<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 1998.
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
THE MACERICH COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Maryland 95-4448705
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 Wilshire Boulevard, # 700
Santa Monica, California 90401
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (310) 394-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -----------------------
Common Stock,
$0.01 Par Value New York Stock Exchange
Preferred Share New York Stock Exchange
Purchase Rights
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 FOR 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 18, 1999, the aggregate market value of the 25,586,863
shares of Common Stock held by non-affiliates of the registrant was $598
million based upon the closing price ($23.375) 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 18, 1999,
there were 33,944,863 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual stockholders meeting to
be held in 1999 are incorporated by reference into Part III.
<PAGE>
THE MACERICH COMPANY
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item No. Page No.
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PART I
<S> <C>
1. Business......................................................................... 1-10
2. Properties....................................................................... 11-17
3. Legal Proceedings................................................................ 17
4. Submission of Matters to a Vote of Security Holders.............................. 17
PART II
5. Market for the Registrant's Common Equity and Related Stockholder Matters........ 18
6. Selected Financial Data.......................................................... 19-22
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 23-34
7A. Quantitative and Qualitative Disclosures
About Market Risk....................................................... 34-35
8. Financial Statements and Supplementary Data...................................... 35
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................................... 35
PART III
10. Directors and Executive Officers of the Company.................................. 36
11. Executive Compensation........................................................... 36
12. Security Ownership of Certain Beneficial Owners and Management................... 36
13. Certain Relationships and Related Transactions.................................. 36
PART IV
14. Exhibits, Financial Statements, Financial Statement Schedules and Reports on Form
8-K............................................................................... 37-72
</TABLE>
SIGNATURES
<PAGE>
PART I
ITEM I. 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 46
regional shopping centers and seven community shopping centers aggregating
approximately 40 million square feet of gross leasable area. These 53 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 Form 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
A. EQUITY OFFERINGS
The Company sold 7,920,181 shares of its common stock in six offerings
during 1998, raising $203.8 million of net proceeds.
On February 25, 1998, the Company issued 3,627,131 shares of its Series
A cumulative convertible redeemable preferred stock ("Series A Preferred Stock")
for net proceeds totaling $99.0 million.
On June 17, 1998, the Company issued 5,487,471 shares of its Series B
cumulative convertible redeemable preferred stock ("Series B Preferred Stock")
for net proceeds totaling $148.5 million.
The total net proceeds from the 1998 common and preferred stock
offerings totaled $451.3 million. These proceeds were used for the 1998
acquisitions, reducing borrowings under the Company's line of credit and general
corporate purposes.
B. ACQUISITIONS
On February 27, 1998, the Company, through a 50/50 joint venture with
an affiliate of Simon Property 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 $974.5
million, which included $485.0 million of assumed debt, at market value. The
Company's share of the cash component of the purchase price was funded by
issuing $100.0 million of Series A Preferred Stock, $80.0 million of common
stock and borrowing the balance from the Company's line of credit.
South Plains Mall was acquired on June 19, 1998. South Plains Mall is a
1,140,574 square foot super regional mall located in Lubbock, Texas. The
purchase price was $115.5 million, consisting of $29.3 million of assumed debt,
at fair market value, and $86.2 million of cash. The cash portion was funded
with a portion of the proceeds from the Company's Series B Preferred Stock
offering.
Westside Pavilion was acquired on July 1, 1998 for $170.5 million.
Westside Pavilion is a 755,759 square foot regional mall located in Los Angeles,
California. The purchase price was funded with a portion of the proceeds from
the Company's Series B Preferred Stock offering, borrowings under the Company's
line of credit and the placement of a ten year $100.0 million mortgage secured
by the property.
1
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B. ACQUISITIONS, CONTINUED:
The Village at Corte Madera is a 428,398 square foot regional mall in
Corte Madera, California, which the Company acquired in two phases: (i) 40% on
June 16, 1998 and (ii) the remaining 60% on July 24, 1998. In addition, Carmel
Plaza, a 115,215 square foot community shopping center in Carmel, California was
acquired on August 10, 1998. The combined purchase price was $165.5 million,
consisting of $40.0 million of assumed debt, the issuance of $7.9 million of
limited partnership interests in the Operating Partnership ("OP Units") and
$117.6 million in cash. The cash component was funded by borrowings under the
Company's line of credit.
Northwest Arkansas Mall was acquired on December 15, 1998. Northwest
Arkansas Mall is a 780,237 square foot regional mall located in Fayetteville,
Arkansas. The purchase price of $94.0 million was funded by a concurrently
placed loan of $63.0 million and borrowings of $31.0 million under the Company's
line of credit.
On February 18, 1999, through a 51/49 joint venture with Ontario
Teachers' Pension Plan Board, the Company closed on the first phase of a two
phase acquisition of a portfolio of properties. The phase one closing included
the acquisition of three regional malls, the retail component of a mixed-use
development, five contiguous properties and two non-contiguous community
shopping centers comprising approximately 3.6 million square feet for a total
purchase price of approximately $427.0 million. The purchase price was funded
with a $120.0 million loan placed concurrently with the closing, $140.4 million
of debt from an affiliate of the seller, and $39.4 million of assumed debt. The
balance of the purchase price was paid in cash. The Company's share of the cash
component was funded with the proceeds from two refinancings of centers and
borrowings under the Company's line of credit. The second phase consists of the
acquisition of the office component of the mixed-use development for a purchase
price of approximately $115 million. The closing of the second phase is expected
to occur in May 1999.
C. REFINANCINGS
On August 3, 1998, the Company, along with the joint venture partner,
refinanced the debt secured by Broadway Plaza. The loan of $43.5 million was
paid in full and a new note was issued for $75.0 million bearing interest at a
fixed rate of 6.68% and maturing August 1, 2008.
On August 7, 1998, the Company refinanced the debt on Fresno Fashion
Fair. A $38.0 million loan was paid in full and a new secured note was issued
for $69.0 million bearing interest at fixed rate of 6.52% and maturing August
10, 2008.
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.
2
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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 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, a dominant location, 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 Express/Bath and Body 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.
3
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MANAGEMENT AND OPERATING PHILOSOPHY, CONTINUED:
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 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 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
through 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 known
as the "1997 Acquisition Centers."
The Company made the following acquisitions in 1998: The Company
along with a 50/50 joint venture partner, acquired a portfolio of twelve
regional malls totaling 10.7 million square feet on February 27, 1998; South
Plains Mall in Lubbock, Texas on June 19,1998; Westside Pavilion in Los
Angeles, California on July 1, 1998; Village at Corte Madera in Corte Madera,
California in June and July 1998; Carmel Plaza in Carmel, California on
August 10, 1998; and Northwest Arkansas Mall in Fayetteville, Arkansas on
December 15, 1998. Together, these properties are known as the "1998
Acquisition Centers."
On February 18, 1999, the Company, along with a joint venture partner,
acquired a portfolio of three regional malls, the retail component of a
mixed-use development, five contiguous properties and two non-contiguous
community shopping centers totaling approximately 3.6 million square feet. The
Company is a 51% owner of this portfolio. The second phase of this transaction
consists of the acquisition of the office component of the mixed-use development
which is expected to occur in May 1999.
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 18, 1999, the Centers consist of 46
Regional Shopping Centers and seven Community Shopping Centers aggregating
approximately 40 million square feet of GLA. The 46 Regional Shopping Centers in
the Company's portfolio average approximately 842,000 square feet of GLA and
range in size from 1.9 million square feet of GLA at Lakewood Mall to 324,859
square feet of GLA at Panorama Mall. The Company's seven Community Shopping
Centers, Albany Plaza, Boulder Plaza, Bristol Shopping Center, Carmel Plaza,
Eastland Plaza, Great Falls Marketplace and Villa Marina Marketplace, have an
average of 180,000 square feet of GLA. The 46 Regional Shopping Centers
presently include 163 Anchors totaling approximately 22.0 million square feet of
GLA and approximately 5,515 Mall and Freestanding Stores totaling approximately
18.0 million square feet of GLA.
Total revenues increased from $221.2 million in 1997 to $283.9 million
in 1998 primarily due to the 1998 and 1997 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 and
16.0% in 1996. Queens Center accounted for 13.8% of 1996 shopping center
revenue. No Center generated more than 10% of shopping center revenues during
1998.
4
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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 Year Ended December 31,
1996 (2) 1997 (3) 1998 (4)
-------- -------- --------
<S> <C> <C> <C>
Minimum rents 8.3% 7.9% 7.7%
Percentage rents 0.4% 0.4% 0.4%
Expense recoveries (1) 2.9% 3.0% 3.0%
------- ------- -------
Mall tenant occupancy costs 11.6% 11.3% 11.1%
------- ------- -------
------- ------- -------
</TABLE>
(1) Represents real estate tax and common area maintenance charges.
(2) Excludes Centers acquired in 1996 (the "1996 Acquisition Centers"). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(3) Excludes 1997 Acquisition Centers.
(4) Excludes 1998 Acquisition Centers.
COMPETITION
The 46 Regional Shopping Centers are generally located in developed
areas in middle to upper income markets where there are relatively few other
Regional Shopping Centers. In addition, 44 of the 46 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 ten other publicly traded mall
companies, any of which under certain circumstances, could compete against the
Company for an acquisition, an Anchor or a tenant. 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, mail-order services, internet
shopping and home shopping networks that could adversely affect the Company's
revenues.
MAJOR TENANTS
The Centers derived approximately 89.9% of their total rents for the
year ended December 31, 1998 from Mall and Freestanding Stores. One retailer
accounted for approximately 6.1% of annual base rents of the Company, and no
other single retailer accounted for more than 4.5%, as of December 31, 1998.
The following retailers (including their subsidiaries) represent the 10
largest retailers in the Company's portfolio (excluding joint ventures) based
upon minimum rents in place as of December 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF STORES % OF TOTAL MINIMUM RENTS
RETAILER IN THE CENTERS AS OF DECEMBER 31, 1998
-------- -------------- -----------------------
<S> <C> <C>
The Limited 107 6.1%
Venator Group 126 4.5%
The Gap 28 2.6%
Barnes & Noble 29 1.8%
J.C. Penney 19 1.8%
Melville Corporation 32 1.2%
The Musicland Group 29 1.1%
Consolidated Stores 29 1.0%
Zale Corporation 24 0.9%
Hallmark Specialty Retail 20 0.8%
</TABLE>
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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, 1998, comprises 70.0% 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 1998 was $28.58 per square foot, or 14% higher than the average base rent
for all Mall and Freestanding Stores (10,000 square feet or under) at December
31, 1998 of $25.08 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
Square Foot (1) During the Year (2) During the Year (3)
----------------------- ------------------------- -------------------------
<S> <C> <C> <C>
DECEMBER 31,
1996............................ $23.90 $27.02 $24.54
1997............................ $24.27 $27.58 $24.84
1998............................ $25.08 $28.58 $26.34
</TABLE>
(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 1996 (excluding the 1996
Acquisition Centers), 1997 (excluding the 1997 Acquisition Centers), and
1998 (excluding the 1998 Acquisition Centers).
(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
1996 average excludes the 1996 Acquisition Centers, the 1997 average
excludes the 1997 Acquisition Centers and the 1998 average excludes the
1998 Acquisition Centers.
(3) The average base rent on leases expiring during the year represents the
final year minimum rent, on a cash basis, for all tenant leases 10,000
square feet or under expiring during the year. On a comparable space basis,
average rents on leases under 10,000 square feet commencing in 1998 was
$31.04 compared to expiring rents of $26.34. The average base rent on
leases expiring in 1996 excludes the 1996 Acquisition Centers, the average
for 1997 excludes 1997 Acquisition Centers and the average for 1998
excludes the 1998 Acquisition Centers.
BANKRUPTCY AND/OR 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 11 of its Centers. Montgomery Ward has indicated that it plans to
cease operating at three of these locations. The Company is negotiating to
recapture these locations and replace Montgomery Ward with another department
store. Montgomery Ward has not yet disclosed whether it will cease to operate
any of its eight remaining stores at the Centers. If Montgomery Ward ceases to
operate any of its stores and the Company is unable to replace them with other
tenants, it could have an adverse effect on a Center.
6
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BANKRUPTCY AND/OR CLOSURE OF RETAIL STORES, CONTINUED:
Retail stores at the Centers other than Anchors may also seek the
protection of the bankruptcy laws and/or close stores, 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
6.1% of total rents, the bankruptcy and/or closure of stores could result in
decreased occupancy levels, reduced rental income or otherwise adversely impact
the Centers. Although certain tenants have filed for bankruptcy, the Company
does not believe such filings and any subsequent closures of their stores will
have a material adverse impact on its operations.
LEASE EXPIRATIONS
The following table shows scheduled lease expirations (for Centers
owned as of December 31, 1998) 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>
Approximate % of Total Ending
Number of GLA of Leased GLA Base Rent per
Year Ending Leases Expiring Represented by Square Foot of
December 31, Expiring Leases Expiring Leases (1) Expiring Leases (1)
------------ -------- ------ ------------------ -------------------
<S> <C> <C> <C> <C>
1999 587 1,057,547 11.9% $23.49
2000 465 840,962 9.5% $26.41
2001 428 807,193 9.1% $27.55
2002 373 794,459 8.9% $25.42
2003 435 950,597 10.7% $24.99
2004 308 727,502 8.2% $25.20
2005 323 869,563 9.8% $26.03
2006 296 804,328 9.1% $26.60
2007 318 841,666 9.5% $28.07
2008 291 811,139 9.1% $28.84
</TABLE>
- ---------------------------------------------------------
(1) For leases 10,000 square feet or under
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 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 represented approximately 10.1% of the Company's total rent for
the year ended December 31, 1998.
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 Centers as of December 31, 1998, except as
otherwise indicated:
7
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ANCHORS, CONTINUED:
<TABLE>
<CAPTION>
GLA GLA Total GLA
Number of Owned Leased Occupied
Name Anchor Stores By Anchor By Anchor By Anchor
- ---- ----------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
J.C. Penney 30 1,196,066 2,731,774 3,927,840
Sears 25 1,437,831 1,518,413 2,956,244
Dayton Hudson Corp.
Mervyn's 10 409,180 408,508 817,688
Target 8 491,260 379,871 871,131
Dayton's 2 115,193 100,790 215,983
----------------- ---------------- ---------------- ------------------
Total 20 1,015,633 889,169 1,904,802
Dillard's 14 1,257,162 662,735 1,919,897
Federated Department Stores
Macy's 8 1,039,844 411,599 1,451,443
Macy's Men's & Home 2 - 155,614 155,614
Macy's Men's & Juniors 2 - 146,906 146,906
----------------- ---------------- ---------------- ------------------
Total 12 1,039,844 714,119 1,753,963
Montgomery Ward (1) 11 585,768 939,687 1,525,455
May Department Stores Co.
Foley's 4 725,316 - 725,316
Hechts 2 140,000 143,426 283,426
Robinsons-May 3 366,250 362,852 729,102
----------------- ---------------- ---------------- ------------------
Total 9 1,231,566 506,278 1,737,844
Younker's 6 - 609,177 609,177
Gottschalks 5 332,638 283,772 616,410
Herberger's 5 188,000 283,891 471,891
Nordstrom 3 109,000 323,369 432,369
Von Maur 3 186,686 59,563 246,249
Belk 2 - 127,950 127,950
Boscov's 2 - 314,717 314,717
Wal-Mart 2 281,455 281,455
Beall's 1 - 40,000 40,000
Burlington Coat Factory 1 - 133,650 133,650
DeJong 1 - 43,811 43,811
Famous Barr 1 180,000 - 180,000
Home Depot 1 - 130,232 130,232
Kohl's 1 - 92,466 92,466
Lazarus 1 159,068 - 159,068
Watson's 1 - 42,090 42,090
ZCMI 1 - 200,000 200,000
Vacant 5 - 348,023 348,023
----------------- ---------------- ---------------- ------------------
163 9,200,717 10,994,886 20,195,603
----------------- ---------------- ---------------- ------------------
----------------- ---------------- ---------------- ------------------
</TABLE>
---------------------------
(1) During 1997, Montgomery Ward filed for bankruptcy. Montgomery Ward
announced that it will close its stores at Holiday Village Mall,
Rimrock Mall and Southridge Mall in 1999. The Company is negotiating to
recapture these locations and replace Montgomery Ward with another
department store. Montgomery Ward has not yet disclosed whether it will
cease to operate any of its eight remaining stores at the Centers.
8
<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 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 responsible current or former tenants, 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 current or former 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, formerly owned by a joint venture
of which the Company was a 50% member. The property was sold on December 18,
1997. The California Department of Toxic Substances Control (DTSC) advised the
Company in 1995 that very low levels of Dichloroethylene (1,2 DCE), a
degradation byproduct of PCE, had been detected in a municipal water well
located 1/4 mile west of 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 1,2 DCE which is
permitted in drinking water is 6 parts per billion (ppb). The 1,2 DCE was
detected in the water well at a concentration of 1.2 ppb, which 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 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 former dry cleaner. $153,100
and $124,000 have already been incurred by the joint venture for remediation,
and professional and legal fees for the periods ending December 31, 1998 and
1997, respectively. An additional $408,000 remains reserved by the joint venture
as of December 31, 1998.
9
<PAGE>
ENVIRONMENTAL MATTERS, CONTINUED:
The joint venture has been sharing costs on a 50/50 basis with a former owner of
the property and intends to look to additional responsible parties for recovery.
Low levels of toluene, a petroleum constituent, was detected in one of
three groundwater dewatering system holding tanks at Queens Center. Although the
Company believes that no remediation will be required, the Company established a
$150,000 reserve in 1996 to cover professional fees and testing costs, which was
reduced by costs incurred of $2,300 and $18,000 for the twelve months ending
December 31, 1998 and 1997, respectively. 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 Center. 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
were well within OSHA's permissible exposure limit (PEL) of .1 fcc. The
accounting for this acquisition includes a reserve of $3.3 million to cover
future removal of this asbestos, as necessary. The Company incurred $255,500 and
$170,000 in remediation costs for the twelve months ending December 31, 1998 and
1997, respectively.
INSURANCE
The Company has comprehensive liability, fire, flood, extended coverage
and rental loss insurance with respect to the Centers. The Company or the joint
venture, as applicable, also currently carries earthquake insurance covering the
Centers located in California. Management believes that such insurance provides
adequate coverage. The Company has been notified by certain of its insurance
carriers that coverage will not be provided for various claims relating to the
Year 2000 issues and is negotiating with such carriers regarding the scope of
any Year 2000 exclusions.
QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST
The Company elected to be taxed as a real estate investment trust under
the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its
first taxable year ended December 31, 1994, and intends to conduct its
operations so as to continue to qualify as a real estate investment trust under
the Code. As a real estate investment trust, the Company generally will not be
subject to federal and state income taxes on its net taxable income that it
currently distributes to stockholders. Qualification and taxation as a real
estate investment trust depends on the Company's ability to meet certain
dividend distribution tests, share ownership requirements and various
qualification tests prescribed in the Code.
EMPLOYEES
The Company and the Management Companies employ approximately 1,443
persons, including eight executive officers, personnel in the areas of
acquisitions and business development (7), property management (260), leasing
(68), redevelopment/construction (22), financial services (37) and legal affairs
(24). In addition, in an effort to minimize operating costs, the Company
generally maintains its own security staff (447) and maintenance staff (570).
Approximately six of these employees are represented by a union. The Company
believes that relations with its employees are good.
10
<PAGE>
ITEM 2. PROPERTIES
The following table sets forth certain information about each of
the Centers:
<TABLE>
<CAPTION>
Year of Year of
Company's Original Most Recent Mall and
Ownership Name of Center / Construction/ Expansion / Total Free-standing
% Location (1) Acquisition Renovation GLA (2) GLA
- -------------------------------------------------- --------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
100% Boulder Plaza 1969 / 1989 1991 158,997 158,997
Boulder, Colorado
100% Bristol Shopping Center (4) 1966 / 1986 1992 165,279 165,279
Santa Ana, California
50% Broadway Plaza (4) 1951 / 1985 1994 678,855 233,358
Walnut Creek, California
100% Capitola Mall (4) 1977 / 1995 1988 584,962 205,245
Capitola, California
100% Chesterfield Towne Center 1975 / 1994 1997 869,606 404,987
Richmond, Virginia
100% Citadel, The 1972 / 1997 1995 1,045,784 450,444
Colorado Springs, Colorado
100% County East Mall 1966 / 1986 1989 494,343 175,783
Antioch, California
100% Crossroads Mall 1974 / 1994 1991 1,174,207 434,519
Oklahoma City, Oklahoma
100% Fresno Fashion Fair 1970 / 1996 1983 874,306 313,425
Fresno, California
100% Great Falls Marketplace 1997 / 1997 - 159,758 159,758
Great Falls, Montana
100% Greeley Mall 1973 / 1986 1987 581,443 238,081
Greeley, Colorado
100% Green Tree Mall (4) 1968 / 1975 1995 781,737 337,741
Clarksville, Indiana
100% Holiday Village Mall (4) 1959 / 1979 1992 597,361 269,842
Great Falls, Montana
100% Lakewood Mall 1953 / 1975 1996 1,850,903 907,254
Lakewood, California
10% Manhattan Village Shopping Ctr (4) 1981 / 1997 1992 551,847 375,793
Manhattan Beach, California
100% Northgate Mall 1964 / 1986 1987 743,849 273,518
San Rafael, California
50% Panorama Mall 1955 / 1979 1980 324,859 159,859
Panorama, California
100% Queens Center 1973 / 1995 1991 624,337 156,194
Queens, New York
100% Rimrock Mall 1978 / 1996 1980 600,788 285,348
Billings, Montana
100% Salisbury, Centre at 1990 / 1995 1990 883,400 278,419
Salisbury, Maryland
100% South Towne Center 1987 / 1997 1997 1,236,356 459,844
Sandy, Utah
100% Stonewood Mall (4) 1953 / 1997 1991 927,553 356,806
Downey, California
<CAPTION>
Percentage
Company's of Mall and Sales Per
Ownership Name of Center / Free-standing Square
% Location (1) GLA Leased Anchors Foot (3)
- ------------------------------------------------------ ---------------- ---------------------------------------- -----------
<S> <C> <C> <C> <C>
100% Boulder Plaza 100.0% ----- $323
Boulder, Colorado
100% Bristol Shopping Center (4) 96.9% ----- 380
Santa Ana, California
50% Broadway Plaza (4) 99.2% Macy's, Nordstrom, 479
Walnut Creek, California Macy's Men's and Juniors
100% Capitola Mall (4) 97.5% Gottschalks, J.C. Penney, 305
Capitola, California Mervyn's, Sears
100% Chesterfield Towne Center 96.0% Dillard's (two), Hechts, Sears 317
Richmond, Virginia
100% Citadel, The 82.4% Dillard's, Foley's, J.C. Penney, Mervyn's 263
Colorado Springs, Colorado
100% County East Mall 88.5% Sears, Gottschalks, Mervyn's (8) 246
Antioch, California
100% Crossroads Mall 91.6% Dillards, Foley's, J.C. Penney, 221
Oklahoma City, Oklahoma Montgomery Ward (6)
100% Fresno Fashion Fair 97.4% Gottschalks, J.C. Penney, Macy's, 321
Fresno, California Macy's Men's and Children
100% Great Falls Marketplace 100.0% ----- 85
Great Falls, Montana
100% Greeley Mall 74.3% Dillard's (two), J.C. Penney, Sears, 237
Greeley, Colorado Montgomery Ward (6)
100% Green Tree Mall (4) 85.8% Dillard's, J.C. Penney, 329
Clarksville, Indiana Sears, Target
100% Holiday Village Mall (4) 93.6% Herberger's, J.C. Penney, Sears, 264
Great Falls, Montana Montgomery Ward (6)
100% Lakewood Mall 96.6% Home Depot, J.C. Penney, Mervyn's, 327
Lakewood, California Montgomery Ward (6), Robinson-May
10% Manhattan Village Shopping Ctr (4) 98.3% Macy's, Macy's Men's & Home 639
Manhattan Beach, California
100% Northgate Mall 92.3% Macy's, Mervyns, Sears 296
San Rafael, California
50% Panorama Mall 98.3% Wal-Mart (5) 408
Panorama, California
100% Queens Center 100.0% J.C. Penney, Macy's 740
Queens, New York
100% Rimrock Mall 93.7% Dillard's, Herbergers, J.C. Penney, 268
Billings, Montana Montgomery Ward (6)
100% Salisbury, Centre at 95.8% Boscov's, J.C. Penney, Hechts, 294
Salisbury, Maryland Montgomery Ward (6), Sears
100% South Towne Center 95.3% Dillard's, J.C. Penney, Mervyn's, Target, 226
Sandy, Utah ZCMI
100% Stonewood Mall (4) 85.7% J.C. Penney, Mervyn's, Robinson-May, 309
Downey, California Sears
</TABLE>
11
<PAGE>
ITEM 2. PROPERTIES, CONTINUED
<TABLE>
<CAPTION>
Year of Year of
Company's Original Most Recent Mall and
Ownership Name of Center / Construction/ Expansion / Total Free-standing
% Location (1) Acquisition Renovation GLA (2) GLA
- -------------------------------------------------- --------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
100% Valley View Center 1973 / 1996 1996 1,507,699 449,802
Dallas, Texas
100% Villa Marina Marketplace 1972 / 1996 1995 448,517 448,517
Marina Del Rey, California
100% Vintage Faire Mall 1977 / 1996 - 1,047,409 347,490
Modesto, California
19% West Acres 1972 / 1986 1992 928,782 376,227
Fargo, North Dakota
--------------- -------------
TOTAL / AVERAGE AT DECEMBER 31, 1998 (a) 19,842,937 8,422,530
--------------- -------------
1998 ACQUISITION CENTERS
100% Carmel Plaza 1974 / 1998 1993 115,215 115,215
Carmel, California
100% Corte Madera, Village at 1985 / 1998 1994 428,398 210,398
Corte Madera, California
100% Northwest Arkansas Mall 1972 / 1998 1997 780,237 305,506
Fayetteville, Arkansas
100% South Plains Mall 1972 / 1998 1995 1,140,574 398,787
Lubbock, Texas
100% Westside Pavilion 1985 / 1998 1991 755,759 397,631
Los Angeles, California
---------------- --------------
TOTAL / AVERAGE 1998 ACQUISITIONS 3,220,183 1,427,537
---------------- --------------
TOTAL / AVERAGE AT DECEMBER 31, 1998 (b) 23,063,120 9,850,067
---------------- --------------
---------------- --------------
<CAPTION>
Percentage
Company's of Mall and Sales Per
Ownership Name of Center / Free-standing Square
% Location (1) GLA Leased Anchors Foot (3)
- ------------------------------------------------------ ---------------- ---------------------------------------- -----------
<S> <C> <C> <C> <C>
100% Valley View Center 92.7% Dillard's, Foleys, J.C. Penney, $274
Dallas, Texas Sears
100% Villa Marina Marketplace 96.7% ----- 429
Marina Del Rey, California
100% Vintage Faire Mall 90.5% Gottschalks, J.C. Penney, Macy's, 315
Modesto, California Macy's Men's & Home, Sears
19% West Acres 96.3% Daytons, Herberger's, J.C. Penney, Sears 346
Fargo, North Dakota
---------------- -----------
TOTAL / AVERAGE AT DECEMBER 31, 1998 (a) 93.4% $337
---------------- -----------
1998 ACQUISITION CENTERS
100% Carmel Plaza 97.7% ----- $327
Carmel, California
100% Corte Madera, Village at 92.4% Macy's, Nordstrom 476
Corte Madera, California
100% Northwest Arkansas Mall 91.7% Dillard's (two), J.C. Penney, Sears 267
Fayetteville, Arkansas
100% South Plains Mall 97.8% Beall's, Dillards, J.C. Penney, 295
Lubbock, Texas Mervyn's, Sears
100% Westside Pavilion 90.8% Nordstrom, Robinson-May 375
Los Angeles, California
---------------- -----------
TOTAL / AVERAGE 1998 ACQUISITIONS 93.6% $345
---------------- -----------
TOTAL / AVERAGE AT DECEMBER 31, 1998 (b) 93.4% $338
---------------- -----------
---------------- -----------
</TABLE>
12
<PAGE>
ITEM 2. PROPERTIES, CONTINUED
<TABLE>
<CAPTION>
Year of Year of
Company's Original Most Recent Mall and
Ownership Name of Center / Construction/ Expansion / Total Free-standing
% Location (1) Acquisition Renovation GLA (2) GLA
- -------------------------------------------------- --------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
1998 ACQUISITION CENTERS (ERE
YARMOUTH PORTFOLIO)
50% Eastland Mall (4) 1978 / 1998 1995 1,084,907 543,643
Evansville, IN
50% Empire Mall (4) 1975 / 1998 1988 1,321,708 631,601
Sioux Falls, SD
50% Granite Run Mall 1974 / 1998 1993 1,034,479 533,670
Media, PA
50% Lake Square Mall 1980 / 1998 1992 560,671 264,634
Leesburg, FL
50% Lindale Mall 1963 / 1998 1997 690,417 384,854
Cedar Rapids, IA
50% Mesa Mall 1980 / 1998 1991 849,958 424,141
Grand Junction, CO
50% NorthPark Mall 1973 / 1998 1994 1,057,383 405,850
Davenport, IA
50% Rushmore Mall 1978 / 1998 1992 834,385 363,725
Rapid City, SD
50% Southern Hills Mall 1980 / 1998 ---- 752,588 439,011
Sioux City, IA
50% SouthPark Mall 1974 / 1998 1990 1,034,195 456,139
Moline, IL
50% SouthRidge Mall (4) 1975 / 1998 1998 1,008,267 510,461
Des Moines, IA
50% Valley Mall 1978 / 1998 1992 482,341 196,278
Harrisonburg, VA
1998 ACQUISITION CENTERS (ERE --------------- -------------
YARMOUTH PORTFOLIO) 10,711,299 5,154,007
--------------- -------------
GRAND TOTAL / AVERAGE AT DECEMBER 31, 1998 (c) 33,774,419 15,004,074
--------------- -------------
--------------- -------------
<CAPTION>
Percentage
Company's of Mall and Sales Per
Ownership Name of Center / Free-standing Square
% Location (1) GLA Leased Anchors Foot (3)
- ------------------------------------------------------ ---------------- ---------------------------------------- -----------
<S> <C> <C> <C> <C>
1998 ACQUISITION CENTERS (ERE
YARMOUTH PORTFOLIO)
50% Eastland Mall (4) 93.3% DeJong, Famous Barr, J.C. Penney, $299
Evansville, IN Lazarus
50% Empire Mall (4) 92.2% Daytons, J.C. Penney, Kohl's 355
Sioux Falls, SD Sears, Target, Younkers (8)
50% Granite Run Mall 99.1% Boscov's, J.C. Penney, Sears 297
Media, PA
50% Lake Square Mall 88.6% Belk, J.C. Penney, Sears, Target 220
Leesburg, FL
50% Lindale Mall 90.8% Sears, VonMaur, Younkers 272
Cedar Rapids, IA
50% Mesa Mall 94.2% Herberger's, J.C. Penney, Mervyn's, 248
Grand Junction, CO Sears, Target,
50% NorthPark Mall 87.4% J.C. Penney, Montgomery Ward (6), Sears, 244
Davenport, IA VonMaur, Younkers
50% Rushmore Mall 93.4% Herberger's, J.C. Penney, Sears, 256
Rapid City, SD Target (8)
50% Southern Hills Mall 91.9% Sears, Target, Younkers 337
Sioux City, IA
50% SouthPark Mall 90.2% J.C. Penney, Sears, Younkers, 235
Moline, IL VonMaur, Montgomery Ward (6)
50% SouthRidge Mall (4) 92.7% Sears, Younkers, J.C. Penney, 235
Des Moines, IA Target, Montgomery Ward (6)
50% Valley Mall 98.6% Belk, J.C. Penney, Wal-Mart, 279
Harrisonburg, VA Watson's
-----------
1998 ACQUISITION CENTERS (ERE ---- -----------
YARMOUTH PORTFOLIO) 92.7% 280
---- -----------
-----------
Grand Total / Average at December 31, 1998 (c) 93.2% $319
---- -----------
---- -----------
</TABLE>
13
<PAGE>
ITEM 2. PROPERTIES, CONTINUED
<TABLE>
<CAPTION>
Year of Year of
Company's Original Most Recent Mall and
Ownership Name of Center / Construction/ Expansion / Total Free-standing
% Location (1) Acquisition Renovation GLA (2) GLA
- -------------------------------------------------- --------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
MAJOR REDEVELOPMENT PROPERTIES
100% Crossroads Mall (4) 1963 / 1979 1998 808,975 365,538
Boulder, Colorado
100% Huntington Center (4), (7) 1965 / 1996 1997 720,147 323,382
Huntington Beach, California
100% Pacific View (formerly
Buenaventura Mall 1965 / 1996 1999 646,851 191,515
Ventura, California
100% Parklane Mall (4) 1967 / 1978 1998 386,911 257,191
Reno, Nevada
--------------- -------------
TOTAL MAJOR REDEVELOPMENT CENTERS 2,562,884 1,137,626
--------------- -------------
TOTAL / AVERAGE (d) 36,337,303 16,141,700
--------------- -------------
1999 ACQUISITION CENTERS (e)
51% Albany Plaza 1983 / 1999 ---- 145,462 145,462
Albany, Oregon
51% Cascade Mall 1989 / 1999 1998 585,259 266,378
Burlington, Washington
51% Eastland Plaza 1974 / 1999 1993 65,313 65,313
Columbus, Ohio
51% Kitsap Mall 1985 / 1999 1997 850,236 340,253
Silverdale, Washington
51% Redmond Town Center (4) (f) 1997 / 1999 ---- 569,289 569,289
Redmond, Washington
51% Washington Square 1974 / 1999 1995 1,422,752 454,425
Tigard, Oregon
--------------- -------------
1999 ACQUISITION CENTERS 3,638,311 1,841,120
--------------- -------------
GRAND TOTAL / AVERAGE 39,975,614 17,982,820
--------------- -------------
--------------- -------------
<CAPTION>
Percentage
Company's of Mall and Sales Per
Ownership Name of Center / Free-standing Square
% Location (1) GLA Leased Anchors Foot (3)
- ------------------------------------------------------ ---------------- ---------------------------------------- -----------
<S> <C> <C> <C> <C>
Major Redevelopment Properties
100% Crossroads Mall (4) (9) Foley's, J.C. Penney, Sears (8) (9)
Boulder, Colorado
100% Huntington Center (4), (7) (9) Mervyn's, Burlington Coat Factory, (9)
Huntington Beach, California Montgomery Ward (6)
100% Pacific View (formerly (9) J.C. Penney, Macy's, Montgomery Ward (6) (9)
Buenaventura Mall)
Ventura, California (9) Gottschalks (9)
100% Parklane Mall (4)
Reno, Nevada
TOTAL MAJOR REDEVELOPMENT CENTERS
TOTAL / AVERAGE (d)
1999 ACQUISITION CENTERS (e)
51% Albany Plaza 73.2% ----- (10)
Albany, Oregon
51% Cascade Mall 87.8% The Bon Marche, Emporium, (10)
Burlington, Washington J.C. Penney, Sears
51% Eastland Plaza 74.7% ----- (10)
Columbus, Ohio
51% Kitsap Mall 97.3% The Bon Marche, J.C. Penney, Lamonts, (10)
Silverdale, Washington Mervyn's, Sears
51% Redmond Town Center (4) (f) 91.3% ----- (10)
Redmond, Washington
51% Washington Square 98.2% J.C. Penney, Meier & Frank, Mervyn's, (10)
Tigard, Oregon Nordstrom, Sears
------------
1999 ACQUISITION CENTERS 91.6%
------------
GRAND TOTAL / AVERAGE 93.0%
------------
------------
</TABLE>
A) EXCLUDING 1998 ACQUISITIONS, REDEVELOPMENT PROPERTIES AND 1999 ACQUISITIONS
B) EXCLUDING REDEVELOPMENT PROPERTIES, ERE YARMOUTH PORTFOLIO AND
1999 ACQUISITIONS
C) EXCLUDING REDEVELOPMENT PROPERTIES AND 1999 ACQUISITIONS
D) EXCLUDING 1999 ACQUISITIONS
E) INCLUDES FIVE CONTIGUOUS FREESTANDING PROPERTIES
F) EXCLUDES THE OFFICE COMPONENT OF THIS MIXED-USE DEVELOPMENT WHICH IS
EXPECTED TO BE ACQUIRED IN MAY 1999.
14
<PAGE>
ITEM 2. PROPERTIES, CONTINUED
(1) The land underlying thirty-nine of the Centers is owned in fee entirely
by the Company or, in the case of jointly-owned Centers, by the joint
venture property partnership or limited liability company. 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.
(2) Includes GLA attributable to Anchors (whether owned or non-owned) and Mall
and Freestanding Stores as of December 31, 1998.
(3) Sales are based on reports by retailers leasing Mall and Freestanding
Stores for the year ending December 31, 1998 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) Wal-Mart opened in May 1998.
(6) During 1997, Montgomery Ward filed for bankruptcy. Montgomery Ward
announced that it will close its stores at Holiday Village Mall, Rimrock
Mall and Southridge Mall in 1999. Montgomery Ward has not yet disclosed
whether it will cease to operate any of its eight remaining stores at the
Centers.
(7) Edwards Cinema signed a lease in January 1997 to open a 16 screen
theater in the former Broadway location.
(8) These properties have a vacant Anchor location. The Company is
contemplating various replacement tenant/redevelopment opportunities for
these vacant sites.
(9) Certain spaces have been intentionally held off the market and remain
vacant because of major redevelopment plans. As a result, the Company
believes the percentage of Mall and Free-standing GLA leased and the sales
per square foot at these major redevelopment properties is not meaningful
data.
(10) Final 1998 sales per square foot information is not currently
available.
15
<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 as of December 31, 1998.
<TABLE>
<CAPTION>
Earliest Date
Annual Balance on which all
Annual Principal Debt Due on Notes Can
Property Pledged Fixed or Interest Balance Service Maturity Maturity Be Defeased
As Collateral Floating Rate (000's) (000's) Date (000's) or Be Prepaid
- ------------------- -------- ---- ------- ------- -------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Capitola Mall Fixed 9.25% $37,345 $3,801 12/15/01 $36,193 1/15/96
Carmel Plaza (3) Floating 7.54% 25,000 1,911 7/1/99 25,000 Any Time
Chesterfield Towne Center (1) Fixed 9.07% 65,064 6,580 1/1/24 1,087 1/1/06
Chesterfield Towne Center Fixed 8.54% 3,266 376 11/1/99 3,183 Any Time
Citadel Fixed 7.20% 74,575 6,648 1/1/08 59,962 1/1/03
Corte Madera, Village at (3) Floating 7.28% 60,000 4,332 11/5/99 60,000 Any Time
Crossroads Mall - Boulder Fixed 7.08% 35,280 3,948 12/15/10 28,107 1/15/00
Fresno Fashion Fair Fixed 6.52% 69,000 4,561 8/10/08 62,890 8/7/01
Greeley Mall Fixed 8.50% 17,055 2,245 9/15/03 12,519 Any Time
Green Tree Mall/Crossroads - OK/
Salisbury Fixed 7.23% 117,714 8,499 3/5/04 117,714 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 9,140 8/10/05 127,000 Any Time
Northgate Mall Fixed 6.75% 25,000 1,688 4/1/01 25,000 1/10/99
Northwest Arkansas Mall Fixed 7.33% 63,000 5,209 1/10/09 49,304 1/1/04
Parklane Mall Fixed 6.75% 20,000 1,350 4/1/01 20,000 1/10/99
Queens Center Floating (2) 65,100 (2) 3/31/99 51,000 Any Time
Rimrock Mall Fixed 7.70% 31,002 2,924 1/1/03 28,496 1/1/00
South Plains Mall Fixed 6.30% 28,795 4,180 (4) 1/1/08 336 Any Time
South Towne Center Fixed 6.61% 64,000 4,289 10/10/08 64,000 7/24/01
Valley View Mall Fixed 7.89% 51,000 4,080 10/10/06 51,000 4/16/00
Villa Marina Marketplace Fixed 7.23% 58,000 4,249 10/10/06 58,000 8/29/00
Vintage Faire Mall Fixed 7.65% 54,522 5,122 1/1/03 50,089 1/1/00
Westside Pavilion Fixed 6.67% 100,000 6,529 7/1/08 91,133 7/1/01
--------------
Total - Wholly Owned Centers $1,208,718
--------------
--------------
Joint Venture Centers:
Broadway Plaza (50%) (5) Fixed 6.68% 37,306 3,089 8/1/08 29,315 Any Time
SDG Macerich Properties L.P. (50%) (5) Fixed 6.23%(6) 160,434 11,114 5/15/06 150,000 Any Time
SDG Macerich Properties L.P. (50%) (5) Floating 6.15%(6) 92,500 5,689 5/15/03 92,500 Any Time
West Acres Center (19%) (5) Fixed 8.89% 7,202 672 7/15/99 6,613
--------------
Total - All Centers $1,506,160
--------------
--------------
</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 $387,101 for
the year ended December 31, 1998 and $98,528 for the year ended
December 31, 1997.
(2) This loan bore interest at LIBOR plus 0.45%. There was an interest
rate protection agreement in place on the first $10.2 million 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 of 7.07% through 1997 and 7.7% thereafter. This loan was
paid in full on February 4, 1999 and refinanced with a new loan of
$100 million, with interest at 6.74%, maturing in 2009.
(3) These loans bear interest at LIBOR plus 2.0%.
16
<PAGE>
MORTGAGE DEBT, CONTINUED:
(4) This note was assumed at acquisition. At the time of
acquisition in June 1998, this debt was recorded at fair market
value and the premium was amortized as interest expense over the
life of the loan using the effective interest method. The monthly
debt service payment was $348,000 per month and was calculated
based on a 12.5% interest rate. At December 31, 1998, the
unamortized premium was $6,165,000. On February 17, 1999, the
loan was paid in full and was refinanced with a new loan of $65
million, with interest at 7.49%, maturing in 2009.
(5) Reflects the Company's pro rata share of debt.
(6) In connection with the acquisition of these Centers, the
joint venture assumed $485 million of mortgage notes payable
which are secured by the properties. At acquisition, this debt
reflected a fair market value of $322.7 million, which included
an unamortized premium of $22.7 million. This premium is being
amortized as interest expense over the life of the loan using the
effective interest method. At December 31, 1998, the unamortized
balance of the debt premium was $20.9 million. This debt is due
in May 2006 and requires a monthly payment of $926,000. $185
million of this debt is due in May 2003 and requires monthly
interest payments at a variable weighted average rate (based on
LIBOR) of 6.15% at December 31, 1998. This variable rate debt
is covered by an interest rate cap agreement which effectively
prevents the interest rate from exceeding 11.53%.
