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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 1-12504
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THE MACERICH COMPANY
(Exact Name of Registrant as Specified in Its Charter)
MARYLAND 95-4448705
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
401 WILSHIRE BOULEVARD, #700
SANTA MONICA, CALIFORNIA 90401
(Address of principal executive (Zip Code)
office)
Registrants telephone number, including area code: (310) 394-6911
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
- -------------------------------------- --------------------------------------
Common Stock, $0.01 Par Value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such report(s)) and (2) has been subject to such
filing requirements of the past 90 days. Yes /X/ No / /
Indicate by a check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. / /
As of February 23, 1998, the aggregate market value of the 20,708,781 shares
of Common Stock held by non-affiliates of the registrant was $582 million based
upon the closing price ($28.125) on the New York Stock Exchange composite tape
on such date. (For this computation, the registrant has excluded the market
value of all shares of its Common Stock reported as beneficially owned by
executive officers and directors of the registrant and certain other
shareholders; such exclusion shall not be deemed to constitute an admission that
any such person is an "affiliate" of the registrant.) As of February 23, 1998,
there were 28,898,881 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual stockholders meeting to be
held in 1998 are incorporated by reference into Part III.
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THE MACERICH COMPANY
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM NO. PAGE NO.
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<C> <S> <C>
PART I
1. Business..................................................................................... 1-11
2. Properties................................................................................... 12-18
3. Legal Proceedings............................................................................ 18
4. Submission of Matter to a Vote of Security Holders........................................... 18
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters........................ 19
6. Selected Financial Data...................................................................... 19-21
7. Management's Discussion and Analysis of Financial Condition and Results of Operations........ 22-30
8. Financial Statements and Supplementary Data.................................................. 30
9. Changes in and Disagreements with Accountants or Accounting and Financial Disclosure......... 30
PART III
10. Directors and Executive Officers of the Company.............................................. 31
11. Executive Compensation....................................................................... 31
12. Security Ownership of Certain Beneficial Owners and Management............................... 31
13. Certain Relationships and Related Transactions............................................... 31
PART IV
14. Exhibits, Financial Statement Schedule and Reports on Form 8-K............................... 32-57
</TABLE>
SIGNATURES
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PART I
ITEM 1. BUSINESS
GENERAL
The Macerich Company (the "Company") is involved in the acquisition,
ownership, redevelopment, management and leasing of regional and community
shopping centers located throughout the United States. The Company is the sole
general partner of, and owns a majority of the ownership interests in, The
Macerich Partnership, L.P., a Delaware limited partnership (the "Operating
Partnership"). The Operating Partnership owns or has an ownership interest in 38
regional shopping centers and four community centers aggregating approximately
33.1 million square feet of gross leasable area. These 42 regional and community
shopping centers are referred to hereinafter as the "Centers", unless the
context otherwise requires. The Company is a self-administered and self-managed
real estate investment trust ("REIT") and conducts all of its operations through
the Operating Partnership and the Company's three management companies, Macerich
Property Management Company, a California corporation, Macerich Manhattan
Management Company, a California corporation, and Macerich Management Company, a
California corporation (collectively, the "Management Companies").
The Company was organized as a Maryland corporation in September 1993 to
continue and expand the shopping center operations of Mace Siegel, Arthur M.
Coppola, Dana K. Anderson and Edward C. Coppola and certain of their business
associates.
All references to the Company in this 10-K include the Company, those
entities owned or controlled by the Company and predecessors of the Company,
unless the context indicates otherwise.
RECENT DEVELOPMENTS
DEBT AND EQUITY OFFERINGS
On February 5, 1997 the Company filed a new shelf registration statement for
$500 million worth of securities (including the remaining $16 million under the
former shelf) to be issued at a later date. The new shelf was declared effective
on December 8, 1997.
On June 27, 1997, the Company sold $150 million of convertible subordinated
debentures (the "Debentures") due 2002. In July 1997, an additional $11.4
million of the Debentures were sold. The net proceeds from the sale of the
Debentures of $157.4 million were used by the Company primarily to repay
floating rate debt and for general corporate purposes. On December 22, 1997, the
Company filed a shelf registration statement for $119.4 million of the
convertible debentures that were issued during June and July of 1997. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Convertible Debt Offering and Recent Developments."
On February 25, 1998, the Company issued $100 million of convertible
preferred shares in a private placement. During February 1998, the Company
issued 2.9 million common shares ($79.6 million of total proceeds) from the
shelf registration. The proceeds from the sale of the preferred shares and the
common shares were used to acquire the ERE Yarmouth portfolio. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Convertible Debt Offering and Recent Developments."
ACQUISITIONS
South Towne Center was acquired on March 27, 1997. South Towne Center is a
1,240,143 square foot super regional mall located in Sandy, Utah. The purchase
price was $98 million, consisting of $52 million of cash and $46 million of
assumed mortgage indebtedness.
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Stonewood Mall is a super regional mall in Downey, California which the
Company acquired on August 6, 1997. Stonewood Mall contains 927,218 square feet
and the purchase price was $92 million which was funded with $58 million in
proceeds from a 10 year fixed rate loan placed concurrently on Villa Marina
Marketplace and the balance from cash on hand plus proceeds drawn from the
Company's line of credit.
Manhattan Village Shopping Center ("Manhattan Village") located in Manhattan
Beach, California was purchased through a joint venture on August 19, 1997.
Manhattan Village is a regional center with a total of 551,685 square feet of
retail, restaurant and entertainment space. The Company owns 10% of the joint
venture.
The Citadel, a 1,044,852 square foot super regional mall in Colorado
Springs, Colorado was purchased on December 19, 1997 for $108 million. The
purchase price was funded by a concurrently placed loan of $75.6 million plus
$32.4 million in cash.
Great Falls Marketplace, a 143,570 square foot community center in Great
Falls, Montana, developed by The Management Companies, was acquired on December
31, 1997. The acquisition price was $14.8 million which approximates the cost
incurred by The Management Companies to acquire and develop the site.
On February 27, 1998, the Company acquired, through a 50/50 joint venture
with an affiliate of Simon DeBartolo Group, Inc., a portfolio of twelve regional
malls ("the ERE Yarmouth portfolio"). The properties in the portfolio comprise
10.7 million square feet and are located in eight states. The total purchase
price was $974.5 million, which included the assumption of $485 million of debt.
THE SHOPPING CENTER INDUSTRY
GENERAL
There are several types of retail shopping centers, which are differentiated
primarily based on size and marketing strategy. Retail shopping centers
generally contain in excess of 400,000 square feet of gross leasable area
("GLA"), are typically anchored by two or more department or large retail stores
("Anchors") and are referred to as "Regional Shopping Centers" or "Malls".
Regional Shopping Centers also typically contain numerous diversified retail
stores ("Mall Stores"), most of which are national or regional retailers
typically located along corridors connecting the Anchors. Community Shopping
Centers, also referred to as "strip centers," are retail shopping centers that
are designed to attract local or neighborhood customers and are typically
anchored by one or more supermarkets, discount department stores and/or drug
stores. Community Shopping Centers typically contain 100,000 square feet to
400,000 square feet of GLA. In addition, freestanding retail stores are located
along the perimeter of the shopping centers ("Freestanding Stores"). Anchors,
Mall and Freestanding Stores and other tenants typically contribute funds for
the maintenance of the common areas, property taxes, insurance, advertising and
other expenditures related to the operation of the shopping center.
REGIONAL SHOPPING CENTERS
A Regional Shopping Center draws from its trade area by offering a variety
of fashion merchandise, hard goods and services and entertainment, generally in
an enclosed, climate controlled environment with convenient parking. Regional
Shopping Centers provide an array of retail shops and entertainment facilities
and often serve as the town center and the preferred gathering place for
community, charity and promotional events.
The Company focuses on the acquisition and redevelopment of Regional
Shopping Centers. Regional Shopping Centers have generally provided owners with
relatively stable growth in income despite the cyclical nature of the retail
business. This stability is due both to the diversity of tenants and to the
typical dominance of Regional Shopping Centers in their trade areas. Regional
Shopping Centers are difficult to develop because of the significant barriers to
entry, including the limited availability of capital and suitable
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development sites, the presence of existing Regional Shopping Centers in most
markets, a limited number of Anchors, and the associated development costs and
risks. Consequently, the Company believes that few new Regional Shopping Centers
will be built in the next five years. However, many of the market, financing and
economic risks typically associated with the development of new Regional
Shopping Centers can be mitigated by acquiring and redeveloping an existing
Regional Shopping Center. Furthermore, the value of Regional Shopping Centers
can be significantly enhanced through redevelopment, renovation and expansion.
Regional Shopping Centers have different strategies with regard to price,
merchandise offered and tenant mix, and are generally tailored to meet the needs
of their trade areas. Anchor tenants are located along common areas in a
configuration designed to maximize consumer traffic for the benefit of the Mall
Stores. Mall GLA, which generally refers to gross leasable area contiguous to
the Anchors for tenants other than Anchors, is leased to a wide variety of
smaller retailers. Mall stores typically account for the bulk of the revenues of
a Regional Shopping Center.
Although a variety of retail formats compete for consumer purchases, the
Company believes that Regional Shopping Centers will continue to be a preferred
shopping destination. The combination of a climate controlled shopping
environment and a diverse tenant mix has resulted in Regional Shopping Centers
generating higher tenant sales than are generally achieved at smaller retail
formats. Further, the Company believes that department stores located in
Regional Shopping Centers will continue to provide a full range of current
fashion merchandise at a limited number of locations in any one market, allowing
them to command the largest geographical trade area of any retail format.
COMMUNITY SHOPPING CENTERS
Community Shopping Centers are designed to attract local and neighborhood
customers and are typically open air shopping centers, with one or more
supermarkets, drugstores or discount department stores. National retailers such
as Kids-R-Us at Bristol Shopping Center, Toys-R-Us at Boulder Plaza, and The
Gap, Victoria's Secret and Limited Express at Villa Marina, provide the
Company's Community Shopping Centers with the opportunity to draw from a much
larger trade area than a typical supermarket or drugstore anchored Community
Shopping Center.
BUSINESS OF THE COMPANY
MANAGEMENT AND OPERATING PHILOSOPHY
The Company believes that the shopping center business requires specialized
skills across a broad array of disciplines for effective and profitable
operations. For this reason, the Company has developed a fully integrated real
estate organization with in-house acquisition, redevelopment, property
management, leasing, finance, construction, marketing, legal and accounting
expertise. In addition, the Company emphasizes a philosophy of decentralized
property management, leasing and marketing performed by on-site professionals.
The Company believes that this strategy results in the optimal operation, tenant
mix and drawing power of each Center as well as the ability to quickly respond
to changing competitive conditions of the Center's trade area.
PROPERTY MANAGEMENT AND LEASING. The Company believes that on-site property
managers can most effectively operate the Centers. Each Center's property
manager is responsible for overseeing the operations, marketing, maintenance and
security functions at the Center. Property managers focus special attention on
controlling operating costs, a key element in the profitability of the Centers,
and seek to develop strong relationships with and to be responsive to the needs
of retailers.
The Company believes strongly in decentralized leasing and accordingly, most
of its leasing managers are located on-site to better understand the market and
the community in which a Center is located. Leasing managers are charged with
more than the responsibility of leasing space; they continually assess
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and fine tune each Center's tenant mix, identify and replace underperforming
tenants and seek to optimize existing tenant sizes and configurations.
ACQUISITIONS. Since its initial public offering ("IPO"), the Company has
acquired interests in shopping centers nationwide. These acquisitions were
identified and consummated by the Company's staff of acquisition professionals
who are strategically located in Santa Monica, Dallas, Denver and Atlanta. The
Company believes that it is geographically well positioned to cultivate and
maintain ongoing relationships with potential sellers and financial institutions
and to act quickly when acquisition opportunities arise. The Company focuses on
assets that are or can be dominant in their trade area, have a franchise and
where there is intrinsic value.
The Company made the following acquisitions in 1996: Villa Marina
Marketplace ("Villa Marina") on January 25, 1996; Valley View Center on October
21, 1996; Vintage Faire Mall and Rimrock Mall on November 27, 1996; and
Buenaventura Mall, Fresno Fashion Fair and Huntington Center on December 18,
1996. Together these properties are referred to herein as the "1996 Acquisition
Centers".
The Company made the following acquisitions in 1997: South Towne Center in
Sandy, Utah on March 27, 1997; Stonewood Mall in Downey, California on August 6,
1997; Manhattan Village in Manhattan Beach, California on August 19, 1997 in a
joint venture in which the Company owns a 10% interest; The Citadel in Colorado
Springs, Colorado on December 19, 1997 and Great Falls Marketplace in Great
Falls, Montana on December 31, 1997. Together these properties are referred to
herein as the "1997 Acquisition Centers".
On February 27, 1998, the Company, along with a joint venture partner,
acquired the ERE Yarmouth portfolio of 12 regional malls totaling 10.7 million
square feet. The Company is a 50% owner of this portfolio.
REDEVELOPMENT. One of the major components of the Company's growth strategy
is its ability to redevelop acquired properties. For this reason, the Company
has built a staff of redevelopment professionals who have primary responsibility
for identifying redevelopment opportunities that will result in enhanced
long-term financial returns and market position for the Centers. The
redevelopment professionals oversee the design and construction of the projects
in addition to obtaining required governmental and Anchor approvals.
THE CENTERS. As of February 27, 1998, the Centers consist of 38 Regional
Shopping Centers and four Community Shopping Centers aggregating approximately
33.1 million square feet of GLA. 38 of the 42 Centers contain more than 400,000
square feet of GLA. The 38 Regional Shopping Centers in the Company's portfolio
average approximately 846,000 square feet of GLA and range in size from 1.8
million square feet of GLA at Lakewood Mall to 369,742 square feet of GLA at
Panorama Mall. The Company's four Community Shopping Centers, Boulder Plaza,
Villa Marina Marketplace, Bristol Shopping Center and Great Falls Marketplace,
have an average of 229,000 square feet of GLA. The 42 Centers presently include
149 Anchors totaling approximately 18.3 million square feet of GLA and
approximately 4,540 Mall and Freestanding Stores totaling approximately 14.8
million square feet of GLA.
Total revenues increased from $155 million in 1996 to $221 million in 1997
primarily due to acquisitions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Lakewood Mall generated 10.5% of
total shopping center revenues in 1997, 16.0% in 1996 and 22.0% in 1995. Queens
Center accounted for 13.8% of 1996 shopping center revenue. Shopping center
revenues at Crossroads Mall-Colorado accounted for 10.6% of total shopping
center revenues in 1995. During 1995 Chesterfield accounted for 12.6% of total
Shopping Center revenues. No other Center generated more than 10% of shopping
center revenues during 1997, 1996 or 1995.
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COST OF OCCUPANCY
The Company's management believes that in order to maximize the Company's
operating cash flow, the Centers' Mall Store tenants must be able to operate
profitably. A major factor contributing to tenant profitability is cost of
occupancy. The following table summarizes occupancy costs for Mall Store tenants
in the Centers as a percentage of total Mall Store sales for the last three
years:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
1995(2) 1996(3) 1997(4)
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<S> <C> <C> <C>
Mall store sales (in thousands)........................ $ 766,849 $ 992,614 $ 1,483,903
---------- ---------- ------------
---------- ---------- ------------
Minimum rents.......................................... 8.3% 8.3% 7.9%
Percentage rents....................................... 0.4% 0.4% 0.4%
Expense recoveries(1).................................. 2.6% 2.9% 3.0%
---------- ---------- ------------
Mall tenant occupancy costs............................ 11.3% 11.6% 11.3%
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
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(1) Represents real estate tax and common area maintenance charges.
(2) Excludes 1995 Acquisition Centers.
(3) Excludes 1996 Acquisition Centers.
(4) Excludes 1997 Acquisition Centers.
COMPETITION
The 38 Regional Shopping Centers are located in developed areas in middle to
upper income markets where there are relatively few other Regional Shopping
Centers. In addition, 37 of the 38 Regional Shopping Centers contain more than
400,000 square feet of GLA. The Company intends to consider additional expansion
and renovation projects to maintain and enhance the quality of the Centers and
their competitive position in their trade areas.
There are numerous owners and developers of real estate that compete with
the Company in its trade areas. There are nine other publicly traded mall REITs,
any of which under certain circumstances, could compete against the Company for
an acquisition or an Anchor. This results in competition for both acquisition of
centers and for tenants to occupy space. The existence of competing shopping
centers could have a material impact on the Company's ability to lease space and
on the level of rent that can be achieved. There is also increasing competition
from other forms of retail, such as factory outlet centers, power centers,
discount shopping clubs, internet shopping services and home shopping networks
that could adversely affect the Company's revenues.
MAJOR TENANTS
The Centers derived approximately 89.5% of their total rents for the year
ended December 31, 1997 from Mall and Freestanding Stores. One retailer
accounted for approximately 7.6% of annual base rents of the Company, and no
other single retailer accounted for more than 4.6%, as of December 31, 1997.
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The following retailers (including their subsidiaries) represent the 10
largest retailers in the Company's portfolio at December 31, 1997 based upon
minimum rents in place as of December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF STORES % OF TOTAL MINIMUM RENTS
RETAILER IN THE CENTERS AS OF DECEMBER 31, 1997
- ------------------------------------------------- ------------------- -----------------------------
<S> <C> <C>
The Limited...................................... 103 7.6%
Woolworth........................................ 113 4.6%
The Gap.......................................... 26 2.3%
Barnes & Noble................................... 32 1.9%
J.C. Penney...................................... 19(1) 1.8%
Federated Department Stores...................... 15(1) 1.6%
Melville......................................... 23 1.3%
The Musicland Group.............................. 30 1.3%
Consolidated Stores.............................. 24 1.1%
Sears............................................ 15(1) 1.0%
</TABLE>
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(1) Amounts include Anchor stores as well as non-Anchor stores owned by the same
parent company.
MALL AND FREESTANDING STORES
Mall and Freestanding Store leases generally provide for tenants to pay rent
comprised of a fixed base (or "minimum") rent and a percentage rent based on
sales. In some cases, tenants pay only a fixed minimum rent, and in some cases,
tenants pay only percentage rents. Most leases for Mall and Freestanding Stores
contain provisions that allow the Centers to recover their costs for maintenance
of the common areas, property taxes, insurance, advertising and other
expenditures related to the operations of the Center.
The Company uses tenant spaces 10,000 square feet and under for comparing
rental rate activity. Tenant space under 10,000 square feet in the portfolio at
December 31, 1997 comprises 75.3% of all Mall and Freestanding Store space. The
Company believes that to include space over 10,000 square feet would provide a
less meaningful comparison.
When an existing lease expires, the Company is often able to enter into a
new lease with a higher base rent component. The average base rent for new Mall
and Freestanding Store leases, 10,000 square feet or under, commencing during
1997 was $27.58 per square foot, or 13.6% higher than the average base rent for
all Mall and Freestanding Stores (10,000 square feet or under) at December 31,
1997 of $24.27 per square foot.
The following table sets forth for the Centers the average base rent per
square foot of Mall and Freestanding GLA, for tenants 10,000 square feet and
under, as of December 31 for each of the past three years.
<TABLE>
<CAPTION>
AVERAGE BASE AVERAGE BASE
AVERAGE BASE RENT PER SQ. FT. ON RENT PER SQ. FT. ON
RENT PER LEASES COMMENCING LEASES EXPIRING
DECEMBER 31 SQUARE FOOT(1) DURING THE YEAR(2) DURING THE YEAR(3)
- ------------------------------------- --------------- ------------------- -------------------
<S> <C> <C> <C>
1995................................. $ 21.19 $ 23.13 $ 22.12
1996................................. $ 23.90 $ 27.02 $ 24.54
1997................................. $ 24.27 $ 27.58 $ 24.84
</TABLE>
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(1) Average base rent per square foot is based on Mall and Freestanding Store
GLA for spaces 10,000 square feet or under occupied as of December 31 for
each of the Centers owned by the Company in 1995 (excluding the 1995
Acquisition Centers), 1996 (excluding the 1996 Acquisition Centers) and 1997
(excluding the 1997 Acquisition Centers).
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(2) The base rent on lease signings during the year represents the actual rent
to be paid on a per square foot basis during the first twelve months. The
1995 average excludes the 1995 Acquisition Centers, the 1996 average
excludes the 1996 Acquisition Centers and the 1997 average excludes the 1997
Acquisition Centers.
(3) The average base rent on leases expiring during the year represents the
final year minimum rent, on a cash basis, for tenant leases 10,000 square
feet or under expiring during the year. The average base rent on leases
expiring in 1995 excludes the 1995 Acquisition Centers, 1996 excludes the
1996 Acquisition Centers and the average for 1997 excludes the 1997
Acquisition Centers.
BANKRUPTCY AND CLOSURE OF RETAIL STORES
The bankruptcy and/or closure of an Anchor, or its sale to a less desirable
retailer, could adversely affect customer traffic in a Center and thereby reduce
the income generated by that Center. Furthermore, the closing of an Anchor
could, under certain circumstances, allow certain other Anchors or other tenants
to terminate their leases or cease operating their stores at the Center or
otherwise adversely affect occupancy at the Center. During 1997, Montgomery Ward
filed for bankruptcy. The Company has Montgomery Ward as an anchor in eleven of
its centers. If Montgomery Ward ceases to operate it could have an adverse
effect on a center.
Retail stores at the Centers other than Anchors may also seek the protection
of the bankruptcy laws, which could result in the termination of such tenants'
leases and thus cause a reduction in the cash flow generated by the Centers.
Although no single retailer accounts for greater than 7.6% of total rents, the
bankruptcy and subsequent closure of stores could create a decrease in occupancy
levels, reduced rental income or otherwise adversely affect the Centers.
LEASE EXPIRATIONS
The following table shows scheduled lease expirations (for Centers owned as
of December 31, 1997) of Mall and Freestanding Stores 10,000 square feet or
under for the next ten years, assuming that none of the tenants exercise renewal
options.
<TABLE>
<CAPTION>
ENDING
APPROXIMATE % OF TOTAL BASE RENT PER
NUMBER OF GLA OF LEASED GLA SQUARE FOOT OF
YEAR ENDING LEASES EXPIRING REPRESENTED BY EXPIRING
DECEMBER 31, EXPIRING LEASES EXPIRING LEASES(1) LEASES(1)
- ----------------------------- ------------- ------------ --------------------- -----------------
<S> <C> <C> <C> <C>
1998....................... 354 673,877 7.8% $ 23.22
1999....................... 298 538,553 6.2% $ 26.09
2000....................... 321 599,211 6.9% $ 27.35
2001....................... 257 496,600 5.8% $ 29.98
2002....................... 235 496,482 5.8% $ 27.70
2003....................... 214 506,674 5.9% $ 27.10
2004....................... 172 402,261 4.7% $ 26.81
2005....................... 164 481,210 5.6% $ 24.79
2006....................... 176 475,078 5.5% $ 26.79
2007....................... 165 449,402 5.2% $ 28.24
</TABLE>
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(1) For leases 10,000 square feet or under
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ANCHORS
Anchors have traditionally been a major factor in the public's
identification with Regional Shopping Centers. Anchors are generally department
stores whose merchandise appeals to a broad range of shoppers. Although the
Centers receive a smaller percentage of their operating income from Anchors than
from Mall and Freestanding Stores, strong Anchors play an important part in
maintaining customer traffic and making the Centers desirable locations for Mall
and Freestanding Store tenants.
Anchors either own their stores, the land under them and in some cases
adjacent parking areas, or enter into long-term leases with an owner at rates
that are typically lower than the rents charged to tenants of Mall and
Freestanding Stores. Each Anchor which owns its own store, and certain Anchors
which lease their stores, enter into reciprocal easement agreements with the
owner of the Center covering, among other things, operational matters, initial
construction and future expansion.
Anchors accounted for approximately 10.5% of the Company's total rent for
the year ended December 31, 1997.
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The following table identifies each Anchor, each parent company that owns
multiple anchors and the number of square feet owned or leased by each such
Anchor or parent company in the Company's portfolio at December 31, 1997, except
as otherwise indicated:
<TABLE>
<CAPTION>
TOTAL GLA
NUMBER OF GLA OWNED GLA LEASED OCCUPIED BY
NAME ANCHOR STORES BY ANCHOR BY ANCHOR ANCHOR
- -------------------------------------------------------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
J.C. Penney................................................... 18 724,369 1,636,432 2,360,801
Sears......................................................... 13 795,445 744,659 1,540,104
Dayton Hudson Corp.
Mervyn's(1)................................................. 9 416,680 326,508 743,188
Target...................................................... 2 -- 267,341 267,341
Dayton's.................................................... 1 115,193 -- 115,193
------------- ----------- ----------- -----------
Total..................................................... 12 531,873 593,849 1,125,722
Federated Department Stores
Macy's...................................................... 7 930,844 411,599 1,342,443
Macy's Men's & Home......................................... 2 -- 155,614 155,614
Macy's Men's & Juniors...................................... 2 -- 146,906 146,906
------------- ----------- ----------- -----------
Total..................................................... 11 930,844 714,119 1,644,963
May Department Stores Co.
Foley's..................................................... 4 725,316 -- 725,316
Hechts...................................................... 2 140,000 100,000 240,000
Robinsons-May............................................... 2 146,250 362,852 509,102
------------- ----------- ----------- -----------
Total..................................................... 8 1,011,566 462,852 1,474,418
Montgomery Ward............................................... 8 476,714 581,770 1,058,484
Gottschalks................................................... 6 544,861 283,772 828,633
Dillard's..................................................... 5 822,802 65,163 887,965
Herberger's................................................... 2 -- 122,635 122,635
Belk.......................................................... 1 -- 109,933 109,933
Boscov's...................................................... 1 -- 140,000 140,000
Burlington Coat Factory....................................... 1 -- 133,650 133,650
Hennessy's.................................................... 1 -- 96,800 96,800
Home Depot.................................................... 1 -- 130,232 130,232
Joslins....................................................... 1 -- 93,270 93,270
Joslins Market................................................ 1 -- 40,000 40,000
Mercantile Stores, Inc. O.J. De Lendrecies.................... 1 188,000 -- 188,000
Nordstrom..................................................... 1 -- 185,241 185,241
Wal-Mart(2)................................................... 1 210,000 -- 210,000
ZCMI.......................................................... 1 -- 200,000 200,000
Vacant(3)..................................................... 2 -- 171,023 171,023
------------- ----------- ----------- -----------
96 6,236,474 6,505,400 12,741,874
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
</TABLE>
- ------------------------------
(1) In February, 1998 the Company bought out the Mervyn's lease at Crossroads
Mall in Boulder, Colorado and then the Company sold the former Mervyn's
building to Sears. Sears is planning to renovate the former Mervyn's store
and to open in the fall, 1998. The Company is currently negotiating with
replacement tenants for the old Sears location.
(2) Wal-Mart purchased the former Broadway Store at Panorama Mall from Federated
in March 1997 which had been vacant since February 1996. Wal-Mart commenced
retrofit of the facility in October 1997 and plans to open its new facility
in June 1998.
(3) J.C. Penney vacated its facility in County East in 1997. The Company is
currently negotiating its replacement. At Crossroads Mall in Boulder, CO,
the Company paid $3 million in 1997 to terminate the Montgomery Ward's
lease. Gart Sports temporarily occupied this space through February 1998.
The Company is currently negotiating with replacement tenants.
9
<PAGE>
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations, an
owner of real estate may be liable for the cost of removal or remediation of
certain hazardous or toxic substances on or in such property. Such laws often
impose such liability without regard to whether the owner knew of, or was
responsible for, the presence of such hazardous or toxic substances. The costs
of investigation, removal or remediation of such substances may be substantial,
and the presence of such substances, or the failure to properly remediate such
substances, may adversely affect the owner's ability to sell or rent such
property or to borrow using such property as collateral. Persons who arrange for
the disposal or treatment of hazardous or toxic substances may also be liable
for the costs of removal or remediation of a release of such substances at a
disposal treatment facility, whether or not such facility is owned or operated
by such person. Certain environmental laws impose liability for release of
asbestos-containing materials (ACMs) into the air and third parties may seek
recovery from owners or operators of real properties for personal injury
associated with ACMs. In connection with the ownership (direct or indirect),
operation, management and development of real properties, the Company may be
considered an owner or operator of such properties or as having arranged for the
disposal or treatment of hazardous or toxic substances and therefore potentially
liable for removal or remediation costs, as well as certain other related costs,
including governmental fines and injuries to persons and property.
Each of the Centers has been subjected to a Phase I audit (which involves
review of publicly available information and general property inspections, but
does not involve soil sampling or ground water analysis) completed by an
environmental consultant.
Based on these audits, and on other information, the Company is aware of the
following environmental issues that are reasonably possible to result in costs
associated with future investigation or remediation, or in environmental
liability:
- ASBESTOS. The Company has conducted ACM surveys at various locations
within the Centers. The surveys indicate that ACMs are present or
suspected in certain areas, primarily vinyl floor tiles, mastics, roofing
materials, drywall tape and joint compounds. The identified ACMs are
generally non-friable, in good condition, and possess low probabilities
for disturbance. At certain Centers where ACMs are present or suspected,
however, some ACMs have been or may be classified as "friable," and
ultimately may require removal under certain conditions. The Company has
developed and implemented an operations and maintenance (O&M) plan to
manage ACM in place.
- UNDERGROUND STORAGE TANKS. Underground storage tanks (USTs) are or were
present at certain of the Centers, often in connection with tenant
operations at gasoline stations or automotive tire, battery and accessory
service centers located at such Centers. USTs also may be or have been
present at properties neighboring certain Centers. Some of these tanks
have either leaked or are suspected to have leaked. Where leakage has
occurred, investigation, remediation, and monitoring costs may be incurred
by the Company, if the responsible current or former tenant, or other
responsible parties are unavailable to pay such costs.
- CHLORINATED HYDROCARBONS. The presence of chlorinated hydrocarbons such
as perchloroethylene (PCE) and its degradation byproducts have been
detected at certain of the Centers, often in connection with tenant dry
cleaning operations. Where PCE has been detected, the Company may incur
investigation, remediation and monitoring costs if responsible tenants, or
other responsible parties, are unavailable to pay such costs.
PCE has been detected in soil and groundwater in the vicinity of a dry
cleaning establishment at North Valley Plaza, which was sold to a third party on
December 18, 1997. The California Department of Toxic Substance Control (DTSC)
advised the Company in 1995 that very low levels of Dichlorethylene (1,2,DCE), a
degradation byproduct of PCE, have been detected in a water well located 1/4
mile west from the dry cleaners, and that the dry cleaning facility may have
contributed to the introduction of 1,2 DCE
10
<PAGE>
into the water well. According to DTSC, the maximum contaminant level (MCL) for
1,2DCE which is permitted in drinking water is 6 parts per billion (ppb). The
1,2DCE which was detected in the water well at 1.2 ppb, is below the MCL. The
Company has retained an environmental consultant and has initiated extensive
testing of the site. Remediation began in October 1997. The joint venture that
owned the property (of which the Company is a 50% general partner) agreed as
between itself and the buyer, that it would be responsible for continuing to
pursue the investigation and remediation of impacted soil and groundwater
resulting from releases of PCE from the shopping center's former dry cleaner.
$124,000 and $155,000 has already been incurred for remediation, and
professional and legal fees in 1997 and 1996, respectively. An additional
$561,000 remains reserved as of December 31, 1997. The Company has initiated
cost recovery actions and intends to continue to look to responsible parties for
recovery.
Toluene, a petroleum constituent, was detected in one of three groundwater
dewatering system holding tanks at the Queens Center. Although the source of the
tolulene has not been fully defined, the Company suspects the source to be
either an adjacent automotive service station and/or a previous automotive
service station, which operated on site prior to development of the mall.
Toluene was detected at levels of 410 and 160 parts per billion (ppb) in samples
taken from the tank in October, 1995 and February 1996, respectively. Additional
samples were taken in May and December of 1996, with results of .63 ppb and
"non-detect" for the May sampling event and 16.2 ppb and 25.2 ppb for the
December sampling event. The maximum allowable contaminant level (MCL) for
toluene in drinking water is 1000 ppb. Although the Company believes that no
remediation will be required, it has set up a $150,000 reserve in 1996 to cover
professional fees and testing costs, which was reduced by $18,000 of costs
incurred in 1997. The Company intends to look to the responsible parties and
insurers if remediation is required.
The Company acquired Fresno Fashion Fair in December 1996. Asbestos has been
detected in structural fireproofing throughout much of the Mall. Recent testing
data conducted by a professional environmental consulting firm indicates that
the fireproofing is largely inaccessible to building occupants and is well
adhered to the structural members. Additionally, airborne concentrations of
asbestos are well within OSHA's permissible exposure limit (PEL) of .1 fcc. The
accounting for this acquisition included a reserve of $3.3 million to cover
future removal of this asbestos, as necessary. $170,000 was incurred for
abatement of this asbestos in 1997.
Dry cleaning chemicals including PCE were detected in soil and groundwater
in the vicinity of a former dry cleaning establishment at Huntington Center. The
release has been reported to the local government authorities. The Company has
retained an environmental consultant and is conducting additional site
assessment activities to attempt to determine the extent to which groundwater
has been impacted. The Company estimates, based on the data currently available,
that costs for assessment, remediation and legal services will not exceed
$500,000. Consequently, at the time of the acquisition, the Company established
a $500,000 reserve to cover professional and legal fees. $9,000 and $6,000 has
been incurred for remediation in 1997 and 1996, respectively. The Company
intends to look to responsible parties and insurers for cost recovery.
EMPLOYEES
The Company and the Management Companies employ approximately 1,264 persons,
including eight executive officers, personnel in the areas of acquisitions and
business development (5), property management (115), leasing (30),
redevelopment/construction (17), financial services (28) and legal affairs (10).
In addition, in an effort to minimize operating costs, the Company generally
maintains its own security staff (401) and maintenance staff (650).
Approximately 6 of these employees are represented by a union. The Company
believes that relations with its employees are good.
11
<PAGE>
ITEM 2. PROPERTIES The following table sets forth certain information about
each of the Centers:
<TABLE>
<CAPTION>
YEAR OF YEAR OF MOST DECEMBER 31, 1997-
ORIGINAL RECENT MALL AND PERCENTAGE OF MALL
NAME OF CENTER/ CONSTRUCTION/ EXPANSION/ FREE-STANDING AND FREE-STANDING
LOCATION(1) ACQUISITION RENOVATION TOTAL GLA(2) GLA GLA LEASED
- ---------------------------------------------- ------------- ------------- ------------ ------------- -------------------
<S> <C> <C> <C> <C> <C>
Boulder Plaza ................................ 1969 / 1989 1991 158,997 158,997 100.0%
Boulder, Colorado
Bristol Shopping Center(4) ................... 1966 / 1986 1992 165,682 165,682 91.6%
Santa Ana, California
Broadway Plaza(4) ............................ 1951 / 1985 1994 679,427 233,930 98.0%
Walnut Creek, California
Capitola Mall(4) ............................. 1977 / 1995 1988 585,340 205,623 96.3%
Capitola, California
Chesterfield Towne Center .................... 1975 / 1994 1997 817,290 396,097 94.5%
Richmond, Virginia
County East Mall ............................. 1966 / 1986 1989 488,883 170,323 91.9%
Antioch, California
Crossroads Mall(4) ........................... 1963 / 1979 1986 809,004 365,567 80.6%
Boulder, Colorado
Crossroads Mall .............................. 1974 / 1994 1991 1,112,470 372,782 84.9%
Oklahoma City, Oklahoma
Fresno Fashion Fair .......................... 1970 / 1996 1983 881,394 320,513 97.9%
Fresno, California
Greeley Mall ................................. 1973 / 1986 1987 585,044 241,682 80.6%
Greeley, Colorado
Green Tree Mall(4) ........................... 1968 / 1975 1995 782,687 338,691 85.3%
Clarksville, Indiana
Holiday Village Mall(4) ...................... 1959 / 1979 1992 491,711 269,842 89.9%
Great Falls, Montana
Lakewood Mall ................................ 1953 / 1975 1996 1,804,489 860,840 98.3%
Lakewood, California
Northgate Mall ............................... 1964 / 1986 1987 744,020 273,689 89.8%
San Rafael, California
Panorama Mall ................................ 1955 / 1979 1980 369,742 159,742 96.8%
Panorama, California
Parklane Mall(4) ............................. 1967 / 1978 1997 448,727 319,007 91.8%
Reno, Nevada
Queens Center ................................ 1973 / 1995 1991 625,677 157,534 100.0%
Queens, New York
<CAPTION>
1997 SALES
NAME OF CENTER/ PER SQUARE
LOCATION(1) ANCHORS FOOT(3)
- ---------------------------------------------- ---------------------------------------------- -----------
<S> <C> <C>
Boulder Plaza ................................ -- $ 332
Boulder, Colorado
Bristol Shopping Center(4) ................... -- 369
Santa Ana, California
Broadway Plaza(4) ............................ Macy's, Nordstrom, 433
Walnut Creek, California Macy's Men's and Juniors,
Capitola Mall(4) ............................. Gottschalks, J.C. Penney, 287
Capitola, California Mervyn's, Sears
Chesterfield Towne Center .................... Hecht's, Belk, Dillard's, Sears, 309
Richmond, Virginia
County East Mall ............................. Sears, Gottschalks, Mervyn's(5) 236
Antioch, California
Crossroads Mall(4) ........................... Foley's, J.C. Penney, Mervyn's, Sears(6) 265
Boulder, Colorado
Crossroads Mall .............................. Dillards, Foley's, J.C. Penney, 211
Oklahoma City, Oklahoma Montgomery Ward
Fresno Fashion Fair .......................... Gottschalks, J.C. Penney, Macy's, 297
Fresno, California Macy's Men's and Children
Greeley Mall ................................. J.C. Penney, Sears, Joslins, Joslins Market 215
Greeley, Colorado Centre, Montgomery Ward
Green Tree Mall(4) ........................... Dillard's, J.C. Penney, 309
Clarksville, Indiana Sears, Target
Holiday Village Mall(4) ...................... Herberger's, J.C. Penney, Sears, 268
Great Falls, Montana Montgomery Ward
Lakewood Mall ................................ Home Depot, J.C. Penney, Mervyn's, Montgomery 318
Lakewood, California Ward, Robinsons-May
Northgate Mall ............................... Macy's, Mervyns, Sears 281
San Rafael, California
Panorama Mall ................................ Wal-Mart(7) 339
Panorama, California
Parklane Mall(4) ............................. Gottschalks 261
Reno, Nevada
Queens Center ................................ J.C. Penney, Macy's 690
Queens, New York
</TABLE>
12
<PAGE>
ITEM 2. PROPERTIES (CONTINUED)
<TABLE>
<CAPTION>
YEAR OF YEAR OF MOST DECEMBER 31, 1997-
ORIGINAL RECENT MALL AND PERCENTAGE OF MALL
NAME OF CENTER/ CONSTRUCTION/ EXPANSION/ FREE-STANDING AND FREE-STANDING
LOCATION(1) ACQUISITION RENOVATION TOTAL GLA(2) GLA GLA LEASED
- ----------------------------------------------- ------------- ------------- ------------ ------------- -------------------
<S> <C> <C> <C> <C> <C>
Rimrock Mall .................................. 1978 / 1996 1980 581,688 266,248 92.1%
Billings, Montana
Salisbury, Centre at .......................... 1990 / 1995 1990 883,791 278,810 89.9%
Salisbury, Maryland
Valley View Center ............................ 1973 / 1996 1996 1,519,453 461,556 86.1%
Dallas, Texas
Villa Marina Marketplace ...................... 1972 / 1996 1995 448,517 448,517 96.5%
Marina Del Rey, California
Vintage Faire Mall ............................ 1977 / 1996 -- 1,051,458 351,539 89.4%
Modesto, California
West Acres .................................... 1972 / 1986 1992 908,841 356,286 98.1%
Fargo, North Dakota
------------ ------------- -------
Total/Average at December 31, 1997*............ 16,944,332 7,173,497 92.1%
------------ ------------- -------
1997 Acquisition Centers
The Citadel ................................... 1972 / 1997 1995 1,044,852 449,512 83.6%
Colorado Springs, Colorado
Great Falls Marketplace ....................... 1997 / 1997 -- 143,570 143,570 100.0%
Great Falls, Montana
Manhattan Village Shopping Ctr.(4) ............ 1981 / 1997 1992 551,685 375,631 97.3%
Manhattan Beach, California
South Towne Center ............................ 1987 / 1997 1997 1,240,143 463,346 90.5%
Sandy, Utah
Stonewood Mall(4) ............................. 1953 / 1997 1991 927,218 356,471 89.4%
Downey, California
------------ ------------- -------
Total/Average 1997 Acquisitions.............. 3,907,468 1,788,530 90.7%
------------ ------------- -------
Total/Average at December 31, 1997**........... 20,851,800 8,962,027 91.8%
------------ ------------- -------
<CAPTION>
1997 SALES
NAME OF CENTER/ PER SQUARE
LOCATION(1) ANCHORS FOOT(3)
- ----------------------------------------------- ----------------------------------------------- -----------
<S> <C> <C>
Rimrock Mall .................................. Herbergers, Hennessy's, $ 248
Billings, Montana J.C. Penney, Montgomery Ward
Salisbury, Centre at .......................... Boscov's, J.C. Penney, Hechts, 277
Salisbury, Maryland Montgomery Ward, Sears
Valley View Center ............................ Dillard's, Foleys, J.C. Penney, 237
Dallas, Texas Sears
Villa Marina Marketplace ...................... -- 402
Marina Del Rey, California
Vintage Faire Mall ............................ Gottschalks, J.C. Penney, Macy's, 293
Modesto, California Macy's Men's & Home, Sears
West Acres .................................... Daytons, J.C. Penney, 347
Fargo, North Dakota O.J. De Lendrecies, Sears
-----
Total/Average at December 31, 1997*............ $ 310
-----
1997 Acquisition Centers
The Citadel ................................... Dillard's, Foley's, J.C. Penney, Mervyn's $ 273
Colorado Springs, Colorado
Great Falls Marketplace ....................... -- (8)
Great Falls, Montana
Manhattan Village Shopping Ctr.(4) ............ Macy's, Macy's Men's & Home 643
Manhattan Beach, California
South Towne Center ............................ 220
Sandy, Utah Dillard's, J.C. Penney, Mervyn's, Target, ZCMI
Stonewood Mall(4) ............................. 272
Downey, California J.C. Penney, Mervyn's, Robinsons-May, Sears
-----
Total/Average 1997 Acquisitions.............. $ 342
-----
Total/Average at December 31, 1997**........... $ 317
-----
</TABLE>
13
<PAGE>
ITEM 2. PROPERTIES (CONTINUED)
<TABLE>
<CAPTION>
YEAR OF YEAR OF MOST DECEMBER 31, 1997-
ORIGINAL RECENT MALL AND PERCENTAGE OF MALL
NAME OF CENTER/ CONSTRUCTION/ EXPANSION/ FREE-STANDING AND FREE-STANDING
LOCATION(1) ACQUISITION RENOVATION TOTAL GLA(2) GLA GLA LEASED
- ----------------------------------------------- ------------- ------------- ------------ ------------- -------------------
<S> <C> <C> <C> <C> <C>
MAJOR REDEVELOPMENT PROPERTIES
Buenaventura Mall ............................. 1965 / 1996 1997 801,277 345,941 (9)
Ventura, California
Huntington Center ............................. 1965 / 1996 1997 683,382 286,617(10) (9)
Huntington Beach, California
------------ -------------
TOTAL MAJOR REDEVELOPMENT CENTERS 1,484,659 632,558
------------ -------------
TOTAL/AVERAGE AT DECEMBER 31, 1997*** 22,336,459 9,594,585
------------ -------------
1998 ACQUISITION CENTERS (ERE YARMOUTH
PORTFOLIO)
Eastland Mall(4) .............................. 1978 / 1998 1995 1,085,280 544,016 95.2%
Evansville, IN
Empire Mall(4) ................................ 1975 / 1998 1988 1,334,557 632,535 91.9%
Sioux Falls, SD
Granite Run Mall .............................. 1974 / 1998 1993 1,036,359 535,950 90.8%
Media, PA
Lake Square Mall .............................. 1980 / 1998 1992 560,671 264,634 87.6%
Leesburg, FL
Lindale Mall .................................. 1963 / 1998 1997 691,940 386,377 92.0%
Cedar Rapids, IA
Mesa Mall ..................................... 1980 / 1998 1991 851,354 425,537 93.6%
Grand Junction, CO
NorthPark Mall ................................ 1973 / 1998 1994 1,066,818 415,285 83.8%
Davenport, IA
Rushmore Mall ................................. 1978 / 1998 1992 837,255 366,595 81.8%
Rapid City, SD
Southern Hills Mall ........................... 1980 / 1998 -- 752,588 439,011 94.7%
Sioux City, IA
SouthPark Mall ................................ 1974 / 1998 1990 1,034,542 456,486 90.3%
Moline, IL
<CAPTION>
1997 SALES
NAME OF CENTER/ PER SQUARE
LOCATION(1) ANCHORS FOOT(3)
- ----------------------------------------------- ----------------------------------------------- -----------
<S> <C> <C>
MAJOR REDEVELOPMENT PROPERTIES
Buenaventura Mall ............................. J.C. Penney, Macy's, Montgomery Ward 269
Ventura, California
Huntington Center ............................. Mervyn's, Burlington Coat Factory 328
Huntington Beach, California Montgomery Ward
-----
TOTAL MAJOR REDEVELOPMENT CENTERS $ 294
-----
TOTAL/AVERAGE AT DECEMBER 31, 1997*** $ 315
-----
1998 ACQUISITION CENTERS (ERE YARMOUTH
PORTFOLIO)
Eastland Mall(4) .............................. J.C. Penney, Lazarus, Famous Barr, (11)
Evansville, IN DeJong
Empire Mall(4) ................................ Best(12), Younkers, J.C. Penney, Sears, (11)
Sioux Falls, SD Dayton's, Kohl's, Target
Granite Run Mall .............................. J.C. Penney, Sears, Boscov's (11)
Media, PA
Lake Square Mall .............................. Belk-Lindsey, Sears, J.C. Penney, (11)
Leesburg, FL Target
Lindale Mall .................................. Younker's, VonMaur, Sears (11)
Cedar Rapids, IA
Mesa Mall ..................................... Sears, Herberger's, J.C. Penney, (11)
Grand Junction, CO Mervyn's, Target
NorthPark Mall ................................ Younkers, VonMaur, J.C. Penney, (11)
Davenport, IA Sears, Montgomery Ward
Rushmore Mall ................................. Best(12), J.C. Penney, Sears, Herberger's, (11)
Rapid City, SD Target
Southern Hills Mall ........................... Younker's, Sears, Target (11)
Sioux City, IA
SouthPark Mall ................................ J.C. Penney, Sears, Younkers, (11)
Moline, IL VonMaur, Montgomery Ward
</TABLE>
14
<PAGE>
ITEM 2. PROPERTIES (CONTINUED)
<TABLE>
<CAPTION>
YEAR OF YEAR OF MOST DECEMBER 31, 1997
ORIGINAL RECENT MALL AND PERCENTAGE OF MALL
NAME OF CENTER/ CONSTRUCTION/ EXPANSION/ FREE-STANDING AND FREE- STANDING
LOCATION(1) ACQUISITION RENOVATION TOTAL GLA(2) GLA GLA LEASED
- ----------------------------------------------- ------------- ------------- ------------ ------------- ------------------
<S> <C> <C> <C> <C> <C>
SouthRidge Mall(4) ............................ 1975 / 1998 1992 993,875 536,523 75.0%
Des Moines, IA
Valley Mall ................................... 1978 / 1998 1992 482,348 196,285 97.6%
Harrisonburg, VA
------------ ------------- -------
1998 ACQUISITION CENTERS (ERE YARMOUTH 10,727,587 5,199,234 89.3%
PORTFOLIO)
------------ ------------- -------
GRAND TOTAL/AVERAGE 33,064,046 14,793,819 90.9%
------------ ------------- -------
------------ ------------- -------
<CAPTION>
1997 SALES
NAME OF CENTER/ PER SQUARE
LOCATION(1) ANCHORS FOOT(3)
- ----------------------------------------------- ----------------------------------------------- -----------
<S> <C> <C>
SouthRidge Mall(4) ............................ Sears, Younkers, J.C. Penney, (11)
Des Moines, IA Target, Montgomery Ward
Valley Mall ................................... J.C. Penney, Leggett, Watson's, (11)
Harrisonburg, VA Wal-Mart
1998 ACQUISITION CENTERS (ERE YARMOUTH
PORTFOLIO)
GRAND TOTAL/AVERAGE
</TABLE>
- ------------------------
* EXCLUDING 1997 ACQUISITIONS, REDEVELOPMENT PROPERTIES AND 1998 ACQUISITIONS
** EXCLUDING REDEVELOPMENT PROPERTIES AND 1998 ACQUISITIONS
*** EXCLUDING 1998 ACQUISITIONS
15
<PAGE>
- ------------------------
(1) The land underlying thirty of the Centers is owned in fee entirely by the
Company or, in the case of jointly-owned Centers, by the property
partnership. All or part of the land underlying the remaining Centers is
owned by third parties and leased to the Company or property partnership
pursuant to long-term ground leases. Under the terms of a typical ground
lease, the Company or property partnership pays rent for the use of the
land and is generally responsible for all costs and expenses associated
with the building and improvements. In some cases, the Company or property
partnership has an option or right of first refusal to purchase the land.
The termination dates of the ground leases range from 2000 to 2070. All
centers are wholly owned by Company or its subsidiaries, except for
Broadway Plaza (50%), Panorama Mall (50%), West Acres (19%), Manhattan
Village Shopping Center (10%) and the ERE Yarmouth Portfolio (50%).
(2) Includes GLA attributable to Anchors (whether owned or non-owned) and Mall
and Freestanding Stores as of December 31, 1997.
(3) Sales are based on reports by retailers leasing Mall and Freestanding
Stores for the year ending December 31, 1997 for tenants which have
occupied such stores for a minimum of twelve months. Consistent with
industry practices, sales per square foot are based on gross leased and
occupied area, excluding theaters, and are not based on GLA.
(4) Portions of the land on which the Center is situated are subject to one or
more ground leases.
(5) J.C. Penney vacated its facility in the Center in 1997. The Company is
currently in negotiations with a replacement tenant.
(6) The Company paid $3 million in 1997 to terminate the Montgomery Ward's
lease. Gart Sports is temporarily occupying this space until February 1998.
In addition, the Company bought the Mervyn's building in February, 1998 and
sold it to Sears. Sears will occupy the former Mervyn's store and the
Company will recapture the existing Sears building. The Company is
currently negotiating with other tenants to occupy these locations.
(7) The Broadway Store ceased operations in February 1996. Wal-Mart purchased
the former Broadway store from Federated in March 1997, commenced retrofit
of the building in October 1997 and plans to open its new facility in June
1998.
(8) Spaces comprising Total GLA at December 31, 1997 have only been developed
and leased within fourth quarter of 1997 and, therefore, comparable sales
figures are not available for presentation in accordance with the
presentation methodology outlined in footnote (3).
(9) Certain spaces have been intentionally held off the market and remain
vacant due to major redevelopment strategy. As a result, the Company
believes the percentage of mall and free-standing GLA leased at these major
redevelopments is not meaningful data.
(10) Edwards Cinema signed a lease in January 1997 to occupy the former
Broadway location. Edwards is expected to open a 21 screen theater complex
on that site in November 1999.
(11) Sales per square foot information not currently available.
(12) The Company is contemplating various replacement tenant/redevelopment
opportunities for these vacant sites.
16
<PAGE>
MORTGAGE DEBT
The following table sets forth certain information regarding the mortgages
encumbering the Centers, including those Centers in which the Company has less
than a 100% interest. All mortgage debt is nonrecourse to the Company. The
information set forth below is for properties owned as of December 31, 1997.
<TABLE>
<CAPTION>
ANNUAL BALANCE EARLIEST DATE
ANNUAL PRINCIPAL DEBT DUE ON ON WHICH ALL
PROPERTY PLEDGED FIXED OR INTEREST BALANCE SERVICE MATURITY MATURITY NOTES CAN
AS COLLATERAL FLOATING RATE (000'S) (000'S) DATE (000'S) BE PREPAID
- ------------------------------- --------- ----------- ---------- ----------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Capitola Mall.................. Fixed 9.25% $ 37,675 3,801 12/15/01 $ 36,193 Any Time
Chesterfield Towne Center(1)... Fixed 9.10% 65,708 6,580 1/1/24 1,087 1/1/24(2)
Chesterfield Towne Center...... Fixed 8.54% 3,359 376 11/1/99 3,183 Any Time
Citadel........................ Fixed 7.20% 75,600 6,528 1/1/08 59,962 Any Time
Crossroads Mall--Boulder....... Fixed 7.08% 35,638 2,928 12/15/10 28,107 12/15/01
Fresno Fashion Fair............ Fixed 8.40% 38,000 3,165 10/1/01 38,000 Any Time
Greeley Mall................... Fixed 8.50% 17,815 2,245 9/15/03 12,519 Any Time
Green Tree Mall/
Crossroads--OK/Salisbury...... Fixed 7.23% 117,714 8,499 3/16/04 117,174 Any Time
Holiday Village................ Fixed 6.75% 17,000 1,147 4/1/01 17,000 1/10/99
Lakewood Mall.................. Fixed 7.20% 127,000 9,081 8/10/05 127,000 Any Time
Northgate Mall................. Fixed 6.75% 25,000 1,688 4/1/01 25,000 1/10/99
Parklane Mall.................. Fixed 6.75% 20,000 1,350 4/1/01 20,000 Any Time
Queens Center.................. Floating (3) 65,100 (3) 3/31/99 51,000 Any Time
Rimrock Mall................... Fixed 7.70% 31,517 2,924 1/1/03 28,496 Any Time
South Towne Center............. Floating (4) 65,000 (4) 10/10/08 65,000 Any Time
Valley View Mall............... Fixed 7.89% 51,000 4,024 11/1/06 51,000 Any Time
Villa Marina Marketplace....... Fixed 7.23% 58,000 4,193 10/10/06 58,000 Any Time
Vintage Faire Mall............. Fixed 7.65% 55,433 5,116 1/1/03 50,089 Any Time
----------
Total--Wholly Owned
Centers.................... 906,559
Joint Venture Centers:
Broadway Plaza (50%)(5)........ Fixed 6.84% 21,750 1,487 5/5/98 21,750 Any Time
West Acres Center (19%)(5)..... Fixed 8.96% 7,170 648 7/15/99 6,613
----------
Total--All Centers $ 935,479
----------
----------
</TABLE>
- ------------------------
Notes:
(1) The annual debt service payment represents the payment of principal and
interest. In addition, contingent interest, as defined in the loan
agreement, may be due to the extent that 35% of the gross receipts (as
defined in the loan agreement) exceeds a base amount specified therein.
Contingent interest recognized was $398,619 for the year ended December 31,
1996 and $98,528 for the year ended December 31, 1997.
(2) No prepayment except under certain circumstances in the event of the sale of
the Center.
(3) The interest rate is LIBOR plus .45%. LIBOR was 5.81% at December 31, 1997.
There is an interest rate cap on $10 million of this debt at a LIBOR strike
rate of 5.88% through maturity. The remaining principal has an interest rate
cap with a LIBOR strike rate of 7.7%.
17
<PAGE>
(4) At December 31, 1997 this loan was at LIBOR plus 1%, which totaled 6.9%. In
February 1998, this loan was converted to a 10 year loan at a fixed rate of
6.62%, maturing in February 2008.
(5) Reflects the Company's pro rata share of debt.
The Company, at December 31, 1997, had a $60 million unsecured credit
facility with a financial institution which bears interest at approximately
LIBOR plus 1.325% or the institution's prime rate. There was $55 million
outstanding on this facility as of December 31, 1997 and $12 million outstanding
as of December 31, 1996. The Company increased this credit facility to $150
million on February 26, 1998 to partially fund the ERE Yarmouth portfolio.
In addition to the above debt, the Company has also issued $161.4 million of
unsecured subordinated convertible debentures due in December 2002. The
debentures bear interest at 7.25% and are convertible into shares of common
stock of the Company at a conversion price of $31.125.
ITEM 3. LEGAL PROCEEDINGS.
The Company, the Operating Partnership, the Management Companies and the
affiliated partnerships are not currently involved in any material litigation
nor, to the Company's knowledge, is any material litigation currently threatened
against such entities or the Centers, other than routine litigation arising in
the ordinary course of business, most of which is expected to be covered by
liability insurance. For information about certain environmental matters, see
"Business of the Company--Environmental Matters."
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS.
None.
18
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The common stock of the Company is listed and traded on the New York Stock
Exchange ("NYSE") under the symbol "MAC". The common stock began trading on
March 10, 1994 at a price of $19 per share. In 1997 the Company's shares traded
at a high of $29.6875 and a low of $24.875.
As of March 4, 1998 there were approximately 241 shareholders of record. The
following table shows high and low closing prices per share of common stock for
each quarter in 1996 and 1997 and dividends/ distributions per share of common
stock declared and paid by quarter.
<TABLE>
<CAPTION>
DIVIDENDS/
MARKET QUOTATION DISTRIBUTIONS
PER SHARE ---------------
-------------------- DECLARED
QUARTERS ENDED HIGH LOW AND PAID
- ------------------------------------------------------------ --------- --------- ---------------
<S> <C> <C> <C>
March 31, 1996.............................................. $ 201/8 $ 191/4 $ 0.42
June 30, 1996............................................... 211/4 19 0.42
September 30, 1996.......................................... 227/8 20 0.42
December 31, 1996........................................... 261/8 213/4 0.44
March 31, 1997.............................................. 295/8 253/8 0.44
June 30, 1997............................................... 287/8 247/8 0.44
September 30, 1997.......................................... 2911/16 271/8 0.44
December 31, 1997........................................... 299/16 246/8 0.46
</TABLE>
In June and July 1997, the Company sold a total of $161.4 million of its
7 1/4% Convertible Subordinated Debentures due 2002 (the "Debentures"). The
Debentures were offered and sold only (1) outside the U.S. in accordance with
Regulation S under the Securities Act of 1933, as amended (the "Securities
Act"), and (2) inside the U.S. to qualified institutional buyers in accordance
with Rule 144A under the Securities Act. Lazard Capital Markets, Lehman Brothers
International (Europe) and UBS Limited agreed to purchase the Debentures at a
purchase price of 100% of the principal amount, less an aggregate offering
discount of 2.5% (plus reimbursement of expenses). The Debentures are
convertible, at any time on or after 60 days from the date of issue at a
conversion price of $31.125 per share. The net proceeds of $157.4 million were
used primarily to repay floating rate debt and for general corporate purposes.
On December 22, 1997, the Company filed a shelf registration statement (File No.
333-38721) with respect to $119.4 million of the Debentures.
On February 25, 1998, the Company sold $100 million of its Series A
Cumulative Convertible Redeemable Preferred Stock, par value $0.01 per share
(the "Series A Preferred Stock") in a private placement to Security Capital
Preferred Growth Incorporated ("SCPG"), an accredited investor, pursuant to
Section 4(2) of the Securities Act. In connection with the transaction, the
Company paid a placement fee of $1 million to an affiliate of SCPG. The Series A
Preferred Stock can be converted into shares of common stock on a one-for-one
basis. The proceeds from the sale of the Series A Preferred Stock were used to
acquire the ERE Yarmouth portfolio.
ITEM 6. SELECTED FINANCIAL DATA.
The following sets forth selected financial data for the Company on a
historical and pro forma consolidated basis, and for the Centers and the
Management Companies (collectively, the "Predecessor"), on an historical
combined basis. The following data should be read in conjunction with the
financial statements (and the notes thereto) of the Company and "Management's
Discussion And Analysis of Financial Condition and Results of Operations" each
included elsewhere in this Form 10-K.
The pro forma data for the Company for the year ended December 31, 1994 has
been prepared as if the IPO and the transactions related to the reorganization
of the Operating Partnership and formation of the Company (the "Formation") and
the application of the net proceeds of the IPO had occurred as of
19
<PAGE>
January 1, 1994. The pro forma information is not necessarily indicative of what
the Company's financial position or results of operations would have been
assuming the completion of the Formation and IPO at the beginning of the period
indicated, nor does it purport to project the Company's financial position or
what results of operations would have been assuming the completion of the
Formation and the IPO at the beginning of the period indicated, nor does it
purport to project the Company's financial position or results of operations at
any future date or for any future period.
The Selected Financial Data is presented on a combined basis. The limited
partnership interests in the Operating Partnership (not owned by the REIT) are
reflected in the pro forma data as minority interest. Centers in which the
Company does not have a greater than 50% ownership interest (Panorama Mall,
North Valley Plaza, Broadway Plaza, Manhattan Village and West Acres Shopping
Center) are referred to as the "Joint Venture Centers", and along with the
Management Companies, are reflected in the selected financial data under the
equity method of accounting. Accordingly, the net income from the Joint Venture
Centers and the Management Companies that is allocable to the Company is
included in the statement of operations as Equity in income (loss) of
unconsolidated joint ventures and management companies.
<TABLE>
<CAPTION>
THE COMPANY
----------------------------------------------------------- PREDECESSOR
PRO FORMA ------------------------
AS REPORTED MARCH 16 TO JANUARY 1 TO
1997 1996 1995 FOR 1994 DEC 31,1994 MAR 15,1994 1993
--------- --------- --------- ----------- ------------- ------------- ---------
(ALL AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA AND NUMBER OF CENTERS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Revenues:
Minimum rents......................... $ 142,251 $ 99,061 $ 69,253 $ 59,640 $ 48,663 $ 9,993 $ 49,219
Percentage rents...................... 9,259 6,142 4,814 4,906 3,681 851 3,550
Tenant recoveries..................... 66,499 47,648 26,961 22,690 18,515 3,108 16,320
Management fee income(2).............. -- -- -- -- -- 528 2,658
Other................................. 3,205 2,208 1,441 921 582 100 766
--------- --------- --------- ----------- ------------- ------ ---------
Total revenues...................... 221,214 155,059 102,469 88,157 71,441 14,580 72,513
Shopping center expenses................ 70,901 50,792 31,580 28,373 22,576 4,891 23,881
Management, leasing and development
services (2)........................... -- -- -- -- -- 557 2,084
REIT general and administrative
expenses............................... 2,759 2,378 2,011 1,954 1,545 -- --
Depreciation and amortization........... 41,535 32,591 25,749 23,195 18,827 3,642 16,385
Interest expense........................ 66,407 42,353 25,531 19,231 16,091 6,146 27,783
--------- --------- --------- ----------- ------------- ------ ---------
Income (loss) before minority interest,
unconsolidated entities and
extraordinary item..................... 39,612 26,945 17,598 15,404 12,402 (656) 2,380
Minority interest(1).................... (10,567) (10,975) (8,246) (8,008) (6,792) -- --
Equity in income (loss) of
unconsolidated joint ventures and
management companies (2)............... (8,063) 3,256 3,250 3,054 3,016 (232) (178)
Gain on sale of assets.................. 1,619 -- -- -- -- -- --
Extraordinary loss on early
extinguishment of debt................. (555) (315) (1,299) -- -- -- --
--------- --------- --------- ----------- ------------- ------ ---------
Net income (loss)....................... $ 22,046 $ 18,911 $ 11,303 $ 10,450 $ 8,626 ($ 888) $ 2,202
--------- --------- --------- ----------- ------------- ------ ---------
--------- --------- --------- ----------- ------------- ------ ---------
Earnings per share--basic:(3)
Income before extraordinary item...... $ 0.86 $ 0.92 $ 0.78 $ 0.72 $ 0.60 N/A N/A
Extraordinary item.................... (0.01) (0.01) (0.05) -- -- N/A N/A
--------- --------- --------- ----------- -------------
Net income per share--basic......... $ 0.85 $ 0.91 $ 0.73 $ 0.72 $ 0.60 N/A N/A
--------- --------- --------- ----------- -------------
--------- --------- --------- ----------- -------------
Earnings per share--diluted:(8)
Income before extraordinary item...... $ 0.85 $ 0.90 $ 0.78 $ 0.72 $ 0.60 N/A N/A
Extraordinary item.................... (0.01) (0.01) (0.05) -- -- N/A N/A
--------- --------- --------- ----------- -------------
Net income per share--diluted........... $ 0.84 $ 0.89 $ 0.73 $ 0.72 $ 0.60 N/A N/A
--------- --------- --------- ----------- -------------
--------- --------- --------- ----------- -------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
AS REPORTED MARCH 16 TO JANUARY 1 TO
1997 1996 1995 FOR 1994 DEC 31,1994 MAR 15,1994 1993
--------- --------- --------- ----------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(ALL AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA AND NUMBER OF CENTERS)
Other Data:
Funds from operations--basic(4).... $ 83,188 $ 62,428 $ 44,938 $ 39,343 $ 32,710 N/A N/A
The Company's share
of FFO--basic(5).................. $ 56,233 $ 39,502 $ 25,982 $ 22,011 $ 18,300 N/A N/A
EBITDA(6).......................... $ 147,554 $ 101,889 $ 68,878 $ 57,592 $ 47,320 N/A N/A
Cash flows from (used in):
Operating activities............. $ 78,476 $ 80,431 $ 48,186 N/A $ 30,011 N/A N/A
Investing activities............. $(215,006) $(296,675) $ (88,413) N/A $ (137,637) N/A N/A
Financing activities............. $ 146,041 $ 216,317 $ 51,973 N/A $ 99,584 N/A N/A
Number of centers at year end...... 30 26 19 16 16 14 14
Weighted average number of shares
outstanding--basic(7)............. 37,982 32,934 26,930 25,645 25,714 N/A N/A
Weighted average number of shares
outstanding--diluted(7)(8)........ 38,403 33,320 26,984 25,771 25,840 N/A N/A
Cash distributions declared per
common share...................... $ 1.78 $ 1.70 $ 1.66 N/A $ .87 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
------------------------------------------ -----------
DECEMBER 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- -----------
(ALL AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investment in real estate
(before accumulated depreciation)..................... $1,607,429 $1,273,085 $ 833,998 $ 554,788 $ 375,972
Total assets............................................ $1,505,002 $1,187,753 $ 763,398 $ 485,903 $ 314,591
Total mortgage and notes payable........................ $1,122,959 $ 789,239 $ 485,193 $ 313,632 $ 372,817
Minority interest(1).................................... $ 100,463 $ 112,242 $ 95,740 $ 72,376 $ --
Partners' deficit....................................... $ -- $ -- $ -- $ -- $ (88,294)
Stockholders' equity.................................... $ 216,295 $ 237,749 $ 158,345 $ 86,939 $ --
</TABLE>
- ------------------------------
(1) "Minority Interest" reflects the ownership interest in the Operating
Partnership not owned by the REIT.
(2) Unconsolidated joint ventures include all Centers that the Company does not
wholly own and the Management Companies. The Management Companies on a pro
forma basis and after March 15, 1994 have been reflected on the equity
method.
(3) Earnings per share is based on SFAS No. 128 for all years presented.
