties accounted for under the
equity method of accounting.
(d) Represents depreciation expense on acquired assets over 40 years.
(e) Represents actual interest expense on $648.7 million of assumed debt,
amortization of credit fees and interest expense on the $135 million
acquisition financing for the year ended December 31, 1999. The average
interest rate for the period is assumed to be 6.9%. This balance sheet debt
of $648.7 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 $25.2 million, equals the $723.4 million of debt being assumed
as part of the transaction.
(f) Represents adjustments to properties accounted for under the equity method
of accounting for depreciation of $4,235,000, management fees of $1,001,000
and interest expense of $8,316,000 on Jacobs' share of debt of $76.8
million.
(g) Represents pro forma adjustment to minority interest in earnings of the
Operating Partnership as if the SCUs were issued on January 1, 1999.
(h) Represents minority interest in pro forma adjustments for depreciation of
$742,000, management fees of $247,000 and interest expense of $2,382,000.
51
<PAGE> 59
CBL & ASSOCIATES PROPERTIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(in thousands)
<TABLE>
<CAPTION>
CBL PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS(a) CONSOLIDATED
---------- -------------- ------------
<S> <C> <C> <C>
ASSETS
REAL ESTATE ASSETS:
Land........................................... $ 284,764 $ 204,978 $ 489,742
Building and improvements...................... 1,857,567 871,559 2,729,126
---------- ---------- ----------
2,142,331 1,076,537 3,218,868
Less: accumulated depreciation............... (259,467) -- (259,467)
---------- ---------- ----------
1,882,864 1,076,537 2,959,401
Developments in progress....................... 129,982 -- 129,982
---------- ---------- ----------
Net investment in real estate assets......... 2,012,846 1,076,537 3,089,383
CASH AND CASH EQUIVALENTS........................... 5,544 7,000 12,544
CASH IN ESCROW...................................... 9,751 -- 9,751
RECEIVABLES:
Tenant, net of allowance for doubtful accounts
of $1,854.................................... 27,904 -- 27,904
Other.......................................... 3,296 -- 3,296
INVESTMENT IN UNCONSOLIDATED AFFILIATES............. (3,586) 94,591 91,005
MORTGAGE NOTES RECEIVABLE........................... 8,694 -- 8,694
OTHER ASSETS........................................ 18,537 2,000 20,537
---------- ---------- ----------
$2,082,986 $1,180,128 $3,263,114
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
MORTGAGE AND OTHER NOTES PAYABLE.................... $1,399,326 $ 783,724 $2,183,050
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES............ 59,245 9,000 68,245
---------- ---------- ----------
Total liabilities............................ 1,458,571 792,724 2,251,295
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST................................... 180,326 284,737 465,063
---------- ---------- ----------
SHAREHOLDERS' EQUITY:
Preferred stock................................ 29 -- 29
Common stock................................... 250 -- 250
Additional paid-in capital..................... 461,205 102,667 563,872
Accumulated deficit............................ (17,395) -- (17,395)
---------- ---------- ----------
Total shareholders' equity................... 444,089 102,667 546,756
---------- ---------- ----------
$2,082,986 $1,180,128 $3,263,114
========== ========== ==========
</TABLE>
---------------------------------------
(a) Represents the acquisition of the properties and allocation of the
consideration to assets acquired and liabilities assumed.
52
<PAGE> 60
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 and the financial statement of the properties
included in this proxy statement.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 2000 vs. Nine Months Ended September 30,
1999
Certain revenues increased by $3.3 million or 2.2% for the nine month
period ended September 30, 2000 versus September 30, 1999. This increase was
primarily attributable to a 3% increase in fixed rents of $3.0 million.
Certain expenses increased $1.1 million or 2.3% over the comparable period
in the prior year. Maintenance and repairs increased 6% to $.7 million, property
operating expenses increased 2.5% to $.6 million and real estate taxes decreased
approximately $.2 million.
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 86% in 1997 to 88% in
1998, and rents from temporary tenants increased by $.9 million in 1998.
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.
53
<PAGE> 61
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 35.5% of total 1999 revenues
from the Jacobs properties, 31.9% of the Jacobs properties' total gross leasable
area and 29.4% of total mall store gross leasable area.
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE OF OF TOTAL PERCENTAGE OF
1999 TOTAL 1999 PORTFOLIO MALL SHOP TOTAL PORTFOLIO
PROPERTY/LOCATION REVENUE REVENUE TOTAL GLA GLA GLA MALL SHOP GLA
----------------- ------------ ------------- ---------- ---------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Hanes Mall
Winston-Salem, NC $ 21,568,000 10.6% 1,556,000 8.1% 555,000 9.4%
Fayette Mall
Lexington, KY 13,321,000 6.5% 1,096,000 5.7% 309,000 5.2%
Cary Towne Center
Cary, NC 12,684,000 6.2% 953,000 5.0% 296,000 5.0%
Brookfield Square
Brookfield, WI 12,472,000 6.1% 1,041,000 5.4% 317,000 5.3%
West Towne Mall(1)
Madison, WI 12,542,000 6.1% 1,468,000 7.7% 263,000 4.4%
------------ ------ ---------- ------ --------- ------
Group Total 72,587,000 35.5% 6,114,000 31.9% 1,740,000 29.3%
Remaining Properties 131,877,000 64.5% 13,047,000 68.1% 4,189,000 70.7%
------------ ------ ---------- ------ --------- ------
PORTFOLIO TOTAL 204,464,000 100.00% 19,161,000 100.0% 5,929,000 100.0%
</TABLE>
---------------------------------------
(1) Includes West Towne Crossing.
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
54
<PAGE> 62
$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 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 PERCENTAGE
RECENT TOTAL SALES PER MALL STORE
NAME OF YEAR OF EXPANSION/ PROPOSED MALL SQUARE GLA
MALL/LOCATION OPENING RENOVATION OWNERSHIP TOTAL GLA(1) STORE GLA FOOT(2) 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 100.00% 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, SC 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
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
</TABLE>
55
<PAGE> 63
<TABLE>
<CAPTION>
YEAR OF
MOST MALL STORE PERCENTAGE
RECENT TOTAL SALES PER MALL STORE
NAME OF YEAR OF EXPANSION/ PROPOSED MALL SQUARE GLA
MALL/LOCATION OPENING RENOVATION OWNERSHIP TOTAL GLA(1) STORE GLA FOOT(2) LEASED ANCHORS
------------- ------- ---------- --------- ------------ --------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kentucky Oaks Mall 1982 1995 40.00% 878,000 278,000 257 91% Dillard's(3),
Paducah, NY 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(3),
Beaumont, TX 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-
Franklin, OH Beerman,
Dillard's,
Sears
Wausau Center 1983 1999 100.00% 429,000 156,000 297 94% Younkers,
Wausau, WI JCPenney,
Sears
West Towne Mall(5) 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
========== =========
</TABLE>
---------------------------------------
(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) Represents two Dillard's stores.
(4) Vacant anchor store.
(5) Includes associated center.