At December 31,1997, the Company had $55.0 million of borrowings
outstanding under its $60.0 million unsecured credit facility, which bore
interest at LIBOR plus 1.325%. On February 26, 1998, the Company increased this
credit facility to $150 million with a maturity of February 2000, currently
bearing interest at LIBOR plus 1.15%. The interest rate on such credit facility
fluctuates between 0.95% and 1.15% over LIBOR. As of December 31, 1998, $137
million of borrowings was outstanding under this line of credit at an interest
rate of 6.79%.
Additionally, the Company had issued $776,000 in letters of credit
guaranteeing performance by the Company of certain events. The Company does not
believe that these letters of credit will result in a liability to the Company.
During January 1999, the Company entered into a bank construction loan
agreement to fund $89.2 million of costs related to the redevelopment of Pacific
View. See "Item 2. Properties." The loan bears interest at LIBOR plus 2.25% and
matures in February 2001. Principal is drawn as construction costs are incurred.
During 1997, the Company issued and sold $161.4 million of convertible
subordinated debentures (the"Debentures") due 2002. 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.
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.
17
<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 1998, the Company's shares
traded at a high of $30.375 and a low of $22.25.
As of February 18, 1999 there were approximately 300 shareholders of
record. The following table shows high and low closing prices per share of
common stock during each quarter in 1997 and 1998 and dividends/distributions
per share of common stock declared and paid by quarter.
<TABLE>
<CAPTION>
Market Quotation Per Share
-------------------------- Dividends/Distributions
Quarters Ended High Low Declared and Paid
- -------------- ---- --- -----------------
<S> <C> <C> <C>
March 31, 1997 $ 29 5/8 $ 25 3/8 $ 0.44
June 30, 1997 28 7/8 24 7/8 0.44
September 30, 1997 29 11/16 27 1/8 0.44
December 31, 1997 29 9/16 24 3/4 0.46
March 31, 1998 30 3/8 27 0.46
June 30, 1998 29 3/4 26 1/16 0.46
September 30, 1998 29 3/8 22 1/4 0.46
December 31, 1998 28 7/16 24 0.485
</TABLE>
The Company has issued 3,627,131 shares of its Series A Preferred Stock,
and 5,487,471 shares of its Series B Preferred Stock. The Series A Preferred
Stock and Series B Preferred Stock can be converted into shares of common stock
on a one-to-one basis. There is no established public trading market for either
the Series A Preferred Stock or the Series B Preferred Stock. All of the
outstanding shares of the Series A Preferred Stock are held by Security Capital
Preferred Growth Incorporated. All of the outstanding shares of the Series B
Preferred Stock are held by Ontario Teachers' Pension Plan Board. The Series A
Preferred Stock and Series B Preferred Stock were issued on February 25, 1998
and June 16, 1998, respectively. The following table shows the dividends per
share of preferred stock declared and paid by quarter. No dividends will be
declared or paid on any class of common or other junior stock to the extent that
dividends on Series A Preferred Stock and Series B Preferred Stock have not been
declared and/or paid.
<TABLE>
<CAPTION>
Series A Series B
Preferred Stock Preferred Stock
Dividends Dividends
Declared and Paid Declared and Paid
----------------- -----------------
Quarters Ended
--------------
<S> <C> <C>
March 31, 1998 .............................. N/A N/A
June 30, 1998 ................................ $0.179 N/A
September 30, 1998 ...................... 0.460 $0.071
December 31, 1998........................ 0.485 0.485
</TABLE>
On October 1, 1998, the Company issued 30,000 shares of common stock
upon the redemption of 30,000 OP Units in a private placement to a limited
partner of the Operating Partnership, an accredited investor, pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
18
<PAGE>
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 a 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 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
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 controlling ownership interest (Panorama Mall, North
Valley Plaza, Broadway Plaza, Manhattan Village, SDG Macerich Properties, L.P.
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."
19
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
The Company Predecessor
---------------------------------------------------------------------------- --------------
Pro Forma
as Reported March 16 to January 1
to
1998 1997 1996 1995 for 1994 Dec 31,1994 Mar 15,1994
---- ---- ---- ---- -------- ----------- -----------
(All amounts in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Minimum rents $179,710 $142,251 $99,061 $69,253 $59,640 $48,663 $9,993
Percentage rents 12,856 9,259 6,142 4,814 4,906 3,681 851
Tenant recoveries 86,740 66,499 47,648 26,961 22,690 18,515 3,108
Management fee income (2) - - - - - - 528
Other 4,555 3,205 2,208 1,441 921 582 100
---------- -------- ---------- -------- -------- --------- ---------
Total revenues 283,861 221,214 155,059 102,469 88,157 71,441 14,580
Shopping center expenses 89,991 70,901 50,792 31,580 28,373 22,576 4,891
Management, leasing and
development services (2) - - - - - - 557
REIT general and
administrative expenses 4,373 2,759 2,378 2,011 1,954 1,545 -
Depreciation and amortization 53,141 41,535 32,591 25,749 23,195 18,827 3,642
Interest expense 91,433 66,407 42,353 25,531 19,231 16,091 6,146
---------- -------- ---------- -------- -------- --------- ---------
Income (loss) before
minority interest,
unconsolidated entities
and extraordinary item 44,923 39,612 26,945 17,598 15,404 12,402 (656)
Minority interest (1) (12,902) (10,567) (10,975) (8,246) (8,008) (6,792) -
Equity in income (loss) of
unconsolidated joint ventures
and management companies (2) 14,480 (8,063) 3,256 3,250 3,054 3,016 (232)
Gain on sale of assets 9 1,619 - - - - -
Extraordinary loss on early
extinguishment of debt (2,435) (555) (315) (1,299) - - -
---------- -------- ---------- -------- -------- --------- ---------
Net income (loss) 44,075 22,046 18,911 11,303 10,450 8,626 (888)
Less preferred dividends 11,547 - - - - - N/A
---------- -------- ---------- -------- -------- --------- ---------
Net income (loss) available to
common stockholders $32,528 $22,046 $18,911 $11,303 $10,450 $8,626 ($888)
---------- -------- ---------- -------- -------- --------- ---------
---------- -------- ---------- -------- -------- --------- ---------
Earnings per share - basic: (3)
Income before extraordinary item $1.14 $0.86 $0.92 $0.78 $0.72 $0.60 N/A
Extraordinary item (0.08) (0.01) (0.01) (0.05) - - N/A
---------- -------- ---------- -------- -------- ---------
Net income per share - basic $1.06 $0.85 $0.91 $0.73 $0.72 $0.60 N/A
---------- -------- ---------- -------- -------- ---------
---------- -------- ---------- -------- -------- ---------
Earnings per share - diluted: (3)(7)
Income before extraordinary item $1.11 $0.86 $0.90 $0.78 $0.72 $0.60 N/A
Extraordinary item (0.05) (0.01) (0.01) (0.05) - - N/A
---------- -------- ---------- -------- -------- ---------
Net income per share - diluted $1.06 $0.85 $0.89 $0.73 $0.72 $0.60 N/A
---------- -------- ---------- -------- -------- ---------
---------- -------- ---------- -------- -------- ---------
</TABLE>
20
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA, CONTINUED
<TABLE>
<CAPTION>
The Company Predecessor
----------------------------------------------------------------------------- --------------
Pro Forma
as Reported March 16 to January 1
to
1998 1997 1996 1995 for 1994 Dec 31,1994 Mar 15,1994
---- ---- ---- ---- -------- ----------- -----------
(All amounts in thousands except per share data and number of Centers)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Funds from operations-diluted (4) $120,518 $83,427 $62,428 $44,938 $39,343 $32,710 N/A
EBITDA (5) $189,497 $147,554 $101,889 $68,878 $57,592 $47,320 N/A
Cash flows from (used in):
Operating activities $85,176 $78,476 $80,431 $48,186 N/A $30,011 N/A
Investing activities ($761,147) ($215,006) ($296,675) ($88,413) N/A ($137,637) N/A
Financing activities $675,960 $146,041 $216,317 $51,973 N/A $99,584 N/A
Number of centers at year end 47 30 26 19 16 16 14
Weighted average number of
shares outstanding - basic (6) 43,016 37,982 32,934 26,930 25,645 25,714 N/A
Weighted average number of
shares outstanding - diluted N/A
(6)(7) 43,628 38,403 33,320 26,984 25,771 25,840
Cash distributions
declared per common share $1.865 $1.78 $1.70 $1.66 N/A $0.87 N/A
FFO per share - diluted (4) $2.426 $2.172 $1.874 $1.669 $1.534 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
The Company
----------------------------------------------------------------------
December 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
( All amounts in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investment in real estate
(before accumulated depreciation) $2,213,125 $1,607,429 $1,273,085 $ 833,998 $ 554,788
Total assets $2,322,056 $1,505,002 $1,187,753 $ 763,398 $ 485,903
Total mortgage, notes and debentures
payable $1,507,118 $1,122,959 $ 789,239 $ 485,193 $ 313,632
Minority interest (1) $ 165,524 $ 100,463 $ 112,242 $ 95,740 $ 72,376
Stockholders' equity $ 577,413 $ 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 in which the Company does
not have a controlling ownership interest and the Management Companies.
The Management Companies on a pro forma basis and after March 15, 1994
have been reflected using 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 or write-down
of assets, 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. The
computation of FFO - diluted and diluted average number of shares
outstanding includes the effect of outstanding common stock options and
restricted stock using the treasury method. Convertible debentures for the
twelve month period ending December 31, 1998 are anti-dilutive and are not
included. On February 25, 1998, the Company sold $100 million of its Series
A Preferred Stock. On June 17, 1998, the Company sold $150 million of its
Series B Preferred Stock. The preferred stock can be converted on a
one-for-one basis for common stock. The preferred shares are not assumed
converted for purposes of net income per share as they would be
anti-dilutive to that calculation. The preferred shares are assumed
converted for purposes of FFO-diluted per share as they are dilutive to
that calculation.
21
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA, CONTINUED
(5) EBITDA represents earnings before interest, income taxes, depreciation,
amortization, minority interest, equity in income (loss) of unconsolidated
entities, extraordinary items, gain (loss) on sale of assets and preferred
dividends. 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.
(6) Assumes that all OP Units are converted to common stock.
(7) 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.
22
<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 or write-down of
assets, 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, equity in income (loss) of unconsolidated
entities, extraordinary items, gain (loss) on sale of assets and preferred
dividends. 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, 1998, 1997
and 1996. The following discussion compares the activity for the year ended
December 31, 1998 to results of operations for 1997. Also included is a
comparison of the activities for the year ended December 31, 1997 to the results
for the year ended December 31, 1996. This information should be read in
conjunction with the accompanying consolidated financial statements and notes
thereto.
FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K contains or incorporates statements
that constitute forward-looking statements. Those statements appear in a number
of places in this Form 10-K and include statements regarding, among other
matters, the Company's growth and acquisition 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. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates," and "should" and
variations of these words and similar expressions, are used in many cases to
identify these forward-looking statements. Stockholders are cautioned that any
such forward-looking statements are not guarantees of future performance and
involve risks, uncertainties and other factors that may cause actual results,
performance or achievements of the Company or industry results to vary
materially from the Company's future results, performance or achievements, or
those of the industry, expressed or implied in such forward-looking statements.
Such factors include, among others, general industry economic and business
conditions, which will, among other things, affect demand for retail space or
retail goods, availability and creditworthiness of current and prospective
tenants, lease rents, availability and cost of financing and operating expenses;
adverse changes in the real estate markets including, among other things,
competition with other companies, retail formats and technology, risks of real
estate development and acquisition; governmental actions and initiatives;
environmental and safety requirements; and Year 2000 compliance issues of the
Company and third parties and related service interruptions or payment delays.
The Company will not update any forward-looking information to reflect actual
results or changes in the factors affecting the forward-looking information.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following table reflects the Company's acquisitions in 1996, 1997 and 1998:
<TABLE>
<CAPTION>
Date
Acquired Location
-------------- ----------------
<S> <C> <C>
"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
Pacific View (formerly
known as 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 (*) August 19, 1997 Manhattan Beach, California
The Citadel Mall December 19, 1997 Colorado Springs, Colorado
Great Falls Marketplace December 31, 1997 Great Falls, Montana
"1998 Acquisition Centers":
- ----------------------------
ERE/Yarmouth Portfolio (*) February 27, 1998 Twelve properties in eight states
South Plains Mall June 19, 1998 Lubbock, Texas
Westside Pavilion July 1, 1998 Los Angeles, California
Village at Corte Madera June-July 1998 Corte Madera, California
Carmel Plaza August 10, 1998 Carmel, California
Northwest Arkansas Mall December 15, 1998 Fayetteville, Arkansas
</TABLE>
(*) denotes the Company owns these Centers through a joint venture partnership.
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 1998, 1997 and 1996. Many factors impact the Company's ability to
acquire additional properties including 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.
Accordingly, management is uncertain whether during the balance of 1999, 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 1998, 1997 and 1996 Acquisition Centers. Pacific View
(formerly known as Buenaventura Mall), Crossroads Mall-Boulder, Huntington
Center and Parklane Mall are currently under redevelopment and are referred
to herein as the "Redevelopment Centers." All other centers are referred to
herein as the "Same Centers".
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 11 of its Centers. Montgomery Ward has indicated that it plans to
cease operating at three of these locations. The Company is negotiating to
recapture these locations and replace Montgomery Ward with another department
store. Montgomery Ward has not yet disclosed whether they will cease to operate
any of its eight remaining stores at the Centers. If Montgomery Ward ceases to
operate any of its stores and the Company is unable to replace them with other
tenants, it could have an adverse effect on a Center.
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.
24
<PAGE>
ASSETS AND LIABILITIES
Total assets increased to $2,322 million at December 31, 1998 compared
to $1,505 million at December 31, 1997 and $1,188 million at December 31, 1996.
During that same period, total liabilities increased from $838 million in 1996
to $1,188 million in 1997 and $1,579 million in 1998. These changes were
primarily as a result of the 1996 and 1998 common stock offerings, the 1997
convertible debenture offering, the purchase of the 1998, 1997 and 1996
Acquisition Centers and related debt transactions.
A. EQUITY OFFERINGS
The Company sold 7,920,181 shares of its common stock in six offerings
during 1998, raising $203.8 million of net proceeds.
On February 25, 1998, the Company issued 3,627,131 shares of its Series
A Preferred Stock for net proceeds totaling $99.0 million.
On June 17, 1998, the Company issued 5,487,471 shares of its Series B
Preferred Stock for net proceeds totaling $148.5 million.
The total net proceeds from the 1998 common and preferred stock
offerings totaled $451.3 million. These proceeds were used for the 1998
acquisitions, reducing borrowings under the Company's line of credit and general
corporate purposes.
B. ACQUISITIONS
On February 27, 1998, the Company, through a 50/50 joint venture with
an affiliate of Simon Property 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 $974.5
million, which included $485.0 million of assumed debt, at market value. The
Company's share of the cash component of the purchase price was funded by
issuing $100.0 million of Series A Preferred Stock, $80.0 million of common
stock and borrowing the balance from the Company's line of credit.
South Plains Mall was acquired on June 19, 1998. South Plains Mall is a
1,140,574 square foot super regional mall located in Lubbock, Texas. The
purchase price was $115.5 million, consisting of $29.3 million of assumed debt,
at fair market value, and $86.2 million of cash. The cash portion was funded
with a portion of the proceeds from the Company's Series B Preferred Stock
offering.
Westside Pavilion was acquired on July 1, 1998 for $170.5 million.
Westside Pavilion is a 755,759 square foot regional mall located in Los Angeles,
California. The purchase price was funded with a portion of the proceeds from
the Company's Series B Preferred Stock offering, borrowings under the Company's
line of credit and the placement of a ten year $100.0 million mortgage secured
by the property.
The Village at Corte Madera is a 428,398 square foot regional mall in
Corte Madera, California, which the Company acquired in two phases: (i) 40% on
June 16, 1998 and (ii) the remaining 60% on July 24, 1998. In addition, Carmel
Plaza, a 115,215 square foot community shopping center in Carmel, California was
acquired on August 10, 1998. The combined purchase price was $165.5 million,
consisting of $40.0 million of assumed debt, the issuance of $7.9 million of OP
Units and $117.6 million in cash. The cash component was funded by borrowings
under the Company's line of credit.
Northwest Arkansas Mall was acquired on December 15, 1998. Northwest
Arkansas Mall is a 780,237 square foot regional mall located in Fayetteville,
Arkansas. The purchase price of $94.0 million was funded by a concurrently
placed loan of $63.0 million and borrowings of $31.0 million under the Company's
line of credit.
On February 18, 1999, through a 51/49 joint venture with Ontario
Teachers' Pension Plan Board, the Company closed on the first phase of a two
phase acquisition of a portfolio of properties. The phase one closing included
the acquisition of three regional malls, the retail component of a mixed-use
development, five contiguous properties and two non-contiguous community
shopping centers comprising approximately 3.6 million square feet for a total
purchase price of approximately $427.0 million. The purchase price was funded
with a $120.0 million loan placed concurrently with the closing, $140.4 million
of debt from an affiliate of the seller, and $39.4 million of assumed debt. The
balance of the purchase price was paid in cash. The Company's share of the cash
component was funded with the proceeds from two refinancings of centers and
borrowings under the Company's line of credit.
25
<PAGE>
B. ACQUISITIONS, CONTINUED:
The second phase consists of the acquisition of the office component of the
mixed-use development for a purchase price of approximately $115 million. The
closing of the second phase is expected to occur in May 1999.
C. REFINANCINGS
On August 3, 1998, the Company, along with the joint venture partner,
refinanced the debt secured by Broadway Plaza. The loan of $43.5 million was
paid in full and a new note was issued for $75.0 million bearing interest at a
fixed rate of 6.68% and maturing August 1, 2008.
On August 7, 1998, the Company refinanced the debt on Fresno Fashion
Fair. A $38.0 million loan was paid in full and a new secured note was issued
for $69.0 million bearing interest at a fixed rate of 6.52% and maturing August
10, 2008.
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997
REVENUES
Minimum and percentage rents increased by 27% to $192.6
million in 1998 from $151.5 million in 1997. Approximately $18.9
million of the increase resulted from the 1997 Acquisition Centers,
$18.8 million resulted from the 1998 Acquisition Centers and $5.0
million of the increase was attributable to the Same Centers. These
increases were partially offset by revenue decreases at the
Redevelopment Centers of $1.6 million in 1998.
Tenant recoveries increased to $86.7 million in 1998 from
$66.5 million in 1997. The 1998 and 1997 Acquisition Centers generated
$17.7 million of this increase and $2.2 million of the increase was
from the Same Centers.
Other income increased to $4.5 million in 1998 from $3.2
million in 1997. Approximately $0.6 million of the increase related to
the 1998 and 1997 Acquisition Centers, $0.7 million of the increase was
attributable to the Same Centers and the Redevelopment Centers.
EXPENSES
Shopping center expenses increased to $90.0 million in 1998
compared to $70.9 million in 1997. Approximately $17.3 million of the
increase resulted from the 1998 and 1997 Acquisition Centers. The other
Centers had a net increase of $1.8 million in shopping center expenses
resulting primarily from increased property taxes and recoverable
expenses.
General and administrative expenses increased to $4.4
million in 1998 from $2.8 million in 1997 primarily due to the
accounting change required by EITF 97-11, "Accounting for Internal
Costs Relating to Real Estate Property Acquisitions," which requires
the expensing of internal acquisition costs. Previously in accordance
with GAAP, certain internal acquisition costs were capitalized. The
increase is also attributable to higher executive and director
compensation expense.
INTEREST EXPENSE
Interest expense increased to $91.4 million in 1998 from
$66.4 million in 1997. This increase of $25.0 million is primarily
attributable to the acquisition activity in 1997 and 1998, which was
partially funded with secured debt and borrowings under the Company's
line of credit. In addition, in June and July of 1997, the Company
issued $161.4 million of convertible debentures, which contributed to
$5.7 million of this increase.
DEPRECIATION AND AMORTIZATION
Depreciation increased to $53.1 million from $41.5 million
in 1997. This increase relates primarily to the 1997 and 1998
Acquisition Centers.
26
<PAGE>
MINORITY INTEREST
The minority interest represents the 28.4% weighted average
interest of the Operating Partnership that was not owned by the Company
during 1998. This compares to 31.8% not owned by the Company during
1997.
INCOME (LOSS) FROM UNCONSOLIDATED JOINT VENTURES AND MANAGEMENT
COMPANIES
The income from unconsolidated joint ventures and the
Management Companies was $14.5 million for 1998, compared to a loss of
$8.1 million in 1997. A total of $14.5 million of the change is
attributable to the 1998 acquisition of the ERE/Yarmouth portfolio.
Also, in 1997, there was a write-down and loss of $10.5 million on the
sale of North Valley Plaza.
GAIN ON SALE OF ASSETS
During 1997, the Company sold a parcel of land for a net gain
of $1.6 million compared to a minimal amount of gain on sale
recognized in 1998.
EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF DEBT
In 1998, the Company wrote off $2.4 million of unamortized
financing costs, compared to $0.6 million written off in 1997.
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
As a result of the foregoing, net income available to common
stockholders increased to $32.5 million in 1998 from $22.0 million in
1997.
OPERATING ACTIVITIES
Cash flow from operations was $85.2 million in 1998 compared
to $78.4 million in 1997. The increase resulted from the factors
discussed above, primarily the impact of the 1997 and 1998 Acquisition
Centers.
INVESTING ACTIVITIES
Cash flow used in investing activities was $761.1 million in
1998 compared to $215.0 million in 1997. The change resulted primarily
from the higher volume of acquisition activity completed in 1998
compared to 1997.
FINANCING ACTIVITIES
Cash flow from financing activities was $676.0 million in
1998 compared to $146.0 million in 1997. The increase resulted from the
offerings of 7,920,181 shares of common stock, 3,627,131 shares of
Series A Preferred Stock and 5,487,471 shares of Series B Preferred
Stock completed in 1998. No equity was raised in 1997.
EBITDA AND FUNDS FROM OPERATIONS
Primarily because of the factors mentioned above, EBITDA
increased 28% to $189.5 million in 1998 from $147.6 million in 1997 and
Funds from Operations - Diluted increased 44% to $120.5 million from
$83.4 million in 1997.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
REVENUES
Minimum and percentage rents increased by 44% to $151.5
million in 1997 from $105.2 million in 1996. 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.
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<PAGE>
REVENUES, CONTINUED:
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 lower recoveries resulting from lower 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 June and July 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 represented 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.
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<PAGE>
OPERATING ACTIVITIES
Cash flow from operations was $78.5 million in 1997 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.
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 major redevelopments has been, and is expected to continue to be,
obtained from equity or debt financings which include borrowings under
the Company's line of credit and construction loans. However, many
factors impact the Company's ability to access capital, such as its
overall debt to market capitalization level, interest rates and
interest coverage ratios. The Company currently is undertaking a $90
million redevelopment of Pacific View. See "Item 2. Properties." The
Company has a bank construction loan agreement to fund $89.2 million
of these construction costs.
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 public and private equity
offerings, debt financings and/or joint ventures. During 1998 and 1999,
the Company acquired two portfolios through joint ventures with another
party. The Company believes such joint venture arrangements provide an
attractive alternative to other forms of financing, particularly during
periods when access to public capital markets is restricted by
prevailing market conditions. See "Equity Offerings" and
"Acquisitions."
The Company's total outstanding loan indebtedness at
December 31, 1998 was $1.8 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 Company, 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 and preferred stock into common stock) ratio of approximately 56%
at December 31, 1998. The Company's debt consists primarily of
fixed-rate conventional mortgages payable secured by individual
properties. See "Properties-Mortgage Debt" for a description of the
Company's outstanding mortgage indebtedness.
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, common stock warrants
or common stock rights. On February 18, 1998, the Company issued
1,052,650 shares and on February 23, 1998 an additional 1,826,484
shares were issued. On April 24, 1998, the Company issued 808,989
shares and an additional 967,256, 1,864, 802 and 1,400,000 shares were
issued on April 29, 1998, May 29, 1998 and December 14, 1998,
respectively. The aggregate offering price of these transactions was
approximately $212.9 million, leaving approximately $287.1 million
available under the shelf registration statement.
29
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES, CONTINUED:
The Company has an unsecured line of credit for up to $150.0
million. There was $137.0 million of borrowings outstanding at
December 31, 1998.
At December 31, 1998, the Company had cash and cash
equivalents available of $25.1 million.
YEAR 2000 READINESS DISCLOSURE
THE INFORMATION PROVIDED BELOW CONTAINS YEAR 2000 STATEMENTS AND IS A
YEAR 2000 READINESS DISCLOSURE PURSUANT TO PUB. L. NO. 105-271.
YEAR 2000 ISSUES
The Year 2000 issue is the result of many existing computer programs
and embedded technology using two digits rather than four to define the
applicable year. The Company's computer equipment and software and devices with
embedded technology that are time-sensitive may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failure or
erroneous data which would cause disruptions of operations.
The Company has initiated a Year 2000 compliance program consisting of
the following phases: (1) identification of Year 2000 issues; (2) assessment of
Year 2000 compliance of systems; (3) remediation or replacement of non-compliant
systems; (4) testing to verify compliance; and (5) contingency planning, as
appropriate. This program includes a review of both information technology
("IT") and non-IT systems and is being supervised by the Company's Year 2000
team which consists of management as well as operational and IT staff members.
On February 18, 1999, the Company acquired several properties from
various Safeco Corporation entities and is in the process of reviewing each
property's Year 2000 readiness. Such review is anticipated to be completed by
June 30, 1999. See "Recent Developments - Acquisitions". The following
disclosure provides information regarding the Company's properties excluding
those acquisition properties.
IT SYSTEMS
The Company has reviewed its core computer hardware systems and
software programs to determine if such systems and programs will properly
process dates in the Year 2000 and thereafter. Based on manufacturer or vendor
information, the Company presently believes most of its critical computer
hardware systems and software programs are substantially Year 2000 compliant.
The Company is aware of one critical hardware system which needs a Year 2000
upgrade at a cost of approximately $13,100. The Company is currently conducting
its own evaluation and testing to verify compliance of its critical hardware
systems and software and expects to conclude such testing by June 1, 1999.
The most important software program to the Company's operations is its
property management and accounting software. The Company has been advised by its
independent software vendor that it has completed its evaluation, testing and
modification of this program and the necessary changes have been completed to
achieve Year 2000 compliance. The Company is conducting its own evaluation and
testing to confirm this conclusion and expects to complete such testing by June
1, 1999.
The Company completed its assessment of the Year 2000 compliance of its
non-critical computer hardware systems and software programs by its target date
of December 31, 1998. Based on manufacturer or vendor information, the Company
presently believes that substantially all of its non-critical hardware systems
and software programs are Year 2000 compliant.
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<PAGE>
YEAR 2000 READINESS DISCLOSURE, CONTINED:
NON-IT SYSTEMS
Part of the Company's Year 2000 program also includes a review of
the various operating systems of each of its portfolio properties and main
offices. These systems typically include embedded technology which
complicates the Company's Year 2000 efforts. Examples of these types of
systems include energy management systems, telecommunication systems,
elevators, security systems and copiers. The various operating systems have
been assigned priorities based on the importance of the system to each
property's operations and the potential impact of non-compliance. All of the
Company's properties have substantially completed their initial assessment of
each system and are verifying Year 2000 compliance through the manufacturers
and/or vendors of the systems. Approximately 70% of the critical operating
systems for which the Company has received information from manufacturers or
vendors are substantially Year 2000 compliant as reported by such entities.
Certain critical systems, 11 energy management systems, one telephone system,
and one parking access computer software system, will need Year 2000 upgrades
and the Company is in the process of obtaining such upgrades at an aggregate
cost of approximately $50,000. Other non-compliant critical systems are being
upgraded by the manufacturer at no cost to the Company or were previously
scheduled for replacement or upgrades prior to January 1, 2000. With respect
to approximately 20% of its critical operating systems, the Company has not
received the necessary information to assess the Year 2000 compliance of such
systems. The Company is contacting these manufacturers/ vendors to obtain the
information necessary to complete its Year 2000 compliance assessment.
Each property is preparing recommendations regarding the remediation
and testing phases. Remediation and testing recommendations and time lines are
prepared based on the importance of each system to the property's operations and
information received from the manufacturer/vendor. The Company plans to
coordinate the testing phase with the manufacturers/vendors of the systems, as
appropriate. The Company established June 1, 1999 as its target date to complete
the remediation and testing phases for the critical operating systems at each
property. The Company will need the cooperation of its manufacturers/vendors in
providing information and testing assistance to meet this timeline for its
critical operating systems. If such cooperation is not provided, completion of
these phases will be delayed. The Company expects the Year 2000 program to
continue beyond January 1, 2000 with respect to non-critical operating systems
and issues.
MATERIAL THIRD PARTIES
The Company mailed surveys to its material vendors, utilities and
tenants about their plans and progress in addressing the Year 2000 issue. Those
entities surveyed include the utilities for each mall (i.e., electric, gas,
water, telephone and waste management companies), the largest tenants of the
Company based on the amount of their 1998 rent payments and certain Anchor
tenants. As of this date, the Company has received responses from approximately
58% of those entities surveyed. Generally, the responses received state that the
entity is in the process of addressing the Year 2000 compliance issues and
expects to achieve compliance prior to January 1, 2000.
COSTS
Because the Company's assessment, remediation and testing efforts are
ongoing, the Company is unable to estimate the actual costs of achieving Year
2000 compliance for its IT and non-IT systems. Based on information received
from manufacturers/vendors, the Company presently anticipates that the
assessment and remediation costs will not be material. As of December 31, 1998,
the Company has not expended significant amounts since its evaluation of Year
2000 issues has been primarily conducted by its own personnel. The Company does
not separately record the internal costs incurred for its Year 2000 compliance
program. Such costs are primarily the related payroll costs for its personnel
who are part of the Year 2000 program.
RISKS
As is true of most businesses, the Company is vulnerable to external
forces that might generally effect industry and commerce, such as utility
company Year 2000 compliance failures and related service interruptions. In
addition, failure of information and operating systems of tenants may delay the
payment of rent to the Company or impair their ability to operate. A formal
contingency plan has not yet been developed for dealing with the most reasonably
likely worst case scenario. The Company will continue to evaluate potential
areas of risk and develop a contingency plan, as appropriate.
Based on currently available information, the Company believes that the
Year 2000 issue will not pose significant operational problems for the Company.
However, if all Year 2000 issues are not properly identified, or assessment,
remediation and testing are not effected in a timely manner, there can be no
assurance that the Year 2000 issue will not adversely affect the Company's
results of operations or its relationships with tenants or other third parties.
Additionally, there can be no assurance that the Year 2000 issues of third
parties will not have an adverse impact on the Company's results of operations.
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<PAGE>
FUNDS FROM OPERATIONS
The Company believes that the most significant measure of its
performance is FFO. FFO is defined by The National Association of Real
Estate Investment Trusts ("NAREIT") to be: Net income (loss) (computed
in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales or write-down of assets, 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. The following
reconciles net income available to common stockholders to FFO:
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
(amounts in thousands)
<S> <C> <C> <C> <C>
Net income - available to common stockholders $32,528 $22,046
Adjustments to reconcile net income to FFO-basic:
Minority interest 12,902 10,567
Loss on early extinguishment of debt 2,435 555
Gain on sale of wholly-owned assets (9) (1,619)
Loss on sale or write-down of assets from
unconsolidated entities (pro rata) 143 10,400
Depreciation and amortization on wholly owned centers 53,141 41,535
Depreciation and amortization on joint ventures and
from the management companies (pro rata) 10,879 2,312
Less: depreciation on personal property and
amortization of loan costs and interest rate caps (3,716) (2,608)
------------ ------------
FFO - basic (1) 43,016 $108,303 37,982 $83,188
Additional adjustment to arrive at FFO-diluted
Impact of convertible preferred stock 6,058 11,547 N/A N/A
Impact of stock options and restricted stock using
the treasury method 612 668 421 239
Impact of convertible debentures (n/a anti-dilutive)
----------- ----------- ----------- ------------
FFO - diluted (2) 49,686 $120,518 38,403 $83,427
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>
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<PAGE>
FUNDS FROM OPERATIONS, CONTINUED:
(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 1998
assuming the conversion of all outstanding OP Units.
(2) The computation of FFO - diluted and diluted average number
of shares outstanding includes the effect of outstanding common
stock options and restricted stock using the treasury method.
Convertible debentures for the twelve month period are
anti-dilutive and are not included. On February 25, 1998, the
Company sold $100 million of its Series A Preferred Stock. On
June 17, 1998, the Company sold $150 million of its Series B
Preferred Stock. The preferred stock can be converted on a
one-for-one basis for common stock. The preferred shares are not
assumed converted for purposes of net income per share as they
would be anti-dilutive to that calculation. The preferred shares
are assumed converted for purposes of FFO-diluted per share as
they are dilutive to that calculation.
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 $3,814,000 for 1998, $3,599,000
for 1997 and $1,832,000 for 1996.
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 pro rata share of operating
expenses. This reduces the Company's exposure to increases in costs and
operating expenses resulting from inflation.
SEASONALITY
The shopping center industry is seasonal in nature, particularly in the
fourth quarter during the holiday season when retailer occupancy and retail
sales are typically at their highest levels. In addition, shopping malls
achieve a substantial portion of their specialty (temporary retailer) rents
during the holiday season. As a result of the above, earnings are generally
highest in the fourth quarter of each year.
NEW PRONOUNCEMENTS ISSUED:
In March, 1998, the Financial Accounting Standards Board
("FASB"), through its Emerging Issues Task Force ("EITF"), concluded based
on EITF 97-11, "Accounting for Internal Costs Relating to Real Estate
Property Acquisitions," that all internal costs to source, analyze and
close acquisitions should be expensed as incurred. The Company has
historically capitalized these costs in accordance with GAAP. The Company
has adopted the FASB's interpretation effective March 19,1998, and the
impact was approximately $0.04 per share reduction of net income and
FFO-diluted per share for 1998.
In May, 1998, the FASB, through the EITF, modified the timing
of recognition of revenue for percentage rent received from tenants in EITF
98-9, "Accounting for Contingent Rent in Interim Financial Periods." The
Company applied this accounting change as of April 1, 1998. The accounting
change had the effect of deferring $1,792,000 of percentage rent in the
second quarter of 1998 and $972,000 of percentage rent in the third quarter
of 1998. During the fourth quarter of 1998, the FASB reversed EITF 98-9.
Accordingly, the Company has resumed accounting for percentage rent on the
accrual basis. The effect of these changes was that approximately
$2,764,000 was deferred from the second and third quarters of 1998 to the
fourth quarter of 1998.
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<PAGE>
NEW PRONOUNCEMENTS ISSUED, CONTINUED:
In June 1998, the FASB issued SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities," which will be effective for
the Company's financial statements for periods beginning January 1, 2000.
The new standard requires companies to record derivatives on the balance
sheet, measured at fair value. Changes in the fair values of those
derivatives will be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. The key criterion for hedge
accounting is that the hedging relationship must be highly effective in
achieving offsetting changes in fair value or cash flows. The Company has
not yet determined when it will implement SFAS 133 nor has it completed the
complex analysis required to determine the impact on its financial
statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is interest rate risk.
The Company has managed and will continue to manage interest rate risk by
(1) maintaining a conservative ratio of fixed rate, long-term debt to total
debt such that variable rate exposure is kept at an acceptable level, (2)
reducing interest rate exposure on certain long-term variable rate debt
through the use of interest rate caps with appropriately matching
maturities, (3) using treasury rate locks where appropriate to fix rates on
anticipated debt transactions, and (4) taking advantage of favorable market
conditions for long-term debt and/or equity.
The following table sets forth information as of December 31, 1998
concerning the Company's long term debt obligations, including principal
cash flows by scheduled maturity, weighted average interest rates and
estimated fair value ("FV").
<TABLE>
<CAPTION>
For the Year Ended December 31,
(dollars in thousands)
1999 2000 2001 2002
---- ---- ---- ----
<S> <C> <C> <C> <C>
Long term debt:
Fixed rate $10,670 $8,159 $107,461 $10,302
Average interest rate 7.30% 7.30% 7.26% 7.26%
Fixed rate - Debentures - - - 161,400
Average interest rate - - - 7.25%
Variable rate 150,100 - 137,000 -
Average interest rate 6.76% - 6.79% -
-----------------------------------------------------
Total debt - Wholly owned Centers $160,770 $8,159 $244,461 $171,702
-----------------------------------------------------
Joint Venture Centers:
(at Company's pro rata share)
Fixed rate $7,202 - - -
Average interest rate 8.89% - - -
Variable rate - - - -
Average interest rate - - - -
-----------------------------------------------------
Total debt - All Centers $167,972 $8,159 $244,461 $171,702
-----------------------------------------------------
-----------------------------------------------------
<CAPTION>
2003 Thereafter Total FV
---- ---------- ----- --
<S> <C> <C> <C> <C>
Long term debt:
Fixed rate $99,832 $822,194 $1,058,618 $1,121,753
Average interest rate 7.20% 7.20% 7.20% -
Fixed rate - Debentures - - 161,400 155,719
Average interest rate - - 7.25% -
Variable rate - - 287,100 287,100
Average interest rate - - 6.77% -
-----------------------------------------------------
Total debt - Wholly owned Centers $99,832 $822,194 $1,507,118 $1,564,572
-----------------------------------------------------
Joint Venture Centers:
(at Company's pro rata share)
Fixed rate - $197,740 $204,942 $205,828
Average interest rate - 6.50% 7.20% -
Variable rate 92,500 - 92,500 92,500
Average interest rate 6.15% - 6.15% -
-----------------------------------------------------
Total debt - All Centers $192,332 $1,019,934 $1,804,560 $1,862,900
-----------------------------------------------------
-----------------------------------------------------
</TABLE>
Of the total variable rate debt maturing in 1999, $65.1 million was paid in
full on February 4, 1999, and refinanced with a new $100 million fixed rate
loan at an interest rate of 6.74%. The Company is currently in negotiations
to refinance the remaining $85.0 million maturing in 1999 with fixed rate
debt. The $137.0 million of variable debt maturing in 2001 represents the
outstanding borrowings under the Company's credit facility. The credit
facility matures in February 2000, with a one year option to extend the
maturity date to February 2001. The table reflects the Company extending
the maturity date to February 2001.
34
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK, CONTINUED:
In addition, the Company has assessed the market risk for its variable rate
debt and believes that a 1% increase in interest rates would decrease
future earnings and cash flows by approximately $3.8 million per year based
on $379.6 million outstanding at December 31, 1998.
The fair value of the Company's long term debt is estimated based on
discounted cash flows at interest rates that management believes reflects
the risks associated with long term debt of similar risk and duration.
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 ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
35
<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 1999 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 1999 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 1999 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 1999 Annual Meeting of Stockholders.
36
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Page
-------
<S> <C>
(a) 1. Financial Statements of the Company
Report of Independent Accountants. 39
Consolidated balance sheets of the Company as of December 31, 1998 and 1997.
40
Consolidated statements of operations of the Company for the years ended
December 31, 1998, 1997 and 1996. 41
Consolidated statements of stockholders' equity of the Company for the years
ended December 31, 1998, 1997 and 1996. 42
Consolidated statements of cash flows of the Company for the years ended
December 31, 1998, 1997 and 1996. 43
Notes to consolidated financial statements 44-61
2. Financial Statements of SDG Macerich Properties, L.P.
Independent Auditors' Report 62
Balance sheet of SDG Macerich Properties, L.P. as of December 31, 1998.
63
Statement of operations of SDG Macerich Properties, L.P. for the year ended
December 31, 1998. 64
Statement of cash flows of SDG Macerich Properties, L.P. for the year ended
December 31, 1998. 65
Statement of partners' equity of the SDG Macerich Properties, L.P. for the
year ended December 31, 1998. 66
Notes to financial statements 67-69
3. Financial Statement Schedules
Schedule III - Real estate and accumulated depreciation of the Company
70-71
Schedule III - Real estate and accumulated depreciation of SDG Macerich
Properties, L.P. 72
(b) 1. Reports on Form 8-K.
Form 8-K/A dated November 10, 1998 amending the Form 8-K
regarding the acquisition of the Village at Corte Madera and
the Form 8-K regarding the acquisition of Carmel Plaza and
including certain financial statements and pro forma financial
information regarding such acquisitions. -
37
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND Page
REPORTS ON FORM 8-K, CONTINUED:
Page
-------
<S> <C>
Form 8-K dated November 13, 1998, as amended by Form 8-K/A
dated December 8, 1998, regarding the declaration of a
dividend of one preferred share purchase right for each
outstanding share of common stock. -
Form 8-K dated December 14, 1998 with respect to the Underwriting Agreement
and opinion of counsel regarding the issuance of 1,400,000 shares of common
stock. -
Form 8-K dated December 30, 1998 with respect to the acquisition of
Northwest Arkansas Mall. -
(c) 1. Exhibits
The Exhibit Index attached hereto is incorporated by reference under this
item. -
</TABLE>
38
<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 (the "Company") as listed in Items 14(a)(1) and
(3) 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 statements and financial statement schedule
based on our audits. We did not audit the financial statements of SDG Macerich
Properties, L.P. (the "Partnership") the investment in which is reflected in the
accompanying consolidated financial statements using the equity method of
accounting. The investment in the Partnership represents approximately 10% of
1998 consolidated total assets of the Company, and the equity in its net income
represents approximately 33% of the Company's 1998 consolidated net income.
Those statements were audited by other auditors whose report has been furnished
to us and our opinion, insofar as it relates to the amounts included for the
Partnership, is based solely on the report of the other auditors.
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 and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of The Macerich Company as of December 31,
1998 and 1997, and the consolidated results of its operations and its cash flows
for the years ended December 31, 1998, 1997 and 1996, 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.