(4) Funds from operations ("FFO") represents net income (loss) (computed in
accordance with generally accepted accounting principles ("GAAP")),
excluding gains (or losses) from debt restructuring and sales of property,
plus depreciation and amortization (excluding depreciation on personal
property and amortization of loan and financial instrument costs), and after
adjustments for unconsolidated entities. Adjustments for unconsolidated
entities are calculated on the same basis. FFO does not represent cash flow
from operations as defined by GAAP and is not necessarily indicative of cash
available to fund all cash flow needs.
(5) The Company's share of FFO represents the Company's weighted average
ownership of the Operating Partnership multiplied by total FFO.
(6) EBITDA represents earnings before interest, income taxes, depreciation,
amortization, minority interest, equity in income (loss) of unconsolidated
entities, extraordinary items and gain (loss) on sale of assets. This data
is relevant to an understanding of the economics of the shopping center
business as it indicates cash flow available from operations to service debt
and satisfy certain fixed obligations. EBITDA should not be construed by the
reader as an alternative to operating income as an indicator of the
Company's operating performance, or to cash flows from operating activities
(as determined in accordance with GAAP) or as a measure of liquidity.
(7) Assumes that all OP Units are converted to common stock.
(8) Assumes issuance of common stock for in-the-money options and restricted
stock calculated using the Treasury method in accordance with SFAS No. 128
for all years presented.
21
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL BACKGROUND AND PERFORMANCE MEASUREMENT
The Company believes that the most significant measures of its operating
performance are Funds from Operations and EBITDA. Funds from Operations is
defined as net income (loss) (computed in accordance with GAAP), excluding gains
(or losses) from debt restructuring and sales of real property, plus
depreciation and amortization (excluding depreciation on personal property and
amortization of loan and financial instrument costs), and after adjustments for
unconsolidated entities. Adjustments for unconsolidated entities are calculated
on the same basis. Funds from Operations does not represent cash flow from
operations as defined by GAAP and is not necessarily indicative of cash
available to fund all cash flow needs.
EBITDA represents earnings before interest, income taxes, depreciation,
amortization, minority interest, income in unconsolidated entities,
extraordinary items and gain (loss) on sale of assets. This data is relevant to
an understanding of the economics of the shopping center business as it
indicates cash flow available from operations to service debt and satisfy
certain fixed obligations. EBITDA should not be construed as an alternative to
operating income as an indicator of the Company's operating performance, or to
cash flows from operating activities (as determined in accordance with GAAP) or
as a measure of liquidity. While the performance of individual Centers and the
Management Companies determines EBITDA, the Company's capital structure also
influences Funds from Operations. The most important component in determining
EBITDA and Funds from Operations is Center revenues. Center revenues consist
primarily of minimum rents, percentage rents and tenant expense recoveries.
Minimum rents will increase to the extent that new leases are signed at market
rents that are higher than prior rents. Minimum rent will also fluctuate up or
down with changes in the occupancy level. Additionally, to the extent that new
leases are signed with more favorable expense recovery terms, expense recoveries
will increase.
Percentage rents generally increase or decrease with changes in tenant
sales. As leases roll over, however, a portion of historical percentage rent is
often converted to minimum rent. It is therefore common for percentage rents to
decrease as minimum rents increase. Accordingly, in discussing financial
performance, the Company combines minimum and percentage rents in order to
better measure revenue growth.
The following discussion is based primarily on the consolidated financial
statements of the Company for the years ended December 31, 1997, 1996 and 1995.
The following discussion compares the activity for the year ended December 31,
1997 to results of operations for 1996. Also included is a comparison of the
activities for the year ended December 31, 1996 to the results for the year
ended December 31, 1995.
This information should be read in conjunction with the accompanying
consolidated financial statements and notes thereto.
This annual report on Form 10-K contains or incorporates statements that
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Those statements appear in a number of
places in this Form 10-K and include statements regarding, among other matters,
the Company's growth opportunities, the Company's acquisition strategy,
regulatory matters pertaining to compliance with governmental regulations and
other factors affecting the Company's financial condition or results of
operations. Stockholders are cautioned that any such forward-looking statements
are not guarantees of future performance and involve risks, uncertainties and
other factors which may cause actual results, performance or achievements to
differ materially from the future results, performance or achievements,
expressed or implied in such forward looking statements.
22
<PAGE>
The following table reflects the Company's acquisitions in 1995, 1996 and
1997:
<TABLE>
<CAPTION>
DATE ACQUIRED LOCATION
----------------------- ---------------------------------
<S> <C> <C>
"1995 ACQUISITION CENTERS":
The Centre at Salisbury............................... August 15, 1995 Salisbury, Maryland
Capitola Mall......................................... December 21, 1995 Capitola, California
Queens Center......................................... December 28, 1995 Queens, New York
"1996 ACQUISITION CENTERS":
Villa Marina Marketplace.............................. January 25, 1996 Marina Del Rey, California
Valley View Center.................................... October 21, 1996 Dallas, Texas
Rimrock Mall.......................................... November 27, 1996 Billings, Montana
Vintage Faire Mall.................................... November 27, 1996 Modesto, California
Buenaventura Mall..................................... December 18, 1996 Ventura, California
Fresno Fashion Fair................................... December 18, 1996 Fresno, California
Huntington Center..................................... December 18, 1996 Huntington Beach, California
"1997 ACQUISITION CENTERS":
South Towne Center.................................... March 27, 1997 Sandy, Utah
Stonewood Mall........................................ August 6, 1997 Downey, California
Manhattan Village Shopping Center..................... August 19, 1997 Manhattan Beach, California
The Citadel Mall...................................... December 19, 1997 Colorado Springs, Colorado
Great Falls Marketplace............................... December 31, 1997 Great Falls, Montana
</TABLE>
The financial statements include the results of these centers for periods
subsequent to their acquisition.
Many of the variations in the results of operations, discussed below,
occurred due to the addition of these properties to the portfolio during 1997
and 1996. Many factors, such as the availability and cost of capital, overall
debt to market capitalization level, interest rates and availability of
potential acquisition targets that meet the Company's criteria, impact the
Company's ability to acquire additional properties. Accordingly, management is
uncertain as to whether during the balance of 1998, and in future years, there
will be similar acquisitions and corresponding increases in revenues, net income
and funds from operations that occurred as a result of the addition of the 1997
and 1996 Acquisition Centers. All other centers are referred to herein as the
"Same Centers".
The bankruptcy and/or closure of retail stores, particularly Anchors, may
reduce customer traffic and cash flow generated by a Center. During 1997,
Montgomery Ward filed bankruptcy. The Company has 11 Montgomery Ward stores in
its portfolio. Montgomery Ward has not yet disclosed whether they will cease
operating any of their stores in the Company's centers. The long-term closure of
these or other stores could adversely affect the Company's performance.
In addition, the Company's success in the highly competitive real estate
shopping center business depends upon many other factors, including general
economic conditions, the ability of tenants to make rent payments, increases or
decreases in operating expenses, occupancy levels, changes in demographics,
competition from other centers and forms of retailing and the ability to renew
leases or relet space upon the expiration or termination of leases.
ASSETS AND LIABILITIES
Total assets increased to $1,505 million at December 31, 1997 compared to
$1,188 million at December 31, 1996 and $763 million at December 31, 1995.
During that same period, total liabilities increased from $509 million in 1995
to $838 million in 1996 and $1,188 million in 1997. These changes were primarily
as a result of the 1996 and 1995 common stock offerings, the 1997 convertible
debenture offering,
23
<PAGE>
the purchase of the 1997, 1996 and 1995 Acquisition Centers and related debt
transactions described below.
A. CONVERTIBLE DEBENTURE OFFERING
On June 27, 1997, the Company issued and sold $150 million of convertible
subordinated debentures due 2002 and an additional $11.4 million of debentures
were sold in July 1997 ("the Debentures"). The Debentures, which were sold at
par, bear interest at 7.25% annually (payable semi-annually) and are convertible
into shares of the Company's common stock at any time, on or after 60 days, from
the date of issue at a conversion price of $31.125 per share. The Debentures
mature on December 15, 2002 and are callable by the Company after June 15, 2002
at par plus accrued interest. The net proceeds from the sale of the Debentures
of $157.4 million were used to repay floating rate debt and for general
corporate purposes.
B. ACQUISITIONS
South Towne Center was acquired on March 27, 1997. South Towne Center is a
1,240,143 square foot super regional mall located in Sandy, Utah. The purchase
price was $98 million, consisting of $52 million of cash and $46 million of
assumed mortgage indebtedness.
Stonewood Mall is a 927,218 square foot super regional mall in Downey,
California, which the Company acquired on August 6, 1997. The purchase price was
$92 million which was funded with $58 million in proceeds from a 10 year fixed
rate loan placed concurrently on Villa Marina Marketplace and from cash on hand.
Manhattan Village located in Manhattan Beach, California was purchased by a
joint venture on August 19, 1997. The Company owns a 10% interest in the joint
venture. Manhattan Village is a regional center with a total of 551,685 square
feet of retail, restaurant and entertainment space. The purchase price was $66.6
million and was paid in cash.
The Citadel, a 1,044,852 square foot super regional mall in Colorado
Springs, Colorado, was purchased on December 19, 1997 for $108 million. The
purchase price was funded by a concurrently placed loan of $75.6 million plus
$32.4 million in cash.
Great Falls Marketplace is an 143,570 square foot community center developed
by the Management Companies and sold to the Company on December 31, 1997. The
purchase price of $14.8 million approximates the cost incurred by the Management
Companies to acquire and develop the site.
C. RECENT DEVELOPMENTS
On February 27, 1998, the Company, through a 50/50 joint venture with an
affiliate of Simon DeBartolo Group, Inc., acquired a portfolio of twelve
regional malls. The properties in the portfolio total 10.7 million square feet
and are located in eight states. The total purchase price was $974.5 million,
which included $485 million of assumed debt. The balance of the Company's share
of the purchase price was funded by issuing $100 million of convertible
preferred stock, $79.6 million of common stock issued to two unit trusts, and
the balance from the Company's line of credit.
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
REVENUES
Minimum and percentage rents increased by 44% to $151.5 million from $105.2.
Approximately $36.0 million of the increase resulted from the 1996 Acquisition
Centers and $11.9 million resulted from the 1997 Acquisition Centers. These
increases were partially offset by decreases of $0.5 million at Parklane Mall
and $0.3 million at Crossroads-Boulder, both due to reduced occupancy incurred
during redevelopment.
24
<PAGE>
Tenant recoveries increased to $66.5 million in 1997 from $47.7 million in
1996. The 1997 and 1996 Acquisition Centers generated $19.6 million of this
increase. These increases were partially offset by an $0.8 million reduction in
Same Center recoverable expenses in 1997 compared to 1996.
Other income increased to $3.2 million in 1997 from $2.2 million in 1996.
Approximately $0.5 million of the increase related to the 1997 and 1996
Acquisition Centers, and approximately $0.5 million of this increase resulted
from nonrecurring fee income received in 1997.
EXPENSES
Shopping center expenses increased to $70.9 million in 1997 compared to
$50.8 million in 1996. Approximately $20.9 million of the increase resulted from
the 1997 and 1996 Acquisition Centers. The other centers had a net decrease of
$0.8 million in shopping center expenses resulting primarily from decreased
property taxes, insurance premiums and recoverable expenses.
General and administrative expenses increased to $2.8 million in 1997 from
$2.4 million in 1996, primarily due to increased executive and director
compensation expense and professional fee expense.
INTEREST EXPENSE
Interest expense increased to $66.4 million in 1997 from $42.4 million in
1996. This increase of $24.0 million is attributable to the acquisition activity
in 1997 and 1996, which was partially funded with secured debt. In addition, in
1997 the Company issued $161.4 million of convertible debentures.
DEPRECIATION AND AMORTIZATION
Depreciation increased to $41.5 million from $32.6 million in 1996. This
increase relates primarily to the 1996 and 1997 Acquisition Centers.
MINORITY INTEREST
The minority interest represents the 31.8% weighted average interest of the
Operating Partnership that was not owned by the Company during 1997. This
compares to 36.9% not owned by the Company during 1996.
INCOME (LOSS) FROM UNCONSOLIDATED JOINT VENTURES AND MANAGEMENT COMPANIES
The loss from unconsolidated joint ventures and the management companies was
$8.1 million for 1997, compared to a gain of $3.3 million in 1996. A total of
$10.5 million of the change is attributable to the write down, and the loss on
the sale, of North Valley Plaza in 1997.
GAIN ON SALE OF ASSETS
During 1997 the Company sold a parcel of land for a net gain of $1.6
million. There was no gain on sale recognized in 1996.
EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF DEBT
In 1997 the Company wrote off $0.6 million of unamortized financing costs,
compared to $0.3 million written off in 1996.
NET INCOME
As a result of the foregoing, net income increased to $22.0 million in 1997
from $18.9 million in 1996.
25
<PAGE>
OPERATING ACTIVITIES
Cash flow from operations was $78.5 million compared to $80.4 million in
1996. The decrease resulted from the factors discussed above, primarily the
impact of the 1996 and 1997 Acquisition Centers and related financings.
INVESTING ACTIVITIES
Cash flow used in investing activities was $215.0 million in 1997 compared
to $296.7 million in 1996. The change resulted primarily from the four
acquisitions completed in 1997, compared to seven acquisitions in 1996.
FINANCING ACTIVITIES
Cash flow from financing activities was $146.0 million in 1997 compared to
$216.3 million in 1996. The decrease resulted from more acquisition financing
done in 1996 than 1997.
EBITDA AND FUNDS FROM OPERATIONS
Due primarily to the factors mentioned above, EBITDA increased 45% to $147.6
million in 1997 from $101.9 million in 1996 and Funds From Operations increased
33% to $83.2 million from $62.4 million in 1996.
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
REVENUES
Minimum and percentage rents increased by 42% to $105.2 million from $74.1
million. Approximately $19.0 million of the increase resulted from the 1995
Acquisition Centers and $13.2 million resulted from the 1996 Acquisition
Centers. These increases were partially offset by declining rents of $1.1
million at Parklane Mall which was adversely impacted by an Anchor closure in
1996.
Tenant recoveries increased to $47.7 million in 1996 from $27.0 million in
1995. The 1996 and 1995 Acquisition Centers caused $19.3 million of this
increase. Approximately $1.1 million of the increase was due to higher
recoverable expenses in 1996 compared to 1995.
Other income increased to $2.2 million in 1996 from $1.4 million in 1995.
Approximately $1.2 million of the increase related to the 1996 and 1995
Acquisition Centers. This increase was partially offset by lower interest income
of $0.3 million in 1996 compared to 1995.
EXPENSES
Shopping center expenses increased to $50.8 million in 1996 compared to
$31.6 million in 1995. Approximately $18.7 million of the increase resulted from
the 1996 and 1995 Acquisition Centers. The other centers had a net increase of
$0.5 million in shopping center expenses of which approximately $1.1 million was
for increased property taxes and $0.5 million of increased bad debt expense,
offset by a reduction in ground rent expense of $1.3 million which resulted from
the October, 1995 acquisition of land at Crossroads Mall--Boulder which had
previously been leased.
General and administrative expenses increased to $2.4 million in 1996 from
$2.0 million in 1995 primarily due to increased professional fee expense.
INTEREST EXPENSE
Interest expense increased to $42.4 million in 1996 from $25.5 million in
1995. Interest expense attributable to County East Mall decreased $1.2 million
in 1996 due to the payoff of that debt on
26
<PAGE>
December 31, 1995. Also, there was a decrease of $1.3 million at Crossroads
Mall--Boulder due to a December 1995 refinancing at a substantially lower
interest rate. These reductions partially offset the increase of $19.1 million
from the 1995 and 1996 Acquisition Centers.
DEPRECIATION AND AMORTIZATION
Depreciation increased to $32.6 million from $25.7 million in 1995. An
increase of approximately $7.6 million related to the 1995 and 1996 Acquisition
Centers. This increase was offset by a decrease of approximately $1.4 million in
amortization of financial instruments in 1996 which resulted from several
financial instruments becoming fully amortized in 1995.
MINORITY INTEREST
The minority interest represents the 36.9% weighted average interest of the
Operating Partnership that was not owned by the Company during 1996, compared to
45.0% during 1995.
INCOME (LOSS) FROM UNCONSOLIDATED JOINT VENTURES AND MANAGEMENT COMPANIES
The income from unconsolidated joint ventures and the management companies
was $3.3 million for 1996, which was essentially the same as 1995.
EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF DEBT
In connection with the sale of an interest rate cap, the Company wrote off
unamortized financing costs of $0.3 million in 1996. In 1995 the Company wrote
off $1.3 million of loan costs concurrent with the 1995 refinancing of Lakewood
Mall.
NET INCOME
As a result of the foregoing, net income increased to $18.9 million in 1996
from $11.3 million in 1995.
OPERATING ACTIVITIES
Cash flow from operations increased to $80.4 million compared to $48.2
million in 1995. The increase resulted from the factors discussed above,
primarily the impact of the 1995 and 1996 Acquisition Centers.
INVESTING ACTIVITIES
Cash flow used in investing activities was $296.7 million in 1996 compared
to $88.4 million in 1995. The change resulted primarily from the seven
acquisitions completed in 1996 compared to three acquisitions in 1995.
FINANCING ACTIVITIES
Cash flow from financing activities increased to $216.3 million in 1996
compared to $52.0 million in 1995. The increase resulted from more mortgage
financing done in 1996, primarily to fund the 1996 acquisitions.
EBITDA AND FUNDS FROM OPERATIONS
Due primarily to the factors mentioned above, EBITDA increased 48%, to
$101.9 million in 1996 from $68.9 million in 1995 and Funds From Operations
increased 39%, to $62.4 million, from $44.9 million in 1995.
27
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company intends to meet its short term liquidity requirements through
cash generated from operations and working capital reserves. The Company
anticipates that revenues will continue to provide necessary funds for its
operating expenses and debt service requirements, and to pay dividends to
stockholders in accordance with REIT requirements. The Company anticipates that
cash generated from operations, together with cash on hand, will be adequate to
fund capital expenditures which will not be reimbursed by tenants, other than
non-recurring capital expenditures. Capital for major expenditures or
redevelopments has been, and is expected to continue to be, obtained from equity
or debt financings.
The Company believes that it will have access to the capital necessary to
expand its business in accordance with its strategies for growth and maximizing
Funds from Operations. The Company presently intends to obtain additional
capital necessary to expand its business through a combination of additional
equity offerings and debt financings.
The Company's total outstanding loan indebtedness at December 31, 1997 was
$1.2 billion (including its pro rata share of joint venture debt). This equated
to a debt to Total Market Capitalization (defined as total debt of the Operating
Partnership, including its pro rata share of joint venture debt, plus aggregate
market value of outstanding shares of common stock, assuming full conversion of
OP Units into stock) rate of approximately 51.5% at year end. Such debt consists
primarily of conventional mortgages payable secured by individual properties.
See "Properties--Mortgage Debt" for a description of the Company's outstanding
indebtedness. In connection with $65.1 million of the Company's floating rate
indebtedness, the Company has entered into interest rate protection agreements
that limit the Company's exposure to increases in interest rates. See
"Properties--Mortgage Debt."
The Company has filed a shelf registration statement, effective December 8,
1997, to sell securities. The shelf registration is for a total of $500 million
of common stock or common stock warrants. On February 18, 1998, the Company
issued 1,826,484 shares from the shelf and on February 12, 1998 an additional
1,052,650 shares were issued from the shelf. The total proceeds of both
transactions were approximately $79.6 million, leaving approximately $420
million available on the shelf registration.
The Company has an unsecured line of credit which has been recently expanded
up to $150 million. There was $55 million outstanding at December 31, 1997 and
$123 million outstanding after the ERE Yarmouth portfolio acquisition on
February 27, 1998.
At December 31, 1997 the Company had cash and cash equivalents of $25.2
million.
YEAR 2000 COMPLIANCE
The Company has been advised by its independent software vendor that it has
completed its evaluation, testing and modification of the property management
and accounting software used by the Company and the necessary changes have been
completed to achieve year 2000 compliance. The Company does not believe it will
have any significant accounting or operations impact as a result of the year
2000.
FUNDS FROM OPERATIONS
The Company believes that the most significant measure of its performance is
Funds from Operations ("FFO"). FFO is defined by The National Association of
Real Estate Investment Trusts ("NAREIT") to be: Net income (computed in
accordance with GAAP), excluding gains or losses from debt restructuring and
sales of real property, plus depreciation and amortization (excluding
depreciation on personal property and amortization of loan and financial
instrument cost) and after adjustments for unconsolidated entities. Adjustments
for unconsolidated entities will be calculated on the same basis. FFO does not
represent cash flow from operations, as defined by generally accepted accounting
principles, and is not
28
<PAGE>
necessarily indicative of cash available to fund all cash flow needs. The
following reconciles net income to FFO:
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income.............................................................. $ 22,046 $ 18,911
Adjustments to reconcile net income to FFO:
Minority interest..................................................... 10,567 10,975
Depreciation and amortization on wholly owned properties.............. 41,535 32,591
Pro rata share of unconsolidated entities depreciation and
amortization........................................................ 2,312 2,096
Extraordinary loss on early extinguishment of debt.................... 555 315
Gain on sale of assets from wholly owned centers...................... (1,619) --
Pro rata share of (gain) loss on sale of joint venture assets......... 10,400 (110)
Amortization of loan costs, including interest rate caps and swaps.... (2,075) (2,090)
Depreciation of personal property..................................... (533) (260)
--------- ---------
FFO--basic(1)........................................................... 37,982 83,188 32,934 62,428
Add back interest expense and amortization of loan costs on convertible
debentures............................................................ 6,468 --
Weighted average additional shares assuming debenture conversion........ 2,664 --
--------- --------- --------- ---------
Sub-total after conversion of debentures................................ 40,646 89,656 32,934 62,428
To arrive at FFO--diluted:
Deduct effect of antidilutive debentures.............................. (2,664) (6,468) -- --
Impact of stock options and restricted stock using the Treasury
method................................................................ 421 239 386 --
--------- --------- --------- ---------
FFO--diluted(2)......................................................... 38,403 $ 83,427 33,320 $ 62,428
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Calculated based upon basic net income as adjusted to reach basic FFO.
Weighted average number of shares includes the weighted average shares of
common stock outstanding for 1997 assuming the conversion of OP units.
(2) The computation of dilutive and diluted average number of shares outstanding
includes the effect of common stock options outstanding and restricted stock
using the Treasury method. Convertible debentures are antidilutive and are
not included.
Included in minimum rents were rents attributable to the accounting practice
of straight lining of rents. The amount of straight lining of rents that
impacted minimum rents was $3,599,000 for 1997, $1,832,000 for 1996 and $944,000
for 1995.
INFLATION
In the last three years, inflation has not had a significant impact on the
Company because of a relatively low inflation rate. Most of the leases at the
Centers have rent adjustments periodically through the lease term. These rent
increases are either in fixed increments or based on increases in the Consumer
Price Index. In addition, many of the leases are for terms of less than ten
years, which enables the Company to replace existing leases with new leases at
higher base rents if the rents of the existing leases are below the then
existing market rate. Additionally, most of the leases require the tenants to
pay their
29
<PAGE>
pro rata share of operating expenses. This reduces the Company's exposure to
increases in costs and operating expenses resulting from inflation.
NEW PRONOUNCEMENTS ISSUED:
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes standards for
the reporting and display of comprehensive income and its components in a full
set of general purpose financial statements. Comprehensive income is defined as
the change in equity of a business enterprise during a period from transactions
and other events and circumstances from nonowner sources. The Company does not
expect this pronouncement to materially impact the Company's results of
operations.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for
disclosure about operating segments in annual financial statements and selected
information in interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. This statement supercedes SFAS No. 14, Financial Reporting for
Segments of a Business Enterprise. The new standard becomes effective for the
Company for the year ending December 31, 1998, and requires that comparative
information from earlier years be restated to conform to the requirements of
this standard. The Company does not expect this pronouncement to materially
change the Company's current reporting and disclosures.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to the Index to Financial Statements and Financial Statement Schedules
for the required information.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS OR ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
30
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
There is hereby incorporated by reference the information which appears
under the captions "Election of Directors," "Executive Officers" and "Section 16
Reporting" in the Company's definitive proxy statement for its 1998 Annual
Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION.
There is hereby incorporated by reference the information which appears
under the caption "Executive Compensation" in the Company's definitive proxy
statement for its 1998 Annual Meeting of Stockholders; provided, however, that
neither the Report of the Compensation Committee on executive compensation nor
the Stock Performance Graph set forth therein shall be incorporated by reference
herein, in any of the Company's prior or future filings under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except
to the extent the Company specifically incorporates such report or stock
performance graph by reference therein and shall not be otherwise deemed filed
under either of such Acts.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information which appears
under the captions "Principal Stockholders," "Information Regarding Nominees and
Directors" and "Executive Officers" in the Company's definitive proxy statement
for its 1998 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information which appears
under the captions "Certain Transactions" in the Company's definitive proxy
statement for its 1998 Annual Meeting of Stockholders.
31
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
-----
<C> <C> <S> <C>
(a) 1. Financial Statements
Report of Independent Accountants.............................................................. 33
Consolidated balance sheets of the Company as of December 31, 1997 and 1996.................... 34
Consolidated statements of operations of the Company for the years ended December 31, 1997,
1996 and 1995................................................................................ 35
Consolidated statements of stockholders' equity of the Company for the years ended December 31,
1997, 1996 and 1995.......................................................................... 36
Consolidated statements of cash flows of the Company for the years ended December 31, 1997,
1996 and 1995................................................................................ 37
Notes to consolidated financial statements..................................................... 38
2. Financial Statement Schedule
Schedule III--Real estate and accumulated depreciation......................................... 56
(b) 1. Reports on Form 8-K filed during the last quarter of 1997 are incorporated by reference to this
item
A. Form 8-K dated August 15, 1997, and Form 8-K/A dated October 15, 1997 for the acquisition of
Stonewood Mall, including the financial statements of South Towne Center and pro forma
financial information........................................................................ --
(c) 1. Exhibits
The Exhibit Index attached hereto is incorporated by reference to this item.................... --
</TABLE>
32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of The Macerich Company
We have audited the consolidated financial statements and financial statement
schedule of The Macerich Company as listed in Item 14(a) of this Form 10-K.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and the financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Macerich
Company as of December 31, 1997 and 1996, and the consolidated results of the
Macerich Company's operations and its cash flows for the years ended December
31, 1997, 1996 and 1995, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information
required to be included therein.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
March 20, 1998
33
<PAGE>
THE MACERICH COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS:
Property, net......................................................................... $ 1,407,179 $ 1,108,668
Cash and cash equivalents............................................................. 25,154 15,643
Tenant receivables, net, including accrued overage rents of $4,330 in 1997 and $3,805
in 1996............................................................................. 23,696 23,192
Due from affiliates................................................................... 3,105 3,105
Deferred charges and other assets, net................................................ 37,899 20,716
Investments in joint ventures and the Management Companies............................ 7,969 16,429
------------ ------------
Total assets...................................................................... $ 1,505,002 $ 1,187,753
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Mortgage notes payable:
Related parties..................................................................... $ 135,313 $ 135,944
Others.............................................................................. 771,246 584,295
------------ ------------
Total............................................................................... 906,559 720,239
Bank notes payable.................................................................... 55,000 69,000
Convertible debentures................................................................ 161,400 --
Accounts payable...................................................................... 5,185 4,197
Accrued interest expense.............................................................. 4,878 3,979
Accrued real estate taxes and ground rent expense..................................... 7,272 7,221
Due to affiliates..................................................................... 15,109 430
Deferred acquisition liability........................................................ 5,000 5,000
Other accrued liabilities............................................................. 27,841 27,696
------------ ------------
Total liabilities................................................................. 1,188,244 837,762
------------ ------------
Minority interest in Operating Partnership............................................ 100,463 112,242
------------ ------------
Commitments and contingencies (Note 11)
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized--none issued.......... -- --
Common stock, $.01 par value, 100,000,000 shares authorized, 26,004,800 and
25,743,000 shares issued and outstanding at December 31, 1997 and 1996,
respectively...................................................................... 260 257
Additional paid in capital.......................................................... 219,121 238,346
Accumulated earnings................................................................ -- --
Unamortized restricted stock........................................................ (3,086) (854)
------------ ------------
Total stockholders' equity........................................................ 216,295 237,749
------------ ------------
Total liabilities and stockholders' equity...................................... $ 1,505,002 $ 1,187,753
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES:
Minimum rents..................................................... $ 142,251 $ 99,061 $ 69,253
Percentage rents.................................................. 9,259 6,142 4,814
Tenant recoveries................................................. 66,499 47,648 26,961
Other............................................................. 3,205 2,208 1,441
------------- ------------- -------------
Total revenues.................................................. 221,214 155,059 102,469
------------- ------------- -------------
EXPENSES:
Shopping center expenses.......................................... 70,901 50,792 31,580
General and administrative expense................................ 2,759 2,378 2,011
------------- ------------- -------------
73,660 53,170 33,591
------------- ------------- -------------
Interest expense:
Related parties................................................. 10,287 10,172 8,226
Others.......................................................... 56,120 32,181 17,305
Depreciation and amortization..................................... 41,535 32,591 25,749
------------- ------------- -------------
107,942 74,944 51,280
------------- ------------- -------------
Equity in income (loss) of unconsolidated joint ventures and the
management companies.............................................. (8,063) 3,256 3,250
Gain on sale of assets.............................................. 1,619 -- --
------------- ------------- -------------
Income before minority interest and extraordinary item.............. 33,168 30,201 20,848
Extraordinary loss on early extinguishment of debt.................. (555) (315) (1,299)
------------- ------------- -------------
Income of the Operating Partnership................................. 32,613 29,886 19,549
Less minority interest in net income of the Operating Partnership... 10,567 10,975 8,246
------------- ------------- -------------
Net income.......................................................... $ 22,046 $ 18,911 $ 11,303
------------- ------------- -------------
------------- ------------- -------------
Earnings per common share--basic:
Income before extraordinary item.................................. $ 0.86 $ 0.92 $ 0.78
Extraordinary item................................................ (0.01) (0.01) (0.05)
------------- ------------- -------------
Net income--basic................................................. $ 0.85 $ 0.91 $ 0.73
------------- ------------- -------------
------------- ------------- -------------
Weighted average number of shares of common stock
outstanding--basic................................................ 25,891,000 20,781,000 15,482,000
------------- ------------- -------------
------------- ------------- -------------
Earnings per common share--diluted:
Income before extraordinary item.................................. $ 0.85 $ 0.90 $ 0.78
Extraordinary item................................................ (0.01) (0.01) (0.05)
------------- ------------- -------------
Net income--diluted............................................... $ 0.84 $ 0.89 $ 0.73
------------- ------------- -------------
------------- ------------- -------------
Weighted average number of shares of common stock
outstanding--diluted.............................................. 26,312,000 21,167,000 15,536,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON COMMON ADDITIONAL UNAMORTIZED TOTAL
STOCK STOCK PAR PAID IN ACCUMULATED RESTRICTED STOCKHOLDERS'
(# SHARES) VALUE CAPITAL EARNINGS STOCK EQUITY
----------- ----------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1994................... 14,375,000 $ 144 $ 86,795 -- -- $ 86,939
Common stock issued to public............. 5,600,000 56 107,408 107,464
Issuance costs............................ (582) (582)
Distributions paid ($1.66 per share)...... (14,913) $ (11,303) (26,216)
Net income................................ 11,303 11,303
Adjustment to reflect minority interest on
a pro rata basis according to year end
ownership percentage of Operating
Partnership............................. (20,615) (20,615)
Other, net................................ 2,000 52 52
----------- ----- ----------- ------------ ------------- ------------
Balance December 31, 1995................... 19,977,000 200 158,145 -- -- 158,345
Common stock issued to public............. 5,750,000 57 122,129 122,186
Issuance costs............................ (152) (152)
Issuance of restricted stock.............. 41,238 854 854
Unvested restricted stock................. (41,238) $ (854) (854)
Exercise of stock options................. 16,000 291 291
Distributions paid ($1.70 per share)...... (17,565) (18,911) (36,476)
Net income 18,911 18,911
Adjustment to reflect minority interest on
a pro rata basis according to year end
ownership percentage of Operating
Partnership............................. (25,356) (25,356)
----------- ----- ----------- ------------ ------------- ------------
Balance December 31, 1996................... 25,743,000 257 238,346 -- (854) 237,749
Issuance costs............................ (352) (352)
Issuance of restricted stock.............. 89,958 2,471 2,471
Unvested restricted stock................. (89,958) (2,471) (2,471)
Restricted stock vested in 1997........... 8,248 239 239
Exercise of stock options................. 253,552 3 2,410 2,413
Distributions paid ($1.78 per share)...... (24,061) (22,046) (46,107)
Net income................................ 22,046 22,046
Adjustment to reflect minority interest on
a pro rata basis according to year end
ownership percentage of Operating
Partnership............................. 307 307
----------- ----- ----------- ------------ ------------- ------------
Balance December 31, 1997................... 26,004,800 $ 260 $ 219,121 $ -- $ (3,086) $ 216,295
----------- ----- ----------- ------------ ------------- ------------
----------- ----- ----------- ------------ ------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 1, JANUARY 1,
1997 TO DEC 1996 TO DEC 1995 TO DEC
31, 1997 31, 1996 31, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................... $ 22,046 $ 18,911 $ 11,303
-------------- -------------- --------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary loss on early extinguishment of debt............ 555 315 1,299
Gain on sale of assets........................................ (1,619) -- --
Depreciation and amortization................................. 41,535 32,591 25,749
Amortization of discount on trust deed note payable........... 33 33 547
Minority interest in net income of the Operating
Partnership................................................. 10,567 10,975 8,246
Changes in assets and liabilities:
Tenant receivables, net..................................... (504) (7,977) (2,973)
Other assets................................................ (10,899) 1,181 (2,149)
Accounts payable and accrued expenses....................... 1,938 6,596 1,378
Due to affiliates........................................... 14,679 (382) 345
Other liabilities........................................... 145 18,188 4,441
-------------- -------------- --------------
Total adjustments......................................... 56,430 61,520 36,883
-------------- -------------- --------------
Net cash provided by operating activities..................... 78,476 80,431 48,186
-------------- -------------- --------------
Cash flows from investing activities:
Acquisitions of property and improvements..................... (199,729) (277,319) (75,738)
Renovations and expansions of centers......................... (12,929) (8,019) (4,571)
Additions to tenant improvements.............................. (2,599) (920) (1,554)
Deferred charges.............................................. (12,542) (9,111) (6,698)
Equity in (income) loss of unconsolidated joint ventures and
the management companies.................................... 8,063 (3,256) (3,250)
Distributions from joint ventures............................. 8,181 4,107 3,774
Contributions to joint ventures............................... (7,783) -- (376)
Loans to affiliates........................................... -- (3,105) --
Proceeds from sale of assets.................................. 4,332 948 --
-------------- -------------- --------------
Net cash used in investing activites.......................... (215,006) (296,675) (88,413)
-------------- -------------- --------------
Cash flows from financing activities:
Proceeds from notes, mortgages and debentures payable......... 331,400 235,673 148,000
Payments on mortgages and notes payable....................... (119,515) (84,775) (157,800)
Net proceeds from equity offerings............................ -- 122,034 106,879
Dividends and distributions................................... (65,844) (56,615) (45,106)
-------------- -------------- --------------
Net cash provided by financing activities..................... 146,041 216,317 51,973
-------------- -------------- --------------
Net increase in cash.......................................... 9,511 73 11,746
Cash and cash equivalents, beginning of period.................. 15,643 15,570 3,824
-------------- -------------- --------------
Cash and cash equivalents, end of period........................ $ 25,154 $ 15,643 $ 15,570
-------------- -------------- --------------
-------------- -------------- --------------
Supplemental cash flow information:
Cash payment for interest, net of amounts capitalized......... $ 65,475 $ 40,572 $ 24,429
-------------- -------------- --------------
-------------- -------------- --------------
Non-cash transactions:
Acquisition of property by assumption of debt................. $ 121,800 $ 152,228 $ 178,900
-------------- -------------- --------------
-------------- -------------- --------------
Acquisition of property by issuance of OP units............... $ -- $ 600 $ 18,448
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
1. ORGANIZATION AND BASIS OF PRESENTATION:
The Macerich Company ("the Company") commenced operations effective with the
completion of the initial public offering (the "IPO") on March 16, 1994. The
Company is the sole general partner of and holds a 68% ownership interest in The
Macerich Partnership, L.P. ("the Operating Partnership"). The interests in the
Operating Partnership are known as OP Units. OP Units not held by the Company
can be exchanged, subject to certain restrictions, on a one-for-one basis, into
the Company's common stock.
The Company was organized to qualify as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended. The 32% limited
partnership interest of the Operating Partnership not owned by the Company is
reflected in these financial statements as minority interest. The average total
number of OP Units outstanding in The Operating Partnership (including the OP
Units owned by the Company) was 37,982,000 for the year ended December 31, 1997,
32,934,000 for the year ended December 31, 1996, and 26,930,000 for the year
ended December 31, 1995.
The property management, leasing and redevelopment of the Company's
portfolio is provided by the Macerich Management Company, Macerich Property
Management Company and Macerich Manhattan Management Company, all California
corporations (together referred to hereafter as "the Management Companies"). The
non-voting preferred stock of the Macerich Management Company and Macerich
Property Management Company is owned by the Operating Partnership, which
provides the Operating Partnership the right to receive 95% of the distributable
cash flow from the Management Companies. Macerich Manhattan Management Company
is a 100% subsidiary of Macerich Management Company.
BASIS OF PRESENTATION:
The consolidated financial statements of the Company include the accounts of
the Company and the Operating Partnership. The properties which the Operating
Partnership does not own a greater than 50% interest in, and the Management
Companies, have been accounted for under the equity method of accounting. These
entities are reflected on the Company's consolidated financial statements as
investment in joint ventures and the Management Companies.
All significant intercompany accounts and transactions have been eliminated
in the consolidated financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments with an original
maturity of 90 days or less when purchased to be cash equivalents, for which
cost approximates market. Included in cash is restricted cash of $5,810 at
December 31, 1997 and $3,783 at December 31, 1996.
REVENUES:
Minimum rental revenues are recognized on a straight-line basis over the
terms of the related lease. The difference between the amount of rent due in a
year and the amount recorded as rental income is referred to as the "straight
lining of rent adjustment." Rental income was increased by $3,599 in 1997,
$1,832 in 1996 and $944 in 1995 due to the straight lining of rent adjustment.
Percentage rents are
38
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
recognized on an accrual basis. Recoveries from tenants for real estate
taxes, insurance and other shopping center operating expenses are recognized as
revenues in the period the applicable costs are incurred.
The Management Companies provide property management, leasing, corporate,
development and acquisitions services to affiliated and non-affiliated shopping
centers. In consideration for these services, the Management Companies receive
monthly management fees generally ranging from 1.5% to 5% of the gross monthly
rental revenue of the properties managed.
PROPERTY:
Costs related to the acquisition, development, construction and improvement
of properties are capitalized. Interest costs are capitalized until construction
is substantially complete.
Expenditures for maintenance and repairs are charged to operations as
incurred. Realized gains and losses are recognized upon disposal or retirement
of the related assets and are reflected in earnings.
Property is recorded at cost and is depreciated using a straight-line method
over the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Tenant improvements..................... initial term of related lease
Buildings and improvements.............. 5-40 years
Equipment and furnishings............... 5-7 years
</TABLE>
The Company assesses whether there has been a permanent impairment in the
value of its assets by considering factors such as expected future operating
income, trends and prospects, as well as the effects of demand, competition and
other economic factors. Such factors include the tenants ability to perform
their duties and pay rent under the terms of the leases. The Company may
recognize a permanent impairment loss if the income stream were not sufficient
to cover its investment. Such a loss would be determined between the carrying
value and the fair value of a center. Management believes no permanent
impairment has occurred in its net property carrying values at December 31,
1997.
DEFERRED CHARGES:
Costs relating to financing of shopping center properties and obtaining
tenant leases are deferred and amortized over the initial term of the agreement.
The straight-line method is used to amortize all costs except financing, for
which the effective interest method is used. The range of the terms of the
agreements are as follows:
<TABLE>
<S> <C>
Deferred lease costs.......... 2-15 years
Deferred financing costs...... 1-15 years
</TABLE>
DEFERRED ACQUISITION LIABILITY:
As part of the Company's total consideration to the seller of Capitola Mall,
the Company will issue $5,000 of OP Units five years after the acquisition date,
which was December 21, 1995. The number of OP Units will be determined based on
the Company's common stock price at that time.
39
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INCOME TAXES:
The Company has elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended. A REIT is generally not subject to income taxation on
that portion of its income that qualifies as REIT taxable income as long as it
distributes at least 95 percent of its taxable income to its stockholders and
complies with other requirements. Accordingly, no provision has been made for
income taxes in the consolidated financial statements.
On a tax basis, the distributions of $1.78 paid during 1997 represented
$0.96 of ordinary income and $0.82 of return of capital and the distributions of
$1.70 per share during 1996 represented $1.14 of ordinary income and $0.56
return of capital. During 1995 the distributions were $1.66 per share of which
$1.00 was ordinary income and $0.66 was return of capital.
Each partner is taxed individually on their share of partnership income or
loss, and accordingly, no provision for federal and state income tax is provided
for the Operating Partnership in the consolidated financial statements.
RECLASSIFICATIONS:
Certain reclassifications have been made to the 1995 and 1996 financial
statements to conform to the 1997 financial statement presentation.
ACCOUNTING PRONOUNCEMENTS:
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes standards for
the reporting and display of comprehensive income and its components in a full
set of general purpose financial statements. Comprehensive income is defined as
the change in equity of a business enterprise during a period from transactions
and other events and circumstances from nonowner sources. The Company does not
expect this pronouncement to materially impact the Company's results of
operations.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for
disclosure about operating segments in annual financial statements and selected
information in interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. This statement supercedes SFAS No. 14, Financial Reporting for
Segments of a Business Enterprise. The new standard becomes effective for the
Company for the year ending December 31, 1998, and requires that comparative
information from earlier years be restated to conform to the requirements of
this standard. The Company does not expect this pronouncement to materially
change the Company's current reporting and disclosures.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
To meet the reporting requirement of SFAS No. 107, Disclosures about Fair
Value of Financial Instruments, the Company calculates the fair value of
financial instruments and includes this additional information in the notes to
financial statements when the fair value is different than the carrying value of
those financial instruments. When the fair value reasonably approximates the
carrying value, no additional disclosure is made. The estimated fair value
amounts have been determined by the Company using available market information
and appropriate valuation methodologies. However, considerable judgment
40
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
is required in interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that the Company could realize in a current market exchange. The use
of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
Interest rate cap agreements are purchased by the Company from third parties
to hedge the risk of interest rate increases on some of the Company's variable
rate debt. The cost of these cap agreements is amortized over the life of the
cap agreement on a straight line basis. Payments received as a result of the cap
agreements are recorded as a reduction of interest expense. The unamortized
costs of the cap agreements are included in deferred charges. The fair market
value of these caps will vary with fluctuations in interest rates. The Company
is exposed to credit loss in the event of nonperformance by these counter
parties to the financial instruments, however, management does not anticipate
nonperformance by the counter party.
EARNINGS PER SHARE ("EPS"):
During 1997, the Company implemented SFAS No. 128. The computation of basic
earnings per share is based on net income and the weighted average number of
common shares outstanding for the years ended December 31, 1997, 1996 and 1995.
The computation of diluted earnings per share includes the effect of outstanding
restricted stock and common stock options calculated using the Treasury stock
method. The convertible debentures were not included in the calculation as the
effect of their inclusion would be antidilutive. The OP Units not held by the
Company have not been included in the diluted EPS calculation as there would be
no effect on the per share amounts as earnings allocated to an OP Unit are the
same amount as allocated to a share of common stock. The following table
reconciles the basic and diluted earnings per share calculation:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
------------------------------------------------------------------------
1997 1996 1995
----------------------- ----------------------- ----------------------
NET PER NET PER NET PER
INCOME SHARES SHARE INCOME SHARES SHARE INCOME SHARES SHARE
------- ------ ------ ------- ------ ------ ------- ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common shareholders... $22,046 25,891 $ 0.85 $18,911 20,781 $ 0.91 $11,303 15,482 $0.73
DILUTED EPS
Effect of dilutive securities:
Employee stock options and
restricted stock...................... 162 421 (0.01) -- 386 (0.02) -- 54 --
------- ------ ------ ------- ------ ------ ------- ------ -----
Income available to common shareholders... $22,208 26,312 $ 0.84 $18,911 21,167 $ 0.89 $11,303 15,536 $0.73
------- ------ ------ ------- ------ ------ ------- ------ -----
------- ------ ------ ------- ------ ------ ------- ------ -----
</TABLE>
CONCENTRATION OF RISK:
Lakewood Mall generated 10.5% of total shopping center revenues in 1997,
16.0% in 1996 and 22.0% in 1995. Queens Center accounted for 13.8% in 1996 of
total shopping center revenues. Shopping center revenues at Crossroads
Mall-Colorado accounted for 10.6% of total shopping center revenues in 1995.
During 1995 Chesterfield accounted for 12.6% of total Shopping Center revenues.
No other Center generated more than 10% of shopping center revenues during 1997,
1996 or 1995.
41
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
The Centers derived approximately 89.5% of their total rents for the year
ended December 31, 1997 from Mall and Freestanding Stores. The Limited
represented 7.6% of total minimum rents in place as of December 31, 1997 and no
other retailer represented more than 4.6% of total minimum rents as of December
31, 1997.
MANAGEMENT ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
YEAR 2000 COMPLIANCE
The Company has been advised by its independent software vendor that it has
completed its evaluation and testing and has made the necessary changes to the
property management and accounting software utilized by the Company and the
software is in year 2000 compliance. The Company does not believe there will be
any significant accounting impact as a result of the year 2000.
3. INVESTMENTS IN JOINT VENTURES AND THE MANAGEMENT COMPANIES:
The following are the Company's investments in various real estate joint
ventures which own regional retail shopping centers. The Operating Partnership's
interest in each joint venture as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
THE OPERATING
PARTNERSHIP'S
JOINT VENTURE OWNERSHIP %
- ------------------------------------------------------------------------------- -------------------
<S> <C>
Macerich Northwestern Associates............................................... 50%
Manhattan Village, LLC......................................................... 10%
Panorama City Associates....................................................... 50%
West Acres Development......................................................... 19%
</TABLE>
The Operating Partnership also owns the non-voting preferred stock of the
Management Companies and is entitled to receive 95% of the distributable cash
flow. The Company accounts for the management companies and joint ventures using
the equity method of accounting.
On August 19, 1997 Macerich acquired a 10% interest in the joint venture
that acquired Manhattan Village Shopping Center ("Manhattan Village") in
Manhattan Beach, California. The results of that joint venture are included for
the period subsequent to the acquisition. In December 1997, North Valley Plaza,
which was 50% owned by the Company, was sold.
Combined and condensed balance sheets and statements of operations are
presented below for all unconsolidated joint ventures, and the Management
Companies, followed by information regarding the Operating Partnership's
beneficial interest in the combined operations. Beneficial interest is
calculated based on the Operating Partnership's ownership interests in the joint
ventures and the Management Companies.
42
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. INVESTMENTS IN JOINT VENTURES AND THE MANAGEMENT COMPANIES: (CONTINUED)
COMBINED AND CONDENSED BALANCE SHEETS OF JOINT VENTURES
AND THE MANAGEMENT COMPANIES
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Assets:
Properties, net.................................................................... $ 153,856 $ 106,751
Other assets....................................................................... 10,013 13,257
------------ ------------
Total assets................................................................... $ 163,869 $ 120,008
------------ ------------
------------ ------------
Liabilities and partners' capital:
Mortgage notes payable............................................................. $ 84,342 $ 81,925
Other liabilities.................................................................. 6,563 11,116
The Company's capital.............................................................. 7,969 16,429
Outside partners' capital.......................................................... 64,995 10,538
------------ ------------
Total liabilities and partners' capital........................................ $ 163,869 $ 120,008
------------ ------------
------------ ------------
</TABLE>
COMBINED AND CONDENSED STATEMENTS OF OPERATIONS OF JOINT VENTURES
AND THE MANAGEMENT COMPANIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------------
1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
Revenues........................................................................ $ 36,645 $ 31,533 $ 32,270
---------- --------- ---------
Expenses:
Management Company expense.................................................... 4,738 4,293 3,987
Shopping center expenses...................................................... 11,952 9,598 9,293
Interest...................................................................... 6,157 6,409 6,414
Depreciation and amortization................................................. 4,992 4,406 4,485
---------- --------- ---------
Total operating costs......................................................... 27,839 24,706 24,179
---------- --------- ---------
Gain (loss) on sale or write down of assets..................................... (20,307) 581 1,265
---------- --------- ---------
Net income (loss)............................................................. $ (11,501) $ 7,408 $ 9,356
---------- --------- ---------
---------- --------- ---------
</TABLE>
Significant accounting policies used by the unconsolidated joint ventures
and the Management Companies are similar to those used by the Company.
Included in mortgage notes payable are amounts due to related parties of
$43,500 for the years ended December 31, 1997, 1996 and 1995. Interest expense
incurred on these borrowings amounted to $2,974 for the years ended December 31,
1997, 1996 and 1995.
Included in the gain (loss) on sale of assets is $20,990 of loss on the sale
and writedown of North Valley Plaza in 1997.
43
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. INVESTMENTS IN JOINT VENTURES AND THE MANAGEMENT COMPANIES: (CONTINUED)
The following table sets forth the Operating Partnership's beneficial
interest in the joint ventures and the Management Companies:
PRO RATA SHARE OF COMBINED AND CONDENSED STATEMENT OF OPERATIONS OF
JOINT VENTURES AND THE MANAGEMENT COMPANIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Revenues............................................................. $ 15,152 $ 14,980 $ 15,393
--------- --------- ---------
Expenses:
Management Company expense......................................... 4,328 3,747 3,988
Shopping center expenses........................................... 4,238 3,856 4,042
Interest........................................................... 1,937 2,135 2,098
Depreciation and amortization...................................... 2,312 2,096 2,255
--------- --------- ---------
Total operating costs.............................................. 12,815 11,834 12,383
--------- --------- ---------
Gain (loss) on sale or write down of assets.......................... (10,400) 110 240
--------- --------- ---------
Net income (loss).................................................. $ (8,063) $ 3,256 $ 3,250
--------- --------- ---------
--------- --------- ---------
</TABLE>
4. PROPERTY:
Property is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Land...................................................................... $ 313,050 $ 239,847
Building improvements..................................................... 1,235,459 990,125
Tenant improvements....................................................... 38,097 34,149
Equipment & furnishings................................................... 7,576 4,769
Construction in progress.................................................. 13,247 4,195
--------- ---------
1,607,429 1,273,085
Less, accumulated depreciation............................................ (200,250) (164,417)
--------- ---------
$1,407,179 $1,108,668
--------- ---------
--------- ---------
</TABLE>
5. DEFERRED CHARGES AND OTHER ASSETS:
Deferred charges and other assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Leasing.............................................................. $ 28,101 $ 25,629
Financing............................................................ 14,396 7,891
------------- -------------
42,497 33,520
Less, accumulated amortization....................................... (18,127) (15,434)
------------- -------------
24,370 18,086
Other assets......................................................... 13,529 2,630
------------- -------------
$ 37,899 $ 20,716
------------- -------------
------------- -------------
</TABLE>
44
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. MORTGAGE NOTES PAYABLE:
Mortgage notes payable at December 31, 1997 and December 31, 1996 consist of
the following:
<TABLE>
<CAPTION>
CARRYING AMOUNT OF NOTES
----------------------------------------------
1997 1996
---------------------- ----------------------
PROPERTY PLEDGED RELATED RELATED INTEREST MATURITY
AS COLLATERAL OTHER PARTY OTHER PARTY RATE PAYMENT TERMS DATE
- ---------------------------------- ---------- ---------- ---------- ---------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Capitola Mall..................... -- $ 37,675 -- $ 37,976 9.25% 316(d) 2001
Chesterfield Towne Center......... $ 65,708 -- -- -- 9.10% 548(e) 2024
Chesterfield Towne Center......... -- -- $ 59,023 -- 8.75% 475(e) 2024
Chesterfield Towne Center......... -- -- 5,304 -- 9.38% 43(e) 2024
Chesterfield Towne Center......... -- -- 1,922 -- 8.88% 16(e) 2024
Chesterfield Towne Center......... 3,359 -- 3,444 -- 8.54% 28(d) 1999
Citadel........................... 75,600 -- -- -- 7.20% 544(d) 2008
Crossroads Mall(a)................ -- 35,638 -- 35,968 7.08% 244(d) 2010
Fresno Fashion Fair............... 38,000 -- 38,000 -- 8.40% interest only 2001
Greeley Mall...................... 17,815 -- 18,514 -- 8.50% 187(d) 2003
Green Tree Mall/ Crossroads--OK/
Salisbury(b).................... 117,714 -- 117,714 -- 7.23% interest only 2004
Holiday Village................... -- 17,000 -- 17,000 6.75% interest only 2001
Lakewood Mall(c).................. 127,000 -- 127,000 -- 7.20% interest only 2005
Northgate Mall.................... -- 25,000 -- 25,000 6.75% interest only 2001
Parklane Mall..................... -- 20,000 -- 20,000 6.75% interest only 2001
Queens Center..................... 65,100 -- 65,100 -- (f) interest only 1999
Rimrock Mall...................... 31,517 -- 31,994 -- 7.70% 244(d) 2003
South Towne Center................ 65,000 -- -- -- (g) interest only 2008
Valley View Center................ 51,000 -- 60,000 -- 7.89%(h) interest only 2006
Villa Marina Marketplace.......... 58,000 -- -- -- 7.23% interest only 2006
Vintage Faire Mall(i)............. 55,433 -- 56,280 -- 7.65% 427(d) 2003
---------- ---------- ---------- ----------
Total............................. $ 771,246 $ 135,313 $ 584,295 $ 135,944
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average interest rate at
December 31, 1997............... 7.42%
----------
----------
Weighted average interest rate at
December 31, 1996............... 7.45%
----------
----------
</TABLE>
- ------------------------
(a) This note was issued at a discount. The discount is being amortized over the
life of the loan using the effective interest method. At December 31, 1997
and December 31, 1996 the unamortized discount was $430 and $463,
respectively.
(b) This loan is cross collateralized by Green Tree Mall, Crossroads
Mall--Oklahoma and Salisbury.
(c) On August 15, 1995 the Company issued $127,000 of collateralized floating
rate notes (the "Notes"). The Notes bear interest at an average fixed rate
of 7.20% and mature in July 2005. The Notes require
45
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. MORTGAGE NOTES PAYABLE: (CONTINUED)
the Company to deposit all cash flow from the property operations with a
trustee to meet its obliga-tions under the Notes. Cash in excess of the
required amount, as defined, is released. Included in cash and cash
equivalents is $750 of restricted cash deposited with the trustee at
December 31, 1997 and 1996.
(d) This represents the monthly payment of principal and interest.
(e) This amount represents the monthly payment of principal and interest. In
addition, contingent interest, as defined in the loan agreement, may be due
to the extent that 35% of the amount by which the property's gross receipts
(as defined in the loan agreement) exceeds a base amount specified therein.
Contingent interest expense recognized by the Company was $98 for the year
ended December 31, 1997 and $399 for the year ended December 31, 1996. As of
January 1, 1997 all these loans were consolidated into a new loan of $66,200
at an interest rate of 9.1%.
(f) This loan bears interest at LIBOR plus 0.45%. There is an interest rate
protection agreement in place on the first $10,200 of this debt with a LIBOR
ceiling of 5.88% through maturity with the remaining principal having an
interest rate cap with a LIBOR ceiling at 7.07% through 1997 and 7.7%
thereafter.
(g) At December 31, 1997 this loan had an interest rate of LIBOR plus 1%, which
totalled 6.9%. In February 1998, this loan was converted into a fixed rate
loan bearing interest at 6.622% maturing in 2008.
(h) On April 16, 1997 the Company converted this loan into a fixed rate 10 year
loan bearing interest at 7.89% and maturing in October 2006.
(i) Included in cash and cash equivalents is $3,030 at December 31, 1997 and
1996, of cash restricted under the terms of this loan agreement.
Certain mortgage loan agreements contain a prepayment penalty provision for
the early extinguishment of the debt.
Total interest expense capitalized during 1997, 1996 and 1995 was $2,224,
$461, and $546, respectively.
The market value of mortgage notes payable at December 31, 1997 and December
31, 1996 is estimated to be approximately $1,013,000 and $733,000,
respectively, based on current interest rates for comparable loans.
46
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. MORTGAGE NOTES PAYABLE: (CONTINUED)
The above debt matures as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
- ----------------------------------------------------------------------------------
<S> <C>
1998.............................................................................. $ 4,671
1999.............................................................................. 73,419
2000.............................................................................. 5,468
2001.............................................................................. 142,074
2002.............................................................................. 5,934
2003 and beyond................................................................... 674,993
----------
$ 906,559
----------
----------
</TABLE>
7. BANK NOTES PAYABLE:
At December 31, 1997, the Company had $55,000 outstanding under its $60,000
unsecured credit facility. The notes bear interest at LIBOR plus 1.325%. As of
February 26, 1998, the Company increased this credit facility to $150,000 with a
maturity of February 2000.
8. CONVERTIBLE DEBENTURES:
On June 27, 1997, the Company issued and sold $150,000 of convertible
subordinated debentures (the "Debentures") due 2002. An additional $11,400 of
Debentures were sold in July 1997. The Debentures, which were sold at par, bear
interest at 7.25% annually (payable semi-annually) and are convertible at any
time, on or after 60 days, from the date of issue at a conversion price of
$31.125 per share. The Debentures mature on December 15, 2002 and are callable
by the Company after June 15, 2002 at par plus accrued interest.
9. RELATED-PARTY TRANSACTIONS:
The Company engaged the Management Companies to manage the operations of its
properties and certain unconsolidated joint ventures. During 1997, 1996 and 1995
management fees of $2,219, $1,788 and $1,456, respectively, were paid to the
Management Companies by the Company.
Certain mortgage notes are held by one of the Company's joint venture
partners. Interest expense, in connection with these notes was $10,287, $10,168
and $8,226 for the years ended December 31, 1997, 1996 and 1995, respectively.
Included in accounts payables and accrued expense is interest payable to these
partners of $518, $516 and $537 at December 31, 1997, 1996, and 1995
respectively.
Included in due to affiliates at December 31, 1997 is $14,800 which is a
note payable to the Management Companies for the purchase of Great Falls
Marketplace. The note was paid off in February 1998.
In 1997 certain executive officers, under the terms of the employee
incentive plan, received loans from the Company totaling $5,500. These loans are
full recourse to the executives. $5,000 of the loans bear interest at 7%, are
due in 2007 and are secured by Company Stock owned by the executives. The
remaining
47
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. RELATED-PARTY TRANSACTIONS: (CONTINUED)
loan is non interest bearing and is forgiven ratably over a five year term.
These loans receivable are included in other assets at December 31, 1997.
Certain Company officers and affiliates have guaranteed mortgages of $21,750
at one of the Company's joint venture properties and $2,000 at Greeley Mall.
10. FUTURE RENTAL REVENUES:
Under existing noncancellable operating lease agreements, tenants are
committed to pay the following minimum rentals to the Company:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
- ----------------------------------------------------------------------
<S> <C>
1998.................................................................. $ 142,023
1999.................................................................. 132,589
2000.................................................................. 119,643
2001.................................................................. 103,807
2002.................................................................. 92,896
2003 and beyond....................................................... 415,539
------------
$ 1,006,497
------------
------------
</TABLE>
11. COMMITMENTS AND CONTINGENCIES:
The Company has certain properties subject to noncancellable operating
ground leases. The leases expire at various times through 2070, subject in some
cases to options to extend the terms of the lease. Certain leases provide for
contingent rent payments based on a percent of base rent income, as defined.
Ground rent expenses were $817 (including contingent rent of $0) in 1997, $704
(including contingent rent of $0) in 1996 and $1,944 (including contingent rents
of $1,168) in 1995.
Minimum future rental payments required under the leases are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
- -------------------------------------------------------------------------
<S> <C>
1998..................................................................... $ 412
1999..................................................................... 456
2000..................................................................... 456
2001..................................................................... 449
2002..................................................................... 449
2003 and beyond.......................................................... 20,359
---------
$ 22,581
---------
---------
</TABLE>
Certain leases also require the lessee to pay real estate taxes, insurance
and certain other operating costs applicable to the leased property.
48
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
Perchloroethylene (PCE) has been detected in soil and groundwater in the
vicinity of a dry cleaning establishment at North Valley Plaza, which was sold
to a third party on December 18, 1997. The California Department of Toxic
Substance Control (DTSC) advised the Company in 1995 that very low levels of
Dichlorethylene (1,2,DCE), a degradation byproduct of PCE, have been detected in
a water well located 1/4 mile west from the dry cleaners, and that the dry
cleaning facility may have contributed to the introduction of 1,2 DCE into the
water well. According to DTSC, the maximum contaminant level (MCL) for 1,2DCE
which is permitted in drinking water is 6 parts per billion (ppb). The 1,2DCE
which was detected in the water well at 1.2 ppb, is below the MCL. The Company
has retained an environmental consultant and has initiated extensive testing of
the site. Remediation began in October 1997. The joint venture that owned the
property agreed (between itself and the buyer) that it would be responsible for
continuing to pursue the investigation and remediation of impacted soil and
groundwater resulting from releases of PCE from the shopping center's former dry
cleaner. $124 and $155 has already been incurred by the Company for remediation,
and professional and legal fees in 1997 and 1996, respectively. An additional
$561 remains reserved by the Company as of December 31, 1997. The Company has
initiated cost recovery actions and intends to continue to look to responsible
parties for recovery.
Toluene, a petroleum constituent, was detected in one of three groundwater
dewatering system holding tanks at Queens Center. Although the source of the
tolulene has not been fully defined, the Company suspects the source to be
either an adjacent automotive service station and/or a previous automotive
service station, which operated on site prior to development of the mall.
Toluene was detected at levels of 410 and 160 parts per billion (ppb) in samples
taken from the tank in October, 1995 and February 1996, respectively. Additional
samples were taken in May and December of 1996, with results of .63 ppb and
"non-detect" for the May sampling event and 16.2 ppb and 25.2 ppb for the
December sampling event. The maximum containment level (MCL) for toluene in
drinking water is 1000 ppb. Although the Company believes that no remediation
will be required, it set up a $150 reserve in 1996 to cover professional fees
and testing costs, which was reduced by $18 of costs incurred in 1997. The
Company intends to look to the responsible parties and insurers if remediation
is required.
The Company acquired Fresno Fashion Fair in December 1996. Asbestos has been
detected in structural fireproofing throughout much of the Mall. Recent testing
data conducted by professional environmental consulting firms indicates that the
fireproofing is largely inaccessible to building occupants and is well adhered
to the structural members. Additionally, airborne concentrations of asbestos are
well within OSHA's permissible exposure limit (PEL) of .1 fcc. The accounting
for this acquisition included a reserve of $3,300 to cover future removal of
this asbestos, as necessary. The Company incurred $170 for abatement of this
asbestos in 1997.
Dry cleaning chemicals including PCE were detected in soil and groundwater
in the vicinity of a former dry cleaning establishment at Huntington Center. The
release has been reported to the local government authorities. The Company has
retained an environmental consultant and is conducting additional site
assessment activities to attempt to determine the extent to which groundwater
has been impacted. The Company estimates, based on the data currently available,
that costs for assessment, remediation and legal services will not exceed $500.
Consequently, at the time of the acquisition, the Company established a $500
reserve to cover professional and legal fees. $9 and $6 has been incurred for
remediation in 1997 and 1996, respectively. The Company intends to look to
responsible parties and insurers for cost recovery.
49
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
12. PROFIT SHARING PLAN:
The Management Companies and the Company have a retirement profit sharing
plan that was established in 1984 covering substantially all of their eligible
employees. The plan is qualified in accordance with section 401(a) of the
Internal Revenue Code. Effective January 1, 1995 this plan was modified to
include a 401(k) plan whereby employees can elect to defer compensation subject
to Internal Revenue Service withholding rules. Contributions by the Management
Companies are made at the discretion of the Board of Directors and are based
upon a specified percentage of employee compensation. The Management Companies
and the Company contributed $400, $350 and $348 to the plan in 1997, 1996 and
1995, respectively.
13. STOCK INCENTIVE PLAN:
The Company has established an employee stock incentive plan under which
stock options or restricted stock may be awarded for the purpose of attracting
and retaining executive officers, directors and key employees. The Company has
issued options to employees and directors to purchase shares of the Company
under the stock incentive plan. The term of these options is ten years from the
grant date. These options generally vest 33 1/3% per year over three years and
were issued and are exercisable at the market value of the common stock at the
grant date.
In addition, the Company has established a plan for non employee directors.
The non employee director options have a term of ten years from the grant date,
vest six months after grant and are issued at the market value of the common
stock on grant date. The plan reserved 52,500 shares, all of which were granted
as of December 31, 1997.
Also, under the employees stock incentive plan 131,196 shares of restricted
stock have been issued to executives. These awards are granted based on certain
performance criteria for the Company. The restricted stock generally vests over
5 years and the compensation expense related to these grants is determined by
market value at the grant date and is amortized over the vesting period on a
straight line basis. As of December 31, 1997 and 1996, 8,248 and 0 shares,
respectively, of restricted stock had vested. A total of 89,958 shares at a
weighted average price of $27.46 were issued in 1997 and 41,238 shares were
issued during 1996, at a weighted average price of $20.70, no shares were issued
or outstanding in 1995. Restricted stock is subject to restrictions determined
by the Company's compensation committee. Restricted stock has the same dividend
and voting rights as other common stock and is considered issued when vested.
Compensation expense for restricted stock was $239 in 1997 and $0 for the years
ended December 31, 1996 and 1995.
50
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. STOCK INCENTIVE PLAN: (CONTINUED)
An additional 691,803 and 412,762 shares were reserved and were available
for issuance under the stock incentive plan at December 31, 1997 and 1996,
respectively. The plan allows for granting options or restricted stock at market
value.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EMPLOYEE PLAN DIRECTOR PLAN EXERCISE PRICE
--------------------------- -------------------------- # OF OPTIONS ON EXERCISABLE
OPTION PRICE OPTION PRICE EXERCISABLE OPTIONS
SHARES PER SHARE SHARES PER SHARE AT YEAR END AT YEAR END
---------- --------------- --------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding at December 31,
1994............................... 1,148,000 $ 19.00-$19.63 17,500 $ 19.00-$21.38
Granted........................... 115,000 $ 20.25 5,000 $ 20.00
Exercised......................... (2,000) $ 19.00 -- --
Forfeited......................... (6,500) -- -- --
---------- --------------- --------- ---------------
Shares outstanding at December 31,
1995............................... 1,254,500 $ 19.00-$20.25 22,500 $ 19.00-$21.38 399,784 $ 19.02
--------------- --------------- ------------ ------
------------ ------
Granted........................... 281,000 $ 21.62 5,000 $ 26.12
Exercised......................... (16,000) $ 19.00 -- --
Forfeited......................... (7,166) -- -- --
--------------- ---------------
Shares outstanding at December 31,
1996............................... 1,512,334 $ 19.00-$21.62 27,500 $ 19.00-$26.12 793,697 $ 19.09
--------------- --------------- ------------ ------
------------ ------
Granted........................... 349,109 $ 26.50-$26.88 25,000 $ 28.50
Exercised......................... (253,552) $ 19.00 -- --
Forfeited......................... (8,000) -- -- --
---------- --------------- --------- ---------------
Shares outstanding at December 31,
1997............................... 1,599,891 $ 19.00-$26.88 52,500 $ 19.00-$28.50 1,230,227 $ 20.58
---------- --------------- --------- --------------- ------------ ------
---------- --------------- --------- --------------- ------------ ------
</TABLE>
The weighted average exercise price for options granted in 1995 is $20.25,
in 1996 is $21.65 and in 1997 is $27.06.