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
56
<PAGE> 64
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 86 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
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 3,097,000 11,325,000
</TABLE>
57
<PAGE> 65
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 7.1% 72 536,459 2.8%
Venator Group 5,752,760 2.8% 81 266,863 1.4%
The Gap 5,740,546 2.8% 33 214,506 1.1%
Intimate Brands 4,401,466 2.2% 36 136,469 0.7%
Transworld 3,512,007 1.7% 28 113,102 0.6%
Border's 3,162,108 1.5% 24 104,702 0.5%
American Eagle 2,667,931 1.3% 16 74,338 0.4%
Musicland 2,666,520 1.3% 26 90,534 0.5%
Hallmark 2,621,021 1.3% 23 87,560 0.5%
Lenscrafters 2,174,320 1.1% 15 76,602 0.4%
------------ ------ ----- ---------- ------
Subtotal 47,207,547 23.1% 354 1,701,135 8.9%
All Others 157,256,453 76.9% 2,146 17,459,865 91.1%
------------ ------ ----- ---------- ------
PORTFOLIO TOTAL $204,464,000 100.0% 2,500 19,161,000 100.0%
</TABLE>
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:
1999 MALL SHOP LEASING ANALYSIS
<TABLE>
<CAPTION>
PRIOR LEASE NEW LEASE INCREASE
BASE RENT INITIAL YEAR PER NEW LEASE
NUMBER TOTAL PER SQUARE BASE RENT SQUARE AVERAGE INCREASE PER
OF LEASES SQUARE FEET FOOT PER FOOT BASE 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.
58
<PAGE> 66
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:
JACOBS MALL SHOP EXPIRATION 2001-2005
<TABLE>
<CAPTION>
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
</TABLE>
---------------------------------------
* The base rental values reflect the base rent that will be in-place at lease
expiration and have not been straight-lined.
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:
<TABLE>
<CAPTION>
1997 1998 1999
----- ----- ----
<S> <C> <C> <C>
Average Occupancy Cost 10.13% 10.00% 9.99%
</TABLE>
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 the Winston-Salem area and in the bulk of the northwestern
portion of the state. The primary trade area encompasses much of six 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, eight 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
59
<PAGE> 67
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 its 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.
The closest competing malls are the 1,000,000 square foot Four Seasons
Mall, which is 28 miles to the east, the CBL-owned 950,000 square foot Oak
Hollow Mall, 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>
ANNUALIZED BASE MALL STORE GLA
NUMBER OF RENT OF MALL STORE GLA OF EXPIRING
YEAR ENDED LEASES EXPIRING OF EXPIRING LEASES (PERCENT
DECEMBER 31, EXPIRING LEASES LEASES (SQ. FT.) 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 our existing 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.
The center was 100% occupied on September 30, 2000.
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. The center
was 95.6% occupied on September 30, 2000.
60
<PAGE> 68
MORTGAGES AND OTHER ENCUMBRANCES
The Jacobs properties are subject to certain mortgages and other liens and
encumbrances securing indebtedness of approximately $837 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.
JACOBS PORTFOLIO DEBT SUMMARY
<TABLE>
<CAPTION>
REMAINING
AMORTIZATION
PRINCIPAL AMOUNT INTEREST TERM AS OF MATURITY
PROPERTY AS 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
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(8) $836,829,002
============
</TABLE>
---------------------------------------
(1) Properties with third party partners.
(2) Recourse loan.
(3) Rate is 200 basis points over LIBOR which was 6.625% as of November 20,
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 November 20,
2000. Payments are interest only.
(8)Does not include the mortgage indebtedness of Randolph Mall, which is to be
defeased, and the mortgage indebtedness of Towne Mall, which is to be paid
off.
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
61
<PAGE> 69
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:
<TABLE>
<CAPTION>
PRINCIPAL ANNUAL DEBT
YEAR ENDED AMOUNT DUE ANNUAL BLENDED INTEREST SERVICE
DECEMBER 31, AT MATURITY INTEREST RATE PAYMENT
------------ ------------ ----------- ---------------- -----------
<S> <C> <C> <C> <C>
2001 $150,150,000 $12,535,000 8.35% $15,435,000
2002 29,800,000 2,545,000 8.54% 3,025,000
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 $353,800,000 $32,010,000 9.05% $37,425,000
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information available to CBL as of December
5, 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-3 FULLY DILUTED
SHARES(1) PERCENTAGE(1) PERCENTAGE(2)
---------- ------------- -------------
<S> <C> <C> <C>
FMR Corp.(3)
82 Devonshire Street
Boston, Massachusetts 02019..................... 2,786,339 11.12% 7.55%
LaSalle Investment Management, Inc.(4)
100 East Pratt Street
Baltimore, Maryland 21202....................... 1,341,300 5.35 3.64
CBL & Associates, Inc.(5)....................... 8,805,243 27.26 19.95
Charles B. Lebovitz(6).......................... 9,751,831 29.30 21.62
John N. Foy(7).................................. 400,196 1.58 1.08
Stephen D. Lebovitz(8).......................... 457,943 1.80 1.23
Eric P. Snyder(9)............................... 131,670 * *
Augustus N. Stephas(10)......................... 86,700 * *
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 * *
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 * *
</TABLE>
62
<PAGE> 70
<TABLE>
<CAPTION>
NUMBER OF RULE 13D-3 FULLY DILUTED
SHARES(1) PERCENTAGE(1) PERCENTAGE(2)
---------- ------------- -------------
<S> <C> <C> <C>
All executive officers and directors as a group
(17 persons) (14)............................. 11,492,277 33.29 24.80
</TABLE>
---------------------------------------
* 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)
25,066,887 shares of common stock actually outstanding as of December 5,
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 December 5, 2000 upon
the exercise of outstanding options. Amounts shown were determined without
regard to applicable Ownership Limits.
(2) Calculated based on 25,066,887 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 36,893,093 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 11.12% of the total
shares outstanding as of December 5, 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 5.35% of the total shares outstanding as of
December 5, 2000. LaSalle reported that it possesses (i) sole dispositive
power with respect to 39,200 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) 53,303 shares of common stock owned directly, (ii) 3,047
shares owned by Mr. Lebovitz' wife, 12,341 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.
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<PAGE> 71
(7) Includes (i) 80,355 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) 75,607 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 848 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) 3,199 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.
(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.
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 have been 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,
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<PAGE> 72
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 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:
- 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;
- 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;
- 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;
- 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;
- dependence on the retail industry;
- financial condition and bankruptcy of tenants, including rejection of
leases by bankrupt tenants;
- competitive nature of the real estate leasing market;
- limitation on availability of, and the cost of, debt and equity
financing;
- compliance with federal, state and local regulatory requirements;
- environmental and safety requirements;
- our qualification as a REIT, which will not be entirely within our
control;
- legislative, judicial and administrative changes to tax laws; and
- 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
65
<PAGE> 73
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.
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 YOU CAN 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:
- Our Annual Report on Form 10-K for the year ended December 31, 1999;
- Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
2000, June 30, 2000 and September 30, 2000;
- Our Current Reports on Form 8-K, dated February 3, 2000, April 27, 2000,
July 27, 2000, September 25, 2000 (as amended) and October 26, 2000; and
- 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 January 19, 2001, and any and all adjournments 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 statement once we
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<PAGE> 74
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 December 19, 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 January 9,
2000 in order to ensure timely receipt before the special meeting.