PricewaterhouseCoopers LLP
Los Angeles, California
March 17, 1999
39
<PAGE>
THE MACERICH COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
December 31,
----------------------------------
1998 1997
---- ----
ASSETS:
<S> <C> <C>
Property, net $1,966,845 $1,407,179
Cash and cash equivalents 25,143 25,154
Tenant receivables, including accrued overage rents of
$5,917 in 1998 and $4,330 in 1997 37,373 23,696
Due from affiliates - 3,105
Deferred charges and other assets, net 62,673 37,899
Investments in joint ventures and the Management Companies 230,022 7,969
----------------- ----------------
Total assets $2,322,056 $1,505,002
----------------- ----------------
----------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Mortgage notes payable:
Related parties $134,625 $135,313
Others 1,074,093 771,246
----------------- ----------------
Total 1,208,718 906,559
Bank notes payable 137,000 55,000
Convertible debentures 161,400 161,400
Accounts payable and accrued expenses 27,701 17,335
Due to affiliates 2,953 15,109
Other accrued liabilities 36,927 32,841
Preferred stock dividend payable 4,420 -
----------------- ----------------
Total liabilities 1,579,119 1,188,244
Minority interest in Operating Partnership 165,524 100,463
----------------- ----------------
Commitments and contingencies (Note 11)
Stockholders' equity:
Series A cumulative convertible redeemable preferred stock, $.01 par
value, 3,627,131 and 0 shares authorized, issued and outstanding
at December 31, 1998 and December 31, 1997,
respectively 36 -
Series B cumulative convertible redeemable preferred stock, $.01 par
value, 5,487,471 and 0 shares authorized, issued and outstanding
at December 31, 1998 and December 31, 1997,
respectively 55 -
Common stock, $.01 par value, 100,000,000 shares
authorized, 33,901,963 and 26,004,800 shares issued and
outstanding at December 31, 1998 and 1997, respectively 338 260
Additional paid in capital 581,508 219,121
Accumulated earnings - -
Unamortized restricted stock (4,524) (3,086)
----------------- ----------------
Total stockholders' equity 577,413 216,295
----------------- ----------------
Total liabilities and stockholders' equity $2,322,056 $1,505,002
----------------- ----------------
----------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the years ended
December 31,
--------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Minimum rents $179,710 $142,251 $99,061
Percentage rents 12,856 9,259 6,142
Tenant recoveries 86,740 66,499 47,648
Other 4,555 3,205 2,208
----------- ------------ ---------
Total revenues 283,861 221,214 155,059
----------- ------------ ---------
EXPENSES:
Shopping center expenses 89,991 70,901 50,792
General and administrative expense 4,373 2,759 2,378
----------- ------------ ---------
94,364 73,660 53,170
----------- ------------ ---------
Interest expense:
Related parties 10,224 10,287 10,172
Others 81,209 56,120 32,181
Depreciation and amortization 53,141 41,535 32,591
----------- ------------ ---------
144,574 107,942 74,944
----------- ------------ ---------
Equity in income (loss) of
unconsolidated joint ventures
and the management companies 14,480 (8,063) 3,256
Gain on sale of assets 9 1,619 -
----------- ------------ ---------
Income before minority interest
and extraordinary item 59,412 33,168 30,201
Extraordinary loss on early
extinguishment of debt (2,435) (555) (315)
----------- ------------ ---------
Income of the Operating Partnership 56,977 32,613 29,886
Less minority interest in net income
of the Operating Partnership 12,902 10,567 10,975
----------- ------------ ---------
Net income 44,075 22,046 18,911
Less preferred dividends 11,547 - -
----------- ------------ ---------
Net income available to common stockholders $32,528 $22,046 $18,911
----------- ------------ ---------
----------- ------------ ---------
Earnings per common share - basic:
Income before extraordinary item $1.14 $0.86 $0.92
Extraordinary item (0.08) (0.01) (0.01)
----------- ------------ ---------
Net income - available to common stockholders $1.06 $0.85 $0.91
----------- ------------ ---------
----------- ------------ ---------
Weighted average number of common shares
outstanding - basic 30,805,000 25,891,000 20,781,000
----------- ------------ ---------
----------- ------------ ---------
Weighted average number of common shares
outstanding - basic, assuming full conversion
of operating units outstanding 43,016,000 37,982,000 32,934,000
----------- ------------ ---------
----------- ------------ ---------
Earnings per common share - diluted:
Income before extraordinary item $1.11 $0.86 $0.90
Extraordinary item (0.05) (0.01) (0.01)
----------- ------------ ---------
Net income - available to common stockholders $1.06 $0.85 $0.89
----------- ------------ ---------
----------- ------------ ---------
Weighted average number of common shares
outstanding - diluted for EPS 43,628,000 38,403,000 33,320,000
----------- ------------ ---------
----------- ------------ ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Common Preferred
Common Preferred Stock Stock Additional
Stock Stock Par Par Paid In
(# shares) (# of shares) Value Value Capital
---------- ------------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1995 19,977,000 - $200 - $158,145
Common stock issued to
public 5,750,000 57 122,129
Issuance costs (152)
Issuance of restricted stock 41,238 854
Unvested restricted stock (41,238)
Exercise of stock options 16,000 291
Distributions paid ($1.70 per share) (17,565)
Net income
Adjustment to reflect minority
interest on a pro rata basis
according to year end ownership
percentage of Operating Partnership (25,356)
---------------------------------------------------------------------------
Balance December 31, 1996 25,743,000 - 257 - 238,346
Issuance costs (352)
Issuance of restricted stock 89,958 2,471
Unvested restricted stock (89,958)
Restricted stock vested in 1997 8,248
Exercise of stock options 253,552 3 2,410
Distributions paid ($1.78 per share) (24,061)
Net income
Adjustment to reflect minority
interest on a pro rata basis
according to year end ownership
percentage of Operating Partnership 307
---------------------------------------------------------------------------
Balance December 31, 1997 26,004,800 - 260 - 219,121
Common stock issued to public 7,828,124 78 214,562
Preferred stock issued 9,114,602 $91 249,909
Issuance costs (13,813)
Issuance of restricted stock 83,018 2,383
Unvested restricted stock (83,018)
Restricted stock vested in 1998 26,039
Exercise of stock options 43,000 839
Distributions paid ($1.865) per share (24,464)
Net income
Adjustment to reflect minority interest
on a pro rata basis according to year
end ownership percentage of
Operating Partnership (67,029)
---------------------------------------------------------------------------
Balance December 31, 1998 33,901,963 9,114,602 $338 $91 $581,508
---------------------------------------------------------------------------
---------------------------------------------------------------------------
<CAPTION>
Unamortized Total
Accumulated Restricted Stockholders'
Earnings Stock Equity
----------- ----------- ---------------
<S> <C> <C> <C>
Balance December 31, 1995 - - $158,345
Common stock issued to
public 122,186
Issuance costs (152)
Issuance of restricted stock 854
Unvested restricted stock ($854) (854)
Exercise of stock options 291
Distributions paid ($1.70 per share) ($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)
-------------------------------------------------
Balance December 31, 1996 - (854) 237,749
Issuance costs (352)
Issuance of restricted stock 2,471
Unvested restricted stock (2,471) (2,471)
Restricted stock vested in 1997 239 239
Exercise of stock options 2,413
Distributions paid ($1.78 per share) (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
-------------------------------------------------
Balance December 31, 1997 - (3,086) 216,295
Common stock issued to public 214,640
Preferred stock issued 250,000
Issuance costs (13,813)
Issuance of restricted stock 2,383
Unvested restricted stock (2,383) (2,383)
Restricted stock vested in 1998 945 945
Exercise of stock options 839
Distributions paid ($1.865) per share (32,528) (56,992)
Net income 32,528 32,528
Adjustment to reflect minority interest
on a pro rata basis according to year
end ownership percentage of
Operating Partnership (67,029)
-------------------------------------------------
Balance December 31, 1998 - ($4,524) $577,413
-------------------------------------------------
-------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JANUARY 1, 1998 JANUARY 1, 1997 JANUARY 1, 1996
TO TO TO
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------------- ----------------------- ----------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income - available to common stockholders $32,528 $22,046 $18,911
Preferred dividends 11,547 - -
----------------------- ----------------------- ----------------------
Net income 44,075 22,046 18,911
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary loss on early extinguishment of debt 2,435 555 315
Gain on sale of assets (9) (1,619) -
Depreciation and amortization 53,141 41,535 32,591
Amortization of (premium) discount on trust deed
note payable (635) 33 33
Minority interest in the net income of the
Operating Partnership 12,902 10,567 10,975
Changes in assets and liabilities:
Tenant receivables, net (13,677) (504) (7,977)
Other assets (19,772) (10,899) 1,181
Accounts payable and accrued expenses 10,366 1,938 6,596
Due to affiliates (12,156) 14,679 (382)
Other liabilities 4,086 145 18,188
Accrued preferred stock dividend 4,420 - -
----------------------- ----------------------- ----------------------
Total adjustments 41,101 56,430 61,520
----------------------- ----------------------- ----------------------
Net cash provided by operating activities 85,176 78,476 80,431
----------------------- ----------------------- ----------------------
Cash flows from investing activities:
Acquisitions of property and improvements (481,735) (199,729) (277,319)
Renovations and expansions of centers (40,545) (12,929) (8,019)
Additions to tenant improvements (5,383) (2,599) (920)
Deferred charges (14,536) (12,542) (9,111)
Equity in (income) loss of unconsolidated joint
ventures and the management companies (14,480) 8,063 (3,256)
Distributions from joint ventures 32,623 8,181 4,107
Contributions to joint ventures (240,196) (7,783) -
Loans to affiliates 3,105 - (3,105)
Proceeds from sale of assets - 4,332 948
----------------------- ----------------------- ----------------------
Net cash used in investing activities (761,147) (215,006) (296,675)
----------------------- ----------------------- ----------------------
Cash flows from financing activities:
Proceeds from mortgages, notes and debentures
payable 480,348 331,400 235,673
Payments on mortgages and notes payable (165,671) (119,515) (84,775)
Net proceeds from equity offerings 450,828 - 122,034
Dividends and distributions (77,998) (65,844) (56,615)
Dividends to preferred shareholders (11,547) - -
----------------------- ----------------------- ----------------------
Net cash provided by financing activities 675,960 146,041 216,317
----------------------- ----------------------- ----------------------
Net (decrease) increase in cash (11) 9,511 73
Cash and cash equivalents, beginning of period 25,154 15,643 15,570
----------------------- ----------------------- ----------------------
Cash and cash equivalents, end of period $25,143 $25,154 $15,643
----------------------- ----------------------- ----------------------
----------------------- ----------------------- ----------------------
Supplemental cash flow information:
Cash payment for interest, net of amounts
capitalized $89,543 $65,475 $40,572
----------------------- ----------------------- ----------------------
----------------------- ----------------------- ----------------------
Non-cash transactions:
Acquisition of property by assumption of debt $70,116 $121,800 $152,228
----------------------- ----------------------- ----------------------
----------------------- ----------------------- ----------------------
Acquisition of property by issuance of OP Units $7,917 - $600
----------------------- ----------------------- ----------------------
----------------------- ----------------------- ----------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER 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 78% 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 are
redeemable, subject to certain restrictions, on a one-for-one basis,
for the Company's common stock or cash at the Company's option.
The Company was organized to qualify as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended. The 22% limited partnership interest of the Operating
Partnership not owned by the Company is reflected in these financial
statements as minority interest.
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 "Investments 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 $5,954 at December 31, 1998 and $5,810 at December
31, 1997.
TENANT RECEIVABLES:
Included in tenant receivables are allowance for doubtful
accounts of $1,707 and $1,303 at December 31, 1998 and 1997,
respectively.
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 $3,814 in 1998, $3,599 in 1997 and $1,832 in
1996 due to the straight lining of rent adjustment. Percentage rents
are 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, redevelopment 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.
44
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
PROPERTY:
Costs related to the redevelopment, 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>
Buildings and improvements 5-40 years
Tenant improvements initial term of related lease
Equipment and furnishings 5- 7 years
</TABLE>
The Company assesses whether there has been an impairment in
the value of its long-lived 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 an impairment loss
if the income stream is 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 such impairment has occurred in its
net property carrying values at December 31, 1998.
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 1 - 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.
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 $1.865 paid during 1998
represented $1.12 of ordinary income and $0.745 of return of capital
and the distributions of $1.78 per share during 1997 represented $0.96
of ordinary income and $0.82 return of capital. During 1996, the
distributions were $1.70 per share of which $1.14 was ordinary income
and $0.56 was return of capital.
Each partner is taxed individually on its 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.
45
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
RECLASSIFICATIONS:
Certain reclassifications have been made to the 1996 and 1997
consolidated financial statements to conform to the 1998 financial
statement presentation.
ACCOUNTING PRONOUNCEMENTS:
In March 1998, the Financial Accounting Standards Board
("FASB"), through its Emerging Issues Task Force ("EITF"), concluded
based on EITF 97-11, "Accounting for Internal Costs Relating to Real
Estate Property Acquisitions," that all internal costs to source,
analyze and close acquisitions should be expensed as incurred. The
Company has historically capitalized these costs, in accordance with
generally accepted accounting principles ("GAAP"). The Company has
adopted the FASB's interpretation effective March 19, 1998, and the
impact was an approximate $.04 per share reduction in net income
diluted per share for 1998.
In May 1998, the FASB, through the EITF, modified the timing
of recognition of revenue for percentage rent received from tenants in
EITF 98-9, "Accounting for Contingent Rent in Interim Financial
Periods." The Company applied this accounting change as of April 1,
1998. The accounting change had the effect of deferring $1,792 of
percentage rent in the second quarter of 1998 and $972 of percentage
rent in the third quarter of 1998. During the fourth quarter of 1998,
the FASB reversed EITF 98-9. Accordingly, the Company has resumed
accounting for percentage rent on the accrual basis. The effect of
these changes was that approximately $2,764 was deferred from the
second and third quarters of 1998 to the fourth quarter of 1998.
In June 1998, the FASB issued SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities," which will be effective
for the Company's consolidated financial statements for periods
beginning January 1, 2000. The new standard requires companies to
record derivatives on the balance sheet, measured at fair value.
Changes in the fair values of those derivatives will be accounted for
depending on the use of the derivative and whether it qualifies for
hedge accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows. The Company has not yet determined
when it will implement SFAS 133 nor has it completed the complex
analysis required to determine the impact on its consolidated financial
statements.
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 consolidated 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 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 parties.
46
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED:
The Company periodically enters into treasury lock agreements
in order to hedge its exposure to interest rate fluctuations on
anticipated financings. Under these agreements, the Company pays or
receives an amount equal to the difference between the treasury lock
rate and the market rate on the date of settlement, based on the
notional amount of the hedge. The realized gain or loss on the
contracts is recorded on the balance sheet, in other assets, and
amortized to interest expense over the period of the hedged loans. At
December 31,1998, the Company had one unsettled treasury lock for a
notional amount of $140,000. As of December 31, 1998, the treasury lock
rate was higher than the market rate resulting in an unrealized hedge
liability of approximately $5,935, which has been accrued at December
31, 1998.
EARNINGS PER SHARE ("EPS"):
During 1998, the Company implemented SFAS No. 128, "Earnings
per share." 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, 1998, 1997 and 1996. 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 and convertible preferred
stock were not included in the calculation as the effect of their
inclusion would be antidilutive. The OP Units not held by the Company
have been included in the diluted EPS calculation since they are
redeemable on a one-for-one basis. The following table reconciles the
basic and diluted earnings per share calculation:
<TABLE>
<CAPTION>
For the years ended
(In thousands, except per share data)
1998 1997 1996
-------------------------------------- ---------------------------------- ------------------------
Net Per Net Per Net Per
Income Shares Share Income Shares Share Income Shares Share
------------------ ------ ----- ------------------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income $44,075 30,805 $22,046 25,891 $18,911 20,781
Less: Preferred stock
dividends 11,547 - -
Basic EPS:
------------------ ------ ----- ------------------ ------ ----- ------- ------ -----
Net income - available to
common stockholders $32,528 30,805 $1.06 $22,046 25,891 $0.85 $18,911 20,781 $0.91
Dilted EPS:
Conversion of OP units 12,902 12,211 10,567 12,091 10,975 12,153
Employee stock options
and restricted stock 668 612 239 421 - 386
Convertible preferred
stock n/a - antidultive N/A N/A
for EPS
Convertible
debentures n/a - antidilutive n/a - antidilutive N/A
------------------ ------ ----- ------------------ ------ ----- ------- ------ -----
Net income - available
to common stockholders $46,098 43,628 $1.06 $32,852 38,403 $0.85 $29,886 33,320 $0.89
------------------ ------ ----- ------------------ ------ ----- ------- ------ -----
------------------ ------ ----- ------------------ ------ ----- ------- ------ -----
</TABLE>
47
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
CONCENTRATION OF RISK:
The Company maintains its cash accounts in a number of
commercial banks. Accounts at these banks are guaranteed by the Federal
Deposit Insurance Corporation ("FDIC") up to $100. At various times
during the year, the Company had deposits in excess of the FDIC
insurance limit.
Lakewood Mall generated 10.5% of total shopping center
revenues in 1997 and 16% in 1996. Queens Center accounted for 13.8% of
total shopping center revenues in 1996. No Center generated more than
10% of shopping center revenues during 1998.
The Centers derived approximately 89.9% and 89.5% of their
total rents for the year ended December 31, 1998 and 1997,
respectively, from Mall and Freestanding Stores. The Limited
represented 6.1% and 7.6% of total minimum rents in place as of
December 31, 1998 and 1997, respectively, and no other retailer
represented more than 4.5% and 4.6% of total minimum rents as of
December 31, 1998 and 1997, respectively.
MANAGEMENT ESTIMATES:
The preparation of financial statements in conformity with
GAAP 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 initiated a Year 2000 compliance program
consisting of the following phases: (1) identification of Year 2000
issues; (2) assessment of Year 2000 compliance of systems; (3)
remediation or replacement of non-compliant systems; (4) testing to
verify compliance; and (5) contingency planning, as appropriate. The
Company is in the process of assessing, remediating and testing both
its information technology ("IT") and non-IT systems. Because the
Company's assessment, remediation and testing efforts are ongoing, the
Company is unable to estimate the actual costs of achieving Year 2000
compliance for its IT and non-IT systems. As of December 31, 1998, the
Company has not expended significant amounts since its evaluation of
Year 2000 issues has been primarily conducted by its own personnel. The
Company is also surveying its material vendors, utilities and tenants
about their plans and progress in addressing the Year 2000 issue.
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, 1998 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%
SDG Macerich Properties, L.P. 50%
West Acres Development 19%
</TABLE>
The Operating Partnership also owns the non-voting preferred
stock of the Macerich Management Company and Macerich Property
Management Company and is entitled to receive 95% of the distributable
cash flow of these two entities. Macerich Manhattan Management Company
is a 100% subsidiary of Macerich Management Company. The Company
accounts for the Management Companies and joint ventures using the
equity method of accounting.
48
<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:
On February 27, 1998, the Company, through a 50/50 joint
venture, SDG Macerich Properties, L.P., acquired a portfolio of twelve
regional malls. The total purchase price was $974,500 including the
assumption of $485,000 in debt, at market value. The Company funded its
50% of the remaining purchase price by issuing 3,627,131 shares of
Series A cumulative convertible preferred stock ("Series A Preferred
Stock") for gross proceeds totaling $100,000 in a private placement.
The Company also issued 2,879,134 shares of common stock ($79,600 of
total proceeds) under the Company's shelf registration statement. The
balance of the purchase price was funded from the Company's line of
credit. Each of the joint venture partners have assumed leasing and
management responsibilities for six of the regional malls.
On August 19, 1997, the Company acquired a 10% interest in the
joint venture that acquired Manhattan Village Shopping Center
("Manhattan Village") in Manhattan Beach, California.
The results of these joint ventures are included for the
period subsequent to their respective dates of 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.
COMBINED AND CONDENSED BALANCE SHEETS OF JOINT VENTURES
AND THE MANAGEMENT COMPANIES
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Assets:
Properties, net $1,141,984 $153,856
Other assets 38,103 10,013
-------------- --------------
Total assets $1,180,087 $163,869
-------------- --------------
-------------- --------------
Liabilities and partners' capital:
Mortgage notes payable $618,384 $84,342
Other liabilities 42,048 6,563
The Company's capital 230,022 7,969
Outside partners' capital 289,633 64,995
-------------- --------------
Total liabilities and partners' capital $1,180,087 $163,869
-------------- --------------
-------------- --------------
</TABLE>
49
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
COMBINED AND CONDENSED STATEMENTS OF OPERATIONS OF JOINT VENTURES
AND THE MANAGEMENT COMPANIES
<TABLE>
<CAPTION>
For the years ended December 31,
1998
--------------------------------------------------------
SDG Other Management Total
Macerich Joint Companies
Properties, L.P. Ventures
--------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $115,426 $34,345 $7,091 $156,862
--------------------------- -------------- -------------
Expenses:
Management Company expense - - 10,122 10,122
Shopping center expenses 42,594 8,956 - 51,550
Interest 26,432 7,129 (398) 33,163
Depreciation and amortization 17,383 4,288 787 22,458
--------------------------- -------------- -------------
Total operating costs 86,409 20,373 10,511 117,293
--------------------------- -------------- -------------
Gain (loss) on sale
or write down of assets 29 140 (198) (29)
--------------------------- -------------- -------------
Net income (loss) $29,046 $14,112 ($3,618) $39,540
--------------------------- -------------- -------------
--------------------------- -------------- -------------
For the years ended December 31,
1997
-----------------------------------------------------
SDG Other Management Total
Macerich Joint Companies
Properties, L.P. Ventures
-----------------------------------------------------
<S> <C> <C> <C> <C>
Revenues - $32,482 $4,163 $36,645
-------------- ---------- ------------ ------------
Expenses:
Management Company expense - - 4,738 4,738
Shopping center expenses - 11,952 - 11,952
Interest - 6,361 (204) 6,157
Depreciation and amortization - 4,600 392 4,992
-------------- ---------- ------------ ------------
Total operating costs - 22,913 4,926 27,839
-------------- ---------- ------------ ------------
Gain (loss) on sale
or write down of assets - (20,491) 184 (20,307)
-------------- ---------- ------------ ------------
Net income (loss) - ($10,922) ($579) ($11,501)
-------------- ---------- ------------ ------------
-------------- ---------- ------------ ------------
<CAPTION>
For the years ended December 31,
1996
----------------------------------------------------
SDG Other Management Total
Macerich Joint Companies
Properties, L.P. Ventures
----------------------------------------------------
<S> <C> <C> <C> <C>
Revenues - $27,059 $4,474 $31,533
---------------- --------- --------------- ---------
Expenses:
Management Company expense - - 4,293 4,293
Shopping center expenses - 9,598 - 9,598
Interest - 6,415 (6) 6,409
Depreciation and amortization - 4,252 154 4,406
---------------- --------- --------------- ---------
Total operating costs - 20,265 4,441 24,706
---------------- --------- --------------- ---------
Gain (loss) on sale
or write down of assets - 581 - 581
---------------- --------- --------------- ---------
Net income (loss) - $7,375 $33 $7,408
---------------- --------- --------------- ---------
---------------- --------- --------------- ---------
</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
affiliates of Northwestern Mutual Life ("NML") of $74,612, $43,500 and
$43,500 for the years ended December 31, 1998, 1997 and 1996,
respectively. NML is considered a related party because they are a
joint venture partner with the Company in Macerich Northwestern
Associates. Interest expense incurred on these borrowings amounted to
$3,786, $2,974 and $2,974 for the years ended December 31, 1998, 1997
and 1996, respectively.
Included in the gain (loss) on sale or write-down of assets is
$20,990 of loss on the sale and write-down of North Valley Plaza in
1997.
50
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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,
1998
-------------------------------------------------------
SDG Other Management Total
Macerich Joint Companies
Properties, L.P. Ventures
----------------------------- -------------------------
<S> <C> <C> <C> <C>
Revenues $57,713 $9,394 $6,736 $73,843
----------------------------- -------------------------
Expenses:
Management Company expense - - 9,616 9,616
Shopping center expenses 21,297 2,065 - 23,362
Interest 13,216 2,525 (378) 15,363
Depreciation and amortization 8,692 1,439 748 10,879
----------------------------- -------------- ----------
Total operating costs 43,205 6,029 9,986 59,220
----------------------------- -------------- ----------
Gain (loss) on sale
or write down of assets 15 30 (188) (143)
----------------------------- -------------- ----------
Net income (loss) $14,523 $3,395 ($3,438) $14,480
----------------------------- -------------- ----------
----------------------------- -------------- ----------
For the years ended December 31,
1997
-------------------------------------------------------
SDG Other Management Total
Macerich Joint Companies
Properties, L.P. Ventures
---------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Revenues - $11,197 $3,955 $15,152
---------------- ---------- -------------- ----------
Expenses:
Management Company expense - - 4,328 4,328
Shopping center expenses - 4,238 - 4,238
Interest - 2,129 (192) 1,937
Depreciation and amortization - 1,940 372 2,312
---------------- ---------- -------------- ----------
Total operating costs - 8,307 4,508 12,815
---------------- ---------- -------------- ----------
Gain (loss) on sale
or write down of assets - (10,400) - (10,400)
---------------- ---------- -------------- ----------
Net income (loss) - ($7,510) ($553) ($8,063)
---------------- ---------- -------------- ----------
---------------- ---------- -------------- ----------
<CAPTION>
For the years ended December 31,
1996
------------------------------------------------------
SDG Other Management Total
Macerich Joint Companies
Properties, L.P. Ventures
----------------- --------- --------------- ---------
<S> <C> <C> <C> <C>
Revenues - $11,061 $3,919 $14,980
----------------- --------- --------------- ---------
Expenses:
Management Company expense - - 3,747 3,747
Shopping center expenses - 3,856 - 3,856
Interest - 2,141 (6) 2,135
Depreciation and amortization - 1,950 146 2,096
----------------- --------- --------------- ---------
Total operating costs - 7,947 3,887 11,834
----------------- --------- --------------- ---------
Gain (loss) on sale
or write down of assets - 110 - 110
----------------- --------- --------------- ---------
Net income (loss) - $3,224 $32 $3,256
----------------- --------- --------------- ---------
----------------- --------- --------------- ---------
</TABLE>
51
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
4. PROPERTY:
Property is summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---- ----
<S> <C> <C>
Land $422,592 $313,050
Building improvements 1,684,188 1,235,459
Tenant improvements 47,808 38,097
Equipment & furnishings 9,097 7,576
Construction in progress 49,440 13,247
--------------- ----------------
2,213,125 1,607,429
Less, accumulated depreciation (246,280) (200,250)
--------------- ----------------
$1,966,845 $1,407,179
--------------- ----------------
--------------- ----------------
</TABLE>
Depreciation expense for the years ended December 31, 1998 and 1997 was $46,041
and $35,835, respectively.
5. DEFERRED CHARGES AND OTHER ASSETS:
Deferred charges and other assets are summarized as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1998 1997
---- ----
<S> <C> <C>
Leasing $30,338 $28,101
Financing 19,137 14,396
-------------------- ----------------------
49,475 42,497
Less, accumulated amortization (20,108) (18,127)
-------------------- ----------------------
29,367 24,370
Other assets 33,306 13,529
-------------------- ----------------------
$62,673 $37,899
-------------------- ----------------------
-------------------- ----------------------
</TABLE>
52
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. MORTGAGE NOTES PAYABLE:
Mortgage notes payable at December 31, 1998 and December 31, 1997 consist
of the following:
<TABLE>
<CAPTION>
Carrying Amount of Notes
------------------------------------
1998 1997
------------- ------------------
Property Pledged Related Related Interest Payment Maturity
As Collateral Other Party Other Party Rate Terms Date
- ---------------- ----- ----- ----- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Capitola Mall -- $37,345 -- $37,675 9.25% 316(d) 2001
Carmel Plaza (k) $25,000 -- -- -- 7.54% interest only 1999
Chesterfield Towne Center 65,064 -- $65,708 -- 9.07% 548(e) 2024
Chesterfield Towne Center 3,266 -- 3,359 -- 8.54% 31(d) 1999
Citadel 74,575 -- 75,600 -- 7.20% 554(d) 2008
Corte Madera, Village at (k) 60,000 -- -- -- 7.28% interest only 1999
Crossroads Mall-Boulder (a) -- 35,280 -- 35,638 7.08% 244(d) 2010
Fresno Fashion Fair (j) 69,000 -- 38,000 -- 6.52% interest only 2008
Greeley Mall 17,055 -- 17,815 -- 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
Northwest Arkansas Mall 63,000 -- -- -- 7.33% 434(d) 2009
Parklane Mall -- 20,000 -- 20,000 6.75% interest only 2001
Queens Center 65,100 -- 65,100 -- (f) interest only 1999
Rimrock Mall 31,002 -- 31,517 -- 7.70% 244(d) 2003
South Plains Mall 28,795 -- -- -- 6.3%(i) 348(d) 2008
South Towne Center (g) 64,000 -- 65,000 -- 6.61% interest only 2008
Valley View Center 51,000 -- 51,000 -- 7.89% interest only 2006
Villa Marina Marketplace 58,000 -- 58,000 -- 7.23% interest only 2006
Vintage Faire Mall (h) 54,522 -- 55,433 -- 7.65% 427(d) 2003
Westside Pavilion 100,000 -- -- -- 6.67% interest only 2008
---------- -------- -------- --------
Total $1,074,093 $134,625 $771,246 $135,313
---------- -------- -------- --------
---------- -------- -------- --------
Weighted average interest rate at December 31, 1998 7.24%
-----
-----
Weighted average interest rate at December 31, 1997 7.42%
-----
-----
</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, 1998 and December 31, 1997 the unamortized
discount was $397 and $430, respectively.
(b) This loan is cross collateralized by Green Tree Mall, Crossroads
Mall-Oklahoma and the Centre at 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 the Company to deposit all cash flow from the property
operations with a trustee to meet its obligations 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, 1998 and at 1997.
(d) This represents the monthly payment of principal and interest.
53
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. MORTGAGE NOTES PAYABLE, CONTINUED:
(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 $387 for the year
ended December 31, 1998 and $98 for the year ended December 31,
1997.
(f) This loan bore interest at LIBOR plus 0.45%. There was 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 of 7.07% through 1997 and 7.7% thereafter. This loan was
paid in full on February 4, 1999 and refinanced with a new loan
of $100,000, with interest at 6.74%, maturing in 2009.
(g) At December 31, 1997, this loan had an interest rate of LIBOR plus
1%, which totaled 6.9%. In July 1998, this loan was reduced by
$1,000 and converted into a fixed rate loan bearing interest at
6.61% and maturing in 2008.
(h) Included in cash and cash equivalents is $3,048 and $3,030 at
December 31, 1998 and 1997 respectively, of cash restricted under
the terms of this loan agreement.
(i) This note was assumed at acquisition. At the time of acquisition
in June 1998, this debt was recorded at fair market value and the
premium is being amortized as interest expense over the life of
the loan using the effective interest method. The monthly debt
service payment is $348 per month and is calculated based on a
12.5% interest rate. At December 31, 1998, the unamortized premium
was $6,165. On February 17, 1999, the loan was paid in full and
was refinanced with a new loan of $65,000, with interest at 7.49%,
maturing in 2009.
(j) The Company incurred a loss on early extinguishment of the old debt in
1998 for $2,345.
(k) These loans bear interest at LIBOR plus 2.0%.
Certain mortgage loan agreements contain a prepayment penalty provision for
the early extinguishment of the debt.
Total interest expense capitalized during 1998, 1997 and 1996 was $3,199,
$2,224, and $461, respectively.
The market value of mortgage notes payable at December 31, 1998 and December
31, 1997 is estimated to be approximately $1,271,853 and $1,013,000,
respectively, based on current interest rates for comparable loans.
The above debt matures as follows:
<TABLE>
<CAPTION>
Years Ending
December 31,
------------
<S> <C>
1999 $160,770
2000 8,159
2001 107,461
2002 10,302
2003 99,832
2004 and beyond 822,194
-----------
$1,208,718
-----------
-----------
</TABLE>
Of the $160,770 maturing in 1999, $65.1 million was paid in full on
February 4, 1999 and refinanced with a new $100 million fixed rate loan at an
interest rate of 6.74%. The Company is currently in negotiations to refinance
the remaining debt maturing in 1999.
54
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. BANK NOTES PAYABLE:
At December 31, 1997, the Company had $55,000 of borrowings outstanding
under its $60,000 unsecured credit facility, which bore interest at LIBOR
plus 1.325%. On February 26, 1998, the Company increased this credit
facility to $150,000 with a maturity of February 2000, currently bearing
interest at LIBOR plus 1.15%. The interest rate on such credit facility
fluctuates between 0.95% and 1.15% over LIBOR. As of December 31, 1998,
$137,000 of borrowings was outstanding under this line of credit at an
interest rate of 6.79%.
Additionally, the Company had issued $776 in letters of credit
guaranteeing performance by the Company of certain events. The Company does
not believe that these letters of credit will result in a liability to the
Company.
During January 1999, the Company entered into a bank construction loan
agreement to fund $89,200 of costs related to the development of Pacific
View. The loan bears interest at LIBOR plus 2.25% and matures in February
2001. Principal is drawn as construction costs are incurred.
8. CONVERTIBLE DEBENTURES:
During 1997, the Company issued and sold $161,400 of convertible
subordinated debentures (the "Debentures") due 2002. 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 1998,
1997 and 1996 management fees of $2,817, $2,219 and $1,788, 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 $10,224,
$10,287 and $10,168 for the years ended December 31, 1998, 1997 and 1996,
respectively. Included in accounts payables and accrued expense is interest
payable to these partners of $512, $518, $516 at December 31, 1998, 1997
and 1996, 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 in full in February 1998.
In 1997, certain executive officers, received loans from the Company
totaling $5,500. These loans are full recourse to the executives. $5,000 of
the loans were issued under the terms of the employee stock incentive plan,
bear interest at 7%, are due in 2007 and are secured by Company common
stock owned by the executives. The remaining 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, 1998 and 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.
55
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. FUTURE RENTAL REVENUES:
Under existing noncancellable operating lease agreements, tenants are
committed to pay the following minimum rental payments to the Company:
<TABLE>
<CAPTION>
Years Ending
December 31,
------------
<S> <C>
1999 $181,782
2000 168,307
2001 151,387
2002 138,468
2003 124,028
2004 and beyond 521,784
-------
$1,285,756
----------
----------
</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 percentage of base rental
income, as defined. Ground rent expenses were $1,125 (including contingent
rent of $0) in 1998, $817 (including contingent rent of $0) in 1997 and
$704 (including contingent rents of $0) in 1996.
Minimum future rental payments required under the leases are as
follows:
<TABLE>
<CAPTION>
Years Ending
December 31,
-------------
<S> <C>
1999 $593,259
2000 593,359
2001 586,859
2002 586,859
2003 602,175
2004 and beyond 32,351,034
----------
$35,313,545
----------
----------
</TABLE>
Perchloroethylene (PCE) has been detected in soil and groundwater in
the vicinity of a dry cleaning establishment at North Valley Plaza, formerly
owned by a joint venture of which the Company was a 50% member. The property was
sold on December 18, 1997. The California Department of Toxic Substances Control
(DTSC) advised the Company in 1995 that very low levels of Dichloroethylene (1,2
DCE), a degradation byproduct of PCE, had been detected in a municipal water
well located 1/4 mile west of 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 1,2 DCE which
is permitted in drinking water is 6 parts per billion (ppb). The 1,2 DCE was
detected in the water well at a concentration of 1.2 ppb, which 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 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 former dry cleaner. $153 and
$124 have already been incurred by the joint venture for remediation, and
professional and legal fees for the periods ending December 31, 1998 and 1997,
respectively. An additional $408 remains reserved by the joint venture as of
December 31, 1998. The joint venture has been sharing costs on a 50/50 basis
with a former owner of the property and intends to look to additional
responsible parties for recovery.
56
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. COMMITMENTS AND CONTINGENCIES, CONTINUED:
Low levels of toluene, a petroleum constituent, was detected in one of
three groundwater dewatering system holding tanks at Queens Center. Although the
Company believes that no remediation will be required, the Company established a
$150 reserve in 1996 to cover professional fees and testing costs, which was
reduced by costs incurred of $2 and $18 for the twelve months ending December
31, 1998 and 1997, respectively. 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 Center. 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
were well within OSHA's permissible exposure limit (PEL) of .1 fcc. The
accounting for this acquisition includes a reserve of $3,300 to cover future
removal of this asbestos, as necessary. The Company incurred $255 and $170 in
remediation costs for the twelve months ending December 31, 1998 and 1997,
respectively.
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 $513,
$400, $350 to the plan in 1998, 1997 and 1996, respectively.
13. STOCK OPTION 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 the grant date. The plan reserved 25,000
shares, all of which were granted as of December 31, 1998.
215,215 shares of restricted stock also have been issued under the
employees stock incentive plan 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 vesting date and is amortized over
the vesting period on a straight line basis. As of December 31, 1998 and
1997, 26,039 and 8,248 shares, respectively, of restricted stock had
vested. A total of 83,018 shares at a weighted average price of $28.71 were
issued in 1998, 89,958 shares at a weighted average price of $27.46 were
issued in 1997 and 41,238 shares at a weighted average price of $20.70 were
issued during 1996 and 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 common stock and is considered issued when vested. Compensation
expense for restricted stock was $944, $239 and $0 in 1998, 1997 and 1996,
respectively.
Approximately 803,000 and 692,000 additional shares were reserved and
were available for issuance under the stock incentive plan at December 31,
1998 and 1997, respectively. The plan allows for granting options or
restricted stock at market value.
57
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. STOCK OPTION PLAN, CONTINUED:
<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) - - - 399,784 $19.02
---------- ---------------- -------- ---------------- ----------- ------------
----------- ------------
Shares outstanding at December 31, 1995 1,254,500 $19.00-$20.25 22,500 $19.00-$21.38
---------------- ----------------
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 369,109 $26.50-$26.88 5,000 $ 28.50
Exercised (253,552) $ 19.00 - -
Forfeited (8,000) - - -
---------- ---------------- -------- ----------------
Shares outstanding at December 31, 1997 1,619,891 $19.00-$26.88 32,500 $19.00-$28.50 1,230,227 $20.58
---------------- ------------ -----------
----------- -----------
Granted 412,500 27.38 5,000 $ 25.625
Exercised (66,080) 19.00 (7,000) $19.00-$21.375
Forfeited - -
---------- ---------------- -------- ----------------
Shares outstanding at December 31, 1998 1,966,311 $19.00-$27.38 30,500 $19.00-$28.50 1,330,654 $19.38
---------- ---------------- -------- ---------------- ------------ ------------
---------- ---------------- -------- ---------------- ------------ ------------
</TABLE>
The weighted average exercise price for options granted in 1995 was
$20.25, in 1996 was $21.65, in 1997 was $27.06 and in 1998 was $27.38.
The weighted average remaining contractual life for options outstanding
at December 31, 1998 was 5 years and the weighted average remaining
contractual life for options exercisable at December 31, 1998 was 5 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 $228 or $0.00 per share for the year ended
December 31, 1998 and $108 or $0.00 per share for the year ended December
31, 1997.
The weighted average fair value of options granted during 1998 and 1997
were $2.01 and $2.51, respectively. The fair value of each option grant
issued in 1998 and 1997 is estimated at the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions: (a) dividend yield of 7.8% in 1998 and 7.0% in 1997, (b)
expected volatility of the Company's stock of 17.26% in 1998 and 14.9% in
1997, (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 1998 and 1997, respectively.
58
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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 $295 during 1998 and $154 during
1997 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:
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.
On February 27, 1998, the Company, through a 50/50 joint venture with an
affiliate of Simon Property 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 $974.5
million, which included $485.0 million of assumed debt, at market value. The
Company's share of the cash component of the purchase price was funded by
issuing $100.0 million of Series A Preferred Stock, $80.0 million of common
stock and borrowing the balance from the Company's line of credit.
South Plains Mall was acquired on June 19, 1998. South Plains Mall is a
1,140,574 square foot super regional mall located in Lubbock, Texas. The
purchase price was $115.5 million, consisting of $29.3 million of assumed debt,
at fair market value, and $86.2 million of cash. The cash portion was funded
with a portion of the proceeds from the Company's Series B cumulative
convertible redeemable preferred stock ("Series B Preferred Stock") offering.
Westside Pavilion was acquired on July 1, 1998 for $170.5 million. Westside
Pavilion is a 755,759 square foot regional mall located in Los Angeles,
California. The purchase price was funded with a portion of the proceeds from
the Company's Series B Preferred Stock offering, borrowings under the Company's
line of credit and the placement of a ten year $100.0 million mortgage secured
by the property.
59
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
15. ACQUISITIONS, CONTINUED:
The Village at Corte Madera is a 428,398 square foot regional mall in
Corte Madera, California, which the Company acquired in two phases: (i) 40% on
June 16, 1998 and (ii) the remaining 60% on July 24, 1998. In addition, Carmel
Plaza, a 115,215 square foot community shopping center in Carmel, California was
acquired on August 10, 1998. The combined purchase price was $165.5 million,
consisting of $40.0 million of assumed debt, the issuance of $7.9 million of OP
Units and $117.6 million in cash. The cash component was funded by borrowings
under the Company's line of credit.
Northwest Arkansas Mall was acquired on December 15, 1998. Northwest
Arkansas Mall is a 780,237 square foot regional mall located in Fayetteville,
Arkansas. The purchase price of $94.0 million was funded by a concurrently
placed loan of $63.0 million and borrowings of $31.0 million under the Company's
line of credit.
See "Note 20 - Subsequent Events" for description of an acquisition
occurring in February 1999.
16. UNAUDITED PRO FORMA FINANCIAL INFORMATION:
The following unaudited pro forma financial information combines the
consolidated results of operations of the Company for 1998 and 1997 as if
the 1998 Acquisitions had occurred on January 1, 1997, 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,
1998 1997
---- ----
<S> <C> <C>
Revenues $319,946 $280,279
Income before minority interest and extraordinary items 44,442 19,944
Income before extraordinary items 33,319 14,837
Net income 47,883 30,505
Net income - available to common stockholders 30,884 14,282
Per share income before extraordinary items $0.98 $0.44
Net income per share - available to common stockholders - basic $0.91 $0.42
Weighted average number of common shares outstanding - basic 33,902 33,811
Per share income before extraordinary items $0.95 $0.43
Net income per share - available to common stockholders - diluted $0.90 $0.42
Weighted average number of common shares outstanding - diluted 46,725 46,323
</TABLE>
60
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
17. PREFERRED STOCK:
On February 25, 1998, the Company issued 3,627,131 shares of Series A
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 quarterly dividend equal to the greater of $0.46 per share, or the
dividend then payable on a share of common stock.
On June 17, 1998, the Company issued 5,487,471 shares of Series B
Preferred Stock for proceeds totaling $150,000 in a private placement. The
preferred stock can be converted on a one for one basis into common stock and
will pay a quarterly dividend equal to the greater of $0.46 per share, or the
dividend then payable on a share of common stock.