51
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. STOCK INCENTIVE PLAN: (CONTINUED)
The weighted average remaining contractual life for options outstanding at
December 31, 1997 is 6.25 years and the weighted average remaining contractual
life for options exercisable at December 31, 1997 is 6.25 years.
The Company records options granted using Accounting Principles Board (APB)
opinion Number 25, Accounting for Stock Issued to Employees and Related
Interpretations. Accordingly, no compensation expense is recognized on the date
the options are granted. If the Company had recorded compensation expense using
the methodology prescribed in Financial Accounting Standards Number 123, the
Company's net income would have been reduced by approximately $108 or $0.00 per
share for the year ended December 31, 1997 and $56 or $0.00 per share for the
year ended December 31, 1996.
The weighted average fair value of options granted during 1997 and 1996 are
$2.51 and $1.89, respectively. The fair value of each option grant issued in
1997 and 1996 is estimated at the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions: (a)
dividend yield of 7.0% in 1997 and 7.5% in 1996, (b) expected volatility of the
Company's stock of 14.9% in 1997 and 17.6% in 1996, (c) a risk free interest
rate based on U.S. Zero Coupon Bonds with time of maturity approximately equal
to the options' expected time to exercise and (d) expected option lives of five
and seven years for options granted in 1997 and 1996, respectively.
14. DEFERRED COMPENSATION PLANS:
The Company has established deferred compensation plans under which key
executives of the Company may elect to defer receiving a portion of their cash
compensation otherwise payable in one calendar year until a later year. The
Company may, as determined by the Board of Directors in its sole discretion,
credit a participant's account with an amount equal to a percentage of the
participant's deferral. The Company contributed $154 during 1997, $125 during
1996 and $104 in 1995 to two of these plans.
In addition, certain executives have split dollar life insurance agreements
with the Company whereby the Company generally pays annual premiums on a life
insurance policy in an amount equal to the executives deferral under one of the
Company's deferred compensation plans.
15. ACQUISITIONS:
On March 16, 1994, concurrent with the IPO, the Company acquired Crossroads
Mall--Oklahoma ("Crossroads--OK"). Crossroads--OK is a 1,112,470 million square
foot super regional mall in Oklahoma City, Oklahoma. The purchase price was
$51,500 and was paid in cash.
On July 21, 1994, the Company acquired Chesterfield Towne Center
("Chesterfield") in Richmond, Virginia. Chesterfield is a 817,290 square foot
regional mall. The purchase price of $84,500 was paid with approximately $13,100
in cash, $3,900 in OP Units of the Operating Partnership and assumption of the
existing mortgage of approximately $67,500.
On August 15, 1995 the Company acquired The Centre at Salisbury
("Salisbury"), an 883,791 square foot super regional mall. The total purchase
price was $78,000, and was comprised of $55,600 of cash, $21,000 of debt and
approximately $1,400 in OP Units.
Capitola Mall ("Capitola") was acquired on December 21, 1995. Capitola is a
585,340 square foot regional mall. The purchase price was $57,500 and was
comprised of the issuance of OP Units valued at
52
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
15. ACQUISITIONS: (CONTINUED)
$12,100, the assumption of $38,300 of mortgage indebtedness, and cash of $2,100.
The remaining $5,000 of consideration will be paid in OP Units in five years.
Queens Center ("Queens"), a 625,677 square foot regional mall, was acquired
on December 28, 1995. The total purchase price was $108,000 which consisted of
assumption of debt of $66,000 and $42,000 of cash.
Villa Marina Marketplace ("Villa Marina") was acquired on January 25, 1996.
Villa Marina is a 448,517 square foot community center/entertainment complex
located in Marina del Rey, California. The purchase price was $80,000,
consisting of $57,600 of cash and $22,400 of assumption of mortgage
indebtedness.
Valley View Center is a super regional mall in Dallas, Texas which the
Company acquired on October 21, 1996. Valley View Mall contains 1,519,453 square
feet and the purchase price was $87,500.
Rimrock Mall, located in Billings, Montana, and Vintage Faire Mall, located
in Modesto, California were purchased simultaneously on November 27, 1996. The
combined purchase price was $118,200. Vintage Faire Mall is a super regional
mall with 1,051,458 square feet and Rimrock Mall is a regional mall consisting
of 581,688 square feet.
Buenaventura Mall, Fresno Fashion Fair and Huntington Center were purchased
on December 18, 1996 for a combined price of $128,900. Buenaventura Mall,
located in Ventura, California, is an 801,277 square foot regional mall, Fresno
Fashion Fair, located in Fresno, California, is a super regional mall containing
881,394 square feet and Huntington Center, located in Huntington Beach,
California, consists of 839,901 square feet.
South Towne Center was acquired on March 27, 1997. South Towne Center is a
1,240,143 square foot super regional mall located in Sandy, Utah. The purchase
price was $98,000, consisting of $52,000 of cash and $46,000 of assumed mortgage
indebtedness.
Stonewood Mall is a super regional mall in Downey, California which the
Company acquired on August 6, 1997. Stonewood Mall contains 927,218 square feet
and the purchase price was $92,000 which was funded with $58,000 in proceeds
from a 10 year fixed rate loan placed concurrently on Villa Marina Marketplace
and the balance from cash on hand.
Manhattan Village located in Manhattan Beach, California was purchased by a
joint venture on August 19, 1997. The Company owns a 10% interest in the joint
venture. Manhattan Village is a regional center with a total of 551,685 square
feet of retail, restaurant and entertainment space. The purchase price was
$66,600.
The Citadel, a 1,044,852 square foot super regional mall in Colorado
Springs, Colorado was purchased on December 19, 1997 for $108,000. The purchase
price was funded by a concurrently placed loan of $75,600 plus $32,400 in cash.
Great Falls Marketplace is a 143,570 square foot community center developed
by the Management Companies and sold to the Company on December 31, 1997. The
purchase price of $14,800 approximates the cost incurred by the Management
Companies to acquire and develop the site.
53
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
On February 27, 1998, the Company, through a recently formed 50/50 joint
venture with an affiliate of Simon DeBartolo Group, Inc., acquired the ERE
Yarmouth portfolio of twelve regional malls. The properties in the portfolio
comprise 10.7 million square feet and are located in eight states. The total
purchase price was $974,500, which included $485,000 of assumed debt.
16. UNAUDITED PRO FORMA FINANCIAL INFORMATION:
The following unaudited pro forma financial information combines the
consolidated results of operations of the Company for 1997 and 1996 as if the
1997 Acquisitions had occurred on January 1, 1996, after giving effect to
certain adjustments, including depreciation, interest expense relating to debt
incurred to finance the acquisitions and general and administrative expense to
manage the properties. The pro forma information is based on assumptions
management believes to be appropriate. The pro forma information is not
necessarily indicative of what the actual results would have been had the
acquisitions occurred at the beginning of the period indicated, nor does it
purport to project the Company's financial position or results of operations at
any future date or for any future period.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Revenues.............................................................. $ 242,084 $ 189,358
Income before minority interest and extraordinary items............... 30,984 27,837
Income before extraordinary items..................................... 20,935 17,730
Net income............................................................ 20,558 17,415
Per share income before extraordinary items........................... $ 0.80 $ 0.85
Net income per share--basic........................................... $ 0.79 $ 0.84
Weighted average number of common shares outstanding-- basic.......... 25,891 20,781
Per share income before extraordinary items........................... $ 0.79 $ 0.83
Net income per share--diluted......................................... $ 0.78 $ 0.82
Weighted average number of common shares outstanding-- diluted........ 26,312 21,167
</TABLE>
54
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
17. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a summary of periodic results of operations for 1997 and
1996:
<TABLE>
<CAPTION>
1997 QUARTER ENDED 1996 QUARTER ENDED
------------------------------------------ ------------------------------------------
DEC 31 SEPT 30 JUNE 30 MAR 31 DEC 31 SEPT 30 JUNE 30 MAR 31
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.............................. $ 61,529 $ 57,032 $ 52,350 $ 50,303 $ 43,924 $ 37,749 $ 38,093 $ 35,293
Income before minority interest and
extraordinary items................. 10,626 2,792 9,839 9,911 8,417 7,479 7,240 7,065
Income before extraordinary items..... 7,253 2,035 6,385 6,751 5,539 4,659 4,502 4,401
Net income............................ 7,253 1,870 6,172 6,751 5,539 4,659 4,312 4,401
Income before extraordinary items per
share--basic........................ $ 0.28 $ 0.07 $ 0.25 $ 0.26 $ 0.24 $ 0.23 $ 0.22 $ 0.22
Net income per share--basic........... $ 0.28 $ 0.07 $ 0.24 $ 0.26 $ 0.24 $ 0.23 $ 0.21 $ 0.22
</TABLE>
18. SUBSEQUENT EVENTS:
On January 30, 1998 a $0.46 per share dividend was declared, payable to
stockholders of record as of February 9, 1998 and paid on March 5, 1998.
On February 27, 1998, the Company, through a 50/50 joint venture, acquired a
portfolio of 12 regional malls. The total purchase price was $974,500 including
the assumption of $485,000 in debt. The Company funded its half of the remaining
purchase price by issuing 3,627,131 shares of convertible preferred stock for
proceeds totaling $100,000 in a private placement. The preferred stock can be
converted on a one for one basis into common stock and will pay a dividend equal
to the greater of $0.46 per share per quarter or the dividend then payable on a
share of common stock. The Company also issued 2,879,134 shares of common stock
($79,600 of total proceeds) from the Company's shelf registration, at an average
price of $27.65, to two unit trusts. The balance of the purchase price was
funded from the Company's $150,000 line of credit.
55
<PAGE>
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT CLOSE
INITIAL COST TO COMPANY OF PERIOD
--------------------------------------- COST ---------------------------------------
EQUIPMENT CAPITALIZED FURNITURE,
BUILDING AND AND SUBSEQUENT TO BUILDING AND FIXTURES AND
LAND IMPROVEMENTS FURNISHINGS ACQUISITION LAND IMPROVEMENTS EQUIPMENT
--------- ------------- ------------- ------------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers
Bristol Shopping Center....... $ 0 $ 11,051 $ 0 $ 1,856 $ 132 $ 12,773 $ 0
Boulder Plaza................. 2,650 7,950 0 2,154 2,919 9,835 0
Buenaventura Mall............. 8,697 8,697 0 1,738 8,697 8,793 6
Capitola Mall................. 11,312 46,689 0 914 11,309 47,577 29
Chesterfield Towne Center..... 18,517 72,936 2 5,798 18,517 77,076 1,620
Citadel, The.................. 21,600 86,711 0 0 21,600 86,711 0
County East Mall.............. 2,633 15,131 716 13,292 4,099 26,833 793
Crossroads Mall--Boulder...... 0 37,528 64 29,253 21,616 41,964 115
Crossroads Mall--Oklahoma..... 10,279 43,458 291 5,914 10,279 45,944 339
Fresno Fashion Fair........... 17,966 72,194 0 (1,173) 17,966 70,986 33
Great Falls Marketplace....... 2,960 11,840 0 0 2,960 11,840 0
Greeley Mall.................. 5,600 12,617 13 7,561 5,600 20,100 91
Green Tree Mall............... 4,947 14,893 332 22,813 4,947 37,599 439
Holiday Village Mall.......... 2,311 13,488 138 22,025 3,491 34,268 203
Huntington Center............. 11,868 11,868 0 1,449 11,868 11,965 4
Lakewood Mall................. 12,502 31,158 117 92,888 24,913 109,456 638
Northgate Mall................ 7,144 29,805 841 24,051 8,400 52,508 929
Parklane Mall................. 1,377 11,775 173 16,175 2,409 25,206 395
Queens Center................. 21,460 86,631 8 1,670 21,454 87,390 629
Rimrock Mall.................. 8,737 35,652 0 929 8,737 36,498 77
Salisbury, The Centre at...... 15,290 63,474 31 925 15,284 63,967 469
South Towne Center............ 19,600 78,954 0 3,030 19,600 81,961 23
Stonewood Mall................ 18,400 73,933 0 127 18,400 74,046 14
Valley View Center............ 17,100 68,687 0 3,368 17,100 71,261 616
Villa Marina Marketplace...... 15,852 65,441 0 400 15,852 65,811 21
Vintage Faire Mall............ 14,902 60,532 0 751 14,901 61,188 93
--------- ------------- ------ ------------- --------- ------------- ------
$ 273,703 $ 1,073,092 $ 2,726 $ 257,908 $ 313,050 $ 1,273,556 $ 7,576
--------- ------------- ------ ------------- --------- ------------- ------
--------- ------------- ------ ------------- --------- ------------- ------
<CAPTION>
TOTAL COST
NET OF
CONSTRUCTION ACCUMULATED ACCUMULATED
IN PROGRESS TOTAL DEPRECIATION DEPRECIATION
------------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Shopping Centers
Bristol Shopping Center....... $ 2 $ 12,907 $ 5,140 $ 7,767
Boulder Plaza................. 0 12,754 2,542 10,212
Buenaventura Mall............. 1,635 19,131 243 18,888
Capitola Mall................. 0 58,915 2,514 56,401
Chesterfield Towne Center..... 40 97,253 8,594 88,659
Citadel, The.................. 0 108,311 85 108,226
County East Mall.............. 47 31,772 9,452 22,320
Crossroads Mall--Boulder...... 3,150 66,845 22,224 44,621
Crossroads Mall--Oklahoma..... 3,380 59,942 5,695 54,247
Fresno Fashion Fair........... 2 88,987 1,927 87,060
Great Falls Marketplace....... 0 14,800 1 14,799
Greeley Mall.................. 0 25,791 9,022 16,769
Green Tree Mall............... 0 42,985 19,299 23,686
Holiday Village Mall.......... 0 37,962 19,161 18,801
Huntington Center............. 1,347 25,184 327 24,857
Lakewood Mall................. 1,658 136,665 41,447 95,218
Northgate Mall................ 4 61,841 17,756 44,085
Parklane Mall................. 1,490 29,500 15,539 13,961
Queens Center................. 296 109,769 4,555 105,214
Rimrock Mall.................. 6 45,318 1,053 44,265
Salisbury, The Centre at...... 0 79,720 3,987 75,733
South Towne Center............ 0 101,584 1,640 99,944
Stonewood Mall................ 0 92,460 769 91,691
Valley View Center............ 178 89,155 2,238 86,917
Villa Marina Marketplace...... 9 81,693 3,294 78,399
Vintage Faire Mall............ 3 76,185 1,746 74,439
------------- --------- ------------- ------------
$ 13,247 $1,607,429 $ 200,250 $1,407,179
------------- --------- ------------- ------------
------------- --------- ------------- ------------
</TABLE>
56
<PAGE>
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
Depreciation and amortization of the Macerich Company's investment in
buildings and improvements reflected in the statements of income are calculated
over the estimated useful lives of the asset as follows:
<TABLE>
<S> <C>
Buildings and Improvements.............................. 5-40 years
life of related
Tenant Improvements..................................... lease
Equipment and Furnishings............................... 5-7 years
</TABLE>
The changes in total real estate assets for the three years ended December
31, 1997 are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- ---------- -----------
<S> <C> <C> <C>
Balance, beginning of year.............................. 554,788 833,998 1,273,085
Additions............................................... 279,210 439,087 334,344
Disposals and retirements............................... 0 0 0
--------- ---------- -----------
Balance, end of year.................................... 833,998 1,273,085 1,607,429
--------- ---------- -----------
--------- ---------- -----------
</TABLE>
The changes in accumulated depreciation and amortization for the three years
ended December 31, 1997 are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Balance, beginning of year................................... 119,466 139,098 164,417
Additions.................................................... 19,632 25,319 35,833
Disposals and retirements.................................... 0 0 0
--------- --------- ---------
Balance, end of year......................................... 139,098 164,417 200,250
--------- --------- ---------
--------- --------- ---------
</TABLE>
57
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
THE MACERICH COMPANY
By: /s/ ARTHUR M. COPPOLA
-----------------------------------------
Arthur M. Coppola
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
/s/ ARTHUR M. COPPOLA President and Chief
- ------------------------------ Executive Officer And March 26, 1998
Arthur M. Coppola Director
/s/ MACE SIEGEL
- ------------------------------ Chairman of the Board March 26, 1998
Mace Siegel
/s/ DANA K. ANDERSON
- ------------------------------ Vice Chairman of the Board March 26, 1998
Dana K. Anderson
/s/ EDWARD C. COPPOLA
- ------------------------------ Executive Vice President March 26, 1998
Edward C. Coppola and Director
/s/ JAMES COWNIE
- ------------------------------ Director March 26, 1998
James Cownie
/s/ THEODORE HOCHSTIM
- ------------------------------ Director March 26, 1998
Theodore Hochstim
/s/ FREDERICK HUBBELL
- ------------------------------ Director March 26, 1998
Frederick Hubbell
/s/ STANLEY MOORE
- ------------------------------ Director March 26, 1998
Stanley Moore
/s/ WILLIAM SEXTON
- ------------------------------ Director March 26, 1998
William Sexton
Senior Vice President,
/s/ THOMAS E. O'HERN Treasurer and Chief
- ------------------------------ Financial and Accounting March 26, 1998
Thomas E. O'Hern Officer
58
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- -------------- --------------------------------------------------------------------------------- -----------------
<C> <S> <C>
3.1* Articles of Amendment and Restatement of the Company
3.1.1** Articles Supplementary of the Company
3.2* Bylaws of the Company
4.1** Form of Common Stock Certificate
4.2 Form of Preferred Stock Certificate
4.3***** Indenture for Convertible Subordinated Debentures dated June 27, 1997
10.1*** Amended and Restated Limited Partnership Agreement for the Operating Partnership,
dated as of March 16, 1994
10.1.1***** Amendment to Amended and Restated Limited Partnership Agreement for the Operating
Partnership dated June 27, 1997
10.1.2 Amendment to Amended and Restated Limited Partnership Agreement for the Operating
Partnership dated November 16, 1997
10.1.3 Fourth Amendment to Amended and Restated Limited Partnership Agreement for the
Operating Partnership dated February 25, 1998
10.1.4 Fifth Amendment to Amended and Restated Limited Partnership Agreement for the
Operating Partnership dated February 26, 1998
10.2*** Employment Agreement between the Company and Mace Siegel, dated as of March 16,
1994
10.2.1*** List of omitted Employment Agreements
10.2.2 Employment Agreement between Macerich Management Company and Larry Sidwell dated
as of February 11, 1997
10.3 The Macerich Company Amended and Restated 1994 Incentive Plan
10.4**** The Macerich Company 1994 Eligible Directors' Stock Option Plan
10.5**** The Macerich Company Deferred Compensation Plan
10.6**** The Macerich Company Deferred Compensation Plan for Mall Executives
10.7*** The Macerich Company Eligible Directors' Deferred Compensation Plan/Phantom Stock
Plan
10.8*** The Macerich Company Executive Officer Salary Deferral Plan
10.9*** Registration Rights Agreement, dated as of March 16, 1994, between the Company
and The Northwestern Mutual Life Insurance Company
10.10*** Registration Rights Agreement, dated as of March 16, 1994, among the Company and
Mace Siegel, Dana K. Anderson, Arthur M. Coppola and Edward C. Coppola
10.11*** Registration Rights Agreement, dated as of March 16, 1994, among the Company,
Richard M. Cohen and MRII Associates
10.12***** Registration Rights Agreement dated as of June 27, 1997
10.13 Registration Rights Agreement dated as of February 25, 1998
10.14*** Incidental Registration Rights Agreement, dated as of March 16, 1994
10.15 Incidental Registration Rights Agreement dated as of July 21, 1994
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- -------------- --------------------------------------------------------------------------------- -----------------
<C> <S> <C>
10.16 Incidental Registration Rights Agreement dated as of August 15, 1995
10.17 Incidental Registration Rights Agreement dated as of December 21, 1995
10.17.1 List of Incidental/Demand Registration Rights Agreements, Election Forms,
Accredited/Non-Accredited Investors Certificates, and Investor Certificates
10.18*** Indemnification Agreement, dated as of March 16, 1994, between the Company and
Mace Siegel
10.18.1*** List of omitted Indemnification Agreements
10.19* Partnership Agreement for Macerich Northwestern Associates, dated as of January
17, 1985, between Macerich Walnut Creek Associates and The Northwestern Mutual
Life Insurance Company
10.20*** First Amendment to Macerich Northwestern Associates Partnership Agreement between
Operating Partnership and The Northwestern Mutual Life Insurance Company
10.21* Agreement of Lease (Crossroads-Boulder), dated December 31, 1960, between H.R.
Hindry, as lessor, and Gerri Von Frellick, as lessee, with amendments and
supplements thereto
10.22 Secured Full Recourse Promissory Note dated November 17, 1997 Due November 16,
2007 made by Edward C. Coppola to the order of the Company
10.23 List of omitted Secured Full Recourse Notes
10.24 Stock Pledge Agreement dated as of November 17, 1997 made by Edward C. Coppola
for the benefit of the Company
10.25 List of omitted Stock Pledge Agreements
10.26 Promissory Note dated as of May 2, 1997 made by David S. Contis to the order of
Macerich Management Company
10.27****** Purchase and Sale Agreement between The Equitable Life Assurance Society of the
United States and S.M. Portfolio Partners
10.28 Partnership Agreement of S.M. Portfolio Ltd. Partnership
21.1 List of Subsidiaries
23.1 Consent of Independent Accountants (Coopers & Lybrand L.L.P.)
</TABLE>
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<TABLE>
<C> <S>
* Previously filed as an exhibit to the Company's Registration Statement on Form
S-11, as amended (No. 33-68964), and incorporated herein by reference.
** Previously filed as an exhibit to the Company's Current Report on Form 8-K,
event date May 30, 1995, and incorporated herein by reference.
*** Previously filed as an exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, and incorporated herein by reference.
**** Previously filed as an exhibit to the Company's Quarterly Statement on Form 10-Q
for the quarter ended June 30, 1994, and incorporated herein by reference.
***** Previously filed as an exhibit to the Company's Current Report on Form 8-K,
event date June 20, 1997, and incorporated herein by reference.
****** Previously filed as an exhibit to the Company's Current Report on Form 8-K,
event date February 27, 1998, and incorporated herein by reference.
</TABLE>
<PAGE>
NUMBER SHARES
THE MACERICH COMPANY
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK, $0.01 PAR VALUE
SEE REVERSE FOR IMPORTANT NOTICE ON TRANSFER RESTRICTIONS AND OTHER INFORMATION
This Certifies that __________________________________________________ is the
record holder of ____________________________________________________________
fully paid and nonassessable Shares of the Series A Cumulative Convertible
Preferred Stock of
THE MACERICH COMPANY
Incorporated under the Laws of the State of Maryland
transferable on the share register of said Corporation in person or by its
duly authorized Attorney upon surrender of this Certificate properly endorsed
or assigned. This Certificate and the shares represented hereby are issued
and shall be held subject to all of the provisions of the charter of the
Corporation (the "Charter") and the Bylaws of the Corporation and any
amendments thereto.
IMPORTANT NOTICE
The Corporation will furnish to any stockholder, on request and without
charge, a full statement of the information required by Section 2-211(b) of
the Corporations and Associations Article of the Annotated code of Maryland
with respect to the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications, and terms and conditions of redemption of the
stock of each class which the Corporation has authority to issue and, if the
Corporation is authorized to issue any preferred or special class in series,
(i) the differences in the relative rights and preferences between the shares
of each series to the extent set, and (ii) the authority of the Board of
Directors to set such rights and preferences of subsequent series. The
foregoing summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the charter of the Corporation, a
copy of which will be sent without charge to each stockholder who so
requests. Such request must be made to the Secretary of the Corporation at
its principal office.
Witness the Seal of the Corporation and the signatures of its duly
authorized officers.
Dated:
- -------------------------- -----------------------
President Secretary
<PAGE>
For Value Received,________________ hereby sell, assign and transfer unto
_________________ Shares of the Series A Cumulative Convertible Preferred
Stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint __________________________ Attorney to transfer the
said Stock on the books of the within named Corporation with full power of
substitution in the premises.
Dated _____________________________
in presence of ___________________________________________________
NOTICE. THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
NO.
CERTIFICATE
FOR
SHARES
OF
SERIES A CUMULATIVE CONVERTIBLE
PREFERRED STOCK
ISSUED TO
DATED
The securities represented by this certificate are subject to restrictions
on ownership and transfer for the purpose of the Corporation's maintenance of
its status as a real estate investment trust under the Internal Revenue Code
of 1986, as amended (the "Code"). Except as otherwise provided pursuant to
the charter of the Corporation, no Person may (1) Beneficially Own shares of
Equity Stock in excess of 5.0% (or such greater percentage as may be provided
in the charter of the Corporation) of the number or value of the outstanding
Equity Stock of the Corporation (unless such Person is an Excluded
Participant), or (2) Beneficially Own Equity Stock that would result in the
Corporation being "closely held" under Section 856(h) of the Code (determined
without regard to Code Section 856(h)(2) and by deleting the words "the last
half of" in the first sentence of Code Section 542(a)(2) in applying Code
Section 856(h)), or (3) beneficially own Equity Stock that would result in
Common Stock and Preferred Stock being beneficially owned by fewer than 100
Persons (determined without reference to any rules of attribution). Any
Person who attempts to Beneficially Own Shares of Equity Stock in excess of
the above limitations must immediately notify the Corporation. All
capitalized terms in this legend have the meanings defined in the
Corporation's charter, as the same may be further amended from time to time,
a copy of which, including the restrictions on ownership or transfer, will be
sent without charge to each stockholder who so requests. Transfers or other
events in violation of the restrictions described above shall be null and
void AB INITIO, and the purported transferee or purported owner shall acquire
or retain no rights to, or economic interest in, any Equity Stock held in
violation of these restrictions. The Corporation may redeem such shares upon
the terms and conditions specified by the Board of Directors in its sole
discretion if the Board of Directors determines that a Transfer or other
event would violate the restrictions described above. In addition, if the
restrictions on ownership or transfer are violated, the shares of Equity
Stock represented hereby shall be automatically exchanged for shares of
Excess Stock which will be held in trust for the benefit of a Beneficiary.
Excess stock may not be transferred at a profit. The Corporation has an
option to acquire Excess Stock under certain circumstances.
<PAGE>
AMENDMENT TO THE
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT OF
THE MACERICH PARTNERSHIP, L.P.
THIS AMENDMENT (the "AMENDMENT") TO THE AMENDED AND RESTATED LIMITED
PARTNERSHIP AGREEMENT DATED AS OF MARCH 16, 1994, AMENDED AS OF AUGUST 14,
1995 AND AS OF JUNE 27, 1997 (the "AGREEMENT") OF THE MACERICH PARTNERSHIP,
L.P. (the "PARTNERSHIP") is dated effective as of November 16, 1997.
RECITALS
WHEREAS, The Macerich Company, the general partner of the Partnership
(the "GENERAL PARTNER"), has determined to amend the Partnership Agreement to
clarify and confirm its ability to borrow funds from the Partnership in order
to make loans for such purposes as are permitted under The Macerich Company
Amended and Restated 1994 Incentive Plan (the "PLAN").
WHEREAS, SECTION 3.3(c) of the Agreement contemplates that the General
Partner may provide incentives to its executive officers in accordance with
the Plan, including the making of loans to such executive officers for such
purposes as are permitted by the Plan;
WHEREAS, SECTION 3.4 of the Agreement purportedly limits the ability of
the General Partner to incur indebtedness and does not expressly include an
exception that would allow the General Partner to incur indebtedness from the
Partnership for such purposes as are permitted under the Plan and as
contemplated by SECTION 3.3(c) of the Agreement;
WHEREAS, the operation of SECTION 3.4 of the Agreement together with
SECTION 3.3(c) of the Agreement creates an ambiguity which the General
Partner desires to clarify;
WHEREAS, the General Partner has determined that authorizing the General
Partner to incur indebtedness from the Partnership for such purposes as are
permitted under the Plan is a change that is of an inconsequential nature and
does not adversely affect the limited partners in any material respect;
WHEREAS, SECTION 12.1(b)(iv) of the Agreement provides that the General
Partner has the power, without the consent of the limited partners of the
Partnership, to amend the Agreement as may be required to (i) cure any
ambiguity and correct any provision of the Agreement or (ii) reflect a change
that is of an inconsequential nature and does not adversely affect the
limited partners in any material respect;
1
<PAGE>
WHEREAS, the General Partner has made the determination that consent of
the partners of the Partnership is not required with respect to the matters
set forth in this Amendment because this Amendment: (i) is being executed for
the purpose of curing an ambiguity created by the relationship between
SECTION 3.3(c) and SECTION 3.3 (and correcting SECTION 3.4); (ii) in any
event, reflects a change that is of an inconsequential nature and does not
adversely affect the limited partners in any material respect; and (iii) does
not otherwise require the consent of the limited partners pursuant to SECTION
12.1(c); and
WHEREAS, all things necessary to make this Amendment a valid agreement
of the Partnership have been done;
NOW, THEREFORE, pursuant to the authority granted to the General Partner
under the Agreement, the Agreement is hereby amended as follows:
1. Amendment:
Section 3.4 of the Agreement is hereby amended to read as follows:
Notwithstanding anything to the contrary in SECTION 3.3, the General
Partner may from time to time advance funds to the Partnership for any
proper Partnership purpose as a loan ("FUNDING LOAN") or a preferred
equity investment ("PREFERRED INVESTMENT"), provided that any such funds
must first be obtained by the General Partner from a third party lender,
and then all of such funds must be advanced or contributed by the
General Partner to the Partnership as a Funding Loan or Preferred
Investment on substantially the same terms and conditions, including
principal amount or preferred equity amount, rate of interest or
preferred return, repayment or redemption schedule, and costs and
expenses, as shall be applicable with respect to or incurred in
connection with such loan with such third party lender. The General
Partner shall not incur any indebtedness for borrowed funds, except for
(i) Funding Loans or Preferred Investments; (ii) loans from the
Partnership to the General Partner to the extent the proceeds thereof
are used to fund, directly or indirectly, participations in, or
acquisitions of, any real or personal property interests for the account
of the General Partner if, and only if, the Partnership participates or
acquires an interest in such property at least to the extent of 99 times
such proposed participation or acquisition, directly or through a
wholly-owned entity, by the General Partner; and/or (iii) loans from the
Partnership to the General Partner to facilitate the making of loans by
the General Partner for such purposes as are authorized under the Plan.
2. DEFINED TERMS AND RECITALS. As used in this Amendment, capitalized
terms used and defined in this Amendment shall have the meaning assigned to
them in this Amendment, and capitalized terms used in this Amendment but not
defined herein, shall have the meaning assigned
2
<PAGE>
to them in the Agreement.
3. RATIFICATION AND CONFIRMATION. Except to the extent specifically
amended by this Amendment, the terms and provisions of the Agreement, as
previously amended, are hereby ratified and confirmed.
IN WITNESS WHEREOF, the undersigned has executed this Amendment
effective as of the date first above mentioned.
GENERAL PARTNER:
THE MACERICH COMPANY,
a Maryland corporation
By: /s/ Richard A. Bayer
---------------------------------
Richard A. Bayer
General Counsel & Secretary
S-1
1
<PAGE>
FOURTH AMENDMENT TO THE
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT OF
THE MACERICH PARTNERSHIP, L.P.
THIS FOURTH AMENDMENT (the "AMENDMENT") TO THE AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT DATED AS OF MARCH 16, 1994, AMENDED AS OF
AUGUST 14, 1995, FURTHER AMENDED AS OF JUNE 27, 1997, AND FURTHER AMENDED AS
OF NOVEMBER 16, 1997 (the "AGREEMENT") OF THE MACERICH PARTNERSHIP, L.P. (the
"PARTNERSHIP") is dated effective as of February 25, 1998.
RECITALS
WHEREAS, The Macerich Company, the general partner of the Partnership
(the "GENERAL PARTNER"), will be issuing to Security Capital Preferred Growth
Incorporated ("Security Capital"), 3,627,131 shares of Series A Cumulative
Convertible Redeemable Preferred Stock, $.01 par value per share ("SERIES A
PREFERRED SHARES"), pursuant to the Series A Preferred Securities Purchase
Agreement dated as of January 19, 1998 between the General Partner and
Security Capital (the "Purchase Agreement");
WHEREAS, SECTION 3.3 (a)(i) of the Agreement authorizes the General
Partner to cause the Partnership to issue additional interests in the
Partnership in one or more classes, or one or more series of any of such
classes, with such designations, preferences and relative, participating,
optional or other special rights, powers and duties, including rights, powers
and duties senior to those of the Limited Partners, all as shall be
determined by the General Partner in its sole and absolute discretion and
without the approval of any of the Limited Partners; PROVIDED, HOWEVER, that
any such additional interests in the Partnership must be issued in connection
with an issuance of shares of or other interests in the General Partner,
which shares or interests have designations, preferences and other rights,
all such that the economic interests are substantially similar to the
designations, preferences and other rights of the additional interests in the
Partnership being issued to the General Partner by the Partnership in
accordance with SECTION 3.3. OF THE AGREEMENT, and the General Partner shall
make a capital contribution to the Partnership in an amount equal to the
proceeds raised in connection with the issuance of such shares of or other
interests in the General Partner;
WHEREAS, SECTION 12.1(b)(iii) of the Agreement provides that the General
Partner has the power, without the consent of the Limited Partners of the
Partnership, to amend the Agreement as may be required to facilitate or
implement setting forth the designations, rights, powers, duties, and
preferences of the holders of any additional interests in the Partnership
issued pursuant to SECTION 3.3;
<PAGE>
WHEREAS, the General Partner has made the determination pursuant to
SECTION 12.1(b)(iii) of the Agreement that consent of the Limited Partners of
the Partnership is not required with respect to the matters set forth in this
Amendment; and
WHEREAS, all things necessary to make this Amendment a valid agreement
of the Partnership have been done;
NOW, THEREFORE, pursuant to the authority granted to the General Partner
under the Agreement, the Agreement is hereby amended as follows:
1. Amendments:
(a) Section 2.2 of the Agreement is hereby amended by inserting the
following new Section 2.2(c) to read as follows:
(c) SERIES A PREFERRED UNITS. The General Partner hereby makes a
capital contribution to the Partnership in the amount of the gross
proceeds from the sale of the Series A Preferred Shares to Security
Capital pursuant to the Purchase Agreement, which amount is
$100,000,001.67. In exchange for such capital contribution, the
Partnership hereby issues to the General Partner 3,627,131 Series A
Preferred Units, each Series A Preferred Unit representing a capital
contribution of $27.57. Series A Preferred Units shall entitle the
General Partner to a Preferred Return, all as described in SECTION 4.1
of the Agreement. Series A Preferred Units shall be converted into
Common Units at the time the Series A Preferred Shares are converted
into common shares of the General Partner in an amount of Common Units
equal to the total amount of such converted common shares divided by the
Conversion Factor. To the extent that Series A Preferred Shares are
being redeemed, the General Partner shall be obligated to put to the
Partnership a number of Series A Preferred Units equal to the number of
Series A Preferred Shares being redeemed or repaid. Upon putting a
Series A Preferred Unit to the Partnership, the General Partner will be
paid, in liquidation of each Series A Preferred Unit being put to the
Partnership, an amount equal to $27.57 plus any accumulated, accrued and
unpaid Series A Preferred Return on such Series A Preferred Unit, PLUS
any other amounts owed or to be paid by the General Partner in
connection with the redemption of the corresponding Series A Preferred
Share; PROVIDED, HOWEVER, that the General Partner shall not put the
Series A Preferred Units to the Partnership if the payment in
liquidation of those Series A Preferred Units would cause the
Partnership or the General Partner to be in violation of (i) any
provision of any agreement with respect to indebtedness, including the
Credit and Guaranty Agreement and those agreements with respect to the
Convertible Subordinated Debentures (the "Debt Instruments"), or (ii)
Section 17-607 of the Act. Before any Series A Preferred Units may be
put to the Partnership, the General Partner shall determine in good
faith that the redemption of such Series A Preferred Units will not
cause a violation of the Debt Instruments
2
<PAGE>
or Section 17-607 of the Act. To the extent the General Partner is not
permitted to make a payment in respect of the Series A Preferred Shares
by reason of a restriction imposed by the Debt Instruments or Section
17-607 of the Act, the Partnership shall not, and shall not be obligated
to, make any such payment to the General Partner with respect to the
corresponding Series A Preferred Units.
(b) Section 4.1 of the Agreement is hereby amended to read as follows:
4.1 DISTRIBUTION OF NET CASH FLOW. The General Partner shall
cause the Partnership to distribute all or a portion of Net Cash Flow to
the Partners from time to time as determined by the General Partner, but
in any event not less frequently than quarterly, in such amounts as the
General Partner shall determine. Notwithstanding the foregoing, the
General Partner shall use its reasonable efforts to cause the
Partnership to distribute sufficient amounts to enable the General
Partner to pay shareholder dividends that will (a) satisfy the
requirements for qualifying as a REIT under the Code and Regulations
("REIT REQUIREMENTS"), and (b) avoid any federal income or excise tax
liability of the General Partner. All amounts withheld pursuant to the
Code or a provision of any state or local tax law with respect to any
allocation, payment or distribution to the General Partner or any
Limited Partner shall be treated as amounts distributed to such Partner.
Upon the receipt by the General Partner of each Exercise Notice
pursuant to which one or more Redemption Partners exercise Redemption
Rights in accordance with the provisions of ARTICLE IX and the
Redemption Rights Exhibit, the General Partner shall, unless the General
Partner has elected to issue only Shares to such Redemption Partners in
respect of the Purchase Price of the Offer Interests, cause the
Partnership to distribute to the Partners, PRO RATA in accordance with
their respective Percentage Interests as of the date of delivery of such
Exercise Notice, all (or such lesser portion as the General Partner
shall reasonably determine to be prudent under the circumstances) of Net
Cash Flow, which distribution shall be made prior to the closing of the
redemption or purchase and sale of the Offered Interests specified in
such Exercise Notice. Subject to any restrictions or limitations
imposed by the Debt Instruments or Section 17-607 of the Act,
distributions shall be made in accordance with the following order of
priority:
(a) First, semi-annual distributions to the General Partner
with respect to the Preferred Units in an amount equal to the cumulative
and unpaid Preferred Return on such Preferred Units in such a way as to
allow the General Partner to pay interest and any additional amounts on
the Convertible Subordinated Debentures payable to the holders thereof;
(b) Second, to the General Partner with respect to the Series
A Preferred Units in an amount equal to the cumulative and unpaid Series
A Preferred Return on such Series A Preferred Units in such a way as to
allow the General Partner to
3
<PAGE>
pay cumulative preferential dividends and any additional amounts
required on the Series A Preferred Shares payable to the holders
thereof; and
(c) Next, to the Partners holding Common Units, PRO RATA in
accordance with such Partners' then Percentage Interests.
(c) The definition of the term "Partnership Interest" contained in the
Glossary of Defined Terms of the Agreement is hereby amended to read as
follows:
"PARTNERSHIP INTEREST" shall mean an ownership interest of a Partner in
the Partnership from time to time, including, as applicable, such
Partner's Preferred Units, Series A Preferred Units and Percentage
Interest and such Partner's Capital Account, and any and all other
benefits to which the holder of such Partnership Interest may be
entitled as provided in this Agreement, together with all obligations of
such Person to comply with the terms of this Agreement.
(d) The definition of the term "Partnership Unit" contained in the
Glossary of Defined Terms of the Agreement is hereby amended to read as
follows:
"PARTNERSHIP UNIT" shall mean a Common Unit, Preferred Unit or Series A
Preferred Unit and shall constitute a fractional, undivided share of the
Partnership Interests corresponding to that particular class of Units.
[The allocation of Partnership Units among the Partners as of this date
is as set forth on EXHIBIT D.]
(e) The definition of the term "Common Unit" contained in the Glossary
of Defined Terms of the Agreement is hereby amended to read as follows:
"COMMON UNIT" shall mean Partnership Interests other than Preferred
Units and Series A Preferred Units.
(f) The Glossary of Defined Terms of the Agreement is hereby amended to
include the following definitions:
"SERIES A PREFERRED RETURN" shall mean an amount per Series A Preferred
Unit equal to the greater of (i) an annual distribution of $1.84 or (ii)
the regular cash distributions on the Common Units, or portion thereof,
into which a Series A Preferred Unit is convertible. The Series A
Preferred Return will be based on the General Partner's Capital
Contribution in respect of the Series A Preferred Units for which the
Series A Preferred Return is being determined as provided in the
definition of Series A preferred Units below (taking into account any
reduction of such Capital Contribution by any redemptions or conversions
of such Series A Preferred Units), commencing on the first date such
Series A Preferred Units are issued to the General Partner. It is
intended that the Series A Preferred Return will be equal to the
dividends and any additional amounts payable on the Series A
4
<PAGE>
Preferred Shares to the holders thereof so that the General Partner will
receive a Series A Preferred Return in an amount sufficient for the
General Partner to make all payments in respect of the Series A
Preferred Shares.
"SERIES A PREFERRED SHARES" shall mean those shares of Series A
Cumulative Convertible Redeemable Preferred Stock, $.01 par value per
share; issued by the General Partner to Security Capital.
"SERIES A PREFERRED SHARES ARTICLES SUPPLEMENTARY" shall mean the Series
A Cumulative Convertible Redeemable Preferred Stock Articles
Supplementary, dated as of February [23], 1998, which fixes the
distribution and other preferences and rights of the Series A Preferred
Shares.
"SERIES A PREFERRED UNITS" shall mean the Partnership Units of the
General Partner representing the Capital Contribution of the Series A
Preferred Share proceeds, as set forth in SECTION 2.2(c) of the
Agreement. For the purposes of this Agreement, if the proceeds actually
received by the General Partner are less than the gross proceeds of the
issuance of the Series A Preferred Shares as a result of any
underwriter's discount, placement fee or other expenses paid or incurred
in connection with such issuance, then the General Partner shall be
deemed to have made a Capital Contribution to the Partnership in the
amount of the gross proceeds of such issuance and the Partnership shall
be deemed simultaneously to have reimbursed the General Partner pursuant
to SECTION 6.1 for the amount of such underwriter's discount, placement
fee or other expenses.
(g) Section 1.1 of Exhibit A (Allocations Exhibit) is hereby amended to
read as follows:
1.1 ESTABLISHMENT AND MAINTENANCE OF CAPITAL ACCOUNTS. The
Partnership shall establish and maintain for each Partner a separate
account ("CAPITAL ACCOUNT") in accordance with the rules of Regulations
Section 1.704-1(b)(2)(iv) and this Allocations Exhibit. The Capital
Account of each Partner shall be increased by (i) the amount of all
Capital Contributions and any other contributions made by such Partner
to the Partnership pursuant to the Agreement, (ii) the amount of Net
Income allocated to such Partner pursuant to Section 2.1 of this
Allocations Exhibit, and (iii) the amount of any other items of income
or gain specially allocated to such Partner pursuant to Article 3 of
this Allocations Exhibit. The Capital Account of each Partner shall be
decreased by (x) the amount of cash or Gross Asset Value (net of any
liabilities to which such property is subject) of any distributions of
cash or property made to such Partner pursuant to the Agreement, (y) the
amount of Net Loss allocated to such Partner pursuant to Section 2.2 of
this Allocations Exhibit, and (z) the amount of any other items of
deduction or loss specially allocated to such Partner pursuant to
Article 3 of this Allocations Exhibit. The Capital Accounts of each
Partner shall be increased or
5
<PAGE>
decreased to reflect the revaluation of Partnership assets under Section
1.3 of this Allocations Exhibit.
(h) Section 2.1 of Exhibit A (Allocations Exhibit) is hereby amended to
read as follows:
2.1 NET INCOME. After giving effect to the special allocations
set forth in Article 3 of this Allocations Exhibit, Net Income for any
fiscal year or other applicable period shall be allocated in the
following order and priority:
(a) First, to the Partners, until the cumulative Net Income
allocated pursuant to this subparagraph 2.1(a) for the current and all
prior periods equals the cumulative Net Loss allocated pursuant to
subparagraphs 2.2(c) and (d) hereof for all prior periods, among the
Partners in the reverse order that such Net Loss was allocated (and, in
the event of a shift of a Partner's interest in the Partnership, to the
Partners in a manner that most equitably reflects the successors in
interest of such Partners);
(b) Second, to the General Partner, until the cumulative Net
Income allocated pursuant to this subparagraph 2.1(b) for the current
and all prior periods equals the cumulative Net Loss allocated pursuant
to Subparagraph 2.2(b) hereof for all prior periods;
(c) Third in respect of its Preferred Units to the General
Partner until the cumulative amount of Net Income allocated pursuant to
this subparagraph 2.1(c) for the current and all prior periods equals
the cumulative Preferred Return on the Preferred Units;
(d) Fourth, to the General Partner in respect of the Series A
Preferred Units until the cumulative amount of Net Income allocated
pursuant to this subparagraph 2.1(d) equals the cumulative Series A
Preferred Return on the Series A Preferred Units; and
(e) Thereafter, the balance of the Net Income, if any, shall
be allocated to the Partners holding Common Units in accordance with
their respective Percentage Interests.
(i) Section 2.2 of Exhibit A (Allocations Exhibit) is hereby amended to
read as follows:
2.2 NET LOSS. After giving effect to the special allocations set
forth in Article 3 of this Allocations Exhibit, Net Loss of the
Partnership for each fiscal year or other applicable period shall be
allocated as follows:
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(a) To the Partners holding Common Units in accordance with
their respective Percentage Interests until the Capital Accounts of the
Limited Partners are all reduced to zero (determined after all capital
contributions, distributions, and special allocations under Article III
of this Allocations Exhibit allocable to the Partner for the Fiscal Year
have been reflected in the Partner's Capital Account). For these
purposes, each Limited Partner's Capital Account shall be increased by
such Limited Partner's share of Partnership Minimum Gain and Minimum
Gain Attributable to a Partner Nonrecourse Debt for the Fiscal Year;
(b) Second, to the General Partner until its Capital Account
is reduced to zero. For these purposes, the General Partner's Capital
Account shall be increased by the General Partner's share of Partnership
Minimum Gain and Minimum Gain Attributable to a Partner Nonrecourse Debt
for the Fiscal Year;
(c) Thereafter, to the Partners holding Common Units in
accordance with their then Percentage Interests; and
(d) Notwithstanding preceding provisions of this Section 2.2,
to the extent any Net Losses allocated to a Partner under this Section
2.2 would cause such Partner (hereinafter, a "RESTRICTED PARTNER") to
have an Adjusted Capital Account Deficit at the end of the fiscal year
to which such Losses related, such Losses shall not be allocated to such
Restricted Partners and instead shall be allocated to the other
Partner(s) (herein, the "PERMITTED PARTNERS") PRO RATA in accordance
with their relative Partnership Interests.
(j) Section 5 of EXHIBIT A (Allocations Exhibit) is hereby amended by
deleting the definitions for the following terms: "Common Capital Account"
and GP Subaccount."
2. DEFINED TERMS AND RECITALS. As used in this Amendment, capitalized
terms used and defined in this Amendment shall have the meaning assigned to
them in this Amendment, and capitalized terms used in this Amendment but not
defined herein, shall have the meaning assigned to them in the Agreement.
3. RATIFICATION AND CONFIRMATION. Except to the extent specifically
amended by this Amendment, the terms and provisions of the Agreement, as
previously amended, are hereby ratified and confirmed.
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IN WITNESS WHEREOF, the undersigned has executed this Amendment
effective as of the date first above mentioned.
GENERAL PARTNER:
THE MACERICH COMPANY
By:
-------------------------------
Name:
Title:
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FIFTH AMENDMENT TO THE
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT OF
THE MACERICH PARTNERSHIP, L.P.
THIS FIFTH AMENDMENT (the "AMENDMENT") TO THE AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT DATED AS OF MARCH 16, 1994, AMENDED AS OF
AUGUST 14, 1995, FURTHER AMENDED AS OF JUNE 27, 1997, FURTHER AMENDED AS OF
NOVEMBER 16, 1997, AND FURTHER AMENDED AS OF FEBRUARY 25, 1998 (the
"AGREEMENT") OF THE MACERICH PARTNERSHIP, L.P. (the "PARTNERSHIP") is dated
effective as of February 26, 1998.
RECITALS
WHEREAS, SECTION 12.1(b)(iv) of the Agreement provides that the General
Partner has the power, without the consent of the Limited Partners of the
Partnership, to amend the Agreement as may be required to facilitate or
implement curing any ambiguity, correcting or supplementing any provision in
the Agreement not inconsistent with law or with other provisions of the
Agreement;
WHEREAS, the General Partner has made the determination pursuant to
SECTION 12.1(b)(iv) of the Agreement that consent of the Limited Partners of
the Partnership is not required with respect to the matters set forth in this
Amendment; and
WHEREAS, all things necessary to make this Amendment a valid agreement
of the Partnership have been done;
NOW, THEREFORE, pursuant to the authority granted to the General Partner
under the Agreement, the Agreement is hereby amended as follows:
1. Amendments:
(a) Section 3.4 of the Agreement is hereby amended to read as follows:
Notwithstanding anything to the contrary in SECTION 3.3, the General
Partner may from time to time advance funds to the Partnership for any
proper Partnership purpose as a loan ("FUNDING LOAN") or a preferred
equity investment ("PREFERRED INVESTMENT"), provided that any such funds
must first be obtained by the General Partner from a third party lender,
and then all of such funds must be advanced or contributed by the
General Partner to the Partnership as a Funding Loan or Preferred
Investment on substantially the same terms and conditions, including
principal amount or preferred equity amount, rate of interest or
preferred return, repayment or redemption schedule, and costs and
expenses, as
<PAGE>
shall be applicable with respect to or incurred in connection with such
loan with such third party lender. The General Partner shall not incur
any indebtedness for borrowed funds, except for (i) Funding Loans or
Preferred Investments, (ii) loans from the Partnership to the General
Partner to the extent the proceeds thereof are used to fund, directly or
indirectly, participations in, or acquisitions of, any real or personal
property interests for the account of the General Partner if, and only
if, the Partnership participates or acquires an interest in such
property at least to the extent of 99 times such proposed participation
or acquisition, directly or through a wholly-owned entity, by the
General Partner and/or (iii) loans from the Partnership to the General
Partner to facilitate the making of loans by the General Partner for
such purposes as are authorized under the Plan. For purposes of this
Section 3.4, participations in or acquisitions of any real estate or
personal property interests shall include ownership through one or more
tiers of partnerships, joint ventures, limited liability companies or
other entities which themselves own real estate or personal property.
(b) Section 6.4 of the Agreement is hereby amended to read as follows:
The General Partner agrees that all business activities of the General
Partner, including activities pertaining to the acquisition, development
and ownership of Properties, shall be conducted through the Partnership
(other than the General Partner's 1% interest in Existing Property
Partnerships owned directly or through a wholly-owned corporation);
PROVIDED, HOWEVER, that the General Partner shall be permitted to
participate or acquire an interest in, directly or indirectly, any real
or personal property for its own account if, and only if, the
Partnership participates or acquires an interest in such property at
least to the extent of 99 times such proposed participation or
acquisition, directly or through a wholly-owned corporation, by the
General Partner. The Company agrees that for so long as it is a Partner
all borrowings for the purpose of making distributions to its
stockholders will be incurred by the Partnership or the Property
Partnerships (and not by the Company directly) and the proceeds of such
indebtedness will be included as Net Financing Proceeds hereunder. For
purposes of this Section 6.4, participations in or acquisitions of any
real estate or personal property interests shall include ownership
through one or more tiers of partnerships, joint ventures, limited
liability companies or other entities which themselves own real estate
or personal property.
2. DEFINED TERMS AND RECITALS. As used in this Amendment, capitalized
terms used and defined in this Amendment shall have the meaning assigned to
them in this Amendment, and capitalized terms used in this Amendment but not
defined herein, shall have the meaning assigned to them in the Agreement.
3. RATIFICATION AND CONFIRMATION. Except to the extent specifically
amended by this Amendment, the terms and provisions of the Agreement, as
previously amended, are hereby ratified and confirmed.
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IN WITNESS WHEREOF, the undersigned has executed this Amendment
effective as of the date first above mentioned.
GENERAL PARTNER:
THE MACERICH COMPANY
By:
-------------------------------
Name:
Title:
3
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EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into by and
among Macerich Management Company, a California corporation, (the "Company"),
The Macerich Partnership, L.P., a Delaware limited partnership (the
"Operating Partnership") and Larry Sidwell ("Employee"), as of the 11th day
of February, 1997.
I. EMPLOYMENT.
The Company and the Operating Partnership hereby employ Employee and
Employee hereby accepts such employment, upon the terms and conditions
hereinafter set forth.
II. TERM.
The initial term of this Agreement shall commence on February 11,
1997, and end on February 10, 2002. As used herein, the "Renewal Date" shall
mean the date during the initial term, and the date during any extension of
the term as provided below, which is one year prior to the end of the
then-current term. On each successive Renewal Date during the term, this
Agreement shall be automatically extended one additional year unless at least
30 days prior to such Renewal Date, the Company or the Operating Partnership
shall have delivered to Employee or Employee shall have delivered to the
Company or the Operating Partnership written notice that the Agreement shall
not be so extended. FOR EXAMPLE, THE FIRST RENEWAL DATE IS FEBRUARY 11,
2001, AND IF THIS AGREEMENT IS AUTOMATICALLY EXTENDED, THE SECOND RENEWAL
DATE WOULD BE FEBRUARY 10, 2002, AND SO ON. AS A FURTHER EXAMPLE, ON
FEBRUARY 11, 2001, THIS AGREEMENT WILL BE AUTOMATICALLY EXTENDED ONE
ADDITIONAL YEAR (AND THEREFORE THE TERM OF THIS AGREEMENT WOULD END ON
FEBRUARY 10, 2003), UNLESS ON OR BEFORE FEBRUARY 11, 2001, THE COMPANY, THE
OPERATING PARTNERSHIP OR THE EXMPLOYEE SHALL HAVE GIVEN NOTICE THAT THE
AGREEMENT SHALL NOT BE SO EXTENDED.
III. DUTIES.
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A. Employee shall serve during the course of his employment as an
officer of the Company and the Operating Partnership, initially Senior Vice
President -- Development, and shall have such other duties and
responsibilities as the Board of Directors of the Company and the Operating
Partnership, or their respective Chief Executive Officers or Presidents,
shall determine from time to time.
B. Employee agrees to devote substantially all of his time, energy
and ability to the business of the Company and the Operating Partnership.
Nothing herein shall prevent Employee, upon approval of the Board of
Directors of the Company and the Operating Partnership, from serving as a
director or trustee of other corporations or businesses which are not in
competition with the business of the Company or in competition with any
present or future affiliate of the Company. Nothing herein shall prevent
Employee from investing in real estate for his own account or from becoming a
partner or a stockholder in any corporation, partnership or other venture not
in competition with the business of the Company or in competition with any
present or future affiliate of the Company.
Employee will serve as a key employee of the Operating Partnership,
in consideration of the grant of the Restricted Stock Award and the Stock
Option Award described in Section IV. At the request of The Macerich Company
("Macerich") or the Operating Partnership, Employee will serve as an
employee, officer or director of Macerich Property Management Company, a
California corporation, or any corporation or other entity a majority of
whose outstanding voting stock or voting power is beneficially owned directly
or indirectly by Macerich (any such entity, including Macerich, the Company
and the Operating Partnership, the "Macerich Entities") without additional
compensation. For the term of this Agreement, Employee shall report directly
to the Chief Executive Officer or President of the Company and the Operating
Partnership or, if there is none, the Chairman of the Board of the Company
and the Operating Partnership.
C. Employee hereby acknowledges and agrees that, except as above
contemplated, the engagement of Employee by the Company and the Operating
Partnership under this Agreement is exclusive to the Company and the
Operating Partnership, and he shall not render services to any other entity
for compensation or otherwise without the prior written consent of the
Company and the Operating Partnership.
IV. COMPENSATION.
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A. The Company will pay to Employee a base salary at the rate of
$225,000 per year. Such salary shall be earned monthly and shall be payable
in periodic installments no less frequently than monthly in accordance with
the Company's customary practices. Amounts payable shall be reduced by
standard withholding and other authorized deductions. The Company will
review Employee's salary at least annually. The Company may in its
discretion increase Employee's salary but it may not reduce it during the
term of this Agreement.
B. INITIAL RESTRICTED STOCK GRANT; INITIAL STOCK OPTION GRANT;
ANNUAL BONUS, INCENTIVE, SAVINGS AND RETIREMENT PLANS.
(i) Upon the commencement of employment, Employee shall receive a
Restricted Stock Award for 10,000 shares of restricted Company stock (the
"Restricted Stock Award"), which shares shall vest and shall be on such other
terms and conditions as are set forth in a Restricted Stock Award Agreement
to be executed as of the date of the Employee's commencement of employment
(which agreement shall be in the form attached hereto as Exhibit A) and which
Restricted Stock Award shall be subject to the terms and conditions of The
Macerich Company 1994 Stock Incentive Plan (the "Plan").
(ii) Upon the commencement of employment, Employee shall receive a
Stock Option Award for 60,000 shares of Company stock (the "Stock Option
Award"), which stock options shall be priced as of the date of the Employee's
commencement of employment, and shall vest and shall be on such other terms
and conditions as are set forth in a Stock Option Agreement to be executed as
of the date of the Employee's commencement of employment (which agreement
shall be in the form attached hereto as Exhibit B) and which Stock Option
Award shall be subject to the terms and conditions of the Plan.
(iii) Employee shall be entitled to participate in all annual bonus,
incentive, stock incentive, savings and retirement plans, practices, policies
and programs applicable generally to other peer executives of the Company and
the Operating Partnership.
C. WELFARE BENEFIT PLANS. Employee and/or his family, as the case
may be, shall be eligible for participation in and shall receive all benefits
under welfare benefit plans, practices, policies and programs provided by the
Company and the Operating Partnership (including, without limitation,
medical, prescription, dental, disability, salary continuance, employee life,
group life, accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives of the
Company and the Operating Partnership.
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D. EXPENSES. Employee shall be receive an automobile allowance in
the amount of $700 per month. In addition, Employee shall be entitled to
receive prompt reimbursement for all reasonable employment expenses incurred
by him in accordance with the policies, practices and procedures as in effect
generally with respect to other peer executives of the Company and the
Operating Partnership.
E. FRINGE BENEFITS. Employee shall be entitled to fringe benefits
in accordance with the plans, practices, programs and policies as in effect
generally with respect to other peer executives of the Company and the
Operating Partnership.
F. VACATION. Employee shall be entitled to at least 4 weeks of paid
vacation in accordance with the plans, policies, programs and practices as in
effect generally with respect to other peer executives of the Company and the
Operating Partnership.
G. The Company and the Operating Partnership reserve the right to
modify, suspend or discontinue any and all of the above plans, practices,
policies and programs at any time without recourse by Employee so long as
such action is taken generally with respect to other similarly situated peer
executives and does not single out Employee.
V. TERMINATION.
A. DEATH OR DISABILITY. Employee's employment shall terminate
automatically upon Employee's death. If the Company and the Operating
Partnership determine in good faith that the Disability of Employee has
occurred (pursuant to the definition of Disability set forth below), they may
give to Employee written notice in accordance with Section XX of its
intention to terminate Employee's employment. In such event, Employee's
employment with the Company and Operating Partnership shall terminate
effective on the 30th day after receipt of such notice by Employee, provided
that, within the 30 days after such receipt, Employee shall not have returned
to full-time performance of his duties. For purposes of this Agreement,
"Disability" shall mean the absence of Employee from his duties with the
Company and Operating Partnership on a full-time basis for a period of nine
months as a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the Company
and the Operating Partnership or their insurers and acceptable to Employee or
his legal representative (such agreement as to acceptability not to be
withheld unreasonably). "Incapacity" as used herein shall be limited only to
a condition that substantially prevents Employee from performing his duties
hereunder.
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<PAGE>
B. CAUSE. During the term of this Agreement, the parties agree that
the Company and Operating Partnership may terminate Employee's employment
only for Cause or for breach of the provisions of Section IX
(Antisolicitation) or XII (Confidential Information) or as set forth in
paragraph A above. For purposes of this Agreement, "Cause" shall mean that
the Company and Operating Partnership, acting in good faith based upon the
information then known to the Company and the Operating Partnership,
determine that Employee has: (1) failed to perform in a material respect his
obligations under this Agreement without proper cause, (2) been convicted of
a felony, or (3) committed a material act of fraud, dishonesty or gross
misconduct which is materially injurious to the Company or the Operating
Partnership.
C. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
1. DEATH OR DISABILITY. If Employee's employment is terminated
by reason of Employee's Death or Disability, the term of this
Agreement shall not be subject to any further extension pursuant to
Section II hereof. During the remainder of the term of this
Agreement (as in effect on the date of Employee's termination of
employment), the Company and the Operating Partnership (a) shall
continue to pay to Employee (or, in the case of his death, his
surviving spouse or, if there is no surviving spouse, his estate)
Employee's annual base salary at the same time and in the same manner
as if he had continued to perform services under this Agreement and
(b) shall provide any coverage required by law and shall continue to
provide to Employee (or, in the case of his death, his surviving
spouse) the same level of health insurance provided to other
executives of the Company and the Operating Partnership. Executive
acknowledges and agrees that the Company and the Operating
Partnership may insure themselves for their financial obligations
upon Employee's death. Employee agrees to subject himself to medical
examinations as may be reasonably required for such purposes.
2. CAUSE. If Employee's employment is terminated by the Company
and the Operating Partnership pursuant to Section V-B, this Agreement
shall terminate without further obligations to Employee other than
for (a) payment of the sum of Employee's annual base salary through
the date of termination and any accrued vacation pay to the extent
not theretofore paid, which shall be paid to Employee or his estate
or beneficiary, as applicable, in a lump sum in cash within 30 days
of the date of termination; (b) payment of any compensation
previously deferred by Employee (together with any accrued interest
or earnings thereon), which
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<PAGE>
shall be paid to Employee or his estate or beneficiary pursuant to
terms of the plan or agreement under which such compensation was
deferred; and (c) payment to Employee or his estate or beneficiary,
as applicable, any amounts due pursuant to the terms of any
applicable welfare benefit plans. The payments described in clauses
(a) and (b) shall hereinafter be referred to as the "Accrued
Obligations." If it is subsequently determined that the Company and
the Operating Partnership did not have Cause for termination under
this Section V-C-2, then the Company's and the Operating
Partnership's decision to terminate shall be deemed to have been made
under Section V-C-3 and the amounts payable thereunder shall be the
only amounts Employee may receive for his termination.
3. OTHER THAN CAUSE OR DEATH OR DISABILITY. If the Company and
the Operating Partnership breach this Agreement by terminating
Employee's employment other than pursuant to Section V-B, then (a)
the Company shall immediately pay to Employee a lump sum equal to
three times Employee's base salary for one year at the rate in effect
immediately prior to Employee's termination of employment, less
standard withholdings and other authorized deductions, (b) the
Company shall timely pay to Employee the Accrued Obligations, (c) the
restrictions on the shares granted pursuant to the Restricted Stock
Award shall immediately lapse (subject to limitations on acceleration
of exercisability and vesting under the Plan and the Restricted Stock
Award Agreement), and (d) the Stock Option Award shall become
immediately exercisable in full (subject to limitations on
acceleration of exercisability and vesting under the Plan and the
Stock Option Agreement). None of the payments provided in this
Section V-C-3 shall be reduced by any amounts earned or received by
Employee from a third party at any time.
4. EXCLUSIVE REMEDY. Employee agrees that the payments
contemplated by this Agreement shall constitute the exclusive and
sole remedy for any termination of his employment and Employee
covenants not to assert or pursue any other remedies, at law or in
equity, with respect to any termination of employment.
VI. CHANGE IN CONTROL.
A. Notwithstanding anything to the contrary in this Agreement, if a
Change in Control (as defined below) of Macerich occurs during the term of
this Agreement, and if within two years after the Change in Control the
Company and the Operating Partnership terminate Employee's employment for a
reason other than Cause, or if employee terminates his employment for Good
Reason (as defined below), the provisions of Section V.C.3 and V.C.4 shall
apply.
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B. Notwithstanding anything in this Agreement to the contrary, any
"parachute payments" to be made to or for Employee's benefit, whether
pursuant to this Agreement or otherwise, shall be modified to the extent
necessary so that the requirements of one of the two subparagraphs below are
satisfied:
1. The aggregate "present value" of all "parachute payments"
payable to Employee or for Employee's benefit, whether pursuant to
this Agreement or otherwise, shall be less than three (3) times
Employee's "base amount"; or
2. Each "parachute payment" payable to Employee or for
Employee's benefit, whether pursuant to this Agreement or otherwise,
shall be in an amount which does not exceed the "reasonable
compensation" allocable to such "parachute payment."
C. For purposes of this Section VI:
1. A "Change in Control" of Macerich means any of the following:
(1) Approval by the shareholders of Macerich of the dissolution
or liquidation of the Macerich;
(2) Approval by the shareholders of Macerich of an agreement to
merge or consolidate, or otherwise reorganize, with or into one or
more entities that are not subsidiaries or other affiliates, as a
result of which less than 50% of the outstanding voting securities of
the surviving or resulting entity immediately after the
reorganization are, or will be, owned, directly or indirectly, by
shareholders or other affiliates of Macerich immediately before such
reorganization (assuming for purposes of such determination that
there is no change in the record ownership of Macerich's securities
from the record date for such approval until such reorganization but
including in such determination any securities of the other parties
to such reorganization held by affiliates of Macerich);
(3) Approval by the shareholders of Macerich of the sale of
substantially all of Macerich's business and/or assets to a person or
entity which is not a Macerich Entity or an affiliate of a Macerich
Entity; or
(4) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
other than a person described in and satisfying the conditions of
Rule 13d-1(b)(1)
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thereunder) becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of
Macerich representing more than 20% of the combined voting power of
Macerich's then outstanding securities entitled to then vote
generally in the election of directors of the Macerich, other than a
person who is the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act) of more than 10% of the outstanding shares of
Common Stock at the time of adoption of this Agreement, or an
affiliate, successor, heir, descendant or related party of or to any
such person.
2. "Good Reason" shall mean (a) an adverse and significant
change in Employee's position, duties, responsibilities, or status
with the Company and the Operating Partnership, (b) a change in
Employee's office location to a point more than 50 miles from
Employee's office immediately prior to a Change in Control, (c) the
taking of any action by the Company and the Operating Partnership to
eliminate benefit plans without providing substitutes therefore, to
reduce benefits thereunder or to substantially diminish the aggregate
value of incentive awards or other fringe benefits, (d) any reduction
in Employee's base salary, or (e) any breach of this Agreement by the
Company or the Operating Partnership.