By Order of the Board of Directors,
Stephen D. Lebovitz
Secretary
December 19, 2000
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<PAGE> 75
INDEX TO FINANCIAL STATEMENT OF THE
RICHARD E. JACOBS GROUP COMBINED PROPERTIES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Combined Statement of Certain Revenues and Certain Expenses
for the Nine Months Ended September 30, 2000 (unaudited)
and the Year Ended December 31, 1999...................... F-3
Notes to Combined Statement of Certain Revenues and Certain
Expenses.................................................. F-4
</TABLE>
F-1
<PAGE> 76
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> 77
THE COMBINED PROPERTIES OF THE RICHARD E. JACOBS GROUP
COMBINED STATEMENT OF CERTAIN REVENUES AND CERTAIN EXPENSES
NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) AND
YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------------ -----------------
<S> <C> <C>
CERTAIN REVENUES:
Minimum rents..................................... $100,975 $132,955
Tenant recoveries................................. 43,793 59,025
Percentage rents.................................. 4,025 9,684
Other rents....................................... 1,440 1,794
Other income...................................... 1,030 1,006
-------- --------
Total certain revenues......................... 151,263 204,464
-------- --------
CERTAIN EXPENSES:
Property operating expenses (Notes 3 and 5)....... 24,342 31,996
Maintenance and repairs........................... 12,746 17,326
Real estate taxes................................. 12,558 16,630
-------- --------
Total certain expenses......................... 49,646 65,952
-------- --------
CERTAIN REVENUES IN EXCESS OF CERTAIN EXPENSES...... $101,617 $138,512
======== ========
</TABLE>
See notes to combined statement of certain revenues and certain expenses.
F-3
<PAGE> 78
THE COMBINED PROPERTIES OF THE RICHARD E. JACOBS GROUP
NOTES TO COMBINED STATEMENT OF CERTAIN REVENUES AND CERTAIN EXPENSES
NINE MONTHS ENDED SEPTEMBER 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 nine months ended September 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
Parkdale Mall Associates Parkdale Mall 100.00
JG Randolph LLC Randolph Mall 100.00
Racine Joint Venture Regency Mall 100.00
</TABLE>
F-4
<PAGE> 79
<TABLE>
<CAPTION>
THE JACOBS GROUP'S
ENTITY PROPERTY % OWNERSHIP
------ -------- ------------------
<S> <C> <C>
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 $87,096 for the nine months ended September 30, 2000 (unaudited) and
$118,259 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 nine months ended September 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 September 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 $1,634 for the nine months
ended September 30, 2000 (unaudited) and $3,031 for the year ended December 31,
1999.
F-5
<PAGE> 80
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:
<TABLE>
<S> <C>
2000......................... $112,011
2001......................... 101,627
2002......................... 89,636
2003......................... 78,774
2004......................... 63,523
2005 and thereafter.......... 234,013
--------
$679,584
========
</TABLE>
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 nine months ended September 30, 2000 (unaudited), the base
rent and additional ground rent were $75 and $111, 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:
<TABLE>
<S> <C>
2000........................... $ 101
2001........................... 100
2002........................... 100
2003........................... 100
2004........................... 100
2005 and thereafter............ 1,442
------
$1,943
======
</TABLE>
F-6
<PAGE> 81
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> 82
TABLE OF CONTENTS
ARTICLE I
CONTRIBUTIONS OF INTERESTS AND MERGERS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
1.1 Contributions of Interests.................................. 2
1.2 Excluded Outparcels......................................... 6
1.3 No Representations.......................................... 8
1.4 Release..................................................... 9
</TABLE>
ARTICLE II
CONSIDERATION
<TABLE>
<C> <S> <C>
2.1 Consideration............................................... 10
</TABLE>
ARTICLE III
TITLE AND OTHER PROPERTY RELATED MATTERS
<TABLE>
<C> <S> <C>
3.1 Title to the Properties..................................... 14
3.2 Title Defects............................................... 15
3.3 Condemnation................................................ 17
3.4 Destruction or Damage....................................... 18
3.5 Insurance................................................... 19
</TABLE>
ARTICLE IV
COVENANTS
<TABLE>
<C> <S> <C>
4.1 Agreement to Explore a Potential Alternate Transaction...... 19
4.2 Amendment to the OP Partnership Agreement................... 20
4.3 Existence................................................... 20
4.4 Commercially Reasonable Efforts............................. 20
4.5 HSR Act Filings............................................. 20
4.6 Conduct of Business......................................... 20
4.7 Registration Rights Agreement............................... 23
4.8 Voting and Standstill Agreement............................. 23
4.9 Department Store Issues..................................... 23
4.10 Amendment to Rights Agreement............................... 23
4.11 Jacobs Employees............................................ 23
4.12 Limitation on Actions by CBL................................ 24
4.13 Expenses.................................................... 24
4.14 Partner Consents............................................ 25
4.15 Stockholder Approval........................................ 25
4.16 Tax Treatment............................................... 27
4.17 Estoppel Certificates....................................... 28
4.18 Reservation of REIT Stock................................... 28
4.19 Assumption of Guaranties.................................... 29
4.20 Non-Competition Agreement................................... 29
4.21 Randolph Mall............................................... 29
4.22 Refinancings................................................ 29
</TABLE>
i
<PAGE> 83
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
4.23 Resignation of Officers..................................... 30
4.24 No Solicitation............................................. 30
4.25 Transition Services Agreement............................... 30
4.26 Financial Statements........................................ 30
4.27 Post-Closing Cooperation.................................... 31
4.28 Environmental Insurance..................................... 31
4.29 Insurance Claims............................................ 31
4.30 Computer Leases............................................. 31
4.31 Weston Management Options................................... 31
</TABLE>
ARTICLE V
TAX PROTECTION
<TABLE>
<C> <S> <C>
5.1 Section 704(c) Method....................................... 32
5.2 Protection Period........................................... 32
5.3 Certain Permitted Transactions.............................. 32
5.4 Debt Protection Period...................................... 32
5.5 Indemnity................................................... 35
5.6 Damages..................................................... 37
5.7 Towne Mall.................................................. 37
5.8 Midland Mall................................................ 38
5.9 Initial Capital Accounts.................................... 38
5.10 Third Party Beneficiaries................................... 38
5.11 Preservation of Tax Status.................................. 39
5.12 Income Tax Reporting........................................ 39
</TABLE>
ARTICLE VI
CLOSING
<TABLE>
<C> <S> <C>
6.1 Closing..................................................... 40
6.2 Closing Deliveries by JRI................................... 42
6.3 Closing Deliveries by the Operating Partnership............. 45
6.4 Deferred Closings........................................... 47
</TABLE>
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
<TABLE>
<C> <S> <C>
7.1 Conditions Precedent to Obligation of the REIT and the
Operating Partnership....................................... 49
7.2 Conditions Precedent to Obligations of the Jacobs Parties... 50
</TABLE>
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
<TABLE>
<C> <S> <C>
8.1 Representations and Warranties of CBL....................... 52
8.2 Representations and Warranties of JRI....................... 58
8.3 General Provisions.......................................... 66
8.4 Survival.................................................... 68
</TABLE>
ii
<PAGE> 84
ARTICLE IX
INDEMNIFICATION
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
9.1 Obligation of CBL to Indemnify.............................. 68
9.2 Obligation of JRI to Indemnify.............................. 69
9.3 Limitations on Recovery..................................... 69
9.4 Indemnification for Certain Historical Liabilities.......... 70
9.5 Indemnification for Matters Relating to Weston Management
and for Certain Known Claims................................ 72
9.6 Covenant to Maintain Net Assets............................. 72
</TABLE>
ARTICLE X
TERMINATION
<TABLE>
<C> <S> <C>
10.1 Termination Rights.......................................... 72
10.2 Termination upon Default or a Failure of a Condition
Precedent................................................... 73
</TABLE>
ARTICLE XI
MISCELLANEOUS
<TABLE>
<C> <S> <C>
11.1 Broker...................................................... 74
11.2 Expenses.................................................... 74
11.3 Further Assurances.......................................... 75
11.4 Payment of Expenses......................................... 75
11.5 Notices..................................................... 75
11.6 Assignment.................................................. 76
11.7 Waiver...................................................... 76
11.8 Incorporation of Recitals and Schedules..................... 76
11.9 Confidentiality; Press Releases............................. 76
11.10 Merger...................................................... 77
11.11 GOVERNING LAW............................................... 77
11.12 Jurisdiction................................................ 77
11.13 Captions.................................................... 78
11.14 Counterparts................................................ 78
11.15 Severability................................................ 78
11.16 Prior Negotiations; Construction............................ 78
11.17 Litigation Expenses......................................... 78
11.18 No Recordation.............................................. 78
11.19 Competitive Activities...................................... 78
11.20 No Obligations of Property Owners........................... 78
11.21 WAIVER OF TRIAL BY JURY..................................... 79
11.22 Relationship of JRI to the Jacobs Parties................... 79
11.23 General Limitation on Liabilities........................... 79
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
Exhibit A PROPERTIES AND PROPERTY OWNERS
Exhibit B INTERESTS AND OUTSIDE PARTNERS
Exhibit C-1A FORM OF INTEREST CONTRIBUTION AGREEMENT (WITHOUT OPTION)
</TABLE>
iii
<PAGE> 85
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
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
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
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
---------
<S> <C>
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
</TABLE>
iv
<PAGE> 86
<TABLE>
<CAPTION>
SCHEDULES
---------
<S> <C>
Schedule 4.17-4 FORM OF GROUND LESSOR ESTOPPEL
Schedule 4.17-5 REA PARTIES
Schedule 4.17-6 FORM OF REA PARTY ESTOPPEL
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
</TABLE>
v
<PAGE> 87
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ --------------
<S> <C>
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.......................... 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)
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)
</TABLE>
vi
<PAGE> 88
<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ --------------
<S> <C>
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
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)
</TABLE>
vii
<PAGE> 89
<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ --------------
<S> <C>
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
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)
</TABLE>
viii
<PAGE> 90
<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ --------------
<S> <C>
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)
Updated Survey.............................................. 3.2(c)
Voting and Standstill Agreement............................. 4.8
Weston Management........................................... Preamble
100% Properties............................................. Preamble
100% Property Owners........................................ Preamble
</TABLE>
ix
<PAGE> 91
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 "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").
<PAGE> 92
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
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 is unwilling to participate
in the foregoing restructuring process, the Jacobs Parties will, in
2
<PAGE> 93
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
(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.
3
<PAGE> 94
(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 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 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.
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(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 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
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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 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 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
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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 (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.
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(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 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 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,
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whether implied, presumed or expressly provided, arising by virtue of any
statute, regulation or common law right or remedy in favor of either of the m.
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 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
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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 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 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
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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 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.
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(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 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.
(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
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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.
(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
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
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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 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;
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(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);