No dividends will be declared or paid on any class of common or other
junior stock to the extent that dividends on Series A Preferred Stock and Series
B Preferred Stock have not been declared and/or paid.
18. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a summary of periodic results of operations for 1998 and
1997:
<TABLE>
<CAPTION>
1998 Quarter Ended 1997 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 $86,200 $75,079 $61,407 $61,175 $61,529 $57,032 $52,350 $50,303
Income before minority interest
and extraordinary items 23,583 12,653 12,607 10,569 10,626 2,792 9,839 9,911
Income before
extraordinary items 13,780 6,903 7,368 6,912 7,253 1,921 6,684 6,743
Net income - available to common
stockholders 13,759 4,579 7,368 6,822 7,253 1,870 6,180 6,743
Income before extraordinary
items per share $0.42 $0.23 $0.24 $0.25 $0.28 $0.07 $0.25 $0.26
Net income - available to common
stockholders per share - basic $0.42 $0.15 $0.24 $0.25 $0.28 $0.07 $0.24 $0.26
</TABLE>
19. SEGMENT INFORMATION:
During 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131
established standards for disclosure about operating segments and related
disclosures about products and services, geographic areas, and major
customers. The Company currently operates in one business segment, the
acquisition, ownership, redevelopment, management and leasing of regional
and community shopping centers. Additionally, the Company operates in one
geographic area, the United States.
20. SUBSEQUENT EVENTS (UNAUDITED):
On February 10, 1999 a dividend/distribution of $0.485 per share was
declared for common stockholders and OP Unit holders of record on February
18, 1999. In addition, the Company declared a dividend of $0.485 on the
Company's Series A Preferred Stock and a dividend of $0.485 on the
Company's Series B Preferred Stock. All dividends/distributions will be
payable on March 8, 1999.
On February 18, 1999, through a 51/49 joint venture with Ontario
Teachers' Pension Plan Board, the Company closed on the first phase of a
two phase acquisition of a portfolio of properties. The phase one closing
included the acquisition of three regional malls, the retail component of a
mixed-use development, five contiguous properties and two non-contiguous
community shopping centers comprising approximately 3.6 million square feet
for a total purchase price of approximately $427.0 million. The purchase
price was funded with a $120.0 million loan placed concurrently with the
closing, $140.4 million of debt from an affiliate of the seller, and $39.4
million of assumed debt. The balance of the purchase price was paid in
cash. The Company's share of the cash component was funded with the
proceeds from two refinancings of centers and borrowings under the
Company's line of credit.
61
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
SDG Macerich Properties, L.P.:
We have audited the accompanying balance sheet of SDG Macerich Properties,
L.P. as of December 31, 1998, and the related statements of operations, cash
flows, and partners' equity for the year then ended. In connection with our
audit of the financial statements, we have also audited the related financial
statement schedule (Schedule III). These financial statements and the
financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SDG Macerich Properties,
L.P. as of December 31, 1998, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule (Schedule III), when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG LLP
Indianapolis, Indiana
February 11, 1999
62
<PAGE>
SDG MACERICH PROPERTIES, L.P.
Balance Sheet
December 31, 1998
(Dollars in thousands)
<TABLE>
<S> <C>
ASSETS
Properties:
Land $ 199,377
Building and Improvements 804,724
Equipment and furnishings 472
-----------
1,004,573
Less accumulated depreciation 17,383
-----------
987,190
Cash and cash equivalents 9,156
Tenant receivables, including accrued revenue
less allowance for doubtful accounts of $804 20,579
Prepaid real estate taxes and other assets 1,096
-----------
$ 1,018,021
-----------
-----------
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable $ 505,868
Accounts payable 10,935
Due to affiliates 443
Accrued real estate taxes 12,423
Accrued interest expense 1,562
Accrued management and leasing fees 249
Other liabilities 1,503
-----------
Total liabilities 532,983
Partners' equity 485,038
-----------
$ 1,018,021
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
63
<PAGE>
SDG MACERICH PROPERTIES, L.P.
Statement of Operations
Year ended December 31, 1998
(Dollars in thousands)
<TABLE>
<S> <C>
Revenues:
Minimum rents $ 72,016
Overage rents 5,782
Tenant recoveries 35,806
Other 1,822
----------
115,426
----------
Expenses:
Property operations 13,561
Depreciation of properties 17,383
Real estate taxes 13,577
Repairs and maintenance 6,312
Advertising and promotion 5,013
Management fees 3,062
Provision for credit losses 809
Interest on mortgage notes 26,432
Other 231
----------
86,380
----------
Net income $ 29,046
----------
----------
</TABLE>
See accompanying notes to financial statements.
64
<PAGE>
SDG MACERICH PROPERTIES, L.P.
Statement of Cash Flows
Year ended December 31, 1998
(Dollars in thousands)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 29,046
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of properties 17,383
Amortization of debt premium (1,843)
Change in receivables (14,452)
Change in accrued real estate taxes (527)
Other items 8,871
----------
Net cash provided by operating activities 38,478
----------
Cash flows from investing activities:
Acquisition of properties, net of mortgage notes payable assumed (480,392)
Improvements to properties (4,922)
----------
Net cash used by investing activities (485,314)
----------
Cash flows from financing activities:
Contributions by partners 480,392
Distributions to partners (24,400)
----------
Net cash provided by financing activities 455,992
----------
Net increase in cash and cash equivalents 9,156
Cash and cash equivalents at beginning of year --
----------
Cash and cash equivalents at end of year $ 9,156
----------
----------
Supplemental cash flow information:
Cash payments for interest $ 26,713
----------
----------
Non-cash transaction:
Fair value of mortgage notes payable assumed with properties acquired $ 507,711
Fair value of other liabilities, net, assumed with properties acquired 11,548
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
65
<PAGE>
SDG MACERICH PROPERTIES, L.P.
Statement of Partners' Equity
Year ended December 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
SIMON THE
PROPERTY MACERICH
GROUP, INC. COMPANY
AFFILIATES AFFILIATES TOTAL
----------- ---------- ---------
<S> <C> <C> <C>
Percentage ownership interest 50% 50% 100%
---------- ---------- ---------
---------- ---------- ---------
Balance at January 1, 1998 $ -- -- --
Contributions 240,196 240,196 480,392
Distributions (12,200) (12,200) (24,400)
Net income for the year 14,523 14,523 29,046
---------- ---------- ---------
Balance at December 31, 1998 $ 242,519 242,519 485,038
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
See accompanying notes to financial statements.
66
<PAGE>
SDG MACERICH PROPERTIES, L.P.
Notes to Financial Statements
December 31, 1998
(Dollars in thousands)
(1) GENERAL
(A) PARTNERSHIP ORGANIZATION
On December 29, 1997, affiliates of Simon Property Group, Inc.
(Simon) and affiliates of The Macerich Company (Macerich) formed a
limited partnership to acquire and operate a portfolio of 12
regional shopping centers. The Partnership acquired the properties
on February 27, 1998. The accompanying financial statements
include the results of operations of the properties since the date
of acquisition.
(B) PROPERTIES
Simon and Macerich have divided the property management services
with affiliates of each company managing six of the shopping
centers. The shopping centers and their locations are as follows:
Simon managed properties:
South Park Mall Moline, Illinois
Valley Mall Harrisonburg, Virginia
Granite Run Mall Media, Pennsylvania
Eastland Mall Evansville, Indiana
Lake Square Mall Leesburg, Florida
North Park Mall Davenport, Iowa
Macerich managed properties:
Lindale Mall Cedar Rapids, Iowa
Mesa Mall Grand Junction, Colorado
South Ridge Mall Des Moines, Iowa
Empire Mall and Empire East Sioux Falls, South Dakota
Rushmore Mall Rapid City, South Dakota
Southern Hills Mall Sioux City, Iowa
The shopping center leases generally provide for fixed annual
minimum rent, overage rent based on sales, and reimbursement for
certain operating expenses, including real estate taxes. For
leases in effect at December 31, 1998, fixed minimum rents to be
received in each of the next five years and thereafter are
summarized as follows:
<TABLE>
<S> <C>
1999 $ 73,955
2000 66,828
2001 60,055
2002 54,013
2003 45,958
Thereafter 157,741
--------
$458,550
--------
--------
</TABLE>
67
<PAGE>
SDG MACERICH PROPERTIES, L.P.
Notes to Financial Statements
December 31, 1998
(Dollars in thousands)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) REVENUES
All leases are classified as operating leases, and minimum rents
are recognized monthly on a straight-line basis over the terms of
the leases.
Most retail tenants are also required to pay overage rents based
on sales over a stated base amount during the lease year,
generally ending on January 31. Overage rents are recognized as
revenues based on reported and estimated sales for each tenant
through December 31. Differences between estimated and actual
amounts are recognized in the subsequent year.
Tenant recoveries for real estate taxes and common area
maintenance are adjusted annually based on the actual expenses,
and the related revenues are recognized in the year in which the
expenses are incurred. Charges for other operating expenses are
billed monthly with periodic adjustments based on the estimated
utility usage and/or a current price index, and the related
revenues are recognized as the amounts are billed and as
adjustments become determinable.
(B) CASH EQUIVALENTS
All highly liquid debt instruments purchased with a maturity of
three months or less are considered to be cash equivalents.
(C) PROPERTIES
Properties are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets
as follows:
Buildings and improvements 39 years
Equipment and furnishings 5-7 years
Tenant improvements Initial term of related lease
Improvements and replacements are capitalized when they extend the
useful life, increase capacity, or improve the efficiency of the
asset. All other repairs and maintenance items are expensed as
incurred.
The Partnership assesses whether there has been an impairment in
the value of its properties 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 Partnership would
recognize an impairment loss if the estimated future income stream
is not sufficient to recover its investment. Such a loss would be
the difference between the carrying value and the fair value of a
property. Management believes no impairment in its net property
carrying values has occurred at December 31, 1998.
68
<PAGE>
SDG MACERICH PROPERTIES, L.P.
Notes to Financial Statements
December 31, 1998
(Dollars in thousands)
(D) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities 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.
(E) INCOME TAXES
As a partnership, the allocated share of income or loss for the
year is includable in the income tax returns of the partners;
accordingly, income taxes are not reflected in the accompanying
financial statements.
(3) MORTGAGE NOTES PAYABLE AND FAIR VALUE OF FINANCIAL INSTRUMENTS
In connection with the acquisition of the shopping center properties,
the Partnership assumed $485,000 of mortgage notes payable which are
secured by liens on the properties. The notes consist of $300,000 of
debt which is due in May 2006 and requires monthly interest payments at
a fixed weighted average rate of 7.41% and $185,000 of debt which is due
in May 2003 and requires monthly interest payments at a variable
weighted average rate (based on LIBOR) of 6.15% at December 31, 1998.
The variable rate debt is covered by an interest cap agreement which
effectively prevents the variable rate from exceeding 11.53%.
The fair value assigned to the $300,000 fixed-rate debt at the
acquisition date based on an estimated market interest rate of 6.23% was
$322,711, and the resultant debt premium is being amortized to interest
expense over the remaining term of the debt using a level yield method.
At December 31, 1998, the unamortized balance of the debt premium was
$20,868.
The fair value of the fixed-rate debt at December 31, 1998 based on an
interest rate of 6.70% is estimated to be approximately $312,000. The
$185,000 carrying value of the variable-rate debt and the Partnership's
other financial instruments are estimated to equal their fair values.
(4) MANAGEMENT SERVICES
An affiliate of Simon manages six of the properties and an affiliate of
Macerich manages the other six properties, both for a fee of 4% of gross
receipts, as defined. Management fees incurred in 1998 totaled $1,592
for the Simon-managed properties and $1,470 for the Macerich-managed
properties.
(5) CONTINGENT LIABILITY
The Partnership currently is not involved with any litigation other than
routine litigation and administrative proceedings arising in the
ordinary course of business. On the basis of consultation with counsel,
management believes that these items will not have a material adverse
impact on the Company's financial statements.
69
<PAGE>
THE MACERICH COMPANY
REAL ESTATE AND ACCUMULATED DEPRECIATION
12/31/98
(IN THOUSANDS)
<TABLE>
<CAPTION>
INITIAL COST TO COMPANY
-------------------------------------
COST
EQUIPMENT CAPITALIZED
BUILDING AND AND SUBSEQUENT TO
LAND IMPROVEMENTS FURNISHINGS ACQUISITION
--------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Shopping Centers:
Bristol Shopping Center $0 $11,051 $0 $1,935
Boulder Plaza 2,650 7,950 0 2,157
Capitola Mall 11,312 46,689 0 1,335
Carmel Plaza 9,080 36,354 0 225
Chesterfield Towne Center 18,517 72,936 2 8,638
Citadel, The 21,600 86,711 0 1,865
Corte Madera, Village at 24,433 97,821 0 548
County East Mall 2,633 15,131 716 13,967
Crossroads Mall - Boulder 0 37,528 64 32,775
Crossroads Mall - Oklahoma 10,279 43,458 291 8,713
Fresno Fashion Fair 17,966 72,194 0 (1,653)
Great Falls Marketplace 2,960 11,840 0 8
Greeley Mall 5,600 12,617 13 7,698
Green Tree Mall 4,947 14,893 332 23,246
Holiday Village Shopping Mall 2,311 13,488 138 22,510
Huntington Beach Center 11,868 11,867 0 4,123
Lakewood Mall 12,502 31,158 117 95,492
Northgate Mall 7,144 29,805 841 24,657
Northwest Arkansas Mall 18,800 75,358 0 0
Pacific View (formerly
known as Buenaventura Mall) 8,697 8,696 0 22,862
Parklane Mall 1,377 11,775 173 18,931
Queens Center 21,460 86,631 8 2,156
Rimrock Mall 8,737 35,652 0 1,519
Salisbury, The Centre at 15,290 63,474 31 1,186
South Plains Mall 23,100 92,728 0 1,183
South Towne Center 19,600 78,954 0 4,768
Stonewood Mall 18,400 73,933 0 1,207
Valley View Center 17,100 68,687 0 9,656
Villa Marina Marketplace 15,852 65,441 0 679
Vintage Faire Mall 14,902 60,532 0 2,213
Westside Pavilion 34,100 136,819 0 412
--------------------------------------------------
$383,217 $1,512,171 $2,726 $315,011
--------------------------------------------------
--------------------------------------------------
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD
-------------------------------------------------------
FURNITURE, TOTAL COST
FIXTURES NET OF
BUILDING AND AND CONSTUCTION ACCUMULATED ACCUMULATED
LAND IMPROVEMENTS EQUIPMENT IN PROGRESS TOTAL DEPRECIATION DEPRECIATION
-------- ------------ --------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers:
Bristol Shopping Center $132 $12,851 $0 $3 $12,986 $5,651 $7,335
Boulder Plaza 2,919 9,838 0 0 12,757 2,887 9,870
Capitola Mall 11,309 47,989 38 0 59,336 3,816 55,520
Carmel Plaza 9,080 36,567 12 0 45,659 371 45,288
Chesterfield Towne Center 18,517 79,399 2,038 139 100,093 11,790 88,303
Citadel, The 21,600 88,521 47 8 110,176 2,430 107,746
Corte Madera, Village at 24,433 98,344 25 0 122,802 1,133 121,669
County East Mall 4,099 27,483 798 67 32,447 10,522 21,925
Crossroads Mall - Boulder 21,616 42,154 128 6,469 70,367 23,384 46,983
Crossroads Mall - Oklahoma 10,279 46,946 345 5,171 62,741 7,322 55,419
Fresno Fashion Fair 17,966 70,380 43 118 88,507 3,753 84,754
Great Falls Marketplace 2,960 11,848 0 0 14,808 305 14,503
Greeley Mall 5,600 20,222 98 8 25,928 9,911 16,017
Green Tree Mall 4,947 38,008 463 0 43,418 21,072 22,346
Holiday Village Shopping Mall 3,500 34,737 210 0 38,447 20,743 17,704
Huntington Beach Center 11,868 11,965 31 3,994 27,858 639 27,219
Lakewood Mall 24,916 113,408 651 294 139,269 46,588 92,681
Northgate Mall 8,400 53,045 935 67 62,447 19,406 43,041
Northwest Arkansas Mall 18,800 75,358 0 0 94,158 90 94,068
Pacific View (formerly
known as Buenaventura Mall) 8,697 8,794 18 22,746 40,255 471 39,784
Parklane Mall 2,426 25,213 402 4,215 32,256 16,457 15,799
Queens Center 21,454 87,400 634 767 110,255 6,873 103,382
Rimrock Mall 8,737 36,966 106 99 45,908 2,095 43,813
Salisbury, The Centre at 15,284 64,219 478 0 79,981 5,884 74,097
South Plains Mall 23,100 93,877 34 0 117,011 1,316 115,695
South Towne Center 19,600 83,696 26 0 103,322 3,978 99,344
Stonewood Mall 18,400 74,908 232 0 93,540 2,756 90,784
Valley View Center 17,100 73,059 631 4,653 95,443 4,447 90,996
Villa Marina Marketplace 15,852 66,082 35 3 81,972 5,026 76,946
Vintage Faire Mall 14,901 61,601 627 518 77,647 3,402 74,245
Westside Pavilion 34,100 137,118 12 101 171,331 1,762 169,569
------------------------------------------------------------------------------------
$422,592 $1,731,996 $9,097 $49,440 $2,213,125 $246,280 $1,966,845
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
</TABLE>
70
<PAGE>
THE MACERICH COMPANY
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(IN THOUSANDS)
Depreciation and amortization of the Company's investment in buildings and
improvements reflected in the statements
<TABLE>
<S> <C>
Buildings and Improvements 5 - 40 years
Tenant Improvements life of related lease
Equipment and Furnishings 5 -7 years
</TABLE>
The changes in total real estate assets for the three years ended December
31, 1998 are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $833,998 $1,273,085 $1,607,429
Additions 439,087 334,344 605,696
Disposals and retirements 0 0 0
----------------------------------------
Balance, end of year $1,273,085 $1,607,429 $2,213,125
----------------------------------------
----------------------------------------
</TABLE>
The changes in accumulated depreciation and amortization for the three years
ended December 31, 1998 are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $139,098 $164,417 $200,250
Additions 25,319 35,833 46,030
Disposals and retirements 0 0 0
------------------------------------
Balance, end of year $164,417 $200,250 $246,280
------------------------------------
</TABLE>
71
<PAGE>
SDG MACERICH PROPERTIES, L.P.
Schedule III - Real Estate and Accumulated Depreciation
As of December 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Initial Cost to Partnership Costs
--------------------------------------------------- Capitalized
Building and Equipment Subsequent
Shopping Center (1) Location Land Improvements and Furnishings to Acquisition
- ------------------- -------- ---- ------------ --------------- --------------
<S> <C> <C> <C> <C> <C>
Mesa Mall Grand Junction, Colorado $ 11,155 44,635 -- 25
Lake Square Mall Leesburg, Florida 7,348 29,392 -- 172
South Park Mall Moline, Illinois 21,341 85,540 -- 522
Eastland Mall Evansville, Indiana 28,160 112,642 -- 833
Lindale Mall Cedar Rapids, Iowa 12,534 50,151 -- 197
North Park Mall Davenport, Iowa 17,210 69,042 -- 585
South Ridge Mall Des Moines, Iowa 11,524 46,097 -- 993
Granite Run Mall Media, Pennsylvania 26,147 104,671 -- 536
Rushmore Mall Rapid City, South Dakota 12,089 50,588 -- 43
Empire Mall Sioux City, South Dakota 23,706 94,860 -- 519
Empire East Sioux City, South Dakota 2,073 8,291 -- 1
Southern Hills Mall Sioux City, South Dakota 15,697 62,793 -- 429
Valley Mall Harrisonburg, Virginia 10,393 41,572 -- 67
--------------------------------------------------------------------
$ 199,377 800,274 -- 4,922
--------------------------------------------------------------------
--------------------------------------------------------------------
<CAPTION>
Gross Book Value at December 31, 1998 Total Cost
------------------------------------------- Net of
Building and Equipment Accumulated Accumulated
Shopping Center (1) Location Land Improvements and Furnishings Depreciation Depreciation
- ------------------- -------- ---- ------------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Mesa Mall Grand Junction, Colorodo 11,155 44,643 17 969 54,846
Lake Square Mall Leesburg, Florida 7,348 29,556 8 642 36,270
South Park Mall Moline, Illinois 21,341 86,055 7 1,838 105,565
Eastland Mall Evansville, Indiana 28,160 113,266 209 2,435 139,200
Lindale Mall Cedar Rapids, Iowa 12,534 50,335 13 1,102 61,780
North Park Mall Davenport, Iowa 17,210 69,616 11 1,496 85,341
South Ridge Mall Des Moines, Iowa 11,524 47,040 50 1,014 57,600
Granite Run Mall Media, Pennsylvania 26,147 105,126 81 2,257 129,097
Rushmore Mall Rapid City, South Dakota 12,089 50,603 28 1,129 61,591
Empire Mall Sioux City, South Dakota 23,706 95,351 28 2,064 117,021
Empire East Sioux City, South Dakota 2,073 8,291 1 177 10,188
Southern Hills Mall Sioux City, South Dakota 15,697 63,207 15 1,371 77,548
Valley Mall Harrisonburg, Virginia 10,393 41,635 4 889 51,143
------------------------------------------------------------------------
199,377 804,724 472 17,383 987,190
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
Depreciation and amortization of the Partnership's investment in shopping
center properties reflected in the statement of operations are calculated
over the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
<S> <C>
Building and improvements 39 years
Equipment and furnishings 5-7 years
</TABLE>
The changes in total shopping center properties for the year ended December
31, 1998 are as follows:
<TABLE>
<S> <C>
Balance, beginning of year $ --
Acquisitions 999,651
Additions 4,922
Disposals and retirements --
-----------
Balance, end of year $ 1,004,573
-----------
-----------
</TABLE>
The changes in accumulated depreciation for the year ended December 31, 1998
are as follows:
<TABLE>
<S> <C>
Balance, beginning of year $ --
Additions 17,383
Disposals and retirements --
--------
Balance, end of year $ 17,383
--------
--------
</TABLE>
(1) All of the shopping centers are encumbered by mortgage notes payable with
a December 31, 1998 carrying value of $505,868.
72
<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.
THE MACERICH COMPANY
By /s/ ARTHUR M. COPPOLA
--------------------------------------
Arthur M. Coppola
President and Chief Executive Officer
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.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- --------- -------- ----
<S> <C> <C>
/s/ ARTHUR M. COPPOLA President and Chief Executive Officer March 29, 1999
- ----------------------- And Director
Arthur M. Coppola
/s/ MACE SIEGEL Chairman of the Board March 29, 1999
- -----------------------
Mace Siegel
/s/ DANA K. ANDERSON Vice Chairman of the Board March 29, 1999
- -----------------------
Dana K. Anderson
/s/ EDWARD C. COPPOLA Executive Vice President March 29, 1999
- -----------------------
Edward C. Coppola
/s/ JAMES COWNIE Director March 29, 1999
- -----------------------
James Cownie
/s/ THEODORE HOCHSTIM Director March 29, 1999
- -----------------------
Theodore Hochstim
/s/ FREDERICK HUBBELL Director March 29, 1999
- -----------------------
Frederick Hubbell
/s/ STANLEY MOORE Director March 29, 1999
- -----------------------
Stanley Moore
/s/ WILLIAM SEXTON Director March 29, 1999
- -----------------------
William Sexton
/s/ THOMAS E. O'HERN Executive Vice President, Treasurer and March 29, 1999
- ----------------------- Chief Financial and Accounting Officer
Thomas E. O'Hern
</TABLE>
73
X
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------- ----------- -------------
<S> <C> <C>
3.1* Articles of Amendment and Restatement of the Company
3.1.1** Articles Supplementary of the Company
3.1.2*** Articles Supplementary of the Company (Series A Preferred Stock)
3.1.3**** Articles Supplementary of the Company (Series B Preferred Stock)
3.1.4 Articles Supplementary of the Company (Series C Junior Participating Preferred
Stock)
3.2***** Amended and Restated Bylaws of the Company
4.1***** Form of Common Stock Certificate
4.2****** Form of Preferred Stock Certificate (Series A Preferred Stock)
4.2.1 Form of Preferred Stock Certificate (Series B Preferred Stock)
4.2.2***** Form of Preferred Stock Certificate (Series C Junior Participating Preferred
Stock)
4.3******* Indenture for Convertible Subordinated Debentures dated June 27, 1997
4.4***** Agreement dated as of November 10, 1998 between the Company and First Chicago
Trust Company of New York, as Rights Agent
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 Partnerships 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
10.1.5 Sixth Amendment to Amended and Restated Limited Partnership Agreement for the
Operating Partnership dated June 17, 1998
10.1.6 Seventh Amendment to Amended and Restated Limited Partnership Agreement for
the Operating Partnership dated December 31, 1998
74
<PAGE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------- ----------- -------------
<S> <C> <C>
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 1999 Cash Bonus/Restricted Stock Program under the Amended and Restated 1994
Incentive Plan (including the form of restricted Stock Award Agreement)
10.10******** Registration Rights Agreement, dated as of March 16, 1994, between the Company
and The Northwestern Mutual Life Insurance Company
- -
10.11******** 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
10.12******* Registration Rights Agreement, dated as of March 16, 1994, among the Company,
Richard M. Cohen and MRII Associates
10.13******* Registration Rights Agreement dated as of June 27, 1997
10.14******* Registration Rights Agreement dated as of February 25, 1998 between the
Company and Security Capital Preferred Growth Incorporated
10.15******** Incidental Registration Rights Agreement dated March 16, 1994
10.16****** Incidental Registration Rights Agreement dated as of July 21, 1994
10.17****** Incidental Registration Rights Agreement dated as of August 15, 1995
10.18****** Incidental Registration Rights Agreement dated as of December 21, 1995
10.18.1****** List of Incidental/Demand Registration Rights Agreements, Election Forms,
Accredited/Non-Accredited Investors Certificates and Investor Certificates
75
<PAGE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------- ----------- -------------
<S> <C> <C>
10.19 Registration Rights Agreement dated as of June 17, 1998 between the Company
and the Ontario Teachers' Pension Plan Board
10.20 Redemption, Registration Rights and Lock-Up Agreement dated as of July 24,
1998 between the Company and Harry S. Newman, Jr. and LeRoy H. Brettin
10.21******** Indemnification Agreement, dated as of March 16, 1994, between the Company and
Mace Siegel
10.21.1******** List of Omitted Indemnification Agreements
10.22* Partnership Agreement for Macerich Northwestern Associates, dated as of
January 17, 1985, between Macerich Walnut Creek Associates and the
Northwestern Mutual Life Insurance Company
10.23******** First Amendment to Macerich Northwestern Associates Partnership Agreement
between Operating Partnership and the Northwestern Mutual Life Insurance
Company
10.24* 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
10.25****** Secured Full Recourse Promissory Note dated November 17, 1997 Due November 16,
2007 made by Edward C. Coppola to the order of the Company
10.25.1****** List of Omitted Secured Full Recourse Notes
10.26****** Stock Pledge Agreement dated as of November 17, 1997 made by Edward C. Coppola
for the benefit of the Company
10.26.1****** List of omitted Stock Pledge Agreement
10.27****** Promissory Note dated as of May 2, 1997 made by David J. Contis to the order
of Macerich Management Company
10.28## Purchase and Sale Agreement between the Equitable Life Assurance Society of
the United States and S.M. Portfolio Partners
10.29****** Partnership Agreement of S.M. Portfolio Ltd. Partnership
10.30 First Amended and Restated Credit Agreement, dated as of June 25, 1998,
between the Operating Partnership, the Company and Wells Fargo Bank, National
Association
21.1 List of Subsidiaries
23.1 Consent of Independent Accountants (PricewaterhouseCoopers LLP)
23.2 Consent of Independent Auditors (KPMG LLP)
76
<PAGE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------- ----------- -------------
<S> <C> <C>
* 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 Current
Report on Form 8-K, event date February 25, 1998, and
incorporated herein by reference.
**** Previously filed as an exhibit to the Company's Current
Report on Form 8-K, event date June 17, 1998, and
incorporated herein by reference.
***** Previously filed as an exhibit to the Company's Current
Report on Form 8-K, event date November 10, 1998, as
amended, 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,
1997, 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 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 February 27, 1998, and
incorporated herein by reference.
</TABLE>
77
<PAGE>
THE MACERICH COMPANY
ARTICLES SUPPLEMENTARY
for
SERIES C JUNIOR PARTICIPATING PREFERRED STOCK
(Pursuant to Sections 2-105(a)(9) and 2-208(a) of the
Maryland General Corporation Law)
-------------------------------------
The Macerich Company, a corporation organized and existing under the
Maryland General Corporation Law (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to Section 2-208(a) of the Maryland General
Corporation Law and to authority granted by the charter of the Corporation (the
"Charter"), the Board of Directors of the Corporation (hereinafter called the
"Board of Directors" or the "Board") at a meeting duly called and held on
November 10, 1998 (i) reclassified 1,000,000 shares of Excess Stock, par value
$0.01 per share, as Preferred Stock, par value $0.01 per share, with the terms
and conditions as set forth in the Charter, and (ii) designated 1,200,000 shares
of Preferred Stock as shares of Series C Preferred Stock, with the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications and terms and conditions of
redemption as follows, which upon any restatement of the Charter shall be made
part of Article Fifth of the Charter, with any necessary or appropriate changes
to the enumeration or lettering of sections or subsections thereof:
Series C Junior Participating Preferred Stock
Section 1. DESIGNATION AND AMOUNT. There shall be a series of
Preferred Stock designated as "Series C Junior Participating Preferred Stock",
par value $0.01 per share (the "Series C Preferred Stock"), and the number of
shares constituting the Series C Preferred Stock shall be 1,200,000. Such
number of shares may be increased or decreased by resolution of the Board of
Directors and by the filing of articles supplementary in accordance with the
Maryland General Corporation Law; PROVIDED, that no decrease shall reduce the
number of shares of Series C Preferred Stock to a number less than the number of
shares then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible into Series C
Preferred Stock.
1
<PAGE>
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to the
Series C Preferred Stock with respect to dividends, the holders of shares
of Series C Preferred Stock, in preference to the holders of Common Stock,
par value $0.01 per share (the "Common Stock"), of the Corporation, and of
any other junior stock, shall be entitled to receive, when, as and if
authorized by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series C Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1 or (b) subject
to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series C Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount to which holders of shares of Series C
Preferred Stock were entitled immediately prior to such event under clause
(b) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series C Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$1 per share on the Series C Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series C Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of is-
2
<PAGE>
sue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series C Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series C Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares
at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series C Preferred Stock entitled
to receive payment of a dividend or distribution declared thereon, which
record date shall be not more than 60 days prior to the date fixed for the
payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series C
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series C Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes per
share to which holders of shares of Series C Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in the terms of any other
series of Preferred Stock or any similar stock, the holders of shares of
Series C Preferred Stock and the holders of shares of Common Stock and any
other stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of stockholders of
the Corporation.
(C) Except as set forth herein, holders of Series C Preferred Stock
shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series C Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not authorized or de-
3
<PAGE>
clared, on shares of Series C Preferred Stock outstanding shall have been
paid in full, neither the Board of Directors nor the Corporation shall:
(i) authorize, declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series C Preferred Stock;
(ii) authorize, declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the
Series C Preferred Stock, except dividends paid ratably on the Series
C Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series C Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series C Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series C Preferred Stock, or any shares of stock ranking
on a parity with the Series C Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(A) of this Section 4, purchase or otherwise acquire such shares at such
time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series C Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall become authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock subject to the conditions
and restrictions on issuance set forth herein, in the Charter, or in any other
articles supplementary creating a series of Preferred Stock or any similar stock
or as otherwise required by law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding
4
<PAGE>
up) to the Series C Preferred Stock unless, prior thereto, the holders of shares
of Series C Preferred Stock shall have received $100 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
authorized or declared, to the date of such payment, provided that the holders
of shares of Series C Preferred Stock shall be entitled to receive an aggregate
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount to be distributed per share to holders
of shares of Common Stock, or (2) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series C Preferred Stock, except distributions made ratably on the
Series C Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series C Preferred Stock were entitled immediately prior
to such event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immedately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series C Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series C Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. NO REDEMPTION. The shares of Series C Preferred Stock
shall not be redeemable.
Section 9. RANK. The Series C Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior to
all series of the Corporation's Preferred Stock.
5
<PAGE>
Section 10. AMENDMENT. The Charter shall not be amended in any
manner which would materially alter or change the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications or terms and conditions of redemption of the
Series C Preferred Stock, as set forth herein, so as to affect them adversely
without the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Series C Preferred Stock, voting together as a single
class.
Section 11. OWNERSHIP RESTRICTIONS. The Series C Preferred Stock
shall be subject to the restrictions and limitations set forth in Article Eighth
of the Charter.
SECOND: The Shares have been classified and designated by the Board
of Directors under the authority contained in the Charter.
THIRD: These Articles Supplementary have been approved by the Board
of Directors in the manner and by the vote required by law.
FOURTH: The undersigned Chairman of the Board of the Corporation
acknowledges these Articles Supplementary to be the corporate act of the
Corporation and, as to all matters or facts required to be verified under oath,
the undersigned Chairman acknowledges that to the best of his knowledge,
information and belief, these matters and facts are true in all material
respects and that this statement is made under the penalties for perjury.
6
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be executed under seal in its name on its behalf by its
Chairman and attested to by its Secretary on this 10th day of November, 1998.
/s/ Mace Siegel
-------------------------------
Chairman
Attest:
/s/ Richard A. Bayer
- ---------------------
Secretary
7
<PAGE>
EXHIBIT 4.2.1
NUMBER SHARES
THE MACERICH COMPANY
SERIES B 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 B 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 B 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 B 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>
SIXTH AMENDMENT TO THE
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT OF
THE MACERICH PARTNERSHIP, L.P.
THIS SIXTH 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, FURTHER AMENDED AS OF FEBRUARY 25, 1998, AND FURTHER AMENDED AS OF
FEBRUARY 26, 1998 (the "AGREEMENT") OF THE MACERICH PARTNERSHIP, L.P. (the
"PARTNERSHIP") is dated effective as of June 17, 1998.
RECITALS
WHEREAS, The Macerich Company, the general partner of the Partnership
(the "GENERAL PARTNER"), will be issuing to The Ontario Teachers Pension Plan
Board ("Ontario Teachers"), 5,487,471 shares of Series B Cumulative Convertible
Redeemable Preferred Stock, $.01 par value per share ("SERIES B PREFERRED
SHARES"), pursuant to the Series B Preferred Securities Purchase Agreement dated
as of June 16, 1998 between the General Partner and Ontario Teachers (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;
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
<PAGE>
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(d) to read as follows:
(d) SERIES B 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 B Preferred Shares to Ontario Teachers
pursuant to the Purchase Agreement, which amount is $150,000,019.70. In
exchange for such capital contribution, the Partnership hereby issues to
the General Partner 5,487,471 Series B Preferred Units, each Series B
Preferred Unit representing a capital contribution of $27.335. Series B
Preferred Units shall entitle the General Partner to a Series B Preferred
Return, all as described in SECTION 4.1 of the Agreement. Series B
Preferred Units shall be converted into Common Units at the time the Series
B 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
B Preferred Shares are being redeemed, the General Partner shall be
obligated to put to the Partnership a number of Series B Preferred Units
equal to the number of Series B Preferred Shares being redeemed or repaid.
Upon putting a Series B Preferred Unit to the Partnership, the General
Partner will be paid, in liquidation of each Series B Preferred Unit being
put to the Partnership, an amount equal to $27.335 plus any accumulated,
accrued and unpaid Series B Preferred Return on such Series B Preferred
Unit, PLUS any other amounts owed or to be paid by the General Partner in
connection with the redemption of the corresponding Series B Preferred
Share; PROVIDED, HOWEVER, that the General Partner shall not put the Series
B Preferred Units to the Partnership if the payment in liquidation of those
Series B 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
B Preferred Units may be put to the Partnership, the General Partner shall
determine in good faith that the redemption of such Series B Preferred
Units will not cause a violation of the Debt Instruments 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 B 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 B
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
2
<PAGE>
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 Offered 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 and Series B Preferred Units, in an amount equal to the
cumulative and unpaid Series A Preferred Return on such Series A Preferred
Units, and the cumulative and unpaid Series B Preferred Return on such
Series B Preferred Units in such a way as to allow the General Partner to
pay cumulative preferential dividends and any additional amounts required
on the Series A Preferred Shares and the Series B Preferred Shares,
respectively, 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, Series B
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.
3
<PAGE>
(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,
Series A Preferred Unit or Series B Preferred Unit and shall constitute a
fractional, undivided share of the Partnership Interests corresponding to
that particular class of Units.
(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,
Series A Preferred Units and Series B Preferred Units.
(f) The Glossary of Defined Terms of the Agreement is hereby amended
to include the following definitions:
"SERIES B PREFERRED RETURN" shall mean an amount per Series B
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 B Preferred Unit is convertible. The Series B
Preferred Return will be based on the General Partner's Capital
Contribution in respect of the Series B Preferred Units for which the
Series B Preferred Return is being determined as provided in the definition
of Series B Preferred Units below (taking into account any reduction of
such Capital Contribution by any redemptions or conversions of such Series
B Preferred Units), commencing on the first date such Series B Preferred
Units are issued to the General Partner. It is intended that the Series B
Preferred Return will be equal to the dividends and any additional amounts
payable on the Series B Preferred Shares to the holders thereof so that the
General Partner will receive a Series B Preferred Return in an amount
sufficient for the General Partner to make all payments in respect of the
Series B Preferred Shares.
"SERIES B PREFERRED SHARES" shall mean those shares of Series B Cumulative
Convertible Redeemable Preferred Stock, $.01 par value per share; issued by
the General Partner to Ontario Teachers.
"SERIES B PREFERRED SHARES ARTICLES SUPPLEMENTARY" shall mean the Series B
Cumulative Convertible Redeemable Preferred Stock Articles Supplementary,
dated as of June 15, 1998, which fixes the distribution and other
preferences and rights of the Series B Preferred Shares.
"SERIES B PREFERRED UNITS" shall mean the Partnership Units of the General
Partner representing the Capital Contribution of the Series B Preferred
Share proceeds, as set forth in SECTION 2.2(d) 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 B Preferred Shares as a result of any 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 discount, placement
fee or other expenses.
4
<PAGE>
(g) 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 and the Series B 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 the cumulative Series B Preferred Return on the Series B Preferred
Units, respectively; 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.
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: /s/ Richard A. Bayer
-----------------------------
Richard A. Bayer
General Counsel and Secretary
6
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SEVENTH AMENDMENT TO THE
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT OF
THE MACERICH PARTNERSHIP, L.P.
THIS SEVENTH 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, FURTHER AMENDED AS OF FEBRUARY 25, 1998, FURTHER AMENDED AS OF
FEBRUARY 26, 1998, AND FURTHER AMENDED AS OF JUNE 17, 1998 (the "AGREEMENT") OF
THE MACERICH PARTNERSHIP, L.P. (the "PARTNERSHIP") is dated effective December
23, 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. AMENDMENT: A section 13.14 is added to the Agreement immediately
following section 13.13 thereof as follows:
13.14 SEPARATE NATURE. In contemplation of procedures required in
connection with securitization of loans, the Partnership will, based
on advice of counsel, adopt such procedures as may be appropriate to
maintain the separate nature of the Partnership.
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:/s/ Richard A. Bayer
-------------------------------
Richard A. Bayer
General Counsel and Secretary
S-1
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EXHIBIT 10.9
THE MACERICH COMPANY
1999 CASH BONUS/RESTRICTED STOCK PROGRAM
UNDER THE AMENDED AND RESTATED 1994 INCENTIVE PLAN
<PAGE>
THE MACERICH COMPANY
--------------------
1999 CASH BONUS/RESTRICTED STOCK PROGRAM
UNDER THE AMENDED AND RESTATED 1994 INCENTIVE PLAN
TABLE OF CONTENTS
-----------------
Page
ARTICLE I TITLE, PURPOSE AND AUTHORIZED SHARES...................... 1
ARTICLE II DEFINITIONS............................................... 1
ARTICLE III PARTICIPATION............................................. 2
ARTICLE IV RESTRICTED STOCK OR CASH ELECTIONS........................ 2
ARTICLE V RESTRICTED STOCK AWARDS................................... 3
ARTICLE VI ADMINISTRATION............................................ 4
ARTICLE VII MISCELLANEOUS............................................. 4
EXHIBIT A ELECTION AGREEMENT
EXHIBIT B RESTRICTED STOCK AWARD AGREEMENT
i
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THE MACERICH COMPANY
1999 CASH BONUS/RESTRICTED STOCK PROGRAM
UNDER THE AMENDED AND RESTATED 1994 INCENTIVE PLAN
ARTICLE I
TITLE, PURPOSE AND AUTHORIZED SHARES
1.1 TITLE
This Program shall be known as The Macerich Company 1999 Cash
Bonus/Restricted Stock Program under the Amended and Restated 1994 Incentive
Plan.
1.2 PURPOSE
The purpose of this Program is to promote the success of the Company and
the interest of its stockholders by providing an additional means to
attract, motivate, retain and reward key employees, including officers, by
providing an opportunity to convert cash bonuses to Restricted Stock Awards,
enhancing compensation deferral opportunities and offering additional
incentives to increase stock ownership in the Company.
1.3 SHARES
The aggregate number of shares subject to Restricted Stock Awards
granted pursuant to this Program shall be charged against and subject to the
limits on the available shares under the Plan.
ARTICLE II
DEFINITIONS
Whenever the following terms are used in this Program they shall have
the meaning specified below unless the context clearly indicates to the
contrary. Capitalized terms not otherwise defined shall have the meaning
assigned to such terms in the Plan.
2.1. BONUS PAYMENT DATE means the date designated by the Committee
(upon or after its decisions as to awards) on which the Cash Bonus is or
would otherwise be received by the Participant.
2.2 CASH BONUS means an incentive award granted by the Committee,
whether or not under the terms of the Plan, that but for elections under this
Program would be paid solely in cash.
2.3 CONVERSION AMOUNT means the dollar amount of the Cash Bonus elected
by the Participant to be converted to a Restricted Stock Award under this
Program.
2.4 EFFECTIVE DATE means November 30, 1998.
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2.5. PARTICIPANT means any Eligible Person who has been designated as
potentially eligible to receive a Restricted Stock Award under this Program
and who has delivered to the Company an election agreement electing to
participate in the Program.
2.6. PLAN means The Macerich Company Amended and Restated 1994 Incentive
Plan.