3. The term "base amount" shall have the meaning ascribed to it
under Section 280G(b)(3) of the Internal Revenue Code of 1986, as
amended (the "Code");
4. The term "parachute payment" shall have the meaning ascribed
in Section 280G(b)(2)(A) of the Code, without regard to Section
280G(b)(2)(A)(ii) of the Code but with regard to Section
280G(b)(4)(A);
5. "Present value" shall be determined in accordance with
Section 280G(d)(4) of the Code;
6. The term "reasonable compensation" shall have the meaning
ascribed to it under Section 280G(b)(4)(B) of the Code (for personal
services actually rendered before the date of the Change in Control
of Macerich); and
7. The portion of the "base amount" and the amount of
"reasonable compensation" allocable to any "parachute payment" shall
be determined in accordance with Section 280G(b)(3) of the Code and
Section 280G(b)(4)(B) of the Code, respectively.
D. If Employee would be entitled to benefits, payments or coverage
hereunder and under any other plan, program or agreement which would
constitute
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"parachute payments," then notwithstanding any other provision hereof or of
any other existing agreement to the contrary, Employee may by written notice
to the Company and the Operating Partnership designate the order in which
such "parachute payments" shall be reduced or modified so that the Company
and the Operating Partnership or either of them is not denied federal income
tax deductions for any "parachute payments" because of Section 280G of the
Code.
E. All determinations required by this Section VI, including without
limitation the determination of whether any benefit or payment would
constitute a parachute payment, the calculation of the value of any parachute
and whether any benefit or payment constitutes reasonable compensation, shall
be made by an independent accounting firm (other than Macerich's outside
auditing firm) having nationally recognized expertise in such matters
selected by the Compensation Committee of the Board of Directors of Macerich.
Any such determination by such accounting firm shall be binding on the
Company, the Operating Partnership and Employee.
F. Payment of amounts pursuant to this Agreement shall not, unless
directed by Employee, be delayed pending determination of the status of a
payment as a "parachute payment" by the Internal Revenue Service, court or
similar body of competent jurisdiction.
VII. ARBITRATION.
Any controversy or claim arising out of or relating to this
Agreement, its enforcement or interpretation, or because of an alleged
breach, default, or misrepresentation in connection with any of its
provisions, shall be submitted to arbitration, to be held in Los Angeles
County, California in accordance with the Voluntary Labor Arbitration Rules
of the American Arbitration Association. Judgment upon the award rendered by
the arbitration may be entered in any court in the State of California, or in
any other court of competent jurisdiction. In the event either party
institutes arbitration under this Agreement arising prior to a Change in
Control of Macerich, the party prevailing in any such litigation shall be
entitled, in addition to all other relief, to reasonable attorneys' fees
relating to such arbitration, and the nonprevailing party shall be
responsible for all costs of the arbitration, including but not limited to,
the arbitration fees, court reporter fees, etc. In the case of any
arbitration or subsequent judicial proceedings arising after a Change in
Control of Macerich, Employee shall be awarded his costs, including
attorneys' fees.
VIII. INTENTIONALLY OMITTED.
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IX. ANTISOLICITATION.
Employee promises and agrees that during the term of this Agreement
he will not influence or attempt to influence customers of any Macerich
Entity, either directly or indirectly, to divert their business to any
individual, partnership, firm, corporation or other entity then in
competition with the business of any Macerich Entity.
X. JOINING FORMER COMPANY EMPLOYEES.
Employee promises and agrees that for one year following his
termination of employment other than pursuant to Section V-C above or
Disability above or expiration of this Agreement, he will not enter business
or work with any person who was employed with any Macerich Entity, and who
earned annually $25,000 or more as a Macerich Entity employee during the last
six months of his or her own employment, in any business, partnership, firm,
corporation or other entity then in competition with the business of a
Macerich Entity.
XI. SOLICITING EMPLOYEES.
Employee promises and agrees that he will not, for a period of one
year following termination of his employment or the expiration of this
Agreement, directly or indirectly solicit any Macerich Entity employees who
earned annually $25,000 or more as a Macerich Entity employee during the last
six months of his or her own employment to work for any business, individual,
partnership, firm, corporation, or other entity then in competition with the
business of any Macerich Entity.
XII. CONFIDENTIAL INFORMATION.
A. Employee shall hold in a fiduciary capacity for the benefit of
the Macerich Entities all secret or confidential information, knowledge or
data relating to any Macerich Entity, and their respective businesses, which
shall have been obtained by Employee during his employment by the Company and
the Operating Partnership and which shall not be or become public knowledge
(other than by acts by Employee or his representatives in violation of this
Agreement). After termination of Employee's employment with the Company and
the Operating Partnership, he shall not, without the prior written consent of
the Company and the Operating Partnership, or as may otherwise be required by
law or legal process, communicate or divulge any such information, knowledge
or data to anyone other than the Company and the Operating Partnership and
those designated by either of them.
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B. Employee agrees that all lists, materials, books, files, reports,
correspondence, records, and other documents ("Company material") used,
prepared, or made available to Employee, shall be and shall remain the
property of the applicable Macerich Entity. Upon the termination of
employment or the expiration of this Agreement, all Company material shall be
returned immediately to the applicable Macerich Entity, and Employee shall
not make or retain any copies thereof.
XIII. SUCCESSORS.
A. This Agreement is personal to Employee and shall not, without the
prior written consent of the Company and the Operating Partnership, be
assignable by Employee.
B. This Agreement shall inure to the benefit of and be binding upon
the Company and the Operating Partnership and their respective successors and
assigns and any such successor or assignee shall be deemed substituted for
the applicable company under the terms of this Agreement for all purposes. As
used herein, "successor" and "assignee" shall include any person, firm,
corporation or other business entity which at any time, whether by purchase,
merger or otherwise, directly or indirectly acquires the equity of the
Company and/or the Operating Partnership, or to which the Company and/or the
Operating Partnership assigns its interest in this Agreement by operation of
law or otherwise.
XIV. WAIVER.
No waiver of any breach of any term or provision of this Agreement
shall be construed to be, nor shall be, a waiver of any other breach of this
Agreement. No waiver shall be binding unless in writing and signed by the
party waiving the breach.
XV. MODIFICATION.
This Agreement may not be amended or modified other than by a written
agreement executed by the Employee, the Company and the Operating Partnership.
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XVI. SAVINGS CLAUSE.
If any provision of this Agreement or the application thereof is held
invalid, the invalidity shall not affect other provisions or applications of
the Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to
be severable.
XVII. COMPLETE AGREEMENT.
This instrument constitutes and contains the entire agreement and
understanding concerning Employee's employment and the other subject matters
addressed herein between the parties, and supersedes and replaces all prior
negotiations and all agreements proposed or otherwise, whether written or
oral, concerning the subject matters hereof. This is an integrated document.
XVIII. GOVERNING LAW.
This Agreement shall be deemed to have been executed and delivered
within the State of California, and the rights and obligations of the parties
hereunder shall be construed and enforced in accordance with, and governed
by, by the laws of the State of California without regard to principles of
conflict of laws.
XIX. CONSTRUCTION.
The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
XX. COMMUNICATIONS.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
in person, by telecopy, telex or equivalent form of written telecommunication
or if sent by registered or certified mail, return receipt requested, postage
prepaid, as follows:
To Company The Macerich Company
and Operating 233 Wilshire Boulevard, Suite 700
Partnership: Santa Monica, CA 90401
To Employee: Larry Sidwell
7375 Westmoreland Dr.
St. Louis, MO 63130
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Any party may change the address at which notice shall be given by written
notice given in the above manner. All notices required or permitted
hereunder shall be deemed duly given and received on the date of delivery, if
delivered in person or by telex, telecopy or other written telecommunication
on a regular business day and within normal business hours or on the fifth
day next succeeding the date of mailing, if sent by certified or registered
mail.
XXI. EXECUTION.
This Agreement is being executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Photographic copies of such signed counterparts
may be used in lieu of the originals for any purpose.
XXII. LEGAL COUNSEL.
The Employee, the Operating Partnership and the Company recognize
that this is a legally binding contract and acknowledge and agree that they
have had the opportunity to consult with legal counsel of their choice.
XXIII. SURVIVAL.
The provisions of this Agreement shall survive the term of this
Agreement to the extent necessary to accommodate full performance of all such
terms.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
THE COMPANY: MACERICH MANAGEMENT COMPANY
a California corporation
By:
-------------------------------------
Arthur M. Coppola
President
OPERATING PARTNERSHIP: THE MACERICH PARTNERSHIP, L.P.
a Delaware partnership
By: The Macerich Company
a Maryland corporation
its general partner
By:
--------------------------------
Arthur M. Coppola
President
EMPLOYEE:
-----------------------------------------
Larry Sidwell
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THE MACERICH COMPANY
AMENDED AND RESTATED 1994 INCENTIVE PLAN
(AS AMENDED EFFECTIVE APRIL 8, 1997)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. THE PLAN.................................................. 1
1.1 Purpose.............................................. 1
1.2 Administration and Authorization; Power and
Procedure............................................ 1
1.3 Participation........................................ 3
1.4 Shares Available for Awards.......................... 3
1.5 Grant of Awards...................................... 4
1.6 Award Period......................................... 4
1.7 Limitations on Exercise and Vesting of Awards........ 4
1.8 Notes to Finance Exercise or Purchase................ 5
1.9 No Transferability of Awards......................... 6
II. EMPLOYEE OPTIONS.......................................... 6
2.1 Grants............................................... 6
2.2 Option Price......................................... 7
2.3 Limitations on Grant and Terms of Incentive Stock
Options.............................................. 7
2.4 Limits on 10% Holders................................ 8
2.5 Award Changes/Limits on Repricing.................... 8
2.6 Limitation on Exercise of Option Award............... 9
III. STOCK APPRECIATION RIGHTS................................. 9
3.1 Grants............................................... 9
3.2 Exercise of Stock Appreciation Rights................ 9
3.3 Payment.............................................. 10
IV. RESTRICTED STOCK AWARDS................................... 11
4.1 Grants............................................... 11
4.2 Restrictions......................................... 11
4.3 Return to the Corporation............................ 12
V. STOCK BONUSES, OTHER CASH OR STOCK PERFORMANCE-BASED
AWARDS, STOCK UNITS AND DIVIDEND EQUIVALENT RIGHTS........ 12
5.1 Grants of Stock Bonuses.............................. 12
5.2 Other Performance-Based Awards....................... 12
5.3 Stock Units.......................................... 14
5.4 Dividend Equivalent Rights........................... 15
VI. OTHER PROVISIONS.......................................... 15
6.1 Rights of Eligible Persons, Participants and
Beneficiaries........................................ 15
6.2 Adjustments; Early Termination....................... 16
6.3 Termination of Employment; Termination of
Subsidiary Status.................................... 17
6.4 Compliance With Laws................................. 19
6.5 Tax Withholding...................................... 20
6.6 Plan Amendment, Termination and Suspension........... 20
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6.7 Privileges of Stock Ownership........................ 21
6.8 Effective Date of This Plan.......................... 21
6.9 Term of This Plan.................................... 21
6.10 Governing Law/Construction/Severability.............. 21
6.11 Captions............................................. 22
6.12 Non-Exclusivity of Plan.............................. 22
VII. DEFINITIONS............................................... 22
7.1 Definitions.......................................... 22
</TABLE>
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THE MACERICH COMPANY
1994 INCENTIVE PLAN
(AS AMENDED EFFECTIVE APRIL 8, 1997)
I. THE PLAN.
1.1 PURPOSE.
The purpose of this Plan is to promote the success of the Company
and the interests of its stockholders by providing an additional means
through the grant of Awards to attract, motivate, retain and reward
employees, including officers, by providing them long-term incentives to
improve the financial performance of the Company. "Corporation" means The
Macerich Company, a Maryland corporation, and its successors, and "Company"
means the Corporation and its Subsidiaries, collectively. These terms and
other capitalized terms are defined in Article VII.
1.2 ADMINISTRATION AND AUTHORIZATION; POWER AND PROCEDURE.
(a) COMMITTEE. This Plan shall be administered by and all Awards
to Eligible Persons shall be authorized by the Committee. Action of the
Committee with respect to the administration of this Plan shall be taken
pursuant to a majority vote or by written consent of its members. Where the
Committee authorizes the issuance of shares for consideration other than
money, the Committee shall adopt a resolution which fairly describes such
consideration and states (i) its actual value as determined by the Committee;
or (ii) that the Committee has determined that the actual value is or will be
not less than a certain sum.
(b) PLAN AWARDS; INTERPRETATION; POWERS OF COMMITTEE. Subject to
the express provisions of this Plan, the Committee shall have the authority:
(i) to determine the particular Eligible Persons who will
receive Awards;
(ii) to grant, directly or indirectly through its Subsidiaries,
Awards to Eligible Persons, determine the price at which securities
will be offered or awarded and the amount of securities to be offered
or awarded to any of such persons, and determine the other specific
terms and conditions of such Awards consistent with the express limits
of this Plan, and establish the installments (if any) in which such
Awards shall become exercisable or shall vest, or determine that no
delayed
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exercisability or vesting is required, and establish the events of
termination or reversion of such Awards;
(iii) to approve the forms of Award Agreements (which need not be
identical either as to type of award or among Participants);
(iv) to construe and interpret this Plan and any agreements
defining the rights and obligations of the Company and Participants
under this Plan, further define the terms used in this Plan, and
prescribe, amend and rescind rules and regulations relating to the
administration of this Plan;
(v) to cancel, modify, or waive the Corporation's rights with
respect to, or modify, discontinue, suspend, or terminate any or all
outstanding Awards held by Eligible Persons, subject to any required
consent under Section 6.6;
(vi) to accelerate the exercisability or the vesting of any
Awards under such circumstances as the Committee shall determine,
including a Change in Control Event, or to extend the exercisability or
extend the term of any or all such outstanding Awards within the term
limits on Awards under Section 1.6; and
(vii) to make all other determinations and take such other action
as contemplated by this Plan or as may be necessary or advisable for
the administration of this Plan and the effectuation of its purposes.
(c) BINDING DETERMINATIONS. Any action taken by, or inaction of,
the Corporation, any Subsidiary, the Board or the Committee relating or
pursuant to this Plan shall be within the absolute discretion of that entity
or body and shall be conclusive and binding upon all persons. No member of
the Board or Committee, or officer of the Corporation or any Subsidiary,
shall be liable for any such action or inaction of the entity or body, of
another person or, except in circumstances involving bad faith, of himself or
herself. Subject only to compliance with the express provisions hereof, the
Board and Committee may act in their absolute discretion in matters within
their authority related to this Plan.
(d) RELIANCE ON EXPERTS. In making any determination or in
taking or not taking any action under this Plan, the Committee or the Board,
as the case may be, may obtain and may rely upon the advice of experts,
including employees of and professional advisors to the Corporation. No
director, officer or agent of the Company shall be liable for any such action
or determination taken or made or omitted in good faith.
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(e) DELEGATION. The Committee may delegate ministerial,
non-discretionary functions to individuals who are officers or employees of
the Company.
1.3 PARTICIPATION.
Awards may be granted by the Committee only to those persons that
the Committee determines to be Eligible Persons. An Eligible Person who has
been granted an Award may, if otherwise eligible, be granted additional
Awards if the Committee shall so determine subject to the limitations
otherwise provided in this Plan.
1.4 SHARES AVAILABLE FOR AWARDS; SHARE LIMITS.
Subject to the provisions of Section 6.2, the stock that may be
delivered under this Plan shall be shares of the Corporation's authorized but
unissued Common Stock. The shares may be delivered for any lawful
consideration, but not for less than the minimum lawful consideration under
applicable state law.
(a) NUMBER OF SHARES. The maximum number of shares of Common
Stock that may be delivered pursuant to Awards granted to Eligible Persons
under this Plan shall not exceed 2,550,000 shares, plus 9.9% of any increase
in the total outstanding shares of the Company after March 31, 1997 (other
than an increase as a result of the issuance of shares under this Plan),
subject to adjustments contemplated by Section 6.2. The Plan share limit may
not contract if shares are reacquired by the Company after an increase has
been made, but neither shall the limit increase if the reacquired shares are
reissued.
(b) CALCULATION OF AVAILABLE SHARES AND REPLENISHMENT. Shares
subject to outstanding Awards shall be reserved for issuance. If any Option
or other right to acquire shares of Common Stock under or receive cash or
shares in respect of an Award shall expire or be cancelled or terminated
without having been exercised or paid in full, or any Common Stock subject to
a Restricted Stock Award or other Award shall not vest or be delivered, the
unpurchased, unvested or undelivered shares of Common Stock subject thereto
shall again be available for the purposes of this Plan, subject only to any
applicable limitations for the preservation of deductibility under Section
162(m) of the Code.
(c) PROVISIONS FOR CERTAIN STOCK-BASED CASH AWARDS. The number of
stock-related Awards actually paid in cash shall be determined by reference
to the number of shares by which the value or price of the Award is measured
and shall not, together with the aggregate number of shares theretofore
delivered and shares subject to then outstanding Awards payable in shares (or
alternatively payable in cash or shares) under this Plan, exceed
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<PAGE>
the aggregate or applicable individual limits of Section 1.4, subject to
adjustments under this Section 1.4 and Section 6.2.
(d) ISO LIMIT. The maximum number of shares of Common Stock that
may be issued under Incentive Stock Options under the Plan shall not exceed
1,950,000 shares.
(e) INDIVIDUAL LIMITS. Notwithstanding anything contained herein
to the contrary, the aggregate number of shares of Common Stock subject to
Options and Stock Appreciation Rights ("SARs") granted during any calendar
year to any individual shall be limited to 300,000, and the maximum
individual limit on the number of shares in the aggregate subject to all
stock-related Awards under this Plan granted during any calendar year shall
be 500,000, subject to adjustments under Section 6.2.
(f) DIRECTOR LIMITS. The maximum number of shares that may be
issued under Awards under this Plan that are granted to any director who is
not as of the applicable date or dates of grant an employee or officer shall
be 50,000, subject to adjustments under Section 6.2. Any Award issued to a
member of the Committee shall be subject to approval or ratification by the
Board.
1.5 GRANT OF AWARDS.
Subject to the express provisions of this Plan, the Committee
shall determine those individuals who are Eligible Persons, the number of
shares of Common Stock subject to each Award, the price (if any) to be paid
for the shares or the Award and the other terms of the Award. Each Award
shall be evidenced by an Award Agreement signed by the Corporation and, if
required by the Committee, by the Participant. Each Award shall be subject
to the terms and conditions set forth in this Plan and such other terms and
conditions established by the Committee as are not inconsistent with the
specific provisions of this Plan.
1.6 AWARD PERIOD.
Any Option, SAR, warrant or similar right shall expire and any
other Award shall either vest or be forfeited not more than 10 years after
the date of grant; provided, however, that any payment of cash or delivery of
stock pursuant to an Award may be delayed until a future date if specifically
authorized by the Committee in writing.
1.7 LIMITATIONS ON EXERCISE AND VESTING OF AWARDS.
(a) PROVISIONS FOR EXERCISE. Unless the Committee otherwise
provides, once exercisable an Award shall remain exercisable until the
expiration or earlier termination of the Award. Unless the Committee
otherwise provides, Options shall
4
<PAGE>
first become exercisable in three equal annual installments, commencing on
the first anniversary of the Award Date.
(b) PROCEDURE. Any exercisable Award shall be deemed to be
exercised when the Corporation receives written notice of such exercise from
the Participant, together with any required payment made in accordance with
Section 2.2.
(c) FRACTIONAL SHARES/MINIMUM ISSUE. Fractional share interests
shall be disregarded, but may be accumulated. The Committee, however, may
determine in the case of Eligible Persons that cash, other securities, or
other property will be paid or transferred in lieu of any fractional share
interests. No fewer than 100 shares may be purchased on exercise of any
Award at one time unless the number purchased is the total number at the time
available for purchase under the Award.
1.8 NOTES TO FINANCE EXERCISE OR PURCHASE.
If the Committee, in its sole discretion approves, and subject to
Section 6.4, the Corporation may accept one or more notes from any Eligible
Person (i) in connection with the exercise, receipt or vesting of any
outstanding Award or (ii) in such other circumstances to facilitate the
purchase of stock by an eligible employee or officer as the Committee
determines to be reasonably expected to benefit the Corporation; provided
that any such note shall be subject to the following terms and conditions:
(a) The principal of the note shall not exceed the amount
required to be paid to the Corporation upon the exercise or receipt of one or
more Awards under this Plan and the note shall be delivered directly to the
Corporation in consideration of such exercise or receipt.
(b) The initial term of the note shall be determined by the
Committee; provided that the term of the note, including extensions, shall
not exceed ten(10) years.
(c) The note shall provide for full recourse to the Participant
and shall bear interest at a rate determined by the Committee but not less
than the interest rate necessary to avoid the imputation of interest under
the Code.
(d) The unpaid principal balance of the note shall become due and
payable on the 10th business day after Termination of Employment of the
Participant; provided, however, that if a sale of the shares financed by the
note would cause such Participant to incur liability under Section 16(b) of
the Exchange Act, the unpaid balance shall become due and payable on the 10th
business day after the first day on which a sale of such shares could have
been made without incurring such liability, assuming for these purposes that
there are no other transactions
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(or deemed transactions) in securities of this Corporation by the Participant
subsequent to such termination.
(e) In the case of a note issued other than in connection with
the receipt, exercise or vesting of another Award or in any case if required
by the Committee or by applicable law, (i) the note shall be secured by a
pledge of any shares or rights financed thereby (and such other collateral as
may be required by the Committee), and (ii) the maximum principal amount of
the note may not exceed $1,000,000.
(f) The terms, repayment provisions, and collateral release
provisions of the note and the pledge securing the note shall conform with
applicable rules and regulations of the Federal Reserve Board as then in
effect.
1.9 NO TRANSFERABILITY OF AWARDS; LIMITED EXCEPTIONS.
Awards may be exercised only by, and amounts payable or shares
issuable pursuant to an Award shall be paid only to (or registered only in
the name of), the Participant or, if the Participant has died, the
Participant's Beneficiary or, if the Participant has suffered a Disability,
the Participant's Personal Representative, if any, or if there is none, the
Participant, or, (except in the case of Incentive Stock Options) to the
extent expressly permitted by the Committee and applicable law to such
persons and pursuant to such conditions and procedures as the Committee may
establish. Other than by will or the laws of descent and distribution or
(except in the case of Incentive Stock Options) as the Committee may
otherwise expressly permit, no right or benefit under this Plan or any Award
(other than shares issued without further restrictions) shall be
transferrable by the Participant or shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge (other than to the Corporation) and any such attempted action shall be
void. The Corporation shall disregard any attempt at transfer, assignment or
other alienation prohibited by the preceding sentences and shall pay or
deliver such cash or shares of Common Stock in accordance with the provisions
of this Plan. The designation of a Beneficiary for purposes hereof shall not
constitute a transfer for these purposes.
II. EMPLOYEE OPTIONS.
2.1 GRANTS.
One or more Options may be granted under this Article to any
Eligible Person. Each Option granted shall be designated by the Committee in
the applicable Award Agreement as either a Nonqualified Stock Option or an
Incentive Stock Option. Notwithstanding anything contained herein to the
contrary,
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Incentive Stock Options may be granted only to Eligible Persons who are
employed by the Corporation or a corporation which is either a direct
Subsidiary of the Corporation or an indirect Subsidiary through an unbroken
chain of corporations.
2.2 OPTION PRICE.
(a) PRICING LIMITS. The purchase price per share of the Common
Stock covered by each Option shall be determined by the Committee at the time
of the Award, PROVIDED that such price shall be no less than 100% (110% in
the case of an Incentive Stock Option granted to a Participant described in
Section 2.4) of the Fair Market Value of the Common Stock on the date of
grant. The base price of each stock appreciation right shall be determined
by the Committee at the time of the Award. The base price of an SAR granted
after the grant of an Option may be less than the Fair Market Value of Common
Stock at the date of grant of the SAR, but if so, may not be less than the
Option exercise price.
(b) PAYMENT PROVISIONS. The purchase price of any shares
purchased on exercise of an Option granted under this Article shall be paid
in full at the time of each purchase in one or a combination of the following
methods: (i) in cash or by electronic funds transfer; (ii) by certified or
cashier's check payable to the order of the Corporation; (iii) if authorized
by the Committee or specified in the applicable Award Agreement, by a
promissory note of the Participant consistent with the requirements of
Section 1.8; or (iv) by the delivery of shares of Common Stock of the
Corporation already owned by the Participant, provided, however, that the
Committee may in its absolute discretion limit the Participant's ability to
exercise an Award by delivering such shares, and any shares delivered which
were initially acquired upon exercise of a share option must have been owned
by the Participant at least six months as of the date of delivery. Shares of
Common Stock used to satisfy the exercise price of an Option shall be valued
at their Fair Market Value on the date of exercise. In addition to the
payment methods described above, the Committee may provide that the Option
can be exercised and payment made by delivering a properly executed exercise
notice together with irrevocable instructions to a broker to promptly deliver
to the Corporation the amount of sale proceeds necessary to pay the exercise
price and, unless otherwise allowed by the Committee, any applicable tax
withholding under Section 6.5. The Corporation shall not be obligated to
deliver certificates for the shares unless and until it receives full payment
of the exercise price therefor and any related withholding obligations have
been satisfied.
2.3 LIMITATIONS ON GRANT AND TERMS OF INCENTIVE STOCK OPTIONS.
(a) $100,000 LIMIT. To the extent that the aggregate
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Fair Market Value of stock with respect to which Incentive Stock Options
first become exercisable by a Participant in any calendar year exceeds
$100,000, taking into account both Common Stock subject to incentive stock
options (as defined in Section 422 of the Code) under this Plan and stock
subject to incentive stock options under all other plans of the Corporation
or its Subsidiaries, if any, such options shall be treated as Nonqualified
Stock Options. For this purpose, the Fair Market Value of the stock subject
to options shall be determined as of the date the options were awarded. In
reducing the number of options treated as incentive stock options to meet the
$100,000 limit, the most recently granted options shall be reduced first. To
the extent a reduction of simultaneously granted options is necessary to meet
the $100,000 limit, the Committee may, in the manner and to the extent
permitted by law, designate which shares of Common Stock are to be treated as
shares acquired pursuant to the exercise of an Incentive Stock Option.
(b) OPTION PERIOD. Each Option and all rights thereunder shall
expire no later than 10 years after the Award Date.
(c) OTHER CODE LIMITS. There shall be imposed in any Award
Agreement relating to Incentive Stock Options such terms and conditions as
from time to time are required in order that the Option be an "incentive
stock option" as that term is defined in Section 422 of the Code.
2.4 LIMITS ON 10% HOLDERS.
No Incentive Stock Option may be granted to any person who, at the
time the Option is granted, owns (or is deemed to own under Section 424(d) of
the Code) shares of outstanding Common Stock possessing more than 10% of the
total combined voting power of all classes of stock of the Corporation or a
Subsidiary, unless the exercise price of such Option is at least 110% of the
Fair Market Value of the stock subject to the Option and such Option by its
terms is not exercisable after the expiration of five years from the date
such Option is granted.
2.5 AWARD CHANGES/LIMITS ON REPRICING.
Subject to Section 1.4, Section 6.2 and Section 6.6 and the
specific limitations on Awards contained in this Plan, the Committee from
time to time may authorize, generally or in specific cases only, for the
benefit of any Eligible Person any adjustment in the vesting schedule, the
number of shares subject to, the restrictions upon or the term of, an Award
granted under this Article, by amendment, by substitution, by waiver or by
other legally valid means. Subject to Section 1.4, Section 6.2 and Section
6.6 and the specific limitations on Awards contained in this Plan, such
amendment or other action may, among other changes, provide for a greater or
lesser number of shares subject
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to the Award, or provide for a longer or shorter vesting or exercise period.
Subject to Section 6.2 and Section 6.3 and the specific limitations on Awards
contained in this Plan, the Committee also may reduce the exercise or
purchase price of any or all outstanding Awards as deemed appropriate by the
Committee, provided that the Committee does not reduce the exercise price of
any Option or related SAR to a price below the Fair Market Value of the
Option on the date of its grant.
2.6 LIMITATION ON EXERCISE OF OPTION AWARD.
No Participant may receive Common Stock upon exercise of an Option
to the extent that it will cause such person to Beneficially or
Constructively Own Equity Shares in excess of the Ownership Limit.
In the event that a Participant exercises any portion of an Option
(by tendering the exercise price to the Corporation) which upon delivery of
the Common Stock would cause the holder of the Option to Beneficially or
Constructively Own Equity Shares in excess of the Ownership Limit, the
Corporation shall have the right to deliver to the Participant, in lieu of
Common Stock, a check or cash in the amount equal to the Fair Market Value of
the Common Stock otherwise deliverable on the date of exercise (minus any
amounts withheld pursuant to Section 6.5).
III. STOCK APPRECIATION RIGHTS.
3.1 GRANTS.
In its discretion, the Committee may grant to any Eligible Person
SARs concurrently with the grant of Options or thereafter, including in the
circumstances of a Change in Control Event, on such terms as set forth by the
Committee in the Award Agreement for such Option or such SARs. Unless the
Committee with the consent of the Participant otherwise determines, any SAR
granted in connection with an Incentive Stock Option shall contain such terms
as may be required to comply with the provisions of Section 422 of the Code
and the regulations promulgated thereunder.
3.2 EXERCISE OF STOCK APPRECIATION RIGHTS.
(a) EXERCISABILITY. Unless the Award Agreement or the Committee
otherwise provides, a SAR shall be exercisable at such time or times, and to
the extent, that the related Option shall be exercisable and only when the
Fair Market Value of the stock subject to the related Option exceeds the
Option price of the related Option.
(b) EFFECT ON AVAILABLE SHARES. To the extent that a SAR is
exercised, the number of shares of Common Stock subject to
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the related Option shall be charged against the maximum amount of Common
Stock that may be delivered pursuant to Awards under this Plan. The number
of shares subject to the SAR and the related Option of the Participant shall
also be reduced by such number of shares.
(c) NON-PROPORTIONATE REDUCTION. If a SAR extends to less than
all the shares covered by the related Option and if a portion of the related
Option is thereafter exercised, the number of shares subject to the
unexercised SAR shall be reduced only if and to the extent that the remaining
number of shares covered by such related Option is less then the remaining
number of shares subject to such SAR, unless the Committee otherwise provides.
3.3 PAYMENT.
(a) AMOUNT. Unless the Committee otherwise provides, upon
exercise of a SAR and surrender of an exercisable portion of any related
Option to the extent required by Section 3.2, the Participant shall be
entitled to receive, subject to Section 6.5, payment of an amount determined
by multiplying
(i) the difference obtained by subtracting the exercise price
per share of Common Stock under the related Option from the Fair Market
Value of a share of Common Stock on the date of exercise of the SAR, by
(ii) the number of shares with respect to which the SAR shall
have been exercised.
If an SAR is granted as a Performance Based Award under Section 5.2 without
reference to any performance criterion other than stock price appreciation,
the base price shall be not less than the Fair Market Value at date of grant.
(b) FORM OF PAYMENT. The Committee, in its sole discretion,
shall determine the form in which payment shall be made of the amount
determined under paragraph (a) above, either solely in cash, solely in shares
of Common Stock (valued at Fair Market Value on the date of exercise of the
SAR), or partly in such shares and partly in cash, PROVIDED that the
Committee shall have determined that such exercise and payment are consistent
with applicable law. If the Committee permits the Participant to elect to
receive cash or shares (or a combination thereof) on such exercise, any such
election shall be subject to such conditions as the Committee may impose.
Notwithstanding anything contained herein to the contrary, no Participant may
receive Common Stock upon the exercise of a SAR to the extent it will cause
such person to Beneficially or Constructively Own Equity Shares in excess of
the Ownership Limit. In the event that a Participant exercises any portion
of a SAR which upon delivery of Common Stock would cause such Participant to
Beneficially or Constructively Own Equity Shares in excess of the Ownership
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Limit, the Corporation shall have the right, notwithstanding any election
granted to the Participant by the Committee, to deliver a check or cash to
the Participant.
IV. RESTRICTED STOCK AWARDS.
4.1 GRANTS.
Subject to the Restricted Stock limits set forth in Section
4.2(e), the Committee may, in its discretion, grant one or more Restricted
Stock Awards to any Eligible Person based upon such factors (which in the
case of any Award to a Section 16 Person shall include but not be limited to
the contributions, responsibilities and other compensation of the person) as
the Committee shall deem relevant in light of the specific terms of the
Award. Each Restricted Stock Award Agreement shall specify the number of
shares of Common Stock to be issued to the Participant, the date of such
issuance, the consideration for such shares (but not less than the minimum
lawful consideration under applicable state law) by the Participant, the
restrictions imposed on such shares and the conditions of release or lapse of
such restrictions, which may include performance criteria, continued
employment for a specified period of time and/or other factors. Such
restrictions shall not lapse earlier than one year after the Award Date,
except as set forth in Section 6.2 and Section 6.3 and to the extent the
Committee may otherwise provide. Shares of Restricted Stock may be issued in
the form of book entries or stock certificates, each registered in the name
of the Participant ("Restricted Shares"). Stock certificates or book entry
records evidencing shares of Restricted Stock pending the lapse of the
restrictions shall bear an appropriate reference to the restrictions imposed
hereunder. Restricted Shares shall be held (if in certificate form) and
restricted as to transfer until the restrictions have lapsed and such shares
have vested in accordance with the provisions of the Award Agreement and this
Plan. Upon issuance of the Restricted Stock Award, the Participant may be
required to provide such further assurance and documents as the Committee may
require to enforce the restrictions.
4.2 RESTRICTIONS.
(a) PERFORMANCE VESTING. The vesting of shares pursuant to a
Restricted Stock Award may be based solely upon the continued employment for
a specific period of time or the degree of attainment, over a specified
period as may be established by the Committee, of such measure(s) of the
performance of the Company (or any part thereof) or the Participant's
performance, or upon any combination thereof, as may be established by the
Committee. Performance-based or accelerating Restricted Stock Awards may
also be granted under Section 5.2.
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(b) PRE-VESTING RESTRAINTS. Except as provided in and subject to
the provisions of Sections 4.1 and 1.9, Restricted Shares comprising any
Restricted Stock Award may not be sold, assigned, transferred, pledged or
otherwise disposed of or encumbered, either voluntarily or involuntarily,
until such shares have vested.
(c) DIVIDEND AND VOTING RIGHTS. Unless otherwise provided in the
applicable Award Agreement, a Participant receiving a Restricted Stock Award
shall be entitled to cash dividend and voting rights for all shares issued
even though they are not vested, provided that all such rights shall
terminate immediately as to any restricted shares which cease to be eligible
for vesting.
(d) CASH PAYMENTS. If the Participant shall have paid cash in
connection with the Restricted Stock Award, the Award Agreement shall specify
whether and to what extent such cash shall be returned (with or without an
earnings factor) as to any restricted shares which cease to be eligible for
vesting.
4.3 RETURN TO THE CORPORATION.
Unless the Committee otherwise expressly provides, Restricted
Shares that are subject to restrictions at the time of Termination of
Employment or are subject to other conditions to vesting that have not been
satisfied by the time specified in the applicable Award Agreement shall not
vest and shall be returned to the Corporation in such manner and on such
terms as the Committee shall therein provide.
V. STOCK BONUSES, OTHER CASH OR STOCK PERFORMANCE-BASED AWARDS,
STOCK UNITS AND DIVIDEND EQUIVALENT RIGHTS.
5.1 GRANTS OF STOCK BONUSES.
The Committee may grant a Stock Bonus to any Eligible Person to
reward exceptional or special services, contributions or achievements in the
manner and on such terms and conditions (including any restrictions on such
shares) as determined from time to time by the Committee. The number of
shares so awarded shall be determined by the Committee; provided, however, in
no case may a Stock Bonus be granted to the extent that it will cause an
Eligible Person to Beneficially or Constructively Own Equity Shares in excess
of the Ownership Limit. The Award may be granted independently or in lieu of
a cash bonus.
5.2 OTHER PERFORMANCE-BASED AWARDS.
(a) GENERAL PROVISIONS. Without limiting the generality of the
foregoing, and in addition to qualifying awards
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granted under other provisions of this Plan (i.e. Options or SARs granted
with an exercise price not less than Fair Market Value at the applicable date
of grant for Section 162(m) purposes to Eligible Persons who are either
salaried employees or officers ("ELIGIBLE EMPLOYEES") ("Presumptively
Qualifying Awards")), the Committee may authorize and grant to any Eligible
Employee, other cash or stock-related performance-based awards, including
"performance-based" awards within the meaning of Section 162(m) of the Code
("PERFORMANCE-BASED AWARDS"), whether in the form of restricted stock, stock
appreciation rights, performance stock, phantom stock, stock units, Dividend
Equivalent Rights ("DERs"), or other rights, whether or not related to stock
values or appreciation, and whether payable in cash, Common Stock or a
combination thereof. If the Award (other than a Presumptively Qualifying
Award) is intended as performance-based compensation under Section 162(m) of
the Code, the vesting or payment thereof will depend on the performance of
the Company on a consolidated, Subsidiary, segment, or division basis with
reference to performance goals relative to one or more of the following
business criteria (the "criterion"): funds from operations, EBITDA, stock
appreciation, total stockholder return, occupancy gains, and overall square
footage growth, each as defined in Exhibit A. These terms otherwise are used
as applied under generally accepted accounting principles and in the
Company's financial reporting. To qualify Awards as performance-based under
Section 162(m), the applicable business criteria and specific performance
goal or goals ("targets") must be established and approved by the Committee
during the first 90 days of the year (or before one-quarter of the
performance measurement period has elapsed, if such period exceeds one year)
and while the performance relating to such targets remains substantially
uncertain within the meaning thereof. The applicable performance measurement
period may be not less than one nor (except as provided in Section 1.6) more
than 10 years.
(b) MAXIMUM AWARD. Grants or awards under this Section 5.2 may
be paid in cash or stock or any combination thereof. In no event shall
grants of stock-related Awards made in any calendar year to any Eligible
Employee under this Plan relate to more than 500,000 shares. In no event
shall grants to any Eligible Employee under this Plan of Awards payable only
in cash and not related to stock provide for payment of more than (x) the
lesser of 200% of base salary as of the beginning of the applicable
performance period or $600,000, times (y) the applicable number of years (not
more than 10) to which the Awards relate in the performance periods.
(c) COMMITTEE CERTIFICATION. Except as otherwise permitted to
qualify as performance-based compensation under Section 162(m), before any
Performance-Based Award under this Section 5.2 is paid, the Committee must
certify that the performance standard, target(s), and the other material
terms of the Performance-Based Award were in fact satisfied.
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(d) TERMS AND CONDITIONS OF AWARDS. The Committee will have
discretion to determine the restrictions or other limitations of the
individual Awards under this Section 5.2, including the authority to reduce
Awards, to determine payout schedules and the extent of vesting or to pay no
Awards, in its sole discretion, if the Committee preserves such authority at
the time of grant by language to this effect in its authorizing resolutions
or otherwise. The Committee may provide that in the event a Participant
terminates employment or service for any one or more reason during a Plan
Year, the Participant shall forfeit all rights to any Award for the Plan Year.
(e) ADJUSTMENTS FOR MATERIAL CHANGES. Performance goals or other
features of an Award may provide that they (a) shall be adjusted to reflect a
change in corporate capitalization, a corporate transaction (such as a
reorganization, combination, separation, or merger) or a complete or partial
corporate liquidation, or (b) shall be calculated either without regard for
or to reflect any change in accounting policies or practices affecting the
Company and/or the business criteria or performance goals or targets, or (c)
shall be adjusted for any other circumstance or event, but only to the extent
in each case that such adjustment or determination in respect of
Performance-Based Awards would be consistent with the requirements of Section
162(m) to qualify as performance-based compensation.
(f) SECTION 162(m) CONSIDERATIONS. Options or SARs granted under
this Plan at an exercise price not less than Fair Market Value at the
applicable date of grant, and (except to the extent an Award becomes vested
or payable as a result of a Change in Control Event) other Qualified
Performance-Based Awards granted under this Section 5.2, shall be interpreted
in a manner consistent with the requirements of Section 162(m) to qualify as
performance-based compensation.
5.3 STOCK UNITS.
(a) GRANTS. Subject to Section 5.3(d) and such rules and
procedures as the Committee may establish from time to time, the Committee
may, in its discretion, authorize Stock Unit Awards and permit an Eligible
Person to elect to defer or receive in Stock Units all or a portion of the
compensation the Eligible Person could otherwise elect to defer under any
other Company plan, or in respect of any Award hereunder, or may grant Awards
in the form of Stock Units in lieu of or in addition to any other Award under
this Plan. The specific terms, conditions and provisions relating to each
Stock Unit Award or election, including the form of payment to be made at or
following the vesting thereof, shall be set forth in or pursuant to the
Participant's Award Agreement in respect thereof.
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(b) OTHER PROVISIONS. The Committee shall determine, among other
terms of a Stock Unit Award, the form of payment of Stock Units, whether in
cash, Common Stock, or other consideration (including any other Award) or any
combination thereof, and the applicable vesting and payout provisions of the
Award. The Committee in the Award Agreement may permit the Participant to
elect the form and time of payout of vested Stock Units on such conditions or
subject to such procedures as the Committee may impose.
(c) STOCK UNITS. Each Award Agreement for an Award of Stock
Units shall include the applicable benefit distribution and termination
provisions, which may include elective features, for such Award and shall
specify the form of payment.
(d) LIMIT ON CERTAIN STOCK UNIT AWARDS. Notwithstanding anything
contained herein to the contrary, any Stock Unit Award or Stock Unit Awards
which individually or in the aggregate would constitute an "employee pension
benefit plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974 ("ERISA")) shall be made only to Eligible Persons who
are members of "a select group of management or highly compensated employees"
(as provided in Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA) of the
Company.
5.4 DIVIDEND EQUIVALENT RIGHTS. In its discretion, the Committee
may grant to any Eligible Person DERs concurrently with the grant of any
Option, Restricted Stock, Stock Unit or other stock-based Award, on such
terms as set forth by the Committee in the Award Agreement. DERs shall be
based on all or part of the amount of dividends declared on shares of Common
Stock and shall be credited as of dividend payment dates, during the period
between the date of grant (or such later date as the Committee may set) and
the date the stock-based Award is exercised or expires (or such earlier date
as the Committee may set), as determined by the Committee. DERs shall be
payable in cash or shares, or (to the extent permitted by law) may be subject
to such conditions, not inconsistent with Section 162(m) (in the case of
Options or SARs, or other Awards intended to satisfy its conditions with
respect to deductibility), as may be determined by the Committee.
VI. OTHER PROVISIONS.
6.1 RIGHTS OF ELIGIBLE PERSONS, PARTICIPANTS AND BENEFICIARIES.
(a) EMPLOYMENT STATUS. Status as an Eligible Person shall not be
construed as a commitment that any Award will be made under this Plan to an
Eligible Person or to Eligible Persons generally.
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(b) NO EMPLOYMENT CONTRACT. Nothing contained in this Plan (or
in any other documents related to this Plan or to any Award) shall confer
upon any Eligible Person or other Participant any right to continue in the
employ or other service of the Company or constitute any contract or
agreement of employment or other service, nor shall interfere in any way with
the right of the Company to change such person's compensation or other
benefits or to terminate the employment of such person, with or without
cause, but nothing contained in this Plan or any document related hereto
shall adversely affect any independent contractual right of such person
without his or her consent thereto.
(c) PLAN NOT FUNDED. Awards payable under this Plan shall be
payable in shares or from the general assets of the Corporation, and (except
as provided in Section 1.4(b)) no special or separate reserve, fund or
deposit shall be made to assure payment of such Awards. No Participant,
Beneficiary or other person shall have any right, title or interest in any
fund or in any specific asset (including shares of Common Stock, except as
expressly otherwise provided) of the Company by reason of any Award
hereunder. Neither the provisions of this Plan (or of any related
documents), nor the creation or adoption of this Plan, nor any action taken
pursuant to the provisions of this Plan shall create, or be construed to
create, a trust of any kind or a fiduciary relationship between the Company
and any Participant, Beneficiary or other person. To the extent that a
Participant, Beneficiary or other person acquires a right to receive payment
pursuant to any Award hereunder, such right shall be no greater than the
right of any unsecured general creditor of the Company.
6.2 ADJUSTMENTS; EARLY TERMINATION.
(a) ADJUSTMENTS. If the outstanding shares of Common Stock are
changed into or exchanged for cash, other property or a different number or
kind of shares or securities of the Corporation, or if additional shares or
new or different securities are distributed with respect to the outstanding
shares of Common Stock, through a reorganization or merger in which the
Corporation is the surviving entity, or through a combination, consolidation,
recapitalization, reclassification, stock split, stock dividend, reverse
stock split, stock consolidation, dividend or distribution of cash or
property to the stockholders of the Corporation, or if there shall occur any
other extraordinary corporate transaction or event in respect of the Common
Stock or a sale of substantially all the assets of the Corporation as an
entirety which in the judgment of the Committee materially affects the Common
Stock, then the Committee shall, in such manner and to such extent (if any)
as it deems appropriate and equitable, (i) proportionately adjust any or all
of (1) the number and kind of shares or other consideration that is subject
to or may be delivered under this Plan and pursuant to outstanding Awards,
(2) any performance standards appropriate to any
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outstanding Awards, and/or (3) the consideration payable with respect to
Awards granted prior to any such change and the price, if any, paid in
connection with Restricted Stock Awards; or (ii) in the case of an
extraordinary dividend or other distribution, merger, reorganization,
consolidation, combination, sale of assets, split up, exchange or spin off,
make provision for a cash payment or for the substitution or exchange of (1)
any or all outstanding Awards or the cash, securities or property deliverable
to the holder of any or all outstanding Awards, for (2) cash, property and/or
other securities, based upon the distribution or consideration payable to
holders of the Common Stock of the Corporation upon or in respect of such
event; provided, however, in each case, that with respect to awards of
Incentive Stock Options, no such adjustment shall be made without the consent
of the holder which would cause this Plan to violate Section 422 or 424(a) of
the Code or any successor provisions thereto. Corresponding adjustments
shall be made with respect to SARs based upon the adjustment made to the
Options to which they relate.
(b) POSSIBLE EARLY TERMINATION OF AWARDS. If any Award or other
right to acquire Common Stock has not been exercised or has not become vested
or exercisable prior to (i) a dissolution of the Corporation or (ii) a
reorganization event described in Section 6.2(a) that the Corporation does
not survive and no provision has been made for the substitution, exchange or
other settlement of such Award, such Award shall thereupon terminate.
(c) LIMITATION ON AWARD ADJUSTMENTS. To the extent required in
the case of an Award intended as a Performance-Based Award for purposes of
Section 162(m), the Committee shall have no discretion (i) to increase the
amount of compensation or the number of shares that would otherwise be due
upon the attainment of the applicable performance goal or the exercise of the
option or SAR or (ii) to waive the achievement of any applicable performance
goal as a condition to receiving a benefit or right under an Award.
6.3 TERMINATION OF EMPLOYMENT; TERMINATION OF SUBSIDIARY STATUS.
Any Award to the extent not exercised shall terminate and become
null and void upon a Termination of Employment of the Participant, except as
set forth in subsections (a) through (e) below or as otherwise expressly
provided by the Committee. Notwithstanding anything contained in this Section
to the contrary, all Awards shall be subject to earlier termination pursuant
to or as contemplated by Section 1.6 and Section 6.2 of this Plan. Unless
the Committee otherwise provides, any and all rights to an Award, to the
extent not exercised or vested, shall expire immediately upon a Termination
of Employment of the
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Participant for cause, of which the Committee (in the case of any dispute
about cause) shall be the sole judge.
(a) NONQUALIFIED STOCK OPTIONS. Unless the Committee otherwise
expressly provides in the Award Agreement:
(i) If the Participant's employment by the Company
terminates by reason other than death, Disability or cause, or by
reason of a Subsidiary ceasing to be a Subsidiary, then the Participant
shall have three months after the date of Termination of Employment to
exercise any Nonqualified Stock Option to the extent that it was
exercisable on such date;
(ii) If the Participant's employment by the Company
terminates by reason of a Disability, or if Participant suffers a
Disability within three months of a Termination of Employment under
subsection (i) above, then the Participant or Participant's Personal
Representative, as the case may be, shall have twelve months after the
date of Disability (or, if earlier, Termination of Employment) to
exercise any Nonqualified Stock Option to the extent that it was
exercisable on such date; and
(iii) If the Participant dies while in the employ of the
Company, or within three months after a Termination of Employment under
subsection (i) or (ii) above, then the Participant's Beneficiary may
exercise, at any time within twelve months after the Participant's
Termination of Employment, any Nonqualified Stock Option to the extent
that it was exercisable on the date of the Participant's Termination of
Employment);
PROVIDED, HOWEVER, that in no event shall the Option be exercised after the
expiration of its term or its earlier termination under any other provisions
of the Plan.
(b) INCENTIVE STOCK OPTIONS. Unless the Committee otherwise
expressly provides in the Award Agreement:
(i) If the Participant's employment by the Company
terminates by reason other than death, Disability or cause, or by
reason of a Subsidiary ceasing to be a Subsidiary, then the Participant
shall have three months after the date of Termination of Employment to
exercise any Incentive Stock Option to the extent that it was
exercisable on such date;
(ii) If the Participant's employment by the Company
terminates by reason of a Disability, or if Participant suffers a
Disability within three months of a Termination of Employment under
subsection (i) above, then the Participant or Participant's Personal
Representative, as
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the case may be, shall have twelve months after the date of Disability
(or, if earlier, Termination of Employment) to exercise any Incentive
Stock Option to the extent that it was exercisable on such date; and
(iii) If the Participant dies while in the employ of the
Company, or within three months after a Termination of Employment under
subsection (i) or (ii) above, then the Participant's Beneficiary may
exercise, at any time within twelve months after the Participant's
Termination of Employment, any Incentive Stock Option to the extent
that it was exercisable on the date of the Participant's Termination of
Employment);
PROVIDED, HOWEVER, that in no event shall the Option be exercised after the
expiration of its term or its earlier termination under other provision of
this Plan.
(c) STOCK APPRECIATION RIGHTS. Each SAR shall have the same
termination provisions and exercisability periods as the Option to which it
relates. The exercisability period of a SAR shall not exceed that provided
in the related Award Agreement, and the SAR shall expire at the end of such
exercisability period.
(d) OTHER AWARDS. The Committee shall establish in respect of
each other Award granted hereunder the Participant's rights and benefits (if
any) in the event of a Termination of Employment and in so doing may make
distinctions based upon, among other factions, the cause of termination and
the nature of the Award.
(e) EXTENSION OF EXERCISE. Notwithstanding the foregoing
provisions but subject to Section 6.2, in the event of, or in anticipation
of, a Termination of Employment with the Company, the Committee may, in its
discretion, increase the portion of the Award available to the Participant
(or Participant's Beneficiary or Personal Representative, as the case may be)
or extend the exercisability period upon such terms as the Committee shall
determine.
6.4 COMPLIANCE WITH LAWS.
This Plan, the granting and vesting of Awards under this Plan and
the offer, issuance and delivery of shares of Common Stock and/or the payment
of money under this Plan or under Awards granted hereunder are subject to
compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, agency or any
regulatory or governmental authority as may, in the opinion of counsel for
the Corporation, be necessary or advisable in connection therewith. Any
securities delivered
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under this Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Corporation, provide
such assurances and representations to the Corporation as the Corporation may
deem necessary or desirable to assure compliance with all applicable legal
requirements.
6.5 TAX WITHHOLDING.
Upon any exercise, vesting, or payment of any Award or upon the
disposition of shares of Common Stock acquired pursuant to the exercise of an
Incentive Stock Option prior to satisfaction of the holding period
requirements of Section 422 of the Code, the Company shall have the right at
its option to (i) require the Participant (or the Participant's Personal
Representative or Beneficiary, as the case may be) to pay or provide for
payment of the amount of any taxes which the Company may be required to
withhold with respect to such transaction or (ii) deduct from any amount
payable the amount of any taxes which the Company may be required to withhold
with respect to such cash amount. In any case where a tax is required to be
withheld in connection with the delivery of shares of Common Stock under this
Plan, the Committee may permit the Participant to elect, pursuant to such
rules and subject to such conditions as the Committee may establish, to have
the Corporation reduce the number of shares to be delivered by (or otherwise
reacquire) the appropriate number of shares valued at their then Fair Market
Value, to satisfy such withholding obligation.
6.6 PLAN AMENDMENT, TERMINATION AND SUSPENSION.
(a) BOARD OR COMMITTEE AUTHORIZATION. The Board may, at any
time, terminate or, from time to time, amend, modify or suspend this Plan, in
whole or in part. No Awards may be granted during any suspension of this
Plan or after termination of this Plan, but the Committee shall retain
jurisdiction as to Awards then outstanding in accordance with the terms of
this Plan.
(b) STOCKHOLDER APPROVAL. Any amendment to this Plan shall be
subject to stockholder approval to the extent then required under Sections
422 and 424 of the Code or any other applicable law, or deemed necessary or
advisable by the Board.
(c) AMENDMENTS TO AWARDS. Without limiting any other express
authority of the Committee under but subject to the express limits of this
Plan (including Section 6.2(c)), the Board or the Committee, by agreement or
resolution, may waive conditions of or limitations on Awards to Eligible
Persons that the Committee in the prior exercise of its discretion has
imposed, without the consent of a Participant, and may make other changes to
the terms and conditions of Awards that do not affect, in any manner
materially adverse to the Employee Participant, his or her rights and
benefits under an Award.
(d) LIMITATIONS ON AMENDMENTS TO PLAN AND AWARDS. No amendment,
suspension or termination of this Plan or change of or
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affecting any outstanding Award shall, without written consent of the
Participant, affect in any manner materially adverse to the Participant any
rights or benefits of the Participant or obligations of the Corporation under
any Award granted under this Plan prior to the effective date of such change.
Changes contemplated by Section 6.2 shall not be deemed to constitute
changes or amendments for purposes of this Section 6.6.
6.7 PRIVILEGES OF STOCK OWNERSHIP.
Except as otherwise expressly authorized by the Committee or this
Plan, a Participant shall not be entitled to any privilege of stock ownership
as to any shares of Common Stock not actually delivered to and held of record
by him or her. No adjustment will be made for dividends or other rights as a
stockholder for which a record date is prior to such date of delivery.
6.8 EFFECTIVE DATE OF THIS PLAN.
The effective date of this Plan was March 4, 1994. Amendments
effective April 8, 1997 were approved by the Board, subject to approval of
stockholders, and did not adversely affect any award holder's rights or
benefits under this Plan.
6.9 TERM OF THIS PLAN.
No Award shall be granted after March 3, 2004 (the "Termination
Date"). Unless otherwise expressly provided in this Plan or in an applicable
Award Agreement, any Award theretofore granted may extend beyond such date,
and all authority of the Committee with respect to Awards hereunder,
including its authority to amend an Award, shall continue during any
suspension of this Plan and in respect of outstanding Awards on such
Termination Date.
6.10 GOVERNING LAW/CONSTRUCTION/SEVERABILITY.
(a) CHOICE OF LAW. This Plan, the Awards, all documents
evidencing Awards and all other related documents shall be governed by, and
construed in accordance with the laws of the State of Maryland.
(b) SEVERABILITY. If any non-essential provision shall be held
by a court of competent jurisdiction to be invalid and unenforceable, the
remaining provisions of this Plan shall continue in effect.
(c) PLAN CONSTRUCTION; BIFURCATION. Notwithstanding anything to
the contrary in this Plan, the provisions of this Plan may at any time be
bifurcated by the Board or the Committee in any manner so that certain
provisions of any Award Agreement (or this Plan) intended (or required in
order) to satisfy the
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applicable requirements of Rule 16b-3 or to qualify for exemption from the
limit on deductibility under Section 162(m) (to the extent permitted thereby)
are applicable only to persons subject to those provisions and to those
Awards to those persons intended to satisfy the requirements of the
applicable rule or rules thereunder.
6.11 CAPTIONS.
Captions and headings are given to the sections and subsections of
this Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or
interpretation of this Plan or any provision thereof.
6.12 NON-EXCLUSIVITY OF PLAN.
Nothing in this Plan shall limit or be deemed to limit the
authority of the Board or the Committee to grant awards or authorize any
other compensation, with or without reference to the Common Stock, under any
other plan or authority.
VII. DEFINITIONS.
7.1 DEFINITIONS.
(a) "Award" shall mean an award of any Option, SAR, Stock Unit,
Restricted Stock, Stock Bonus, DER, or any combination thereof, whether
alternative or cumulative, authorized by and granted under this Plan.
(b) "Award Agreement" shall mean any writing setting forth the
terms of an Award that has been authorized by the Committee.
(c) "Award Date" shall mean the date upon which the Committee
took the action granting an Award or such later date as the Committee
designates as the Award Date at the time of the Award.
(d) "Award Period" shall mean the period beginning on an Award
Date and ending on the expiration date of such Award.
(e) "Beneficial Ownership" shall mean ownership of Equity Shares
by a person who would be treated as an owner of such shares either directly
or indirectly through the application of Section 544 of the Code, as modified
by Section 856(h)(1)(B) of the Code. The terms "Beneficial Owner,"
"Beneficially Owns" and "Beneficially Owned" shall have correlative meanings.
(f) "Beneficiary" shall mean the person, persons, trust or trusts
entitled by will or the laws of descent and
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distribution to receive the benefits specified in the Award Agreement and
under this Plan in the event of a Participant's death, and shall mean the
Participant's executor or administrator if no other Beneficiary is identified
and able to act under the circumstances.
(g) "Board" shall mean the Board of Directors of the Corporation.
(h) "Change in Control Event" shall mean any of the following:
(1) Approval by the stockholders of the Corporation of the
dissolution or liquidation of the Corporation;
(2) Approval by the stockholders of the Corporation of an
agreement to merge or consolidate, or otherwise reorganize, with or
into one or more entities that are not Subsidiaries or other
affiliates, as a result of which less than 50% of the outstanding
voting securities of the surviving or resulting entity immediately
after the reorganization are, or will be, owned, directly or
indirectly, by stockholders or other affiliates of the Corporation
immediately before such reorganization (assuming for purposes of such
determination that there is no change in the record ownership of the
Corporation's securities from the record date for such approval until
such reorganization but including in such determination any securities
of the other parties to such reorganization held by affiliates of the
Corporation);
(3) Approval by the stockholders of the Corporation of the sale
of substantially all of the Corporation's business and/or assets to a
person or entity which is not a Subsidiary or other affiliate; or
(4) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing more than 20% of the
combined voting power of the Corporation's then outstanding securities
entitled to then vote generally in the election of directors of the
Corporation.
(i) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(j) "Commission" shall mean the Securities and Exchange
Commission.
(k) "Committee" shall mean a committee appointed by the Board to
administer this Plan, which committee shall be
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comprised of at least two Board members or such greater number of directors
as may be required under applicable law, each of whom, during such time as
one or more Participants may be subject to Section 16 of the Exchange Act,
shall be a Disinterested Director.
(l) "Common Stock" shall mean the Common Stock of the Corporation
and such other securities or property as may become the subject of Awards, or
become subject to Awards, pursuant to an adjustment made under Section 6.2 of
this Plan.
(m) "Company" shall mean, collectively, The Macerich Company and
its Subsidiaries, and shall mean, individually, any one of them, as the
context requires.
(n) "Constructive Ownership" shall mean ownership of Equity
Shares by a person who would be treated as an owner of such shares either
directly or indirectly through the application of Section 318 of the Code, as
modified by Section 856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructive Owns" and "Constructively Owned" shall have correlative
meanings.
(o) "Corporation" shall mean The Macerich Company, a Maryland
corporation, and its successors.
(p) "Deferred Stock Award" shall mean a deferred payment award
payable in Common Stock or cash or other consideration, as determined by the
Committee, based on Stock Units credited to a Participant's Stock Unit
Account.
(q) "Disability" shall mean, in the case of an Incentive Stock
Option, a "permanent and total disability" within the meaning of Section
22(e)(3) of the Code and, in the case of all other Awards, such other
disabilities, infirmities, afflictions or conditions as the Committee by rule
may include.
(r) "Disinterested Director" shall mean (unless the Board
otherwise determines) a member of the Board who is a Non-Employee Director as
defined in Rule 16b-3 and an "outside director" as defined in regulations
under Section 162(m) of the Code, as each may be amended from time to time.
(s) "Dividend Equivalent Right" shall mean a right authorized
under Section 5.4 of this Plan.
(t) "Eligible Person" shall mean an officer (whether or not an
employee), an employee of the Company, a director of the Company or any other
person (including a significant agent or consultant) who performs substantial
services for the Company, all as determined by the Committee in its
discretion, except as otherwise limited for purposes of Sections 5.2 and 5.3.
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(u) "Equity Shares" shall mean shares that are either Common
Stock or Preferred Stock.
(v) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
(w) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(x) "Fair Market Value" on any date shall mean the closing price
of the stock on the Composite Tape, as published in the Western Edition of
The Wall Street Journal, of the principal securities exchange or market on
which the stock is so listed, admitted to trade, or quoted on such date, or,
if there is no trading of the stock on such date, then the closing price of
the stock as quoted on such Composite Tape on the next preceding date on
which there was trading in such shares; PROVIDED, HOWEVER, if the stock is
not so listed, admitted or quoted, the Committee may designate such other
exchange, market or source of data as it deems appropriate for determining
such value for purposes of this Plan.
(y) "Incentive Stock Option" shall mean an Option which is
designated as an incentive stock option within the meaning of Section 422 of
the Code and which contains such provisions as are necessary to comply with
that section.
(z) "Nonqualified Stock Option" shall mean an Option that is
designated as a Nonqualified Option and shall include any Option intended as
an Incentive Option that fails to meet the applicable legal requirements
thereof. Any Option granted hereunder that is not designated as an Incentive
Stock Option shall be deemed to be designated a Nonqualified Stock Option
under this Plan and not an Incentive Share Option under the Code.
(aa) "Option" shall mean an option to purchase Common Stock under
this Plan. The Committee shall designate any Option granted to an Eligible
Person as a Nonqualified Stock Option or an Incentive Stock Option.
(bb) "Ownership Limit" shall mean 9.8% of the value of the
outstanding Equity Shares of the Corporation.
(cc) "Participant" shall mean an Eligible Person who has been
granted an Award under this Plan.
(dd) "Personal Representative" shall mean the person or persons
who, upon the disability or incompetence of a Participant, shall have
acquired on behalf of the Participant, by legal proceeding or otherwise, the
power to exercise the rights or receive benefits under this Plan by virtue of
having become the legal representative of the Participant.
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(ee) "Plan" shall mean The Macerich Company 1994 Stock Incentive
Plan, as amended, renamed and restated effective April 8, 1997.
(ff) "Preferred Stock" shall mean the Preferred Stock of the
Corporation.
(gg) "Qualified Performance-Based Award" shall mean a
performance-based award under this Plan that is intended to satisfy the
requirements of Section 162(m) of the Code in respect of performance-based
compensation, the payment of which is contingent upon attainment of
performance objectives specified by the Committee in respect of the business
criteria specified in Section 5.2, and the issuance or vesting of which may
be subject to other restrictions or conditions.
(hh) "Restricted Stock" shall mean shares of Common Stock awarded
to a Participant pursuant to Article IV.
(ii) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the
Commission pursuant to the Exchange Act as in effect on November 1, 1996, or
any successor provision, as amended from time to time.
(jj) "Section 16 Person" shall mean a person subject to Section
16(a) of the Exchange Act.
(kk) "Section 162(m)" shall mean Section 162(m) of the Code and
the regulations and interpretations of the Internal Revenue Service
thereunder, as amended from time to time.
(ll) "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
(mm) "Stock Appreciation Right" shall mean a right authorized
under Article III of this Plan.
(nn) "Stock Bonus" shall mean an Award of shares of Common Stock
for no consideration other than past services (subject to Section 6.4) that
includes such restrictions (if any) as the Committee may deem advisable to
assure compliance with law or satisfaction of other conditions it may impose.
(oo) "Stock Unit" shall mean a non-voting unit of measurement
which is deemed for bookkeeping purposes to be equivalent to one outstanding
share of Common Stock of the Company (subject to adjustment) solely for
purposes of this Plan.
(pp) "Stock Unit Account" shall mean the bookkeeping account
maintained by the Company on behalf of each Participant which is credited
with Stock Units in accordance with Section 5.3(c) and which is payable in
cash, stock and/or other consideration as the Committee may determine.
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(qq) "Subsidiary" shall mean The Macerich Partnership, L.P., a
Delaware limited partnership, The Macerich Management Company, The Macerich
Property Management Company, both California corporations, or any corporation
or other entity a majority of whose outstanding voting stock or voting power
is beneficially owned directly or indirectly by the Corporation.
(rr) "Termination of Employment" shall mean any termination of the
Participant's employment with the Company; if an entity ceases to be a
Subsidiary, a Termination of Employment shall be deemed to have occurred with
respect to each employee of such Subsidiary who does not continue as an
employee of another entity owned, controlled by or under common control with
the Company. The Committee may provide generally or on a case-by-case basis
on such conditions as it deems appropriate that a Termination of Employment
does not occur if a person's status as an employee terminates but his or her
services continue as an officer or other person who would be eligible to
participate in the Plan as an Other Eligible Person.
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EXHIBIT A
PERFORMANCE-BASED BUSINESS CRITERIA
FUNDS FROM OPERATIONS means Funds from Operations, as defined by
The National Association of Real Estate Investment Trusts at the time of the
grant of an Award, for the applicable period, as reflected in the
Corporation's periodic financial reports for the period.
STOCK APPRECIATION means an increase in the price or value of the
Common Stock of the Corporation after the date of grant of an Award and
during the applicable period.
TOTAL STOCKHOLDER RETURN means the aggregate Common Stock price
appreciation and dividends paid (assuming full reinvestment of dividends)
during the applicable period.
OCCUPANCY GAINS means increases in the occupancy level (leased and
occupied areas) of malls and freestanding store area (excluding Anchors)
(owned at both the beginning and end of the applicable period) during the
period, measured as a percentage of the gross leasable/occupiable area of
such properties, as reported to the Committee for inclusion in the
Corporation's reports to the SEC for the applicable period.
EBITDA means earnings before interest, taxes, depreciation and
amortization for the applicable period, as reflected in the Corporation's
financial reports for the applicable period.
OVERALL SQUARE FOOTAGE GROWTH means the increase, between the
beginning and end of the applicable period, in the total square feet of gross
leasable mall and free standing stores area (excluding Anchors), as reported
to the Committee for inclusion in the Corporation's reports to the SEC for
the applicable period.
Except as otherwise expressly provided, all financial terms are
used as defined under Generally Accepted Accounting Principles (GAAP) and all
determinations shall be made in accordance with GAAP, as applied by the
Corporation in the preparation of its periodic reports to stockholders.