(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 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"
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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 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
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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 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. (a) 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 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
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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 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)
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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 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.
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
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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.
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
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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 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 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;
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(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: (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 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
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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 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
expenses; it being understood that any
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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.
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
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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 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.
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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,
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 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
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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
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
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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 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 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).
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(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 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,
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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 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.
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.
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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 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
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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 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 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
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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 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
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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.
(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 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
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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
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
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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 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.
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
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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 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.
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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 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.
(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
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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 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
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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 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, 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.
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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
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
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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 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 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
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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.
(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 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
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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 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.
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(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).
(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 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
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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.
(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.
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,
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(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
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
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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.
(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.
(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
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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 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
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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.
(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.
(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
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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 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
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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, 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 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
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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 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
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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 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.
(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
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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 (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.
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(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 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 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
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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 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 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
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(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.
(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
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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 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 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.
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(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 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;
(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;
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(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 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
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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.
(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).
(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
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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.
(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
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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.
(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 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
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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.
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,
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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
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 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
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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 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
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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
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 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.
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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 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
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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-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 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
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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 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
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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 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 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
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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-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
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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.
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
If to CBL:
CBL & Associates Properties, Inc.
Watermill Center
800 South Street, Suite 395
Waltham, Massachusetts 02453
Attention: Stephen D. Lebovitz
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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.
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
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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 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 court.
Nothing contained in this Section 11.12 shall be construed as
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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
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.
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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, 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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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
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
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REIT:
CBL & ASSOCIATES PROPERTIES, INC.
By: /s/ CHARLES B. LEBOVITZ
------------------------------------
Name: Charles B. Lebovitz
Title: Chairman of the Board and
Chief
Executive Officer
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AMENDMENT TO THE MASTER CONTRIBUTION AGREEMENT
THIS AMENDMENT TO THE MASTER CONTRIBUTION AGREEMENT (this "Amendment") is
made as of the 19th day of December, 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 parties hereto have entered into a Master Contribution
Agreement, dated as of September 25, 2000 (such agreement as amended, the
"Agreement"); terms used but not defined herein shall have the meanings ascribed
to them in the Agreement.
WHEREAS, the terms of Section 3.2 of the Agreement were amended by a
Letter Agreement, dated November 13, 2000, between JRI and the Operating
Partnership.
WHEREAS, the parties hereto desire to further amend the terms of the
Agreement in the manner set forth below.
NOW, THEREFORE, in consideration of the agreements contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. JRI agrees that it will cause the Property Owner of CherryVale Mall to
contribute CherryVale Mall, and CBL agrees that it will accept such
contribution, in the form of a deed 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 such Property. For all purposes of the
Agreement, CherryVale Mall shall be considered a 100% Property and not a Partial
Property. The parties acknowledge that any transfer taxes incurred by the Jacobs
Parties in connection with the contribution of CherryVale Mall to the Operating
Partnership will be included among the costs subject to reimbursement by CBL
pursuant to the second sentence of Section 4.13 of the Agreement.
2. Section 2.1(a)(i) of the Agreement is hereby amended to delete the
reference to "$100,000,000" therein as the cash portion of the Consideration and
to replace that reference with "$88,629,000"; and Section 2.1(a)(ii) of the
Agreement is hereby amended to delete the reference to "11,707,194" therein as
the SCU portion of the Consideration and to replace that reference with
"11,567,659."
3. Schedule 2.1(a) now attached to the Agreement is hereby deleted in its
entirety and replaced with the Schedule 2.1(a) that is attached hereto as
Exhibit A.
4. Section 2.1(b)(i) of the Agreement is hereby deleted in its entirety
and replaced with the following:
"JRI, in its discretion, may elect to reallocate up to $15,000,000 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 or ICOA Option Closing to which the
reallocation will relate."
<PAGE> 173
5. Section 2.1(b)(vi) of the Agreement is hereby deleted in its entirety
and replaced with the following:
"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
$88,629,000, the portion in excess of $88,629,000 will be payable in SCUs
instead of cash at a rate of one SCU for each $32.25 of such excess
amount."
6. The following paragraph is hereby added as Section 2.2 of the
Agreement:
"2.2 Payment of Certain Fees. (a) At the Closing with respect to any of
the Properties identified on Schedule 2.2 hereto, CBL agrees to deliver to each
of the Persons set forth opposite the name of such Property on Schedule 2.2 the
amount of money set forth opposite such Person's name on Schedule 2.2 in respect
of such Property, payable in cash by wire transfer of immediately available
funds to the bank accounts designated by such Person in writing to the Operating
Partnership at least three (3) days prior to the Closing Date with respect to
such Property.