2.7. PROGRAM means this The Macerich Company 1999 Cash Bonus/Restricted
Stock Program under the Amended and Restated 1994 Incentive Plan.
2.8. RESTRICTED STOCK means shares of Common Stock awarded to a
Participant pursuant to Article IV of the Plan.
2.9. RESTRICTED STOCK AWARD means an award of Restricted Stock granted
by the Committee under the Plan based on the Conversion Amount elected under
and in accordance with this Program.
2.10. RESTRICTED STOCK AWARD AGREEMENT means an agreement substantially
in the form of Exhibit B (as from time to time revised by the Committee).
2.11 YEAR means the applicable calendar year.
ARTICLE III
PARTICIPATION
Each Eligible Person designated by the Committee for any Year may elect
in advance to receive all or part (in increments and on forms authorized by
the Committee) of any Cash Bonus that may be granted in the future in the
form of Restricted Stock to the extent provided in Article IV.
ARTICLE IV
RESTRICTED STOCK OR CASH ELECTIONS
4.1. TIME AND TYPES OF ELECTIONS
On or before December 31, 1998 and September 30 of each subsequent Year,
each Eligible Person may make an irrevocable election to receive a percentage
of Cash Bonus that may be granted to the Participant during the following
Year in shares of Restricted Stock. This election shall become effective
only if the Committee, in authorizing the Cash Bonus, expressly recognizes
such alternative payment opportunity in Restricted Stock and grants the
Restricted Stock at that time. A person who first becomes an Eligible Person
after the applicable deadline may, within 30 days of becoming and being
designated as an Eligible Person, make an irrevocable election to receive any
Cash Bonuses granted during the applicable Year (or remaining portion
thereof, as the case may be) in Restricted Stock.
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4.2. ELECTION PROCEDURES
The elections shall be made in writing on forms provided by the Company
and authorized by the Committee. These forms initially shall take the form
of the Election Agreement attached hereto as Exhibit A. Neither the
distribution nor completion of election agreements shall convey any right to
receive a bonus, in cash or in Restricted Stock. Failure to timely elect
Restricted Stock, however, will result in the payment in cash if any cash
bonus is awarded.
4.3 NUMBER OF SHARES
The number of shares of Restricted Stock to be granted under this
Program shall equal a multiple of the Conversion Amount divided by the Fair
Market Value of a share of Common Stock (without regard to any restriction)
on the applicable Bonus Payment Date. The multiple shall not be changed as
to any election after it is duly made under the terms of this Program without
the consent of the Participant.
The multiple for bonuses paid in 1999 and until changed by the Committee
shall be 1.5. For example, assume that prior to December 31, 1998 a
Participant elects to receive 40% of any cash bonus in Restricted Stock and,
on March 1, 1999, the Company grants him a $40,000 cash bonus. The market
value of a share of Common Stock on the Bonus Payment Date is $20. The
Participant will receive $24,000 in cash and 1,200 shares of Restricted Stock.
4.4. NO FRACTIONAL SHARE INTERESTS
If an election would result in the issuance of a fractional share, the
amount of Restricted Stock granted shall be rounded down to the next whole
share and the cash alternative amount in lieu of the fractional interest
shall be paid in cash.
ARTICLE V
RESTRICTED STOCK AWARDS
The grant of Restricted Stock Awards, including, but not limited to, the
terms of grant, conditions and restrictions, the consideration to be paid,
dividend rights, vesting, redelivery to the Company, and adjustments in case
of changes in the Common Stock, shall be governed by the terms of the Plan,
the Program and of the Restricted Stock Award Agreement, substantially in the
form of Exhibit B (as from time to time revised by the Committee), to be
executed and delivered by the Company and the Participant. After an election
is made, the form of the Restricted Stock Award Agreement may not be changed
in any manner materially adverse to the Participant without his or her
consent. All Restricted Stock Awards are subject to express prior
authorization by the Committee of the terms of the Restricted Stock Award and
the specific number of shares of Restricted Stock thereunder.
3
<PAGE>
ARTICLE VI
ADMINISTRATION
This Program shall be administered by and all Restricted Stock Awards to
Eligible Persons shall be authorized by the Committee. The Committee shall
have all powers necessary to accomplish those purposes, including, but not by
way of limitation, the following:
(a) to determine the particular Eligible Persons who will receive Cash
Bonuses, the extent to which and price at which a Cash Bonus may be settled
in shares of Common Stock or Restricted Stock, and the other specific terms
and conditions of Restricted Stock Awards consistent with the express limits
of this Program and the Plan;
(b) to approve from time to time the election agreement and other forms
of Restricted Stock Award Agreements (which need not be identical either as
to type of award or among Participants or from year to year); and
(c) to resolve any questions concerning benefits payable to a
Participant and make all other determinations and take such other action as
contemplated by this Program or the Plan or as may be necessary or advisable
for the administration or interpretation of this Program.
ARTICLE VII
MISCELLANEOUS
7.1. INCORPORATION BY REFERENCE
Except where in conflict with the express terms of this Program, the
terms of the Plan govern the Program and are incorporated by reference,
including, without limitation, the following: the administrative powers and
authority of the Committee and the effect of its decisions; the unfunded
status of benefits; provisions for non-transferability of rights; rights (or
absence of rights) of eligible persons, participants, and beneficiaries;
compliance with laws; tax withholding obligation of Participants; privileges
of stock ownership; and governing law/construction/severability.
7.2. AMENDMENT, TERMINATION AND SUSPENSION
The Committee or the Board may, at any time, terminate or, from time to
time, amend, modify or suspend this Program, in whole or in part. No
Restricted Stock Awards may be granted under this Program during any
suspension of this Program or after termination of this Program. Termination
or amendment of this Program shall have no effect on any then outstanding
Restricted Stock Awards.
7.3. TERM OF THIS PROGRAM
The term of this Program is indefinite, subject to the term of the Plan
and Section 7.2. All authority of the Committee with respect to Restricted
Stock Awards hereunder, including its authority to amend a Restricted Stock
Award, shall continue during any suspension of this Program or the Plan, in
respect of outstanding Restricted Stock Awards on such Termination Date.
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<PAGE>
7.4. NON-EXCLUSIVITY OF PROGRAM
Nothing in this Program 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 the Plan
or any other plan or authority.
7.5 RELATIONSHIP TO EMPLOYMENT AGREEMENTS
In the case of any Participant who has an employment agreement with the
Company, the Conversion Amount reflected by a Restricted Stock Award shall
not be, but any remaining cash amount paid as a Cash Bonus shall be,
considered a bonus paid in the applicable Year in which it is paid. The
consequences of a termination of service, whether before or after a Change in
Control, in respect of any benefits related to the Conversion Amount shall be
governed solely by the terms of the Restricted Stock Award.
5
<PAGE>
EXHIBIT A
THE MACERICH COMPANY
IRREVOCABLE ELECTION AGREEMENT
UNDER THE
1999 CASH BONUS/RESTRICTED STOCK PROGRAM
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
IF DURING 1999, THE COMPENSATION COMMITTEE GRANTS A CASH BONUS TO ME AND IF
THE COMPENSATION COMMITTEE THEN EXPRESSLY AUTHORIZES ME TO RECEIVE ALL OR
PART OF THE CASH BONUS IN THE FORM OF A RESTRICTED STOCK AWARD:
I IRREVOCABLY ELECT TO RECEIVE ____% OF MY CASH BONUS IN THE FORM OF A
RESTRICTED STOCK AWARD UNDER THE MACERICH COMPANY AMENDED AND RESTATED 1994
INCENTIVE PLAN FOR THE NUMBER OF SHARES CALCULATED ACCORDING TO SECTION 4.3
OF THE PROGRAM.
THIS ELECTION MUST BE FILED WITH THE COMMITTEE, C/O RICHARD A. BAYER, GENERAL
COUNSEL, 401 WILSHIRE BOULEVARD, SUITE 700, SANTA MONICA, CALIFORNIA 90401,
BY DECEMBER 31, 1998. IF IT IS NOT TIMELY FILED, YOU WILL HAVE NO
OPPORTUNITY TO RECEIVE RESTRICTED STOCK IN LIEU OF ANY CASH BONUS AWARDS IN
1999.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ACKNOWLEDGMENT AND AGREEMENT
I ACKNOWLEDGE AND AGREE TO THE TERMS OF THIS ELECTION AGREEMENT, THE PROGRAM
AND THE PLAN.
I UNDERSTAND THAT THIS ELECTION IS IRREVOCABLE ON MY PART AND IS SUBJECT TO
THE TERMS OF THE PROGRAM, THE PLAN (INCLUDING THE INDIVIDUAL SHARE AWARD
LIMITS UNDER THE PLAN), ANY LIMITS IMPOSED BY THE COMMITTEE ON THE CONVERSION
AMOUNT AND THE RESTRICTED STOCK AWARD AGREEMENT.
- --------------------------------------------------
(Participant's Signature) (Date)
- --------------------------------------------------
(Print Name)
<PAGE>
THE MACERICH COMPANY
RESTRICTED STOCK AWARD AGREEMENT
AMENDED AND RESTATED 1994 INCENTIVE PLAN
Employee Name:
------------------------
Soc. Sec. No.:
------------------------
No. of Shares:
------------------------
Vesting Schedule: [20%/33-1/3%*] on each anniversary of the Award Date,
beginning __________ __, _____ and ending _________ __, 200_
Award Date: ____________ __, _____
THIS AGREEMENT is among THE MACERICH COMPANY, a Maryland corporation
(the "Corporation"), THE MACERICH PARTNERSHIP L.P., a Delaware limited
partnership (the "Operating Partnership"), and the employee named above, an
employee of [the Operating Partnership](the "Employee") and is delivered
under The Macerich Company Amended and Restated 1994 Incentive Plan (the
"Plan").
WITNESSETH
WHEREAS, pursuant to Article IV of the Plan, the Corporation has granted
to the Employee with reference to services rendered and to be rendered to the
Company, effective as of the Award Date, a restricted stock award (the
"Restricted Stock Award" or "Award"), upon the terms and conditions set forth
herein and in the Plan.
NOW THEREFORE, in consideration of services rendered by the Employee and
the mutual promises made herein and the mutual benefits to be derived
therefrom, the parties agree as follows:
1. DEFINED TERMS. Capitalized terms used herein and not otherwise
defined herein shall have the meaning assigned to such terms in the Plan.
2. GRANT. Subject to the terms of this Agreement, the Corporation
grants to the Employee a Restricted Stock Award with respect to an aggregate
number of shares of Common Stock, par value $.01 per share (the "Restricted
Stock") set forth above. The Corporation acknowledges, pursuant to Section
4.1 of the Plan, receipt of consideration for the shares in the form of
services rendered to the Company by the Employee prior to the Award Date with
a value (1) in the case of an award pursuant to the terms of the
Corporation's 1999 Cash Bonus/Restricted Stock Program (the "Program") equal
to the amount of bonus compensation in
- -------------------------------------
* Awards to the President and Executive Vice President-Acquisitions (except
under the Cash Bonus/Restricted Stock Program) vest at the 33-1/3% rate. As
of December 31, 1998, all other restricted stock awards vested at the 20%
rate. The Committee has the authority to authorize or to change the vesting
schedules.
1
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cash that would otherwise have been payable to the Employee but for the
Employee's election to receive Restricted Stock under the Program, or (2) in
other cases, not less than the aggregate par value of the shares, which
amount in either case is not less than the minimum lawful consideration under
Maryland law.
3. VESTING. The Award shall vest, and restrictions (other than those
set forth in Section 6.4 of the Plan) shall lapse, with respect to the
portion of the total number of shares (subject to adjustment under Section
6.2 of the Plan) on each of the anniversaries of the Award Date until the
Award is fully vested, as reflected in the Vesting Schedule above, subject to
earlier termination or acceleration as provided herein or in the Plan.
4. DIVIDEND AND VOTING RIGHTS. After the Award Date, the Employee shall
be entitled to cash dividends and voting rights with respect to the shares of
Restricted Stock subject to the Award even though such shares are not vested,
provided that such rights shall terminate immediately as to any shares of
Restricted Stock that cease to be eligible for vesting.
5. RESTRICTIONS ON TRANSFER. Prior to the time they become vested,
neither the shares of Restricted Stock comprising the Award, nor any other
rights of the Employee under this Agreement or the Plan may be transferred,
except as expressly provided in Sections 1.9 and 4.1 of the Plan. No other
exceptions have been authorized by the Committee.
6. STOCK CERTIFICATES.
(a) BOOK ENTRY FORM; INFORMATION STATEMENT POWER OF ATTORNEY. The
Corporation shall issue the shares of Restricted Stock subject to the Award
in book entry form, registered in the name of the Employee with notations
regarding applicable restrictions on transfer. Concurrent with the execution
and delivery of this Agreement, the Corporation shall deliver to the Employee
a written information statement with respect to such shares, and the Employee
shall deliver to the Corporation an executed stock power, in blank, with
respect to such shares. The Employee, by acceptance of the Award, shall be
deemed to appoint the Corporation and each of its authorized representatives
as the Employee's attorney(s)-in-fact to effect any transfer of unvested
forfeited shares (or shares otherwise reacquired by the Corporation
hereunder) to the Corporation as may be required pursuant to the Plan or this
Agreement and to execute such documents as the Corporation or such
representatives deem necessary or advisable in connection with any such
transfer.
(b) CERTIFICATES TO BE HELD BY CORPORATION; LEGEND. Any
certificates representing Restricted Stock that the Employee may be entitled
to receive from the Corporation prior to vesting shall be redelivered to the
Corporation to be held by the Corporation until the restrictions on such
shares shall have lapsed and the shares shall thereby have become vested or
the shares represented thereby have been forfeited hereunder. Such
certificates shall bear the following legend:
"The transferability of this certificate and the shares of stock represented
hereby are subject to the terms and conditions contained in an Agreement
entered into between the registered owner, The Macerich Partnership L.P. and
The Macerich Company. A copy of
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such Agreement is on file in the office of the Secretary of The Macerich
Company, 401 Wilshire Boulevard, Suite 700, Santa Monica, California
90401."
(c) DELIVERY OF CERTIFICATES UPON VESTING. Promptly after the lapse
or other release of restrictions, a certificate or certificates evidencing
the number of shares of Common Stock as to which the restrictions have lapsed
or been released or such lesser number as may be permitted pursuant to
Section 6.5 of the Plan shall be delivered to the Employee or other person
entitled under the Plan to receive the shares. The Employee or such other
person shall deliver to the Corporation any representations or other
documents or assurances required pursuant to Section 6.4 of the Plan. The
shares so delivered shall no longer be restricted shares hereunder.
7. EFFECT OF TERMINATION OF EMPLOYMENT.
(a) FORFEITURE AFTER CERTAIN EVENTS. Except as provided in Sections
7(c) and 8 hereof, the Employee's shares of Restricted Stock shall be
forfeited to the extent such shares have not become vested upon the date the
Employee is no longer employed by the Company for any reason, whether with or
without cause, voluntarily or involuntarily. If an entity ceases to be a
Subsidiary, such action shall be deemed to be a termination of employment of
all employees of that entity, but the Committee, in its sole and absolute
discretion, may make provision in such circumstances for accelerated vesting
of some or all of the remaining restricted shares under any Awards held by
such employees, effective immediately prior to such event.
(b) RETURN OF SHARES. Upon the occurrence of any forfeiture of
shares of Restricted Stock hereunder, such unvested, forfeited shares shall,
without payment of any consideration by the Corporation for such transfer, be
automatically transferred to the Corporation, without any other action by the
Employee, or the Employee's Beneficiary or Personal Representative, as the
case may be. The Corporation may exercise its powers under Section 6(a)
hereof and take any other action necessary or advisable to evidence such
transfer. The Employee, or the Employee's Beneficiary or Personal
Representative, as the case may be, and the Operating Partnership shall
deliver any additional documents of transfer that the Corporation may request
to confirm the transfer of such unvested, forfeited shares to the Corporation.
(c) TERMINATION WITHOUT CAUSE FOLLOWING CHANGE IN CONTROL EVENT. If
the Employee's employment is terminated by the Company other than because of
Employee's death or Disability or for Cause, or if the Employee after a
Change in Control Event terminates his or her employment for Good Reason,
then any portion of the Award that has not previously vested shall thereupon
vest, subject to the provisions of Sections 6.4 and 6.5 of the Plan and
Section 11 hereof; provided, however, that in no event shall restrictions on
the shares lapse or the shares vest earlier than six months after the date
hereof. As used in this Agreement, "Disability" shall mean (1) a "permanent
and total disability" within the meaning of Section 22(e)(3) of the Code, (2)
the absence of Employee from his or her duties with the Company 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 or its insurers and acceptable to the
Employee or the Employee's legal representative (such agreement as to
acceptability not to be withheld unreasonably), or (3) such other
disabilities, infirmities,
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afflictions or conditions as the Committee by rule may include. "Incapacity"
as used in this Agreement shall be limited only to a condition that
substantially prevents the Employee from performing his or her duties.
"Cause" as used in this Agreement shall mean that the Company, acting in good
faith based upon the information then known to the Company, determines that
the Employee has: (1) failed to perform required job duties in a material
respect without proper cause, (2) been convicted of a felony, or (3)
committed an act of fraud, dishonesty or gross misconduct which is injurious
to the Company. "Good Reason" as used in this Agreement shall mean (1) a
materially adverse and significant change in the Employee's position, duties,
responsibilities, or status with the Company, (2) a change in the Employee's
office location to a point more than 50 miles from the Employee's office
immediately prior to a Change in Control, (3) the taking of any action
following a Change in Control by the Company to eliminate benefit plans
without providing reasonable substitutes therefor, to materially reduce
benefits thereunder or to substantially diminish the aggregate value of
incentive awards or other fringe benefits, (4) any reduction in the
Employee's base salary, or (5) any material breach by the Company of the
written employment contract with Employee, if any.
8. EFFECT OF DISABILITY, DEATH OR RETIREMENT. If the Employee incurs a
Disability or dies while employed by the Company, then any portion of his or
her Award that has not previously vested shall thereupon vest, subject to the
provisions of Sections 6.4 and 6.5 of the Plan. If the Employee retires from
employment by the Company, the Committee may, on a case-by-case basis and in
its sole discretion, provide for partial or complete vesting prior to
retirement of that portion of his or her Award that has not previously vested.
9. ADJUSTMENTS UPON SPECIFIED EVENTS. Upon the occurrence of certain
events relating to the Corporation's stock contemplated by Section 6.2 of the
Plan, the Committee shall make adjustments if appropriate in the number and
kind of securities that may become vested under an Award. If any adjustment
shall be made under Section 6.2 of the Plan or a Change in Control Event
shall occur and the shares of Restricted Stock are not fully vested upon such
Event or prior thereto, the restrictions applicable to such shares of
Restricted Stock shall continue in effect with respect to any consideration
or other securities (the "RESTRICTED PROPERTY" and, for the purposes of this
Agreement, "Restricted Stock" shall include "Restricted Property", unless the
content otherwise requires) received in respect of such Restricted Stock.
Such Restricted Property shall vest at such times and in such proportion as
the shares of Restricted Stock to which the Restricted Property is
attributable vest, or would have vested pursuant to the terms hereof if such
shares of Restricted Stock had remained outstanding. Notwithstanding the
foregoing, to the extent that the Restricted Property includes any cash, the
commitment hereunder shall become an unsecured promise to pay an amount equal
to such cash (with earnings attributable thereto as if such amount had been
invested, pursuant to policies established by the Committee, in interest
bearing, FDIC-insured (subject to applicable insurance limits) deposits of a
depository institution selected by the Committee) at such times and in such
proportions as the Restricted Stock would have vested.
10. POSSIBLE EARLY TERMINATION OF AWARD. As permitted by Section 6.2(b)
of the Plan, the Committee retains the right to terminate the Award to the
extent not vested upon an event or transaction which the Corporation does not
survive. This Section 10 is not intended to prevent vesting of the Award as
a result of termination without Cause following a Change in Control Event as
provided in Section 7(c) hereof.
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11. LIMITATIONS ON ACCELERATION AND REDUCTION IN BENEFITS IN EVENT OF
TAX LIMITATIONS.
(a) LIMITATION ON ACCELERATION. Notwithstanding anything contained
herein or in the Plan or any other agreement to the contrary, in no event
shall the vesting of any share of Restricted Stock be accelerated pursuant to
Section 6.3 of the Plan or Section 7(c) hereof to the extent that the Company
would be denied a federal income tax deduction for such vesting because of
Section 280G of the Code and, in such circumstances, the restricted shares
not subject to acceleration will continue to vest in accordance with and
subject to the other provisions hereof.
(b) REDUCTION IN BENEFITS. If the Employee would be entitled to
benefits, payments or coverage hereunder and under any other plan, program or
agreement which would constitute "parachute payments," then notwithstanding
any other provision hereof or of any other existing agreement to the
contrary, the Employee Participant may by written notice to the Secretary of
the Corporation designate the order in which such "parachute payments" shall
be reduced or modified so that the Company is not denied federal income tax
deductions for any "parachute payments" because of Section 280G of the Code.
(c) DETERMINATION OF LIMITATIONS. The term "parachute payments" shall
have the meaning set forth in and be determined in accordance with Section
280G of the Code and regulations issued thereunder. All determinations
required by this Section 11, including without limitation the determination
of whether any benefit, payment or coverage would constitute a parachute
payment, the calculation of the value of any parachute payment and the
determination of the extent to which any parachute payment would be
nondeductible for federal income tax purposes because of Section 280G of the
Code, shall be made by an independent accounting firm (other than the
Corporation's outside auditing firm) having nationally recognized expertise
in such matters selected by the Committee. Any such determination by such
accounting firm shall be binding on the Corporation, its Subsidiaries and the
Employee.
12. TAX WITHHOLDING. The entity within the Company last employing the
Employee shall be entitled to require a cash payment by or on behalf of the
Employee and/or to deduct from other compensation payable to the Employee any
sums required by federal, state or local tax law to be withheld with respect
to the vesting of any Restricted Stock, but, in the alternative the Employee
or other person in whom the Restricted Stock vests may irrevocably elect, in
such manner and at such time or times prior to any applicable tax date as may
be permitted or required under Section 6.5 of the Plan and rules established
by the Committee, to have the entity last employing the Employee withhold and
reacquire shares of Restricted Stock at their Fair Market Value at the time
of vesting to satisfy any withholding obligations of the Company with respect
to such vesting. Any election to have shares so held back and reacquired
shall be subject to such rules and procedures, which may include prior
approval of the Committee, as the Committee may impose, and shall not be
available if the Employee makes or has made an election pursuant to Section
83(b) of the Code with respect to such Award.
13. NOTICES. Any notice to be given under the terms of this Agreement
shall be in writing and addressed to the Corporation at its principal office
located at 401 Wilshire Boulevard, Suite 700, Santa Monica, California 90401,
to the attention of the Corporate
5
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Secretary and to the Employee at the address given beneath the Employee's
signature hereto, or at such other address as either party may hereafter
designate in writing to the other.
14. PLAN. The Award and all rights of the Employee with respect thereto
are subject to, and the Employee agrees to be bound by, all of the terms and
conditions of the provisions of the Plan, incorporated herein by reference,
to the extent such provisions are applicable to Awards granted to Eligible
Employees. The Employee acknowledges receipt of a copy of the Plan, which is
made a part hereof by this reference, and agrees to be bound by the terms
thereof. Unless otherwise expressly provided in other Sections of this
Agreement, provisions of the Plan that confer discretionary authority on the
Committee do not (and shall not be deemed to) create any rights in the
Employee unless such rights are expressly set forth herein or are otherwise
in the sole discretion of the Committee so conferred by appropriate action of
the Committee under the Plan after the date hereof.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written. By the Employee's execution of this Agreement, the
Employee agrees to the terms and conditions hereof and of the Plan.
THE MACERICH COMPANY
(a Maryland corporation)
By
--------------------------
Richard A. Bayer
General Counsel & Secretary
THE MACERICH PARTNERSHIP, L.P.
(a Delaware limited partnership)
By: The Macerich Company
(its general partner)
By
----------------------
Richard A. Bayer
General Counsel & Secretary
EMPLOYEE
----------------------------------
(Signature)
----------------------------------
(Print Name)
----------------------------------
(Address)
----------------------------------
(City, State, Zip Code)
7
<PAGE>
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Restricted Stock
Award Agreement by The Macerich Company and The Macerich Partnership L.P., I,
__________________, the spouse of the Employee therein named, do hereby join
with my spouse in executing the foregoing Restricted Stock Award Agreement
and do hereby agree to be bound by all of the terms and provisions thereof
and of the Plan.
Dated: _____________, _____.
--------------------------
Signature of Spouse
8
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of June 17, 1998 (this
"AGREEMENT"), by and between The Macerich Company, a Maryland corporation (the
"COMPANY"), and The Ontario Teachers' Pension Plan Board, an Ontario corporation
(the "INVESTOR").
WHEREAS, pursuant to that certain Series B Preferred Securities
Purchase Agreement, dated as of June 16, 1998 (the "PURCHASE AGREEMENT"), by and
between the Company and the Investor, the Investor has agreed to acquire
5,487,471 shares of Series B 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.
"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
<PAGE>
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.
"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
2
<PAGE>
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 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
3
<PAGE>
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 B
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 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
4
<PAGE>
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, subject to any preferential registration rights granted prior to
the date of this Agreement.
(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 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:
5
<PAGE>
(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.
(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
6
<PAGE>
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 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
7
<PAGE>
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.
(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
8
<PAGE>
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 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
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<PAGE>
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.
(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.
10
<PAGE>
(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 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]
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE MACERICH COMPANY
By: /s/ Richard A. Bayer
------------------------------
General Counsel and Secretary
THE ONTARIO TEACHERS' PENSION PLAN BOARD
By: /s/ Andrea Stephen
----------------------------------------
Portfolio Manager
Address:
Fax Number:
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<PAGE>
REDEMPTION, REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
This REDEMPTION, REGISTRATION RIGHTS AND LOCK-UP AGREEMENT is made as
of the 24th day of July, 1998 (this "AGREEMENT"), among THE MACERICH COMPANY, a
Maryland corporation (the "COMPANY"), The Macerich Partnership, L.P., a Delaware
limited partnership (the "PARTNERSHIP"), 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
Partnership, which may be redeemed for shares of Common Stock, $.01 par value
per share, of the Company (the "COMMON STOCK") on the terms and conditions set
forth in the Agreement of Limited Partnership (the "PARTNERSHIP AGREEMENT") of
the Partnership;
WHEREAS, the Company has agreed to provide Investors with certain
redemption and registration rights as set forth herein;
WHEREAS, the Investors have agreed to the Lock-Up provision set forth
herein; and
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, PROVIDED, HOWEVER, that if upon any redemption of OP Units
the Company issues to any 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
1
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Securities for purposes of this Agreement and the 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.
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 the Company and such securities shall be freely transferable to the
public without registration under the Securities Act.
1.4 "PERMITTED TRANSFEREES" with respect to each Investor shall mean
any Affiliates (as defined in the Partnership Agreement) of such Investor.
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, transfer taxes applicable to
Eligible Securities or fees, disbursements and expenses of Investor's counsel,
accountants and experts.
2
<PAGE>
1.7 "SEC" means the Securities and Exchange Commission.
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
REDEMPTION, REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
3.1 REDEMPTION RIGHTS. The Investor, upon admission as a limited
partner of the Partnership, will be granted rights to redeem OP Units on the
terms and conditions set forth in the Partnership Agreement, provided that
notwithstanding anything set forth in the Partnership Agreement, the Investor
may not: (i) exercise such rights with respect to all or any portion of the OP
Units prior to that date which is six months prior to the Closing, (ii) deliver
more than two separate redemption notices per calendar year, and (iii) redeem
less than 5,000 OP Units (or, if the Investor holds less than 5,000 OP Units,
all of the OP Units held by the Investor) in a single redemption.
3.2 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
3
<PAGE>
written notice of such determination to the Investor or Investors
seeking 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.
3.3 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.
3.4 LOCK-UP AGREEMENT. The Investor agrees, that, prior to that date
which is one year following the Closing Date, it will not directly or
indirectly, offer, sell, contract to sell, grant any option to purchase, make
any short sale, transfer, pledge, cause a registration of, or otherwise dispose
of or make a distribution of any of the shares of Common Stock acquired by the
redemption of all or any portion of its OP Units, without the prior written
consent of the Company.
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
4
<PAGE>
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 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 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.
5
<PAGE>
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. 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.
(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 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 an Investor that the Company has
determined in good faith, with the advice of counsel, that such 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 (a "Blackout"), such Investor shall suspend sales of Eligible
Securities pursuant to such registration statement until the earlier of:
(a) the date upon which such material information is disclosed
to the public or ceases to be material, or
(b) such time as the Company notifies such 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
6
<PAGE>
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.
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 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
7
<PAGE>
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.
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
8
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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.
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.
9
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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: /s/ Richard A. Bayer
---------------------------------------
Name: Richard A. Bayer
Title: Secretary and General Counsel
THE MACERICH PARTNERSHIP, L.P.
By: The Macerich Company,
its General Partner
By: /s/ Richard A. Bayer
-------------------------------------
Name: Richard A. Bayer
Title: Secretary and General Counsel
THE "INVESTORS"
/s/ Harry S. Newman, Jr.
------------------------------
Harry S. Newman, Jr.
/s/ LeRoy H. Brettin
------------------------------
LeRoy H. Brettin
10
<PAGE>
FIRST AMENDED AND RESTATED
CREDIT AND GUARANTY AGREEMENT
among
THE MACERICH PARTNERSHIP, L.P.,
A DELAWARE LIMITED PARTNERSHIP,
AS THE BORROWER,
THE ENTITIES FROM TIME TO TIME PARTIES HERETO
AS GUARANTORS,
THE MACERICH COMPANY,
A MARYLAND CORPORATION,
THE BANKS AND OTHER FINANCIAL INSTITUTIONS
THAT EITHER NOW OR IN THE FUTURE
ARE PARTIES HERETO
and
WELLS FARGO BANK,
NATIONAL ASSOCIATION,
AS THE AGENT
June 25, 1998
$150,000,000
<PAGE>
CONTENTS
<TABLE>
<S> <C>
ARTICLE 1. DEFINITIONS AND RELATED MATTERS ................................ 1
Section 1.1. Definitions ...................................... 1
Section 1.2. Related Matters .................................. 28
ARTICLE 2. AMOUNT AND TERMS OF THE CREDIT FACILITIES ...................... 29
Section 2.1. Credit Facilities ................................ 29
Section 2.2. Letters of Credit ................................ 36
Section 2.3. Use of Proceeds .................................. 38
Section 2.4. Interest; Conversion/Continuation ................ 38
Section 2.5. Note, Etc. ....................................... 41
Section 2.6. Fees ............................................. 41
Section 2.7. Termination, Reduction and Extension of
Commitment ....................................... 42
Section 2.8. Repayments and Prepayments ....................... 42
Section 2.9. Manner of Payment ................................ 43
Section 2.10. Pro Rata Treatment ............................... 43
Section 2.11. Mandatory Suspension and Conversion of
Fixed Rate Advances .............................. 44
Section 2.12. Increased Regulatory Costs ....................... 44
Section 2.13. Fixed Rate Price Adjustment ...................... 45
Section 2.14. Purchase, Sale and Matching of Funds ............. 46
ARTICLE 3. GUARANTY ....................................................... 46
Section 3.1. Guaranty ......................................... 46
Section 3.2. Continuing and Irrevocable Guaranty .............. 47
Section 3.3. Nature of Guaranty ............................... 47
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Section 3.4. Authorization .................................... 48
Section 3.5. Certain Waivers .................................. 49
Section 3.6. Subrogation; Certain Agreements .................. 50
Section 3.7. Bankruptcy No Discharge .......................... 50
Section 3.8. Maximum Liability of Guarantor ................... 51
Section 3.9. Financial Benefit ................................ 51
ARTICLE 4. CONDITIONS PRECEDENT TO ADVANCES AND LETTERS OF CREDIT ........ 52
Section 4.1. Conditions Precedent to Closing Date ............. 52
Section 4.2. Conditions Precedent to Advances and Letters of
Credit ........................................... 52
Section 4.3. Additional Conditions Precedent and
Provisions Applicable to Certain Acquisition
Advances ......................................... 53
ARTICLE 5. REPRESENTATIONS AND WARRANTIES ................................. 55
Section 5.1. Organization, Authority and Tax Status of
the Borrower; Enforceability, Etc. ............... 55
Section 5.2. Organization, Authority and REIT Status of
the REIT; Enforceability, Etc. ................... 56
Section 5.3. Organization, Authority and Tax Status of
Guarantors; Enforceability, Etc. ................. 57
Section 5.4. Consolidated Entities and Unconsolidated
Joint Ventures; Management Companies ............. 57
Section 5.5. No Conflict, Etc. ................................ 58
Section 5.6. Financial Information ............................ 58
Section 5.7. No Material Adverse Changes ...................... 59
Section 5.8. Litigation ....................................... 59
Section 5.9. Agreements; Applicable Law ....................... 59
Section 5.10. Governmental Regulation .......................... 60
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Section 5.11. Margin Regulations ............................... 60
Section 5.12. Employee Benefit Plans ........................... 60
Section 5.13. Title to Property; Liens ......................... 60
Section 5.14. Licenses, Trademarks, Etc. ....................... 61
Section 5.15. Environmental Condition .......................... 61
Section 5.16. Absence of Certain Restrictions .................. 62
Section 5.17. Disclosure ....................................... 62
ARTICLE 6. AFFIRMATIVE COVENANTS OF THE BORROWER PARTIES .................. 62
Section 6.1. Financial Statements and Other Reports ........... 62
Section 6.2. Records and Inspection ........................... 64
Section 6.3. Corporate Existence, Etc. ........................ 65
Section 6.4. Payment of Taxes and Charges ..................... 65
Section 6.5. Maintenance of Properties ........................ 65
Section 6.6. Maintenance of Insurance ......................... 65
Section 6.7. Conduct of Business .............................. 65
Section 6.8. Exchange Listing; Tax Status of Borrower Parties . 65
Section 6.9. Subordination .................................... 66
Section 6.10. Remedial Action Regarding Hazardous Materials .... 67
Section 6.11. Year 2000 Covenant ............................... 67
ARTICLE 7. NEGATIVE COVENANTS OF THE BORROWER PARTIES ..................... 68
Section 7.1. Unsecured Debt and Claims ........................ 68
Section 7.2. Investments; Asset Mix ........................... 68
Section 7.3. Financial Covenants .............................. 70
Section 7.4. Minimum Unencumbered Pool ........................ 71
Section 7.5. Aggregate Leased Area of Real Properties in
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Unencumbered Pool ................................ 71
Section 7.6. Restriction on Fundamental Changes ............... 71
Section 7.7. Transactions with Affiliates ..................... 72
Section 7.8. Restricted Payments .............................. 72
Section 7.9. ERISA ............................................ 73
Section 7.10. Amendments of Charter and Bylaws ................. 73
Section 7.11. Payments with Respect to Permitted Subordinated
Debentures ....................................... 73
Section 7.12. Acquisitions of Real Properties .................. 74
ARTICLE 8. EVENTS OF DEFAULT .............................................. 74
Section 8.1. Events of Default ................................ 74
Section 8.2. Remedies ......................................... 76
Section 8.3. Rescission ....................................... 77
ARTICLE 9. THE AGENT AND THE LENDERS .................................... 80
Section 9.1. Authorization and Action ......................... 80
Section 9.2. Exculpation; Agent's Reliance; Etc. .............. 81
Section 9.3. Agent and Affiliates ............................. 81
Section 9.4. Lender Credit Decision ........................... 81
Section 9.5. Indemnification .................................. 82
Section 9.6. Successor Agent .................................. 82
Section 9.7. Excess Payments .................................. 82
Section 9.8. Lender Parties ................................... 83
Section 9.9. Default By The Borrower; Acceleration ............ 83
Section 9.10. Payments; Availability of Funds; Certain
Notices .......................................... 83
Section 9.11. Obligations of Lender Parties Several;
Enforcement
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by the Agent ......................... 85
Section 9.12. Reply of Lenders ................................. 86
ARTICLE 10. MISCELLANEOUS .................................................. 86
Section 10.1. Expenses; Indemnity .............................. 86
Section 10.2. Waivers; Modifications in Writing ................ 87
Section 10.3. Cumulative Remedies; Failure or Delay ............ 88
Section 10.4. Notices, Etc. .................................... 88
Section 10.5. Successors and Assigns ........................... 89
Section 10.6. Confidentiality .................................. 90
Section 10.7. Choice of Forum .................................. 90
Section 10.8. Changes in Accounting Principles ................. 90
Section 10.9. Survival of Agreements, Representations
and Warranties ................................... 91
Section 10.10. Execution in Counterparts ....................... 91
Section 10.11. Complete Agreement .............................. 91
Section 10.12. Limitation of Liability ......................... 91
Section 10.13. Unsecured Advances; No Lien ..................... 92
Section Amendment and Restatement .............................. 92
Section 10.14. Waiver of Trial by Jury ........................ 93
</TABLE>
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FIRST AMENDED AND RESTATED
CREDIT AND GUARANTY AGREEMENT
FIRST AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT, dated as of June
25, 1998 (as amended from time to time, this "AGREEMENT"), by and among THE
MACERICH PARTNERSHIP, L.P., a Delaware limited partnership (the "BORROWER"), THE
ENTITIES FROM TIME TO TIME PARTIES HERETO AS GUARANTORS, THE MACERICH COMPANY, a
Maryland corporation (the "REIT"), THE BANKS AND OTHER FINANCIAL INSTITUTIONS
THAT EITHER NOW OR IN THE FUTURE ARE PARTIES HERETO (collectively, the "LENDERS"
and each individually, a "LENDER"), and WELLS FARGO BANK, NATIONAL ASSOCIATION
(including in its capacity as an issuer of Letters of Credit, the "AGENT BANK"),
as agent and representative for the Lenders (the Agent Bank in such capacity or
any successor in such capacity is referred to herein as the "AGENT"). The
Lenders (including the Agent Bank) and the Agent are collectively referred to
herein as the "LENDER PARTIES" and each individually as a "LENDER PARTY."
R E C I T A L S
A. The Borrower, the Guarantors, the REIT, the Agent and the Agent Bank
have entered into a Credit and Guaranty Agreement dated as of February 26,
1998 (the "EXISTING CREDIT AGREEMENT").
B. As of the Closing Date, (I) the Existing Credit Agreement is
being amended and restated as set forth herein, (II) all outstanding
Advances (the "EXISTING COMMITTED ADVANCES") under the Existing
Credit Agreement will be considered "Committed Advances" under this
Agreement, (III) the outstanding Letter of Credit under the Existing
Credit Agreement (the "EXISTING LETTER OF CREDIT") will be considered
"Committed Advances" and a "Letter of Credit" under this Agreement,
(IV) the Agent Bank is assigning a portion of its Commitment
hereunder (the "ASSIGNED COMMITMENT") and a corresponding portion of
the Existing Committed Advances and participations in the Existing
Letter of Credit (the "TRANSFERRED PARTICIPATIONS") to certain
additional lenders (the "NEW LENDERS") and (IV) the New Lenders are
assuming the Agent Bank's obligations under the Assigned Commitment
and the Transferred Participations, all of which transactions will
occur contemporaneously.
ARTICLE 1.
DEFINITIONS AND RELATED MATTERS
SECTION 1.1. DEFINITIONS. The following terms with initial capital letters
have the following meanings:
<PAGE>
"ABSOLUTE RATE" means, in connection with any Absolute Rate Auction,
the rate of interest per annum (expressed in multiples of 1/1000th of one
percent) offered for any Bid Advance to be made pursuant to Section 2.1.2.
"ABSOLUTE RATE AUCTION" means a solicitation of a Competitive Bid
setting forth Absolute Rates pursuant to Section 2.1.2.3.1.
"ABSOLUTE RATE BID ADVANCE" means a Bid Advance that bears
interest at an Absolute Rate.
"ACQUISITION" is defined in Section 4.3.1.
"ACQUISITION ADVANCES" is defined in Section 4.3.1.3.
"ACQUISITION AGREEMENT" is defined in Section 4.3.1.6.
"ADVANCE" means a Committed Advance or a Bid Advance.
"AFFILIATE" means, with respect to any Person, any other Person
that, directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such first Person. Unless
otherwise indicated, "Affiliate" refers to an Affiliate of any Borrower Party.
Notwithstanding the foregoing, in no event shall any Lender Party or any
Affiliate of any Lender Party be deemed to be an Affiliate of the Borrower.
"AGENT" is defined in the Preamble.
"AGENT BANK" is defined in the Preamble.
"AGENT'S ACCOUNT" means the account identified on SCHEDULE 1.1B as
the Agent's Account or such account as the Agent may hereafter designate by
notice to the Borrower and each Lender.
"AGENT'S OFFICE" means the office of the Agent identified as such on
SCHEDULE 1.1.B, or such other office as the Agent may hereafter designate by
notice to the Borrower and each Lender.
"AGREEMENT" is defined in the Preamble and includes all
Schedules and Exhibits.
"APPLICABLE LAW" means all applicable provisions of all (i)
constitutions, treaties, statutes, laws, rules, regulations and ordinances of
any Governmental Authority, (ii) Governmental Approvals and (iii) orders,
decisions, judgments, awards and decrees of any Governmental Authority.
"APPLICABLE LENDING OFFICE" means, with respect to any Lender, (i)
in the case of any payment with respect to Fixed Rate Advances or Fixed Rate Bid
Advances, the Lender's LIBO Lending Office, and (ii) in the case of any payment
with respect to Base Rate Advances or
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<PAGE>
Absolute Rate Bid Advances or any other payment under the Loan Documents, the
Lender's Domestic Lending Office.
"APPLICABLE LIBO MARGIN" means, in respect of Fixed Rate Advances
that are Committed Advances, at any date, (i) 0.950% per annum if the ratio of
Total Liabilities to Gross Asset Value (expressed as a percentage) as of the
last day of the Fiscal Quarter most recently ended is less than 45.0%, (ii)
1.000% per annum if the ratio of Total Liabilities to Gross Asset Value
(expressed as a percentage) as of the last day of the Fiscal Quarter most
recently ended is greater than or equal to 45.0% but less than 55.0%, (iii)
1.100% per annum if the ratio of the Total Liabilities to Gross Asset Value
(expressed as a percentage) as of the last day of the Fiscal Quarter most
recently ended is greater than or equal to 55.0% but less than 60.0%, or (iv)
1.150% per annum if none of clause (i), (ii) or (iii) applies (including if the
Compliance Certificate showing that any of clause (i), (ii) or (iii), as the
case may be, is satisfied is not delivered when required hereby), PROVIDED in
the case of any of clause (i), (ii) or (iii), at least four Business Days shall
have expired from the day on which the Borrower shall have delivered a
Compliance Certificate showing that any of clause (i), (ii) or (iii) is
satisfied and PROVIDED, FURTHER, that any change in the Applicable LIBO Margin
resulting from the change in the ratio of Total Liabilities to Gross Asset Value
shall not take effect until the fifth Business Day after the Compliance
Certificate with respect to a Fiscal Quarter is (or is required to be)
delivered.