A-1
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of February 25, 1998 (this
"AGREEMENT"), by and between The Macerich Company, a Maryland corporation (the
"COMPANY"), and Security Capital Preferred Growth Incorporated, a Maryland
corporation (the "INVESTOR").
WHEREAS, pursuant to that certain Series A Preferred Securities
Purchase Agreement, dated as of January 19, 1998 (the "PURCHASE AGREEMENT"), by
and among the Company, Macerich Partnership, L.P., a Delaware limited
partnership, and the Investor, the Investor has agreed to acquire 3,627,131
shares of Series A Cumulative Convertible Preferred Stock, par value $.01 per
share, of the Company (the "PREFERRED SHARES"), all of which may be converted
into shares of the Company's common stock, par value $.01 per share (the "COMMON
SHARES"), pursuant to the terms of the Preferred Shares; and
WHEREAS, in connection with the Purchase Agreement, the Company has
agreed to register for sale by the Investor and certain transferees, the Common
Shares received by the Investor upon conversion of Preferred Shares (the
"REGISTRABLE SHARES"); and
WHEREAS, the parties hereto desire to enter into this Agreement to
evidence the foregoing agreement of the Company and the mutual covenants of the
parties relating thereto.
NOW, THEREFORE, in consideration of the foregoing and the covenants of
the parties set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, subject to the terms
and conditions set forth herein, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. In this Agreement the following
terms shall have the following respective meanings:
"ACCREDITED INVESTOR" shall have the meaning set forth in Rule 501 of
the General Rules and Regulations promulgated under the Securities Act.
"AFFILIATE" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified.
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the relevant time.
<PAGE>
"HOLDERS" shall mean (i) the Investor and (ii) each Person holding
Registrable Shares (which term, for purposes of this definition shall include
Common Shares that may be issued upon conversion of outstanding Preferred
Shares) as a result of a transfer or assignment to that Person of Registrable
Shares other than pursuant to an effective registration statement or Rule 144
under the Securities Act, which transfer or assignment is properly completed in
accordance with Section 10 hereof.
"INDEMNIFIED PARTY" shall have the meaning ascribed to it in
Section 6(c) of this Agreement.
"INDEMNIFYING PARTY" shall have the meaning ascribed to it in
Section 6(c) of this Agreement.
"PERSON" shall mean an individual, corporation, partnership, estate,
trust, association, private foundation, joint stock company or other entity.
"PIGGYBACK NOTICE" shall have the meaning ascribed to it in
Section 3(a) of this Agreement.
"PIGGYBACK REGISTRATION" shall have the meaning ascribed to it in
Section 3(a) of this Agreement.
"PREFERRED SHARES" shall have the meaning ascribed to it in the
recitals to this Agreement.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act providing for the sale by the Holders of
Registrable Shares in accordance with the method or methods of distribution
designated by the Holders, and the declaration or ordering of the effectiveness
of such registration statement by the Commission.
"REGISTRABLE SHARES" shall have the meaning ascribed to it in the
recitals to this Agreement, except that as to any particular Registrable Shares,
once issued such securities shall cease to be Registrable Shares when (a) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) such securities
shall have been sold in accordance with Rule 144 (or any successor provision)
under the Securities Act or (c) if in the opinion of counsel reasonably
acceptable to the Company and the Holders securities may be sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act and the Company has removed all transfer restrictions and
legends with respect to the registration and prospectus delivery requirements
for the consummation of such sale.
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<PAGE>
"REGISTRATION EXPENSES" shall mean all out-of-pocket expenses
(excluding Selling Expenses) incurred by the Company in connection with any
attempted or completed registration pursuant to Sections 2, 3 and 4 hereof,
including, without limitation, the following: (a) all registration, filing and
listing fees; (b) fees and expenses of compliance with federal and state
securities or real estate syndication laws (including, without limitation,
reasonable fees and disbursements of counsel in connection with state securities
and real estate syndication qualifications of the Registrable Shares under the
laws of such jurisdictions as the Holders may reasonably designate);
(c) printing (including, without limitation, expenses of printing or engraving
certificates for the Registrable Shares in a form eligible for deposit with The
Depository Trust Company and otherwise meeting the requirements of any
securities exchange on which they are listed and of printing registration
statements and prospectuses), messenger, telephone, shipping and delivery
expenses; (d) fees and disbursements of counsel for the Company; (e) fees and
disbursements of all independent public accountants of the Company (including
without limitation the expenses of any annual or special audit and "cold
comfort" letters required by the managing underwriter); (f) Securities Act
liability insurance if the Company so desires; (g) fees and expenses of other
Persons reasonably necessary in connection with the registration, including any
experts, retained by the Company; (h) fees and expenses incurred in connection
with the listing of the Registrable Shares on each securities exchange on which
securities of the same class or series are then listed; and (i) fees and
expenses associated with any filing with the National Association of Securities
Dealers, Inc. required to be made in connection with the registration statement.
"REGISTRATION REQUEST" shall have the meaning ascribed to it in
Section 2(a) of this Agreement.
"RULE 144" shall mean Rule 144 promulgated by the Commission under the
Securities Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the relevant time.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to any sale of Registrable
Shares and, if neither the Company nor any person not a Holder includes
securities with the subject Registration, shall include all travel and other
expenses of members of the management of the Company and its affiliates (and if
the Company or any such Person shall so include securities, Selling Expenses
shall include a pro rata portion of such travel and other expenses).
Section 2. DEMAND REGISTRATION.
(a) Upon receipt of a written request (a "REGISTRATION REQUEST")
delivered not earlier than 120 days prior to the first anniversary of this
Agreement from Holders holding at least 50% of the aggregate of the number of
Registrable Shares then outstanding, the
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Company shall (i) promptly give notice of the Registration Request to all
non-requesting Holders and (ii) prepare and file with the Commission, within
45 days after its receipt of such Registration Request a registration
statement for the purpose of effecting a Registration of the sale of all
Registrable Shares by the requesting Holders and any other Holder who
requests to have his Registrable Shares included in such registration
statement within 10 days after receipt of notice by such Holder of the
Registration Request. The Company shall use its reasonable best efforts to
effect such Registration as soon as practicable but not later than 120 days
after its receipt of such Registration Request (including, without
limitation, the execution of an undertaking to file post-effective amendments
and appropriate qualification under applicable state securities and real
estate syndication laws); and shall keep such Registration continuously
effective until the earlier of (i) the third anniversary of the date hereof,
(ii) the date on which all Registrable Shares registered pursuant to such
Registration have been sold pursuant to such registration statement or Rule
144, and (iii) the date on which, in the opinion of counsel reasonably
acceptable to the Company and the Holders, all of the Registrable Shares
registered pursuant to such Registration may be sold in accordance with Rule
144(k); PROVIDED, HOWEVER, that the Company shall not be obligated to take
any action to effect any such Registration, qualification or compliance
pursuant to this Section 2 in any particular jurisdiction in which the
Company would be required to execute a general consent to service of process
in effecting such Registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction.
Notwithstanding the foregoing, the Company shall have the right (the
"SUSPENSION RIGHT") to defer such filing (or suspend sales under any filed
registration statement or defer the updating of any filed registration statement
and suspend sales thereunder) for a period of not more than 105 days during any
one-year period ending on December 31, if the Company shall furnish to the
Holders a certificate signed by an executive officer or any director of the
Company stating that, in the good faith judgment of the Company, it would be
detrimental to the Company and its shareholders to file such registration
statement or amendment thereto at such time (or continue sales under a filed
registration statement) and therefore the Company has elected to defer the
filing of such registration statement (or suspend sales under a filed
registration statement).
(b) The Company shall not be required to effect more than two
(2) Registrations pursuant to this Section 2.
Section 3. PIGGYBACK REGISTRATIONS.
(a) On and after the Conversion Date (as defined in the Series A
Preferred Articles Supplementary), so long as the Investor and its Affiliates
hold at least 50% of the Registrable Shares, if the Company proposes to register
under the Securities Act any of its common equity securities with an expected
aggregate offering price to the public of at least $100 million (other than
pursuant to (i) a registration statement filed pursuant to Rule 415 under the
Securities Act, (ii) a registration on Form S-4 or any successor form, or (iii)
an offering of securities in connection with an employee benefit, share
dividend, share ownership or dividend
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reinvestment plan) and the registration form to be used may be used for the
registration of Registrable Shares, the Company will give prompt written
notice to all Holders of Registrable Shares of its intention to effect such a
registration (each a "PIGGYBACK NOTICE") and, subject to subparagraph 3(c)
below, the Company will include in such registration all Registrable Shares
with respect to which the Company has received written requests for inclusion
therein within ten days after the date of sending the Piggyback Notice (a
"PIGGYBACK REGISTRATION"), unless, if the Piggyback Registration is not an
underwritten offering, the Company in its reasonable judgement determines
that, or in the case of an underwritten Piggyback Registration, the managing
underwriters advise the Company in writing that in their opinion, the
inclusion of Registrable Shares would adversely interfere with such offering,
affect the Company's securities in the public markets, or otherwise adversely
affect the Company. Nothing herein shall affect the right of the Company to
withdraw any such registration in its sole discretion.
(b) If a Piggyback Registration is a primary registration on
behalf of the Company and, if the Piggyback Registration is not an underwritten
offering, the Company in its reasonable judgement determines that, or in the
case of an underwritten Piggyback Registration, the managing underwriters advise
the Company in writing that in their opinion, the number of securities requested
to be included in such registration exceeds the number which can be sold in an
orderly manner within a price range acceptable to the Company, the Company will
include in such registration (i) first, the securities the Company proposes to
sell and (ii) second, the Registrable Shares requested to be included in such
Registration and any other securities requested to be included in such
registration, pro rata among the holders of Registrable Shares requesting such
registration and the holders of such other securities on the basis of the number
of Shares requested for inclusion in such registration by each such holder.
(c) If a Piggyback Registration is a secondary registration on
behalf of holders of the Company's securities other than the holders of
Registrable Shares, and, if the Piggyback Registration is not an underwritten
offering, the Company determines that, or in the case of an underwritten
Piggyback Registration, the managing underwriters advise the Company in writing
that in their opinion, the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the holders initially requesting
such registration, the Company will include in such registration the securities
requested to be included therein by the holders requesting such registration and
the Registrable Shares requested to be included in such registration, pro rata
among the holders of securities requesting such registration on the basis of the
number of Shares initially requested for inclusion in such registration by each
such holder.
(d) In the case of an underwritten Piggyback Registration, the
Company will have the right to select the investment banker(s) and manager(s) to
administer the offering. In a registration pursuant to Section 2(a), the
Holders requesting registration shall have the right to select the investment
banker(s) and manager(s) to administer the offering, which shall be reasonably
acceptable to the Company. If requested by the underwriters for any
underwritten offerings by Holders, under a registration requested pursuant to
Section 2(a), the Company will enter into a customary underwriting agreement
with such underwriters for such
5
<PAGE>
offering, to contain such representations and warranties by the Company and
such other terms as are customarily contained in agreements of that type.
The Holders who elect to register Registrable Shares shall be a party to such
underwriting agreement and may, at their option, require that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of Holders.
Such Holders shall not be required to make any representations or warranties
to or agreement with the Company or the underwriters other than
representations, warranties or agreements regarding the Holders and the
Holders' intended method of distribution and any other representation or
warranties required by law.
Section 4. REGISTRATION PROCEDURES.
(a) The Company shall promptly notify the Holders of the
occurrence of the following events:
(i) when any registration statement relating to the
Registrable Shares or post-effective amendment thereto filed with the
Commission has become effective;
(ii) the issuance by the Commission of any stop order
suspending the effectiveness of any registration statement relating to the
Registrable Shares;
(iii) the suspension of an effective registration
statement by the Company in accordance with the last paragraph of
Section 2(a) hereof;
(iv) the Company's receipt of any notification of the
suspension of the qualification of any Registrable Shares covered by a
registration statement for sale in any jurisdiction; and
(v) the existence of any event, fact or circumstance that
results in a registration statement or prospectus relating to Registrable
Shares or any document incorporated therein by reference containing an
untrue statement of material fact or omitting to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading during the distribution of securities.
The Company agrees to use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of any such registration
statement or any state qualification as promptly as possible. The Investor
agrees by acquisition of the Registrable Shares that upon receipt of any notice
from the Company of the occurrence of any event of the type described in Section
4(a)(ii), (iii), (iv) or (v) to immediately discontinue its disposition of
Registrable Shares pursuant to any registration statement relating to such
securities until the Investor's receipt of written notice from the Company that
such disposition may be made.
6
<PAGE>
(b) The Company shall provide to the Holders, at no cost to the
Holders, a copy of the registration statement and any amendment thereto used to
effect the Registration of the Registrable Shares, each prospectus contained in
such registration statement or post-effective amendment and any amendment or
supplement thereto and such other documents as the requesting Holders may
reasonably request in order to facilitate the disposition of the Registrable
Shares covered by such registration statement. The Company consents to the use
of each such prospectus and any supplement thereto by the Holders in connection
with the offering and sale of the Registrable Shares covered by such
registration statement or any amendment thereto. The Company shall also file a
sufficient number of copies of the prospectus and any post-effective amendment
or supplement thereto with the New York Stock Exchange, Inc. (or, if the Common
Shares are no longer listed thereon, with such other securities exchange or
market on which the Common Shares are then listed) so as to enable the Holders
to have the benefits of the prospectus delivery provisions of Rule 153 under the
Securities Act.
(c) The Company agrees to use its reasonable best efforts to
cause the Registrable Shares covered by a registration statement to be
registered with or approved by such state securities authorities as may be
necessary to enable the Holders to consummate the disposition of such shares
pursuant to the plan of distribution set forth in the registration statement;
provided, however, that the Company shall not be obligated to take any action to
effect any such Registration, qualification or compliance pursuant to this
Section 4 in any particular jurisdiction in which the Company would be required
to execute a general consent to service of process in effecting such
Registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction..
(d) Subject to the Company's Suspension Right, if any event,
fact or circumstance requiring an amendment to a registration statement relating
to the Registrable Shares or supplement to a prospectus relating to the
Registrable Shares shall exist, immediately upon becoming aware thereof the
Company agrees to notify the Holders and prepare and furnish to the Holders a
post-effective amendment to the registration statement or supplement to the
prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of the
Registrable Shares, the prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
(e) The Company agrees to use its reasonable best efforts
(including the payment of any listing fees) to obtain the listing of all
Registrable Shares covered by the registration statement on each securities
exchange on which securities of the same class or series are then listed.
(f) The Company agrees to use its reasonable best efforts to
comply with the Securities Act and the Exchange Act in connection with the offer
and sale of Registrable Shares pursuant to a registration statement, and, as
soon as reasonably practicable following the end of any fiscal year during which
a registration statement effecting a Registration of the
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Registrable Shares shall have been effective, to make available to its
security holders an earnings statement satisfying the provisions of Section
11(a) of the Securities Act.
(g) The Company agrees to cooperate with the selling Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Shares to be sold pursuant to a Registration and not bearing any
Securities Act legend; and enable certificates for such Registrable Shares to be
issued for such numbers of shares and registered in such names as the Holders
may reasonably request at least two business days prior to any sale of
Registrable Shares.
Section 5. EXPENSES OF REGISTRATION. The Company shall pay all
Registration Expenses incurred in connection with the registration,
qualification or compliance pursuant to Sections 2, 3 and 4 hereof. All Selling
Expenses incurred in connection with the sale of Registrable Shares by any of
the Holders shall be borne by the Holder selling such Registrable Shares. Each
Holder shall pay the expenses of its own counsel.
Section 6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company will (i) indemnify each Holder, each Holder's
officers and directors, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (including reasonable legal expenses), arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement or prospectus relating to
the Registrable Shares, or any amendment or supplement thereto, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(ii) reimburse each Holder for all reasonable legal or other expenses incurred
in connection with investigating or defending any such action or claim as such
expenses are incurred, PROVIDED, HOWEVER, that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with
information furnished in writing to the Company by such Holder or underwriter
for inclusion therein; and PROVIDED FURTHER, that in the case of a
nonunderwritten offering, the Company shall not be liable in any such case with
respect to any preliminary prospectus or preliminary prospectus supplement to
the extent that any such expenses, claims, losses, damages and liabilities
result from the fact that Registrable Shares were sold to a person as to whom it
shall be established that there was not sent or given at or prior to the written
confirmation of such sale a copy of the prospectus as then amended or
supplemented under circumstances were such delivery is required under the
Securities Act, if the Company shall have previously furnished copies thereof to
such Indemnified Person in sufficient quantities to enable such Indemnified
Party to satisfy such obligations and the expense, claim, loss, damage or
liability of such Indemnified Person results from an untrue statement or
omission of a material fact contained it the preliminary prospectus or the
preliminary prospectus supplement which was corrected in the prospectus.
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(b) Each Holder selling shares pursuant to a Registration (and,
in the case of a nonunderwritten offering, any agents of each Holder that
facilitate the distribution of Registrable Shares) will (i) indemnify the
Company, each of its directors and each of its officers who signs the
registration statement, each underwriter, if any, of the Company's securities
covered by such registration statement, and each person who controls the Company
or such underwriter within the meaning of Section 15 of the Securities Act,
against all expenses, claims, losses, damages and liabilities (including
reasonable legal fees and expenses) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any such
registration statement or prospectus, or any amendment or supplement thereto, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement or prospectus, in reliance upon and in
conformity with information furnished in writing to the Company by such Holder
for inclusion therein, and (ii) reimburse the Company for all reasonable legal
or other expenses incurred in connection with investigating or defending any
such action or claim as such expenses are incurred.
(c) Each party entitled to indemnification under this Section 6
(the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
omission to so notify the Indemnifying Party shall not relieve it from any
liability which it may have to the Indemnified Party pursuant to the provisions
of this Section 6 except to the extent of the actual damages suffered by such
delay in notification. The Indemnifying Party shall assume the defense of such
action, including the employment of counsel to be chosen by the Indemnifying
Party to be reasonably satisfactory to the Indemnified Party, and payment of
expenses. The Indemnified Party shall have the right to employ its own counsel
in any such case, but the legal fees and expenses of such counsel shall be at
the expense of the Indemnified Party, unless the employment of such counsel
shall have been authorized in writing by the Indemnifying Party in connection
with the defense of such action, or the Indemnifying Party shall not have
employed counsel to take charge of the defense of such action or the Indemnified
Party shall have reasonably concluded that there may be defenses available to it
or them which are different from or additional to those available to the
Indemnifying Party (in which case the Indemnifying Party shall not have the
right to direct the defense of such action on behalf of the Indemnified Party),
in any of which events such fees and expenses shall be borne by the Indemnifying
Party. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
(d) If the indemnification provided for in this Section 6 is
unavailable to a party that would have been an Indemnified Party under this
Section 6 in respect of any expenses, claims, losses, damages and liabilities
referred to herein, then each party that would
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have been an Indemnifying Party hereunder shall, in lieu of indemnifying such
Indemnified Party, contribute to the amount paid or payable by such
Indemnified Party as a result of such expenses, claims, losses, damages and
liabilities in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and such Indemnified Party on
the other in connection with the statement or omission which resulted in such
expenses, claims, losses, damages and liabilities, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Indemnifying Party or
such Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and each Holder agree that it would not be just and equitable if
contribution pursuant to this Section were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 6(d).
(e) No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) In no event shall any Holder be liable for any expenses,
claims, losses, damages or liabilities pursuant to this Section 6 in excess of
the net proceeds to such Holder of any Registrable Shares sold by such Holder.
Section 7. INFORMATION TO BE FURNISHED BY HOLDERS. Each Holder
shall furnish to the Company such information as the Company may reasonably
request and as shall be required in connection with the Registration and related
proceedings referred to in Section 2 or Section 3 hereof. If any Holder fails
to provide the Company with such information within 10 days of receipt of the
Company's request, the Company's obligations under Section 2 or Section 3
hereof, as applicable, with respect to such Holder or the Registrable Shares
owned by such Holder, shall be suspended until such Holder provides such
information.
Section 8. UNDERTAKING TO PARTICIPATE IN UNDERWRITING. If the
Holders of at least $75 million of the Registrable Shares shall propose to sell
Registrable Shares in an underwritten public offering, the Company shall make
available, for reasonable periods of time and with reasonable notice, members
of the management of the Company and its affiliates for reasonable assistance in
selling efforts relating to such offering, to the extent customary for a public
offering (including, without limitation, to the extent customary, senior
management attendance at due diligence meetings with the underwriters and their
counsel and road shows) and shall enter into underwriting agreements containing
usual and customary terms and conditions reasonably acceptable to the Company
for such types of offerings.
Section 9. RULE 144 SALES.
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(a) The Company covenants that it will use its best efforts to
file the reports required to be filed by the Company under the Exchange Act, so
as to enable any Holder to sell Registrable Shares pursuant to Rule 144 under
the Securities Act.
(b) In connection with any sale, transfer or other disposition
by any Holder of any Registrable Shares pursuant to Rule 144 under the
Securities Act, the Company shall cooperate with such Holder to facilitate the
timely preparation and delivery of certificates representing Registrable Shares
to be sold and not bearing any Securities Act legend, and enable certificates
for such Registrable Shares to be for such number of shares and registered in
such names as the selling Holder may reasonably request at least two business
days prior to any sale of Registrable Shares.
Section 10. TRANSFER OF REGISTRATION RIGHTS. The rights and
obligations of a Holder under this Agreement may be transferred or otherwise
assigned to a transferee or assignee of Registrable Shares provided that (i)
such transferee or assignee becomes a party to this Agreement or agrees in
writing to be subject to the terms hereof to the same extent as if such
transferee or assignee were an original party hereunder and (ii) the Company is
given written notice by such Holder of such transfer or assignment stating the
name and address of such transferee or assignee and identifying the securities
with regard to which such rights and obligations are being transferred or
assigned.
Section 11. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Maryland.
(b) ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof.
(c) AMENDMENT. No supplement, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by the
Company and the Holders of at least two-thirds of the Registrable Shares.
(d) NOTICES, ETC. Each notice, demand, request, request for
approval, consent, approval, disapproval, designation or other communication
(each of the foregoing being referred to herein as a notice) required or desired
to be given or made under this Agreement shall be in writing (except as
otherwise provided in this Agreement), and shall be effective and deemed to have
been received (i) when delivered in person, (ii) when sent by fax with receipt
acknowledged, (iii) five (5) days after having been mailed by certified or
registered United States mail, postage prepaid, return receipt requested, or
(iv) the next business day after having been sent by a nationally recognized
overnight mail or courier service, receipt requested. Notices shall be
addressed as follows: (a) if to the Investor, at the Investor's address or fax
number set forth below its signature hereon, or at such other address or fax
number as the Investor shall have furnished to the Company in writing, or (b) if
to any assignee or transferee of
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an Investor, at such address or fax number as such assignee or transferee
shall have furnished the Company in writing, or (c) if to the Company, at the
address of its principal executive offices and addressed to the attention of
the President, or at such other address or fax number as the Company shall
have furnished to the Investors or any assignee or transferee. Any notice or
other communication required to be given hereunder to a Holder in connection
with a registration may instead be given to the designated representative of
such Holder.
(e) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which may be executed by fewer than all of the parties
hereto (PROVIDED that each party executes one or more counterparts), each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
(f) SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision.
(g) SECTION TITLES. Section titles are for descriptive purposes
only and shall not control or alter the meaning of this Agreement as set forth
in the text.
(h) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the parties hereto and their respective successors and assigns.
(i) REMEDIES. The Company and the Investor acknowledge that
there would be no adequate remedy at law if any party fails to perform any of
its obligations hereunder, and accordingly agree that the Company and each
Holder, in addition to any other remedy to which it may be entitled at law or in
equity, shall be entitled to compel specific performance of the obligations of
another party under this Agreement in accordance with the terms and conditions
of this Agreement in any court of the United States or any State thereof having
jurisdiction.
(j) ATTORNEYS' FEES. If the Company or any Holder brings an
action to enforce its rights under this Agreement, the prevailing party in the
action shall be entitled to recover its costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred in connection with such action,
including any appeal of such action.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
THE MACERICH COMPANY
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
SECURITY CAPITAL PREFERRED GROWTH
INCORPORATED
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
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INCIDENTAL REGISTRATION RIGHTS AGREEMENT
----------------------------------------
Dated: As of July 21, 1994
----------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C> ----
ARTICLE I
CERTAIN DEFINITIONS . . . . . . . . . 1
1.1. "BUSINESS DAY" . . . . . . . . . . . . . . . . . 1
1.2. "CLOSING DATE" . . . . . . . . . . . . . . . . . 1
1.3. "ELIGIBLE SECURITIES" . . . . . . . . . . . . . . 1
1.4. Intentionally Omitted . . . . . . . . . . . . . . 2
1.5. "PERSON". . . . . . . . . . . . . . . . . . . . . 2
1.6. "REGISTRATION EXPENSES" . . . . . . . . . . . . . 2
1.7. "SEC" . . . . . . . . . . . . . . . . . . . . . . 2
1.8. "SECURITIES ACT". . . . . . . . . . . . . . . . . 3
ARTICLE II
EFFECTIVENESS OF REGISTRATION RIGHTS. 3
2.1 EFFECTIVENESS OF REGISTRATION RIGHTS . . . . . . . 3
ARTICLE III
INCIDENTAL REGISTRATION RIGHTS. . . . 3
3.1 NOTICE AND REGISTRATION . . . . . . . . . . . . . 3
3.2 REGISTRATION EXPENSES . . . . . . . . . . . . . . 4
ARTICLE IV
REGISTRATION PROCEDURES . . . . . . . 4
4.1 REGISTRATION AND QUALIFICATION . . . . . . . . . 4
4.2 UNDERWRITING . . . . . . . . . . . . . . . . . . 6
4.3 QUALIFICATION FOR RULE 144 SALES . . . . . . . . 6
ARTICLE V
PREPARATION; REASONABLE INVESTIGATION 7
5.1 PREPARATION; REASONABLE INVESTIGATION . . . . . . 7
ARTICLE VI
INDEMNIFICATION AND CONTRIBUTION. . . 7
6.1 INDEMNIFICATION AND CONTRIBUTION . . . . . . . . 7
ARTICLE VII
TRANSFER OF REGISTRATION RIGHTS . . . 8
7.1 TRANSFER OF REGISTRATION RIGHTS . . . . . . . . . 8
ARTICLE VIII
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<S> <C> <C> <C>
MISCELLANEOUS . . . . . . . . . . . . 9
8.1 CAPTIONS . . . . . . . . . . . . . . . . . . . . 9
8.2 SEVERABILITY . . . . . . . . . . . . . . . . . . 9
8.3 GOVERNING LAW . . . . . . . . . . . . . . . . . . 9
8.4 MODIFICATION AND AMENDMENT . . . . . . . . . . . 9
8.5 COUNTERPARTS . . . . . . . . . . . . . . . . . . 9
8.6 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . 9
8.7 NOTICES . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
This INCIDENTAL REGISTRATION RIGHTS AGREEMENT is made as of the 21 day of
July, 1994 (this "AGREEMENT"), among THE MACERICH COMPANY, a Maryland
corporation (the "COMPANY"), and the investors set forth on the signature
pages hereto (each an "INVESTOR" and collectively the "INVESTORS").
W I T N E S S E T H:
WHEREAS, on the Closing Date (as defined below), each of the Investors will
hold units ("OP Units") representing a limited partnership interest in The
Macerich Partnership, L.P., a Delaware limited partnership, which may be
redeemed for shares of Common Stock, $.01 par value per share, of the Company
(the "Common Stock"); and
WHEREAS, the Company has agreed to provide Investors with certain
registration rights as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to and on the terms
and conditions herein set forth, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 "BUSINESS DAY" means any day on which the New York Stock Exchange is
open for trading.
1.2. "CLOSING DATE" means the date hereof.
1.3. "ELIGIBLE SECURITIES" means all or any portion of any shares of
Common Stock acquired by Investors upon redemption of OP Units held by Investors
on the Closing Date.
As to any proposed offer or sale of Eligible Securities, such securities
shall cease to be Eligible Securities with respect to such proposed offer or
sale when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement or (ii) such securities are permitted to be distributed pursuant to
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Rule 144(k) (or any successor provision to such Rule) under the Securities Act
or (iii) such securities shall have been otherwise transferred pursuant to an
applicable exemption under the Securities Act, new certificates for such
securities not bearing a legend restricting further transfer shall have been
delivered by the Company and such securities shall be freely transferable to the
public without registration under the Securities Act.
1.4. Intentionally Omitted.
1.5. "PERSON" means an individual, a partnership (general or limited),
corporation, joint venture, business trust, cooperative, association or other
form of business organization, whether or not regarded as a legal entity under
applicable law, a trust (inter vivos or testamentary), an estate of a deceased,
insane or incompetent person, a quasi-governmental entity, a government or any
agency, authority, political subdivision or other instrumentality thereof, or
any other entity.
1.6. "REGISTRATION EXPENSES" means all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in
this Agreement including, without limitation, the following: (i) the fees,
disbursements and expenses of the Company's counsel(s) (United States and
foreign), accountants and experts in connection with the registration of
Eligible Securities to be disposed of under the Securities Act; (ii) all
expenses in connection with the preparation, printing and filing of the
registration statement, any preliminary prospectus or final prospectus, any
other offering document and amendments and supplements thereto and the mailing
and delivering of copies thereof to the underwriters and dealers; (iii) the cost
of printing or producing any agreement(s) among underwriters, underwriting
agreement(s) and blue sky or legal investment memoranda, any selling agreements
and any other documents in connection with the offering, sale or delivery of
Eligible Securities to be disposed of; (iv) all expenses in connection with the
qualification of Eligible Securities to be disposed of for offering and sale
under state securities laws, including the fees and disbursements of counsel for
the underwriters in connection with such qualification and in connection with
any blue sky and legal investment surveys; (v) the filing fees incident to
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of the sale of Eligible Securities to be disposed of; and (vi)
fees and expenses incurred in connection with the listing of Eligible Securities
on each securities exchange on which securities of the same class are then
listed; PROVIDED, however, that Registration Expenses with respect to any
registration pursuant to this Agreement shall not include underwriting discounts
or commissions attributable to Eligible Securities or transfer taxes applicable
to Eligible Securities.
1.7. "SEC" means the Securities and Exchange Commission.
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1.8. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall be
in effect at the relevant time.
ARTICLE II
EFFECTIVENESS OF REGISTRATION RIGHTS
2.1 EFFECTIVENESS OF REGISTRATION RIGHTS. This Agreement shall become
effective immediately, provided, however, that the exercise by any Investor
of any registration rights granted pursuant to Article 3 hereof prior to the
first anniversary of the Closing Date shall be subject to such Investor first
having received written consent from the Company.
ARTICLE III
INCIDENTAL REGISTRATION RIGHTS
3.1 NOTICE AND REGISTRATION. If the Company proposes to register any
shares of Common Stock or other securities issued by it having terms
substantially similar to Eligible Securities ("Other Securities") for public
sale under the Securities Act (whether proposed to be offered for sale by the
Company or by any other Person) on a form and in a manner which would permit
registration of Eligible Securities for sale to the public under the Securities
Act, it will give prompt written notice to each Investor of its intention to do
so, and upon the written request of any of the Investors delivered to the
Company within fifteen (15) Business Days after the giving of any such notice
(which request shall specify the number of Eligible Securities intended to be
disposed of by such Investor and the intended method of disposition thereof) the
Company will use all reasonable efforts to effect, in connection with the
registration of the Other Securities, the registration under the Securities Act
of all Eligible Securities which the Company has been so requested to register
by the Investor or Investors, to the extent required to permit the disposition
(in accordance with the intended method or methods thereof as aforesaid) of
Eligible Securities so to be registered provided that:
(a) if, at any time after giving such written notice of its
intention to register any Other Securities and prior to the effective date
of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register the Other
Securities, the Company may, at its election, give written notice of such
determination to the Investor or Investors seeking
3
<PAGE>
registration hereunder (hereafter referred to as the "SELLING
INVESTORS") and thereupon the Company shall be relieved of its
obligation to register such Eligible Securities in connection with the
registration of such Other Securities (but not from its obligation to pay
Registration Expenses to the extent incurred in connection therewith as
provided in Section 3.2);
(b) The Company will not be required to effect any registration
pursuant to this Article 3 if the Company shall have been advised in
writing (with a copy to Investor) by a nationally recognized independent
investment banking firm selected by the Company to act as lead underwriter
in connection with the public offering of securities by the Company, that
in such firm's opinion, a registration of the Eligible Securities which the
Company has been requested to register by Investor at that time would
materially and adversely affect the Company's own scheduled offering; and
(c) The Company shall not be required to effect any registration of
Eligible Securities under this Article 3 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange
offers, subscription offers, dividend reinvestment plans or stock options
or other employee benefit plans.
3.2 REGISTRATION EXPENSES. The Company (as between the Company and the
Selling Investors) shall be responsible for the payment of all Registration
Expenses in connection with any registration pursuant to this Article 3.
ARTICLE IV
REGISTRATION PROCEDURES
4. 1 REGISTRATION AND QUALIFICATION. If and whenever the Company is
required to use all reasonable efforts to effect the registration of any
Eligible Securities under the Securities Act as provided in Article 3, the
Company will as promptly as is practicable:
(a) prepare, file and use all reasonable efforts to cause to
become effective a registration statement under the Securities Act
regarding the Eligible Securities to be offered;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect to the
disposition of all Eligible Securities until the earlier of
4
<PAGE>
such time as all of such Eligible Securities have been disposed of in
accordance with the intended methods of disposition by the Selling
Investors set forth in such registration statement or the expiration of
twelve (12) months after such registration statement becomes effective;
(c) furnish to each Selling Investor and to any underwriter of such
Eligible Securities such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, such documents incorporated by
reference in such registration statement or prospectus, and such other
documents as such Selling Investor or such underwriter may reasonably
request;
(d) use all reasonable efforts to register or qualify all Eligible
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as the Selling
Investors or any underwriter of such Eligible Securities shall
reasonably request, and do any and all other acts and things which may
be reasonably requested by the Selling Investors or any underwriter to
consummate the disposition in such jurisdictions of the Eligible
Securities covered by such registration statement, except the Company
shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it is not
so qualified, or to subject itself to taxation in any jurisdiction where
it is not then subject to taxation, or to consent to general service of
process in any jurisdiction where it is not then subject to service of
process;
(e) use all reasonable efforts to list the Eligible Securities on
each national securities exchange on which the Common Stock is then
listed, if the listing of such securities is then permitted under the
rules of such exchange; and
(f) immediately notify the Selling Investors at any time when a
prospectus relating to a registration pursuant to Article 3 hereof is
required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement
of material fact or omits to state any 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, and at
the request of any Selling Investor prepare and furnish to such Investor
as many copies of a supplement to or an amendment of such prospectus as
the Selling Investor may request so that, as thereafter delivered to the
purchasers of
5
<PAGE>
such Eligible Securities, such prospectus shall 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.
The Company may require the Investors to furnish the Company such information
regarding the Investors and the distribution of such securities as the Company
may from time to time reasonably request in writing and as shall be required by
law or by the SEC in connection with any registration.
4.2 UNDERWRITING. (a) In the event that any registration
pursuant to Article 3 hereof shall involve, in whole or in part, an
underwritten offering, the Company may require Eligible Securities
requested to be registered pursuant to Article 3 to be included in such
underwriting on the same terms and conditions as shall be applicable to
the Other Securities being sold through underwriters under such
registration.
(b) If requested by the underwriters for any underwritten offering
of Eligible Securities pursuant to a registration requested hereunder,
the Company will enter into and perform its obligations under an
underwriting agreement with such underwriters for such offering, such
agreement to contain such representations and warranties by the Company
and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions,
including, without limitation, indemnities and contribution to the
effect and to the extent provided in Article 6 hereof. Each Selling
Investor shall be a party to any such underwriting agreement and the
representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of each such Selling Investor. Such
agreement shall also contain such representations and warranties by each
such Selling Investor and such other terms and provisions as are
customarily contained in underwriting agreements with respect to
secondary distributions, including, without limitation, indemnities and
contribution to the effect and to the extent provided in Article 6.
4.3 QUALIFICATION FOR RULE 144 SALES. The Company will take
all actions reasonably necessary to comply with the filing requirements
described in Rule 144(c)(1) so as to enable the Investors to sell
Eligible Securities without registration under the Securities Act and,
upon the written request of any Investor, the Company will deliver to
such Investor a written statement as to whether it has complied with
such filing requirements.
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ARTICLE V
PREPARATION; REASONABLE INVESTIGATION
5.1 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement registering Eligible
Securities under the Securities Act, the Company will give each Selling
Investor and the underwriters, if any, and their respective counsel and
accountants, drafts of such registration statement for their review and
comment prior to filing and such reasonable and customary access to its books
and records and such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have certified
its financial statements as shall be necessary, in the opinion of the Selling
Investors and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
ARTICLE VI
INDEMNIFICATION AND CONTRIBUTION
6.1 INDEMNIFICATION AND CONTRIBUTION. (a) In the event of any
registration of Eligible Securities hereunder, the Company will enter into
customary indemnification arrangements to indemnify and hold harmless each
Selling Investor, and each Person who participates as an underwriter in the
offering or sale of such securities, and each Person, if any, who controls
such underwriter within the meaning of the Securities Act against any
losses, claims, damages, liabilities and expenses, joint or several, to
which such Person may be subject under the Securities Act or otherwise
insofar as such losses, claims, damages, liabilities or expenses (or actions
or proceedings in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such securities were registered
under the Securities Act, any preliminary prospectus or final prospectus
included therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will promptly
reimburse each such Person for any legal or any other expenses reasonably
incurred by such Person in connection with investigating or defending any
such loss, claim, damage, liability, action or proceeding; PROVIDED that the
Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, any such preliminary
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prospectus or final prospectus, amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by such
Selling Investor expressly for use in the registration statement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Selling Investor or any such
Person and shall survive the transfer of such securities by such Selling
Investor. The Company also shall agree to provide provision for contribution
as shall be reasonably requested by the Selling Investors or any underwriters
in circumstances where such indemnity is held unenforceable.
(b) Each Selling Investor, by virtue of exercising its registration
rights hereunder, agrees and undertakes to enter into customary
indemnification arrangements to indemnify and hold harmless (in the same
manner and to the same extent as set forth in clause (a) of this Article 6)
the Company, each director of the Company, each officer of the Company who
shall sign such registration statement, each Person who participates as an
underwriter in the offering or sale of such securities and each Person, if
any, who controls the Company or any such underwriter within the meaning of
the Securities Act, with respect to any statement in or omission from such
registration statement, any preliminary prospectus or final prospectus
included therein, or any amendment or supplement thereto, but only to the
extent that such statement or omission was made in reliance upon and in
conformity with written information furnished by such Investor to the Company
expressly for use in the registration statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf
of the Company or any such director, officer or controlling Person and shall
survive the transfer of the registered securities by the Investor and the
expiration of this Agreement. Each Investor also shall agree to provide
provision for contribution as shall be reasonably requested by the Company or
any underwriters in circumstances where such indemnity is held unenforceable.
(c) Indemnification and contribution similar to that specified in the
preceding subdivisions of this Article 6 (with appropriate modifications)
shall be given by the Company and each Selling Investor with respect to any
required registration or other qualification of Eligible Securities under any
federal or state law or regulation of governmental authority other than the
Securities Act.
ARTICLE VII
TRANSFER OF REGISTRATION RIGHTS
7.1 TRANSFER OF REGISTRATION RIGHTS. The Investors may NOT transfer the
registration rights granted hereunder to any other Person.
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ARTICLE VIII
MISCELLANEOUS
8.1 CAPTIONS. The captions or headings in this Agreement are for
convenience and reference only, and in no way define, describe, extend or
limit the scope or intent of this Agreement.
8.2 SEVERABILITY. If any clause, provision or section of this Agreement
shall be invalid or unenforceable, the invalidity or unenforceability of such
clause, provision or section shall not affect the enforceability or validity
of any of the remaining clauses, provisions or sections hereof to the extent
permitted by applicable law.
8.3 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of California, without
reference to its rules as to conflicts or choice of laws.
8.4 MODIFICATION AND AGREEMENT. This Agreement may not be changed,
modified, discharged or amended, except by an instrument signed by all of the
parties hereto.
8.5 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be an original, but all of which together shall constitute one
and the same instrument.
8.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding among the parties and supersedes any prior understandings
and/or written or oral agreements among them respecting the subject matter
herein.
8.7 NOTICES. All notices, requests, demands, consents and other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and delivered by hand, by overnight courier delivery
service or by certified mail, return receipt requested, postage prepaid.
Notices to Investors shall be made to the address listed on the stock
transfer records of the Company.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above
written.
THE MACERICH COMPANY
By:
----------------------------
Name:
Title:
THE "INVESTORS"
/s/ Kevin Donohoe
-------------------------------
Kevin Donohoe
/s/ Elizabeth Donohoe
-------------------------------
Elizabeth Donohoe
/s/ Arthur Forte
-------------------------------
Arthur Forte
/s/ Laura Forte
-------------------------------
Laura Forte
/s/ Frank May
-------------------------------
Frank May
/s/ Henry Glover, Jr.
-------------------------------
Henry Glover, Jr.
CHESTERFIELD MALL ASSOCIATES,
a Virginia general partnership
BY: DONOHOE, O'BRIEN ASSOCIATES
a Pennsylvania limited partnership,
General Partner
By: THE KEVIN F. DONOHOE COMPANY
a Pennsylvania general partnership,
General Partner
By: /s/ Arthur W. Forte
-------------------------------
Arthur W. Forte,
General Partner
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THE MACERICH COMPANY
INCIDENTAL REGISTRATION RIGHTS AGREEMENT
--------------------------------------
DATED: AS OF AUGUST 15, 1995
--------------------------------------
<PAGE>
This INCIDENTAL REGISTRATION RIGHTS AGREEMENT is made as of the 15th day
of August, 1995 (this "AGREEMENT") between THE MACERICH COMPANY, a Maryland
corporation (the "COMPANY") and SALISBURY-SPRINGHILL LIMITED PARTNERSHIP, a
Maryland limited partnership ("INVESTOR").
W I T N E S S E T H:
WHEREAS, the Company has agreed to provide Investor with certain
registration rights as set forth in this Agreement with respect to the units
("OP Units") held by Investor representing a limited partnership interest in
The Macerich Partnership, L.P., a Delaware limited partnership (the
"Partnership"), which may be redeemed for shares of Common Stock, $.01 par
value per share, of the Company (the "Common Stock");
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and subject to and on the
terms and conditions herein set forth, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1. "BUSINESS DAY" means any day on which the New York Stock Exchange
is open for trading.
1.2. "CLOSING DATE" means the date hereof.
1.3. "ELIGIBLE SECURITIES" means all or any portion of any shares of
Common Stock acquired by Investor upon redemption of OP Units held by
Investor on the Closing Date, subject to the provisions of Section 3.4
hereof.
As to any proposed offer or sale of Eligible Securities, such securities
shall cease to be Eligible Securities with respect to such proposed offer or
sale when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement or, (ii) such securities are permitted to be distributed pursuant
to Rule 144(k) (or any successor provision to such Rule) under the Securities
Act or, (iii) such securities shall have been otherwise transferred pursuant
to an applicable exemption under the Securities Act, new certificates for
such securities not bearing a legend restricting further transfer shall have
been delivered by
2
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the Company and such securities shall be freely transferable to the public
without registration under the Securities Act.
1.4. "PERSON" means an individual, a partnership (general or limited),
corporation, joint venture, business trust, cooperative, association or other
form of business organization, whether or not regarded as a legal entity
under applicable law, a trust (inter vivos or testamentary), an estate of a
deceased, insane or incompetent person, a quasi-governmental entity, a
government or any agency, authority, political subdivision or other
instrumentality thereof, or any other entity.
1.5. "REGISTRATION EXPENSES" means all expenses incident to the
Company's performance of or compliance with the registration requirements set
forth in this Agreement including, without limitation, the following: (i) the
fees, disbursements and expenses of the Company's counsel(s) (United States
and foreign), accountants and experts in connection with the registration of
Eligible Securities to be disposed of under the Securities Act; (ii) all
expenses in connection with the preparation, printing and filing of the
registration statement, any preliminary prospectus or final prospectus, any
other offering document and amendments and supplements thereto and the
mailing and delivering of copies thereof to the underwriters and dealers;
(iii) the cost of printing or producing any agreement(s) among underwriters,
underwriting agreement(s) and blue sky or legal investment memoranda, any
selling agreements and any other documents in connection with the offering,
sale or delivery of Eligible Securities to be disposed of; (iv) all expenses
in connection with the qualification of Eligible Securities to be disposed of
for offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment
surveys; (v) the filing fees incident to securing any required review by the
National Association of Securities Dealers, Inc. of the terms of the sale of
Eligible Securities to be disposed of; and (vi) fees and expenses incurred in
connection with the listing of Eligible Securities on each securities
exchange on which securities of the same class are then listed; PROVIDED,
however, that Registration Expenses with respect to any registration pursuant
to this Agreement shall not include underwriting discounts or commissions
attributable to Eligible Securities or transfer taxes applicable to Eligible
Securities.
1.6. "SEC" means the Securities and Exchange Commission.
1.7 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall
be in effect at the relevant time.
3
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ARTICLE II
EFFECTIVENESS OF REGISTRATION RIGHTS
2.1. EFFECTIVENESS OF REGISTRATION RIGHTS. This Agreement shall become
effective immediately; PROVIDED, HOWEVER, that the exercise by Investor of
any registration rights granted pursuant to Article 3 hereof prior to the
last day of the eighteenth (18th) month following the Closing Date shall be
subject to Investor first having received written consent from the Company.
ARTICLE III
INCIDENTAL REGISTRATION RIGHTS
3.1. NOTICE AND REGISTRATION. If the Company proposes to register any
shares of Common Stock or other securities issued by it having terms
substantially similar to Eligible Securities ("Other Securities") for public
sale under the Securities Act to be offered for sale by, and for the benefit
of, the Company on a form and in a manner which would permit registration of
Eligible Securities for sale to the public under the Securities Act, it will
give prompt written notice to Investor (whether or not the direct holder of
Eligible Securities) of its intention to do so, and upon the written request
of Investor (the "Investor Notice") delivered to the Company within fifteen
(15) Business Days after the giving of any such notice (which request shall
specify the number of Eligible Securities intended to be disposed of by
Investor and the intended method of disposition thereof) the Company will use
all reasonable efforts to effect, in connection with the registration of the
Other Securities, the registration under the Securities Act of all Eligible
Securities which the Company has been so requested to register by Investor,
to the extent required to permit the disposition (in accordance with the
intended method or methods thereof as aforesaid) of Eligible securities so to
be registered, provided that:
(a) if, at any time after giving such written notice of its
intention to register any Other Securities and prior to the of
effective date of the registration statement filed in connection with
such registration, the Company shall determine for any reason not to
register the Other Securities, the Company may, at its election, give
written notice of such determination to Investor and thereupon the
Company shall be relieved of its obligation to register such Eligible
Securities in connection with the registration of such Other Securities
(but not from its obligation to pay Registration Expenses to the extent
incurred in connection therewith as provided in Section 3.2);
(b) The Company will not be required to effect any registration
pursuant to this Article 3 if the Company shall
4
<PAGE>
have been advised in writing (with a copy to Investor) by a nationally
recognized independent investment banking firm selected by the Company
to act as lead underwriter in connection with the public offering of
securities by the Company, that in such firm's opinion, a registration
of the number of Eligible Securities which the Company has been
requested to register by Investor and any existing or future holder of
incidental registration rights (collectively, the "Selling
Shareholders") at that time would adversely affect the Company's own
scheduled offering or the market price of the Common Stock (a "Full
Cutback"), provided, however, that if registration of some but not all
of the shares requested to be registered by Investor and any other Selling
Shareholder would not adversely affect the Company's offering or the
market price of the Common Stock, the aggregate number of shares of all
of the Selling Shareholders that may be included in such registration
shall be allocated first, to the Selling Shareholders who presently
have demand registration rights with the Company and their permitted
transferees in accordance with their respective registration rights
agreements and second, if applicable, to the other Selling Shareholders
pro rata according to the total number of shares for which registration
was initially requested by such Selling Shareholders (a "Pro Rata Cutback");
(c) The Company shall not be required to effect any registration of
Eligible Securities under this Article 3 incidental to the registration
of any of its securities in connection with mergers, acquisitions,
exchange offers, subscription offers, dividend reinvestment plans or
stock options or other employee benefit plans; and
(d) Investor shall have the right to request registration of
Eligible Securities pursuant to this Article 3 no more than a total of
two times during the life of this Agreement. No registration request
by Investor shall be deemed a request for purposes of this Section 3.1(d)
unless all of the Eligible Securities requested to be registered
by Investor as specified in an Investor Notice are so registered by the
Company in accordance with the provisions of this Agreement.
3.2. REGISTRATION EXPENSES. The Company (as between the Company and
Investor) shall be responsible for the payment of all Registration Expenses
in connection with any registration pursuant to this Article 3.
3.3. NOTICE REQUIREMENTS.
(a) At the time of the delivery of the Investor Notice, Investor must
directly hold the number of Eligible Securities that Investor is requesting
to be registered or follow the procedures specified herein. If at the time of
the delivery of the Investor
5
<PAGE>
Notice Investor does not directly hold the number of Eligible Securities that
Investor is requesting to be registered, an exercise notice (the "Exercise
Notice") must also be delivered in accordance with the partnership agreement
of the Partnership requesting the redemption of OP Units (which together with
any other Eligible Securities directly held by Investor) equal the number of
Eligible Securities Investor is requesting the Company register pursuant to
Article 3. If upon delivery of the Exercise Notice, all or any portion of the
OP units are redeemed for cash or Unrestricted Common Stock (as defined
below), the Investor Notice will be deemed to be amended to reflect the
change in the number of shares of restricted Common Stock received upon such
redemption.
(b) Notwithstanding any provision of the Partnership Agreement to the
contrary, this Exercise Notice may only be revoked by Investor if (i) the
registration statement filed in connection with such registration of Eligible
Securities does not become effective, or (ii) the Eligible Securities that
the Investor is requesting to be registered are not included in such
registration statement in accordance with the provisions hereof, or (iii) a
Full Cutback has occurred, or (iv) a Pro Rata Cutback has occurred; provided,
however, that, in such event, the Exercise Notice may be revoked only with
respect to the number of Eligible Securities not included in such
registration statement. Within five (5) Business Days of receipt of written
notice of any of the events described above, Investor must provide written
notice to the Company of the intent of Investor to withdraw the Exercise
Notice or Investor will be deemed to have declined the right to revoke the
Exercise Notice.
1.4. ISSUANCE OF UNRESTRICTED COMMON STOCK. If upon any redemption of OP
Units the Company issues to Investor Common Stock where its issuance was
registered under the Securities Act ("Unrestricted Common Stock"), such
shares of Unrestricted Common Stock shall not be deemed Eligible Securities
for purposes of this Agreement and Investor will have no registration rights,
and the Company will be relieved of all of its obligations hereunder, with
respect to those shares of Unrestricted Common Stock.
ARTICLE IV
REGISTRATION PROCEDURES
4.1. REGISTRATION AND QUALIFICATION. If and whenever the Company is
required to use all reasonable efforts to effect the registration of any
Eligible Securities under the Securities Act as provided in Article 3, the
Company will as promptly as is practicable:
(a) prepare, file and use all reasonable efforts to cause to become
effective a registration statement under the Securities Act regarding
the Eligible Securities to be offered;
6
<PAGE>
(b) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with
respect to the disposition of all Eligible Securities until the earlier
of such time as all of such Eligible Securities have been disposed of in
accordance with the intended methods of disposition by Investor set
forth in such registration statement or the expiration of twelve (12)
months after such registration statement becomes effective;
(c) furnish to Investor and to any underwriter of such Eligible
Securities such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, such documents incorporated by
reference in such registration statement or prospectus, and such other
documents as Investor or such underwriter may reasonably request;
(d) use all reasonable efforts to register or qualify all Eligible
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as Investor or any
underwriter of such Eligible Securities shall reasonably request, and do
any and all other acts and things which may be reasonably requested by
Investor or any underwriter to consummate the disposition in such
jurisdictions of the Eligible Securities covered by such registration
statement, except the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it is not so qualified, or to subject itself
to taxation in any jurisdiction where it is not then subject to taxation,
or to consent to general service of process in any jurisdiction where it
is not then subject to service of process;
(e) use all reasonable efforts to list the Eligible Securities on
each national securities exchange on which the Common Stock is then
listed, if the listing of such securities is then permitted under the
rules of such exchange; and
(f) immediately notify Investor at any time when a prospectus
relating to a registration pursuant to Article 3 hereof is required to
be delivered under the Securities Act of the happening of any event as a
result of which the prospectus included in such registration statement,
as then in effect, includes an untrue statement of material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
7
<PAGE>
circumstances under which they were made, not misleading, and at the
request of Investor prepare and furnish to such Investor as many copies
of a supplement to or an amendment of such prospectus as Investor may
reasonably request so that, as thereafter delivered to the purchasers of
such Eligible Securities, such prospectus shall 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.
The Company may require Investor to furnish the Company such information
regarding Investor and the distribution of such Eligible Securities as the
Company may from time to time reasonably request in writing and as shall be
required by law or by the SEC in connection with any registration. The Company
may also impose such restrictions and limitations on the distribution of such
Eligible Securities as the Company reasonably believes are necessary or
advisable to comply with applicable law or to effect an orderly distribution,
including those restrictions set forth in Section 4.3 hereof.
4.2. UNDERWRITING. (a) In the event that any registration pursuant
to Article 3 hereof shall involve, in whole or in part, an underwritten
offering, the Company may require Eligible Securities requested to be
registered pursuant to Article 3 to be included in such underwriting on
the same terms and conditions as shall be applicable to the Other
Securities being sold through underwriters under such registration. In
such case, the holders of Eligible Securities on whose behalf Eligible
Securities are to be distributed by such underwriters shall be parties
to any such underwriting agreement. Such agreement shall contain such
representations and warranties by Investor and such other terms and
provisions as are customarily contained in underwriting agreements with
respect to secondary distributions, including, without limitation,
indemnities and contribution to the effect and to the extent provided in
Article 6. The representations and warranties in such underwriting
agreement by, and the other agreements on the part of, the Company to
and for the benefit of such underwriters shall also be made to and for
the benefit of such holders of Eligible Securities.
(b) If requested by the underwriters for any underwritten offering
of Eligible Securities pursuant to a registration requested hereunder,
the Company will enter into and perform its obligations under an
underwriting agreement with such underwriters for such offering, such
agreement to contain such representations and warranties by the Company
and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions,
including, without limitation, indemnities and
8
<PAGE>
contribution to the effect and to the extent provided in Article 6
hereof. Investor shall be a party to any such underwriting agreement and
the representations and warranties by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters shall
also be made to and for the benefit of Investor. Such agreement shall
also contain such representations and warranties by Investor and such
other terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, indemnities and contribution to the effect and to the extent
provided in Article 6.
4.3. BLACKOUT PERIODS. At any time when a registration statement effected
pursuant to Article 3 relating to Eligible Securities is effective, upon written
notice from the Company to Investor that the Company has determined in good
faith, with the advice of counsel, that Investor's sale of Eligible Securities
pursuant to the registration statement would require disclosure of non-public
material information the disclosure of which would have a material adverse
effect on the Company or would otherwise adversely effect a material financing,
acquisition, disposition, merger or other comparable transaction, Investor
shall suspend sales of Eligible Securities pursuant to such registration
statement until the earlier of:
(X) the date upon which such material information is disclosed to
the public or ceases to be material, or
(Y) such time as the Company notifies Investor that sales pursuant
to such registration statement may be resumed.
4.4. QUALIFICATION FOR RULE 144 SALES. The Company will take all actions
reasonably necessary to comply with the filing requirements described in Rule
144(c)(1) so as to enable Investor to sell Eligible Securities without
registration under the Securities Act and, upon the written request of Investor,
the Company will deliver to Investor a written statement as to whether it has
complied with such filing requirements.
ARTICLE V
PREPARATION; REASONABLE INVESTIGATION
5.1 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement registering Eligible
Securities under the Securities Act, the Company will give Investor and the
underwriters, if any, and their respective counsel and accountants, drafts of
such registration statement for their review and comment prior to filing and
such reasonable and customary access to its books and records
9
<PAGE>
and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of Investor and
such underwriters or their respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
ARTICLE VI
INDEMNIFICATION AND CONTRIBUTION
6.1. INDEMNIFICATION AND CONTRIBUTION. (a) In the event of any
registration of Eligible Securities hereunder, the Company will enter into
customary indemnification arrangements to indemnify and hold harmless
Investor, and each Person who participates as an underwriter in the offering
or sale of such securities, and each Person, if any, who controls such
underwriter within the meaning of the Securities Act against any losses,
claims, damages, liabilities and expenses, joint or several, to which such
Person may be subject under the Securities Act or otherwise insofar as such
losses, claims, damages, liabilities or expenses (or actions or proceedings
in respect thereof) arise out of or are based upon (i) any untrue statement
or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus included
therein, or any amendment or supplement thereto, or any document incorporated
by reference therein, or (ii) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will promptly
reimburse each such Person for any legal or any other expenses reasonably
incurred by such Person in connection with investigating or defending any
such loss, claim, damage, liability, action or proceeding; PROVIDED that the
Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, any such preliminary prospectus or final prospectus, amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by Investor expressly for use in the registration
statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of Investor or any such Person and
shall survive the transfer of such securities by Investor. The Company also
shall agree to provide provision for contribution as shall be reasonably
requested by Investor or any underwriters in circumstances where such
indemnity is held unenforceable.
(b) Investor, by virtue of exercising its registration rights hereunder,
agrees and undertakes to enter into customary indemnification arrangements to
indemnify and hold harmless (in the
10
<PAGE>
same manner and to the same extent as set forth in clause (a) of this
Article 6) the Company, each director of the Company, each officer of the
Company who shall sign such registration statement, each Person who participates
as an underwriter in the offering or sale of such securities and each Person,
if any, who controls the Company or any such underwriter within the meaning
of the Securities Act, with respect to any statement in or omission from such
registration statement, any preliminary prospectus or final prospectus
included therein, or any amendment or supplement thereto, but only to the
extent that such statement or omission was made in reliance upon and in
conformity with written information furnished by Investor to the Company
expressly for use in the registration statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf
of the Company or any such director, officer or controlling Person and shall
survive the transfer of the registered securities by Investor and the
expiration of this Agreement. Investor also shall agree to provide provision
for contribution as shall be reasonably requested by the Company or any
underwriters in circumstances where such indemnity is held unenforceable.
(c) Indemnification and contribution similar to that specified in the
preceding subdivisions of this Article 6 (with appropriate modifications)
shall be given by the Company and Investor with respect to any required
registration or other qualification of Eligible Securities under any federal
or state law or regulation of governmental authority other than the
Securities Act.
ARTICLE VII
TRANSFER OF REGISTRATION RIGHTS
7.1. TRANSFER OF REGISTRATION RIGHTS. Investor may NOT transfer the
registration rights granted hereunder to any other Person.
ARTICLE VIII
MISCELLANEOUS
8.1. CAPTIONS. The captions or headings in this Agreement are for
convenience and reference only, and in no way define, describe, extend or
limit the scope or intent of this Agreement.
8.2. SEVERABILITY. If any clause, provision or section of this Agreement
shall be invalid or unenforceable, the invalidity or unenforceability of such
clause, provision or section shall not affect the enforceability or validity of
any of the remaining
11
<PAGE>
clauses, provisions or sections hereof to the extent permitted by applicable
law.
8.3. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of California, without
reference to its rules as to conflicts or choice of laws.
8.4. MODIFICATION AND AMENDMENT. This Agreement may not be changed,
modified, discharged or amended, except by an instrument signed by all of the
parties hereto.
8.5. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be an original, but all of which together shall constitute one
and the same instrument.
8.6. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding among the parties and supersedes any prior understandings
and/or written or oral agreements among them respecting the subject matter
herein.
8.7. NOTICES. All notices, requests, demands, consents and other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and delivered by hand, by overnight courier delivery
service or by certified mail, return receipt requested, postage prepaid.
Notices to Investor shall be made to the address listed on the stock transfer
records of the Company.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above
written.
MACERICH:
THE MACERICH COMPANY,
a Maryland corporation
By: /s/ Arthur M. Coppola
-------------------------
Arthur M. Coppola
President
SALISBURY:
SALISBURY-SPRINGHILL LIMITED PARTNERSHIP,
a Maryland limited partnership
By: DMA Limited Partnership,
a general partner
By: /s/ Roy Praver
-----------------------------
Roy Praver
General Partner
13
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EXHIBIT Q-2
INCIDENTAL REGISTRATION RIGHTS AGREEMENT
CLOSING DISTRIBUTEE PARTNERS
This INCIDENTAL REGISTRATION RIGHTS AGREEMENT is made as of the 21st day
of December, 1995 (this "Agreement"), between THE MACERICH COMPANY, a
Maryland corporation (the "Company") and JOHN L. DEBENEDETTI, TRUSTEE OF THE
DEBENEDETTI FAMILY TRUST ("Investor").
W I T N E S E T H:
WHEREAS, the Company has agreed to provide Investor with certain
registration rights as set forth in this Agreement with respect to the units
("OP Units") held by Investor representing a limited partnership interest in
The Macerich Partnership, L.P., a Delaware limited partnership (the
"Partnership"), which may be redeemed for shares of Common Stock, $.01 par
value per share, of the Company (the "Common Stock");
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to
and on the terms and conditions herein set forth, the parties hereto agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1. "BUSINESS DAY" means any day on which the New York Stock
Exchange is open for trading.
1.2. "CLOSING DATE" means the date hereof.
1.3. "ELIGIBLE SECURITIES" means all or any portion of any shares of
Common Stock acquired by Investor upon redemption of OP Units held by
Investor on the Closing Date, subject to the provision of Section 3.4 hereof.
As to any proposed offer or sale of Eligible Securities, such securities
shall cease to be Eligible Securities with respect to such proposed offer or
sale when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement or, (ii) such securities are permitted to be
Q-2-1
<PAGE>
distributed pursuant to Rule 144(k) (or any successor provision to such Rule)
under the Securities Act or, (iii) such securities shall have been otherwise
transferred pursuant to an applicable exemption under the Securities Act, new
certificates for such securities not bearing a legend restricting further
transfer shall have been delivered by the Company and such securities shall
be freely transferable to the public without registration under the
Securities Act.
1.4. "PERSON" means an individual, a partnership (general or
limited), corporation, joint venture, business trust, cooperative,
association or other form of business organization, whether or not regarded as
a legal entity under applicable law, a trust (inter vivos or testamentary),
an estate of a deceased, insane or incompetent person, a quasi-governmental
entity, a government or any agency, authority, political subdivision or other
instrumentality thereof, or any other entity.
1.5. "REGISTRATION EXPENSES" means all expenses incident to the
Company's performance of or compliance with the registration requirements set
forth in this Agreement including, without limitation, the following; (i) the
fees, disbursements and expenses of the Company's counsel(s) (United States
and foreign), accountants and experts in connection with the registration of
Eligible Securities to be disposed of under the Securities Act; (ii) all
expenses in connection with the preparation, printing and filing of the
registration statement, any preliminary prospectus or final prospectus, any
other offering document and amendments and supplements thereto and the
mailing and delivering of copies thereof to the underwriters and dealers;
(iii) the cost of printing or producing any agreement(s) among underwriters,
underwriting agreement(s) and blue sky or legal investment memoranda, any
selling agreements and any other documents in connection with the offering,
sale or delivery of Eligible Securities to be disposed of; (iv) all expenses
in connection with the qualification of Eligible Securities to be disposed of
for offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment
surveys; (v) the filing fees incident to securing any required review by the
National Association of Securities Dealers, Inc. of the terms of the sale of
Eligible Securities to be disposed of; and (vi) fees and expenses incurred in
connection with the listing of Eligible Securities on each securities
exchange on which securities of the same class are then listed; PROVIDED,
however, that Registration Expenses with respect to any registration pursuant
to this Agreement shall not include underwriting discounts or commissions
attributable to Eligible Securities or transfer taxes applicable to Eligible
Securities.
1.6. "SEC" means the Securities and Exchange Commission.
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<PAGE>
1.7. "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the SEC thereunder, all as the
same shall be in effect at the relevant time.
ARTICLE II
EFFECTIVENESS OF REGISTRATION RIGHTS
------------------------------------
2.1. EFFECTIVENESS OF REGISTRATION RIGHTS. This Agreement shall
become effective immediately; PROVIDED, HOWEVER, that the exercise by
Investor of any registration rights granted pursuant to Article 3 hereof
prior to eighteen (18) months from the Closing Date shall be subject to
Investor first having received written consent from the Company.
ARTICLE III
INCIDENTAL REGISTRATION RIGHTS
------------------------------
3.1. NOTICE AND REGISTRATION. If the Company proposes to register
any shares of Common Stock or other securities issued by it having terms
substantially similar to Eligible Securities ("Other Securities") for public
sale under the Securities Act to be offered for sale by, and for the benefit
of, the Company on a form and in a manner which would permit registration of
Eligible Securities for sale to the public under the Securities Act or as
specified in Section 3.1(d) below, it will give prompt written notice to
Investor (whether or not the direct holder of Eligible Securities) of its
intention to do so, and upon the written request of Investor (the "Investor
Notice") delivered to the Company within fifteen (15) Business Days after the
giving of any such notice (which request shall specify the number of
Eligible Securities intended to be disposed of by Investor and the intended
method of disposition thereof) the Company will use all reasonable efforts to
effect, in connection with the registration of the Other Securities, the
registration under the Securities Act of all Eligible Securities which the
Company has been so requested to register by Investor, to the extent required
to permit the disposition (in accordance with the intended method or methods
thereof as aforesaid) of Eligible Securities so to be registered, provided
that:
(a) if, at any time after giving such written notice of its
intention to register any Other Securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to
register the Other Securities, the Company may, at its election, give
written notice of such determination to Investor and thereupon the
Company shall be relieved of its obligation to register such
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<PAGE>
Eligible Securities in connection with the registration of such Other
Securities (but not from its obligation to pay Registration Expenses to the
extent incurred in connection therewith as provided in Section 3.2);
(b) The Company will not be required to effect any registration
pursuant to this Article 3 if the Company shall have been advised in writing
(with a copy to Investor) by a nationally recognized independent investment
banking firm selected by the Company to act as lead underwriter in
connection with the public offering of securities by the Company, that in
such firm's opinion, a registration of the number of Eligible Securities
which the Company has been requested to register by Investor and any existing
or future holder of incidental registration rights (collectively, the
"Selling Shareholders") at that time would adversely affect the Company's own
scheduled offering or the market price of the Common Stock (a "Full
Cutback"), provided, however, that if registration of some but not all of the
shares requested to be registered by Investor and any other Selling
Shareholder would not adversely affect the Company's offering or the market
price of the Common Stock, the aggregate number of shares of all of the
Selling Shareholders that may be included in such registration shall be
allocated first, to the Selling Shareholders who presently have demand
registration rights with the Company and their permitted transferees in
accordance with their respective registration rights agreements and second,
if applicable, to the other Selling Shareholders pro rata according to the
total number of shares for which registration was initially requested by such
Selling Shareholders (a "Pro Rata Cutback");
(c) The Company shall not be required to effect any registration of
Eligible Securities under this Article 3 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange
offers, subscription offers, dividend reinvestment plans or stock options or
other employee benefit plans;
(d) If the Company proposes to register any Other Securities to be
offered for sale by, and for the benefit of the Company, utilizing an
unallocated shelf registration statement on Form S-3 and the SEC does not
permit any secondary offering by an Investor to be registered in connection
therewith, the Company agrees to use all reasonable efforts to effect the
registration under the Securities Act of all Eligible Securities which the
Company has been so requested to register by Investor, to the extent such
secondary offering may be registered utilizing a registration statement on
Form S-3 and to the extent required to permit the disposition of Eligible
Securities so to be registered. Any registration to be effected pursuant
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<PAGE>
to this Section 3.1(d) shall be subject to the limitations and
restrictions set forth in this Agreement; and
(e) Investor shall have the right to request registration of
Eligible Securities pursuant to this Article 3 no more than a total of
two times during the life of this Agreement. No registration request by
an Investor shall be deemed a request for purposes of this Section
3.1(e) unless all of the Eligible Securities requested to be registered
by an Investor as specified in an Investor Notice are so registered by
the Company in accordance with the provisions of this Agreement.