(b) In addition, at the Closing with respect to Randolph Mall, CBL
agrees to deliver to the entity designated by JRI, as reimbursement to JRI
for funds contributed by JRI to defease the loan currently secured by
Randolph Mall, $12,204,000, payable in cash by wire transfer of immediately
available funds to the bank account(s) of the entity designated by JRI in
writing to the Operating Partnership at least three (3) days prior to the
Closing Date with respect to such Property."
7. The Schedule 2.2 that is attached hereto as Exhibit B is hereby added
to the Agreement as Schedule 2.2 thereof.
8. The parties agree, that (i) at the Closing with respect to Towne Mall,
CBL will repay the then-outstanding principal balance (including deferred
interest thereon) of the CIGNA loan now secured by Towne Mall in full (provided,
however, that if there are any payments of interest, prepayment premiums or
other amounts (other than principal) owing at the time of repayment, CBL will
not be required to pay any such additional amounts and the same will be paid by
the owners of the applicable Property Owner or, if JRI so determines, by JRI on
behalf of the owners of the applicable Property Owner), (ii) prior to the
Closing with respect to Towne Mall, JRI will deliver to CBL written confirmation
from CIGNA that it will accept repayment in full of such loan at the Closing
with respect to Towne Mall and, upon repayment in full of such loan at the
Closing with respect to Towne Mall, the mortgage and other security documents
securing such loan will be released, (iii) such loan is hereby deleted from
Schedule 8.2(n) of the Agreement and shall not be considered a Continuing Loan
(except as set forth in clause (v) below), and the environmental indemnity with
respect to such loan is hereby deleted from Schedule 4.19 of the Agreement, (iv)
notwithstanding the terms of Section 1.1(b) of the Agreement, JRI will not have
any obligation to use commercially reasonable efforts to refinance the
aforementioned CIGNA loan, and (v) the aforementioned CIGNA loan will be
considered a Continuing Loan for the purpose of making (x) the adjustments to
the Consideration described in Section 2.1(b)(v) of the Agreement in respect of
any regularly scheduled amortization payments made in respect of such loan
during the period after December 31, 2000 through and including the Closing Date
for Towne Mall and (y) the reimbursements described in Section 18 of Exhibit A
to the Interest Contribution Agreements. In addition, the parties acknowledge
that no adjustments to the Consideration described in Section 1.1(b)(iii) of the
Agreement will be made in respect of the repayment of the aforementioned CIGNA
loan.
9. Notwithstanding Section 4.22(b) of the Agreement, at the Closing with
respect to each of Fayette Mall and Eastgate Mall, CBL agrees to reimburse those
Jacobs Parties, affiliates of the Jacobs Parties and Associates who own
Interests in the applicable related Property Owner for fifty percent (50%) of
their share of the extension fee paid by such Property Owner to CIGNA for the
extension of the
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maturity date of the loan secured by such Property; provided, however, that the
amount that CBL shall be required to pay pursuant to this Paragraph 9 with
respect to each such Property shall not exceed 1/8 of one percent (1%) of the
outstanding balance of the loan secured by such Property as of the applicable
date for determination of the extension fee. Any payment made by CBL pursuant to
this Paragraph 9 shall be in addition to, and shall not reduce, the amounts that
CBL is required to pay in reimbursement of the Jacobs Parties pursuant to the
second sentence of Section 4.13 of the Agreement. The reimbursement will be paid
concurrently with the Closing for the applicable Property, as part of the
post-Closing adjustment to the working capital amounts with respect to the
applicable Property under the Interest Contribution Agreement for such Property
and not as an adjustment to the portion of the Consideration payable with
respect to such Property. In addition, the parties agree that the outstanding
principal balance of any Continuing Loan secured by Fayette Mall or Eastgate
Mall shall not be reduced prior to the Closing with respect to such Property,
other than in compliance with the scheduled amortization payments in respect of
such Continuing Loan.
10. CBL hereby consents to an amendment to the partnership agreement of
Madison Joint Venture as appropriate to permit Northwestern Mutual Life
Insurance Company ("Northwestern Mutual") to exercise the buy-sell provisions
set forth in that partnership agreement at any time from and after the seventh
anniversary of the Principal Closing Date. CBL also consents to an amendment of
the Management Contracts and Leasing Contracts with respect to East Towne Mall
and West Towne Mall as appropriate to reduce the management fees payable
thereunder to three percent (3%) of base rent, specialty rent and percentage
rent and the leasing commissions payable thereunder to $4.00 per square foot for
new leases and $2.00 per square foot for renewals of leases. CBL does not
consent, however, to any further reduction of the management fees or leasing
commissions payable under the Management Contracts and/or Leasing Contracts with
respect to East Towne Mall and/or West Towne Mall.
11. Section 5.5(b) of the Agreement is hereby deleted in its entirety and
replaced with the following:
"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 at the time of the Closing with respect to
such Partial Property 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 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."
12. Section 5.7 of the Agreement is hereby deleted in its entirety and
replaced with the following:
"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
indebtedness for which a first mortgage lien
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against the fee interest in Towne Mall is the primary security, 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, in each case so long as (1) such first mortgage
indebtedness is with a bona fide third-party lender and was entered into on
arms' length terms consistent with market practice at the time of its
origination, (2) the default first occurs after the fourth anniversary of
the Closing Date with respect to Towne Mall, (3) 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 and (4) if
said indebtedness is also secured or otherwise supported by any guaranty or
other similar obligation by CBL or any other Person, concurrently with the
transfer referred to in clause (3) above, each guarantor or other similarly
bound Person affirms its ongoing obligations thereunder to the lender in
writing and names JRI or its designated transferee as an intended third
party beneficiary of such affirmation. 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 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)."
13. Section 5.8 of the Agreement is hereby deleted in its entirety and
replaced with the following:
"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, then
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
Midland Mall as of the Closing Date with respect to such Property, and the
Operating Partnership will not be required to
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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 the interests in
the entity that owns Midland Mall that correspond to the Interests that
were contributed to CBL in respect of Midland Mall as contemplated herein
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 Midland 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 such interests in the entity that
owns Midland Mall to JRI, and (c) upon the transfer of such interests 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 the
applicable interests in the entity that owns Midland 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 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 Midland 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 Midland Mall, the
Protected Parties will continue to be fully entitled to the benefits of
this Article V with respect to Midland 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 Midland
Mall."
14. Schedule 4.15(b)-3 now attached to the Agreement is hereby deleted in
its entirety and replaced with the Schedule 4.15(b)-3 that is attached hereto as
Exhibit C.
15. The parties acknowledge that the terms of the registration rights set
forth in the form of Registration Rights Agreement attached as Exhibit H-1 to
the Agreement are solely for the benefit of the Jacobs Parties, affiliates of
the Jacobs Parties, the Associates and their respective transferees, and are not
for the benefit of any Outside Partners. The parties further acknowledge that
CBL will be negotiating directly with the participating Outside Partners with
respect to the registration rights, if any, that such Outside Partners will
receive upon the contribution of their interests in the Property Owners to the
Operating Partnership.