"APPLICABLE LIBO RATE" means, (i) in respect of Fixed Rate Advances
that are Committed Advances, the rate of interest, rounded upward (if necessary)
to the nearest whole multiple of .01%, equal to the sum of (x) the Applicable
LIBO Margin, PLUS (y) the LIBO Rate, which LIBO Rate is divided by 1.00 minus
the Reserve Percentage, and (ii) in respect of Fixed Rate Bid Advances, the rate
of interest, rounded upward (if necessary) to the nearest whole multiple of
.01%, equal to the sum of (x) the LIBO Bid Margin, PLUS (y) the LIBO Rate, which
LIBO Rate is divided by 1.00 MINUS the Reserve Percentage; which, in the case of
either clause (i) or clause (ii) , may be expressed as follows:
Applicable LIBO Rate = Applicable LIBO Margin + LIBO Rate / (1 - Reserve
OR Percentage)
LIBO Bid Margin, as the
case may be
"ASSIGNED COMMITMENT" is defined in the Recitals.
"ASSIGNMENT" and "ASSIGNMENT AND ACCEPTANCE" are defined in
Section 10.5.2.
"BANKRUPTCY CODE" means Title 11 of the United States Code (11
U.S.C. Section 101 ET SEQ.), as amended from time to time.
"BANKRUPTCY REMOTE ENTITY" means a Consolidated Entity (i) one
hundred percent of the Capital Stock of which is owned, directly or indirectly,
by the Borrower or the REIT and (ii) which is a so-called "bankruptcy remote
special purpose vehicle" or "bankruptcy
3
<PAGE>
remote SPV" that meets the published criteria in effect from time to time of
S&P, Moody's, Duff & Phelps Credit Rating Co. or Fitch Investors Service Inc.
"BASE RATE" means a fluctuating interest rate per annum as shall be
in effect from time to time, which rate per annum shall at all times be equal to
the higher of:
(i) the then effective Prime Rate; or
(ii) the then effective Federal Funds Rate PLUS 0.50%.
Each change in the interest rate on Advances based on a change in the Base Rate
shall be effective as of the effective date of such change in the Base Rate.
"BASE RATE ADVANCE" means any Committed Advance that constitutes or,
when made, will constitute, part of the Base Rate Portion.
"BASE RATE PORTION" means, at any time, the portion or portions of
the unpaid principal balance of all Committed Advances bearing interest at a
rate determined by reference to the Base Rate.
"BID ADVANCE" means an Advance by a Lender pursuant to the Bid
Facility, which may be either an Absolute Rate Bid Advance or a Fixed Rate Bid
Advance.
"BID ADVANCE LIMIT" means the lesser of (i) Seventy-Five Million
Dollars ($75,000,000) or (ii) the aggregate amount of the Commitments of all
Lenders.
"BID ADVANCE NOTE" means a promissory note made by Borrower payable
to the order of any Lender, in the amount of the lesser of (i) the Bid Advance
Limit or (ii) the aggregate amount of the Bid Advances from time to time
outstanding to such Lender, which note is substantially in the form of EXHIBIT
A-2, as amended from time to time.
"BID FACILITY" means the credit facility for the requesting and
making of Bid Advances described in Section 2.1.2.
"BOARD OF DIRECTORS" means the Board of Directors, as constituted
from time to time, of the REIT (in the case of actions to be taken by the REIT,
the Borrower or any other Borrower Party or Consolidated Entity of which the
REIT is the general partner or manager) or of any other Borrower Party or
Consolidated Entity (as in the case of actions to be taken by such Borrower
Party or Consolidated Entity or by any other Borrower Party or Consolidated
Entity of which such Borrower Party or Consolidated Entity is the general
partner or manager).
"BORROWER" is defined in the Preamble and includes its
successors and permitted assigns.
"BORROWER ACCOUNT" means the account of the Borrower identified as
such on SCHEDULE 10.4., or such other account as the Borrower may hereafter
designate by notice to the
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<PAGE>
Agent (including in connection with a Credit Sweep Program), PROVIDED that if
such account is maintained with any Person other than the Agent Bank, such
designation shall not be effective unless and until a Funds Transfer Agreement
and all documents contemplated thereby are executed and delivered by the
Borrower to the Agent Bank.
"BORROWER PARTY" means the Borrower, any Guarantor or the REIT.
Notwithstanding anything herein to the contrary, recourse to the REIT for
payment and performance of the Obligations is limited as set forth in Section
10.12.
"BORROWING" means a contemporaneous borrowing of Advances or
the issuance of a Letter of Credit, as applicable.
"BULLET PAYMENT" means any payment of the entire unpaid balance of
any Debt at its final maturity other than the final payment with respect to a
loan that is fully amortized over its term.
"BUSINESS DAY" means a day of the week (but not a Saturday, Sunday
or holiday) on which the offices of banks located in San Francisco and Los
Angeles, California are open to the public for carrying on substantially all of
such banks' business functions, PROVIDED that with respect to any Fixed Rate
Advance, "Business Day" shall further mean any day on which commercial banks are
open for dealings in Dollar deposits in the London interbank market.
"CAPITAL STOCK" means, with respect to any Person, all (i) shares,
interests, participations or other equivalents (howsoever designated) of capital
stock or partnership or other equity interests of such Person and (ii) rights
(other than debt securities convertible into capital stock or other equity
interests), warrants or options to acquire any such capital stock or partnership
or other equity interests of such Person. The term "Capital Stock" includes the
Partnership Units of the Borrower.
"CAPITALIZED LEASES" means all leases of the REIT and the
Consolidated Entities of real or personal property that are required to be
capitalized on the consolidated balance sheets of such Persons.
"CAPITALIZED LOAN FEES" means, with respect to the REIT, any
Consolidated Entity or any Unconsolidated Joint Venture, and with respect to any
period, any upfront, closing or similar fees paid by such Person in connection
with the incurrence or refinancing of Debt during such period that are
capitalized on the balance sheet of such Person.
"CLOSING DATE" means the earliest date upon which all of the
conditions to the effectiveness of this Agreement set forth in Section 4.1.
are satisfied.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COLLATERAL" is defined in Section 3.2.
5
<PAGE>
"COMMENCEMENT OF CONSTRUCTION" with respect to a Real Property,
means the commencement of material on-site work (including grading) or the
commencement of a work of improvement of such Real Property.
"COMMITMENT" means, with respect to each Lender, the amount set
forth for such Lender as its "Commitment" on SCHEDULE 1.1.A, as reduced or
terminated from time to time pursuant to the terms hereof.
"COMMITMENT USAGE" means, at any time, (i) with respect to any
Lender, the sum of (A) the aggregate unpaid principal amount of all Committed
Advances made by such Lender, PLUS (B) the Lender's PRO RATA share of all Letter
of Credit Liability, PLUS (C) the Lender's PRO RATA share of the Interest
Reserve PLUS (D) the Lender's PRO RATA share of all Bid Advances outstanding
(regardless of whether such Bid Advances were made by such Lender) or (ii) with
respect to all Lenders, the sum of (A) the aggregate unpaid principal amount of
all Committed Advances made by all Lenders, PLUS (B) all Letter of Credit
Liability, PLUS (C) the Interest Reserve, PLUS (D) all Bid Advances outstanding,
in each case giving effect to the Borrowings then requested. For purposes of
clause (i)(D), a Lender's PRO RATA share of all Bid Advances shall be equal to
the aggregate amount of such Bid Advances, multiplied by a fraction, the
numerator of which is such Lender's Commitment and the denominator of which is
the aggregate Commitments of all Lenders.
"COMMITTED ADVANCE" is defined in Section 2.1.1.1.
"COMPETITIVE BID" means an offer by a Lender to make a Bid Advance
in response to a Competitive Bid Request, substantially in the form of EXHIBIT
B-4.
"COMPETITIVE BID REQUEST" means a notice, in substantially the form
of EXHIBIT B-3, requesting that Lenders submit Competitive Bids.
"COMPLIANCE CERTIFICATE" means a certificate of the chief financial
officer and the secretary of each Borrower Party, substantially in the form of
EXHIBIT C-4.
"CONSOLIDATED ENTITIES" means, collectively, (i) the Borrower, (ii)
any other Person the accounts of which are consolidated with those of the REIT
in the consolidated financial statements of the REIT in accordance with GAAP,
and (iii) except for purposes of Sections 7.1.2. and 7.3. all Unconsolidated
Joint Ventures of which any Consolidated Entity is a general partner.
"CONSTRUCTION-IN-PROCESS" means, with respect to any Retail Property
Under Construction, the aggregate amount of expenditures classified as
"construction-in-process" on the REIT's balance sheet with respect thereto.
"CONTINGENT OBLIGATION" means, as to any Person, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) with respect to
any Debt or other obligation of another Person, including any direct or indirect
guarantee of such Debt (other than any
6
<PAGE>
endorsement for collection in the ordinary course of business) or any other
direct or indirect obligation, by agreement or otherwise, to purchase or
repurchase any such Debt or obligation or any security therefor, or to provide
funds for the payment or discharge of any such Debt or obligation (whether in
the form of loans, advances, stock purchases, capital contributions or
otherwise), (ii) to provide funds to maintain the financial condition of the
other Person, or (iii) otherwise to assure or hold harmless the holders of Debt
or other obligation of another Person against loss in respect thereof. The
amount of any Contingent Obligation shall be an amount equal to the amount of
the Debt or obligation guaranteed or otherwise supported thereby.
Notwithstanding the foregoing, "CONTINGENT OBLIGATIONS" shall not include (x)
any obligation of the Borrower or any of the Consolidated Entities under any
contract for the acquisition of Real Property entered into in the ordinary
course to pay the purchase price of such Real Property prior to the transfer of
title to such Real Property, (y) any unliquidated contingent liabilities under
environmental indemnities given by the Borrower or any of the Consolidated
Entities or (z) any amount representing the excess of the obligations of an
Unconsolidated Joint Venture over the Borrower's PRO RATA share of such
obligations.
"CONTRACTUAL OBLIGATION" means, as applied to any Person, any
provision of any security issued by that Person or of any agreement or other
instrument to which that Person is a party or by which it or any of the
properties owned by it is bound or otherwise subject.
"CONTROL" means the possession, directly or indirectly, of the
power, whether or not exercised, to direct or cause the direction of the
management or policies of a Person, whether through the ownership of Capital
Stock, by contract or otherwise, and the terms "CONTROLLED" and "COMMON CONTROL"
have correlative meanings.
"CONTROLLED CONSOLIDATED ENTITY" means any Consolidated Entity,
except an Unconsolidated Joint Venture that is not controlled by the REIT or the
Borrower, PROVIDED that any Unconsolidated Joint Venture the general partners of
which include both a Consolidated Entity (or a Person controlled by a
Consolidated Entity) and a Person (the "THIRD PERSON") other than a Consolidated
Entity (or an Affiliate of a Consolidated Entity) shall not be a Controlled
Consolidated Entity as to any transaction or matter that such Third Person has
the power, under Applicable Law, to engage in or undertake on behalf of the
Unconsolidated Joint Venture without the consent of the Consolidated Entity that
is also a general partner (whether or not such consent would be required under
the partnership agreement or any other Contractual Obligation of the Third
Person or the Unconsolidated Joint Venture).
"CONTROLLED GROUP" means all domestic and foreign members of a
controlled group of corporations under Section 1563(a) of the Code (determined
without regard to Section 1563(b)(2)(C) of the Code) and all trades or
businesses (irrespective of whether incorporated) that are under common control
with the REIT. With regard to all Plans and Multiemployer Plans, "CONTROLLED
GROUP" includes all ERISA Affiliates.
"CREDIT SWEEP PROGRAM" is defined in Section 2.1.1.3.3.
"CUT-OFF DATE" is defined in Section 4.3.2.1.
7
<PAGE>
"DEBT" means, with respect to any Person, the aggregate amount of,
without duplication: (i) all obligations for borrowed money including, in the
case of the REIT, the Permitted Subordinated Debentures; (ii) all obligations
evidenced by bonds, debentures, notes or other similar instruments; (iii) all
obligations to pay the deferred purchase price of property or services,
including trade accounts payable arising in the ordinary course of business;
(iv) all Capitalized Leases; (v) all obligations or liabilities of others
secured by a Lien on any asset owned by such Person or Persons whether or not
such obligation or liability is assumed; (vi) all obligations of such Person or
Persons, contingent or otherwise, in respect of any letters of credit or
bankers' acceptances; (vii) the maximum fixed redemption or repurchase price of
Disqualified Capital Stock of such Person at the date of determination, (viii)
all Contingent Obligations and (ix) the Interest Reserve, which shall be
considered unsecured Debt for purposes of this Agreement.
"DEFAULT" means any condition or event that, with the giving of
notice or lapse of time or both, would, unless cured or waived, become an Event
of Default.
"DEFAULTING LENDER" is defined in Section 9.10.2.
"DEFINED BENEFIT PLAN" means any pension plan subject to Title IV of
ERISA including a Multiemployer Plan and any money purchase pension plan subject
to the funding requirements of Section 412 of the Code.
"DEPRECIATION AND AMORTIZATION EXPENSE" means (without duplication),
for any period, the sum for such period of (i) total depreciation and
amortization expense, whether paid or accrued, of the REIT and the Consolidated
Entities, PLUS (ii) the REIT's and any Consolidated Entity's PRO RATA share of
depreciation and amortization expenses of Unconsolidated Joint Ventures. For
purposes of this definition, the REIT's PRO RATA share of depreciation and
amortization expense of any Unconsolidated Joint Venture shall be deemed equal
to the product of (i) the depreciation and amortization expense of such
Unconsolidated Joint Venture, MULTIPLIED BY (ii) the percentage of the total
outstanding Capital Stock of such Person held by the REIT or any Consolidated
Entity, expressed as a decimal.
"DISQUALIFIED CAPITAL STOCK" of any Person means any Capital Stock
of such Person that by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), or otherwise (including upon
the occurrence of any event), is required to be redeemed or is redeemable for
cash at the option of the holder thereof, in whole or in part (including by
operation of a sinking fund), or is exchangeable for Debt (other than at the
option of such Person), in whole or in part, at any time prior to the 91st day
after the Maturity Date.
"DOLLARS" and "$" means lawful money of the United States of
America.
"DOMESTIC LENDING OFFICE" means the office, branch or Affiliate of
the Lender identified on SCHEDULE 1.1B designated as its Domestic Lending Office
or such other office, branch or Affiliate as such Lender may hereafter designate
as its Domestic Lending Office for one or more types of Advances by notice to
the Borrower and the Agent.
8
<PAGE>
"EBITDA" means, for any period, (i) Net Income, PLUS (without
duplication) (A) Interest Expense, (B) Tax Expense, and (C) Depreciation and
Amortization Expense, in each case for such period.
"EFFECTIVE RATE" is defined in Section 2.4.1.
"ELIGIBLE ASSIGNEE" is defined in Section 10.5.2.
"ENVIRONMENTAL DAMAGES" means all claims, judgments, damages,
losses, penalties, liabilities (including strict liability), costs and expenses,
including costs of investigation, remediation, defense, settlement and
attorneys' fees and consultants' fees, that are incurred at any time as a result
of the existence of Hazardous Materials upon, about or beneath any Real Property
or migrating or threatening to migrate to or from any Real Property, or arising
in any manner whatsoever out of any violation of Environmental Requirements.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for Environmental Damages.
"ENVIRONMENTAL REQUIREMENTS" means all Applicable Laws relating to
Hazardous Materials or the protection of human health or the environment,
including all requirements pertaining to reporting, permitting, investigation
and remediation of releases or threatened releases of Hazardous Materials into
the environment, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA AFFILIATE" means any Person that is or was a member of the
controlled group of corporations or trades or businesses (as defined in
Subsection (b), (c), (m) or (o) of Section 414 of the Code) of which any
Borrower Party is or was a member at any time within the last six years.
"EXISTING COMMITTED ADVANCES" is defined in the Recitals.
"EXISTING CREDIT AGREEMENT" is defined in the Recitals.
"EXISTING LETTER OF CREDIT" is defined in the Recitals.
"EXISTING WFB CREDIT AGREEMENT" means that certain Second Amended
and Restated Credit and Guaranty Agreement, dated as of December 13, 1996 (as
amended by Amendment No. 1 to Second Amended and Restated Credit and Guaranty
Agreement dated as of July 10, 1997, and Amendment No. 2 to Second Amended and
Restated Credit and Guaranty Agreement dated as of December 31, 1997).
"EXTENSION FEE" is defined in Section 2.6.4.
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"EVENT OF DEFAULT" means any of the events specified in
Section 8.1.
"FACILITY FEE" is defined in Section 2.6.3.
"FAIR SALABLE VALUE" is defined in Section 3.9.
"FAIR VALUATION" is defined in Section 3.9.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York on the Business
Day next succeeding such day, PROVIDED that if such rate is not so published for
any day that is a Business Day, the Federal Funds Rate for such day shall be the
average rate charged to the Agent Bank on such day on such transactions as
determined by the Agent Bank.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System, or any successor thereto.
"FEE LETTER" means that certain letter dated June __, 1998 between
the Borrower and the Agent, as amended from time to time.
"FEES" means, collectively, the fees described or referenced in
the Fee Letter and in Section 2.6.
"FISCAL YEAR" means the fiscal year of the REIT, which shall be the
12-month period ending on December 31 in each year or such other period as the
REIT may designate and the Agent may approve in writing. "FISCAL QUARTER" or
"FISCAL QUARTER" means any quarter of a Fiscal Year.
"FIXED CHARGES" means, for any period, the sum of the amounts for
such period of (i) scheduled payments of principal of Debt of the REIT and the
Consolidated Entities (other than any Bullet Payment), (ii) the REIT's PRO RATA
share of scheduled payments of principal of Debt of Unconsolidated Joint
Ventures (other than any Bullet Payment) that does not otherwise constitute Debt
of and is not otherwise recourse to the REIT and the Consolidated Entities or
their assets, (iii) Interest Expense, (iv) payments of dividends in respect of
Disqualified Capital Stock and (v) an amount equal to $0.05 per quarter,
MULTIPLIED BY the total square footage of all Real Properties owned by the
Consolidated Entities and the PRO RATA share of square footage of all Real
Properties owned by the Unconsolidated Joint Ventures, in each case, at the end
of such period. For purposes of clauses (ii) and (v), the REIT's PRO RATA share
of payments by or square footage of any Unconsolidated Joint Venture shall be
deemed equal to the product of (a) the payments made by or square footage of
such Unconsolidated Joint Venture, MULTIPLIED BY (b) the percentage of the total
outstanding Capital Stock of such Person held by the REIT or any Consolidated
Entity, expressed as a decimal.
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"FIXED CHARGE COVERAGE RATIO" means, at any time, the ratio of (i)
EBITDA for the fiscal quarter then most recently ended, to (ii) Fixed Charges
for such period.
"FIXED RATE" means (i) in the case of Committed Advances, the
Applicable LIBO Rate as accepted by the Borrower as an Effective Rate for a
particular Fixed Rate Period and Fixed Rate Portion or (ii) in the case of Fixed
Rate Bid Advances, the Applicable LIBO Rate for the Fixed Rate Period applicable
to such Fixed Rate Bid Advances.
"FIXED RATE ADVANCE" means any Advance that constitutes or, when
made, will constitute, the Fixed Rate Portion of any Committed Advance or a
Fixed Rate Bid Advance.
"FIXED RATE AUCTION" means a solicitation of Competitive Bids
setting forth LIBO Bid Margins pursuant to Section 2.1.2.3.1.
"FIXED RATE BID ADVANCE" means a Bid Advance that bears interest for
the relevant Fixed Rate Period, at a Fixed Rate.
"FIXED RATE COMMENCEMENT DATE" , with respect to any Fixed Rate
Advance that is a Committed Advance, is defined in Section 2.4.2.4. and, with
respect to any Fixed Rate Bid Advance or Absolute Rate Bid Advance, is defined
in Section 2.1.2.3.6.
"FIXED RATE NOTICE" means, with respect to any Fixed Rate Advance, a
written notice, substantially in the form of EXHIBIT B-2, which confirms the
Fixed Rate for a particular Fixed Rate Period and, if the Fixed Rate Advance is
a Committed Advance, the Fixed Rate Portion or, if the Fixed Rate Advance is a
Bid Advance, the amount of the Bid Advance.
"FIXED RATE PERIOD" means the period or periods of (a) in respect of
any Fixed Rate Advance that is a Committed Advance, (i) one, two, three or six
months; or (ii) any other period of at least one month that ends at the Maturity
Date, which periods are selected by the Borrower pursuant to Section 2.4.2. and
may be confirmed in a Fixed Rate Notice; (b) in respect of any Absolute Rate Bid
Advance, the period, commencing on the Funding Date in respect of such Bid
Advance and ending on a date that is thirty, sixty or ninety days later, as
selected by the Borrower in the related Competitive Bid Request; and (c) in
respect of any Fixed Rate Advance that is a Fixed Rate Bid Advance, the period,
commencing on the Funding Date in respect of such Bid Advance and ending on a
date that is one, two or three months later; PROVIDED that no Fixed Rate Period
shall extend beyond the Maturity Date. Notwithstanding the foregoing: (a) if a
Fixed Rate Advance that is a Committed Advance is continued, the Fixed Rate
Period applicable to the continued or converted Advance shall commence on the
day on which the Fixed Rate Period applicable to such Fixed Rate Advance ends;
(b) any Fixed Rate Period applicable to a Fixed Rate Advance (1) that would
otherwise end on a day that is not a Business Day shall be extended to the next
succeeding Business Day, unless such succeeding Business Day falls in another
calendar month, in which case such Fixed Rate Period shall end on the next
preceding Business Day or (2) that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Fixed Rate Period) shall end on the last
Business Day of the calendar month at the end of such Fixed
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Rate Period.
"FIXED RATE PORTION" means the portion or portions of the
unpaid principal balance of all Committed Advances that the Borrower
selects to have subject to a Fixed Rate. The Fixed Rate Portion shall
comply with Sections 2.4.2.7.
"FIXED RATE PRICE ADJUSTMENT" is defined in Section 2.13.
"FLOATING RATE DEBT" is defined in Section 7.3.6.
"FUNDING DATE" means any date on which an Advance is (or is
requested to be) made or a Letter of Credit is (or is requested to be) issued.
"FUNDS FROM OPERATIONS" or "FFO" means, for any period, the "Funds
From Operations" calculated for such period in accordance with NAREIT
Guidelines, PROVIDED that, notwithstanding Section 10.8., the components of
Funds From Operations or FFO shall be calculated on the basis of, and in
accordance with, GAAP as it exists on the date of this Agreement, and no effect
shall be given to any changes to such accounting principles that may be made
from time to time after the Closing Date. It is understood by the parties that,
notwithstanding the internal accounting practices or operations of the Borrower,
the defined terms included in this definition shall have the meanings set forth
in this Agreement.
"FUNDS TRANSFER AGREEMENT" means a Funds Transfer Agreement for
Disbursement of Loan Proceeds between the Agent Bank and the Borrower, on the
Agent Bank's standard form, executed and delivered after the date hereof as
contemplated by the definition of "Borrower Account," as such agreement may be
amended from time to time.
"GAAP" means generally accepted accounting principles as in effect
in the United States of America (as such principles are in effect on the date
hereof).
"GOVERNMENTAL APPROVAL" means an authorization, consent, approval,
permit or license issued by, or a registration or filing with, any Governmental
Authority.
"GOVERNMENTAL AUTHORITY" means any nation and any state or political
subdivision thereof and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any
tribunal or arbitrator of competent jurisdiction.
"GROSS ASSET VALUE" means, at any time, the sum of (without
duplication):
(i) for Retail Properties that are Wholly-Owned , the sum of, for
each such property, (a) such property's Property NOI for the Measuring Period,
MULTIPLIED BY 4, DIVIDED BY (b) (1) 8.5% (expressed as a decimal), in the case
of regional Retail Properties (other than Huntington Beach Mall) or (2) 9.5%
(expressed as a decimal) in the case of Huntington Beach Mall or other Retail
Properties that are not regional Retail Properties, PLUS
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(ii) for Retail Properties that are not Wholly-Owned, the sum of,
for each such property, (a) the Gross Asset Value of each such Retail Property
at such time, as calculated pursuant to the foregoing clause (i), MULTIPLIED BY
(b) a percentage (expressed as a decimal) equal to the percentage of the total
outstanding Capital Stock held by the Borrower of the Consolidated Entity or
Unconsolidated Joint Venture holding title to such Retail Properties, PLUS
(iii) all cash and Permitted Investments (other than, in either
case, Restricted Cash) held by the Consolidated Entities at such time,
MULTIPLIED BY in the case of cash and Permitted Investments not Wholly-Owned, a
percentage (expressed as a decimal) equal to the percentage of the total
outstanding Capital Stock held by the Borrower of the Consolidated Entity
holding title to such cash and Permitted Investments, PLUS
(iv) for Mortgage Loans that are Wholly-Owned, the lowest of (A) the
book value of each such Mortgage Loan at the time it is initially acquired, (B)
the book value of each such Mortgage Loan at the time Gross Asset Value is being
determined, or (C) the excess, if any, of (1) 80% of the Gross Asset Value of
the Retail Property securing such Mortgage Loan, determined pursuant to the
applicable clause of this definition as if such Retail Property were
Wholly-Owned, over (2) the amount of any Debt and other liabilities or
obligations, absolute or contingent, also secured by a Lien on such Retail
Property, which Lien is senior to or PARI PASSU with the Lien securing such
Mortgage Loan; PLUS
(v)(a) 100% of Construction-in-Process with respect to Retail
Properties that are Wholly-Owned and (b) the product of (1) 100% of
Construction-in-Process with respect to Retail Properties Under Construction
that are not Wholly-Owned MULTIPLIED BY (2) a percentage (expressed as a
decimal) equal to the percentage of the total outstanding Capital Stock held by
the Borrower of the Consolidated Entity or Unconsolidated Joint Venture holding
title to such Retail Properties Under Construction;
PROVIDED, HOWEVER, that the determination of Gross Asset Value for
any period shall not include any Retail Property that has been sold or otherwise
disposed of at any time prior to or during such period.
"GUARANTOR" means (i) any Initial Guarantor and (ii) any other
Person who from time to time becomes a Guarantor hereunder by executing and
delivering a Joinder Agreement substantially in the form of EXHIBIT E, in each
case unless and until such Person is released from any further liability
hereunder as specified in the definition of "Unencumbered Asset."
"GUARANTY" is defined in Section 3.1.
"HAZARDOUS MATERIALS" means any chemical substance (i) the presence
of which requires investigation or remediation under any Applicable Law; or (ii)
that is or becomes defined as a "hazardous waste" or "hazardous substance" under
any Applicable Law, including the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 ET SEQ.) or the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.); or (iii) that is
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
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mutagenic, or otherwise hazardous and is or becomes regulated by any
Governmental Authority; or (iv) the presence of which on any Real Property
causes or threatens to cause a nuisance upon the Real Property or to adjacent
properties or poses or threatens to pose a hazard to any Real Property or to the
health or safety of Persons on or about any Real Property; or (v) which contains
gasoline, diesel fuel or other petroleum hydrocarbons; or (vi) which contains
polychlorinated biphenyls (PCBs) or asbestos.
"HUNTINGTON BEACH MALL" means the property identified as such
on Schedule 1.1C.
"INDEMNIFIED LIABILITIES" is defined in Section 10.1.3.
"INDEMNITEES" is defined in Section 10.1.3.
"INITIAL GUARANTORS" means MACERICH BRISTOL ASSOCIATES, a California
general partnership, and its successors, and MACERICH BUENAVENTURA LIMITED
PARTNERSHIP, a California limited partnership, and its successors, MACERICH
HUNTINGTON LIMITED PARTNERSHIP, a California limited partnership, and its
successors, and MACERICH STONEWOOD LIMITED PARTNERSHIP, a California limited
partnership, and its successors.
"INSOLVENT" is defined in Section 3.9.
"INTANGIBLE ASSETS" means (i) all unamortized debt discount and
expense, unamortized deferred charges, goodwill and other intangible assets and
(ii) all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of assets of a going concern business made within
twelve months after the acquisition of such business) subsequent to December 31,
1994, in the book value of any asset owned by the REIT or any Consolidated
Entity.
"INTEREST COVERAGE RATIO" means, at any time, the ratio of (i)
EBITDA for the fiscal quarter then most recently ended, to (ii) Interest Expense
for such period.
"INTEREST EXPENSE" means, for any period, the sum (without
duplication) for such period of (i) total interest expense, whether paid or
accrued, of the REIT and the Consolidated Entities, including Fees payable
pursuant to Section 2.6., charges in respect of Letters of Credit and the
portion of any Capitalized Lease Obligations allocable to interest expense,
including the REIT's share of interest expenses in Unconsolidated Joint Ventures
but excluding amortization or write-off of debt discount and expense (except as
provided in clause (ii) below), (ii) amortization of costs related to interest
rate protection contracts and rate buydowns (other than the costs associated
with the interest rate buydowns completed in connection with the initial public
offering of the REIT), (iii) capitalized interest, PROVIDED that capitalized
interest may be excluded from this clause (iii) to the extent such interest (A)
does not exceed the Interest Reserve designated for such period or (B) is paid
or reserved out of any interest reserve established under a loan facility, (iv)
for purposes of determining Interest
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Expense as used in the Fixed Charge Coverage Ratio (both numerator and
denominator) only, amortization of Capitalized Loan Fees, (v) to the extent not
included in clauses (i), (ii), (iii) and (iv), the REIT's PRO RATA share of
interest expense and other amounts of the type referred to in such clauses of
the Unconsolidated Joint Ventures, and (vi) interest incurred on any liability
or obligation that constitutes a Contingent Obligation of the REIT or any
Consolidated Entity. For purposes of clause (v), the REIT's PRO RATA share of
interest expense or other amount of any Unconsolidated Joint Venture shall be
deemed equal to the product of (a) the interest expense or other relevant amount
of such Unconsolidated Joint Venture, MULTIPLIED BY (b) the percentage of the
total outstanding Capital Stock of such Person held by the REIT or any
Consolidated Entity, expressed as a decimal.
"INTEREST RESERVE" means, with respect to any Fiscal Quarter, the
dollar amount designated by the Borrower as "Interest Reserve" for such Fiscal
Quarter in the Compliance Certificate submitted during such Fiscal Quarter;
PROVIDED, HOWEVER, that such dollar amount may not exceed the lesser of (i) the
amount that the Borrower would be permitted to draw as an Advance under this
Agreement or (ii) $10,000,000; PROVIDED FURTHER, however, that on the date of
this Agreement, the Interest Reserve shall be equal to $1,000,000.
"INVESTMENT" means, with respect to any Person, (i) any direct or
indirect purchase or other acquisition by that Person of stock or securities, or
any beneficial interest in stock or other securities, of any other Person, any
partnership interest (whether general or limited) in any other Person, or all or
any substantial part of the business or assets of any other Person, or (ii) any
direct or indirect loan, advance or capital contribution by that Person to any
other Person, including all indebtedness and accounts receivable from that other
Person that are not current assets or did not arise from sales to that other
Person in the ordinary course of business. The amount of any Investment shall be
the original cost of such Investment, PLUS the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment.
"JOINT VENTURE" means a joint venture, partnership, limited
liability company, business trust or similar arrangement, whether in corporate,
partnership or other legal form; PROVIDED that, as to any such arrangement in
corporate form, such corporation shall not, as to any Person of which such
corporation is a Subsidiary, be considered to be a Joint Venture to which such
Person is a party.
"LENDER" is defined in the Preamble, subject to Section 9.10.2. For
purposes of the Sections referred to in (and subject to) Section 10.5.3.,
"LENDER" includes a holder of a Participation.
"LENDER PARTY" is defined in the Preamble. For purposes of the
Sections referred to in (and subject to) Section 10.5.3., "LENDER PARTY"
includes a holder of a Participation.
"LETTER OF CREDIT" means a standby letter of credit issued pursuant
to this Agreement (including the Existing Letter of Credit) and a Letter of
Credit Agreement, either as originally issued or as amended, supplemented,
modified, renewed or extended.
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"LETTER OF CREDIT AGREEMENT" means an Application and Agreement for
Standby Letter of Credit in the form attached hereto as EXHIBIT G.
"LETTER OF CREDIT COLLATERAL" is defined in Section 8.4.2.
"LETTER OF CREDIT COLLATERAL ACCOUNT" is defined in Section
8.4.1.
"LETTER OF CREDIT FEE" is defined in Section 2.6.2.
"LETTER OF CREDIT LIABILITY" means, at any time, all contingent
liabilities of the Borrower to the Agent Bank in respect of Letters of Credit
outstanding at such time and shall equal the aggregate Stated Amount of all
Letters of Credit then outstanding.
"LIBO BID MARGIN" means, in connection with any Fixed Rate Auction,
a margin (expressed in multiples of 1/1000th of one percent) above or below the
LIBO Rate offered for any Bid Advance to made pursuant hereto.
"LIBO LENDING OFFICE" means the office, branch or Affiliate of any
Lender identified on SCHEDULE 1.1.B as its LIBO Lending Office or such other
office, branch or Affiliate as such Lender may hereafter designate as its LIBO
Lending Office by notice to the Borrower and the Agent.
"LIBO RATE" is the rate of interest, rounded upward (if necessary)
to the nearest whole multiple of one-sixteenth of one percent (.0625%), quoted
by the Agent Bank as the London Inter-Bank Offered Rate for deposits in U.S.
Dollars at approximately 11:00 a.m. (London time),
(i) in the case of a Fixed Rate Advance that is a Committed Advance,
on the second Business Day prior to (or, if the Agent Bank is then the sole
Lender hereunder, on) a Fixed Rate Commencement Date or on a Price Adjustment
Date, as appropriate, for purposes of calculating effective rates of interest
for loans or obligations making reference thereto for an amount approximately
equal to the Fixed Rate Portion and for a period of time approximately equal to
a Fixed Rate Period or the time remaining in a Fixed Rate Period after a Price
Adjustment Date, as appropriate; and
(ii) in the case of a Fixed Rate Bid Advance, on the second Business
Day prior to the related Funding Date, for purposes of calculating effective
rates of interest for loans or obligations making reference thereto for an
amount approximately equal to such Fixed Rate Bid Advance and for a period of
time approximately equal to the Fixed Rate Period applicable thereto.
"LIEN" means any lien, mortgage, pledge, security interest, charge,
or encumbrance of any kind (including any conditional sale or other title
retention agreement or any lease in the nature thereof) and any agreement to
give or refrain from giving any lien, mortgage, pledge, security interest,
charge, or other encumbrance of any kind.
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"LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, the
Fee Letter, each Letter of Credit Agreement, each Letter of Credit, any Funds
Transfer Agreement and any other agreement, instrument or other writing executed
or delivered by the Borrower, the REIT or any Subsidiary in connection herewith
from time to time, and all amendments, exhibits and schedules to any of the
foregoing.
"M&F GROSS LEASEABLE AREA" means, with respect to any Real Property,
the gross leaseable area of the mall and freestanding areas of such Real
Property (excluding the gross leaseable area of such Real Property that is, at
the time of determination, undergoing substantial capital improvements other
than any such capital improvements made to a tenant space pursuant to or in
anticipation of a new or renewed lease for such space).
"MANAGEMENT COMPANIES" means Macerich Property Management Company, a
California corporation, and Macerich Management Company, a California
corporation, and includes their respective successors.
"MANAGEMENT CONTRACT" means any contract between any Management
Company, on the one hand, and the Borrower and/or any other Consolidated Entity
or Unconsolidated Joint Venture, on the other hand, relating to the management
of the Borrower, any other Consolidated Entity or any Unconsolidated Joint
Venture or any of the properties of such Person, as the same may be amended from
time to time.
"MACERICH GROUP MEMBER" means any of the Borrower Parties, the
Principal Investors, the Management Companies, any Consolidated Entity (other
than any of the foregoing), or any other Person involved in the day-to-day
management of any Consolidated Entity or any Real Property held
by it.
"MARGIN REGULATIONS" means Regulations G, T, U and X of the Federal
Reserve Board, as amended from time to time.
"MARGIN STOCK" means "margin stock" as defined in Regulation U.
"MATERIAL," "MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE"
means (i) a condition or event material to, (ii) a material adverse effect on or
(iii) a material adverse change in, as the case may be, any one or more of the
following: (A) the business, assets, results of operations, financial condition
or prospects of the REIT and the Consolidated Entities taken as a whole or (B)
the ability of any Borrower Party to perform its obligations under any Loan
Document to which it is a party.
"MATURITY DATE" means February 26, 2000; PROVIDED, that if the
Maturity Date shall have been extended pursuant to Section 2.7.2., "MATURITY
DATE" means February 26, 2001.
"MEASURING PERIOD" means the period of three consecutive months,
constituting one full Fiscal Quarter, ended most recently for which operating
statements with respect to a Real Property have been delivered to the Lenders.
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"MINORITY INTERESTS" means all of the Partnership Units of the
Borrower held by any Person other than the REIT.
"MOODY'S" means Moody's Investors Service, Inc. or any
successor.
"MORTGAGE LOANS" means all loans owned or held by the Borrower
secured by mortgages or deeds of trust on Retail Properties.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 3(37) and Section 4001(a)(3) of ERISA to which the Borrower or any of
its ERISA Affiliates is making or accruing an obligation to make contributions
or to which any such Person has made or accrued an obligation to make
contributions.
"NAREIT GUIDELINES" means the guidelines published from time to time
by the National Association of Real Estate Investment Trusts as in effect on the
date of this Agreement.
"NET INCOME" means, for any period, total net income (or loss) of
the REIT and the Consolidated Entities for such period taken as a single
accounting period, including the REIT's PRO RATA share of the income (or loss)
of any Unconsolidated Joint Venture for such period, PROVIDED that there shall
be excluded therefrom (i) any charges for minority interests in the Borrower
held by Persons holding Partnership Units of the Borrower (other than the REIT),
(ii) any income or loss attributable to extraordinary items, (iii) gains and
losses from sales of assets (other than undeveloped land that constitutes a
portion of any Retail Property), (iv) except to the extent otherwise included
hereunder, the income (or loss) of any Person accrued prior to the date it
becomes a Consolidated Entity or is merged with the REIT or any Consolidated
Entity or such Person's assets are acquired by the REIT or any Consolidated
Entity, and (v) any impairment loss required to be taken in such period in
accordance with Statement of Financial Accounting Standards No. 121 (Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of) with respect to any long-lived assets to be disposed of and whose value is
being reported during such period at the lower of its carrying amount or fair
value. For purposes of this definition, the REIT's PRO RATA share of income (or
loss) of any Unconsolidated Joint Venture shall be deemed equal to the product
of (i) the income (or loss) of such Unconsolidated Joint Venture, MULTIPLIED BY
(ii) the percentage of the total outstanding Capital Stock of such Person held
by the REIT or any Consolidated Entity, expressed as a decimal.
"NET WORTH" means, at any date, the consolidated stockholders'
equity of the REIT and the Consolidated Entities, excluding any amounts
attributable to Disqualified Capital Stock.
"NEW LENDERS" is defined in the Recitals.
"NON-RECOURSE DEBT" means Debt that (i) is non-recourse to the
Consolidated Entities (other than such Unconsolidated Joint Venture) and their
assets and (ii) does not constitute Debt of the Consolidated Entities (other
than such Unconsolidated Joint Venture).
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"NON-RECOURSE SECURED DEBT" means Debt that (i) is non-recourse to
the Consolidated Entities (other than such Unconsolidated Joint Venture) and
their assets, (ii) does not constitute Debt of the Consolidated Entities (other
than such Unconsolidated Joint Venture) and (iii) is recourse only to Retail
Properties that secures such Debt.
"NOTE" means a Revolving Note or a Bid Advance Note.
"NOTICE OF BORROWING" is defined in Section 2.1.1.3.1.
"OBLIGATED PARTY" is defined in Section 9.10.2.
"OBLIGATIONS" means all present and future obligations and
liabilities of the Borrower of every type and description arising under or in
connection with this Agreement, the Notes and the other Loan Documents due or to
become due to the Lender Parties or any Person entitled to indemnification, or
any of their respective successors, transferees or assigns, whether for
principal, interest, letter of credit or other reimbursement obligations, cash
collateral cover, Fees, expenses, indemnities or other amounts (including
attorneys' fees and expenses) and whether due or not due, direct or indirect,
joint and/or several, absolute or contingent, voluntary or involuntary,
liquidated or unliquidated, determined or undetermined, and whether now or
hereafter existing, renewed or restructured, whether or not from time to time
decreased or extinguished and later increased, created or incurred, whether or
not arising after the commencement of a proceeding under the Bankruptcy Code
(including post-petition interest) and whether or not allowed or allowable as a
claim in any such proceeding, and whether or not recovery of any such obligation
or liability may be barred by a statute of limitations or such obligation or
liability may otherwise be unenforceable.
"OBLIGOR" is defined in Section 3.2.
"OFFERING CIRCULAR" means, as the case may be, (i) with respect to
the debentures described in clause (i) of the definition of "Permitted
Subordinated Debentures," the Offering Circular, dated June 20, 1997, pursuant
to which the Permitted Subordinated Debentures were offered by the REIT or (ii)
with respect to any other Permitted Subordinated Debentures, the final offering
document pursuant to which such Permitted Subordinated Debentures are offered by
the REIT.
"OPERATIVES" is defined in Section 10.12.2.
"OTHER GUARANTOR" is defined in Section 3.2.
"OTHER GUARANTY" is defined in Section 3.2.
"PARTICIPATION" is defined in Section 10.5.3.
"PARTNERSHIP UNITS," "PREFERRED PARTNERSHIP UNITS" and "SERIES A
PARTNERSHIP UNITS" are each defined in the Partnership Agreement of the
Borrower. Unless the
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context indicates otherwise, the term "PARTNERSHIP UNITS" is used herein to
refer, collectively, to the Partnership Units, the Preferred Partnership Units
and the Series A Partnership Units.
"PBGC" means the Pension Benefit Guaranty Corporation, as defined in
Title IV of ERISA, or any successor.