3.2. REGISTRATION EXPENSES. The Company (as between the Company
and Investor) shall be responsible for the payment of all Registration
Expenses in connection with any registration pursuant to this Article 3.
3.3. NOTICE REQUIREMENTS.
(a) At the time of the delivery of the Investor Notice, Investor
must directly hold the number of Eligible Securities that Investor is
requesting to be registered or follow the procedures specified herein.
If at the time of the delivery of the Investor Notice Investor does not
directly hold the number of Eligible Securities that Investor is
requesting to be registered, an exercise notice (the "Exercise Notice")
must also be delivered in accordance with the partnership agreement of
the Partnership requesting the redemption of OP Units (which together
with any other Eligible Securities directly held by Investor) equal the
number of Eligible Securities Investor is requesting the Company
register pursuant to Article 3. If upon delivery of the Exercise
Notice, all or any portion of the OP Units are redeemed for cash or
Unrestricted Common Stock (as defined below), the Investor Notice will
be deemed to be amended to reflect the change in the number of shares
of restricted Common Stock received upon such redemption.
(b) Notwithstanding any provision of the Partnership Agreement to
the contrary, this Exercise Notice may only be revoked by Investor if
(i) the registration statement filed in connection with such
registration of Eligible Securities does not become effective, or
(ii) the Eligible Securities that the Investor is requesting to be
registered are not included in such registration statement in
accordance with the provisions hereof, or (iii) a Full Cutback has
occurred, or (iv) a Pro Rata Cutback has occurred; provided, however,
that, in such event, the Exercise Notice may be revoked only with
respect to the number of Eligible Securities not included in such
registration statement. Within five (5) Business Days of receipt of
written notice of any of the events described above, Investor must
provide written notice
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<PAGE>
to the Company of the intent of Investor to withdraw the Exercise
Notice or Investor will be deemed to have declined the right to revoke
the Exercise Notice.
3.4. ISSUANCE OF UNRESTRICTED COMMON STOCK. If upon any redemption
of Op Units the Company issues to Investor Common Stock where its issuance
was registered under the Securities Act ("Unrestricted Common Stock"), such
shares of Unrestricted Common Stock shall not be deemed Eligible Securities
for purposes of this Agreement and Investor will have no registration rights,
and the Company will be relieved of all of its obligations hereunder, with
respect to those shares of Unrestricted Common Stock.
ARTICLE IV
REGISTRATION PROCEDURES
-----------------------
4.1. REGISTRATION AND QUALIFICATION. If and whenever the Company
is required to use all reasonable efforts to effect the registration of any
Eligible Securities under the Securities Act as provided in Article 3, the
Company will as promptly as is practicable:
(a) prepare, file and use all reasonable efforts to cause to
become effective a registration statement under the Securities Act
regarding the Eligible Securities to be offered;
(b) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with
respect to the disposition of all Eligible Securities until the earlier
of such time as all of such Eligible Securities have been disposed of
in accordance with the intended methods of disposition by Investor set
forth in such registration statement or the expiration of twelve (12)
months after such registration statement become effective;
(c) furnish to Investor and to any underwriter of such Eligible
Securities such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, such documents incorporated by
reference in such registration statement or prospectus, and such other
documents as Investor or such underwriter may reasonably request;
Q-2-6
<PAGE>
(d) use all reasonable efforts to register or qualify all Eligible
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as Investor or any
underwriter of such Eligible Securities shall reasonably request, and do
any and all other acts and things which may be reasonably requested by
Investor or any underwriter to consummate the disposition in such
jurisdictions of the Eligible Securities covered by such registration
statement, except the Company shall not for any such purpose be required
to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified, or to subject itself to
taxation in any jurisdiction where it is not then subject to taxation,
or to consent to general service of process in any jurisdiction where
it is not then subject to service of process;
(e) use all reasonable efforts to list the Eligible Securities on
each national securities exchange on which the Common Stock is then
listed, if the listing of such securities is then permitted under the
rules of such exchange; and
(f) immediately notify Investor at any time when a prospectus
relating to a registration pursuant to Article 3 hereof is required
to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of material
fact or omits to state any 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, and at the
request of Investor prepare and furnish to such Investor as many copies
of a supplement to or an amendment of such prospectus as Investor may
reasonably request so that, as thereafter delivered to the purchasers
of such Eligible Securities, such prospectus shall 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.
The Company may require Investor to furnish the Company such information
regarding Investor and the distribution of such Eligible Securities as the
Company may from time to time reasonably request in writing and as shall be
required by law or by the SEC in connection with any registration. The
Company may also impose such restrictions and limitations on the distribution
of such Eligible Securities as the Company reasonably believes are necessary
or advisable to comply with applicable law or to effect an orderly
distribution, including those restrictions set forth in Section 4.3 hereof.
Q-2-7
<PAGE>
4.2. UNDERWRITING.
(a) In the event that any registration pursuant to Article 3 hereof
shall involve, in whole or in part, an underwritten offering, the
Company may require Eligible Securities requested to be registered
pursuant to Article 3 to be included in such underwriting on
the same terms and conditions as shall be applicable to the Other
Securities being sold through underwriters under such registration. In
such case, the holders of Eligible Securities on whose behalf Eligible
Securities are to be distributed by such underwriters shall be parties
to any such underwriting agreement. Such agreement shall contain such
representations and warranties by Investor and such other terms and
provisions as are customarily contained in underwriting agreements
with respect to secondary distributions, including, without limitation,
indemnities and contribution to the effect and to the extent provided
in Article 6. The representations and warranties in such underwriting
agreement by, and the other agreements on the part of, the Company to
and for the benefit of such underwriters shall also be made to and for
the benefit of such holders of Eligible Securities.
(b) If requested by the underwriters for any underwritten offering
of Eligible Securities pursuant to a registration requested hereunder,
the Company will enter into and perform its obligations under an
underwriting agreement with such underwriters for such offering, such
agreement to contain such representations and warranties by the Company
and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions,
including, without limitation, indemnities and contribution to the effect
and to the extent provided in Article 6 hereof. Investor shall be a party
to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, the Company to
and for the benefit of such underwriters shall also be made to and for
the benefit of Investor. Such agreement shall also contain such
representations and warranties by Investor and such other terms and
provisions as are customarily contained in underwriting agreements
with respect to secondary distributions, including, without limitation,
indemnities and contribution to the effect and to the extent provided in
Article 6.
4.3. BLACKOUT PERIODS. At any time when a registration statement
effected pursuant to Article 3 relating to Eligible Securities is effective,
upon written notice from the Company to Investor that the Company has
determined in good faith, with the advice of counsel, that Investor's sale of
Eligible Securities pursuant to the registration statement would require
disclosure
Q-2-8
<PAGE>
of non-public material information the disclosure of which would have a
material adverse effect on the Company or would otherwise adversely effect a
material financing, acquisition, disposition, merger or other comparable
transaction, Investor shall suspend sales of Eligible Securities pursuant to
such registration statement until the earlier of:
(X) the date upon which such material information is
disclosed to the public or ceases to be material, or
(Y) such time as the Company notifies Investor that sales
pursuant to such registration statement may be resumed.
4.4 QUALIFICATION FOR RULE 144 SALES. The Company will take all
actions reasonably necessary to comply with the filing requirements described
in Rule 144(c) so as to enable Investor to sell Eligible Securities without
registration under the Securities Act and, upon the written request of
Investor, the Company will deliver to Investor a written statement as to
whether it has complied with such filing requirements.
ARTICLE V
PREPARATION; REASONABLE INVESTIGATION
5.1 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement registering
Eligible Securities under the Securities Act, the Company will give Investor
and the underwriters, if any, and their respective counsel and accountants,
drafts of such registration statement for their review and comment prior to
filing and such reasonable and customary access to its books and records and
such opportunities to discuss the business of the Company with its officers
and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of Investor and such
underwriters or their respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
ARTICLE VI
INDEMNIFICATION AND CONTRIBUTION
6.1 Indemnification and Contribution.
(a) In the event of any registration of Eligible Securities
hereunder, the Company will enter into customary indemnification
arrangements to indemnify and hold harmless Investor, and each Person who
participates as an underwriter in the offering or sale of such securities,
and each Person,
Q-2-9
<PAGE>
if any, who controls such underwriter within the meaning of the Securities
Act against any losses, claims, damages, liabilities and expenses, joint or
several, to which such Person may be subject under the Securities Act or
otherwise insofar as such losses, claims, damages, liabilities or expenses
(or actions or proceedings in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus included therein, or any amendment or supplement thereto, or any
document incorporated by reference therein, or (ii) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
promptly reimburse each such Person for any legal or any other expenses
reasonably incurred by such Person in connection with investigating or
defending any such loss, claim, damage, liability, action or proceeding;
PROVIDED that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, any such preliminary prospectus or final
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by Investor expressly for use in
the registration statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of Investor or
any such Person and shall survive the transfer of such securities by
Investor. The Company also shall agree to provide provision for contribution
as shall be reasonably requested by Investor or any underwriters in
circumstances where such indemnity is held unenforceable.
(b) Investor, by virtue of exercising its registration rights
hereunder, agrees and undertakes to enter into customary indemnification
arrangements to indemnify and hold harmless (in the same manner and to the
same extent as set forth in clause (a) of this Article 6) the Company, each
director of the Company, each officer of the Company who shall sign such
registration statement, each Person who participates as an underwriter in the
offering or sale of such securities and each Person, if any, who controls
the Company or any such underwriter within the meaning of the Securities Act,
with respect to any statement in or omission from such registration
statement, any preliminary prospectus or final prospectus included therein, or
any amendment or supplement thereto, but only to the extent that such
statement or omission was made in reliance upon and in conformity with
written information furnished by Investor to
Q-2-10
<PAGE>
the Company expressly for use in the registration statement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer of the
registered securities by Investor and the expiration of this Agreement.
Investor also shall be reasonably requested by the Company or any
underwriters in circumstances where such indemnity is held unenforceable.
(c) Indemnification and contribution similar to that specified in
the preceding subdivisions of this Article 6 (with appropriate
modifications) shall be given by the Company and Investor with respect
to any required registration or other qualification of Eligible
Securities under any federal or state law or regulation of governmental
authority other than the Securities Act.
ARTICLE VII
TRANSFER OF REGISTRATION RIGHTS
7.1. TRANSFER OF REGISTRATION RIGHTS. Investor may NOT transfer the
registration rights granted hereunder to any other Person.
ARTICLE VIII
MISCELLANEOUS
8.1. CAPTIONS. The captions or headings in this Agreement are for
convenience and reference only, and in no way define, describe, extend or
limit the scope or intent of this Agreement.
8.2. SEVERABILITY. If any clause, provision or section of this
Agreement shall be invalid or unenforceable, the invalidity or
unenforceability of such clause, provision or section shall not affect the
enforceability or validity of any of the remaining clauses, provisions or
sections hereof to the extent permitted by applicable law.
8.3. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the internal laws of the State of California, without
reference to its rules as to conflicts or choice of laws.
8.4. MODIFICATION AND AMENDMENT. This Agreement may not be
changed, modified, discharged or amended, except by an instrument signed by
all of the parties hereto.
Q-2-11
<PAGE>
8.5. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall
constitute one and the same instrument.
8.6. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding among the parties and supersedes any prior
understandings and/or written or oral agreements among them respecting the
subject matter herein.
8.7. NOTICES. All notices, requests, demands, consents and other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and delivered by hand, by overnight courier delivery
service or by certified mail, return receipt requested, postage prepaid.
Notices to Investor shall be made to the address listed on the stock transfer
records of the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
or caused this Agreement to be executed as of the day and year first above
written.
THE MACERICH COMPANY
By: /s/ Richard A. Bayer
-------------------------------------
Name: Richard A. Bayer
Title: General Counsel and Secretary
INVESTOR:
/s/ John L. Debenedetti
----------------------------------------
Print Name: JOHN L. DEBENEDETTI, TRUSTEE
DEBENEDETTI FAMILY TRUST
Address: 497 Stockbridge Avenue
Atherton, California 94027
Q-2-12
<PAGE>
INCIDENTAL/DEMAND REGISTRATION RIGHTS AGREEMENTS, ELECTION FORMS,
ACCREDITED/NON-ACCREDITED INVESTORS CERTIFICATES, AND INVESTOR CERTIFICATES
(CALIFORNIA) dated as of various dates by and between Macerich and the
following investors:
1. John L. deBenedetti Trust
2. Jack R. Taylor
3. Timothy G. Sheehan
4. Silvia Breiholz
5. Richard Elkus Trust
6. Michael Franchetti
7. Peter Franchetti Trust
8. Sherry Franchetti
9. Robert Kantor
10. Irene Kivitz
11. Albert Knorp
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VOLUME VIII
12. Robert Lanctot
13. Morshead Trust
14. Wilmot Nicholson Trust
15. Rod & Pat Stofle
16. Catherine Wyler Trust
17. Judy Wyler Trust
18. Melanie Wyler Trust
19. David Wyler Trust
20. Curry P/S Pension Trust
21. Edward Cutter Trust
22. Fitzgerald P/S Trust
** Photocopy
13
<PAGE>
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VOLUME IX
23. Richard Gould Trust
24. Jeffery P/S Pension Trust
25. Jeanne Murphy
26. Harvey & Nancy Newton
27. William Roach
28. Leo & Myrna Roselyn Trust
29. Ralph & Marilyn Speigl Trust
30. Speigl P/S Pension Trust
31. John Gatto
32. Constance Seymour
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VOLUME X
33. John & Carmen Aitken Trust
34. Andrew Blum UGMA
35. Blum Associates
36. Morgan Blum UGMA
37. Morgan Blum Trust
38. Ari Blum UGMA
39. Ari Blum Trust
40. Joseph Blum IRA
41. Charles Brandes
42. Eugene & Kathleen Clahan Trust
43. Kevin Clahan
44. Brian Clahan
45. Eugenia Clahan
46. James & Wera Clough Trust
47. Freidman P/S Pension Trust
48. Jacobs Group Ptrshp
49. Henry Jacobsen
** Photocopy
14
<PAGE>
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VOLUME XI
50. Jacobsen Trust
51. Gerald Neimeyer
52. Cecil & Josephine Osborne Trust
53. David Rawson Trust
54. Barry & Janet Robbins Trust
55. Jeremy Rose UGMA
56. Timothy Rose UGMA
57. Richard & Kathryn Rose Trust
58. Stanley Rosenberg
59. Carol Rosenberg
60. Daniel Spiegelman
- -------------------------------------------------------------------------------
VOLUME XII
61. Lisa Spiegelman UGMA
62. Robert Spiegelman Trust
63. Betty Spiegelman Trust
64. Mitchell Tarkoff
65. Robert Wilkinson Trust
66. Benjamin Wells
<PAGE>
SECURED FULL RECOURSE
PROMISSORY NOTE
DUE NOVEMBER 16, 2007
$1,000,000.00 Dallas,Texas
_____________ November 17, 1997
FOR VALUE RECEIVED, Edward C. Coppola, Jr., an individual
("MAKER"), unconditionally promises to pay to The Macerich Company, a
Maryland corporation (together with any successor or assignee by operation of
law or otherwise, the "PAYEE"), on the earlier of November 16, 2007 or such
other date as provided herein, in the manner and at the place hereinafter
provided, the lesser of (i) one million dollars ($1,000,000.00) and (ii) the
unpaid principal amount of all advances made by Payee to Maker for the
purposes of Maker's purchase of common stock of the Payee pursuant to the
terms of The Macerich Company Amended and Restated 1994 Incentive Plan (the
"Plan"). All advances made under this Note shall be noted hereon; PROVIDED,
HOWEVER, that the failure to make a notation shall not limit or otherwise
affect the obligations of Maker hereunder with respect to payments of
principal or interest on this Note.
Maker also promises to pay interest on the unpaid principal balance
of this Note from the date such principal is advanced until such principal is
paid in full at a rate per annum equal to the lesser of: (i) the maximum
amount allowable pursuant to applicable law; or (ii) 7.00%. Interest that is
due and payable but not yet paid shall be added to principal and accrue
interest from the date due. Interest on this Note shall be computed on the
basis of a 365-day year, based on the actual number of days elapsed and shall
be payable in arrears quarterly on the fifteenth (15th) day of each March,
June, September and December, commencing on December 15, 1997, upon any
prepayment of this Note (to the extent accrued on the amount being prepaid)
and at maturity.
1. PAYMENTS; VOLUNTARY REPAYMENT. All payments of principal and
interest in respect of this Note shall be made in lawful money of the United
States of America. Each payment made hereunder shall be credited first to
interest then due and the remainder of such payment shall be credited to
principal, and interest shall thereupon cease to accrue upon the principal so
credited. Maker shall have the right at any time and from time to time to
prepay the principal of this Note in whole or in part, without premium or
penalty, such prepayment hereunder being accompanied by interest on the
principal amount of the Note being prepaid to the date of prepayment.
Notwithstanding any payment or prepayment of principal hereunder by Maker,
Maker acknowledges and agrees that the aggregate advances made by Payee
hereunder shall in no event exceed the sum of $1,000,000.
1
<PAGE>
2. MANDATORY REPAYMENT.
(a) If the Board of Directors of Payee (the "Board") makes any
dividend or other distribution to its stockholders which it determines for
these purposes to be unusual or extraordinary (an "Extraordinary
Distribution"), then the Board, or the Compensation Committee of the Board,
may, in its sole discretion, require that Maker use the Net Cash Proceeds (as
defined below) of the Extraordinary Distribution to repay this Note. The Net
Cash Proceeds shall be applied first to accrued and unpaid interest on this
Note and second to the unpaid principal balance of this Note. As used
herein, Net Cash Proceeds means all cash or cash proceeds from an
Extraordinary Distribution in respect of the Pledged Collateral (as defined
in that certain Pledge Agreement (the "Pledge Agreement") dated as of
November 17, 1997 between Maker and Payee) MINUS the amount of applicable
federal, state and local taxes which the Board, or the Compensation Committee
of the Board, reasonably determines will be payable by Maker in connection
with the Extraordinary Distribution. The Board, or the Compensation
Committee of the Board, shall cause Payee to notify Maker in writing at least
10 days prior to the payment date of any Extraordinary Distribution with
respect to which it intends to require Maker to use the Net Cash Proceeds to
repay this Note. If Maker is required to use the Net Cash Proceeds to repay
this Note, then within three (3) business days of receipt of the Net Cash
Proceeds, Maker shall pay to Payee an amount equal to the Net Cash Proceeds
to be so applied.
(b) In the event that Maker sells, transfers, assigns or otherwise
disposes of any of the Pledged Collateral as permitted by and in accordance
with Section 6 of the Pledge Agreement, Maker shall concurrently repay the
unpaid principal balance of this Note in an amount equal to the greater of:
(i)(A) the percentage of the total Pledged Collateral (prior to such
disposition) that the shares so disposed of represents MULTIPLIED BY (B) the
unpaid principal amount of this Note or (ii) the amount by which the unpaid
principal amount of this Note exceeds the Fair Market Value (as defined in
the Pledge Agreement) of the Pledged Collateral (after giving effect to the
release of collateral set forth in Section 6 of the Pledge Agreement).
(c) If there shall occur a Termination of Employment (as such term
is defined in the Plan) of Maker, the unpaid principal amount of this Note
together with accrued interest thereon shall become due and payable on the
10th business day after the Termination of Employment of Maker except as
otherwise provided in Section 1.8(d) of the Plan.
3. FULL RECOURSE NOTE. This Note is the Note referred to in the
Pledge Agreement. This Note is a full
2
<PAGE>
recourse Note and Maker shall be liable for the full payment of principal of
and interest on this Note. This Note is also secured by, and is entitled to
the benefit of, the Pledge Agreement, the terms and provisions of which are
hereby incorporated herein as if set forth herein in full.
4. EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default:
(a) The sale, transfer, assignment or other disposition of any
Pledged Collateral, other than in accordance with the terms and conditions of
Section 2(b) of this Note and Section 6(c) of the Pledge Agreement;
(b) The failure by Maker to pay any principal under this Note when
due, whether at stated maturity, by acceleration, or otherwise, or failure to
pay any interest or other amount due under this Note within five (5) days
after the date due;
(c) any challenge, or institution of any proceedings to challenge
by Maker of the validity, binding effect or enforceability of this Note or
any endorsement of this Note;
(d) any default by Maker of any other obligation under this Note
or the Pledge Agreement; or
(e) The initiation of any proceeding relating to Maker under any
bankruptcy, reorganization, arrangement of debt, insolvency, readjustment of
debt or receivership law or statute, whether filed by or against Maker, or
the assignment for the benefit of creditors by Maker.
Upon an Event of Default set forth in clauses (a), (b) and (e)
above, the principal amount of this Note together with accrued interest
thereon shall become immediately due and payable, without presentment,
demand, notice, protest or other requirements of any kind (all of which are
hereby expressly waived by Maker). Upon any other Event of Default, Payee
may, by written notice to Maker, declare the principal amount of this Note
together with accrued interest thereon to be due and payable, and the
principal amount of this Note together with such interest shall thereupon
immediately become due and payable without presentment, further notice,
protest or other requirements of any kind (all of which are hereby expressly
waived by Maker).
5. SET-OFF. Payee shall be entitled to set-off against this Note
any and all amounts owed by Payee to Maker as and when such amounts become
due and payable, whether presently existing or hereafter incurred, to the
maximum extent allowable under applicable laws. To the extent that Maker's
consent to the set-off is required, this Note constitutes Maker's consent.
3
<PAGE>
6. MISCELLANEOUS.
(a) All notices and other communications provided for hereunder
shall be in writing (including telegraphic, telex, telefacsimile or cable
communication) and hand-delivered, mailed, or telecopied as follows: if to
Maker, at its address specified opposite its signature below; and if to
Payee, at 233 Wilshire Boulevard, Santa Monica, CA 90401; or in each case at
such other address as shall be designated by Payee or Maker. All such
notices and communications shall, when hand-delivered, mailed, or telecopied
(with answer-back confirmation) be effective when deposited in the mails,
delivered or sent by telecopier.
(b) No failure or delay on the part of Payee or any other holder
of this Note to exercise any right, power or privilege under this Note and no
course of dealing between Maker and Payee shall impair such right, power or
privilege or operate as a waiver of any default or an acquiescence therein,
nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. The rights and remedies expressly
provided in this Note are cumulative to, and not exclusive of, any rights or
remedies that Payee would otherwise have. No notice to or demand on Maker in
any case shall entitle Maker to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the right of Payee
to any other or further action in any circumstances without notice or demand.
(c) Maker and any endorser of this Note hereby consent to renewals
and extensions of time at or after the maturity hereof, without notice, and
hereby waive diligence, presentment, protest, demand and notice of every kind
and, to the full extent permitted by law, the right to plead any statute of
limitations as a defense to any demand hereunder. To the fullest extent
permitted by law, the obligations of Maker hereunder shall not be subject to
any counterclaim, set-off, deduction, diminution, abatement, recoupment,
deferment, suspension, reduction or defense (other than the full and strict
compliance by Maker with those obligations) based on any claim that Maker may
have against Payee or any other person.
(d) No provision of this Note may be waived, modified or
discharged orally, but only by an agreement signed by the party against whom
enforcement is sought.
(e) If any provision in or obligation under this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in
4
<PAGE>
any other jurisdiction, shall not in any way be affected or impaired thereby.
(f) This note and the rights and obligations of maker and payee
hereunder shall be governed by, and shall be construed and enforced in
accordance with the laws of the State of California except for such matters
as are subject to the General Corporation Law of the State of Maryland.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as
of the day and year and at the place first above written.
---------------------------------------
Edward C. Coppola, Jr.
Notice Address:
Edward C. Coppola, Jr.
c/o The Macerich Company
Two Galleria Tower
13455 Noel Rd., Suite 1480
Dallas, TX 75240
5
<PAGE>
TRANSACTIONS ON PROMISSORY NOTE
<TABLE>
<CAPTION>
Amount of Outstanding
Amount of Principal Principal
Loan Made Repaid on Balance on
Date on this Date this Date this Date
- ---- ------------ --------- ---------
<S> <C> <C> <C>
11/17/97 $657,938.46 $657,938.46
11/18/97 $341,948.40 $999,886.86
</TABLE>
6
<PAGE>
List of Omitted Secured Full Recourse Notes
1. Secured Full Recourse Promissory Note dated November 17, 1997 Due
November 16, 2007 made by Richard A. Bayer to the order of the Company.
2. Secured Full Recourse Promissory Note dated November 17, 1997 Due
November 16, 2007 made by David J. Contis to the order of the Company.
3. Secured Full Recourse Promissory Note dated November 17, 1997 Due
November 16, 2007 made by Thomas E. O'Hern to the order of the Company.
4. Secured Full Recourse Promissory Note dated November 17, 1997 Due
November 16, 2007 made by Larry Sidwell to the order of the Company.
<PAGE>
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT (this "AGREEMENT") is dated as of November
17, 1997 and entered into by and between EDWARD C. COPPOLA, JR., AN
INDIVIDUAL ("PLEDGOR"), and THE MACERICH COMPANY, a Maryland corporation
("SECURED PARTY").
WITNESSETH
WHEREAS, pursuant to the terms of a promissory note dated of even date
herewith executed by Pledgor in favor of Secured Party (said promissory note,
as it may hereafter be amended, supplemented or otherwise modified from time
to time, being the "NOTE," the terms defined therein and not otherwise
defined herein being used herein as therein defined), Secured Party has
agreed to loan (the "LOAN") up to one million dollars ($1,000,000) to Pledgor;
WHEREAS, the proceeds of the Loan will be used to pay for the purchase
by Pledgor of shares of common stock of the Secured Party; and
WHEREAS, as a condition to the making of such Loans by Secured Party the
repayment of which is evidenced by the Note, Pledgor has agreed to grant the
security interests and undertake the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Secured Party to make the Loan the repayment of which is evidenced by the
Note and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, Pledgor hereby agrees with Secured Party as
follows:
SECTION 1. CERTAIN DEFINITIONS. The following terms used in this
Agreement shall have the following meanings:
"AGREEMENT" means this Pledge Agreement dated as of November 17, 1997 by
and between Pledgor and Secured Party.
"BOARD" means the Board of Directors of Secured Party, or the
Compensation Committee thereof.
"CONTRACTUAL OBLIGATION," as applied to any Person, means any provision
of any security issued by that Person or of any material indenture, mortgage,
deed of trust, contract,
1
<PAGE>
undertaking, agreement or other instrument to which that Person is a party or
by which it or any of its properties is bound or to which it or any of its
properties is subject.
"EVENT OF DEFAULT" has the meaning assigned to such term in the Note.
"FAIR MARKET VALUE," with respect to shares of the Company's common
stock or any other securities, means the average closing sale price as
reported on the New York Stock Exchange (or such other national exchange or
market system on which the Company's common stock or such other securities
may then be listed or quoted) for the ten (10) trading days immediately
preceding the date of valuation or such other method as may be required by
applicable Legal Limits, or, if the Company's common stock or such other
securities are not listed or quoted on a national exchange or market system,
then a value determined in good faith by the Board. "Fair Market Value," with
respect to any other property shall be determined in good faith by the Board
of Directors.
"LEGAL LIMITS" means any legal restrictions applicable to the release of
the Pledged Collateral and the extension or maintenance of credit or its
repayment, including without limitation those included in Regulation G of the
Federal Reserve Board.
"LIEN" means any lien, mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, and any agreement
to give any security interest) and any option, trust or other preferential
arrangement having the practical effect of any of the foregoing.
"LOAN" has the meaning assigned to such term in the recitals to this
Agreement.
"MANDATORY REPAYMENT OBLIGATIONS" means the obligations of Pledgor to
repay the Note pursuant to Section 2 of the Note.
"NOTE" has the meaning assigned to such term in the recitals to this
Agreement.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.
"PLEDGED COLLATERAL" has the meaning assigned to such term in Section 2.
2
<PAGE>
"PLEDGED SHARES" means all shares of common stock of the Company
purchased by Pledgor using the proceeds of the Loan, and any other securities
into which such shares are converted or reclassified (by stock split, merger,
extraordinary distribution or otherwise) or for which such shares are
exchanged by operation of law or consent of Secured Party.
"PLEDGOR" means Edward C. Coppola, Jr.
"PROCEEDS" has the meaning assigned to such term in Section 2(c).
"SEC" means the Securities and Exchange Commission.
"SECURED OBLIGATIONS" has the meaning assigned to such term in Section 3.
"SECURED PARTY" means The Macerich Company, a Maryland corporation, and
its successors and assigns by operation of law or otherwise.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"UNDERLYING DEBT" has the meaning assigned to such term in Section 3.
SECTION 2. PLEDGE OF SECURITY. Subject to Section 8(a), Pledgor hereby
pledges and assigns to Secured Party, and hereby grants to Secured Party a
security interest in, all of Pledgor's right, title and interest in and to
the following and all interests therein (the "PLEDGED COLLATERAL"):
(a)
3
<PAGE>
List of Omitted Stock Pledge Agreements
1. Stock Pledge Agreement dated November 17, 1997 Due November 16, 2007
made by Richard A. Bayer for the benefit of the Company.
2. Stock Pledge Agreement dated November 17, 1997 Due November 16, 2007
made by David J. Contis for the benefit of the Company.
3. Stock Pledge Agreement dated November 17, 1997 Due November 16, 2007
made by Thomas E. O'Hern for the benefit of the Company.
4. Stock Pledge Agreement dated November 17, 1997 Due November 16, 2007
made by Larry Sidwell for the benefit of the Company.
<PAGE>
PROMISSORY NOTE
$550,000.00 DATED AS OF MAY 2, 1997
FOR VALUE RECEIVED, the undersigned, David J. Contis ("BORROWER"), an
employee of Lender, hereby unconditionally promises to pay on demand made in
accordance with Paragraph 3 below, to the order of Macerich Management
Company ("LENDER"), in lawful money of the United States and in immediately
available funds, the full amount of the unpaid principal balance of the
Demand Loan made by Lender to the undersigned pursuant to Schedule A attached
hereto. Such payment shall be made for the account of Lender at its office
located at 233 Wilshire Boulevard, Suite 700, Santa Monica, California 90401,
or at such other office as Lender may notify Borrower. Borrower acknowledges
and agrees to the following additional terms:
1. One-fifth (1/5) of the original amount of this loan will be
forgiven by Lender at the end of each successive twelve (12)
month period of Borrower's continued employment with Lender
elapsing after the date of this Demand Note. In the event
Borrower's employment with Lender terminates for any reason
before the principal amount of this loan is forgiven or
otherwise paid in full, an additional one-sixtieth (1/60) of
the original amount of this loan will be forgiven for each full
calendar month of Borrower's continued employment with Lender
completed since the then most recent anniversary date of the
date of this Demand Note.
2. Taxable income will be imputed to Borrower as a result of
(a) the forgiveness of each portion of this loan as specified
in Paragraph 1 above and (b) the lack of interest payments on
the principal balance due, so that Lender will issue W-2 forms
or 1099 forms, as Lender deems appropriate, to Borrower which
reflect such imputed income and, further, that Lender may be
required to withhold tax on such income from salary and other
compensation payments made to Borrower during and after the
period this loan is outstanding. In the event Lender notifies
Borrower that funds available to Lender for withholding are
insufficient, Borrower agrees to remit to Lender on demand an
appropriate amount to cover any and all taxes to be withheld by
Lender as contemplated by the previous sentence hereof.
-1-
<PAGE>
3. If Borrower's employment with Lender terminates for any reason
before the principal amount of this loan is forgiven or
otherwise paid in full, all amounts then remaining unpaid on
this Demand Note shall be due and payable upon demand and
interest shall accrue on such unpaid balance from the date of
such termination forward at the rate of ten percent (10%) per
annum.
4. Lender has not made any representations concerning Lender's
willingness not to exercise, or delay exercising, its rights to
enforce this Note or to demand payment of this Note. Such
demand may be made at any time following the date Borrower's
employment with Lender terminates as set forth in Paragraph 3
above. Interest shall accrue on the unpaid balance of this loan
from the time of demand forward at the rate of ten percent
(10%) per annum. No delay or omission on the part of the Lender
in exercising any right or remedy to enforce this Note shall
operate as a waiver of such right or remedy under this Note. No
waiver by Lender of any right or remedy shall be effective
unless in writing and signed by the Lender on the reverse side
of the original of this Note and no such waiver on one occasion
shall be construed as a waiver on any other occasion. No
modification of this Note shall be effective unless the
modification is in writing and is signed by the Lender on the
reverse side of the original of this Note.
5. Borrower agrees that the rights granted to the Lender pursuant
to this Note shall accrue to any endorsee of this Note who is
lawfully in possession of this Note.
THIS DEMAND NOTE SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT REFERENCE TO ITS
CHOICE OF LAW RULES).
IN CONNECTION WITH ANY ACTION, PROCEEDING OR COUNTERCLAIM, BORROWER
HEREBY EXPRESSLY, INTENTIONALLY AND IRREVOCABLY WAIVES ANY RIGHT THE PARTY
MAY OTHERWISE HAVE TO TRIAL BY JURY OF ANY CLAIM, WHETHER SUCH CLAIM IS MADE
BY LENDER AGAINST BORROWER OR BORROWER AGAINST LENDER.
BORROWER AGREES TO PAY ALL REASONABLE COSTS AND EXPENSES OF LENDER IN
ENFORCING AND COLLECTING THIS DEMAND NOTE, INCLUDING REASONABLE ATTORNEY'S
FEES, INCURRED IN LITIGATION PROCEEDINGS OR OTHERWISE, INCLUDING ANY SUCH
ATTORNEY'S FEES INCURRED IN BANKRUPTCY, REORGANIZATION OR SIMILAR PROCEEDINGS.
-2-
<PAGE>
IN WITNESS WHEREOF, the party hereto has caused this Demand Note to be
duly executed and delivered as of the date and year first above written.
BORROWER:
/s/ David J. Contis
------------------------------------
David J. Contis
Address:
------------------------------------
------------------------------------
CONSENT OF SPOUSE
I have read and understand this
Promissory Note and consent to
its terms.
/s/ Jane L. Contis
------------------------------------
Jane L. Contis
-3-
<PAGE>
SCHEDULE A
LOAN AMOUNT: $550,000.00
INTEREST RATE: 0%/10%
Upon demand for payment following Borrower's termination of employment
in accordance with the terms of the Note, interest on the unpaid principal
amount shall accrue at a rate of ten percent (10%) per annum, and such
interest shall be payable on demand.
-4-
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PARTNERSHIP AGREEMENT
OF
SM PORTFOLIO LIMITED PARTNERSHIP
BY AND BETWEEN
MACERICH EQ LIMITED PARTNERSHIP,
MACERICH EQ GP CORP.,
SDG EQ DEVELOPERS LIMITED PARTNERSHIP,
AND
SDG EQ ASSOCIATES, INC.
Dated as of
February 24, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
<TABLE>
<CAPTION>
<S> <C> <C>
FORMATION AND ORGANIZATION . . . . . . . . . . . . . 1
1.1 Formation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Character of the Business. . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Principal Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Title to Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Payments of Individual Obligations . . . . . . . . . . . . . . . . . . . 2
1.8 Other Business Interests . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2
CAPITAL CONTRIBUTIONS AND OTHER FINANCING MATTERS. . . . . . . . 3
2.1 Percentage Interests . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Initial Capital Contributions. . . . . . . . . . . . . . . . . . . . . . 4
2.3 Additional Capital Contributions . . . . . . . . . . . . . . . . . . . . 6
2.5 Other Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6 No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Third Party Financing. . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 3
DISTRIBUTIONS. . . . . . . . . . . . . . . . . 10
3.1 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Distributions after Dissolution. . . . . . . . . . . . . . . . . . . . . 10
3.3 Timing of Distributions Among Partners . . . . . . . . . . . . . . . . . 10
ARTICLE 4
ALLOCATIONS AND OTHER TAX AND ACCOUNTING MATTERS. . . . . . . . 10
4.1 Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Accounting, Books and Records. . . . . . . . . . . . . . . . . . . . . . 10
4.3 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 Tax Returns; Information . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 Special Basis Adjustment . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6 Tax Matters Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
i
<PAGE>
<CAPTION>
<S> <C> <C>
ARTICLE 5
MANAGEMENT . . . . . . . . . . . . . . . . . 12
5.1 Executive Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 No Individual Authority. . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 Operating Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.4 Warranted Reliance by Executive Committee Members and Operating
Committee Members on Others. . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 REIT Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.7 Budgets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.8 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.9 Unanimous Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.10 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.11 Compensation and Reimbursement.. . . . . . . . . . . . . . . . . . . . . 22
5.12 No Employees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.13 Personal Services Contract.. . . . . . . . . . . . . . . . . . . . . . . 23
5.14 Defaults and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 6
TRANSFERS OF INTERESTS . . . . . . . . . . . . . . 25
6.1 Restrictions on Transfers. . . . . . . . . . . . . . . . . . . . . . . . 25
6.2 Transferee Requirements. . . . . . . . . . . . . . . . . . . . . . . . . 26
6.3 Partnership Interest Loans . . . . . . . . . . . . . . . . . . . . . . . 26
6.4 Admission of Transferee as a Partner . . . . . . . . . . . . . . . . . . 31
6.5 Allocations and Distributions Upon Transfers . . . . . . . . . . . . . . 31
ARTICLE 7
Buy-Sell. . . . . . . . . . . . . . . . . . 32
7.1 Buy-Sell Offering Notice . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Exercise of Buy-Sell . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 8
EXIT CALL; PORTFOLIO SALE. . . . . . . . . . . . . . 34
8.1 Call Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.2 Procedures upon Call Exercise. . . . . . . . . . . . . . . . . . . . . . 34
8.3 Closing Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.5 Fair Market Value Appraisal Process. . . . . . . . . . . . . . . . . . . 37
8.6 Portfolio Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.7 Effect of Existing Financing . . . . . . . . . . . . . . . . . . . . . . 39
ii
<PAGE>
<CAPTION>
<S> <C> <C>
ARTICLE 9
WITHDRAWALS; ACTIONS FOR PARTITION . . . . . . . . . . . 39
9.1 Waiver of Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.2 Covenant Not to Withdraw or Dissolve . . . . . . . . . . . . . . . . . . 39
ARTICLE 10
DISSOLUTION, LIQUIDATION, WINDING-UP AND TERMINATION . . . . . . . 40
10.1 Causes of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2 Winding Up and Liquidation . . . . . . . . . . . . . . . . . . . . . . . 40
10.3 Timing Requirements; Deemed Distribution and Re-contribution . . . . . . 41
10.4 Sales Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.5 Documentation of Dissolution and Termination . . . . . . . . . . . . . . 42
ARTICLE 11
MISCELLANEOUS . . . . . . . . . . . . . . . . . 42
11.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.2 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.3 Construction of Agreement . . . . . . . . . . . . . . . . . . . . . . . . 43
11.4 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.5 Incorporation by Reference. . . . . . . . . . . . . . . . . . . . . . . . 43
11.6 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.8 Counterpart Execution . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.9 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.10 No Third Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.11 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.12 Usury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.13 Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.14 Proposing and Adopting Amendments . . . . . . . . . . . . . . . . . . . . 44
11.15 Partners Not Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.16 Entire Understanding; Etc.. . . . . . . . . . . . . . . . . . . . . . . . 44
11.17 Action Without Dissolution. . . . . . . . . . . . . . . . . . . . . . . . 45
11.18 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.19 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.20 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.21 Press Releases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.22 Existing Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
iii
<PAGE>
Schedule 1 - Original Approved Pre-Closing Budget
Schedule 2 - Intentionally Omitted
Schedule 3 - Intentionally Omitted
Schedule 4 - List of Properties
Schedule 5 - Noncompetition Area
<PAGE>
PARTNERSHIP AGREEMENT
OF
SM PORTFOLIO LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS PARTNERSHIP AGREEMENT (this "AGREEMENT") is made and entered
into as of February 24, 1998, by and between SDG EQ DEVELOPERS LIMITED
PARTNERSHIP a Delaware limited partnership ("SDG"), SDG EQ ASSOCIATES, INC.,
a Delaware corporation ("SSPE"), MACERICH EQ LIMITED PARTNERSHIP, a Delaware
limited partnership ("MACERICH"), and MACERICH EQ GP CORP., a Delaware
corporation ("MSPE"), on the terms and conditions set forth herein. Attached
to this Agreement immediately following the signature page is a glossary of
defined terms (the "GLOSSARY OF DEFINED TERMS"). Each capitalized term used
in this Agreement either is defined in the Glossary of Defined Terms, or the
location of its definition is cross-referenced in the Glossary of Defined
Terms.
ARTICLE 1
FORMATION AND ORGANIZATION
1.1 FORMATION. SDG, Macerich, SSPE and MSPE hereby form a limited
partnership (the "PARTNERSHIP") under the Act upon the terms and conditions
set forth in this Agreement. Each of SSPE and MSPE (and their permitted
successors-in-interest that are admitted as partners in the Partnership) is a
general partner in the Partnership and is referred to herein individually as
a "GENERAL PARTNER," and each of Macerich and SDG (and their permitted
successors-in-interest that are admitted as partners in the Partnership) is a
limited partner in the Partnership and is referred to herein individually as
a "LIMITED PARTNER." Each of the General Partners and the Limited Partners
are referred to herein individually as a "PARTNER" and, collectively, as the
"PARTNERS." SSPE and SDG, on the one hand, and MSPE and Macerich, on the
other hand, are jointly referred to herein as a "PARTY" and collectively as
"PARTIES". Any contributions by or distributions to a Party shall be deemed
to have been made to or by, as the case may be, the entities constituting
such Party in proportion to each such entity's Partnership Interest. The
General Partners shall promptly execute, publish or file all assumed or
fictitious name, or other similar, certificates required by law to be
published or filed, in connection with the formation and operation of the
Partnership in each state and locality where it is necessary or desirable to
publish or file such certificates in order to form and operate the
Partnership.
1.2 NAME. The name of the Partnership shall be "SM Portfolio
Limited Partnership," and all business of the Partnership shall be conducted
in such name or such other name as the Executive Committee, from time to
time, shall unanimously select.
1.3 CHARACTER OF THE BUSINESS. The purpose of the Partnership is
to (a) hold a ninety-nine percent (99%) limited partner interest in the
Underlying Partnership, (b) conduct
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all activities reasonably related to the ownership of such interests, (c)
acquire, own, develop, finance, refinance, mortgage, encumber, hypothecate,
lease, sell, maintain, improve, alter, remodel, expand, manage, exchange,
dispose, and otherwise operate and deal with real property, (d) to transact
any and all other businesses for which limited partnerships may be formed
under Delaware law, and (e) to accomplish any of the foregoing purposes for
its own account or as nominee, agent or trustee for others; PROVIDED,
HOWEVER, that such business shall be limited to and conducted in such a
manner as to permit any Persons owning any interests in any of the Partners
at all times to be classified as a "real estate investment trust" within the
meaning of Section 856 of the Code (a "REIT").
1.4 PRINCIPAL OFFICE. The principal office of the Partnership
shall be at 233 Wilshire Boulevard, Suite 700, Santa Monica, California
90401, or at such other place as the Executive Committee may, from time to
time, determine (the "PRINCIPAL OFFICE").
1.5 TERM. The Partnership shall commence on the date of this
Agreement and shall continue until the Partnership is dissolved and
terminated in accordance with the provisions of ARTICLE 10.
1.6 TITLE TO PROPERTY. All real and personal property owned by
the Partnership shall be owned by the Partnership as an entity and no Partner
shall have any ownership interest in such property in its individual name or
right, and each Partner's interest in the Partnership shall be personal
property for all purposes. Except as otherwise provided in this Agreement,
the Partnership shall hold all of its real and personal property in the name
of the Partnership and not in the name of any Partner.
1.7 PAYMENTS OF INDIVIDUAL OBLIGATIONS. The Partnership's credit
and assets shall be used solely for the benefit of the Partnership, and no
asset of the Partnership shall be transferred or encumbered for, or in
payment of, any individual obligation of a Partner.
1.8 OTHER BUSINESS INTERESTS.
(a) Each Partner shall be required to devote only such time
to the affairs of the Partnership as may be necessary for the proper
performance of such Partner's duties hereunder. Except to the extent
expressly provided to the contrary in this SECTION 1.8, nothing in this
Agreement shall: (i) limit the rights of each Partner and its Affiliates,
and such Partner's and Affiliate's respective officers, directors, employees
and stockholders ("RELATED PERSONS") to serve other Persons in any capacity,
to own interests in other businesses and undertakings, to pursue and engage
in other investments, opportunities and activities, and to derive and enjoy
profits, compensation and other consideration in respect thereof, whether or
not such services, interests, businesses, undertakings, investments,
opportunities and activities (collectively, "OTHER INTERESTS") are similar to
or competitive with the business or assets of the Partnership, (ii) afford
any Partner any right to share in the profits, compensation and other
consideration derived from the Other Interests of any other Partner or any
other Partner's Related Persons, or to participate in the Other Interests of
any other Partner or any other Partner's Related Persons, (iii) require any
Partner to disclose to any other Partner or the Partnership the existence or
nature of any such
2
<PAGE>
Other Interest, or (iv) obligate any Partner to first offer any such Other
Interest to any other Partner or the Partnership, or allow any other Partner
or the Partnership to participate therein.
(b) Notwithstanding the foregoing, until an individual
Property has been sold or otherwise transferred by the Underlying Partnership
or Partnership, respectively, a Party (or any Affiliate of a Party) (each a
"PROPOSING PARTY") shall not obtain an equity interest (whether direct or
indirect) in any real estate venture ("REAL ESTATE ACTIVITY") within the area
described as the "Non-Competition Area" for each Property on SCHEDULE 5
attached hereto, as such SCHEDULE 5 may be amended from time to time,
("NON-COMPETITION AREA") unless it has first provided the other Party (the
"NONPROPOSING PARTY") with written notice describing in reasonable detail the
proposed transaction and offering the transaction as a Partnership
opportunity (the "PROPOSAL") and the Nonproposing Party has failed to notify
the Proposing Party within thirty (30) days of its receipt of such notice
that such Nonproposing Party desires that the Partnership, rather than the
Proposing Party individually, enter into and invest in such Real Estate
Activity. In the event that the Nonproposing Party delivers the notice
described in the immediately preceding sentence directing that the
Partnership invest in the Real Estate Activity, each Party shall make any
Additional Capital Contributions required by the Executive Committee to fund
the investment of the Partnership pursuant to the Proposal, the Real Estate
Activity will be an opportunity for the Partnership and the Real Estate
Activity shall be included as a business of the Partnership within SECTION
1.3. The Proposal described above shall include all information that the
Proposing Party has with respect to the Real Estate Activity, including
proformas, plans and specifications and economic projections relating to the
Real Estate Activity. If the Nonproposing Party consents to the Proposing
Party's investment in the Real Estate Activity individually or fails to
respond to the Proposal within thirty (30) days after its receipt thereof,
the Proposing Party or its Affiliate shall be permitted to invest in the Real
Estate Activity in its individual capacity.
1.9 TRANSACTIONS WITH AFFILIATES. To the extent permitted by
applicable law and except as otherwise provided in this Agreement (including
SECTION 5.11 hereof), the Operating Committee and any property manager, when
acting through the Partnership, are hereby authorized to purchase property
and services from, sell property and services to, or otherwise deal with any
Partner, acting on its own behalf, or any Affiliate of any Partner, provided
that any such purchase, sale, or other transaction (and any such Affiliates'
affiliation to a Partner) shall be fully disclosed to the Partners and shall
be made on market terms and conditions which are no less favorable to the
Partnership (including as to price, quality and payment terms) than if the
sale, purchase, or other transaction had been entered into with an
independent third party.
ARTICLE 2
CAPITAL CONTRIBUTIONS AND OTHER FINANCING MATTERS
2.1 PERCENTAGE INTERESTS. The names, addresses, and percentage
interests ("PERCENTAGE INTERESTS") of the Partners are as follows:
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE INTEREST
---------------- -------------------
<S> <C>
GENERAL PARTNERS
Macerich EQ GP Corp.
233 Wilshire Boulevard, Suite 700
Santa Monica, California 90401
Telecopier No.: (310) 395-2791 .1%
SDG EQ Associates, Inc.
c/o Simon DeBartolo Group
National City Center
115 West Washington Street
Indianapolis, Indiana 46204
Telecopier No.: (317) 685-7221 .1%
LIMITED PARTNERS
Macerich EQ Limited Partnership
233 Wilshire Boulevard, Suite 700
Santa Monica, California 90401
Telecopier No.: (310) 395-2791 49.9%
SDG EQ Developers Limited Partnership
c/o Simon DeBartolo Group
National City Center
115 West Washington Street
Indianapolis, Indiana 46204
Telecopier No.: (317) 685-7221 49.9%
</TABLE>
2.2 INITIAL CAPITAL CONTRIBUTIONS. The initial Capital Contributions
("INITIAL CAPITAL CONTRIBUTIONS") of the Parties shall be made as follows:
(a) Concurrently with the execution of the Purchase Agreement by
the Underlying Partnership, each Party shall deliver to Equitable (the seller of
the Properties), as a contribution to the Partnership, and as a contribution by
the Partnership to the Underlying Partnership, a clean, irrevocable letter of
credit in the amount of $12,500,000 each naming Equitable as beneficiary (such
letters of credit to satisfy the "Deposit" requirement under the Purchase
Agreement). For this purpose, each of SDG and Macerich shall be deemed to have
contributed to each of SSPE and MSPE, respectively, a portion of each such
letter of credit representing each's proportionate interest in the Partnership,
which letters of credit shall be deemed contributed by to the Partnership by
SSPE and MSPE.
4
<PAGE>
(b) Each Party hereby agrees to contribute to the capital of
the Partnership, as a Capital Contribution, an amount equal to fifty percent
(50%) of the Closing Funding Requirement (as defined below), subject,
however, to the remaining provisions of this SECTION 2.2. As used herein,
the term "CLOSING FUNDING REQUIREMENT" shall mean the sum of (i) all amounts
required to be deposited by the Underlying Partnership with Escrow Agent
pursuant to the Purchase Agreement in order to close the transaction
thereunder, including amounts due to Equitable under the Purchase Agreement
as the purchase price consideration paid for the Underlying Properties and
the Underlying Partnership's share of all closing costs and expenses required
to be deposited with and paid through Escrow Agent pursuant to the Purchase
Agreement (the "ESCROW CLOSING REQUIREMENT"), (ii) all out-of-pocket costs
and expenses paid or payable to Persons other than the Underlying
Partnership, any Partner or any Affiliate thereof (other than those amounts
described in CLAUSE (i) above) that have been and/or will be incurred by the
Underlying Partnership, the Partnership, the Partners and the Partners'
respective Affiliates in connection with the formation of the Partnership and
the Underlying Partnership and investigating and acquiring the Properties
(including, without limitation, costs incurred in connection with the
negotiation of the Purchase Agreement and this Agreement and all
out-of-pocket due diligence costs and fees (collectively, "DUE DILIGENCE,
FORMATION AND ACQUISITION COSTS"), and (iii) the amount set forth in the
Original Approved Pre-Closing Budget (as defined below) for the funding of
the Underlying Partnership's initial capital improvement and operating
reserve (as such amount may be adjusted by the mutual consent of the Partners
in their sole and absolute discretion) (the "INITIAL RESERVE REQUIREMENTS").
(c) Attached hereto as SCHEDULE 1 is a budget (the "ORIGINAL
APPROVED PRE-CLOSING BUDGET") reflecting the Partners' best and good-faith
estimate of all Due Diligence, Formation and Acquisition Costs that will be
incurred in connection with the Partnership and Underlying Partnership's
formation and the acquisition of the Properties. In the event that any Party
incurs Due Diligence, Formation and Acquisition Costs in excess of that
budgeted in the Original Approved Pre-Closing Budget, the written approval of
the other Party shall be required before such additional amount may be
included in the Closing Funding Requirement. In the event that a Party
requests in writing that the other Party approve any such additional
expenditure or cost and the other Party fails to disapprove of the same in
writing (together with its specific written objections thereto) within five
(5) business days after its receipt of such request, such expenditure or cost
shall be deemed approved (but in each case only if such written request
specifically advises the Party that failure to respond within such five (5)
business day period will result in such deemed approval).
(d) Each of the Parties separately agrees to deposit its
portion of the Escrow Closing Requirement in escrow in good funds with Escrow
Agent at least one (1) business day prior to the Underlying Partnership's
acquisition of the Underlying Properties. Notwithstanding the foregoing,
each Party shall be permitted to deposit its portion of the Escrow Closing
Requirement into a separate escrow established with such Escrow Agent, which
escrow shall be solely for such Party's benefit until the closing of the
acquisition of the Underlying Properties, and shall be terminable solely by
such Party (provided that any such termination shall not relieve or release
such Party of its obligations hereunder, if any). Concurrently with such
Party's deposit of its portion of the Escrow Closing Requirement in escrow,
such Party shall enter
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<PAGE>
into escrow instructions with Escrow Agent authorizing Escrow Agent to
transfer such amounts into the escrow established for the purchase and sale
of the Underlying Properties upon the satisfaction of all conditions
precedent for the closing of such purchase and sale. Such escrow
instructions shall also provide that if the closing of the purchase and sale
of the Underlying Properties does not occur on or before the date set forth
in SECTION 10.1(h), the escrow shall terminate and all sums held therein
(together with any interest actually earned thereon) shall be immediately
returned to such Party (whereupon such Party shall have no further liability
or duty hereunder with respect to the making of such portion of the Escrow
Closing Requirement), unless Escrow Agent receives written instructions from
such Party to extend such escrow. Any interest earned on amounts placed in
escrow prior to such closing shall accrue for the benefit of the Party
depositing same. Each Party shall deposit into the Partnership accounts
designated by the Operating Committee prior to the acquisition of the
Underlying Properties such Party's share of the Initial Reserve Requirement.
The Parties shall meet and shall exchange invoices and other evidence of Due
Diligence, Formation and Acquisition Costs incurred by each of them or their
Affiliates in connection with the purchase and sale transaction. Once the
Parties have agreed upon all Due Diligence, Formation and Acquisition Costs,
the Party who incurred the lesser amount of Due Diligence, Formation and
Acquisition Costs shall promptly pay to the other Party an amount sufficient
to reimburse such other Party for the share of Due Diligence, Formation and
Acquisition Costs incurred by such other Party in excess of its combined 50%
share, it being the intention of the Parties that all Due Diligence,
Formation and Acquisition Costs be shared by the Parties equally.
(e) Notwithstanding anything else to the contrary contained
in this Agreement, if the Purchase Agreement is terminated or the purchase
and sale of the Underlying Properties fails to occur, each Party shall bear
fifty percent (50%) of the aggregate Due Diligence, Formation and Acquisition
Costs. If a Party has paid a disproportionate share of the aggregate Due
Diligence, Formation and Acquisition Costs, the other Party shall pay to such
Party the amount necessary such that each Party bears such costs in the
foregoing proportions, which payment shall be made within fifteen (15) days
after delivery of written notice, together with reasonably detailed
supporting documentation. Each Party agrees to provide to the other Party
such documentation as is reasonably necessary to substantiate such costs
incurred by such Party. Nothing contained in this SECTION 2.2(e) shall limit
or impair any right or remedy that a Party may have against any other Party
as a result of such other Party's breach of any obligation such other Party
may have under this Agreement to make its Initial Capital Contribution.
2.3 ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) Additional capital contributions ("ADDITIONAL CAPITAL
CONTRIBUTIONS") may be called for in accordance with this SECTION 2.3. The
Executive Committee may call for Additional Capital Contributions for any
reason. Additional Capital Contributions may also be called for by either
Party if necessary in order to fund Cash Flow Shortfalls or Budgeted Capital
Items and for no other reason without the approval of the Executive
Committee. Except as otherwise provided in SUBSECTION (b) below, Additional
Capital Contributions shall be made upon written demand by the requesting
Party upon the other Party, or by the Executive Committee upon the Parties,
as the case may be, from time to time, shall be
6
<PAGE>
payable in proportion to the Percentage Interests of the Parties, and shall
be contributed by the Parties within ten (10) business days of the receipt of
the notice hereinbefore described, which notice shall state the amount of
such Additional Capital Contribution required from each Party.
(b) Each Party agrees to make all Additional Capital
Contributions required to be made in accordance with this Agreement within
the ten (10) business day period described in SUBSECTION (a) above; PROVIDED
THAT, any Party may, during such ten (10) business day period, request that
the Partnership seek third party financing (in lieu of the Parties making
Additional Capital Contributions) to satisfy the Partnership's cash need. In
the event that either Party makes such request, the period of time within
which the Additional Capital Contributions must be made will be extended as
hereinafter provided, and the Partnership shall use its commercially
reasonable efforts to secure third party financing at commercially reasonable
rates to satisfy the Partnership's cash needs. If the Partnership is unable
to secure any such financing on terms that are mutually acceptable to and
approved by the Parties within thirty (30) days after any Party's request to
fund the required amounts via third party financing, the Additional Capital
Contributions shall immediately become due and payable within five (5)
business days after the expiration of such thirty (30) day period. If any
Party fails to make its share of the Additional Capital Contributions within
the said five (5) business day period, then the terms and provisions of
SUBSECTION (c) below shall apply.
(c) If a Party fails to make its share of any required
Additional Capital Contributions after the Partnership has been unable to
secure third party financing approved by both Parties pursuant to SUBSECTION
(b) above, then such Party (the "NONCONTRIBUTING PARTY") shall be a
Defaulting Party hereunder, and the other Party (a "CONTRIBUTING PARTY") who
has made its share of such Additional Capital Contributions may elect to give
notice to the Noncontributing Party of its default hereunder. If such
Noncontributing Party cures such default within the cure period set forth in
SECTION 5.14(a) hereof, it shall thereupon become a Contributing Party. If
such Noncontributing Party fails to cure such default within the cure period
set forth in SECTION 5.14(a) hereof, then the Contributing Party may, in its
sole discretion and without limitation on its other rights and remedies under
this Agreement, elect to exercise its rights under the following SUBSECTIONS
(d) or (e) of this SECTION 2.3 (subject to the terms and conditions set forth
in said SUBSECTIONS (d) and (e)).
(d) The Contributing Party shall have the right to withdraw
all of its Additional Capital Contribution immediately after the expiration
of the Noncontributing Party's cure period. Any Contributing Party that
withdraws its Additional Capital Contribution in compliance with this
provision shall not be deemed a Defaulting Party by reason of such withdrawal.
(e) The Contributing Party shall have the right to make a
Default Loan to the Partnership pursuant to SECTION 2.4 equal to 100% of the
Noncontributing Party's share of the Additional Capital Contributions that it
failed to contribute.
7
<PAGE>
2.4 DEFAULT LOANS.
(a) Without limitation on any other rights and remedies of
the Partners, if a Noncontributing Party shall have failed to timely pay its
portion of the Closing Funding Requirement as provided in SECTION 2.2 or to
make any Additional Capital Contributions as required pursuant to this
Agreement, and fails to cure such default after receiving notice thereof
within the applicable cure period provided under SECTION 5.14(a) hereof, the
Contributing Party may advance the amount of such delinquency to the
Partnership and direct the Partnership to pay the party or parties (which
party or parties may be a Partner (or Affiliate of a Partner) hereunder,
including the Contributing Party (or an Affiliate of the Contributing Party)
making such advance, if such amount is owed to such Person) to whom the same
is owed. Any such advance shall be treated as a loan (a "DEFAULT LOAN") by
such Contributing Party to the Partnership, payable on demand, and shall bear
interest at the Base Rate plus three percent (3%) per annum (compounded
monthly as of the last day of each calendar month) from the date of such loan
to the date of payment in full. In addition and without limitation on the
foregoing, the making of such Default Loan shall also create an obligation on
the part of the Noncontributing Party to contribute to the Partnership an
amount equal to the amount of the Default Loan (together with interest at the
aforesaid rate) made by the Contributing Party to the Partnership. As used
herein, the term "BASE RATE" shall mean the commercial loan rate of interest
announced publicly from time to time by Chase Manhattan Bank in New York, New
York as such bank's "prime rate", as from time to time in effect, such
interest rate to change monthly as of the first day of the calendar month
next succeeding the calendar month in which a change in Base Rate occurs;
PROVIDED THAT, if such rate is unavailable for any reason, then the parties
shall meet and agree upon a different bank's "prime rate" or "reference rate"
to serve as the Base Rate hereunder.
(b) The Contributing Party shall give written notice to the
Noncontributing Party of the making of any Default Loan, and the
Noncontributing Party may contribute the amount of such advance (plus all
accrued interest) to the Partnership at any time (and shall contribute such
amount at the time prescribed by SECTION 10.2 hereof). The Partnership shall
immediately pay such amounts received from the Noncontributing Party to the
Contributing Party. Such payments by the Noncontributing Party to the
Partnership and from the Partnership to the Contributing Party shall be
applied first against accrued interest and then against the principal of the
Default Loan until the repayment in full of principal and accrued interest on
the Default Loan. Notwithstanding any provision to the contrary herein, at
any time when a Default Loan shall be outstanding, all distributions of Net
Cash Flow by the Partnership from and after the making of such Default Loan
shall be made as follows: FIRST, all such distributions to which the
Contributing Party would normally (i.e., but for the effect and operation of
the provisions set forth in this SECTION 2.4) be entitled to receive under
SECTION 3.1 shall be calculated and made to such Contributing Party; SECOND,
the balance, if any, shall be paid by the Partnership directly to the
Contributing Party to be applied first against interest and then against
principal of the Default Loan; and THIRD, the balance, if any, shall be paid
to the Noncontributing Party in respect of the amounts to which it would
normally (i.e., but for the effect and operation of the provisions set forth
in this SECTION 2.4) be entitled to receive under SECTION 3.1 (and to the
extent such amounts, if any, paid to the Noncontributing Party are less than
the amounts which the Noncontributing Party would normally be entitled to
receive under SECTION 3.1, such deficiency
8
<PAGE>
shall forever be forfeited by the Noncontributing Party and it shall have no
right to recoup or recover the same out of future distributions hereunder).
Only upon the payment in full of the principal of and all accrued interest on
a Default Loan shall the Noncontributing Party's Event of Default with
respect to which the Default Loan was made be deemed cured and after such
cure, provided no other Event of Default of the Noncontributing Party then
exists, the Noncontributing Party's rights under this Agreement shall be
immediately reinstated.
(c) Upon request by the Contributing Party at any time from
the date of the Contributing Party's advance pursuant to SUBSECTION (a) above
until any such Default Loan shall be repaid in full by cash payment, the
Noncontributing Party shall, on its own behalf and/or on behalf of the
Partnership, execute any and all documents reasonably requested by the
Contributing Party, including, without limitation, promissory notes or such
other documentation as may be necessary to reflect and perfect the
Contributing Party's rights under this SECTION 2.4 (and for such purpose the
Noncontributing Party hereby appoints the Contributing Party its true and
lawful attorney-in-fact with full power of substitution to execute and
deliver such documents on behalf of such Noncontributing Party, which power
of attorney shall be deemed to be a power coupled with an interest which
cannot be revoked by death, dissolution or otherwise).
2.5 OTHER MATTERS.
(a) Except as otherwise provided in this Agreement, no Party
shall demand or receive a return of its Capital Contributions or withdraw
from the Partnership without the consent of all Partners. Under circumstances
requiring a return of any Capital Contributions, no Partner shall have the
right to receive property other than cash except as may be specifically
provided herein.
(b) No Partner shall receive any interest, salary, or draw
with respect to its Capital Contributions or its Capital Account or for
services rendered on behalf of the Partnership or otherwise in its capacity
as Partner, except as otherwise provided in this Agreement. No Partner shall
be entitled to interest on its Capital Contributions or on such Partner's
Capital Account.
2.6 NO THIRD PARTY BENEFICIARY. No creditor or other third party
having dealings with the Partnership shall have the right to enforce the
right or obligation of any Partner to make Capital Contributions or loans or
to pursue any other right or remedy hereunder or at law or in equity, it
being understood and agreed that the provisions of this Agreement shall be
solely for the benefit of, and may be enforced solely by, the parties hereto
and their respective successors and assigns. None of the rights or
obligations of the Partners herein set forth to make Capital Contributions to
the Partnership shall be deemed asset of the Partnership for any purpose by
any creditor or other third party, nor may such rights or obligations be
sold, transferred or assigned by the Partnership or pledged or encumbered by
the Partnership to secure any debt or other obligation of the Partnership or
of any of the Partners. Without limiting the generality of the foregoing, a
deficit capital account of a Partner shall not be deemed to be a liability of
such Partner nor an asset or property of the Partnership.
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<PAGE>
2.7 THIRD PARTY FINANCING. Except as otherwise provided herein to
the contrary, the Partnership may obtain, on its own behalf, upon the
approval of the Executive Committee, all additional money and funds
necessary, at any time, to develop, construct, acquire and operate the
Partnership Assets. No Partner or Affiliate of a Partner shall be required to
guaranty or make any other financial commitment with respect to any debt or
other obligation of the Partnership. The Operating Committee shall use
commercially reasonable efforts to obtain, on behalf of the Partnership, all
additional money and funds necessary, at any time, to conduct the business of
the Partnership that cannot be funded through the resources of the
Partnership.
ARTICLE 3
DISTRIBUTIONS
3.1 DISTRIBUTIONS. As soon as practicable after the approval by
the Executive Committee of the quarterly statements of Net Cash Flow prepared
and delivered pursuant to SECTION 4.3, the Partnership shall distribute such
portion of the Net Cash Flow of the Partnership for the quarterly period
covered by each such statement as the Executive Committee or Operating
Committee may elect to distribute (which shall not, in any event, equal less
than ninety percent (90%) of the total Funds From Operations for such
quarterly period), to the Partners pro rata in accordance with their
respective Percentage Interests, subject to the alternative allocations set
forth in SECTION 2.4(b) in the event that a Default Loan is then outstanding.
Notwithstanding the foregoing, the Executive Committee shall approve for each
period a distribution sufficient to satisfy the requirements of SECTION
5.6(f) hereof.