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16. The parties agree that the first sentence of Section 2 of the form of
Assurance Agreement attached as Exhibit V to the Agreement shall be deleted and
replaced with the following before the Assurance Agreement is executed at the
Principal Closing:
"For the period beginning on the date hereof and ending on the fifth
anniversary of the Principal Closing Date and for so long thereafter until
all claims in respect of JRI's indemnity obligations under the Master
Contribution Agreement that are pending upon the expiration of such five
year period have been resolved, (i) each of JG and Richard Jacobs agrees
not to take any affirmative action, consent to any action or, to the extent
within their respective control and commercially reasonable, affirmatively
permit any action to be taken by others, that could reasonably be expected
to have the effect of reducing the consolidated net worth of JRI below $25
million and (ii) to the extent that Richard Jacobs has the authority to
appoint any successor Trustee or Trustees of the REJ, Richard Jacobs will
condition any such appointment on the agreement of such appointee to be
bound by the terms of this Agreement applicable to Richard Jacobs;
provided, that, under no circumstances shall (a) JG, Richard Jacobs or any
successor Trustee or Trustees of the REJ be required to contribute any
additional funds or other assets to JRI or (b) this Agreement be construed
or interpreted as a personal guaranty by JG, Richard Jacobs or any
successor Trustee or Trustees of the REJ of any of the agreements of JRI or
the other Jacobs Parties contained in the Master Contribution Agreement or
otherwise or of the net worth of JRI."
17. The parties acknowledge that the Guaranty Agreement, dated November
30, 1999, by the Richard E. Jacobs Revocable Living Trust in favor of Teachers
Insurance and Annuity Association of America, with respect to Jefferson Mall, is
hereby added to Schedule 4.19 of the Agreement.
18. Notwithstanding the requirement in Section 5.4(c)(3) of the Agreement
that CBL provide at least sixty (60) days' notice of any Guaranty Opportunity in
order for such Guaranty Opportunity to be a Qualified Protection Opportunity,
the parties agree that, with respect to any Guaranty Opportunity that will need
to be provided at the Principal Closing, CBL will be required to provide at
least twenty-four (24) days' notice of such Guaranty Opportunity. In addition,
notwithstanding the requirement in Section 5.4(c)(1) of the Agreement that each
party provided a Guaranty Opportunity must 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 and must in any event accept
such opportunity by delivering its signed guaranty at least five (5) days before
the closing of the event that gave rise to the Guaranty Opportunity, the parties
agree that any Guaranty Opportunity that will need to be provided at the
Principal Closing may be accepted by delivery of the signed guaranty at the
Principal Closing, and no party provided with such a Guaranty Opportunity shall
be required to use commercially reasonable efforts to inform CBL whether it is
willing to enter into the guaranty prior to the Principal Closing Date.
19. The first sentence of Section 5.4(c)(3) is hereby deleted in its
entirety and replaced with the following:
"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 sum of (x) the aggregate
final required debt allocations provided by JRI pursuant to Section 5.4(a)
hereof and (y) $17,985,000."
20. The parties acknowledge that the Maximum Financing Adjustment Amount
has been exceeded and that in the event that additional adjustments to the
Consideration are required pursuant to clause (B) and/or clause (D) of Section
1.1(b)(iii) of the Agreement, the provisions of clause (E) of Section
1.1(b)(iii) shall apply.
21. The parties acknowledge and confirm that, except as expressly set
forth above, the terms and conditions of the Agreement have not been modified
and continue in full force and effect.
22. AS PERMITTED BY SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE
STATE OF NEW YORK, THE PARTIES HERETO AGREE THAT THIS AMENDMENT
6
<PAGE> 178
SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
23. The recitals to this Amendment and the Exhibits attached hereto are
hereby incorporated by reference into the body of this Amendment and made a part
hereof.
24. This Amendment 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 Amendment 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 Amendment.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
7
<PAGE> 179
IN WITNESS WHEREOF, the parties hereto have executed this Amendment 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 to acknowledge that the
Agreement is amended as set forth
herein,
By: /s/ RICHARD E. JACOBS
------------------------------------
Richard E. Jacobs, solely as
trustee for the
Richard E. Jacobs Revocable Living
Trust
solely to acknowledge that the
Agreement is amended as set forth
herein,
By: /s/ RICHARD E. JACOBS
------------------------------------
Richard E. Jacobs, solely as
trustee for the
David H. Jacobs Marital Trust
OPERATING PARTNERSHIP:
CBL & ASSOCIATES LIMITED PARTNERSHIP
By: CBL Holdings I, Inc.
By: /s/ STEPHEN D. LEBOVITZ
------------------------------------
Name: Stephen D. Lebovitz
Title: President
REIT:
CBL & ASSOCIATES PROPERTIES, INC.
By: /s/ STEPHEN D. LEBOVITZ
------------------------------------
Name:Stephen D. Lebovitz
Title: President
8
<PAGE> 180
ANNEX B
INVESTMENT BANKING
CORPORATE AND
INSTITUTIONAL
CLIENT GROUP
WORLD FINANCIAL CENTER
NORTH TOWER
NEW YORK, NEW YORK
10281-1330
(MERRILL LYNCH LOGO)
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 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;
<PAGE> 181
(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, 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
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<PAGE> 182
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.
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
3
<PAGE> 183
ANNEX C
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 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.
<PAGE> 184
(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 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
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<PAGE> 185
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.
(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 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
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<PAGE> 186
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.
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
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<PAGE> 187
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 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 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
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<PAGE> 188
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 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
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<PAGE> 189
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
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.
(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
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<PAGE> 190
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:
(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
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<PAGE> 191
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 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
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.
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<PAGE> 192
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
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> 194
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.
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.
<PAGE> 195
"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 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 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.
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"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 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 immediately preceding such event shall be adjusted by multiplying
the Conversion Factor by a fraction, the numerator of which shall be the
number of
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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.
(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
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<PAGE> 198
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:
"(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 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
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<PAGE> 199
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)."
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 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
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<PAGE> 200
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:
"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."
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<PAGE> 201
15. Section 9.2(a) of the Agreement is hereby deleted and replaced in its
entirety with the following:
"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
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
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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:
"(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."
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."
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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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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:
11
<PAGE> 205
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> 206
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: /s/
------------------------------------
Name:
Power of Attorney
Acknowledged and accepted:
CBL & Associates Limited Partnership
By: CBL Holdings I, Inc.,
General Partner
By: /s/
----------------------------------------------------
Name:
Title:
2
<PAGE> 207
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 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.
<PAGE> 208
(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\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.
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<PAGE> 209
(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 (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 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;
3
<PAGE> 210
(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 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 with their proportionate ownership of Common Units other than
Common Units issued on a redemption or conversion of SCUs.
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<PAGE> 211
(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
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
5
<PAGE> 212
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 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.
6
<PAGE> 213
ATTACHMENT 5
EXHIBIT F
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
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
<PAGE> 214
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 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 its designee, with an appropriate
legend reflecting
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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 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.
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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 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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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> 218
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 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
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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 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
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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 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 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.
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(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 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,
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(v) otherwise act, alone or in concert with others (including by
providing financing for another party), to seek to exercise a
controlling 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.
(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,
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(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),
(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 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
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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 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
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(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
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, such deceased Jacobs Party's legal
representatives), concurrently with such transfer, will cause the Jacobs
Family Member to
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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 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
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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 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).
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(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 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 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
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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
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
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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 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 (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.
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(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]
14
<PAGE> 232
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
By: /s/ CHARLES B. LEBOVITZ
------------------------------------
Charles B. Lebovitz
By: /s/ STEPHEN D. LEBOVITZ
------------------------------------
Stephen D. Lebovitz
/s/ JOHN N. FOY
--------------------------------------
John N. Foy
15
<PAGE> 233
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
16
<PAGE> 234
SCHEDULE A(1)
CBL PRINCIPALS
<TABLE>
<CAPTION>
SHARES EQUIVALENTS
SHARES OF COMMON OF THE OPERATING
STOCK OF THE REIT PARTNERSHIP
NAME DIRECT/INDIRECTLY OWNED DIRECT/INDIRECTLY OWNED
---- ----------------------- -----------------------
<S> <C> <C>
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)
</TABLE>
---------------------------------------
(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> 235
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.