"PERMITTED INVESTMENTS" means (i) marketable direct obligations
issued or unconditionally guaranteed by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof, (ii) marketable direct obligations issued by any state of the United
States or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and having, at the time of acquisition, the highest rating obtainable
from either Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, or Moody's, (iii) commercial paper having, at the time of
acquisition, the highest rating obtainable from either S&P or Moody's, (iv)
certificates of deposit, other time deposits, and bankers' acceptances maturing
within one year from the date of acquisition thereof issued by any bank
operating under the laws of the United States or any state thereof or the
District of Columbia that has combined capital and surplus of not less than
$500,000,000, (v) institutional money market funds organized under the laws of
the United States of America or any state thereof that invest solely in any of
the Investments permitted under the foregoing clauses (i), (ii), (iii) and (iv)
or (vi) Capital Stock that is (x) traded on a national securities exchange, (y)
purchased in the secondary market and (z) not subject to any legal or
contractual restrictions on transferability.
"PERMITTED SUBORDINATED DEBENTURES" means (i) the 7 1/4% Convertible
Subordinated Debentures due 2002 of the REIT in the aggregate principal amount
of $161,400,000, offered pursuant to the Offering Circular, which debentures
have such terms and are subject to such conditions as are set forth in the
Offering Circular and (ii) any other unsecured subordinated debentures issued by
the REIT PROVIDED that, in the reasonable discretion of the Agent, the terms and
conditions related to subordination of such unsecured subordinated debentures
are substantially similar to the terms and conditions related to subordination
of the debentures described in clause (i) of this definition.
"PERSON" means an individual, a corporation, a partnership, a
limited liability company, a trust, an unincorporated organization or any other
entity or organization, including a government or any agency or political
subdivision thereof and, for the purpose of the definition of "ERISA Affiliate,"
a trade or business.
"PLAN" means any pension, retirement, disability, defined benefit,
defined contribution, profit sharing, deferred compensation, employee stock
ownership, employee stock purchase, health, life insurance, or other employee
benefit plan or arrangement, irrespective of whether any of the foregoing is
funded, in which any personnel of any Borrower Party or its ERISA Affiliates
participates or from which any such personnel may derive a benefit.
"POST-DEFAULT RATE" means, at any time, a rate per annum equal to
the Base Rate
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in effect at such time PLUS 2%.
"PRICE ADJUSTMENT DATE", with respect to any Fixed Rate
Advance, or Absolute Rate Bid Advance, is defined in Section 2.13.
"PRIME RATE" means a base rate of interest which the Agent Bank
establishes from time to time and which serves as the basis upon which effective
rates of interest are calculated for those loans making reference thereto. Any
change in an Effective Rate due to a change in the Prime Rate shall become
effective on the day each such change is announced within the Agent Bank.
"PRINCIPAL INVESTORS" means, collectively, Mace Siegel, Arthur
Coppola, Dana Anderson and Edward Coppola.
"PRO FORMA UNENCUMBERED ASSET VALUE" is defined in
Section 4.3.1..
"PROHIBITED TRANSACTION" means a transaction that is prohibited
under Section 4975 of the Code or Section 406 or 407 of ERISA and not exempt
under Section 4975 of the Code or Section 408 of ERISA.
"PROPERTY EXPENSES" means, for any Retail Property, all operating
expenses relating to such Retail Property, including the following items
(PROVIDED, HOWEVER, that Property Expenses shall not include Debt service,
tenant improvement costs, leasing commissions, capital improvements,
Depreciation and Amortization Expenses and any extraordinary items not
considered operating expenses under GAAP):
(i) all expenses for the operation of such Retail Property,
including any management fees payable under the Management Contracts and all
insurance expenses, but not including any expenses incurred in connection with a
sale or other capital or interim capital transaction;
(ii) water charges, property taxes, sewer rents and other
impositions, other than fines, penalties, interest or such impositions (or
portions thereof) that are payable by reason of the failure to pay an imposition
timely; and
(iii) the cost of routine maintenance, repairs and minor
alterations, to the extent they can be expensed under GAAP.
"PROPERTY INCOME" means, for any Retail Property, all gross revenue
from the ownership and/or operation of such Retail Property (but excluding
income from a sale or other capital item transaction), service fees and charges
and all tenant expense reimbursement income payable with respect to such Retail
Property (but not such reimbursement for expenditures not deducted as a Property
Expense).
"PROPERTY NOI" means, for any Retail Property for any period, (i)
all Property
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Income for such period, MINUS (ii) all Property Expenses for such period.
"RAW LAND" means (i) raw land or (ii) undeveloped land that
constitutes a portion of any Retail Property, other than such portions of the
Retail Properties as are reasonably considered to be an integral part of or a
pad site for such properties.
"REAL PROPERTY" means each of those parcels (or portions thereof) of
real property, improvements and fixtures thereon and appurtenances thereto now
or hereafter owned or leased by the Borrower or any other Consolidated Entity.
"REGULATION D" means Regulation D of the Federal Reserve Board, as
amended from time to time.
"REGULATION U" means Regulation U of the Federal Reserve Board, as
amended from time to time.
"REGULATORY COSTS" are, collectively, future, supplemental,
emergency or other changes in Reserve Percentages, assessment rates imposed by
the FDIC, or similar requirements or costs imposed by any domestic or foreign
governmental authority and related in any manner to a Fixed Rate.
"REGULATORY CHANGE" means, with respect to any Lender, (i) the
adoption or becoming effective after the date hereof of any treaty, law, rule or
regulation, (ii) any change in any such treaty, law, rule or regulation, or any
change in the administration or enforcement thereof, by any Governmental
Authority, central bank or other monetary authority charged with the
interpretation or administration thereof, in each case after the date hereof, or
(iii) compliance after the date hereof by the Lender (or its Applicable Lending
Office or any holding company of the Lender) with, any interpretation,
directive, request, order or decree (whether or not having the force of law) of
any such Governmental Authority, central bank or other monetary authority.
"REIT" is defined in the Preamble.
"REQUIRED LENDERS" means, (i) if the Commitments have not
terminated, Lenders holding at least 66-2/3% of the aggregate amount of the
Commitments and, if the Agent Bank is not the sole Lender hereunder at such
time, at least two Lenders, or (ii) if the Commitments have terminated, (a)
Lenders holding at least 66-2/3% of the sum of (x) the aggregate unpaid
principal amount of the Advances PLUS (y) the aggregate amount of all Letter of
Credit Liability and (b) if the Agent Bank is not the sole Lender hereunder at
such time, at least two Lenders, in each case giving effect to the provisions of
Section 9.10.2.
"RESPONSIBLE OFFICER" is defined in Section 2.1.3.1.
"RESERVE PERCENTAGE" is, at any time the percentage announced within
the Agent Bank as the reserve percentage under Regulation D for loans and
obligations making reference to a LIBO Rate for a Fixed Rate Period or time
remaining in a Fixed Rate Period on a Price
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Adjustment Date, as appropriate. The Reserve Percentage shall be based on
Regulation D or other regulations from time to time in effect concerning
reserves for eurocurrency liabilities, as defined in Regulation D, from related
institutions as though the Agent Bank were in a net borrowing position, as
promulgated by the Federal Reserve Board.
"RESTRICTED CASH" means any cash or cash equivalents held by the
Borrower or any of the other Consolidated Entities with respect to which the
Borrower or the Consolidated Entity does not have unrestricted access and
unrestricted right to expend such cash or expend or liquidate such Permitted
Investments including, without limitation, cash or Permitted Investments
constituting tenant deposits held pursuant to any lease for any Real Property.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution,
direct or indirect, on account of any Capital Stock of the Borrower, the REIT or
any Subsidiary now or hereafter outstanding, except (a) a dividend or other
distribution payable solely in shares of Capital Stock of the Borrower, the REIT
or such Subsidiary, as the case may be, and (b) the issuance of equity interests
upon the exercise of outstanding warrants, options or other rights, or (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any Capital Stock of the Borrower,
the REIT or any Subsidiary now or hereafter outstanding. It is understood that
the conversion of any Capital Stock of the Borrower into Capital Stock of the
REIT shall not constitute a Restricted Payment by the Borrower.
"RETAIL PROPERTY" means any Real Property that is a neighborhood,
community or regional shopping center or mall.
"RETAIL PROPERTY UNDER CONSTRUCTION" means Retail Property for which
Commencement of Construction has occurred but construction of such Retail
Property is not substantially complete.
"REVOLVING NOTE" means a promissory note made by Borrower payable to
the order of any Lender, in the amount of such Lender's Commitment, which note
is substantially in the form of EXHIBIT A-1, as amended from time to time.
"SEC" means the United States Securities and Exchange
Commission, and any successor.
"SENIOR OBLIGATIONS" is defined in Section 9.10.2.
"SENIOR OFFICER" means, with respect to any Borrower Party, the
Chairman of the Board of Directors, the Vice Chairman of the Board of Directors,
the President, the Chief Executive Officer, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, the General Counsel or any Vice
President in charge of a principal business unit or division of such Borrower
Party.
"SENIOR UNSECURED INTEREST EXPENSE COVERAGE RATIO" means, at any
time, the
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ratio of (i) Property NOI of all Unencumbered Assets for the fiscal quarter then
most recently ended, to (ii) Interest Expense on all unsecured Debt for such
period (other than Interest Expense attributable to the Permitted Subordinated
Debentures).
"SINGLE EMPLOYER PLAN" means a Plan other than a Multiemployer
Plan.
"STATED AMOUNT" means, with respect to a Letter of Credit, the
maximum amount available to be drawn thereunder, without regard to whether any
conditions to drawing could be met.
"SUBORDINATED DEBT" is defined in Section 6.9.
"SUBORDINATED CREDITOR" is defined in Section 6.9.
"SUBSIDIARY" means, with respect to any Person, any other Person of
which more than 50% of the total voting power of the Capital Stock entitled to
vote in the election of the board of directors (or other Persons performing
similar functions) are at the time directly or indirectly owned by such first
Person. Unless otherwise specified, the term "SUBSIDIARY" refers to any
Subsidiary of a Borrower Party.
"S&P" means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., or any successor.
"TANGIBLE NET WORTH" means, at any time, (i) Net Worth MINUS (ii)
Intangible Assets, PLUS (iii) solely for purposes of Section 7.3.1., any
minority interest reflected in the balance sheet of the REIT, but only to the
extent attributable to Minority Interests, in each case at such time.
"TAX EXPENSE" means (without duplication), for any period, total tax
expense (if any) attributable to income and franchise taxes based on or measured
by income, whether paid or accrued, of the REIT and the Consolidated Entities,
including the REIT's and Consolidated Entity's PRO RATA share of tax expenses in
the Unconsolidated Joint Venture. For purposes of this definition, the REIT's
PRO RATA share of any such tax expense of any Unconsolidated Joint Venture shall
be deemed equal to the product of (i) such tax expense of such Unconsolidated
Joint Venture, MULTIPLIED BY (ii) the percentage of the total outstanding
Capital Stock of such Person held by the REIT or any Consolidated Entity,
expressed as a decimal.
"TAXES" means, collectively, all withholdings, interest equalization
taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by
any domestic or foreign Governmental Authority and related in any manner to a
Fixed Rate.
"THIRD PERSON" is defined in the definition of "Controlled
Consolidated Entity" in this Section 1.1.
"TOTAL LIABILITIES" means, at any time, without duplication, the
aggregate
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amount of (i) all Debt and other liabilities of the Borrower and the
Consolidated Entities reflected in the financial statements of the REIT or
disclosed in the financial notes thereto, PLUS (ii) all liabilities of all
Unconsolidated Joint Ventures that is otherwise recourse to the Borrower or any
Consolidated Entity or any of its assets or that otherwise constitutes Debt of
the Borrower or any Consolidated Entity, PLUS (iii) the Borrower's PRO RATA
share of all Debt and other liabilities of any Unconsolidated Joint Venture not
otherwise constituting Debt of or recourse to the Borrower or any Consolidated
Entity or any of its assets. For purposes of clause (iii), the Borrower's PRO
RATA share of all Debt and other liabilities of any Unconsolidated Joint Venture
shall be deemed equal to the product of (a) such Debt or other liabilities,
MULTIPLIED BY (b) the percentage of the total outstanding Capital Stock of such
Person held by the Borrower or any Consolidated Entity, expressed as a decimal.
"TRANSFERRED PARTICIPATIONS" is defined in the Recitals.
"UNCONSOLIDATED JOINT VENTURE" means (i) any Joint Venture of the
REIT or any Consolidated Entity in which the REIT or such Consolidated Entity
holds any Capital Stock but which would not be combined with the REIT in the
consolidated financial statements of the REIT in accordance with GAAP, and (ii)
any Investment of the REIT or any Consolidated Entity in any Person that is not
a Joint Venture.
"UNENCUMBERED ASSET" means, subject to Section 4.3., any Real
Property that satisfies all of the following conditions:
(i) is a neighborhood, community and regional shopping center
or mall;
(ii) is Wholly-Owned, free and clear of any Lien (other than (a)
easements, covenants, and other restrictions, charges or encumbrances not
securing Debt that do not interfere materially with the ordinary operations of
the property and do not materially detract from the value of the property; (b)
building restrictions, zoning laws and other Applicable Laws, and (c) leases and
subleases of the property in the ordinary course of business, PROVIDED that any
such Liens under (c) that are ground leases entered into after the Closing Date
or that are ground leases with respect to Real Properties that become part of
the Unencumbered Pool after the Closing Date shall have been approved by the
Required Lenders in their discretion);
(iii) in the case of any Real Property title to which is not held
directly by the Borrower, (a) the Consolidated Entity holding title to such Real
Property is a Guarantor or becomes a Guarantor prior to the the Real Property
being treated as an Unencumbered Asset for purposes of determining the
Unencumbered Pool, (b) the Capital Stock of such Consolidated Entity is not
subject to any Lien, and (c) the Consolidated Entity delivers to the Agent (1)
an opinion of counsel, substantially in the form delivered to the Agent pursuant
to Section 4.1 and by counsel reasonably acceptable to the Agent, with respect
to the matters covered by the closing opinion delivered pursuant to Section 4.1
with respect to the Initial Guarantors, and (2) a copy of the charter documents
of the Guarantor, as in effect at that time;
(iv) unless waived by the Agent, a title report from a title
company of national
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repute for such Real Property is delivered to the Agent showing that no material
defects exist in or with respect to title to the Real Property (other than Liens
permitted to exist pursuant to clause (ii));
(v) unless waived by the Required Lenders, a Phase I
environmental study for such Real Property is delivered to the Agent showing
that no material adverse environmental conditions exist on or with respect to
the Real Property;
(vi) not less than 80% of the M&F Gross Leaseable Area of the Real
Property shall be subject to a lease or a sublease pursuant to which rent is
being paid by the tenant thereunder;
(vii) the Real Property has been otherwise expressly approved by
the Required Lenders in writing as eligible for inclusion in the Unencumbered
Pool in their discretion; and
(viii) the Real Property has been designated by the Borrower as an
Unencumbered Asset.
Unless the Borrower shall have notified the Agent and the Lenders to
the contrary, the Real Properties listed as "Unencumbered Assets" in the
Compliance Certificate most recently delivered to the Agent pursuant to Section
6.1.3, shall be considered designated by the Borrower as Unencumbered Assets
pursuant to clause (viii) above. As of the date hereof, all of the Real
Properties that have been approved by the Required Lenders as eligible for
inclusion in the Unencumbered Pool and designated by the Borrower as
Unencumbered Assets pursuant to clauses (vii) and (viii) above, respectively,
are set forth on SCHEDULE 1.1C. If any Unencumbered Asset (including any of the
properties listed on SCHEDULE 1.1C) no longer satisfies the conditions of the
foregoing clauses (ii), (iii) or (vi), at the direction of the Required Lenders,
the Agent shall notify the Borrower that, effective upon the giving of such
notice, such asset shall no longer be considered an Unencumbered Asset
(irrespective of whether a Default or Event of Default exists at that time or
results therefrom). If the Borrower intends to designate a property as an
Unencumbered Asset to be added to the Unencumbered Pool from time to time (other
than those listed on SCHEDULE 1.1C), it will notify the Agent and the Lenders of
such intention, which notice will include (a) a physical description of the
property to be added to the Unencumbered Pool, including its age and location
and, if requested by the Agent, a recent title report, (b) if title to the
property is held by a Consolidated Entity other than the Borrower, the names and
respective percentage interests of all Persons holding Capital Stock of such
Consolidated Entity, (c) information regarding the occupancy of the property (a
rent roll), (d) operating statements for the most recent Fiscal Quarter and the
most recent Fiscal Year (and the previous Fiscal Year, if available) and (e) an
operating budget for the current Fiscal Year. The property shall become part of
the Unencumbered Pool upon the written approval of the Required Lenders. If the
Borrower at any time intends to withdraw any Real Property from the Unencumbered
Pool, it shall (i) notify the Agent and the Lenders of its intention, and (ii)
deliver to the Agent and the Lenders a certificate of its chief financial
officer setting forth the calculations establishing that the Borrower will be in
compliance with Section 7.4. with giving effect to such withdrawal (and any
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concurrent addition of properties to the Unencumbered Pool), which calculations
shall be substantially in the form of the calculations in EXHIBIT C-4 relating
to Section 7.4. Effective automatically upon delivery of such notice and
certificate by the Borrower, (i) such property shall no longer constitute an
Unencumbered Asset and (ii) if title to the property that is being released from
the Unencumbered Pool is not held directly by the Borrower and the Consolidated
Entity holding title to such property holds title to no other Unencumbered
Asset, such Consolidated Entity shall be released from the Guaranty, and shall
cease to be a Guarantor hereunder, in each case without any further action by
the Agent or any Lender.
"UNENCUMBERED ASSET VALUE" means, at any time:
(i) with respect to any specified Unencumbered Asset other than
the Unencumbered Assets described in clauses (ii), (iii) or (v) below, for each
such property, (a) the product of such property's Property NOI for the Measuring
Period, MULTIPLIED BY 4, DIVIDED BY (b) 9.5% (expressed as a decimal); PLUS
(ii) with respect to any specified Unencumbered Asset that is a
regional Retail Property other than a regional Retail Property described in
clause (iii) or (v) below, for each such property, (a) the product of such
property's Property NOI for the Measuring Period, MULTIPLIED BY 4, DIVIDED BY
(b) 8.5% (expressed as a decimal); PLUS
(iii) so long as Huntington Beach Mall is an Unencumbered Asset and
provided the Huntington Beach Mall is not described in clause (v) below, (a) the
product of such property's Property NOI for the Measuring Period, MULTIPLIED BY
4, DIVIDED BY (b) 9.5% (expressed as a decimal); PLUS
(iv) all cash and Permitted Investments (other than, in either
case, Restricted Cash) held by the Consolidated Entities at such time,
MULTIPLIED BY in the case of cash and Permitted Investments not Wholly-Owned, a
percentage (expressed as a decimal) equal to the percentage of the total
outstanding Capital Stock held by the Borrower of the Consolidated Entity
holding title to such cash and Permitted Investments; PLUS
(v)(a) 100% of Construction-in-Process with respect to Retail
Properties in the Unencumbered Pool that are Wholly-Owned and are Unencumbered
Assets and (b) the product of (1) 100% of Construction-in-Process with respect
to Retail Properties in the Unencumbered Pool that are not Wholly-Owned
MULTIPLIED BY (2) a percentage (expressed as a decimal) equal to the percentage
of the total outstanding Capital Stock held by the Borrower of the Consolidated
Entity holding title to such Retail Properties in the Unencumbered Pool;
PROVIDED, HOWEVER, that the Unencumbered Asset Value included in this clause (v)
shall not constitute more than 25% percent of the total Unencumbered Asset
Value.
"UNENCUMBERED POOL" means the pool of Unencumbered Assets.
"UNSECURED FUNDED DEBT" means any Debt referred to in clause (i),
(ii), (iii), (iv) or (ix) of the definition of "Debt" that is not secured by any
Lien.
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"WHOLLY-OWNED" means, with respect to any Real Property or other
asset owned or leased, that (i) title to such asset is held directly by, or such
asset is leased by, the Borrower, or (ii) in the case of Real Property, title to
such property is held by, or such property is leased by, a Consolidated Entity
at least 99% of the Capital Stock of which is held of record and beneficially by
the Borrower and the balance of the Capital Stock of which (if any) is held of
record and beneficially by the REIT (or any wholly-owned Subsidiary of the
REIT).
"WHOLLY-OWNED ENTITY" is defined in Section 7.2.2.
"YEAR 2000 COMPLIANT" is defined in Section 6.11.
SECTION 1.2. RELATED MATTERS.
1.2.1. CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, the singular
includes the plural, the part includes the whole, "including" is not limiting,
and "or" has the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder" and similar terms in this Agreement
refer to this Agreement as a whole (including the Preamble, the Recitals, the
Schedules and the Exhibits) and not to any particular provision of this
Agreement. Article, section, subsection, exhibit, schedule, recital and preamble
references in this Agreement are to this Agreement unless otherwise specified.
References in this Agreement to any agreement, other document or law "as
amended" or "as amended from time to time," or to amendments of any document or
law, shall include any amendments, supplements, replacements, renewals, waivers
or other modifications. References in this Agreement to any law (or any part
thereof) include any rules and regulations promulgated thereunder (or with
respect to such part) by the relevant Governmental Authority, as amended from
time to time.
1.2.2. DETERMINATIONS. Any determination or calculation contemplated
by this Agreement that is made by any Lender Party shall be final and conclusive
and binding upon each Borrower Party, and, in the case of determinations by the
Agent, also the other Lender Parties, in the absence of manifest error.
References in this Agreement to any "determination" by any Lender Party include
good faith estimates by such Lender Party (in the case of quantitative
determinations), and good faith beliefs by such Lender Party (in the case of
qualitative determinations). All references herein to "discretion" of any Lender
Party (or terms of similar import) shall mean "absolute and sole discretion."
All consents and other actions of any Lender Party contemplated by this
Agreement may be given, taken, withheld or not taken in such Lender Party's
discretion (whether or not so expressed), except as otherwise expressly provided
herein.
1.2.3. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared on a consolidated basis in
accordance with GAAP applied on a basis consistent (except for changes that the
independent public accountants of the REIT deem necessary in order to allow them
to render an unqualified opinion to the REIT and for changes that are not deemed
so necessary but are concurred in by such independent public accountants and the
Agent) with the
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audited consolidated financial statements of the REIT and the Consolidated
Entities referred to in Section 5.6.1. Notwithstanding anything herein to the
contrary, for purposes of determining the REIT's PRO RATA share of any income,
expense, asset, liability or other item of or with respect to any Unconsolidated
Joint Venture, as used in the defined terms used in or by reference in Section
7.3., the percentage of the Capital Stock held by the REIT or any Consolidated
Entity shall be the percentage required to be used under GAAP.
1.2.4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS (OTHER THAN THE RULES REGARDING CONFLICTS
OF LAWS, EXCEPT THOSE CONTAINED IN CALIFORNIA CIVIL CODE SECTION 1646.5) OF THE
STATE OF CALIFORNIA.
1.2.5. HEADINGS. The Article and Section headings used in this
Agreement are for convenience of reference only and shall not affect the
construction hereof.
1.2.6. SEVERABILITY. If any provision of this Agreement shall be
held to be invalid, illegal or unenforceable under Applicable Law in any
jurisdiction, such provision shall be ineffective only to the extent of such
invalidity, illegality or unenforceability, which shall not affect any other
provisions hereof or the validity, legality or enforceability of such provision
in any other jurisdiction.
1.2.7. INDEPENDENCE OF COVENANTS. All covenants under this Agreement
shall each be given independent effect so that if a particular action or
condition is not permitted by any such covenant, the fact that it would be
permitted by another covenant, by an exception thereto, or be otherwise within
the limitations thereof, shall not avoid the occurrence of a Default or an Event
of Default if such action is taken or condition exists.
1.2.8. OTHER DEFINITIONS. Terms otherwise defined in Preamble, the
Recitals and in any other provision of this Agreement or any of the other Loan
Documents not defined or referenced in Section 1.1. have their respective
defined meanings when used herein or therein.
ARTICLE 2.
AMOUNT AND TERMS OF THE CREDIT FACILITIES
SECTION 2.1. CREDIT FACILITIES.
2.1.1. COMMITTED FACILITY.
2.1.1.1. COMMITTED ADVANCES.
Upon the terms and subject to the conditions set forth in
this Agreement, (a) on the Closing Date, the Existing Credit Agreement is hereby
superseded, amended and restated in its entirety, and (b) each Lender hereby
severally agrees, at any time from and after the Closing Date until the Business
Day next preceding the Maturity Date, to make advances
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(each a "COMMITTED ADVANCE," which term shall also include amounts drawn under
Letters of Credit pursuant to Section 2.2.5.1.) to the Borrower in an aggregate
outstanding principal amount not to exceed at any time outstanding, when added
to other Commitment Usage of such Lender at such time, the Commitment of such
Lender, PROVIDED that the Commitment Usage of all Lenders at any time, in the
aggregate, shall not exceed the aggregate Commitments of all Lenders. Committed
Advances may be voluntarily prepaid and, subject to the provisions of this
Agreement (including Section 2.13.), any amounts so prepaid may be re-borrowed,
up to the amount available under this Section 2.1.1. at the time of such
re-borrowing.
2.1.1.2. TYPE OF COMMITTED ADVANCES AND MINIMUM AMOUNTS.
Committed Advances made under this Section 2.1. may be Base Rate Advances or
Fixed Rate Advances, subject, however, to Section 2.4. Each Borrowing of Fixed
Rate Advances to which the same Fixed Rate Period is applicable shall be in a
minimum amount of $2,000,000 and integral multiples of $1,000,000.
2.1.1.3. NOTICE OF BORROWING.
2.1.1.3.1. When the Borrower desires to borrow pursuant to
Section 2.1., it shall deliver to the Agent a Notice of Borrowing substantially
in the form of EXHIBIT B-1, duly completed and executed by a Responsible Officer
(a "NOTICE OF BORROWING"), no later than 10:00 a.m. (California time) (i) at
least one Business Day before (or, if the Agent Bank is the sole Lender
hereunder at such time, on) the proposed Funding Date, in the case of a Base
Rate Advance, or (ii) at least three Business Days (or, if the Agent Bank is the
sole Lender hereunder at such time, one Business Day) before the proposed
Funding Date, in the case of a Fixed Rate Advance.
2.1.1.3.2. In lieu of delivering a Notice of Borrowing for a
Base Rate Advance, the Borrower, through a Responsible Officer, may give the
Agent telephonic notice by the required time of the proposed borrowing for
Advances of that type and all information required by a Notice of Borrowing;
PROVIDED, HOWEVER, that such notice shall be confirmed in writing by delivery of
a Notice of Borrowing by fax to the Agent as soon as practicable one day prior
to the proposed Funding Date. The Lender Parties shall incur no liability to the
Borrower in acting upon any telephonic notice that the Agent believes to have
been given by a Person authorized to act on behalf of the Borrower or for
otherwise acting in good faith under this Section 2.1. and in making any Advance
in accordance with this Agreement pursuant to any telephonic notice.
2.1.1.3.3. Notwithstanding anything herein to the contrary,
no Notice of Borrowing shall be required at any time while the Agent Bank is the
only Lender hereunder with respect to any Base Rate Advance while there shall be
in effect, pursuant to subsequent mutual agreement between the Borrower and the
Agent Bank, a program (such as a credit sweep) whereby Base Rate Advances are
made automatically to maintain a target balance in an account the Borrower
maintains with the Agent Bank (a "CREDIT SWEEP PROGRAM"). The Agent Bank shall
incur no liability to the Borrower making Advances pursuant to any Credit Sweep
Program.
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2.1.1.3.4. The Agent shall promptly notify each Lender of
the contents of any Notice of Borrowing (or telephonic notice in lieu thereof)
received by it and such Lender's PRO RATA portion of the Borrowing of Committed
Advances requested. Not later than 9:00 a.m. (California time) on the date
specified in such notice as the Funding Date, each Lender, subject to the terms
and conditions hereof, shall make its PRO RATA portion of the Borrowing of
Committed Advances available, in immediately available funds, to the Agent at
the Agent's Account.
2.1.1.4. FUNDING OF COMMITTED ADVANCES. Subject to and
upon satisfaction of the applicable conditions set forth in Article 4. as
determined by the Agent, the Agent shall make the proceeds of the requested
Committed Advances available to the Borrower in Dollars in immediately available
funds in the Borrower Account. In addition, if the Borrower Account is
maintained with a financial institution other than the Agent, all borrowings
hereunder shall be subject to the terms and conditions of the Funds Transfer
Agreement.
2.1.2. BID FACILITY.
2.1.2.1. BID ADVANCES.
2.1.2.1.1. Each Lender severally agrees that, subject to the
conditions that at the time of the Borrower's submission of the relevant
Competitive Bid Request no Default or Event of Default has occurred and is
continuing, the Borrower may, in accordance with this SECTION 2.1.2. and the
other relevant provisions of the Loan Documents, from time to time request that
the Lenders, at any time before the 32nd day prior to the Maturity Date, submit
Competitive Bids to make Bid Advances to the Borrower; PROVIDED, HOWEVER, that
(X) at no time shall the Commitment Usage of all Lenders at any time, in the
aggregate, exceed the aggregate Commitments of all Lenders; (y) at no time shall
the aggregate principal amount of all Bid Advances exceed the Bid Advance Limit;
and (Z) at no time may the number of Fixed Rate Periods of then outstanding
Fixed Rate Advances and Absolute Rate Bid Advances exceed eight, in each case
giving effect to any Bid Advances then requested.
2.1.2.1.2. The Lenders may, but shall not be obligated to,
submit Competitive Bids in response to any Competitive Bid Request, and the
Borrower may, but shall not be obligated to, accept any such offers. Subject to
Section 2.1.1.1., the obligation of a Lender to fund its PRO rata share of
Committed Advances shall be unaffected by its making of any Bid Advances,
notwithstanding that the sum of such Lender's Commitment Usage LESS the Lender's
PRO RATA share of all Bid Advances outstanding (regardless of whether such Bid
Advances were made by such Lender) PLUS the aggregate amount of such Lender's
outstanding Bid Advances, may exceed such Lender's Commitment.
2.1.2.1.3. On the last day of each Fixed Rate Period
applicable to any Bid Advances, the Borrower shall pay to the Agent, for the
respective accounts of the Lenders making such Bid Advances, the full amount of
the principal of such Bid Advances.
2.1.2.2. TYPE OF BID ADVANCES AND MINIMUM AMOUNTS. Bid
Advances
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made under this Section 2.1.2 may be Absolute Rate Bid Advances or Fixed Rate
Bid Advances, subject, however, to Section 2.11. Each Borrowing of Fixed Rate
Bid Advances to which the same Fixed Rate Period is applicable shall be in a
minimum amount of $15,000,000 and integral multiples of $1,000,000.
2.1.2.3. BID ADVANCE BORROWINGS.
2.1.2.3.1. When the Borrower desires to effect one or more
Borrowings consisting of one or more Bid Advances, BUT NOT more often than once
in any period of 30 consecutive days, the Borrower shall notify the Agent by
telephone (followed promptly by a facsimile of the related Competitive Bid
Request) no later than 8:00 a.m. (California time), (x) in the case of a Fixed
Rate Auction, five Business Days prior to the proposed Funding Date of the
requested Borrowing, or (y) in the case of an Absolute Rate Auction, two
Business Days prior to the proposed Funding Date of the requested Borrowing(s),
TOGETHER WITH payment of any Fees payable to the Agent as provided in the Fee
Letter, specifying (together with the other information required to be provided
pursuant to the Competitive Bid Request):
(a) the Funding Date of such Borrowing(s), which shall be a
Business Day;
(b) the aggregate amount of such Borrowing(s), which shall be
in an amount (subject to the limitations set forth in other provisions of
the Loan Documents) equal to $15,000,000 or an integral multiple of
$1,000,000 in excess thereof;
(c) whether the requested Borrowing(s) is/are to be made as
either (1) one or more Fixed Rate Bid Advances or (2) one or more Absolute
Rate Bid Advances; and
(d) the duration of the requested Fixed Rate Period (subject to
the limitation that Borrower may request no more than three Fixed Rate
Periods in any single Competitive Bid Request).
Borrower's right to request Competitive Bids for Bid Advances, and each Lender's
obligation to fund any Bid Advance pursuant to any Competitive Bid accepted by
Borrower, and all Bid Advances made from time to time, shall be subject in all
respects to the provisions of Sections 2.11, 2.12 and 2.13.
2.1.2.3.2. Upon receipt of a Competitive Bid Request, the
Agent shall promptly send a copy thereof to each of the Lenders by facsimile,
attaching thereto notice of the date and time (as specified in Section
2.1.2.3.3.) by which responses must be received in order to be considered by the
Borrower. The Competitive Bid Request shall not constitute an offer by the
Borrower, but merely an invitation to the Lenders to submit Competitive Bids
with respect to the requested Borrowing(s).
2.1.2.3.3.
(a) Each Lender may, in its discretion, submit a Competitive Bid
containing
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an offer or offers to make Bid Advances in response to any
Competitive Bid Request. Each Competitive Bid must comply with the
provisions of this Section 2.1.2.3 and must be submitted to the Agent (or,
in the case of a Competitive Bid being submitted by the Agent in its
capacity as a Lender, to the Borrower), by facsimile, no later than 7:00
a.m. (or, in the case of a Competitive Bid by the Agent, in its capacity
as Lender, 6:30 a.m.), California time, (1) in the case of a Fixed Rate
Auction, three Business Days prior to the Funding Date of the proposed
Borrowing(s), or (2) in the case of an Absolute Rate Auction, on the
Funding Date. Each Competitive Bid so submitted (subject only to the
provisions of Sections 2.1.2.1.1, 2.11, 2.12, 2.13 and 4.2 and to the
satisfaction of all other conditions precedent to the requested Bid
Advance(s)) shall be irrevocable, unless the Borrower otherwise agrees in
writing.
(b) Each Competitive Bid shall identify and be signed on behalf of
the submitting Lender, shall specify the date of the proposed Borrowing(s)
specified in the Competitive Bid Request in the form attached hereto as
EXHIBIT B-3 to which the submitting Lender is responding and shall
specify:
(i) the principal amount of each Bid Advance for which a
Competitive Bid is being made (which shall not be limited by the
submitting Lender's Commitment, but which shall be in an amount, no
greater than the amount of the requested Borrowing, equal to
$5,000,000 or an integral multiple of $1,000,000 in excess
thereof); and
(ii)(1) in the case of a Fixed Rate Auction, the LIBO
Bid Margin offered by the submitting Lender, or (2) in the case of
an Absolute Rate Auction, the Absolute Rate offered by the
submitting Lender.
A Competitive Bid may include up to three separate offers by the
submitting Lender with respect to each Fixed Rate Period specified in the
Competitive Bid Request to which it responds. Any Competitive Bid that (X)
does not include all the information required by this Section 2.1.2.3.3,
(Y) contains language that qualifies or conditions the submitting Lender's
offer to make the Bid Advance(s) described therein or to otherwise make
such an offer revocable or proposes terms other than (or in addition to)
the terms proposed in the relevant Competitive Bid Request OTHER THAN by
setting an aggregate limit on the principal amount of Bid Advances for
which offers being made by the submitting Lender maybe accepted, or (Z) is
received by the Agent (or the Borrower, as applicable) after the time set
forth in this Section 2.1.2.3.3 (unless amended to bring it into
compliance with respect to any noncompliance described in clause (X) or
(Y), in either case prior to the time set forth in this Section 2.1.2.3.3)
shall be disregarded.
2.1.2.3.4. Promptly upon receipt, but not later than 8:00
a.m. (California time) on the date by which Competitive Bids are required to
have been submitted with respect to a Competitive Bid Request, the Agent shall
notify the Borrower of (i)(A) the terms of each Competitive Bid (other than one
that is to be disregarded as described above) received in
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response to the Competitive Bid Request, and (B) the identity of the Lender
submitting such Competitive Bid, and (ii)(A) the aggregate principal amount of
Bid Advances for which Competitive Bids have been received for each Fixed Rate
Period requested in the Competitive Bid Request, and (B) the respective
principal amounts and LIBO Bid Margins or Absolute Rates, as the case may be, so
offered.
2.1.2.3.5. No later than 8:30 a.m. (California time) on the
date by which Competitive Bids are required to have been submitted with respect
to a Competitive Bid Request, the Borrower shall notify the Agent, by means of a
notice reasonably acceptable to the Agent in form, of its acceptance or
rejection of the offers notified to it as provided in Section 2.1.2.3.4. The
Borrower shall have no obligation to accept any such offer, and may choose to
reject all of them. If the Borrower has failed to timely notify the Agent of its
acceptance or rejection of any one or more offers by the time specified in this
Section 2.1.2.3.5., the Borrower shall be deemed to have rejected such offer(s).
The Borrower may accept any Competitive Bid (other than one that is to be
disregarded as provided above) in whole or in part, PROVIDED THAT:
(a) the aggregate principal amount of the Competitive Bids so
accepted may not exceed the aggregate amount of the Borrowing(s) requested
in the relevant Competitive Bid Request;
(b)(i) subject to the provisions set forth below with respect to
multiple offers at the same LIBO Bid Margin or Absolute Rate, the
principal amount of each accepted Competitive Bid must be in an amount
equal to $5,000,000 or an integral multiple of $1,000,000 in excess
thereof and (ii) Competitive Bids must be accepted with respect to an
aggregate principal amount of at least $15,000,000; and
(c) with respect to each Fixed Rate Period for which Competitive
Bids were requested, the Borrower may accept offers solely on the basis of
ascending LIBO Bid Margins or Absolute Rates, as the case may be (provided
that the Borrower may, to the extent necessary to comply with the
preceding subparagraph (b) accept only part of an offer at a particular
LIBO Bid Margin or Absolute Rate and accept all or part of one or more
offers at a higher Fixed Rate Bid Margin or Absolute Rate).
If the Borrower chooses to accept one or more offers, Borrower shall
deliver a notice to the Agent by not later than 8:30 a.m. (California
time), in such form as Agent may from time to time reasonably request),
specifying the aggregate principal amount of offers with respect to each
requested Fixed Rate Period that it chooses to accept. If two or more
Lenders offer the same LIBO Bid Margin or Absolute Rate for an aggregate
principal amount greater than the amount for which such offers were
requested (or greater than the remaining portion of such offers that has
not been allocated to offers at lower Fixed Rate Bid Margins or Absolute
Rates) with respect to any requested Fixed Rate Period, the Borrower shall
allocate the principal amount of the affected Bid Advances among such
Lenders as nearly as possible (in such multiples, not less than
$1,000,000, as the Borrower may deem appropriate) in proportion to the
aggregate principal amounts to
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which their respective offers related. The Borrower's allocation, in the
absence of manifest error, shall be conclusive.
2.1.2.3.6. Promptly upon receipt of the notice from the
Borrower pursuant to Section 2.1.2.3.5, the Agent shall promptly notify each
Lender having submitted a Competitive Bid whether its offer has been accepted
and, if its offer has been accepted, of the amount of the Bid Advance(s) to be
made by it on the date of the relevant Borrowing(s). The date that is the second
Business Day prior to the Funding Date of the Borrowing set forth in the
applicable Competitive Bid Request shall be the "FIXED RATE COMMENCEMENT DATE"
for the Fixed Rate Period.
2.1.2.3.7. Promptly (but no later than one Business Day)
following each Borrowing of one or more Bid Advances, the Agent shall notify
each Lender (whether or not such Lender submitted a Competitive Bid with respect
to such Borrowing) of the ranges of Competitive Bids submitted and the highest
and lowest Competitive Bids accepted for each Fixed Rate Period requested by the
Borrower and of the aggregate amount of the Bid Advances made pursuant to such
Borrowing.
2.1.2.3.8. Upon receipt of a Competitive Bid Request in
proper form requesting Competitive Bids to make a Bid Advance that is a Fixed
Rate Advance under Section 2.1.2.3.1 above, the Agent shall determine the Fixed
Rate applicable to each of the Fixed Rate Periods specified in the Competitive
Bid Request, and shall, two Business Days prior to the beginning of such Fixed
Rate Period, send a Fixed Rate Notice specifying such rate (or rates, as the
case may be) to the Borrower and the Lenders; PROVIDED, HOWEVER, that failure to
give such notice to any Person shall not affect the validity of such rate.
2.1.2.3.9. Not later than 9:00 a.m. (California time) on the
date specified in such notice as the Funding Date, each Lender that submitted a
Competitive Bid that was accepted by the Borrower, subject to the terms and
conditions hereof, shall make its Bid Advance available, in immediately
available funds, to the Agent at the Agent's Account.
2.1.2.4. FUNDING OF BID ADVANCES. Subject to and upon satisfaction
of the applicable conditions set forth in Article 4. as determined by the Agent,
the Agent shall make the proceeds of the requested Bid Advances available to the
Borrower in Dollars in immediately available funds in the Borrower Account. In
addition, if the Borrower Account is maintained with a financial institution
other than the Agent, all borrowings hereunder shall be subject to the terms and
conditions of the Funds Transfer Agreement.
2.1.3. RESPONSIBLE OFFICERS WITH RESPECT TO ADVANCES.
2.1.3.1. The Borrower shall notify the Agent of the names of its
officers and employees authorized to request and take other actions with respect
to Advances on behalf of the Borrower (each a "RESPONSIBLE OFFICER") and shall
provide the Agent with a specimen signature of each such officer or employee.
The Agent shall be entitled to rely conclusively on a Responsible Officer's
authority to request and take other actions (including any Notices of
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Borrowing or telephonic notice in lieu thereof, notices pursuant to Section
2.4.2., acceptance of telephonic quotes of Fixed Rates given by the Lender
pursuant to Section 2.4.2., issuance of Competitive Bid Requests or telephonic
notice in lieu thereof and acceptance of Competitive Bids) with respect to
Advances on behalf of the Borrower until the Agent receives written notice to
the contrary. The Agent shall have no duty to verify the authenticity of the
signature appearing on any Notice of Borrowing, Competitive Bid Request or any
other certificate or notice delivered pursuant to this Agreement.
2.1.3.2. Any Notice of Borrowing (or telephone notice in lieu
thereof) delivered pursuant to Section 2.1.1.3. and any notice delivered
pursuant to Section 2.1.2.3.5. shall be irrevocable and the Borrower shall be
bound to make a Borrowing in accordance therewith. Further, each Notice of
Borrowing and each Competitive Bid Request shall set forth that the Agent's Loan
Number is 3959ZL and the Agent's Accounting Unit Number is 2924.