3.2 DISTRIBUTIONS AFTER DISSOLUTION. Notwithstanding the
provisions of SECTION 3.1 to the contrary, all distributions of Net Cash Flow
to be made from and after the dissolution of the Partnership shall be made in
accordance with the provisions of ARTICLE 10.
3.3 TIMING OF DISTRIBUTIONS AMONG PARTNERS. Except as provided in
SECTION 6.3, all distributions of cash shall be distributed to the Persons
who are Partners on the day such distribution is made.
ARTICLE 4
ALLOCATIONS AND OTHER TAX AND ACCOUNTING MATTERS
4.1 ALLOCATIONS. The Net Income, Net Loss and/or other Tax Items
of the Partnership shall be allocated pursuant to the provisions of the
Allocations Exhibit.
4.2 ACCOUNTING, BOOKS AND RECORDS. The Partnership shall maintain
or cause to be maintained at its Principal Office (with full and complete
copies thereof to be delivered to and maintained at the offices of the Simon
DeBartolo Group at 115 West Washington Street, Indianapolis, Indiana 46204)
separate books of account for the Partnership which shall show a
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true and accurate record of all costs and expenses incurred, all charges
made, all credits made and received, and all income derived in connection
with the operation of the Partnership business in accordance with generally
accepted accounting principles consistently applied and, to the extent
inconsistent therewith, in accordance with this Agreement. The Partnership
shall use the accrual method of accounting in preparation of its annual
reports and for tax purposes and shall keep its book accordingly. Each
Partner shall, at its sole expense, have the right, at any time, without
notice to any other Partner, to examine, copy, and audit the Partnership's
books and records during normal business hours.
4.3 REPORTS.
(a) IN GENERAL. The Operating Committee shall be responsible
for the preparation of financial reports of the Partnership and the
coordination of financial matters of the Partnership with the Accountants.
(b) REPORTS. Within sixty (60) days after the end of each
Fiscal Year and within thirty (30) days after the end of each of the first
three (3) fiscal quarters, and within thirty (30) days after the end of each
calendar month, the Operating Committee shall cause each Executive Committee
Member to be furnished with a copy of the balance sheet of the Partnership as
of the last day of the applicable period, and a statement of income or loss
for the Partnership for such period. In addition, concurrently with the
delivery of the quarterly and year-end financial statements referred to in
the preceding sentence, the Operating Committee shall cause each Executive
Committee Member to be furnished with a copy of a statement setting forth the
calculation of the Net Cash Flow (if any) for such prior quarterly period,
and setting forth the calculation of all amounts to be distributed to the
Partners pursuant to SECTION 3.1 or SECTION 10.2, as the case may be. Annual
statements shall also include a statement of the Partners' Capital Accounts
and changes therein for such Fiscal Year. Annual statements shall be audited
by the Accountants, and shall be in such form as shall enable the Partners to
comply with all reporting requirements applicable to either of them or their
Affiliates under the Securities Exchange Act of 1934, as amended. All
quarterly and annual statements shall be subject to the approval of the
Executive Committee, and no action shall be taken with respect thereto until
such approval has been given. The Operating Committee shall also cause to be
prepared such reports and/or information as are necessary for the Partners
(or any Persons who directly or indirectly own interests in the Partners) to
determine their qualification as a REIT and their compliance with all
requirements to qualify as a REIT or as may be required by any lender of the
Partnership.
4.4 TAX RETURNS; INFORMATION. The Operating Committee shall
arrange for the preparation and timely filing of all income and other tax
returns of the Partnership. Within ninety (90) days after the end of each
Fiscal Year, the Operating Committee shall cause the Accountants to prepare
the Partnership's tax returns for approval and execution by the Operating
Committee. The Operating Committee shall furnish to each Partner a copy of
each approved return, together with any schedules or other information which
each Partner may require in connection with such Partner's own tax affairs.
The Partnership shall be treated and shall file
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its tax returns as a partnership for federal, state and municipal income tax
and other tax purposes. Upon request of any Partner, any elections made
pursuant to this Agreement under the provisions of the Code or similar
provisions hereafter enacted shall be evidenced by appropriate filings with
the Internal Revenue Service on behalf of the Partnership.
4.5 SPECIAL BASIS ADJUSTMENT. In connection with any Transfer of
a Partnership Interest permitted under ARTICLE 6, the Operating Committee
shall cause the Partnership, at the written request of the transferor or the
Transferee, but only upon the approval of the General Partners, on behalf of
the Partnership and at the time and in the manner provided in Regulations
Section 1.754-1(b), to make an election to adjust the basis of the
Partnership's property in the manner provided in Sections 734(b) and 743(b)
of the Code, and the Transferee shall pay all costs incurred by the
Partnership in connection therewith, including reasonable attorneys' and
accountants' fees.
4.6 TAX MATTERS PARTNER. MSPE is specially authorized and
appointed to act as the "Tax Matters Partner" under the Code and in any
similar capacity under state or local law; PROVIDED, HOWEVER, that it shall
exercise its authority in such capacity subject to all applicable terms and
limitations set forth in this Agreement. Notwithstanding the foregoing, the
Tax Matters Partner shall not, without the prior written approval of the
other General Partner, (i) make any tax election on behalf of the
Partnership, (ii) take any action with respect to any federal, state or local
contest of any partnership item (as defined in Section 6231(a)(7) of the Code
(or any successor thereto) (and comparable provisions of state and local
income tax laws) of the Partnership, or (iii) take any action with respect to
any audit of any federal, state or local income tax return or income tax
report filed by or on behalf of the Partnership.
ARTICLE 5
MANAGEMENT
5.1 EXECUTIVE COMMITTEE. The Partnership shall at all times have
an executive committee (the "EXECUTIVE COMMITTEE") composed of two
individuals (the "EXECUTIVE COMMITTEE MEMBERS") who shall vote on Major
Decisions and oversee the performance of the Operating Committee.
(a) MEMBERSHIP AND VOTING.
(i) MEMBERSHIP. The Executive Committee will consist of
two (2) Executive Committee Members, with one (1) Executive Committee
Member appointed by each General Partner. Concurrently with the execution
and delivery of this Agreement, the General Partners have notified one
another in writing of their respective initial appointed Executive
Committee Member. Each General Partner may, at any time, appoint an
alternate Executive Committee Member by prior written notice to the other
General Partner's appointed Executive Committee Member and such alternates
will have all the powers, authority and duties of a regular Executive
Committee Member in the absence
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or inability of a regular Executive Committee Member to serve. In no
event, however, shall the other Executive Committee Member be under any
obligation to make inquiries as to, or verify or confirm, any such
absence or inability to serve of a regular Executive Committee Member,
it being understood and agreed that the Executive Committee Members
shall be entitled to rely upon and accept an alternate Executive
Committee Member's assertion of the absence or inability to serve of the
regular Executive Committee Member in question. Each General Partner
shall cause its appointed Executive Committee Member and alternate
Executive Committee Member to comply with the terms of this Agreement.
Each General Partner will have the power to remove its Executive
Committee Member or alternate Executive Committee Member appointed by it
by written notice to the other General Partner's Executive Committee
Member. Vacancies on the Executive Committee will be filled by
appointment by the General Partner that appointed the Executive
Committee Member previously holding the position that is then vacant.
The General Partners may mutually agree to increase or decrease the size
of the Executive Committee proportionately, from time to time. Notices
to an Executive Committee Member shall be delivered to such Person's
attention at the address set forth in SECTION 2.1 for the General
Partner that appointed such Executive Committee Member, and in the
manner prescribed in SECTION 11.1. No appointment or removal by a
General Partner of an Executive Committee Member or alternate Executive
Committee Member shall be effective until written notice of such action
is received or deemed received pursuant to SECTION 11.1 by the Executive
Committee Member of the other General Partner. Each General Partner,
its Limited Partner affiliate, and its respective Executive Committee
Member and alternate Executive Committee Member, when dealing with the
other General Partner's respective Executive Committee Member and
alternate Executive Committee Member, (i) shall be entitled to rely upon
and accept the written act, approval, consent or vote of each of such
other General Partner's then-appointed Executive Committee Member and
alternate Executive Committee Member, and (ii) shall be under no
obligation to make any inquiries in order to verify or confirm any of
such written acts, approvals, consents or votes.
(ii) VOTING. Each Executive Committee Member shall have one
vote on any decision of the Executive Committee. An Executive Committee
Member may give a written proxy to another Executive Committee Member to
vote on such Executive Committee Member's behalf in such Executive
Committee Member's absence. Except as expressly provided to the contrary
in this Agreement, all actions, decisions, capital calls,
determinations, waivers, approvals and consents to be taken or given by
the Executive Committee must be unanimously approved by the Executive
Committee Members (whether or not present at the meeting at which such
vote occurs).
(b) MEETINGS OF THE EXECUTIVE COMMITTEE; TIME AND PLACE.
Unless otherwise agreed by the Executive Committee, regular meetings of the
Executive Committee shall be held no less often than quarterly at such time
and at such place as the Executive Committee shall determine. At such regular
meetings, the Operating Committee shall report on the financial performance
and condition of the Partnership on a year-to-date basis (including cash
flows, reserves, outstanding loans, and compliance efforts), progress on
capital projects, material
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contracts entered into, material litigation, marketing and leasing efforts,
deviations from any Budget and such other matters relevant to the management
and operation of the Partnership and the Properties. Special meetings of the
Executive Committee shall be held on the call of any Executive Committee
Member; provided that at least three (3) business days' notice is given to
all Executive Committee Members (unless written waiver of this requirement by
all Executive Committee Members is obtained). A quorum for any Executive
Committee meeting shall consist of not less than two (2) Executive Committee
Members (one appointed by each General Partner) present either in person or
by proxy. The Executive Committee may make use of telephones and other
electronic devices to hold meetings; provided that the Executive Committee
Members participating in such meeting can hear one another. The Executive
Committee may act without a meeting if the action taken is reduced to writing
and approved by the Executive Committee in accordance with the other voting
provisions of this Agreement. Written minutes shall be taken at each meeting
of the Executive Committee. However, any action taken or matter agreed upon
by the Executive Committee shall be deemed final, whether or not written
minutes are ever prepared or finalized.
(c) MAJOR DECISIONS. No action shall be taken, no sum shall
be expended and no obligation shall be incurred by the Operating Committee or
any property manager with respect to any matter affecting the Partnership
which is within the scope of a Major Decision unless such Major Decision
shall have been approved by the Executive Committee in advance in writing. A
"MAJOR DECISION" shall mean any decision:
(i) to sell, assign, transfer, exchange, grant easements
over, or otherwise convey or dispose of, any of the Partnership Properties,
or any portion thereof or any material interest therein, or to lease or
license the Partnership's entire interest in any of the Partnership
Properties;
(ii) to acquire any Partnership Property or any option or
interest therein, and to appoint a property manager with respect to each
such Partnership Property;
(iii) to approve or make any change to any Budget or
marketing plan for the Partnership or any of the Partnership Properties;
(iv) to amend this Agreement;
(v) to borrow money or to apply for, execute, grant or
modify any mortgage, pledge, deed of trust, financing statement,
encumbrance or other hypothecation or security agreement affecting the
Partnership Assets or any portion thereof or any interest therein, except
as otherwise may be provided in an approved Budget;
(vi) to approve proposals submitted to, or agreements
entered into, or to authorize or give any consent with respect to any
matter relating to zoning, rezoning variances, compliance with
environmental laws, subdivision, modification of
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development rights or other land use matters which affect the
Partnership or any of the Partnership Properties;
(vii) to select and retain the Accountants;
(viii) to approve the Partnership's tax returns, or to
make proposals to or to conduct any actions, litigation or other activities
with federal or state taxing authorities;
(ix) to change or permit to be changed in any substantial
way the accounting process and procedures employed in keeping the books of
account or preparing financial statements with respect to the operation or
management of the Partnership pursuant to this Agreement;
(x) to compromise or settle any claim for insurance
proceeds, or any claim for payment of awards or damages arising out of the
exercise of eminent domain by any public or governmental authority;
(xi) to make, execute or deliver on behalf of the
Partnership any assignment for the benefit of creditors;
(xii) to dissolve, terminate or liquidate the
Partnership, or to petition a court for the dissolution, termination or
liquidation of the Partnership, except in accordance with this Agreement;
(xiii) to cause the Partnership, or any of the
Partnership Properties to be subject to the authority of any trustee,
custodian or receiver or to be subject to any proceeding for bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt, relief of
debtors, or similar proceedings;
(xiv) to obligate the Partnership as a surety,
guarantor, indemnitor or accommodation party to any obligation;
(xv) to enter into, terminate, accept the surrender of,
modify, amend, supplement, or give any material approval, consent or waiver
on behalf of the Partnership under the Purchase Agreement or any of the
loan documents relating to the Existing Financing; or
(xvi) to take any other action or decision that this
Agreement provides may only be taken or made by the Executive Committee.
5.2 NO INDIVIDUAL AUTHORITY. Except as otherwise expressly
provided in this Agreement, no Partner, acting alone, shall have any
authority to act for, or undertake or assume any obligation or responsibility
on behalf of, any other Partner or the Partnership.
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5.3 OPERATING COMMITTEE. Unless otherwise agreed to by the
General Partners, the management of the Partnership, subject to the
restrictions on its authority set forth in SECTION 5.1, shall be vested in
the operating committee (the "OPERATING COMMITTEE"). The Operating Committee
shall be composed of two individuals (the "OPERATING COMMITTEE MEMBERS") who
shall vote on all management issues relating to the business and operations
of the Partnership.
(a) MEMBERSHIP AND VOTING.
(i) MEMBERSHIP. The Operating Committee will consist of
two (2) Operating Committee Members, with one (1) Operating Committee
Member appointed by each General Partner. Concurrently with the execution
and delivery of this Agreement, the General Partners have notified one
another in writing of their respective initial appointed Operating
Committee Member. Each General Partner may, at any time, appoint one of
its employees as an alternate Operating Committee Member by prior written
notice to the other General Partner's appointed Operating Committee Member
and such alternates will have all the powers, authority and duties of a
regular Operating Committee Member in the absence or inability of a regular
Operating Committee Member to serve. In no event, however, shall the other
Operating Committee Member be under any obligation to make inquiries as to,
or verify or confirm, any such absence or inability to serve of a regular
Operating Committee Member, it being understood and agreed that the
Operating Committee Members shall be entitled to rely upon and accept an
alternate Operating Committee Member's assertion of the absence or
inability to serve of the regular Operating Committee Member in question.
Each General Partner shall cause its appointed Operating Committee Member
and alternate Operating Committee Member to comply with the terms of this
Agreement. Each General Partner will have the power to remove its
Operating Committee Member or alternate Operating Committee Member
appointed by it by written notice to the other General Partner's Operating
Committee Member. Vacancies on the Operating Committee will be filled by
appointment by the General Partner that appointed the Operating Committee
Member previously holding the position that is then vacant. The General
Partners may mutually agree to increase or decrease the size of the
Operating Committee proportionately, from time to time. Notices to an
Operating Committee Member shall be delivered to such Person's attention at
the address set forth in SECTION 2.1 for the General Partner that appointed
such Operating Committee Member, and in the manner prescribed in SECTION
11.1. No appointment or removal by a General Partner of an Operating
Committee Member or alternate Operating Committee Member shall be effective
until written notice of such action is received or deemed received pursuant
to SECTION 11.1 by the Operating Committee Member of the other General
Partner. Each General Partner, its Limited Partner affiliate, and its
respective Operating Committee Member and alternate Operating Committee
Member, when dealing with the other General Partner's respective Operating
Committee Member and alternate Operating Committee Member, (i) shall be
entitled to rely upon and accept the written act, approval, consent or vote
of each of such other General Partner's then-appointed Operating Committee
Member and alternate Operating Committee Member, and (ii) shall
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be under no obligation to make any inquiries in order to verify or confirm
any of such written acts, approvals, consents or votes.
(ii) VOTING. Each Operating Committee Member shall have
one vote on any decision of the Operating Committee. An Operating
Committee Member may give a written proxy to another Operating Committee
Member or any Partner's employee to vote on such Operating Committee
Member's behalf in such Operating Committee Member's absence. Except as
expressly provided to the contrary in this Agreement, all actions,
decisions, capital calls, determinations, waivers, approvals and consents
to be taken or given by the Operating Committee must be unanimously
approved by the Operating Committee Members (whether or not present at the
meeting at which such vote occurs).
(b) REPORTS AND MEETINGS OF THE OPERATING COMMITTEE; TIME AND
PLACE. The Operating Committee shall report to the Executive Committee on
activities undertaken by the Operating Committee, as required by the Executive
Committee and this Agreement. Unless otherwise agreed by the Operating
Committee, regular meetings of the Operating Committee shall be held monthly at
such time and at such place as the Operating Committee shall determine.
Special meetings of the Operating Committee shall be held on the call of any
Operating Committee Member; provided that at least three (3) business days'
notice is given to all Operating Committee Members (unless written waiver of
this requirement by all Operating Committee Members is obtained). A quorum for
any Operating Committee meeting shall consist of not less than two (2)
Operating Committee Members (one appointed by each General Partner) present
either in person or by proxy. The Operating Committee may make use of
telephones and other electronic devices to hold meetings; provided that the
Operating Committee Members participating in such meeting can hear one another.
The Operating Committee may act without a meeting if the action taken is
reduced to writing and approved by the Operating Committee in accordance with
the other voting provisions of this Agreement. Written minutes shall be taken
at each meeting of the Operating Committee. However, any action taken or
matter agreed upon by the Operating Committee shall be deemed final, whether or
not written minutes are ever prepared or finalized. Operating Committee
meetings may be attended by persons other than the Operating Committee Members
(including other employees of the Partners and their Affiliates).
(c) DUTIES OF THE OPERATING COMMITTEE. The Operating Committee
shall be generally responsible for overseeing and managing the day-to-day
business, operations and affairs of the Partnership and carrying out the duties
delegated to it by the Executive Committee, and shall have fiduciary
responsibility for the safekeeping and use of all funds and assets of the
Partnership, whether or not in its immediate possession or control. The
Operating Committee may, in carrying out its duties, defend against lawsuits or
other judicial or administrative proceedings brought against the Partnership,
provided that it promptly notifies the Executive Committee of such action. The
funds of the Partnership shall not be commingled with the funds of any other
Person, and the Operating Committee shall not employ, or permit any other
Person to employ, such funds in any manner except for the benefit of the
Partnership. The bank accounts of the Partnership shall be maintained in such
banking institutions as are approved
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by the Operating Committee and withdrawals shall be made only in the regular
course of Partnership business and as otherwise authorized in this Agreement on
such signature or signatures as the Operating Committee may determine. The
Operating Committee shall also have the duties imposed upon it elsewhere in
this Agreement. The Operating Committee shall devote sufficient time, effort
and managerial resources to the business of the Partnership as is reasonably
required to fulfill its obligations hereunder.
5.4 WARRANTED RELIANCE BY EXECUTIVE COMMITTEE MEMBERS AND OPERATING
COMMITTEE MEMBERS ON OTHERS. In exercising their authority and performing
their duties under this Agreement, the Executive Committee Members and the
Operating Committee Members shall be entitled to rely on information, opinions,
reports, or statements of the following persons or groups unless they have
actual knowledge concerning the matter in question that would cause such
reliance to be unwarranted:
(a) one or more agents of the Partnership whom the Executive
Committee Member or Operating Committee Member, as the case may be, reasonably
believes to be reliable and competent in the matters presented; and
(b) any attorney, public accountant, or other person as to
matters which the Executive Committee Member or Operating Committee Member, as
the case may be, reasonably believes to be within such person's professional or
expert competence.
5.5 INTENTIONALLY OMITTED.
5.6 REIT STATUS. The Partners hereby acknowledge that Macerich and
SDG (and/or certain Persons directly or indirectly owning interests in Macerich
or SDG) are and intend to qualify at all times as a REIT, and that each such
Partner's or other Person's ability to qualify as such will depend principally
upon the nature of the Partnership's operations. Accordingly, the
Partnership's operations shall be conducted at all times in a manner that will
enable each of Macerich, SDG and each Person owning, directly or indirectly,
interests in either Macerich or SDG to satisfy all requirements for REIT status
under Sections 856 through 860 of the Code and the regulations promulgated
thereunder to the extent possible. In furtherance of the foregoing (and not in
limitation thereof), notwithstanding any other provision herein to the
contrary, the Partnership shall conduct its operations in accordance with the
following provisions at all times:
(a) The Partnership shall not render any services to any lessee
or sublessee or any customer thereof, either directly or through an
"independent contractor" within the meaning of Section 856(d)(3) of the Code,
if the rendering of such services shall cause all or any part of the rents
received by the Partnership to fail to qualify as "rents from real property"
within the meaning of Section 856(d) of the Code;
(b) The Partnership shall not own, directly or indirectly
(taking into account the attribution rules referred to in Section 856(d)(5) of
the Code), in the aggregate 10% or more of the total number of shares of all
classes of stock, 10% or more of the voting power
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of all classes of voting stock or 10% or more of the assets or net profits of
any lessee or sublessee of all or any part of any of the Properties or any
Partnership Property;
(c) No lease or sublease of any space at the Properties shall
provide for any rent based in whole or in part on the "income or profits"
within the meaning of Section 856(d)(2)(A) of the Code derived by any lessee or
sublessee;
(d) The Partnership shall not own more than 10% of the
outstanding voting securities of any one issuer (as determined for purposes of
Section 856(c)(5)(B) of the Code);
(e) Neither the Partnership nor any Partner shall take any action
(or fail to take any action permitted under this Agreement) that would
otherwise cause the Partnership's and Underlying Partnership's gross income to
consist of more than one percent (1%) of income not described in Section
856(c)(2) of the Code or more than ten percent (10%) of income not described in
Section 856(c)(3) of the Code, or cause any significant part of the Partnership
Assets to consist of assets other than "real estate assets" within the meaning
of Section 856(c)(6)(B) of the Code;
(f) The Partnership shall distribute to the Partners during each
Fiscal Year an amount of cash such that the portion so distributed will equal
or exceed 100% of the amount of Partnership taxable income, if any, to be
allocated to the Partners with respect to such Fiscal Year distributed at the
times required to prevent the imposition of an excise tax under Section 4981 of
the Code; PROVIDED, HOWEVER, that if each such Partner's distributable share of
any Net Cash Flow of the Partnership and its distributable share of any funds
maintained in the Partnership reserves are insufficient to meet the aforesaid
distribution requirement with respect to such Partner, then the Partnership
shall have satisfied the foregoing distribution requirement with respect to
such Partner upon distributing to it such distributable share of Net Cash Flow
and funds maintained in the Partnership reserves. In no event shall the
Partnership be required to borrow funds, or any Partner be required to
contribute funds to the Partnership, in order to permit the Partnership to
satisfy the foregoing distribution requirement. In no event shall the
foregoing provisions of this SUBSECTION (f) adversely affect the allocation of,
and Percentage Interest in, Net Cash Flow of any other Partner.
(g) The Partnership shall not engage in any "prohibited
transactions" within the meaning of Section 857(b)(6)(B)(iii) of the Code.
The Partners hereby acknowledge that the foregoing are the current guidelines
applicable to the qualification of REITs. If and to the extent that any of the
requirements to qualify for REIT status shall be changed, altered, modified or
added to, then such changes, alterations, modifications or additions, as
applicable, shall be deemed incorporated herein, and this SECTION 5.6 shall be
deemed to be amended and modified as necessary to incorporate such changed,
altered, modified or added REIT requirements.
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5.7 BUDGETS.
(a) PREPARATION AND APPROVAL. As soon as reasonably possible
hereafter, the Operating Committee shall prepare (or cause to be prepared) and
submit to the Executive Committee for approval an interim operating budget
(each an "INTERIM OPERATING BUDGET") for the management, leasing and operation
of each Partnership Property through the end of Fiscal Year 1998. At least
forty-five (45) days prior to the beginning of each Fiscal Year, the Operating
Committee shall prepare and submit to the Executive Committee for approval a
proposed budget (each an "ANNUAL BUDGET") for the management, leasing and
operation of each Partnership Property for the next Fiscal Year. The Interim
Operating Budgets and Annual Operating Budgets shall sometimes hereinafter be
collectively referred to individually as a "BUDGET" and collectively as the
"BUDGETS". The Executive Committee may approve or disapprove the entire Budget
or certain cost items or categories of each Budget. If the Executive Committee
disapproves any Budget or any cost item or category thereof, the Operating
Committee shall meet within five (5) business days after the Executive
Committee's disapproval and seek in good faith to agree upon an acceptable
revision to such disapproved Budget(s) or cost item or category, as the case
may be. Once revised, each such disapproved Budget shall be resubmitted to the
Executive Committee for approval and such process shall continue until the
Executive Committee has approved a Budget for each Partnership Property for the
Fiscal Year in question. Such Budgets will be prepared by the Operating
Committee and approved by the Executive Committee in good faith based upon
estimates taking into account the most recent information then available to the
Operating Committee. The Operating Committee shall update each Budget no less
frequently than quarterly, and shall promptly submit any proposed revisions to
such Budgets resulting from such updates to the Executive Committee for
approval in the manner provided above for approval of the original Budgets.
(b) OPERATIONS. The approved Budget for each Partnership
Property shall be submitted to the property manager for such Partnership
Property for implementation. The Operating Committee and property managers
shall manage and operate each Property and each Partnership Property consistent
with the approved Budget therefor (as may be updated from time to time in
accordance with SUBSECTION (a) above). If the Executive Committee has not
approved a Budget or any cost item or category of any Budget prior to the
beginning of the next Fiscal Year, the Operating Committee shall substitute the
Budget or the actual cost of such disapproved item or category incurred by the
Partnership during the preceding Fiscal Year, if any; PROVIDED THAT, if any
such item or category of expense is in the nature of utility expenses, personal
or real property taxes, insurance expenses to be incurred in accordance with
SECTION 5.8 hereof, debt service due and payable under any loan of the
Partnership, or any payments that the Partnership is required to make by law,
then the Operating Committee shall substitute the reasonably anticipated costs
of such items or categories of expense (based on the previous year's bills
therefor, if available).
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5.8 INSURANCE.
(a) COVERAGE. The Operating Committee shall procure and
maintain, or cause to be procured and maintained, insurance sufficient to enable
the Partnership to comply with applicable laws, regulations, and contractual
requirements (including the requirements of Persons providing financing to the
Partnership), including as a minimum, the following:
(i) Comprehensive general liability insurance covering
each Partnership Property in the amounts and upon terms customary for
businesses and assets comparable to such Partnership Property, and
otherwise satisfactory to the Executive Committee;
(ii) With respect to completed improvements, fire and
extended coverage insurance, and, whenever construction of any improvement
is taking place, builders' risk insurance, in each case, on a replacement
cost basis of not less than one hundred percent (100%) of the full
replacement cost of such improvements;
(iii) Worker's compensation insurance as required by law
including employer's liability;
(iv) Fidelity insurance in an amount to protect against
losses due to employee dishonesty, theft by any other Partnership
contractor, and mysterious disappearances; and
(v) Such additional insurance against other risks of loss
to the Partnership Properties as, from time to time, may be required by any
lender making a loan to the Partnership or which may be required by law.
The Operating Committee shall furnish the Executive Committee, no
less frequently than annually, a schedule of such insurance and copies of
certificates evidencing the same. The Executive Committee must consent to the
establishment or modification of any self insurance or deductibles which
exposes the Partnership to uninsured liability. Each Partner shall be named as
an additional insured to the Partnership's comprehensive general liability
insurance policies.
5.9 UNANIMOUS CONSENT. Notwithstanding anything to the contrary in
this Agreement, the Partnership may take any action contemplated under this
Agreement if approved by the unanimous consent of the General Partners.
5.10 INDEMNIFICATION.
(a) The Partnership shall, to the fullest extent permitted by
law, indemnify any and all Indemnitees from and against any and all losses,
claims, damages, liabilities, costs and expenses (including attorneys' fees and
costs), judgments, fines, settlements, and other amounts arising from any and
all claims, demands, actions, suits or proceedings, civil,
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criminal, administrative or investigative, that relate to the operations of the
Partnership as set forth in this Agreement in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it
is established that: (i) the act or omission of the Indemnitee was material to
the matter giving rise to the claim, demand, action, suit or proceeding and
either was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the Indemnitee actually received an improper personal benefit
in money, property or services; or (iii) in the case of any criminal
proceeding, the Indemnitee had reasonable cause to believe that the act or
omission was unlawful. Any indemnification pursuant to this SECTION 5.10 shall
be made only out of Partnership Assets, and no Partner shall be required to
contribute or advance funds to the Partnership to enable the Partnership to
satisfy its obligations under this SECTION 5.10.
(b) Reasonable expenses incurred by an Indemnitee who is a party
to a proceeding shall be paid or reimbursed by the Partnership in advance of
the final disposition of the proceeding upon receipt by the Partnership of (i)
a written affirmation by the Indemnitee of the Indemnitee's good faith belief
that it is entitled to indemnification by the Partnership pursuant to this
SECTION 5.10(b) with respect to such expenses and proceeding, and (ii) a
written undertaking by or on behalf of the Indemnitee, to and in favor of the
Partnership, wherein the Indemnitee agrees to repay the amount if it shall
ultimately be adjudged not to have been entitled to indemnification under this
SECTION 5.10.
(c) The indemnification provided by this SECTION 5.10 shall be
in addition to any other rights to which an Indemnitee or any other Person may
be entitled under any agreement, as a matter of law or otherwise.
(d) The Partnership may purchase and maintain insurance, on
behalf of the Indemnitees and such other Persons as the Partners shall mutually
determine, against any liability that may be asserted against or expenses that
may be incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the obligation to indemnify
such Person against such liability under the provisions of this Agreement.
(e) The provisions of this SECTION 5.10 are for the benefit of
the Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons.
5.11 COMPENSATION AND REIMBURSEMENT. The Partnership shall not pay a
Partner or an Affiliate of a Partner any fees or other compensation except as
set forth in this Agreement or except as otherwise agreed by the Executive
Committee. The Partnership will reimburse a Partner and its Affiliates for all
reasonable actual out-of-pocket third party expenses incurred in connection
with the carrying out of the duties set forth in this Agreement imposed upon
such Partner or its Affiliates, provided such expenses are approved by the
Executive Committee or are reflected in a Budget that has been approved by the
Executive Committee, in each case upon the presentation of reasonable
supporting documentation of the amount and purpose of such expenses.
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5.12 NO EMPLOYEES. The Partnership shall not have employees. Each
Partner shall be solely responsible for all wages, benefits, insurance and
payroll taxes with respect to any of its respective Executive Committee
Members, Operating Committee Members or other employees.
5.13 PERSONAL SERVICES CONTRACT. The Partners acknowledge and agree
that except for their respective economic interests in the Partnership, each
Partner's respective rights, powers and privileges as a Partner hereunder shall
be deemed to be in respect of a personal services contract, and not an
executory contract, under the United States Bankruptcy Code and any state
insolvency or bankruptcy laws. Without limitation on the foregoing, each
Partner confirms and agrees that one of the major factors that caused the
Partners to form this Partnership and to enter into this Agreement was the
personal trust and confidence each Partner reposed in the personal services,
management skills and business experience of the other Partner. The Partners
do not desire to, and agree that they shall not be required to, accept the
exercise of management or control rights (including rights to give approvals or
consents under this Agreement) by any party other than a Partner. Accordingly,
in the event of a Bankruptcy of a General Partner or the withdrawal of a
General Partner, such General Partner's Operating Committee Members and
Executive Committee Members shall immediately be terminated and deemed removed
from the Operating Committee and Executive Committee, respectively, and such
General Partner shall have no right whatsoever to participate in the management
or control of the Partnership; PROVIDED, HOWEVER, that such General Partner
shall be entitled to all of the rights and benefits of an assignee of a
partnership interest under the Act.
5.14 Defaults and Remedies.
(a) EVENTS OF DEFAULT. The occurrence of any of the following
events by or with respect to a Partner of one Party or such Party (the
"DEFAULTING PARTY"; and the other Party shall be referred to herein as a
"NON-DEFAULTING PARTY," provided that neither a Partner of the other Party nor
the other Party itself is already a Defaulting Party) shall be a default
hereunder and if not cured within the applicable notice and cure period
provided below, if any, such default shall constitute an "EVENT OF DEFAULT"
hereunder:
(i) The failure of a Partner or Party to make any payment
as required by this Agreement that is not cured within five (5) business
days of written notice to such Partner or Party;
(ii) The failure of a Partner or Party to perform any of
its other obligations under this Agreement or the breach by a Partner or
Party of any of the terms of this Agreement, and a continuation of such
failure or breach for more than thirty (30) days after notice by a
Non-defaulting Party to the Defaulting Partner that such Defaulting Party
has failed to perform any of its obligations under, or has breached, this
Agreement; provided that if such failure or breach is of the nature that it
can be cured but cannot reasonably be cured within such thirty (30) day
period, such period shall be extended for up to an additional sixty (60)
days so long as the Defaulting Party in good faith commences all reasonable
curative efforts within ten (10) days of its receipt of such notice
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from the Non-defaulting Party and diligently and expeditiously continues
its curative efforts to completion; or
(iii) The occurrence of a Bankruptcy with respect to a
Partner or the withdrawal by a Partner.
(b) REMEDIES. Upon the occurrence of any Event of Default, the
Non-defaulting Party may elect to do one or more of the following:
(i) Exercise its rights under SECTION 5.14(c);
(ii) Dissolve the Partnership and commence to liquidate
its assets as provided in ARTICLE 10;
(iii) Enforce any covenant by the Defaulting Party to
advance money or to take or forbear from any other action hereunder; or
(iv) Pursue any other remedy permitted by this Agreement
or at law or in equity.
(c) CHANGE OF GOVERNANCE OF PARTNERSHIP. In addition to any
other rights or remedies which a Non-defaulting Party may have under this
Agreement or under applicable laws with respect to an Event of Default, a
Non-defaulting Party shall have the option to exercise the rights set forth
below in this SECTION 5.14(c) in the event of the occurrence of any Event of
Default. Upon the occurrence of an Event of Default, the General Partner of the
Non-defaulting Party may elect, by giving written notice to the Defaulting
Party, to assume the role of the "CONTROLLING PARTY" of the Partnership, and
shall remain as such unless and until (i) the Partners otherwise agree,
(ii) such Controlling Party is removed as such pursuant to the foregoing
provisions of this SECTION 5.14(c) by reason of its having become a Defaulting
Party, or (iii) such Event of Default is cured. During the period of time that
an Event of Default has occurred and is continuing, the General Partner of the
Controlling Party shall have the authority to take exclusive charge and control
of the Partnership free and clear of any and all restrictions (including any and
all restrictions set forth in this ARTICLE 5 and any and all consent, voting or
approval rights granted the Executive Committee, Operating Committee or any
Partner, other than that of the Controlling Party) imposed by this Agreement,
and the Defaulting Party's right to, acting alone, make certain decisions and
take certain actions with respect to matters concerning the Partnership's
management agreements with the Non-defaulting Party (or its Affiliates) as
provided in SECTION 5.5 shall be suspended and the General Partner of the
Controlling Party shall make all such decisions and take all such actions
thereunder. The General Partner of the Controlling Party shall have the right
to amend any fictitious business name statement, certificate of partnership, or
any similar document to reflect such election and to provide that it is the sole
Partner authorized to bind the Partnership, and to file or record any such
amended documents and change the Partnership's Principal Office, and each
Partner hereby grants to the General Partner of the Controlling Party its
irrevocable power of attorney to do the same, which power of attorney shall be
deemed to be a power coupled with an interest which may not be revoked until
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the termination and winding up of the Partnership. The provisions of this
SECTION 5.14(c) shall take precedence over any provision to the contrary set
forth in this Agreement.
(d) REMEDIES NOT eXCLUSIVE. No remedy conferred upon the
Partnership or any Partner in this Agreement is intended to be exclusive of any
other remedy herein or by law provided or permitted, but rather each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law, in equity or by statute.
ARTICLE 6
Transfers of Interests
6.1 RESTRICTIONS ON TRANSFERS.
(a) Except as permitted in SECTION 6.1(b) or otherwise expressly
permitted or required by this Agreement, no Partner shall Transfer all or any
portion of its Partnership Interest, and no partner or other controlling entity
or Person of a Partner shall directly or indirectly Transfer its ownership
interest in such Partner or take any action which would have such an effect,
without the unanimous prior written consent of the Partners, which consent may
be withheld by a Partner in its sole and absolute discretion. Any Transfer or
attempted Transfer by any Partner in violation of the preceding sentence shall
be null and void and of no force or effect whatsoever. Each Partner hereby
acknowledges the reasonableness of the restrictions on Transfer imposed by this
Agreement in view of the Partnership purposes and the relationship of the
Partners and the Partnership. Accordingly, the restrictions on Transfer
contained herein shall be specifically enforceable. Each Partner hereby
further agrees to hold the Partnership and each Partner wholly and completely
harmless from any cost, liability, or damage (including liabilities for income
taxes and costs of enforcing this indemnity) incurred by any of such
indemnified Persons as a result of a Transfer or an attempted Transfer in
violation of this Agreement.
(b) Notwithstanding anything to the contrary contained herein,
the following Transfers shall be permitted under this Agreement without any
consent being required from any Partner ("PERMITTED TRANSFERS"):
(i) Any Transfer of the entire Partnership Interest to an
Affiliate of the respective Operating Partnership of the Partner, provided
that the applicable Operating Partnership has a direct or indirect legal or
beneficial ownership interest entitled to receive at least 25% of the
dividends, distributions or other cash proceeds of such Affiliate;
(ii) Any transaction involving (1) the Transfer, issuance
or redemption of stock or other equity securities of any direct or indirect
corporate partner of a Partner, whether or not such Transfer, issuance or
redemption occurs on any public stock exchange, (2) the Transfer, issuance
or redemption of any partnership units in the
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respective Operating Partnership of the Partner, or (3) the direct or
indirect Transfer, issuance or redemption of limited partnership interests
in any Partner; PROVIDED THAT following any such transaction referred to in
(1) - (3) of this SUBSECTION (ii), the entire Partnership Interest is owned
by an Affiliate of the applicable Operating Partnership and the applicable
Operating Partnership continues to have a direct or indirect legal or
beneficial ownership interest entitled to receive at least 25% of the
dividends, distributions or other cash proceeds of such Affiliate.
6.2 TRANSFEREE REQUIREMENTS. In no event may any Partner Transfer
its Partnership Interest pursuant to the provisions of this ARTICLE 6 or
otherwise (i) to any person who lacks the legal right, power or capacity to own
a Partnership Interest; (ii) in violation of any provision of any mortgage or
deed of trust (or note or bond secured thereby) constituting a lien against any
Partnership Property or any part thereof, or of any other instrument, document
or agreement to which the Partnership is a party or otherwise bound; (iii) in
violation of applicable law; (iv) in the event such Transfer or issuance would
cause any Partner who is a REIT (or any Person who, directly or indirectly,
owns an interest in any Partner who is a REIT) to cease to comply with the
requirements necessary to achieve REIT status; (v) if such Transfer would cause
a termination of the Partnership for federal income tax purposes or would cause
a constructive distribution to any Partner or to any partner of the Underlying
Partnership under Section 752 of the Code; (vi) if such Transfer would, in the
opinion of counsel to the Partnership, cause the Partnership to cease to be
classified as a partnership for federal income tax purposes; (vii) if such
Transfer would cause the Partnership to become, with respect to any employee
benefit plan subject to Title 1 of ERISA, a "party-in-interest" (as defined in
Section 3(14) of ERISA) or a "disqualified person" (as defined in Section
4975(c) of the Code); or (xiii) if such Transfer would, in the opinion of
counsel to the Partnership, cause any portion of the Partnership Properties to
constitute assets of any employee benefit plan pursuant to the Department of
Labor Regulations Section 2510.2-101. As used in this Agreement, the term
"TRANSFEREE" shall mean any approved Transferee pursuant to ARTICLE 6 hereof.
6.3 PARTNERSHIP INTEREST LOANS.
(a) GENERAL LOAN PROVISIONS. Each Partner shall have the right
to pledge its entire Partnership Interest, and the proceeds thereof as security
for a loan or loans (or a guaranty of a loan or loans to its partner or other
controlling Entity or Person) under a credit facility and all other obligations
under the related loan documents (collectively, a "PARTNERSHIP INTEREST LOAN
OBLIGATIONS") and to obtain such loan or loans secured by its Partnership
Interest and the proceeds thereof (all loans under a single credit facility
being, collectively, a "PARTNERSHIP INTEREST LOAN") at any time during the term
of this Agreement upon the following terms and conditions:
(i) there shall never be more than one Partnership Interest
Loan with respect to each Partner's Partnership Interest outstanding at any
time;
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(ii) the Partnership Interest Loan Obligations may be
secured by the Partner's Partnership Interest and the proceeds thereof but
shall not be secured by or in any way collateralized by any of the
Properties;
(iii) the Partnership Interest Loan shall be prepayable
in full at any time, subject to customary notice and prepayment penalties;
(iv) the Partner obtaining or guaranteeing any such
Partnership Interest Loan shall pay each other Partner's reasonable
attorneys' fees incurred in connection with the review of the loan
documents for each such Partnership Interest Loan with respect to the
compliance of such loan documents with the conditions set forth in this
SECTION 6.3;
(v) At the time such Partnership Interest Loan is incurred,
no default or Event of Default by or with respect to the Partner obtaining
the Partnership Interest Loan shall have occurred and be continuing under
this Agreement;
(vi) The lender or lenders under each such Partnership
Interest Loan shall be a bank, or other institutional lender, provided that
in the case of a Partnership Interest Loan made by more than one lender (or
in which there are one or more participants), the Partners and the
Partnership shall be entitled to deal only with an agent or other
representative for all such lenders (and their participants, if any, or, in
the case of a Partnership Interest Loan held by a single lender in which
there are one or more participants, shall be entitled to deal only with
such lender) in connection with such Partnership Interest Loan and any
notice given to such representative (or lender) shall be deemed notice to
all lenders and participants, and any consent or approval by such
representative (or lender) shall be deemed given by all lenders and
participants);
(vii) The other Partners shall be reasonably satisfied
that any loan by a Partner will not result in any adverse tax consequences
to such Partners or the Partnership;
(viii) Any loan must be an arm's length "bridge" or other
financing on terms customary for financings of that type or otherwise
reasonably acceptable to the other Partners;
(ix) (a) The loan documents for each such Partnership
Interest Loan shall not include terms or conditions which unreasonably
(taking into account what is then customary in loan documents for similar
loans with similar lenders) and adversely impact the Partnership's, the
Underlying Partnership's, the Partners' or any property manager's ability
to operate, manage or lease any Property or any Partnership Property; and
(b) the loan documents for each such loan shall not include terms or
conditions that grant the lender approval or consent rights with respect to
the operation, management or leasing of any Property or any Partnership
Property except, in the case of CLAUSES (a) and
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(b) immediately above, as approved by the other Partners, which
approval shall not be unreasonably withheld;
(x) The loan shall not include any participation,
contingent interest or equity conversion features (provided that the
foregoing limitations shall not preclude the calculation or payment of any
prepayment penalty based upon a yield maintenance or similar formula);
interest on the loan shall be payable on a basis no less frequently than
monthly (or, in the case of LIBOR loans, at the end of the interest period
applicable thereto, but not less frequently than every three months);
(xi) A Partnership Interest Loan shall not cause a default
under any agreement to which the Partnership or the Partner incurring or
guaranteeing such Partnership Interest Loan (the "PLEDGING PARTNER") is a
party or bound and the Pledging Partner shall have obtained all third party
consents to such loan required to be obtained by it;
(xii) The loan documents shall provide that the lender
or lenders (or such representative) will not exercise remedies thereunder
except after giving written notice to the other Partners and the
Partnership of any default under the loan documents concurrently with the
giving of such notice to the defaulting Partner; the Pledging Partner shall
agree that the loan documents shall not be amended, modified or
supplemented without the other Partners' prior written consent; and the
lender or representative shall, at any other Partner's request, enter into
a separate agreement in form reasonably satisfactory to such other Partner,
wherein the lender reasonably agrees to provide such other Partner and the
Partnership with such notice; and
(xiii) Neither the Person making the Partnership Interest
Loan, nor any Person participating in a Partnership Interest Loan, shall
have made a loan to the Partnership or to the Underlying Partnership or
secured by any Partnership Assets or any Underlying Partnership Assets.
(b) Within a reasonable time after receipt of a request by the
Partner obtaining a Partnership Interest Loan accompanied by a copy of the
related loan documents, the other Partners shall certify whether the Partnership
Interest Loan and the loan documents relating to such Partnership Interest Loan
comply with the conditions set forth in CLAUSES (iii), (iv), (v), (vi), (vii),
(viii), (ix), (x), (xi) as to the Partnership only, (xii) and (xiii) of this
SECTION 6.3(a), which certification shall not be unreasonably withheld, and any
such lender or representative may conclusively rely on such certification.
(c) The Partnership shall notify the lender or representative of
any failure by the Pledging Partner to make any payment to the Partnership or to
any other Partner required under this Agreement. Notwithstanding anything
herein to the contrary, the lender or lenders under the Partnership Interest
Loan (or such representative) shall have the right (but not the obligation) to
cure such default within 30 days after receipt of such notice by making such
payment (which shall have the same effect as if such payment had been made by
such Partner),
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and until the expiration of such 30 day period, the other Partners shall not
exercise any of their rights and remedies hereunder or under the Act with
respect to such default and, if and when such secured party makes the
payment, such default shall be considered cured and shall cease to exist for
all purposes of this Agreement and the Act.
(d) Notwithstanding anything herein to the contrary, at any time
after the date on which the Partnership receives written notice (a "PARTNERSHIP
INTEREST LOAN DEFAULT NOTICE") from a lender or representative that an "event of
default" of the Pledging Partner has occurred and exists under a Partnership
Interest Loan and instructing the Partnership to make all future distributions
or other payments then required to be made to the Pledging Partner under the
Partnership Agreement or any Default Loan to such lender or representative until
further notice from such lender or representative, such payments shall be made
to such lender or representative notwithstanding receipt by the Partnership or
any other Partner of any notice by the Pledging Partner (or any trustee or other
person acting on its behalf) to the contrary. In addition, at any time after
the date on which the Partnership receives a Partnership Interest Loan Default
Notice and until such notice is rescinded by the lender or representative after
all "events of default" of the Pledging Partner have ceased to exist, the
Partnership shall provide to the lender or representative under the Partnership
Interest Loan copies of all notices and reports being provided hereunder or
under the Act to the Pledging Partner and such other information regarding the
Properties or the Partnership Property and the operations, assets, liabilities
and business of the Partnership as the lender or representative may reasonably
request.
(e) Upon any foreclosure of the security interest securing any
Partnership Interest Loan Obligations, or any transfer in lieu thereof, (i) the
secured party, purchaser, transferee or a designee thereof shall have the rights
of an "assignee" of such Partnership Interest under the Act, including, without
limitation, all rights of the Pledging Partner to (A) share in profits and
losses of the Partnership, (B) receive distributions from the Partnership under
ARTICLE 3 or 10 or SECTION 7.3(b), 8.4 or 8.6(b) hereof or the other provisions
of this Agreement or the Act and (C) all other economic rights of such Pledging
Partner with respect to the Partnership Interest (including the right to receive
any and all sale proceeds of the Partnership Interest if and when the
Partnership Interest is sold in accordance with the provisions of this
Agreement), and (ii) in all other respects the Pledging Partner shall continue
as a Partner under this Agreement with all other rights hereunder (including,
without limitation, the right to exercise any voting, management or other
consensual rights), unless and until the secured party, purchaser, transferee or
designee is admitted as a substitute Partner pursuant to SECTION 6.4 at such
Person's request. Upon satisfaction by such secured party, purchaser,
transferee or designee of the conditions set forth in Section 6.4, (i) such
Person shall be admitted as a Partner and (ii) the Pledging Partner shall cease
to be a Partner, in each case without the consent of any other Partner or other
Person being required. Unless and until such secured party, purchaser,
transferee or designee becomes a Partner under this Agreement, such secured
party, purchaser, transferee or designee shall not be liable for any of the
liabilities and obligations of the Partnership or such Pledging Partner, whether
under this Agreement, the Act or otherwise, except as otherwise provided by law.
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(f) Any partner or other controlling Person of a Partner shall
be entitled to grant a security interest to a lender or lenders (or
representative) referred to in CLAUSE (vi) of SECTION 6.3(a) under a Partnership
Interest Loan in the direct or indirect ownership interests that such partner or
other Person holds from time to time in such Partner or the Partnership,
provided that such security interest shall not be foreclosed (and no transfer in
lieu thereof shall occur) at any time prior to foreclosure of the security
interest in the Partnership Interest (or transfer in lieu thereof).
(g) Notwithstanding anything herein to the contrary, the
provisions of this SECTION 6 shall accrue to the benefit of all lenders and
representatives under Partnership Interest Loans.
(h) RIGHT OF PURCHASE. If any lender of a Partnership Interest
Loan or any third party (each a "LOAN DEFAULT TRANSFEREE") should become an
assignee of any Partner's Partnership Interest as a result of a default under
any such Partnership Interest Loan, whether by or through foreclosure of its
security interest in and to such Partnership Interest, assignment-in-lieu
thereof, or otherwise, then a Partner of the other Party shall have a one-time
right to purchase from the Loan Default Transferee such assignee's interest in
the Partnership Interest on the terms and conditions of this SECTION 6.3(h). No
later than five (5) business days after its acquisition of such assignee's
interest in the Partnership Interest, the Loan Default Transferee shall deliver
written notice (the "LOAN DEFAULT TRANSFER NOTICE") to the other Partners
notifying such other Partners of the transfer, setting forth such Loan Default
Transferee's address for notices and stating the credit bid, purchase price or
other amount paid for the assignee's interest in the Partnership Interest (which
amount may include the discharge of indebtedness in exchange therefor). The
other Partners may then exercise its rights under this SUBSECTION (h) by
delivering to the Loan Default Transferee, within 30 days after such other
Partner's receipt of the Loan Default Transfer Notice, written notice stating
its intention to purchase such assignee's interest in the Partnership Interest.
The purchase price for the assignee's interest in the Partnership Interest shall
equal the credit bid, purchase price or other amount paid by such Loan Default
Transferee for such assignee's interest in the Partnership Interest as stated in
the Loan Default Transfer Notice, plus interest thereon from the date that the
Loan Default Transferee acquires title to the assignee's interest in the
Partnership Interest until the date that the sale of the assignee's interest in
the Partnership Interest to the other Partner is consummated at the default rate
stated in the loan documents. If any other Partner exercises its option to
purchase such assignee's interest in the Partnership Interest hereunder to such
other Partner or its designee, the transfer of the assignee's interest in the
Partnership Interest to the other Partner shall be consummated no later than the
sixtieth (60th) day after the date of such Loan Default Transferee's receipt of
the other Partner's written notice exercising such purchase option. The other
Partner may designate an Affiliate of such Partner as the purchaser of such
assignee's interest in the Partnership Interest. Upon the consummation of any
transfer hereunder to such Partner or its designee, the Loan Default Transferee
shall be released from any and all obligations and liability hereunder except
for obligations, liabilities, duties and rights arising before such transfer
which have not been determined or ascertained as of the date of transfer.
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Upon request by a Partner who is obtaining a Partnership Interest Loan
in accordance with the provisions of this Section 6.3, the Partnership and the
other Partners shall each execute and deliver to the lender or representative
under such Partnership Interest Loan, in addition to the certifications
contemplated by Section 6.3(b), such agreements and other documents as may be
reasonably requested by such lender or representative in connection therewith,
provided such agreements and other documents are consistent with the provisions
of this Article 6.
6.4 ADMISSION OF TRANSFEREE AS A PARTNER. No Transferee pursuant to
the provisions of this ARTICLE 6 above shall become a substituted Partner until
all of the following conditions have been satisfied, as applicable:
(a) A certified copy of the instrument of transfer shall have
been filed with the Partnership. The Transferee shall agree in writing for the
benefit of the Partnership to be bound by all of the terms of this Agreement and
to assume and perform all obligations and duties of the transferring Partner,
and an executed, duplicate original of said assumption shall be delivered to the
Partnership.
(b) The proposed Partner shall have executed and acknowledged
for recordation an amendment to this Agreement and the Statement of Partnership
and such other instruments as the other Partners may reasonably deem necessary
or desirable to effect such admission or substitution.
(c) A transfer fee sufficient to cover all expenses in
connection with such assignment and substitution (including reasonable legal and
accounting fees) shall have been paid to the Partnership either by the
Transferee or the transferring Partner.
(d) The admission of a Transferee as a substituted Partner and
any release of the transferring Partner shall not be a cause for dissolution of
the Partnership under the Delaware Uniform Partnership Act. Each Partner hereby
agrees in writing that the Partnership shall continue after such admission.
6.5 ALLOCATIONS AND DISTRIBUTIONS UPON TRANSFERS. Upon the
occurrence of a Transfer during any Fiscal Year, Profits, Losses, each item
thereof, and all other items attributable to the Partnership Interest so
transferred for such Fiscal Year shall be divided and allocated between the
transferring Partner and the Transferee by taking into account their varying
interests during the Fiscal Year in accordance with Code Section 706(d), using
any conventions permitted by law and selected by the Operating Committee. All
distributions and allocations on or before the date of a Transfer shall be made
to the transferring Partner, and all distributions and allocations thereafter
shall be made to the Transferee. The Operating Committee and the Partnership
shall incur no liability for making allocations and distributions in accordance
with the provisions of this SECTION 6.5, whether or not the Operating Committee
or the Partnership has knowledge of any Transfer of ownership of any interest in
the Partnership.
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ARTICLE 7
BUY-SELL
7.1 BUY-SELL OFFERING NOTICE. Either Party may exercise its rights
under this ARTICLE 7 at any time after a deadlock over a Buy-Sell Major Decision
relating to one (1) of the Underlying Properties or Partnership Properties (the
"SUBJECT PROPERTY") is not resolved within thirty (30) days after the Executive
Committee meeting at which the same is voted upon; PROVIDED, HOWEVER, that in
the case of an Underlying Property (i) such rights may only be exercised in
connection with an in-kind distribution of such Underlying Property to the
Partnership under Section 5.3 of the Underlying Partnership Agreement, and (ii)
in the event of any such in-kind distribution, the Party whose Affiliate elected
to cause such in-kind distribution shall be required to become the Initiating
Party with respect to such Property hereunder. At any such time, either Party
(the "INITIATING PARTY") may give written notice (the "OFFERING NOTICE") to the
other Party (the "RESPONDING PARTY") of its intent to purchase all, but not less
than all, of the Subject Property. The Offering Notice must be given within
fifteen (15) days after the expiration of the thirty (30) day period described
immediately above. In such event, the provisions set forth in this ARTICLE 7
shall apply. The Initiating Party shall specify in its Offering Notice the all
cash purchase price ("PURCHASE PRICE") at which the Initiating Party would be
willing to purchase a fifty percent (50%) undivided interest in the Subject
Property free and clear of all debt secured by mortgages, deeds of trust and
other security instruments thereon as of the date the Offering Notice is given
("DATE OF VALUE"). Once given, an Offering Notice may not be revoked or
withdrawn by an Initiating Party without the written consent of the Responding
Party, which consent may be withheld in its sole and absolute discretion. In no
event shall either Party be permitted to give an Offering Notice initiating its
buy-sell rights under this ARTICLE 7 more often than once in any twelve (12)
successive month period.
7.2 EXERCISE OF BUY-SELL. Upon receipt of the Offering Notice, the
Responding Party shall then be obligated either:
(a) To consent to the sale of a fifty percent (50%) undivided
interest in the Subject Property to the Initiating Party for the Purchase Price;
or
(b) To purchase a fifty percent (50%) undivided interest in the
Subject Property for the Purchase Price.
The Responding Party shall notify the Initiating Party of its election within
thirty (30) days after the Date of Value. Failure to give notice within the
required time period shall be deemed consent to the sale of the Subject Property
to the Initiating Party. For purposes of this ARTICLE 7, the terms "PURCHASING
PARTY" and "SELLING PARTY" shall mean, respectively, the Party who is obligated
to purchase and the Party who is obligated to sell a fifty percent (50%)
undivided interest in the Subject Property pursuant to either SECTION 7.2(a) or
7.2(b) (regardless of which Party is the Initiating Party and which Party is the
Responding Party).
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7.3 CLOSING.
(a) The Parties shall meet and exchange documents and pay
amounts due, and otherwise do all things necessary to conclude the transaction
set forth herein at the closing of such purchase (the "BUY-SELL CLOSING"). The
Buy-Sell Closing shall occur at the office of the Purchasing Party's legal
counsel at 9:00 a.m. on the first Wednesday after the ninetieth (90th) day after
the Date of Value unless the day is a Saturday, Sunday, or national or state
holiday and, in that event, on the next business day. At the Buy-Sell Closing,
the Partnership shall distribute to each of the Initiating Party and the
Responding Party a fifty percent (50%) undivided fee simple interest in the
Subject Property. Immediately thereafter, the Purchasing Party shall purchase
the interest of the Selling Party in the Subject Property for cash in an amount
equal to the Purchase Price. At the Buy-Sell Closing, there shall be delivered
to the Purchasing Party a duly executed and acknowledged deed in such form as
may be appropriate and required to legally transfer such fee simple title in and
to the Subject Property to the Purchasing Party, and shall also, upon the
request of the Purchasing Party, concurrently therewith (or at any time and from
time to time thereafter) be executed, acknowledged and delivered such other
documents and records as the Purchasing Party determines are reasonably
necessary or desirable to conclude the Buy-Sell Closing and to otherwise vest
title in and to the Subject Property in the Purchasing Party and allow the
Purchasing Party to develop, use, sell, rent, manage or operate the Subject
Property (including, without limitation, assignments of leases, reciprocal
easement and operating agreements, contracts, personal property and other rights
or property of the Partnership necessary or useful in the management and
operation of the Subject Property). Additionally, the Selling Party shall
execute, acknowledge and deliver such other documents and records as the
Purchasing Party determines are reasonably necessary or desirable to provide the
Purchasing Party with the same rights and interests in the Subject Property as
were granted to the Selling Party by the Partnership. The management agreement
for the Subject Property shall be immediately terminated effective as of the day
of the Buy-Sell Closing. Further, from and after the date of the Buy-Sell
Closing, both the Partnership and the Selling Party shall be released from all
obligations and liabilities accruing in connection with the Subject Property,
and the Purchasing Party shall indemnify and hold the Partnership and the
Selling Party harmless from and against any and all such obligations and
liabilities accruing from and after the Buy-Sell Closing.
(b) At the Buy-Sell Closing, each of the Purchasing Party and
the Selling Party shall be responsible for the satisfaction of fifty percent
(50%) of any debt secured by mortgages or deeds of trust against the Subject
Property as of the Value Date and, if applicable, the "release price" necessary
to release any mortgage or deed of trust securing the Existing Financing as of
the Value Date. It is expressly understood and agreed that (i) the transfer of
a Subject Property shall be reflected on the books and records of the
Partnership and the Underlying Partnership as a partial transfer to the general
partners of the Underlying Partnership, in accordance with their respective
Percentage Interests therein, followed by a sale of such partial interest by the
general partner that is an Affiliate of the Selling Party to the Purchasing
Party (or its Assignee), and (ii) such satisfaction may occur through the
assumption of such debt by the Purchasing Party, or the refinancing of such debt
with new indebtedness secured by the Purchasing Party (in each case, with an
appropriate reduction of amounts
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otherwise owed by the Purchasing Party to the Selling Party), or through
other tax-efficient means agreed upon by the Partners. It is also expressly
understood and agreed that the Buy-Sell Closing may be effected through the
transfer of a duly executed and acknowledged deed directly from the
Partnership or the Underlying Partnership, as the case may be, to the
Purchasing Party (or its designee). The Purchasing Party shall be
responsible for and pay all costs and expenses incurred in connection with
the sale of the Subject Property; PROVIDED THAT, each Party shall bear its
own attorneys' fees and further the Initiating Party shall pay any yield
maintenance or other interest premium on the pay-off of such debt.
(c) The Partners acknowledge and agree that each Subject
Property is extraordinary and unique, and the provisions of this ARTICLE 7 shall
be specifically enforceable.
ARTICLE 8
EXIT CALL; PORTFOLIO SALE
8.1 CALL RIGHTS. At any time from and after the date which is
eighteen (18) months after the acquisition of the Underlying Properties by
the Underlying Partnership, either Party may, without cause and in its sole
and absolute discretion, elect to call for the Partnership to dissolve and
the distribution of all Partnership Properties to the Partners in kind;
PROVIDED, HOWEVER, that such election may only be made in connection with an
election, pursuant to Section 10.01(e) of the Underlying Partnership
Agreement, to liquidate the Underlying Partnership, in which case the Party
whose Affiliate elected such liquidation shall be the "Exercising Party"
hereunder. Such distribution by the Underlying Partnership shall be treated
as occurring as follows: (i) first, as a distribution to the partners in the
Underlying Partnership in accordance with their interests therein; and (ii)
as a distribution by the Partnership of its assets (including its
proportionate share of the Underlying Partnership Assets) to the Partners in
accordance with their Partnership Interests. Any Party may exercise its
right to call for the dissolution of the Partnership by delivering to the
other Party written notice stating that it is exercising its call right under
this ARTICLE 8 (a "CALL NOTICE"). The Party exercising its rights hereunder
shall be referred to herein as the "EXERCISING PARTY" and the other Party
shall be referred as the "NON-EXERCISING PARTY". Once a Call Notice is
delivered, it cannot be rescinded or withdrawn except with the prior written
consent of the Non-Exercising Party.
8.2 PROCEDURES UPON CALL EXERCISE. Within fifteen (15) business days
after the delivery of a Call Notice requiring the dissolution of the Partnership
by the Exercising Party, the Partners shall meet (a "CALL DISSOLUTION MEETING")
in order to determine and agree upon the fair market value of each Property (for
purposes of this ARTICLE 8, any such property being referred to, individually,
as a "CALL PROPERTY," and collectively, as the "CALL PROPERTIES"). It is
expressly acknowledged and agreed that the Call Dissolution Meeting may occur
over the course of a number of days and may be adjourned from time to time and
reconvened upon the agreement of the Parties. If the Parties are unable to
agree upon the fair market value of any Call Property within thirty (30) days
after the first day of such Call Dissolution Meeting, the fair market value of
such Call Property shall be determined in accordance with the appraisal process
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set forth in SECTION 8.5 below. Upon the determination of the fair market value
of each Call Property, whether by agreement of the Parties or appraisal, the
Call Properties will be distributed to the Parties as follows:
(a) first, the Non-Exercising Party shall select a Call Property for
acquisition;
(b) second, the Exercising Party shall select a Call Property for
acquisition; and
(c) thereafter, the Non-Exercising Party shall select a Call Property
for acquisition and the Parties shall alternate choices in such manner until all
of the Call Properties have been allocated between the Partners.
If the total number of Call Properties is an odd number, then the
Non-Exercising Party shall be permitted to elect, in its sole and absolute
discretion, whether to acquire the final Call Property or to mandate that the
Exercising Party acquire such final Call Property. The Call Properties to be
acquired by the Exercising Party pursuant to this SECTION 8.2 shall be herein
referred to each as an "EXERCISING PARTY'S PROPERTY" and collectively as the
"EXERCISING PARTY'S PROPERTIES", and the Call Properties to be acquired by
the Non-Exercising Party pursuant to this SECTION 8.2 shall be herein
referred to each as a "NON-EXERCISING PARTY'S PROPERTY" and collectively as
the "NON-EXERCISING PARTY'S PROPERTIES"
8.3 CLOSING PROCEDURE. The Partners shall meet and exchange
documents and pay amounts due, and otherwise do all things necessary to conclude
the transactions set forth in this ARTICLE 8 at the closing (the "CALL
CLOSING"). The Call Closing shall occur at the office of the Exercising Party's
legal counsel at 9:00 a.m. on the first Wednesday after the thirtieth (30th) day
following the day that the selection procedure described in SECTION 8.2 above
shall have been completed (unless such day is a Saturday, Sunday, or national or
state holiday and, in that event, on the next business day). At the Call
Closing each of the Exercising Party and the Non-Exercising Party shall be
responsible for the satisfaction of any debt secured by mortgages or deeds of
trust against the Exercising Party's Properties and the Non-Exercising Party's
Properties, respectively, as of such date and, if applicable, the "release
price" necessary to release any mortgage or deed of trust securing the Existing
Financing as of such date. It is expressly understood and agreed that such
satisfaction may occur through the assumption of such debt, or the refinancing
of such debt with new indebtedness, or through other tax-efficient means agreed
upon by the Partners. Immediately thereafter, the Partnership shall (i) deliver
to the Exercising Party a duly executed and acknowledged deed in such form as
may be appropriate and required to legally transfer fee simple title in and to
each Exercising Party's Property to the Exercising Party, and shall also, upon
the request of the Exercising Party, concurrently therewith (or at any time and
from time to time thereafter) execute, acknowledge and deliver such other
documents and records as the Exercising Party determines are reasonably
necessary or desirable to conclude the Call Closing and to otherwise vest title
in and to the Exercising Party's Properties in the Exercising Party and allow
the Exercising Party to develop, use, sell, rent, manage or operate the
Exercising Party's Properties (including, without limitation, assignments of
leases, reciprocal easement and operating agreements, contracts, personal
property and other rights or property of the Partnership necessary or useful in
the management and operation of the Exercising Partner's
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Properties), and (ii) deliver to the Non-Exercising Party a duly executed and
acknowledged deed in such form as may be appropriate and required to legally
transfer fee simple title in and to each Non-Exercising Party's Property to
the Non-Exercising Party, and shall also, upon the request of the
Non-Exercising Party, concurrently therewith (or at any time and from time to
time thereafter) execute, acknowledge and deliver such other documents and
records as the Non-Exercising Party determines are reasonably necessary or
desirable to conclude the Call Closing and to otherwise vest title in and to
the Non-Exercising Party's Properties in the Non-Exercising Party and allow
the Non-Exercising Party to develop, use, sell, rent, manage or operate the
Non-Exercising Party's Properties (including, without limitation, assignments
of leases, reciprocal easement and operating agreements, contracts, personal
property and other rights or property of the Partnership or the Underlying
Partnership necessary or useful in the management and operation of the
Non-Exercising Party's Properties). The Partnership shall distribute to the
Exercising Party all of the Exercising Party's Properties, and distribute to
the Non-Exercising Party all of the Non-Exercising Party's Properties. In
the event that the aggregate fair market value of the Exercising Party's
Properties (less any debt assumed by the Exercising Party) and the aggregate
fair market value of the Non-Exercising Party's Properties (less any debt
assumed by the Non-Exercising Party), as determined pursuant to SECTION 8.6
below, are unequal, the Partnership shall designate one Call Property (the
"DESIGNATED PROPERTY"), which Designated Property shall be deemed to have
been distributed to the Exercising and Non-Exercising Parties in that
proportion necessary to equate, as closely as possible, the fair market
values of the Call Properties distributed to the Exercising and
Non-Exercising Parties (less any debt assumed by the Parties). If the
Designated Property is an Exercising Party Property, then the Exercising
Party shall pay to the Non-Exercising Party cash, in an amount equal to the
fair market value of such Designated Property multiplied by the percentage of
the Designated Property distributed to the Non-Exercising Party. If the
Designated Property is a Non-Exercising Party Property, then the
Non-Exercising Party shall pay to the Exercising Party cash in an amount
equal to the fair market value of such Designated Property multiplied by the
percentage of the Designated Property distributed to the Exercising Party.