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
<PAGE> 236
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.
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.
2
<PAGE> 237
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 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.
3
<PAGE> 238
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 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.
<PAGE> 239
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 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.
2
<PAGE> 240
"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.
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 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
3
<PAGE> 241
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.
4
<PAGE> 242
ANNEX H
SHARE OWNERSHIP AGREEMENT
WHEREAS, the Master Contribution Agreement dated 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, Inc.
and CBL & Associates Limited Partnership, as amended, (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)-2 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.
"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.
<PAGE> 243
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 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 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 Section 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 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
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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 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 25,
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 25, 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 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 25, 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
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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 25, 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
("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 25, 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 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 25, 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.
2.12. Adjustments to the Lebovitz Permitted Ownership Amount and the
Jacobs Permitted Ownership Amount under this Article II shall be computed from
September 25, 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.
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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. (a) The Corporation and the other parties hereto agree that, except
as explicitly permitted by Section 3.2(b) hereof or Section 3.2(e) hereof, in no
event may (i) any of clauses (A) through (E) of the definition of "Beneficial
Ownership Limit" in the Resolution be modified or amended or (ii) there be any
modification to the definition of "Beneficial Ownership Limit" in the
Certificate of Incorporation in any manner that, in either case, would either
(x) reduce at any time the Jacobs Permitted Ownership Amount or otherwise limit
in any way the right of the Jacobs Group and its members to acquire Beneficial
Ownership of shares of Equity Stock or (y) reduce at any time the Lebovitz
Permitted Ownership Amount or otherwise limit in any way the right of the
Lebovitz Group and its members to acquire Beneficial Ownership of shares of
Equity Stock.
(b) An amendment or modification that would otherwise be prohibited by
Section 3.2(a) hereof shall be permitted if all of the following requirements
are satisfied:
(i) the amendment or modification creates (x) an ownership limit that
applies on an aggregate basis to (I) the Jacobs Group and its members, (II)
the Lebovitz Group and its members and (III) an additional Person or group
(such Person or group, the "Third Holder") to which shares of the
Corporation's Equity Stock or Units are being issued by the Corporation or
may be issued by the Corporation in exchange for or on the conversion of
Units of CBL & Associates Limited Partnership or interests in another
entity in which the Corporation or CBL & Associates Limited Partnership has
an interest, and (y) a "permitted ownership amount" with respect to the
Third Holder;
(ii) the amendment or modification would not limit in any manner or
circumstance the ability of the Jacobs Group and its members to convert or
exchange Units into a number of shares of Common Stock equal to the Jacobs
Permitted Ownership Amount, except to the extent that the Jacobs Group or
its members have acquired shares of Common Stock in a Jacobs Open Market
Transaction prior to such conversion or exchange and such acquisitions have
used ownership capacity under the Beneficial Ownership Limit that would
otherwise have been used by such conversions or exchanges;
(iii) the amendment or modification would not limit in any manner or
circumstance the ability of the Lebovitz Group and its members to convert
or exchange Units into a number of shares of Common Stock equal to the
Lebovitz Permitted Ownership Amount, except to the extent that the Lebovitz
Group or its members have acquired shares of Common Stock in a Lebovitz
Open Market Transaction prior to such conversion or exchange and such
acquisitions have used ownership capacity under the Beneficial Ownership
Limit that would otherwise have been used by such conversions or exchanges;
(iv) the amendment or modification (together with any prior
amendments or modifications permitted by this Section 3.2) would not have
the effect, in any circumstance, of restricting or limiting the ability of
the Jacobs Group and its members to acquire Beneficial Ownership in a
Jacobs Open Market Transaction (and assuming that immediately prior to such
acquisition the Jacobs Group and its members Beneficially Owned no more
than 50 shares of Common Stock) at least (i) 2,908,000 shares of Common
Stock if the Charter Amendment has not been approved or (ii) 3,559,000
shares of Common Stock if the Charter Amendment has been approved;
(v) the amendment or modification (together with any prior amendments
or modifications permitted by this Section 3.2) would not have the effect,
in any circumstance, of restricting or limiting the ability of the Lebovitz
Group and its members to acquire Beneficial Ownership in a
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Lebovitz Open Market Transaction (and assuming that immediately prior to
such acquisition the Lebovitz Group and its members Beneficially Owned no
more than 2,187,000 shares of Common Stock) at least (i) 2,551,000 shares
of Common Stock if the Charter Amendment has not been approved or (ii)
3,236,000 shares of Common Stock if the Charter Amendment has been
approved;
(vi) except as described in clause (viii) below, such amendment or
modification (x) would not affect increases in the Jacobs Permitted
Ownership Amount and the Lebovitz Permitted Ownership Amount occurring as a
result of an event described in Section 2.2 hereof (relating to the
issuance of Common Stock by the Corporation) and (y) shall provide that, on
the occurrence of an event described in Section 2.2 hereof (relating to an
issuance of Common Stock by the Corporation) the permitted ownership amount
(or equivalent concept) for the Third Holder shall increase by a number of
shares of Common Stock equal to the product of (i) the percentage specified
in the Standard Beneficial Ownership Limit and (ii) the number of shares of
Common Stock issued in the event;
(vii) except as provided in clause (ix) below, following such
amendment or modification, upon an event described in Section 2.4 and
Section 2.5 hereof (other than a repurchase by the Corporation of Common
Stock Beneficially Owned by the Third Holder) the permitted ownership
amount (or equivalent concept) of the Third Holder, the Jacobs Permitted
Ownership Amount and the Lebovitz Permitted Ownership shall each be
decreased by a percentage of the total number of shares repurchased that
equals one-third of the percentage Beneficial Ownership Limit that applies
on an aggregate basis to the Third Holder, the Jacobs Group and the
Lebovitz Group;
(viii) such amendment or modification provides that where, following
an event described in Section 2.4 and 2.5 hereof, other than a repurchase
of Common Stock Beneficially Owned by the Third Holder, (the "Reduction
Event") as to which the Jacobs Permitted Ownership Amount and the Lebovitz
Permitted Ownership Amount were decreased in the manner described in
Section 3.2(b)(vii) above, an event described in Section 2.2 hereof occurs,
the Jacobs Permitted Ownership Amount and the Lebovitz Permitted Ownership
Amount will each be increased by a percentage of the shares of Common Stock
issued by the Corporation that equals the percentage provided pursuant to
Section 3.2(b)(vii), until each of the Jacobs Permitted Ownership Amount
and the Lebovitz Permitted Ownership Amount equals what it was immediately
before the Reduction Event, and subsequently Section 2.2 hereof shall be
applied without regard to this Section 3.2(b)(viii);
(ix) such amendment or modification provides that where, following an
event described in Section 2.2 hereof (the "Increase Event") as to which
the Jacobs Permitted Ownership Amount and Lebovitz Permitted Ownership
Amounts were increased, an event described in Section 2.4 and Section 2.5
occurs (other than a repurchase of shares of Common Stock Beneficially
Owned by the Third Holder), the Jacobs Permitted Ownership Amount and the
Lebovitz Permitted Ownership Amount will each be decreased by a percentage
of the shares of Common Stock repurchased by the Corporation that equals
the percentage specified in Section 2.2, until each of the Jacobs Permitted
Ownership Amount and the Lebovitz Permitted ownership Amount equals what it
was immediately before the Increase Event, and subsequently Sections 2.4
and 2.5 hereof shall be applied without regard to this Section 3.2(b)(ix);
(x) such amendment or modification provides that in the event of a
repurchase by the Corporation of Common Stock Beneficially Owned by the
Third Holder, (I) the permitted ownership amount (or equivalent concept) of
the Third Holder shall be reduced by a number of shares of Common Stock
equal to the product of (i) the number of shares repurchased and (ii) the
percentage specified in the aggregate Beneficial Ownership Limit applicable
to the Jacobs Group and its members, the Lebovitz Group and its members and
such Person or group and (II) there shall be no decrease in either the
Jacobs Permitted Ownership Amount or the Lebovitz Permitted Ownership
Amount;
(xi) notwithstanding Section 2.6 hereof, such amendment or
modification provides that in the event of a repurchase of Common Stock by
the Corporation from a member of the Jacobs Group, the
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Jacobs Permitted Ownership Amount shall be reduced by a number of shares of
Common Stock equal to the product of (i) the number of shares repurchased
and (ii) the percentage specified in the aggregate Beneficial Ownership
Limit applicable to the Jacobs Group and its members, the Lebovitz Group
and its members and the Third Holder;
(xii) notwithstanding Section 2.7 hereof, such amendment or
modification provides that 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 a number of shares of Common Stock
equal to the product of (i) the number of shares repurchased and (ii) the
percentage specified in the aggregate Beneficial Ownership Limit applicable
to the Jacobs Group and its members, the Lebovitz Group and its members and
the Third Holder; and
(xiii) the amendment or modification complies with the restrictions
imposed by Section 3.3 hereof.
(c) The references to 2,908,000 and 3,559,000 shares of Common Stock in
Section 3.2(b)(iv) and to 2,551,000 and 3,236,000 shares of Common Stock in
Section 3.2(b)(v) hereof shall be appropriately adjusted to reflect stock
splits, stock dividends, reverse stock splits, share issuances, share
repurchases and similar events occurring after the date hereof.
(d) In connection with an amendment or modification permitted by Section
3.2 hereof, the percentages referred to in Sections 2.4 and 2.5 may be amended,
provided that in no event may the percentage referred to in Section 2.5 be less
than the percentage referred to in Section 2.4.
(e) If an amendment or modification that would otherwise be prohibited by
Section 3.2(a) hereof would satisfy all of the requirements of Section 3.2(b)
hereof except for requirements relating to the Jacobs Group, the Jacobs
Permitted Ownership Amount, or the ability of the Jacobs Group or any of its
members to acquire Beneficial Ownership of Common Stock, either through
conversions or exchanges of Units or otherwise, then such amendment or
modification may be made notwithstanding that it otherwise fails to satisfy
Section 3.2(b) hereof if and only if JRI has provided its prior written consent
to such amendment. If an amendment or modification that would otherwise be
prohibited by Section 3.2(a) hereof would satisfy all of the requirements of
Section 3.2(b) hereof except for requirements relating to the Lebovitz Group,
the Lebovitz Permitted Ownership Amount, or the ability of the Lebovitz Group or
any of its members to acquire Beneficial Ownership of Common Stock, either
through conversions or exchanges of Units or otherwise, then such amendment or
modification may be made notwithstanding that it otherwise fails to satisfy
Section 3.2(b) hereof if and only if LebFam has provided its prior written
consent to such amendment.
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 clauses (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;
(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.
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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 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 has 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:
(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 25, 2000 as though the modifications set
forth in Section 4.1 hereof had always been in effect.
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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.
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.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
[ ] day of , 2001.
CBL & Associates Properties, Inc.
By:
------------------------------------
Name:
Title:
CBL & Associates, Inc.
By:
------------------------------------
Name:
Title:
LebFam, Inc.
By:
------------------------------------
Name:
Title:
--------------------------------------
Charles B. Lebovitz
--------------------------------------
Stephen D. Lebovitz
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Jacobs Realty Investors Limited
Partnership
By: /s/ JG REALTY INVESTORS CORP.
------------------------------------
By:
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Name:
Title:
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Richard E. Jacobs, solely as
trustee for the
Richard E. Jacobs Revocable Living
Trust
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Richard E. Jacobs, solely as
trustee for the
David H. Jacobs Marital Trust
11
<PAGE> 253
PROXY
CBL & ASSOCIATES PROPERTIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CBL & ASSOCIATES
PROPERTIES, INC.
IN CONNECTION WITH ITS SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON JANUARY 19,
2001
The undersigned stockholder of CBL & Associates Properties, Inc. (the
"Company") hereby appoints CHARLES B. LEBOVITZ, STEPHEN D. LEBOVITZ and JOHN N.
FOY, and each of them, the true and lawful attorneys, agents and proxies of the
undersigned, with full power of substitution, to vote all shares of the
Company's Common Stock, $0.01 par value per share ("Common Stock"), which the
undersigned may be entitled to vote at the Special Meeting of Stockholders of
the Company to be held on January 19, 2001, and at any and all adjournments and
postponements of such meeting, with all powers which the undersigned would
possess if personally present, for the following purposes set forth on the
reverse side.
IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE STRONGLY
URGE YOU TO COMPLETE, DATE, SIGN AND RETURN YOUR PROXY AS SOON AS POSSIBLE.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE.
<PAGE> 254
<TABLE>
<S> <C>
Please mark
vote as in
this example X
</TABLE>
THE BOARD OF DIRECTORS OF CBL & ASSOCIATES PROPERTIES, INC. RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" EACH OF THE PROPOSALS LISTED BELOW:
<TABLE>
<S> <C> <C> <C> <C>
For Against Abstain
1. To approve the issuance of approximately 11.6 [ ] [ ] [ ]
million SCUs (special common units) (and their
underlying shares of the Company's Common Stock),
which under certain circumstances may be increased
up to 13.94 million SCUs, of the Company's
subsidiary Operating Partnership, CBL & Associates
Limited Partnership, which SCUs may be exchanged
for shares of Common Stock on a one-for-one basis,
subject to adjustments, as contemplated under the
Master Contribution Agreement, dated as of
September 25, 2000, as amended, and the Terms of
Special Common Units of the Operating Partnership.
For Against Abstain
2. To approve and adopt an amendment to the Com- [ ] [ ] [ ]
pany's certificate of incorporation, which, among
other things, modifies the Company's share owner-
ship limits to permit the Lebovitz Group and the
Jacobs Group to beneficially or constructively own
in the aggregate up to 37.99% of the Company's
outstanding shares of Common Stock.
3. To transact such other business as may be properly
brought before the Special Meeting or at any and
all adjournments and postponements of the Meeting.
</TABLE>
<TABLE>
<S> <C>
This proxy will be voted as directed or, if no direction is
indicated, will be voted FOR the approval of each of the
proposals described above.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
</TABLE>
Signature(s) ------------------------- Date ----------
(Please sign your name or names exactly as it appears on your share
certificate(s). If joint owners, all co-owners should sign. When signing as
attorney, executor, administrator, trustee, guardian or corporate executor,
please give your full title as such. If a corporation, please sign in full
corporate name by the duly authorized officer. If a partnership, please sign in
partnership name by an authorized person.)