The Partnership shall be responsible for and shall pay all costs and expenses
incurred in connection with the pay-off and satisfaction of all financing
secured by the Partnership Properties, or any of them (including, without
limitation, the Existing Financing) and the release of all liens created
thereby (including, without limitation, all prepayment penalties or fees,
recording charges and other such costs and expenses). Except as otherwise
provided in the immediately preceding sentence and in this sentence below,
the Exercising Party shall be responsible for and pay all costs and expenses
incurred in connection with the distribution of the Exercising Party's
Properties, and the Non-Exercising Party shall be responsible for and pay all
costs and expenses incurred in connection with the distribution of the
Non-Exercising Party's Properties; PROVIDED THAT, each Party, the Partnership
and the Underlying Partnership shall bear its own attorneys' fees in
connection with such transactions. Each Party shall also, upon the request
of the other Party, concurrently with the Call Closing (or at any time and
from time to time thereafter) execute, acknowledge and deliver such other
documents and records as such other Party determines are reasonably necessary
or desirable to conclude the Call Closing. The management agreements for all
Call Properties shall be terminated effective as of the day of the Call
Closing. Further, from and after the date of the Call Closing, the
Partnership shall be released from all obligations and liabilities accruing
to them in connection with the Call Properties, and each Party shall
indemnify and hold the Underlying Partnership, the Partnership
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and the other Party harmless from and against any and all such obligations
and liabilities with respect to or relating to the Call Properties
distributed to such Party accruing from and after the Call Closing. It is
also expressly understood and agreed that (i) the transfer of Partnership
Properties shall be reflected on the books and records of the Partnership and
the Underlying Partnership so as to take into account, as appropriate, the
ownership interests of the general partners of the Underlying Partnership,
and (ii) the Call Closing may be effected through the transfer of a duly
executed and acknowledged deed directly from the Partnership or the
Underlying Partnership, as the case may be, to the appropriate Parties (or
their designees).
8.4 WINDING UP; DISTRIBUTION OF PROCEEDS. Immediately following
the Call Closing, the Partnership and the Underlying Partnership shall be
wound up, and all remaining Partnership Properties shall be distributed to
the Partners, in accordance with the terms and provisions of ARTICLE 10
hereof.
8.5 FAIR MARKET VALUE APPRAISAL PROCESS. If the Parties are
unable to agree upon the fair market value of any Call Property in accordance
with and within the time period set forth in SECTION 8.2 above, then the fair
market value of such Call Property shall be determined in accordance with the
terms and provisions of this SECTION 8.5. Within twenty (20) days after the
conclusion of the Call Dissolution Meeting or the expiration of the thirty
(30) day period described in SECTION 8.2, whichever occurs first, each Party
shall appoint an appraiser and, within ten (10) days after their appointment,
the appraisers so appointed shall appoint a third appraiser. The appraisers
so appointed shall proceed to determine the fair market value of the Call
Property (determined assuming the Call Property was not encumbered by any
debt). The fair market value of the Call Property shall be the average of
the two (2) most proximate appraisals. If the highest and the lowest of the
three (3) appraisals are exactly equidistant from the middle appraisal,
however, the fair market value of the Call Property shall be an amount equal
to the middle appraisal. Each appraiser appointed pursuant to this
SECTION 8.5 shall be a real estate appraiser with at least ten (10) years'
professional experience and with knowledge of the regional shopping center
market (or knowledge of any other relevant market with respect to any
particular Call Property) within the area where the Call Property is located.
If either Party fails to appoint an appraiser within such twenty (20) day
period, the determination of the fair market value of the Call Property shall
be made by the appraiser chosen by the other Party and such determination
shall be binding upon the Parties. If the first two (2) appraisers are
unable to agree upon the third appraiser within the ten (10) day period
following their appointment, then they shall notify the then chairman of the
chapter of the American Institute of Real Estate Appraisers that is the
closest to the Call Property geographically and request such person to select
a third appraiser. Each Party shall pay the expense of the appraiser that it
appoints and the Parties shall share the expense of the third appraiser.
8.6 PORTFOLIO SALE.
(a) Any time after the date which is eighteen (18) months after
the date of the acquisition of the Properties by the Underlying Partnership, a
Party (for purposes of this SECTION 8.6, the "PORTFOLIO SELLING PARTY") shall
have the right to cause (i) the Partnership to sell all (but not less than all)
of the Partnership Properties to any unaffiliated third-party Person,
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subject to compliance with this SECTION 8.6; PROVIDED, HOWEVER, that such
right may only be exercised in connection with an election, pursuant to
Section 10.01(e) of the Underlying Partnership Agreement, to liquidate the
Underlying Partnership, in which case the Party whose Affiliate elected such
liquidation shall be the "Portfolio Selling Party" hereunder. If the
Portfolio Selling Party desires to sell the Partnership Properties, the
Portfolio Selling Party shall give the other Party (for purposes of this
SECTION 8.6, the "REMAINING PARTY") written notice of its desire to do so
(the "PORTFOLIO OFFER NOTICE"), which Portfolio Offer Notice shall state the
aggregate price, measured in dollars and payable solely in cash or
immediately available funds (but which may include a credit for any existing
mortgage debt to be assumed), at which the Properties as a portfolio, will be
offered for sale (the "PORTFOLIO OFFER PRICE"). The Remaining Party shall,
within ninety (90) days after its receipt of the Portfolio Offer Notice,
notify the Portfolio Selling Party in writing whether or not the Remaining
Party will purchase the entire Partnership Interest of the Portfolio Selling
Party in the Partnership for a purchase price equal to the amount that the
Portfolio Selling Party (and the Affiliate of such Portfolio Selling Party
that is a general portion of the Underlying Partnership) would receive if all
of the Properties were sold for cash (including a credit for any mortgage
debt to be assumed if included in the Portfolio Offer Notice) at the
Portfolio Offer Price, and the Partnership were liquidated, on a closing date
set forth in such notice which shall not be less than ten (10) nor more than
thirty (30) days after the date of delivery of the Remaining Party's response
notice. If the Remaining Party does not respond within the said ninety (90)
day period, the Remaining Party shall be deemed conclusively to have declined
to purchase the entire Partnership Interest of the Portfolio Selling Party in
the Partnership as provided hereinabove and to have consented to the sale of
the Properties to an unaffiliated third-party Person on the terms hereinafter
provided. If the Remaining Party elects to purchase the entire Partnership
Interest of the Portfolio Selling Party in the Partnership, the Portfolio
Offer Notice and the Remaining Party's response notice shall constitute a
binding agreement of purchase and sale between the Portfolio Selling Party
and the Remaining Party and the Partnership Interest sale transaction shall
close on the date stated in the Remaining Party's response notice. At the
closing, the Parties will each execute and deliver to one another such
documents as may be necessary and appropriate to consummate the transfer of
the Selling Party's Partnership Interest (including, without limitation, an
Assignment of Partnership Interest containing customary indemnity
provisions), and the Remaining Party shall pay to the Selling Party, in cash,
the purchase price for such Partnership Interest. If applicable, all
management agreements for the Properties and Partnership Property managed by
any property manager affiliated with the Portfolio Selling Party shall be
automatically terminated upon the consummation of the sale of such
Partnership Interest.
(b) If the Remaining Party does not elect to purchase the entire
Partnership Interest of the Portfolio Selling Party in the Partnership, the
Portfolio Selling Party shall have the right, subject to this SUBSECTION (b), to
cause the Partnership to sell the Partnership Properties for a cash (with a
credit for mortgage debt to be assumed) purchase price equal to or greater than
ninety-eight percent (98%) of the Portfolio Offer Price; PROVIDED THAT, the
Partnership Properties must be listed with an investment banking firm
experienced in the sales of portfolio properties similar to the Partnership
Properties for the highest and best price recommended by such investment banking
firm, but not in any event less than the Project Offer Price. The closing of
such portfolio sale shall occur not later than nine (9) months after the earlier
of (x) the expiration
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of the Remaining Party's one hundred twenty (120) day response period
provided in SUBSECTION (a) above, and (y) the date that the Remaining Party
delivers written notice to the Selling Party stating that it consents to the
sale of the Partnership Properties on the terms and conditions of this
SECTION 8.6. If the Portfolio Selling Party does not close such sale within
such nine (9) month period in accordance with the terms hereof, then the
Partnership Properties may not thereafter be sold as a portfolio under this
SECTION 8.6 without again giving notice to the Remaining Party pursuant to
SUBSECTION (a) above. The Remaining Party shall cooperate with the Portfolio
Selling Party in order to sell the Partnership Properties on the terms
provided in this SECTION 8.6.
8.7 EFFECT OF EXISTING FINANCING. Notwithstanding anything in
this Agreement to the contrary, the foregoing provisions of this Article 8
shall not be effective unless, prior to or contemporaneously with any
transaction described herein, the Existing Financing has been satisfied in
full.
ARTICLE 9
WITHDRAWALS; ACTIONS FOR PARTITION
9.1 WAIVER OF PARTITION. No Partner shall, either directly or
indirectly, take any action to require partition of any Partnership
Properties, and notwithstanding any provisions of applicable law to the
contrary, each Partner hereby irrevocably waives any and all rights it may
have to maintain any action for partition or to compel any sale with respect
to its Partnership Interest or with respect to the Partnership's interest in
the Underlying Partnership, or with respect to any Partnership Properties,
except as expressly provided in this Agreement.
9.2 COVENANT NOT TO WITHDRAW OR DISSOLVE. Each Partner hereby
covenants and agrees that the Partners have entered into this Agreement based
on their mutual expectation that all Partners will continue as Partners and
carry out the duties and obligations undertaken by them hereunder and that,
except as otherwise expressly required or permitted hereby, each Partner
hereby covenants and agrees not to (a) take any action to file a certificate
of dissolution or its equivalent with respect to itself, (b) take any action
that would cause a Bankruptcy of such Partner, (c) withdraw or attempt to
withdraw from the Partnership, (d) exercise any power under the Act to
dissolve the Partnership, (e) Transfer all or any portion of its Partnership
Interest (other than pursuant to the terms and provisions of ARTICLE 6
hereof), (f) petition for judicial dissolution of the Partnership or permit
or cause the Partnership to cause a dissolution of the Underlying
Partnership, or (g) demand a return of such Partner's contributions or
profits (or a bond or other security for the return of such contributions or
profits) without the unanimous consent of the Partners, or except as
otherwise specifically allowed under this Agreement.
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ARTICLE 10
DISSOLUTION, LIQUIDATION, WINDING-UP AND TERMINATION
10.1 CAUSES OF DISSOLUTION. The Partnership shall be dissolved
upon the first to occur of the following:
(a) January 1, 2095;
(b) The written agreement of the Partners or by any Party
upon the exercise of its call right pursuant to ARTICLE 8 of this Agreement;
(c) The dissolution, termination, retirement, withdrawal or
Bankruptcy of a Partner, unless the business of the Partnership is continued
at the election of other Partners having at least a fifty percent (50%)
Partnership Interest, made by delivery of written notice to the Partners and
the Executive Committee given within ninety (90) days of the discovery by
such other Partners of such dissolution, termination, retirement, withdrawal
or Bankruptcy;
(d) The election of a Non-defaulting Party made at any time
during the continuation of an Event of Default with respect to the other
Party;
(e) The occurrence of any event that makes it unlawful for
the business of the Partnership to be carried on;
(f) The sale or other disposition of all of the Partnership
Properties;
(g) The decree of the dissolution of the Partnership by a
court of competent jurisdiction; and
(h) The failure of the Underlying Partnership to acquire the
Properties on or before April 1, 1998, unless such date is extended in
writing by all Partners.
To the fullest extent permitted by law, the Partners agree
that no act, thing, occurrence, event or circumstance shall cause or result
in the dissolution or termination of the Partnership except as provided in
this SECTION 10.1.
10.2 WINDING UP AND LIQUIDATION. Upon the dissolution of the
Partnership, the Partnership shall immediately commence to wind up its
affairs, and the Partners or the Liquidator, as the case may be, shall
proceed with reasonable promptness to liquidate the Partnership Assets.
Except as provided below, during the period of the winding up of the affairs
of the Partnership, the rights and obligations of the Partners set forth in
ARTICLE 5 with respect to the management and operation of the Partnership and
its business shall continue. Notwithstanding anything contained in this
Agreement to the contrary, if any event described in SECTION 10.1(c) shall be
continuing with respect to a Partner of one Party at the time the Partnership
is dissolved, a Partner of the other Party (provided no such event is then
continuing
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with respect to it), shall be entitled to act as the liquidating Partner
hereunder or to appoint a liquidating trustee (in either event, such Partner
or trustee being referred to herein as the "LIQUIDATOR") and (i) such
Liquidator shall be fully empowered to act on behalf of the Partnership and
to wind up the Partnership's affairs and liquidate the Partnership
Properties, and (ii) the Liquidator shall be empowered to make, perform and
implement all Major Decisions hereunder without obtaining the consent,
approval or waiver of any Partner or Person. The Liquidator shall be
entitled to receive reasonable compensation for its services, and shall be
fully indemnified, defended and held harmless by the Partnership from and
against all claims, costs and expenses (including reasonable attorneys' fees
and costs) arising in the course of it performing its duties hereunder,
except for any such claims, costs or expenses resulting from the gross
negligence or wilful misconduct of the Liquidator. From and after the
dissolution of the Partnership, the Partnership Assets shall be liquidated
and reduced to cash or cash equivalents as soon as practicable and the
resulting Net Cash Flow, and all other Net Cash Flow, shall be applied and
distributed in the following rank and order:
(a) To the payment of creditors of the Partnership (other
than in respect of Default Loans) in the order of priority as provided by law;
(b) To the establishment and maintenance of a reserve of cash
or other assets of the Partnership to pay contingent liabilities of the
Partnership (other than any Default Loans) in such amounts as may be
reasonably and in good faith determined by the Partners or the Liquidator, as
the case may be;
(c) To repay the principal amount of, and to pay any interest
owing with respect to, any Default Loan; and
(d) To the Partners in accordance with their respective
Percentage Interests.
If, immediately prior to the liquidation of the Partnership in
accordance with the preceding provisions, there shall continue to be
outstanding any principal or accrued interest on any Default Loan (a "DEFAULT
LOAN DEFICIENCY"), the Noncontributing Party with respect to such Default
Loan shall contribute to the Partnership the amount of such Default Loan
Deficiency, which amount shall immediately thereafter be distributed to the
Contributing Party in satisfaction of the Default Loan.
10.3 TIMING REQUIREMENTS; DEEMED DISTRIBUTION AND RE-CONTRIBUTION.
In the event that the Partnership is "liquidated" within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Regulations, any and all distributions to
the Partners pursuant to SECTION 10.2(c) hereof shall be made no later than
the later to occur of (i) the last day of the taxable year of the Partnership
in which such liquidation occurs or (ii) ninety (90) days after the date of
such liquidation. Subject to the foregoing, a reasonable time shall be
allowed for the orderly winding up of the business and affairs of the
Partnership and the liquidation of its assets in order to minimize any losses
otherwise attendant upon such winding up. Notwithstanding any other
provisions of this ARTICLE 10 to the contrary, if the Partnership is
liquidated within the meaning
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of Regulations Section 1.704-1(b)(2)(ii)(g)(3), but no dissolution event
described in SUBSECTIONS (a) through (h) of SECTION 10.1 has occurred, the
Partnership Properties shall not be liquidated, the Partnership's liabilities
shall not be paid or discharged, and the Partnership's affairs shall not be
wound up.
10.4 SALES RECEIVABLES. The winding up of the Partnership shall
not be deemed finally completed until the Partnership shall have received
cash payments in full with respect to obligations such as notes, installment
sale contracts and other similar receivables received by the Partnership in
connection with the sale of Partnership Properties. The Partners or the
Liquidator, as the case may be, shall continue to act to enforce all of the
rights of the Partnership pursuant to any such obligations until paid in full.
10.5 DOCUMENTATION OF DISSOLUTION AND TERMINATION. Upon the
dissolution of the Partnership and the appointment of a Liquidator in
accordance with SECTION 10.2, the Liquidator shall execute, file and record
such certificates, instruments and documents as it shall deem necessary or
appropriate in each state in which the Partnership or its affiliates do
business. Upon the completion of the winding-up of the Partnership
(including the application or distribution of all cash or other assets placed
in reserve in accordance with SECTION 10.2(b)), the Partnership shall be
terminated and the Partners or the Liquidator, as the case may be, shall
execute, file and record such certificates, instruments and documents as it
shall deem necessary or appropriate in each state in which the Partnership or
its affiliates do business in order to reflect or effect the termination of
the Partnership.
ARTICLE 11
MISCELLANEOUS
11.1 NOTICES. Notices may be delivered either by private messenger
service, by mail, or facsimile transmission. Any notice or document required
or permitted hereunder to a Partner shall be in writing and shall be deemed
to be given on the date received by the Partner; PROVIDED, HOWEVER, that all
notices and documents mailed to a Partner in the United States Mail, postage
prepaid, certified mail, return receipt requested, addressed to the Partner
at its respective address as shown in the records of the Partnership, shall
be deemed to have been received five (5) days after mailing and provided
further, that the sender of any such notice or document by facsimile
transmission shall bear the burden of proof as to proper transmission and
date of transmission of such facsimile. The address and the telecopier
number of each of the Partners shall for all purposes be as set forth at
SECTION 2.1 unless otherwise changed by the applicable Partner by notice to
the other as provided herein.
11.2 BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Partners and their respective
permitted successors, transferees, and assigns.
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11.3 CONSTRUCTION OF AGREEMENT. As used herein, the singular shall
be deemed to include the plural, and the plural shall be deemed to include
the singular, and all pronouns shall include the masculine, feminine and
neuter, whenever the context and facts require such construction. The
headings, captions, titles and subtitles herein are inserted for convenience
of reference only and are to be ignored in any construction of the provisions
hereof. Except as otherwise indicated, all section and exhibit references in
this Agreement shall be deemed to refer to the sections and exhibits of and
to this Agreement, and the terms "herein", "hereof", "hereto", "hereunder"
and similar terms refer to this Agreement generally rather than to the
particular provision in which such term is used. Whenever the words
"including", "include" or "includes" are used in this Agreement, they shall
be interpreted in a non-exclusive manner as though the words "but [is] not
limited to" immediately followed the same. Time is of the essence of this
Agreement. The language in all parts of this Agreement shall in all cases be
construed simply according to the fair meaning thereof and not strictly
against the party which drafted such language. Except as otherwise provided
herein, references in this Agreement to any agreement, articles, by-laws,
instrument or other document are to such agreement, articles, by-laws,
instrument or other document as amended, modified or supplemented from time
to time.
11.4 SEVERABILITY. Every provision of this Agreement is intended
to be severable. If any term or provision hereof is illegal or invalid for
any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
11.5 INCORPORATION BY REFERENCE. The Glossary of Defined Terms and
every exhibit, schedule, and other appendix attached to this Agreement and
referred to herein is incorporated in this Agreement by reference.
11.6 FURTHER ASSURANCES. Each of the Partners shall hereafter
execute and deliver such further instruments and do such further acts and
things as may be required or useful to carry out the intent and purpose of
this Agreement and as are not inconsistent with the terms hereof.
11.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
regard to any conflict of laws rules thereof.
11.8 COUNTERPART EXECUTION. This Agreement may be executed in any
number of counterparts with the same effect as if all of the Partners had
signed the same document. All counterparts shall be construed together and
shall constitute one agreement.
11.9 LOANS. Any Partner may, with the approval of the Executive
Committee or as otherwise provided by this Agreement, lend or advance money
to the Partnership. If any Partner shall make any loan or loans to the
Partnership, the amount of any such loan or advance shall not be treated as a
contribution to the capital of the Partnership but shall be a debt due from
the Partnership. Except as otherwise provided herein, no Partner shall be
obligated to make any loan or advance to the Partnership.
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11.10 NO THIRD PARTY RIGHTS. This Agreement is intended to create
enforceable rights between the parties hereto only, and creates no rights in,
or obligations to, any other Persons whatsoever. Without limiting the
generality of the foregoing, as to any third party, a deficit capital account
of a Partner shall not be deemed to be a liability of such Partner nor an
asset or property of the Partnership.
11.11 ESTOPPEL CERTIFICATES. Upon the written request of a Partner,
the other Partner shall, within fifteen (15) days of its receipt of such
request, execute and deliver a written statement certifying: (a) that this
Agreement is unmodified and in full force and effect (or, if modified, that
this Agreement is in full force and effect as modified and, stating any and
all modifications), (b) no Event of Default has occurred with respect to such
Partner that has not been cured and, to its actual knowledge, no Event of
Default has occurred with respect to the requesting Partner that has not been
cured, in each case except as specified in such statement and, (c) that to
its actual knowledge, no event has occurred which with the passage of time or
the giving of notice, or both, would ripen into an Event of Default
hereunder, except as specified in such statement.
11.12 USURY. If any return, interest payment, or other charge
payable under this Agreement shall at any time exceed the maximum amount
chargeable by applicable law, then the applicable rate of return or interest
shall be the maximum rate permitted by applicable law.
11.13 BUSINESS DAY. "BUSINESS DAY" or "BUSINESS DAY" means any
calendar day except Saturday, Sunday, or a federal or State of Delaware legal
holiday.
11.14 PROPOSING AND ADOPTING AMENDMENTS. Amendments to this
Agreement may be proposed by any Executive Committee Member by his submitting
to the Executive Committee a verbatim statement of the proposed amendment,
and such Executive Committee Member shall include in any such submission a
recommendation as to the proposed amendment. A proposed amendment shall be
adopted and be effective as an amendment hereto upon the approval of the
Executive Committee and its mutual execution and delivery by the Partners.
This Agreement may be amended only upon the written agreement of both
Partners, and no provision benefiting a Partner may be waived, except by a
written instrument signed by the Partner. The giving of consent by any
Partner to any action by another Partner in any one instance shall not limit
or waive the necessity to obtain such Partner's consent in any future
instance.
11.15 PARTNERS NOT AGENTS. Nothing contained herein shall be
construed to constitute any Partner the agent of another Partner, except as
otherwise expressly provided herein, or in any manner to limit the Partners
in the carrying on of their own respective businesses or activities.
11.16 ENTIRE UNDERSTANDING; ETC. This Agreement constitutes the
entire agreement and understanding among the Partners, and supersedes any
prior or contemporaneous understandings and/or written or oral agreements
among them, respecting the subject matter of this Agreement.
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11.17 ACTION WITHOUT DISSOLUTION. To the fullest extent permitted
by law, each Partner shall be entitled to maintain, on its own behalf or on
behalf of the Partnership, any action or proceeding against any other Partner
or the Partnership (including an action for damages, specific performance, or
injunctive or declaratory relief) for or by reason of the tortious conduct of
such party or the breach by such party of this Agreement or any other
agreement entered into with such party in connection with the transactions
contemplated hereunder, and the bringing of such action or proceeding shall
not cause or require the dissolution of the Partnership or an accounting of
the Partnership's assets or affairs.
11.18 ATTORNEYS' FEES. In the event of any litigation between
Partners by reason of a breach hereunder, or to enforce or interpret any
provision, right or obligation hereunder, the unsuccessful party or parties
to such litigation covenants and agree to pay the successful party or parties
all costs and expenses reasonably incurred, including reasonable attorneys'
fees. For the purpose of this Agreement, the term "attorneys' fees" and
"attorneys' fees and costs" shall mean the fees and expenses of counsel to
the parties hereto, which may include printing, photostating, duplicating and
other expenses, air freight charges and fees billed for law clerks,
paralegals, librarians and others not admitted to the bar but performing
services under the supervision of any attorney. Such term shall also include
all such fees and expenses incurred with respect to appeals and bankruptcy
proceedings, and whether or not any action or proceeding is brought with
respect to the matter for which said fees and expenses were incurred.
11.19 WAIVER OF JURY TRIAL. To the fullest extent permitted by law,
each Partner hereby waives trial by jury in any action, proceeding or
counterclaim brought by a Partner or the Partnership with respect to any
matter whatsoever arising out of or in any way connected with this Agreement,
the relationship of the Partners, any claim of injury or damage relating to
any of the foregoing, or the enforcement of any remedy under any statute with
respect thereto.
11.20 CONFIDENTIALITY. The terms of this Agreement, any non-public
details of the transactions contemplated hereby, any financial, marketing or
other information delivered or produced pursuant to the terms of this
Agreement not generally disclosed to the public, the trade, or creditors, and
any non-public information regarding any other Partner or any of its
Affiliates learned as a result of the partnership relationship created by
this Agreement, shall not be disclosed by any Partner (or any of its
Affiliates) to any Person other than its Affiliates, directors, officers,
trustees, employees, partners, attorneys and agents of such Partner and their
affiliates, except as may be required by any regulatory authority having
jurisdiction or by any applicable law, regulation, ordinance or order, and
except as otherwise required to carry out the intent of this Agreement.
11.21 PRESS RELEASES. Each Partner agrees to refrain from
generating or participating in any publicity statement, press release, or
other public notice regarding the formation of this Partnership or the
identification of its Partners, the acquisition, disposition or financing of
the Properties by the Partnership or any other business or affairs of the
Partnership. All publicity statements, press releases or other public
notices relating to the formation of this Partnership or the identification
of its Partners, the acquisition, disposition or financing of the Properties
by the Partnership or any other business or affairs of the Partnership must
be approved
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by the Executive Committee. Upon the full execution of the Purchase
Agreement, the Partners shall issue a joint press release in a form
acceptable to both Partners.
11.22 EXISTING FINANCING. The Partners hereby acknowledge and agree
that the Underlying Properties shall be acquired by the Underlying
Partnership subject to, and the Underlying Partnership shall assume, the
Existing Financing and that the acquisition of the Properties subject to such
Existing Financing is subject to the approval of the Rating Agencies (Moody's
Investors Service, Inc. and Fitch Investors Service, L.P.). Each of the
Partners hereby agrees to execute any commercially reasonable amendment to
this Agreement reasonably required by such Rating Agencies in connection with
such approval.
11.23 CONSENTS; APPROVALS. Unless otherwise herein provided, in any
instance in which any Partner, any Executive Committee Member or any
Operating Committee Member shall be requested to consent to or approve of any
matter with respect to which such Person's consent or approval is required by
any of the provisions of this Agreement, such consent (or refusal to consent)
or approval (or disapproval) shall be given in writing, and such consent or
approval shall not be unreasonably withheld or delayed unless this Agreement
with respect to a particular consent or approval shall expressly provide that
the same may be given or refused in the sole judgment or discretion of such
Partner, Executive Committee Member or Operating Committee Member, as
applicable.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date and year first above written.
GENERAL PARTNERS
MACERICH EQ GP CORP.,
a Delaware corporation
By:
---------------------------------------
Its:
--------------------------------------
SDG EQ ASSOCIATES, INC.,
a Delaware corporation
By:
---------------------------------------
Its:
--------------------------------------
LIMITED PARTNERS
MACERICH EQ LIMITED PARTNERSHIP,
a California limited partnership
By: MACERICH EQ GP CORP.,
a Delaware corporation,
its General Partner
By:
---------------------------------------
Its:
--------------------------------------
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SDG EQ DEVELOPERS LIMITED PARTNERSHIP,
a Delaware limited partnership
By: SDG EQ ASSOCIATES, INC.,
a Delaware corporation,
its General Partner
By:
---------------------------------------
Its: Chief Executive Officer
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GLOSSARY OF DEFINED TERMS
"ACCOUNTANTS" shall mean the firm or firms of independent certified
public accountants selected by the Partners on behalf of the Partnership to
audit the books and records of the Partnership and to prepare statements and
reports in connection therewith.
"ACT" shall mean the Delaware Uniform Partnership Act, as the same may
hereafter be amended or supplemented from time to time and any successor
thereto.
"ADDITIONAL CAPITAL CONTRIBUTIONS" is defined in SECTION 2.3.
"AFFECTED GAIN" is defined in the Allocations Exhibit.
"AFFILIATE" shall mean any Entity which directly or indirectly through
one or more intermediaries, Controls, is Controlled by, or is under common
Control with, any Person and shall include in the case of Macerich and MSPE,
Macerich Property Management Company, a California corporation and Macerich
Management Company, a California corporation, and in the case of SDG and SSPE
shall include M.S. Management Associates, Inc., a Delaware corporation, and
its subsidiaries.
"AGREEMENT" shall mean this Partnership Agreement.
"ALLOCATIONS EXHIBIT" shall mean EXHIBIT A.
"ANNUAL BUDGET" is defined in SECTION 5.7(a).
"AUDITED FINANCIAL STATEMENTS" shall mean financial statements (balance
sheets, statement of income, statement of partners' equity and statement of
cash flows) prepared in accordance with generally accepted accounting
principles and accompanied by an independent auditor's report.
"BANKRUPTCY" shall mean, with respect to any Partner, (i) the
commencement by such Partner of any proceeding seeking relief under any
provision or chapter of the federal Bankruptcy Code or any other federal or
state law relating to insolvency, bankruptcy or reorganization; (ii) an
adjudication that such Partner is insolvent or bankrupt; (iii) the entry of
an order for relief under the federal Bankruptcy Code with respect to such
Partner; (iv) the filing of any such petition or the commencement of any such
case or proceeding against such Partner, unless such petition and the case or
proceeding initiated thereby are dismissed within ninety (90) days from the
date of such filing; (v) the filing of an answer by such Partner admitting
the material allegations of any such petition; (vi) the appointment of a
trustee, receiver or custodian for all or substantially all of the assets of
such Partner unless such appointment is vacated or dismissed within ninety
(90) days from the date of such appointment but not less than five (5) days
before the proposed sale of any assets of such Partner; (vii) the insolvency
of such Partner or the execution by such Partner of a general assignment for
the benefit of creditors; (viii) the convening by such Partner
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of a meeting of its creditors, or any class thereof, for purposes of
effecting a moratorium upon or extension or composition of its debts; (ix)
the failure of such Partner to pay its debts as they mature; (x) the levy,
attachment, execution or other seizure of substantially all of the assets of
such Partner where such seizure is not discharged within thirty (30) days
thereafter; or (xi) the admission by such Partner in writing of its inability
to pay its debts as they mature or that it is generally not paying its debts
as they become due.
"BASE RATE" is defined in SECTION 2.4(a).
"BUDGET" and "BUDGETS" is defined in SECTION 5.7(a).
"BUDGETED CAPITAL ITEMS" shall mean capital expenditures set forth in a
Budget for any of the Properties.
"BUSINESS DAY" is defined in SECTION 11.13.
"BUY-SELL CLOSING" is defined in SECTION 7.3(a).
"BUY-SELL MAJOR DECISION" shall mean a decision to sell, finance,
refinance, expand or renovate a Property involving an expenditure or
commitment by the Partnership in the case of an expansion or renovation of
not less than $10,000,000.
"CALL CLOSING" is defined in SECTION 8.3.
"CALL DISSOLUTION MEETING" is defined in SECTION 8.2.
"CALL NOTICE" is defined in SECTION 8.1.
"CALL PROPERTY" is defined in SECTION 8.2.
"CAPITAL ACCOUNT" is defined in the Allocations Exhibit.
"CAPITAL CONTRIBUTION" shall mean, with respect to any Partner, the
amount of money and initial Gross Asset Value of any property other than
money contributed to the Partnership with respect to the Partnership Interest
held by such Partner (net of liabilities to which such property is subject).
"CASH FLOW SHORTFALLS" shall mean the EXCESS, if any, of (a) the sum
(without duplication) of all operating or other cash expenditures paid by the
Partnership (other than capital expenditures of any nature), plus all
payments of principal, interest, fees and related costs made by the
Partnership with respect to Partnership indebtedness (including all such
payments, fees and costs paid in connection with the Existing Financing),
plus all additions to Partnership reserves established in accordance with
this Agreement], OVER (b) all cash revenues and funds received by the
Partnership from any and all sources, including reductions of Partnership
reserves established in accordance with this Agreement, but excluding
security deposit and other refundable deposits
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unless and until earned or applied. Non-cash allowances such as
depreciation, amortization, cost recovery deductions, or similar items shall
not be considered when calculating Cash Flow Shortfalls.
"CLOSING FUNDING REQUIREMENT" is defined in SECTION 2.2(b).
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"CONTRIBUTING PARTY" is defined in SECTION 2.3(c).
"CONTROL" shall mean the ability, whether by the direct or indirect
ownership of shares or other equity interests, by contract or otherwise, to
elect a majority of the directors of a corporation, to select the managing
partner of a partnership, or otherwise to select, or have the power to remove
and then select, a majority of those persons exercising governing authority
over an Entity. In the case of a limited partnership, the sole general
partner, all of the general partners to the extent each has equal management
control and authority, or the managing general partner or managing general
partners thereof shall be deemed to have control of such partnership and, in
the case of a trust, any trustee thereof or any Person having the right to
select any such trustee shall be deemed to have control of such trust. The
terms "Controls" and "Controlled" shall have correlative meanings.
"CONTROLLING PARTY" is defined in SECTION 5.14(c).
"DATE OF VALUE" is defined in SECTION 7.1.
"DEFAULT LOAN" is defined in SECTION 2.4(a).
"DEFAULT LOAN DEFICIENCY" is defined in SECTION 10.2.
"DEFAULTING PARTY" is defined in SECTION 5.14(a).
"DEPRECIATION" is defined in the Allocations Exhibit.
"DESIGNATED PROPERTY" is defined in SECTION 8.3.
"DUE DILIGENCE FORMATION AND ACQUISITION COSTS" is defined in SECTION
2.2(b).
"ENTITY" shall mean any general partnership, limited partnership,
corporation, limited liability company, joint venture, trust, business trust,
cooperative or association.
"ESCROW AGENT" shall mean the "Escrow Agent" under and defined in the
Purchase Agreement.
"ESCROW CLOSING REQUIREMENT" is defined in SECTION 2.2(b).
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"EQUITABLE" shall mean The Equitable Life Assurance Society of the
United States, a New York corporation, the "seller" of the Properties under
the Purchase Agreement.
"EVENT OF DEFAULT" is defined in SECTION 5.14(a).
"EXECUTIVE COMMITTEE" is defined in SECTION 5.1.
"EXECUTIVE COMMITTEE MEMBERS" is defined in SECTION 5.1.
"EXERCISING PARTY" is defined in SECTION 8.1.
"EXERCISING PARTY'S PROPERTY" and "EXERCISING PARTY'S PROPERTIES" are
defined in SECTION 8.2.
"EXISTING FINANCING" shall mean that certain financing with respect to
all of the Properties evidenced by those certain collateralized fixed and
floating rate notes in the aggregate principal sum of $485,000,000 issued by
Equitable, which notes are secured by, INTER ALIA, those documents and
instruments more particularly described on Exhibit B to the Purchase
Agreement.
"FISCAL YEAR" is defined in the Allocations Exhibit.
"FUNDS FROM OPERATIONS" shall mean net income (loss) (computed in
accordance with generally accepted accounting principles), excluding gains
(or losses) from debt restructuring and sales of property, plus depreciation
and amortization (excluding depreciation on personal property and
amortization of loan and financial instrument costs), and after adjustments
for unconsolidated entities. Adjustments for unconsolidated entities are
calculated at the same basis.
"GLOSSARY OF DEFINED TERMS" is defined in the preamble paragraph to this
Agreement.
"GROSS ASSET VALUE" is defined in the Allocations Exhibit.
"IMMEDIATE FAMILY" shall mean, with respect to any individual, such
individual's spouse, parents, parents-in-law, descendants, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law and children-in-law.
"INDEMNITEE" means (i) any Person that is (A) a Partner, (B) an
Executive Committee Member, (C) an Operating Committee Member or (D) a
director, officer, employee, trustee, agent or representative of a Partner,
and (ii) such other Persons (including Affiliates of a Partner or the
Partnership) as the Partners may mutually designate from time to time.
"INITIAL CAPITAL CONTRIBUTIONS" is defined in SECTION 2.2.
"INITIAL RESERVE REQUIREMENT" is defined in SECTION 2.2(b).
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"INITIATING PARTY" is defined in SECTION 7.1.
"INTERIM OPERATING BUDGET" is defined in SECTION 5.7(a).
"LIEN" shall mean any liens, security interests, mortgages, deeds of
trust, charges, claims, encumbrances, pledges, options, rights of first offer
or first refusal and any other rights or interests of others of any kind or
nature, actual or contingent, or other similar encumbrances of any nature
whatsoever.
"LIQUIDATOR" is defined in SECTION 10.2.
"LOAN DEFAULT TRANSFEREE" is defined in SECTION 6.3(c).
"LOAN DEFAULT TRANSFER NOTICE" is defined in SECTION 6.3(c).
"MACERICH" is defined in the Introduction to this Agreement.
"MAJOR DECISION" is defined in SECTION 5.1(c).
"MINIMUM GAIN ATTRIBUTABLE TO PARTNER NONRECOURSE DEBT" is defined in
the Allocations Exhibit.
"NET CASH FLOW" means with respect to any period, the EXCESS, if any, of
(a) all cash revenues and funds received by the Partnership from any and all
sources during such period, including reductions of Partnership reserves
established in accordance with this Agreement, but excluding security deposit
and other refundable deposits unless and until earned or applied, OVER (b)
the sum (without duplication) of all capital, operating or other cash
expenditures of the Partnership paid during such period, plus all payments of
principal, interest, fees and related costs with respect to Partnership
indebtedness made during such period (including all such payments, fees and
costs paid in connection with the Existing Financing), plus all additions to
Partnership reserves established in accordance with this Agreement. Net Cash
Flow shall not be reduced by depreciation, amortization, cost recovery
deductions, or similar non-cash allowances.
"NET INCOME OR NET LOSS" is defined in the Allocations Exhibit.
"NON-COMPETITION AREA" is defined in SECTION 1.8(b).
"NONCONTRIBUTING PARTY" is defined in SECTION 2.3(c).
"NON-DEFAULTING PARTY" is defined in SECTION 5.14(a).
"NON-EXERCISING PARTY" is defined in SECTION 8.1.
"NON-EXERCISING PARTY'S PROPERTY" and "NON-EXERCISING PARTY'S
PROPERTIES" are defined in SECTION 8.2.
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"NONPROPOSING PARTY"is defined in SECTION 1.8(b).
"NONRECOURSE DEDUCTIONS" is defined in the Allocations Exhibit.
"NONRECOURSE LIABILITIES" is defined in the Allocations Exhibit.
"OFFERING NOTICE" is defined in SECTION 7.1.
"OPERATING COMMITTEE" is defined in SECTION 5.3.
"OPERATING COMMITTEE MEMBERS" is defined in SECTION 5.3.
"OPERATING PARTNERSHIP" shall mean, in the case of SDG or SSPE, Simon
DeBartolo Group, L.P., a Delaware limited partnership, and in the case of
Macerich or MSPE, The Macerich Partnership, L.P., a Delaware limited
partnership, as well as their successors by consolidation or other
combination with or into another Person.
"ORIGINAL APPROVED PRE-CLOSING BUDGET" is defined in SECTION 2.2(c).
"OTHER INTERESTS" is defined in SECTION 1.8(a).
"PARTNER NONRECOURSE DEDUCTIONS" is defined in the Allocations Exhibit.
"PARTNER NONRECOURSE DEBT" is defined in the Allocations Exhibit.
"PARTNER" shall mean Macerich, MSPE, SDG and SSPE, and their permitted
successors and assigns that are admitted as Partners, individually.
"PARTNERS" shall mean Macerich MSPE, SDG and SSPE, and their permitted
successors and assigns that are admitted as Partners.
"PARTNERSHIP" shall mean the partnership hereby constituted, as such
partnership may from time to time be constituted.
"PARTNERSHIP INTEREST" shall mean an ownership interest of a Partner in
the Partnership from time to time, including such Partner's Percentage
Interest and such Partner's Capital Account, and any and all other benefits
to which the holder of such Partnership Interest may be entitled as provided
in this Agreement, together with all obligations of such Person to comply
with the terms of this Agreement.
"PARTNERSHIP INTEREST LOAN" is defined in SECTION 6.3(a).
"PARTNERSHIP INTEREST LOAN DEFAULT NOTICE" is defined in SECTION 6.3(d).
"PARTNERSHIP INTEREST LOAN OBLIGATIONS" is defined in SECTION 6.3(a).
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"PARTNERSHIP MINIMUM GAIN" is defined in the Allocations Exhibit.
"PARTNERSHIP PROPERTIES" shall mean any tangible or intangible property
hereafter acquired by the Partnership.
"PARTY" and "PARTIES" are defined in SECTION 1.1.
"PERCENTAGE INTEREST" is defined in SECTION 2.1.
"PERMITTED TRANSFERS" is defined in SECTION 6.1(b).
"PERSON" shall mean any individual or Entity.
"PLEDGING PARTNER" is defined in SECTION 6.3(a)(xi).
"PORTFOLIO OFFER NOTICE" is defined in SECTION 8.6(a).
"PORTFOLIO OFFER PRICE" is defined in SECTION 8.6(a).
"PORTFOLIO SELLING PARTY" is defined in SECTION 8.6(a).
"PRINCIPAL OFFICE" is defined in SECTION 1.4.
"PROPERTY" shall mean any of the Properties individually.
"PROPERTIES" shall mean, collectively, the Partnership Properties and
the Underlying Properties.
"PROPOSAL" is defined in SECTION 1.8(b).
"PROPOSING PARTY" is defined in SECTION 1.8(b).
"PURCHASE AGREEMENT" shall mean that certain Purchase and Sale Agreement
by and between Equitable and SM Portfolio Partners, which provides for the
sale of the Properties by Equitable to SM Portfolio Partners, subject to the
Existing Financing.
"PURCHASE PRICE" is defined in SECTION 7.1.
"PURCHASING PARTY" is defined in SECTION 7.2.
"REIT" is defined in SECTION 1.3.
"REAL ESTATE ACTIVITY" is defined in SECTION 1.8(b).
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"REGULATIONS" shall mean the final, temporary or proposed Income Tax
Regulations promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of succeeding
regulations).
"REGULATORY ALLOCATIONS" is defined in the Allocations Exhibit.
"RELATED PERSONS" is defined in SECTION 1.8.
"REMAINING PARTY" is defined in SECTION 8.6(a).
"RESPONDING PARTY" is defined in SECTION 7.1.
"SDG" is defined in the Introduction to this Agreement.
"SUBJECT PROPERTY" is defined in SECTION 7.1.
"TAX ITEM" is defined in the Allocations Exhibit.
"TERM" is defined in SECTION 1.5.
"TRANSFER" means, as a noun, any voluntary or involuntary transfer,
sale, other disposition, hypothecation or encumbrance, and, as a verb,
voluntarily or involuntarily to transfer, sell, otherwise dispose of,
hypothecate or encumber.
"TRANSFEREE" is defined in SECTION 6.2.
"UNDERLYING PARTNERSHIP" shall mean SDG Macerich Properties, L.P., a
Delaware limited partnership, which owns the Properties.
"UNDERLYING PROPERTIES" shall mean the real properties to be acquired by
the Underlying Partnership pursuant to the Purchase Agreement, each of which
real properties is more specifically identified and defined on Schedule 4
attached hereto, together with all other tangible and intangible property to
be acquired by the Underlying Partnership pursuant to the Purchase Agreement.
"UNREALIZED GAIN" is defined in the Allocations Exhibit.
"UNREALIZED LOSS" is defined in the Allocations Exhibit.
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EXHIBIT A
ALLOCATIONS EXHIBIT
Each Capitalized term used in this Allocations Exhibit either is defined
in the Glossary of Defined Terms to the Agreement or in Section 5 of this
Allocations Exhibit.
1. CAPITAL ACCOUNTS.
1.1 ESTABLISHMENT AND MAINTENANCE OF CAPITAL ACCOUNTS. The Partnership
shall establish and maintain for each Partner a separate account ("CAPITAL
ACCOUNT") in accordance with the rules of Regulations Section
1.704-1(b)(2)(iv) and this Allocations Exhibit. The Capital Account of each
Partner shall be increased by (i) the amount of all Capital Contributions and
any other contributions made by such Partner to the Partnership pursuant to
the Agreement, (ii) the amount of Net Income allocated to such Partner
pursuant to Section 2.1 of this Allocations Exhibit, and (iii) the amount of
any other items of income or gain specially allocated to such Partner
pursuant to Section 3 of this Allocations Exhibit. The Capital Account of
each Partner shall be decreased by (i) the amount of cash or Gross Asset
Value (net of any liabilities to which the Partnership Assets distributed are
subject) of any distributions of cash or property made to such Partner
pursuant to the Agreement, (ii) the amount of Net Loss allocated to such
Partner pursuant to Section 2.2 of this Allocations Exhibit, and (iii) the
amount of any other items of deduction or loss specially allocated to such
Partner pursuant to Section 3 of this Allocations Exhibit. The initial
balance of each Partner's Capital Account shall equal the amount of such
Partner's Capital Contribution to the Partnership on the date hereof as
described in ARTICLE 2 of the Agreement. The Capital Accounts of each
Partner shall be increased or decreased to reflect the revaluation of
Partnership Assets under Section 1.3 of this Allocations Exhibit.
1.2 TRANSFEREES. Generally, a transferee (including any assignee) of a
Partnership Interest shall succeed to a pro rata portion of the Capital
Account of the transferor; PROVIDED, HOWEVER, that, if the transfer causes a
termination of the Partnership under Section 708(b)(1)(B) of the Code, the
Partnership's properties and liabilities shall be deemed, solely for federal
income tax purposes, to have been contributed to a new Partnership in
exchange for an interest in the new Partnership, and the terminated
Partnership distributes interests in the new Partnership to the purchasing
Partner and the other remaining Partners in proportion to their respective
Percentage Interests in liquidation of the terminated Partnership. In such
event, the Gross Asset Values of the Partnership properties shall be adjusted
immediately prior to such deemed contribution pursuant to Section 1.3(b) of
this Allocations Exhibit. The Capital Accounts of such reconstituted
Partnership shall be maintained in accordance with the principles of this
Allocations Exhibit.
1.3 REVALUATIONS OF PARTNERSHIP ASSETS.
(a) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in this Section 1.3, the Gross
Asset Values of all Partnership Assets shall
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be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership Assets, as of the times
of the adjustments provided in Section 1.3(b) of this Allocations
Exhibit, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property and allocated
pursuant to this Allocations Exhibit.
(b) Such adjustments shall be made as of the following times: (i)
immediately prior to the acquisition of an additional interest in the
Partnership, after the date hereof, by any new or existing Partner in
exchange for more than a de minimis Capital Contribution; (ii)
immediately prior to the distribution by the Partnership to a Partner of
more than a de minimis amount of property as consideration for an
interest in the Partnership; and (iii) immediately prior to the
liquidation of the Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); PROVIDED, HOWEVER, that adjustments pursuant to
clauses (i) and (ii) above shall be made only if the Partners determine
that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners in the Partnership.
(c) In accordance with Regulations Section 1.704-1(b)(2)(iv)(e)
the Gross Asset Value of Partnership Assets distributed in kind shall be
adjusted upward or downward to reflect any Unrealized Gain or Unrealized
Loss attributable to such Partnership property, as of the time any such
asset is distributed.
(d) In determining Unrealized Gain or Unrealized Loss for purposes
of this Allocations Exhibit, the aggregate cash amount and fair market
value of all Partnership Assets (including cash or cash equivalents)
shall be determined by the Partners using such reasonable methods of
valuation as they may adopt, or in the case of a liquidating
distribution pursuant to ARTICLE 10 of the Agreement, be determined and
allocated by the Liquidator using such reasonable methods of valuation
as it may adopt. The Partners, or the Liquidator, as the case may be,
shall allocate such aggregate value among the assets of the Partnership
(in such manner as it determines in its sole and absolute discretion
necessary to arrive at a fair market value for individual properties).
1.4 COMPLIANCE WITH REGULATIONS. The provisions of this Allocations
Exhibit relating to the maintenance of Capital Accounts are intended to
comply with Regulations Section 1.704-1(b), and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the
Partners shall determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Partnership,
or any of the Partners), are computed in order to comply with such
Regulations, the Partners may make such modification, provided that it is not
likely to have a material effect on the amounts distributable to any Person
pursuant to ARTICLE 10 of the Agreement upon the dissolution of the
Partnership. The Partners also shall (i) make any adjustments that are
necessary or appropriate to maintain equality between the Capital Accounts of
the Partners and the amount of Partnership capital reflected on the
Partnership's balance sheet, as computed for book purposes, in accordance
with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate
A-2
<PAGE>
modifications in the event unanticipated events might otherwise cause the
Agreement and this Allocations Exhibit not to comply with Regulations Section
1.704-(b).
2. ALLOCATION OF NET INCOME AND NET LOSS. After giving effect to the
special allocations set forth in Section 3 of this Allocations Exhibit, Net
Income and Net Loss for any Fiscal Year or other applicable period shall be
allocated to the Partners in accordance with their respective Percentage
Interests.
3. SPECIAL ALLOCATIONS.
Notwithstanding any other provision of the Agreement or this Allocations
Exhibit, the following special allocations shall be made in the following
order:
3.1 MINIMUM GAIN CHARGEBACK. Notwithstanding any other provisions of
this Allocations Exhibit, if there is a net decrease in Partnership Minimum
Gain during any Fiscal Year, each Partner shall be specially allocated items
of Partnership income and gain for such year (and, if necessary, subsequent
years) in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain, as determined under Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to
the respective amounts required to be allocated to each Partner pursuant
thereto. The items to be so allocated shall be determined in accordance with
Regulations Section 1.704-2(f)(6). This Section 3.1 is intended to comply
with the minimum gain chargeback requirements of Regulations Section
1.704-2(f) and shall be interpreted consistently therewith.
3.2 PARTNER MINIMUM GAIN CHARGEBACK. Notwithstanding any other
provision of this Allocations Exhibit (except Section 3.1), if there is a net
decrease in Minimum Gain Attributable to a Partner Nonrecourse Debt during
any Fiscal Year, each Partner who has a share of the Partnership Minimum Gain
Attributable to such Partner Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(5), shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent
years) in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain Attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with
Regulations Section 1.704-2(i)(4). This Section 3.2 is intended to comply
with the minimum gain chargeback requirements of Regulations Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
3.3 INTEREST ON DEFAULT LOANS. Interest Deductions with respect to any
Default Loan shall be allocated to the Noncontributing Partner with respect
to such Default Loan.
3.4 PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse Deductions
for any Fiscal Year shall be specially allocated to the Partner who bears the
economic risk of loss, under Regulations Section 1.704-2(i)(1), with respect
to the Partner Nonrecourse Debt to which such
A-3
<PAGE>
Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(2).
3.5 CODE SECTION 754 ADJUSTMENTS. To the extent an adjustment to the
adjusted tax basis of any Partnership Asset pursuant to Section 732, 734 or
743 of the Code is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such item of
gain or loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required to be
adjusted pursuant to such Section of the Regulations.
3.6 CURATIVE ALLOCATIONS. The allocations set forth in Sections 3.1,
3.2, 3.3 and 3.5 (the "REGULATORY ALLOCATIONS") are intended to comply with
certain requirements of Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding any provisions of Sections 2 and 3 to the contrary (other
than the Regulatory Allocations), the Regulatory Allocations shall be taken
into account in allocating other items of income, gain, loss and deduction
among the Partners so that, to the extent possible, the cumulative net amount
for the allocations of Partnership items under Sections 2 and 3 hereof shall
be equal to the net amount that would have been allocated had the Regulatory
Allocations not occurred. This Section 3.8 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.
4. ALLOCATIONS FOR TAX PURPOSES.
4.1 GENERALLY. Except as otherwise provided in this Section 4, for
federal income tax purposes, each item of income, gain, loss and deduction (a
"TAX ITEM") shall be allocated among the Partners in the same manner as its
correlative item of "book" income, gain, loss or deduction is allocated among
the Partners pursuant to Sections 2 and 3 of this Allocations Exhibit.
4.2 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 Sections 1245 or 1250 ("AFFECTED GAIN"), then (i) 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 (ii) other Tax Items of gain of the same character
that would have been recognized, but for the application of Code Sections
1245 and/or 1250, shall be allocated away from those Partners who are
allocated Affected Gain pursuant to Clause (i) 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 Sections 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 period.
4.3 TAX ALLOCATIONS: CODE SECTION 704(c). In accordance with Code
Section 704(c) and the Regulations promulgated thereunder, income, gain, loss
and deduction with respect to any
A-4
<PAGE>
property contributed to the capital of the Partnership shall, solely for tax
purposes, be allocated among the Partners so as to take account of any
variation between the adjusted basis of such property to the Partnership for
federal income tax purposes and its initial Gross Asset Value. In the event
the Gross Asset Value of any Partnership asset is adjusted pursuant to
Section 1.3 of this Allocations Exhibit, subsequent allocations of income,
gain, loss and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset to the Partnership for
federal income tax purposes and its Gross Asset Value in the same manner as
under Code Section 704(c) and the Regulations promulgated thereunder.
Without limiting the foregoing, the Partners shall allocate income, gain,
loss and deduction with respect to any property acquired as of the date
hereof, the adjusted basis of which differs from its Gross Asset Value, among
the Partners on a property by property basis, subject to the application of
the "ceiling limitation," in accordance with Regulations Section 1.704-3(b).
The Partners shall allocate income, gain, loss and deduction with respect to
any property acquired after the date hereof, the adjusted basis of which
differs from its Gross Asset Value, among the Partners under any method the
they may elect, so long as such method is set forth in the Regulations
promulgated under Section 704(c) of the Code on the date such property is
acquired.
5. DEFINITIONS.
"AFFECTED GAIN" is defined in SECTION 4.2.
"DEPRECIATION" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Fiscal Year, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization or other cost recovery
deduction for such Fiscal Year bears to such beginning adjusted tax basis;
PROVIDED, HOWEVER, that if the adjusted basis for federal income tax purposes
of an asset at the beginning of such Fiscal Year is zero, Depreciation shall
be determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Partners.
"FISCAL YEAR" means each calendar year, or partial calendar year,
occurring during the term of the Partnership, or such other Fiscal Year as
may be adopted by the Executive Committee from time to time.
"GROSS ASSET VALUE" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset contributed by a
Partner to a Partnership shall be the gross fair market value
of such asset on the date of contribution to the Partnership,
as determined by the Partners;
(ii) the Gross Asset Values of all Partnership Assets shall be
adjusted in accordance with Section 1.3 of this Allocations
Exhibit; and
<PAGE>
(iii) the Gross Asset Value of an asset shall be adjusted each
Fiscal Year by the Depreciation with respect to such asset
taken into account for purposes of computing Net Income and
Net Loss for such year.
"MINIMUM GAIN ATTRIBUTABLE TO PARTNER NONRECOURSE DEBT" shall mean
"partner nonrecourse debt minimum gain" as determined in accordance with
Regulation Section 1.704-2(i)(2).
"NET INCOME OR NET LOSS" shall mean, for each Fiscal Year or other
applicable period, an amount equal to the Partnership's taxable income or
loss for such year or period, determined in accordance with Section 703(a) of
the Code (for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Section 703(a) of the Code shall
be included in taxable income or loss), with the following adjustments:
(i) The computation of all items of income, gain, loss and
deduction shall be made without regard to the fact that items
described in Sections 705(a)(1)(B) or 705(a)(2)(B) of the Code
are not includable in gross income or are neither currently
deductible nor capitalized for federal income tax purposes;
(ii) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as
if the adjusted basis of such property as of such date of
disposition were equal in amount to the Partnership's Gross
Asset Value with respect to such property as of such date;
(iii) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account
Depreciation for such Fiscal Year;
(iv) In the event the Gross Asset Value of any Partnership property
is adjusted to reflect any Unrealized Gain or Unrealized Loss
with respect to such property pursuant to Section 1.3 hereof,
the amount of any such Unrealized Gain or Unrealized Loss
shall be taken into account as gain or loss from the
disposition of such property; and
(v) Any items specially allocated under Article 3 of this
Allocations Exhibit shall not be taken into account.
"NONRECOURSE DEDUCTIONS" shall have the meaning set forth in Sections
1.704-2(b)(1) and (c) of the Regulations.
"NONRECOURSE LIABILITIES" shall have the meaning set forth in Section
1.752-1(a)(2) of the Regulations.
A-6
<PAGE>
"PARTNER NONRECOURSE DEDUCTIONS" shall have the meaning set forth in
Section 1.704-2(i)(1) of the Regulations.
"PARTNER NONRECOURSE DEBT" shall have the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
"PARTNERSHIP MINIMUM GAIN" shall have the meaning set forth in
Sections 1.704-2(b)(2) and (d)(1) of the Regulations.
"TAX ITEM" is defined in SECTION 4.1 of this Allocations Exhibit.
"UNREALIZED GAIN" means, with respect to any Partnership property
as of any particular date, the excess of (i) the gross fair market value of
such property on such date as determined in accordance with Section 1.3 of
this Allocations Exhibit, over (ii) the Gross Asset Value of such property to
the Partnership on such date.
"UNREALIZED LOSS" means, with respect to any Partnership property
as of any particular date, the excess of (i) the Gross Asset Value of such
property to the Partnership on such date, over (ii) the gross fair market
value of such property on such date, as determined in accordance with Section
1.3 of this Allocations Exhibit as of such date.
A-7
<PAGE>
SCHEDULE 1
ORIGINAL APPROVED PRE-CLOSING BUDGET
To be mutually approved by SDG and Macerich and incorporated into this
Agreement by an amendment signed by SDG and Macerich.
SCHEDULE 1
<PAGE>
SCHEDULE 2
[Intentionally Omitted]
SCHEDULE 2
<PAGE>
SCHEDULE 3
[Intentionally Omitted]
SCHEDULE 3
<PAGE>
SCHEDULE 4
LIST OF PROPERTIES
1. Eastland Mall
Evansville, Indiana
2. Empire East
Sioux Falls, South Dakota
3. Empire Mall
Sioux Falls, South Dakota
4. Granite Run Mall
Media, Pennsylvania
5. Lake Square Mall
Leesburg, Florida
6. Lindale Mall
Cedar Rapids, Iowa
7. Mesa Mall
Grand Junction, Colorado
8. NorthPark Mall
Davenport, Iowa
9. Rushmore Mall
Rapid City, South Dakota
10. Southern Hills Mall
Sioux City, Iowa
11. SouthPark Mall
Moline, Illinois
12. Southridge Mall
Des Moines, Iowa
13. Valley Mall
Harrisonburg, Virginia
SCHEDULE 4
<PAGE>
SCHEDULE 5
NONCOMPETITION AREA
To be mutually approved by SDG and Macerich and incorporated into this
Agreement by an amendment signed by SDG and Macerich.
SCHEDULE 5
<PAGE>
EXHIBIT 21.1
<TABLE>
<CAPTION>
LIST OF SUBSIDIARIES
<S> <C>
THE MACERICH PARTNERSHIP, L.P., a Delaware limited partnership
MACERICH FARGO ASSOCIATES, a California general partnership
MACERICH BRISTOL ASSOCIATES, a California general partnership
MACERICH BUENAVENTURA LIMITED PARTNERSHIP, a California limited partnership
MACERICH BUENAVENTURA GP CORP., a Delaware corporation
MACERICH NORTHWESTERN ASSOCIATES, a California general partnership
MACERICH CITADEL LIMITED PARTNERSHIP, a California limited partnership
MACERICH CITADEL GP CORP., a Delaware corporation
MACERICH EQ LIMITED PARTNERSHIP, a California limited partnership
MACERICH EQ GP CORP., a Delaware corporation
MACERICH FRESNO LIMITED PARTNERSHIP, a California limited partnership
MACERICH FRESNO GP CORP., a Delaware corporation
MACERICH GREAT FALLS LIMITED PARTNERSHIP, a California limited partnership
MACERICH GREAT FALLS GP CORP., a Delaware corporation
MACERICH GREELEY ASSOCIATES, a California general partnership
MACERICH HUNTINGTON LIMITED PARTNERSHIP, a California limited partnership
MACERICH HUNTINGTON GP CORP., a Delaware corporation
NORTHGATE MALL ASSOCIATES, a California general partnership
NORTH VALLEY PLAZA ASSOCIATES, a California general partnership
PANORAMA CITY ASSOCIATES, a California general partnership
LAKEWOOD MALL BUSINESS COMPANY, a Delaware business trust
LAKEWOOD MALL FINANCE COMPANY, a Delaware corporation
MACERICH PROPERTY MANAGEMENT COMPANY, a California corporation
MACERICH MANAGEMENT COMPANY, a California corporation
MACERICH MANHATTAN LIMITED PARTNERSHIP, a California limited partnership
MACERICH MANHATTAN GP CORP., a Delaware corporation
MANHATTAN VILLAGE LLC, a California limited liability company
MACERICH MANHATTAN MANAGEMENT COMPANY, a California corporation
MACERICH MARINA LIMITED PARTNERSHIP, a California limited partnership
MACERICH MARINA GP CORP., a Delaware corporation
MACERICH OKLAHOMA LIMITED PARTNERSHIP, a California limited partnership
MACERICH OKLAHOMA GP CORP., a Delaware corporation
MACERICH PROPERTY EQ GP CORP., a Delaware corporation
MACERICH QUEENS LIMITED PARTNERSHIP, a California limited partnership
MACERICH QUEENS GP CORP., a Delaware corporation
MACERICH QUEENS FUNDING CORP., a Delaware corporation
MACERICH QUEENS ADJACENT GP CORP, a Delaware corporation
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIST OF SUBSIDIARIES
<S> <C>
MACERICH QUEENS ADJACENT GUARANTY G.P. CORP., a Delaware corporation
MACERICH QUEENS ADJACENT LIMITED PARTNERSHIP, a California limited partnership
MACERICH RIMROCK LIMITED PARTNERSHIP, a California limited partnership
MACERICH RIMROCK GP CORP., a Delaware corporation
MACERICH SCG LIMITED PARTNERSHIP, a California limited partnership
MACERICH SCG GP CORP., a Delaware corporation
MACERICH SCG FUNDING LIMITED PARTNERSHIP, a California limited partnership
MACERICH SCG HOLDING LIMITED PARTNERSHIP, a California limited partnership
MACERICH SCG FUNDING GP CORP., a Delaware corporation
MACERICH SASSAFRAS GP CORP., a Delaware corporation
MACERICH SASSAFRAS LIMITED PARTNERSHIP, a California limited partnership
MACERICH SOUTH TOWNE LIMITED PARTNERSHIP, a California limited partnership
MACERICH SOUTH TOWNE GP CORP., a Delaware corporation
MACERICH ST MARKETPLACE LIMITED PARTNERSHIP, a California limited partnership
MACERICH ST MARKETPLACE GP CORP., a Delaware corporation
MACERICH STONEWOOD LIMITED PARTNERSHIP, a California limited partnership
MACERICH STONEWOOD GP CORP., a Delaware corporation
MACERICH VALLEY VIEW LIMITED PARTNERSHIP, a California limited partnership
MACERICH VALLEY VIEW GP CORP., a Delaware corporation
MACERICH VALLEY VIEW ADJACENT LIMITED PARTNERSHIP, a California limited partnership
MACERICH VALLEY VIEW ADJACENT GP CORP., a Delaware corporation
MACERICH VINTAGE FAIRE LIMITED PARTNERSHIP, a California limited partnership
MACERICH VINTAGE FAIRE GP CORP., a Delaware corporation
SDG MACERICH PROPERTIES, L.P., a Delaware limited partnership
SM PORTFOLIO LIMITED PARTNERSHIP, a California limited partnership
WEST ACRES DEVELOPMENT, a North Dakota general partnership
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of The Macerich Company on Form S-3 (File No. 333-21157), Form S-3 (File No.
333-38721) and Form S-8 of our report dated March 20, 1998, on our audits of the
consolidated financial statements and financial statement schedule of The
Macerich Company as of December 31, 1997 and 1996 and for the years ended
December 31, 1997, 1996 and 1995, which report is included in this Annual Report
on Form 10-K.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
March 20, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 34 AND 35 OF THE COMPANY'S FORM 10-K FOR THE YEAR AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 25,154
<SECURITIES> 0
<RECEIVABLES> 26,801
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,607,429
<DEPRECIATION> (200,250)
<TOTAL-ASSETS> 1,505,000
<CURRENT-LIABILITIES> 32,444
<BONDS> 1,122,959
0
0
<COMMON> 257
<OTHER-SE> 216,038
<TOTAL-LIABILITY-AND-EQUITY> 1,505,002
<SALES> 0
<TOTAL-REVENUES> 221,214
<CGS> 0
<TOTAL-COSTS> 73,660
<OTHER-EXPENSES> 58,546
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66,407
<INCOME-PRETAX> 22,601
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,601
<DISCONTINUED> 0
<EXTRAORDINARY> (555)
<CHANGES> 0
<NET-INCOME> 22,046
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.84
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> YEAR YEAR 3-MOS 3-MOS
3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1996
DEC-31-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996 MAR-31-1996 JUN-30-1996
SEP-30-1996
<CASH> 0 0 0 0
0
<SECURITIES> 0 0 0 0
0
<RECEIVABLES> 0 0 0 0
0
<ALLOWANCES> 0 0 0 0
0
<INVENTORY> 0 0 0 0
0
<CURRENT-ASSETS> 0 0 0 0
0
<PP&E> 0 0 0 0
0
<DEPRECIATION> 0 0 0 0
0
<TOTAL-ASSETS> 0 0 0 0
0
<CURRENT-LIABILITIES> 0 0 0 0
0
<BONDS> 0 0 0 0
0
0 0 0 0
0
0 0 0 0
0
<COMMON> 0 0 0 0
0
<OTHER-SE> 0 0 0 0
0
<TOTAL-LIABILITY-AND-EQUITY> 0 0 0 0
0
<SALES> 0 0 0 0
0
<TOTAL-REVENUES> 0 0 0 0
0
<CGS> 0 0 0 0
0
<TOTAL-COSTS> 0 0 0 0
0
<OTHER-EXPENSES> 0 0 0 0
0
<LOSS-PROVISION> 0 0 0 0
0
<INTEREST-EXPENSE> 0 0 0 0
0
<INCOME-PRETAX> 0 0 0 0
0
<INCOME-TAX> 0 0 0 0
0
<INCOME-CONTINUING> 0 0 0 0
0
<DISCONTINUED> 0 0 0 0
0
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 0 0 0 0
0
<EPS-PRIMARY> 0.73 0.91 0.22 0.21
0.23
<EPS-DILUTED> 0.73 0.89 0.22 0.21
0.23
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 0 0 0
<SECURITIES> 0 0 0
<RECEIVABLES> 0 0 0
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 0 0 0
<PP&E> 0 0 0
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 0 0 0
<CURRENT-LIABILITIES> 0 0 0
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 0 0
<SALES> 0 0 0
<TOTAL-REVENUES> 0 0 0
<CGS> 0 0 0
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> 0 0 0
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 0 0 0
<EPS-PRIMARY> 0.26 0.24 0.07
<EPS-DILUTED> 0.26 0.24 0.07
</TABLE>