SECTION 2.2. LETTERS OF CREDIT.
2.2.1. IN GENERAL. Upon the terms and subject to the conditions
set forth in this Agreement, at any time from and after the Closing Date until
the day that is thirty (30) days prior to the Maturity Date, the Agent Bank
shall issue for the account of the Borrower one or more Letters of Credit,
PROVIDED that (a) the aggregate Stated Amount of all outstanding Letters of
Credit shall not exceed $15,000,000, (b) the Stated Amount of the proposed
Letter of Credit, when added to other Commitment Usage of all Lenders at such
time, in the aggregate, shall not exceed the aggregate Commitments of all
Lenders, and (c) in no event shall Letters of Credit be issued for the benefit
of any of the Lenders. Letters of Credit shall have expiry dates not later than
24 months from the date of issuance and in any event not later than 10 Business
Days prior to the Maturity Date. No Letter of Credit shall contain an automatic
renewal or extension clause. The provisions of this Section 2.2. and Section
4.2. shall apply to any supplement, amendment, extension, renewal or increase of
a Letter of Credit as if it were a new Letter of Credit.
2.2.2. EXISTING LETTER OF CREDIT.
The Existing Letter of Credit shall be treated as having been
issued pursuant to this Section 2.2.
2.2.3. ISSUANCES OF LETTERS OF CREDIT. When the Borrower desires
the issuance of a Letter of Credit, the Borrower shall deliver to the Agent Bank
at least five (5) Business Days before the Funding Date, a Letter of Credit
Agreement and such other documents and materials as may be required by the Agent
Bank, each in form and substance satisfactory to the Agent Bank. The Agent Bank
shall, if it approves of the contents of the Letter of Credit Agreement and such
other documents and materials, and subject to the terms and conditions of this
Agreement, issue the Letter of Credit on or before 5:00 p.m. (California time)
on or before the day that is five (5) Business Days following the receipt of all
documents required under this Section 2.2.3. In the event of a conflict between
the terms of any Letter of Credit Agreement and this Agreement, the terms of
this Agreement shall govern. Upon issuance of a Letter of Credit, the Agent
shall promptly notify each Lender thereof and of such Lender's PRO RATA share of
such
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Letter of Credit.
2.2.4. PARTICIPATIONS IN LETTERS OF CREDIT. Immediately upon any
Person (other than the Agent Bank) becoming a Lender under this Agreement, such
Lender shall be deemed to have irrevocably purchased from the Agent Bank a
participation in the Existing Letter of Credit, any drawing thereunder in an
amount equal to such Lender's PRO RATA share of the aggregate Stated Amount of
the Existing Letter of Credit and such Lender's PRO RATA share of any unearned
Letter of Credit Fees paid by the Borrower to the Agent Bank in respect of the
Existing Letter of Credit. Immediately upon the issuance of a Letter of Credit
(other than the Existing Letter of Credit), each Lender (other than the Agent
Bank) shall be deemed to have irrevocably purchased from the Agent Bank a
participation in such Letter of Credit and any drawing thereunder in an amount
equal to such Lender's PRO RATA share of the Stated Amount of such Letter of
Credit. An amount equal to the Letter of Credit Liability for each Letter of
Credit shall be reserved under the Commitments and shall not be available for
borrowing for any purpose other than reimbursement of amounts drawn under the
Letters of Credit pursuant to the terms of this Section 2.2.
2.2.5. DRAWINGS, ETC. Notwithstanding any provisions to the
contrary in any Letter of Credit Agreement:
2.2.5.1. In case of a drawing under any Letter of Credit,
the amounts so drawn shall, from the date of payment thereof by the Agent Bank,
be deemed to be an Advance by the Agent Bank, as a Lender, and, to the extent
reimbursed pursuant to Section 2.2.5.2., Advances by the other Lenders, for all
purposes hereunder.
2.2.5.2. Promptly after payment by the Agent Bank of any
amount drawn under any Letter of Credit, the Agent shall notify each Lender of
the amount of such drawing and of such Lender's respective participation
therein. Each Lender shall make available to the Agent Bank an amount equal to
its respective participation in immediately available funds, at the office of
such Agent Bank specified in such notice, not later than the Business Day after
the date on which the Agent gives such notice. Each Lender's obligations under
this Section 2.2.5.2. (a) shall not be subject to any set-off, counterclaim or
defense to payment that the Lender may have against any Borrower Party or
against the Agent Bank and (b) shall be absolute, unconditional and irrevocable,
and as a primary obligor, not as a surety, notwithstanding any circumstance or
event whatsoever, including (i) the occurrence of an Event of Default or
Default, (ii) the failure of any other Lender to fund its participation as
required hereby, (iii) the financial condition of any Borrower Party or Lender
Party or any set-off, counterclaim or defense to payment that the Borrower may
have or (iv) the termination or cancellation of the Commitment of such Lender.
If any Lender fails to make available to the Agent Bank the amount of such
Lender's participation in the Letter of Credit as provided in this Section
2.2.5.2., (A) such amount shall bear interest at the Federal Funds Rate (or,
commencing with the third day, the Base Rate) from the day on which the Agent's
notice referred to above is given until paid and (B) upon demand by the Agent
Bank, the Borrower shall make payment to the Agent Bank of such amount, together
with interest accrued thereon.
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SECTION 2.3. USE OF PROCEEDS. The proceeds of the Advances shall be used
by the Borrower only for pre-development and development costs, acquisition
costs, capital improvements, working capital, Investments, repayment of Debt,
scheduled amortization payments of Debt and general corporate purposes, in each
case to the extent otherwise permissible hereunder. No part of the proceeds of
the Advances or Letters of Credit shall be used directly or indirectly (a) to
purchase Capital Stock of any Lender Party or any of their respective
Affiliates, or (b) for the purpose, whether immediate, incidental or ultimate,
of purchasing or carrying any Margin Stock or maintaining or extending credit to
others for such purpose or for any other purpose that otherwise violates the
Margin Regulations.
SECTION 2.4. INTEREST; CONVERSION/CONTINUATION.
2.4.1. EFFECTIVE RATE.
2.4.1.1. The unpaid principal amount of all Advances (or
portions thereof) shall bear interest at the Effective Rate. The "EFFECTIVE
RATE" upon which interest shall be calculated for the Advances shall be one or
more of the following:
2.4.1.1.1. Provided no Default or Event of Default
then exists:
(i) for those portions of the principal balance of
Committed Advances that are not part of any Fixed Rate Portions, the
Effective Rate shall be the Base Rate;
(ii) for those portions of the principal balance of
Committed Advances that are part of Fixed Rate Portions, the Effective
Rate for the Fixed Rate Period thereof shall be the Fixed Rate selected by
the Borrower and set in accordance with the provisions hereof;
(iii) for those Bid Advances that are Absolute Rate
Bid Advances, the Effective Rate for the Fixed Rate Period thereof shall
be the Absolute Rate quoted by the Lender making such Bid Advance pursuant
to Section 2.1.2.3.3 and accepted by the Borrower pursuant to Section
2.1.2.3.5; and
(iv) for those Bid Advances that are Fixed Rate Bid
Advances, the Effective Rate for the Fixed Rate Period thereof shall be
the Fixed Rate quoted by the Lender making such Bid Advance pursuant to
Section 2.1.2.3.3 and accepted by the Borrower pursuant to Section
2.1.2.3.5.
2.4.1.2. During such time as a Default or Event of Default
exists (whether or not the Obligations have then become due and payable by
acceleration) and from and after the Maturity Date, the interest rate applicable
to the then outstanding principal balance of all Advances shall be the rate set
forth in Section 2.4.1.1.1. or, at the option of the Lenders holding 66-2/3% of
the outstanding Advances, the Post-Default Rate.
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2.4.2. SELECTION OF FIXED RATE FOR COMMITTED Advances. Provided no
Default or Event of Default then exists, the Borrower, at its option and upon
satisfaction of the conditions set forth herein, may request a Fixed Rate as the
Effective Rate for calculating interest on any Committed Advance being requested
pursuant to Section 2.1. or the portion of the unpaid principal balance of
outstanding Committed Advances, in each case for the period selected in
accordance with and subject to the following procedures and conditions:
2.4.2.1. In the case of a request of a Fixed Rate with
respect to outstanding Committed Advances, three Business Days (or, if the Agent
Bank is the sole Lender hereunder at such time, one Business Day) before
requesting a Fixed Rate, the Borrower shall give the Agent advance telephonic
notice that it will request a rate quotation for a portion of the principal
balance of the Advances and for a period of time that conforms to a Fixed Rate
Portion and Fixed Rate Period and the other provisions hereof. The Agent will
promptly notify the Lenders of such request. In the case of a new Advance, the
Notice of Borrowing shall set forth the requested period of time, which shall
conform to a Fixed Rate Portion and Fixed Rate Period and the other provisions
hereof.
2.4.2.2. In the case of a request of a Fixed Rate with
respect to outstanding Committed Advances, at approximately 9:00 a.m.
(California time) on the Business Day next following such advance notice, the
Borrower shall telephonically request the Agent to quote telephonically an
Applicable LIBO Rate as a Fixed Rate for the Fixed Rate Portion and Fixed Rate
Period selected by the Borrower. If upon the expiration of any Fixed Rate Period
with respect to any Fixed Rate Portion, the Borrower fails to select, or the
Agent is unable to provide, a Fixed Rate with respect to such Fixed Rate Portion
or any part thereof, such Fixed Rate Portion or part shall automatically convert
into a Base Rate Portion, and the Agent shall promptly notify the Lenders of
such fact. The Borrower shall not be released from its obligation to pay
interest at the Effective Rate and the Lender Parties shall incur no liability
to the Borrower if the Borrower is unable to obtain, or the Agent is unable to
provide, a telephonic quote on any Business Day.
2.4.2.3. In the case of a new Committed Advance that is a
Fixed Rate Advance, at approximately 9:00 a.m. (California time) on the Business
Day before the Funding Date (or, if the Agent Bank is the sole Lender hereunder
at such time, on the Funding Date) requested in the Notice of Borrowing, the
Borrower shall telephonically request the Agent to quote telephonically an
Applicable LIBO Rate as a Fixed Rate for the Fixed Rate Portion and Fixed Rate
Period selected by the Borrower in the related Notice of Borrowing. The Lender
Parties shall incur no liability to the Borrower if the Borrower is unable to
obtain, or the Agent is unable to provide, a telephonic quote on any Business
Day. In any such case, the Borrower shall be deemed to have withdrawn its Notice
of Borrowing without any further action being required by the Agent or the
Borrower.
2.4.2.4. If the Borrower accepts the Agent's telephonic
quote of the Fixed Rate requested with respect to any Committed Advance by
approximately 9:05 a.m. (California time) on the day of the Agent's quote, such
Fixed Rate shall be the Effective Rate for the Fixed
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Rate Portion and Fixed Rate Period selected. The date that is two Business Days
after the day on which (or, if the Agent Bank is then the sole Lender hereunder,
the day on which) the quoted Fixed Rate is telephonically accepted by the
Borrower shall be the "FIXED RATE COMMENCEMENT DATE" for that Fixed Rate Period.
2.4.2.5. The Agent is authorized to rely upon the telephonic
request by any Responsible Officer and acceptance of the Agent's telephonic
quote by any Person who purports to be a Responsible Officer. The Agent shall
incur no liability to the Borrower in acting upon any telephonic notice or
acceptance of any telephonic quote that the Agent believes to have been given or
made by a Person authorized to act on behalf of the Borrower or for otherwise
acting in good faith under this Section 2.4.2.
2.4.2.6. The Borrower's acceptance of a Fixed Rate shall be
confirmed by a written Fixed Rate Notice, which the Agent shall promptly deliver
to the Borrower and the Lenders not less than two days prior to the Fixed Rate
Commencement Date. The Agent's failure to deliver the Fixed Rate Notice shall
not release the Lenders from funding any Committed Advance requested pursuant to
a Notice of Borrowing, or the Borrower from its obligation to pay interest at
the Effective Rate pursuant to the terms hereof.
2.4.2.7. The Borrower shall not have the right to request a
Committed Advance in the form of a Fixed Rate Advance or request or accept a
quote of a Fixed Rate applicable to Fixed Rate Advances if more than five Fixed
Rate Portions are then subject to a Fixed Rate or if more than eight different
Fixed Rate Periods are then applicable to Fixed Rate Advances (including any
Fixed Rate Bid Advances and Absolute Rate Bid Advances).
2.4.2.8. All Committed Advances made or deemed made pursuant
to Section 2.2.5.1. shall initially be Base Rate Advances.
2.4.3. PAYMENT OF INTEREST. Interest accrued on the Base Rate
Portion and each Fixed Rate Advance shall be due and payable in arrears (a) on
the first Business Day of each month, commencing with the first month following
the Closing Date and (b) on the Maturity Date.
2.4.4. COMPUTATIONS. Interest on the Advances and other amounts
payable hereunder or the other Loan Documents shall be computed on the basis of
a 360-day year and the actual number of days elapsed. Any change in the interest
rate on any Advance or other amount resulting from a change in the rate
applicable thereto (or any component thereof) pursuant to the terms hereof shall
become effective as of the opening of business on the Business Day on which such
change in the applicable rate (or component) shall become effective. Each
determination of an interest rate by the Agent pursuant to any provision of this
Agreement shall be conclusive and binding on the Borrower for all purposes, in
the absence of manifest error.
2.4.5. MAXIMUM LAWFUL RATE OF INTEREST. The rate of interest
payable on any Advances or other amount shall in no event exceed the maximum
rate permissible under Applicable Law. If the rate of interest payable on any
Advances or other amount is ever reduced
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as a result of this Section and at any time thereafter the maximum rate
permitted by Applicable Law shall exceed the rate of interest provided for in
this Agreement, then the rate provided for in this Agreement shall be increased
to the maximum rate provided by Applicable Law for such period as is required so
that the total amount of interest received by the Lenders is that which would
have been received by the Lenders but for the operation of the first sentence of
this Section.
SECTION 2.5. NOTE, ETC.
2.5.1. ADVANCES EVIDENCED BY NOTE. The Committed Advances made by
each Lender shall be evidenced by its own single Revolving Note. The Bid
Advances made by each Lender shall be evidenced by its own single Bid Advance
Note. Each Note shall be dated the Closing Date and stated to mature in
accordance with the provisions of this Agreement applicable to the relevant
Advances.
2.5.2. NOTATION OF AMOUNTS AND MATURITIES, ETC. Each Lender is
hereby irrevocably authorized to record on the schedule attached to its Note (or
a continuation thereof) the information contemplated by such schedule. The
failure to record, or any error in recording, any such information shall not,
however, affect the obligations of the Borrower hereunder or under any Note to
repay the principal amount of the Advances evidenced thereby, together with all
interest accrued thereon. All such notations shall constitute conclusive
evidence of the accuracy of the information so recorded, in the absence of
manifest error.
SECTION 2.6. FEES.
2.6.1. On the Closing Date and from time to time thereafter as
specified in the Fee Letter, the Borrower shall pay to the Agent the Fees
specified in the Fee Letter. All Fees shall be fully earned when payable
hereunder and under the Fee Letter and shall be non-refundable.
2.6.2. The Borrower shall pay to the Agent, for the account of the
Lenders, a standby letter of credit fee (the "LETTER OF CREDIT FEE") for each
Letter of Credit issued (which Letter of Credit Fee shall be remitted to the
Lenders net of the Agent's usual and customary operational charges related to
the issuance, amendment or negotiation of any Letters of Credit) equal to one
and one-half percent (1.50%) per annum ($500 minimum per annum) of the Stated
Amount of each Letter of Credit from the date of issuance of such Letter of
Credit until its expiry. The Letter of Credit Fee shall be payable in advance
upon the issuance of any Letter of Credit.
2.6.3. On each of April 1, July 1, October 1 and January 1 prior
to the Maturity Date and on the Maturity Date, the Borrower shall pay in
arrears to the Agent for the PRO RATA benefit of the Lenders a fee (the
"FACILITY FEE") equal to (i) 0.25% per annum of the Commitments of all
Lenders if the ratio of Total Liabilities to Gross Asset Value (expressed as
a percentage) at the end of the Fiscal Quarter with respect to which the
Facility Fee is being determined is less than 60% and (ii) 0.30% per annum of
the Commitments of all Lenders if
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clause (i) does not apply (including if the Compliance Certificate
showing that clause (i) is satisfied is not delivered when required hereby).
2.6.4. If the extension option is exercised by the Borrower in
accordance with Section 2.7.2., then the Borrower shall pay to the Agent for the
PRO RATA benefit of the Lenders, a fee (the "EXTENSION FEE") equal to 0.25% of
the aggregate amount of the Commitments.
SECTION 2.7. TERMINATION, REDUCTION AND EXTENSION OF COMMITMENT.
2.7.1. Each Lender's Commitment shall terminate without further
action on the part of such Lender on the Maturity Date unless the Maturity Date
is extended pursuant to Section 2.7.2. In addition, the Commitment shall
terminate in accordance with Section 8.2.
2.7.2. The Borrower may, by written notice to the Agent and the
Lenders not less than 60 days and not more than 120 days before the Maturity
Date initially in effect, request that the Maturity Date be extended to the date
that is one year following the initial Maturity Date. If the Borrower shall so
request such an extension, the Maturity Date shall be automatically extended to
the date that is one year following the initial Maturity Date; PROVIDED that no
such extension shall be effective unless (a) no Default or Event of Default
shall exist either on the date of the notice requesting such extension or on the
Maturity Date initially in effect , (b) each of the representations and
warranties of the Borrower Parties set forth in the Loan Documents shall be true
and complete on and as of each such date with the same force and effect as if
made on and as of each such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such specific
date) and (c) the Borrower shall have paid the Extension Fee.
2.7.3. The Borrower shall have the right, at any time or from time
to time after the Closing Date, to terminate in whole or permanently reduce in
part, without premium or penalty, the unused Commitments to an amount not less
than the Commitment Usage of all Lenders outstanding at such time, by giving the
Agent not less than three Business Days' prior written notice of such
termination or reduction and the amount of any partial reduction. Any such
termination or partial reduction shall be effective on the date specified in the
Borrower's notice, shall be in a minimum amount of $1,000,000 and an integral
multiple thereof and shall be applied to the reduction, on a proportionate
basis, of each of the Commitments, the maximum Stated Amount of all Letters of
Credit as set forth in Section 2.2.1 and the Bid Advance Limit.
SECTION 2.8. REPAYMENTS AND PREPAYMENTS.
2.8.1. REPAYMENT. The unpaid principal amount of all Advances shall
be paid in full on the Maturity Date.
2.8.2. MANDATORY PREPAYMENT FOR EXCESS ADVANCES. If at any time the
outstanding principal amount of all Advances PLUS the Letter of Credit Liability
exceeds the aggregate amount of the Commitments, the Borrower shall, on the
Business Day on which the Borrower learns or is notified of the excess, make
mandatory prepayments of first, the
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Committed Advances and, second, any Bid Advances as may be necessary so that,
after such repayment, such excess is eliminated.
2.8.3. REINSTATEMENT. To the extent any Lender Party receives
payment of any amount under the Loan Documents, whether by way of payment by the
Borrower, set-off or otherwise, which payment is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, receiver or any other party under any bankruptcy law, other law or
equitable cause, in whole or in part, then, to the extent of such payment
received, the Obligations or part thereof intended to be satisfied thereby shall
be revived and continue in full force and effect as if such payment had not been
received by such Lender Party.
2.8.4. NO PREPAYMENT OF BID ADVANCES. The Borrower shall have no
right to pay all or any portion of any Bid Advance prior to the last day of the
Fixed Rate Period applicable thereto.
SECTION 2.9. MANNER OF PAYMENT.
Except as otherwise expressly provided, the Borrower shall make
each payment hereunder or under the other Loan Documents to the Agent in Dollars
and in immediately available funds, without any deduction whatsoever, including
any deduction for any set-off, recoupment, counterclaim or Taxes, at the Agent's
Office, for the account of the Applicable Lending Offices of the Lenders
entitled to such payment, not later than 11:00 a.m. (California time) on the due
date thereof. Any payments received after 11:00 a.m. (California time) on any
Business Day shall be deemed received on the next succeeding Business Day.
Whenever any payment to be made hereunder shall be due on a day that is not a
Business Day, such payment shall instead be made on the next succeeding Business
DAY. Not later than 5:00 p.m. (California time) on the day such payment is
credited to the Advances outstanding hereunder, the Agent shall deliver to each
Lender, for the account of the Lender's Applicable Lending Office, in Dollars
and in immediately available funds, such Lender's share of the payment so made,
determined pursuant to Section 2.10. Delivery shall be made in accordance with
the written instructions satisfactory to the Agent from time to time given to
the Agent by each Lender.
SECTION 2.10. PRO RATA TREATMENT. Except to the extent otherwise
expressly provided herein,
2.10.1. Committed Advances shall be requested from, and all Letter
of Credit Liability, the Interest Reserve and all Fees payable pursuant to
Sections 2.6.2, 2.6.3 and 2.6.4 shall be allocated to, the Lenders, PRO RATA
according to their respective Commitments.
2.10.2. Each reduction of the Commitments of the Lenders shall be
applied to the respective Commitments of the Lenders PRO RATA according to their
respective Commitments before such reduction.
2.10.3. Subject to Section 2.10.5, each payment or prepayment by
the Borrower of principal of the Committed Advances shall be made for the
account of the Lenders PRO RATA
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according to the respective unpaid principal amount of the Committed Advances
owed to the Lenders, and each payment by the Borrower of interest on the
Committed Advances shall be made for the account of the Lenders PRO RATA
according to the respective accrued but unpaid interest on the Committed
Advances owed to such Lenders.
2.10.4. Subject to Section 2.10.5, each payment by the Borrower of
principal of Bid Advances made as part of the same Borrowing shall be made for
the account of the Lenders holding such Bid Advances PRO RATA according to the
respective unpaid principal amount of such Bid Advances owed to such Lenders,
and each payment by the Borrower of interest on Bid Advances shall be made for
the account of the Lenders holding such Bid Advances PRO RATA according to the
respective accrued but unpaid interest on the Bid Advances owed to such Lenders.
2.10.5. If, pursuant to Section 8.2.2, the Agent shall have
declared the unpaid principal amount of all Advances together with any and all
accrued interest thereon to be due and payable, all amounts received by the
Agent or any of the Lenders (whether received by voluntary payment, by
counterclaim or cross action or by the enforcement of any or all of the
Obligations) which are applicable to the payment of the Obligations, equitable
adjustment will be made so that, in effect, all such amounts will be shared
among the Lenders ratably in accordance with their proportionate share of the
amount to be so applied based on, in each case, the ratio of the aggregate
principal amount of all outstanding Advances (whether Committed Advances or Bid
Advances) owed to each Lender to the aggregate principal amount of all
outstanding Advances.
SECTION 2.11. MANDATORY SUSPENSION AND CONVERSION OF FIXED RATE ADVANCES.
If any of the transactions necessary for the calculation of interest at any
Fixed Rate requested or selected by the Borrower should be or become prohibited
or unavailable to any Lender, or, if in the Agent's good faith judgment, it is
not possible or practical for the Agent to set a Fixed Rate for a Fixed Rate
Portion, Fixed Rate Bid Advance or any Fixed Rate Period as requested or
selected by the Borrower or to continue to have outstanding any Fixed Rate
Portion or Fixed Rate Bid Advance, the Effective Rate for such Fixed Rate
Portion or Fixed Rate Bid Advance shall remain at or automatically revert to the
Base Rate, and (i) in the case of any Committed Advance, such Fixed Rate Advance
then being requested by the Borrower shall be made as a Base Rate Advance, or
(ii) in the case of any Fixed Rate Bid Advance, such Advance shall not be made,
in each case without any action on the part of the Borrower or the Lender
Parties.
SECTION 2.12. INCREASED REGULATORY COSTS.
2.12.1. TAXES, REGULATORY COSTS AND PERCENTAGES. Upon any Lender's
demand, the Borrower shall pay to the Agent, in addition to all other amounts
that may be, or become, due and payable under this Agreement or the other Loan
Documents, any and all Taxes and Regulatory Costs, to the extent they are not
internalized by calculation of a Fixed Rate. Further, at each Lender's option,
the Fixed Rate shall be automatically adjusted by adjusting the Reserve
Percentage, as determined by such Lender in its prudent banking judgment, from
the date of imposition (or any subsequent date selected by such Lender) of any
such Regulatory Costs. The
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relevant Lender shall give the Borrower notice of any Taxes and Regulatory Costs
as soon as practicable after their occurrence, but the Borrower shall be liable
for any Taxes and Regulatory Costs regardless of whether or when notice is so
given. In addition, if, on or after the date hereof, any Regulatory Change (a)
shall subject any Lender Party (or its Applicable Lending Office) to any Taxes
with respect to Letters of Credit or its obligations under or with respect
thereto, or changes the basis of taxation of payments to any Lender Party of
reimbursement obligations or related Fees or (b) shall impose, modify or deem
applicable any reserve, special deposit, compulsory loan, insurance or similar
requirement against, or any fees or charges in respect of, assets held by,
deposits with or other liabilities for the account of, Letters of Credit or
shall impose on any Lender Party (or its Applicable Lending Office) any other
condition affecting any Letter of Credit or any obligation in respect of Letter
of Credit participations, and the effect of the foregoing is (i) to increase the
cost to such Lender Party (or its Applicable Lending Office) of making, issuing,
renewing or maintaining any Letter of Credit or in respect of Letter of Credit
participations or (ii) to reduce the amount of any sum received or receivable by
such Lender Party (or its Applicable Lending Office) hereunder or under any
other Loan Document with respect thereto, then the Borrower shall from time to
time pay to such Lender Party, within 10 days after request by such Lender
Party, such additional amounts as may be specified by such Lender Party as
sufficient to compensate such Lender Party for such increased cost or reduction.
2.12.2. CAPITAL COSTS. If a Regulatory Change after the date hereof
regarding capital adequacy (including the adoption or becoming effective of any
treaty, law, rule, regulation or guideline adopted pursuant to or arising out of
the July 1988 report of the Basle Committee on Banking Regulations and
Supervisory Practices entitled "International Convergence of Capital Measurement
and Capital Standards") has or would have the effect of reducing the rate of
return on the capital of or maintained by any Lender Party or any company
controlling such Lender Party as a consequence of such Lender Party's Advances,
Letters of Credit, participations therein or obligations hereunder and other
commitments of this type to a level below that which such Lender Party or such
company could have achieved but for such Regulatory Change (taking into account
such Lender Party's or company's policies with respect to capital adequacy),
then, subject to Section 2.14., the Borrower shall from time to time pay to such
Lender Party, within 10 days after request by such Lender Party, such additional
amounts as may be specified by such Lender Party as sufficient to compensate
such Lender Party or company for such reduction in return, to the extent such
Lender Party or such company determines such reduction to be attributable to the
existence, issuance or maintenance of such Advances, Letters of Credit,
participations therein or obligations for the account of the Borrower.
SECTION 2.13. FIXED RATE PRICE ADJUSTMENT. The Borrower acknowledges that
prepayment or acceleration of a Fixed Rate Advance or an Absolute Rate Bid
Advance (including pursuant to Sections 2.8.2., 2.11., 2.12., 2.13. and 8.2.)
during a Fixed Rate Period will result in the Lender Party holding such Fixed
Rate Advance or Absolute Rate Bid Advance incurring additional costs, expenses
and/or liabilities and that it is extremely difficult and impractical to
ascertain the extent of such costs, expenses and/or liabilities. Therefore, on
the date a Fixed Rate Portion is prepaid or the date all Obligations become due
and payable, by
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acceleration or otherwise (a "PRICE ADJUSTMENT DATE"), the Borrower will pay
each Lender Party (in addition to all other sums then owing to such Lender
Party) an amount (the "FIXED RATE PRICE ADJUSTMENT") equal to (a) (i) in the
case of a Fixed Rate Advance, the then present value, calculated by using as a
discount rate the LIBO Rate quoted on the Price Adjustment Date, of the amount
of interest that would have accrued on the Fixed Rate Portion or Fixed Rate Bid
Advances then outstanding to such Lender Party for the remainder of the Fixed
Rate Period at the Fixed Rate, set on the related Fixed Rate Commencement Date
or applicable to such Fixed Rate Bid Advance LESS (ii) the amount of interest
that would accrue on the same Fixed Rate Portion or Fixed Rate Bid Advance for
the same period if the Fixed Rate were set on the Price Adjustment Date as the
Applicable LIBO Rate in effect on the Price Adjustment Date or (b) in the case
of an Absolute Rate Bid Advance, the sum of such losses and expenses as the
Lender that made such Absolute Rate Bid Advance may reasonably incur by reason
of such prepayment, including, without limitation, any losses or expenses
incurred in obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after such prepayment.
By initialing this provision where indicated below, the Borrower
confirms that each Lender Party's agreement to make the Advances
evidenced by this Agreement at the interest rates and on the other
terms set forth herein and in the other Loan Documents constitutes
adequate and valuable consideration, given individual weight by the
Borrower, for this Agreement.
BORROWER'S INITIALS:
----------------
SECTION 2.14. PURCHASE, SALE AND MATCHING OF FUNDS. The Borrower
understands, agrees and acknowledges the following: (a) no Lender Party has any
obligation to purchase, sell and/or match funds in connection with the use of a
LIBO Rate as a basis for calculating a Fixed Rate or Fixed Rate Price
Adjustment; (b) a LIBO Rate is used merely as a reference in determining a Fixed
Rate and Fixed Rate Price Adjustment; and (c) the Borrower has accepted a LIBO
Rate as a reasonable and fair basis for calculating a Fixed Rate and a Fixed
Rate Price Adjustment. The Borrower further agrees to pay the Fixed Rate Price
Adjustment, Taxes and Regulatory Costs, if any, whether or not any Lender Party
elects to purchase, sell and/or match funds.
ARTICLE 3.
GUARANTY
SECTION 3.1. GUARANTY.
3.1.1. The Guarantors unconditionally jointly and severally
guaranty and promise to pay to the order of the Agent, for the benefit of the
Lender Parties, on demand, in lawful money of the United States of America, any
and all Obligations from time to time owing to the Lender Parties (together with
the related provisions of this Article 3, this "GUARANTY"). All Obligations
shall be conclusively presumed to have been created in reliance on this
Guaranty.
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3.1.2. In addition, the Guarantors jointly and severally promise to
pay to the Lender Parties, any and all costs and expenses, including attorneys'
fees and expenses, that the Lender Parties may incur in connection with (a) the
collection of all sums guarantied hereunder or (b) the exercise or enforcement
of any of the rights, powers or remedies of the Lender Parties under this
Guaranty or Applicable Law. All such amounts and all other amounts payable
hereunder shall be payable on demand, together with interest at a rate equal to
the lesser of (i) the Post Default Rate, or (ii) the maximum rate allowed by
Applicable Law, from and including the due date to and excluding the date of
payment.
3.1.3. All payments under this Guaranty shall be made free and clear
of any and all deductions, withholdings and setoffs, including withholdings on
account of Taxes.
SECTION 3.2. CONTINUING AND IRREVOCABLE GUARANTY. This Guaranty is a
continuing guaranty of the Obligations and may not be revoked and shall not
otherwise terminate unless and until the Obligations have been indefeasibly paid
and performed in full. If, notwithstanding the foregoing, any Guarantor shall
have any right under Applicable Law to terminate this Guaranty prior to
indefeasible payment in full of the Obligations, no such termination shall be
effective until noon the next Business Day after the Lender Parties shall
receive written notice thereof, signed by such Guarantor. Any such termination
shall not affect this Guaranty in relation to (a) any Obligation that was
incurred or arose prior to the effective time of such notice, (b) any Obligation
incurred or arising after such effective time where such Obligation is incurred
or arises either pursuant to commitments existing at such effective time or
incurred for the purpose of protecting or enforcing rights against the Borrower,
any Guarantor or other guarantor of or other Person directly or indirectly
liable on the Obligations or any portion thereof (an "OTHER GUARANTOR"; each of
the Borrower, the Guarantors and the Other Guarantors is referred to herein as
an "OBLIGOR") or any security ("COLLATERAL") given for the Obligations or any
other guaranties of the Obligations or any portion thereof (an "OTHER GUARANTY")
(c) any renewals, extensions, readvances, modifications or rearrangements of any
of the foregoing or (d) the liability of any other Guarantor hereunder.
SECTION 3.3. NATURE OF GUARANTY. The liability of each Guarantor under
this Guaranty is independent of and not in consideration of or contingent upon
the liability of the Borrower or any other Obligor, and a separate action or
actions may be brought and prosecuted against any Guarantor, whether or not any
action is brought or prosecuted against the Borrower or any other Obligor or
whether the Borrower or any other Obligor is joined in any such action or
actions. This Guaranty shall be construed as a continuing, absolute and
unconditional guaranty of payment (and not merely of collection) without regard
to:
3.3.1. the legality, validity or enforceability of this Agreement
(including this Guaranty), the Note or any other Loan Document, any of the
Obligations, any Lien or Collateral or any Other Guaranty;
3.3.2. any defense (other than payment), set-off or counterclaim
that may at any time be available to the Borrower or any other Obligor against,
and any right of setoff at any time
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held by, any Lender Party; or
3.3.3. any other circumstance whatsoever (with or without notice to
or knowledge of each Guarantor or any other Obligor), whether or not similar to
any of the foregoing, that constitutes, or might be construed to constitute, an
equitable or legal discharge of the Borrower or any other Obligor, in bankruptcy
or in any other instance.
Any payment by any Obligor or other circumstance that operates to toll any
statute of limitations applicable to such Obligor shall also operate to toll the
statute of limitations applicable to each Guarantor. When making any demand
hereunder (including by commencement or continuance of any legal proceeding),
any Lender Party may, but shall be under no obligation to, make a similar demand
on all or any of the other Obligors, and any failure by any Lender Party to make
any such demand shall not relieve any Guarantor of its obligations hereunder.
SECTION 3.4. AUTHORIZATION. Each Guarantor authorizes each Lender Party,
without notice to or further assent by each Guarantor, and without affecting
each Guarantor's liability hereunder (regardless of whether any subrogation or
similar right that each Guarantor may have or any other right or remedy of each
Guarantor is extinguished or impaired), from time to time to:
3.4.1. permit the Borrower to increase or create Obligations, or
terminate, release, compromise, subordinate, extend, accelerate or otherwise
change the amount or time, manner or place of payment of, or rescind any demand
for payment or acceleration of, the Obligations or any part thereof, or
otherwise amend the terms and conditions of this Agreement, any other Loan
Document or any provision thereof;
3.4.2. take and hold any Collateral from the Borrower or any other
Person for the Obligations, perfect or refrain from perfecting a Lien on such
Collateral, and exchange, enforce, subordinate, release (whether intentionally
or unintentionally), or take or fail to take any other action in respect of, any
such Collateral or Lien or any part thereof;
3.4.3. exercise in such manner and order as it elects in its sole
discretion, fail to exercise, waive, suspend, terminate or suffer expiration of,
any of the remedies or rights of any Lender Party against the Borrower or any
other Obligor in respect of any Obligations or any Collateral;
3.4.4. release, add or settle with any Obligor in respect of
this Guaranty, any Other Guaranty of the Obligations;
3.4.5. accept partial payments on the Obligations and apply any and
all payments or recoveries from any Obligor or Collateral to such of the
Obligations as any Lender Party may elect in its sole discretion, whether or not
such Obligations are secured or guaranteed;
3.4.6. refund at any time, at any Lender Party's sole discretion,
any payments or
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recoveries received by such Lender Party in respect of any Obligations or
Collateral; and
3.4.7. otherwise deal with the Borrower, any other Obligor and any
Collateral as any Lender Party may elect in its sole discretion.
SECTION 3.5. CERTAIN WAIVERS. Each Guarantor hereby waives:
3.5.1. the right to require any Lender Party to proceed against the
Borrower or any other Obligor, to proceed against or exhaust any Collateral or
to pursue any other remedy in such Lender Party's power whatsoever and the right
to have the property of the Borrower or any other Obligor first applied to the
discharge of the Obligations;
3.5.2. all rights and benefits under Section 2809 of the California
Civil Code and any other Applicable Law purporting to reduce a guarantor's
obligations in proportion to the obligation of the principal or providing that
the obligation of a surety or guarantor must neither be larger nor in other
respects more burdensome than that of the principal;
3.5.3. the benefit of any statute of limitations affecting the
Obligations or Guarantor's liability hereunder and of Section 359.5 of the
California Code of Civil Procedure;
3.5.4. any requirement of marshaling or any other principle of
election of remedies and all rights and defenses arising out of an election of
remedies by any Lender Party, even though that election of remedies, such as
nonjudicial foreclosure with respect to the security for a guaranteed
obligation, has destroyed such Guarantor's rights of subrogation, and
reimbursement against the Borrower by the operation of Section 580d of the
California Code of Civil Procedure or otherwise;
3.5.5. any right to assert against any Lender Party any defense
(legal or equitable), set-off, counterclaim and other right that such Guarantor
may now or any time hereafter have against the Borrower or any other Obligor;
3.5.6. presentment, demand for payment or performance (including
diligence in making demands hereunder), notice of dishonor or nonperformance,
protest, acceptance and notice of acceptance of this Guaranty, and all other
notices of any kind;
3.5.7. all defenses that at any time may be available to such
Guarantor by virtue of any valuation, stay, moratorium or other law now or
hereafter in effect;
3.5.8. any rights, defenses and other benefits such Guarantor may
have by reason of any failure of any Lender Party to comply with Applicable Law
in connection with the disposition of Collateral;
3.5.9. any rights or defenses the Guarantor may have because the
Obligations are secured by real property or an estate for years, including any
rights or defenses that are based upon, directly or indirectly, the application
of Section 580a, 580b, 580d, or 726 of the California
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Code of Civil Procedure to the Obligations; and
3.5.10. without limiting the generality of the foregoing or any
other provision hereof, EACH GUARANTOR HEREBY WAIVES ALL RIGHTS AND DEFENSES
THAT ARE OR MAY BECOME AVAILABLE TO THE GUARANTOR BY REASON OF SECTIONS 2787 TO
2855, INCLUSIVE, AND SECTION 3433 OF THE CALIFORNIA CIVIL CODE.
SECTION 3.6. SUBROGATION; CERTAIN AGREEMENTS.
3.6.1. EACH GUARANTOR WAIVES ANY AND ALL RIGHTS OF SUBROGATION,
INDEMNITY, CONTRIBUTION OR REIMBURSEMENT, AND ANY AND ALL BENEFITS OF AND RIGHTS
TO ENFORCE ANY POWER, RIGHT OR REMEDY THAT ANY LENDER PARTY MAY NOW OR HEREAFTER
HAVE IN RESPECT OF THE OBLIGATIONS AGAINST THE BORROWER OR ANY OTHER OBLIGOR,
ANY AND ALL BENEFITS OF AND RIGHTS TO PARTICIPATE IN ANY COLLATERAL, WHETHER
REAL OR PERSONAL PROPERTY, NOW OR HEREAFTER HELD BY ANY LENDER PARTY, AND ANY
AND ALL OTHER RIGHTS AND CLAIMS (AS DEFINED IN THE BANKRUPTCY CODE) THE
GUARANTOR MAY HAVE AGAINST THE BORROWER OR ANY OTHER OBLIGOR, UNDER APPLICABLE
LAW OR OTHERWISE, AT LAW OR IN EQUITY, BY REASON OF ANY PAYMENT HEREUNDER,
UNLESS AND UNTIL THE OBLIGATIONS SHALL HAVE BEEN PAID IN FULL. Without
limitation, each Guarantor shall exercise no voting rights, shall file no claim,
and shall not participate or appear in any bankruptcy or insolvency case
involving the Borrower with respect to the Obligations unless and until all the
Obligations shall have been paid in full. If, notwithstanding the foregoing, any
amount shall be paid to any Guarantor on account of any such rights at any time,
such amount shall be held in trust for the benefit of the Lender Parties and
shall forthwith be paid to the Lender Parties to be credited and applied in
accordance with the terms of this Agreement and the other Loan Documents upon
the Obligations, whether matured, unmatured, absolute or contingent, in the
discretion of the Agent.
3.6.2. Each Guarantor assumes the responsibility for being and
keeping itself informed of the financial condition of the Borrower and each
other Obligor and of all other circumstances bearing upon the risk of nonpayment
of the Obligations that diligent inquiry would reveal, and agrees that the
Lender Parties shall have no duty to advise any Guarantor of information
regarding such condition or any such circumstances.
SECTION 3.7. BANKRUPTCY NO DISCHARGE.
3.7.1. Without limiting Section 3.3 this Guaranty shall not be
discharged or otherwise affected by any bankruptcy, reorganization or similar
proceeding commenced by or against the Borrower, any Guarantor or any other
Obligor, including (i) any discharge of, or bar or stay against collecting, all
or any part of the Obligations in or as a result of any such proceeding, whether
or not assented to by any Lender Party, (ii) any disallowance of all or any
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portion of any Lender Party's claim for repayment of the Obligations, (iii) any
use of cash or other collateral in any such proceeding, (iv) any agreement or
stipulation as to adequate protection in any such proceeding, (v) any failure by
any Lender Party to file or enforce a claim against the Borrower, any Guarantor
or any other Obligor or its estate in any bankruptcy or reorganization case,
(vi) any amendment, modification, stay or cure of any Lender Party's rights that
may occur in any such proceeding, (vii) any election by any Lender Party under
Section 1111(b)(2) of the Bankruptcy Code, or (viii) any borrowing or grant of a
Lien under Section 364 of the Bankruptcy Code. Each Guarantor understands and
acknowledges that by virtue of this Guaranty, it has specifically assumed any
and all risks of any such proceeding with respect to the Borrower and each other
Obligor.
3.7.2. Notwithstanding anything herein to the contrary, any Event
of Default under Section 8.1.7 and 8.1.8 of this Agreement shall render all
Obligations under this Guaranty, automatically due and payable for purposes of
this Guaranty, without demand on the part of any Lender Party.
3.7.3. Notwithstanding anything to the contrary herein contained,
this Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment, or any part thereof, of any or all of the
Obligations is rescinded, invalidated, declared to be fraudulent or preferential
or otherwise required to be restored or returned by any Lender Party in
connection with any bankruptcy, reorganization or similar proceeding involving
the Borrower, any other Obligor or otherwise or if such Lender Party elects to
return any such payment or proceeds or any part thereof in its sole discretion,
all as though such payment had not been made or such proceeds not been received.
SECTION 3.8. MAXIMUM LIABILITY OF GUARANTOR. If the obligations of each
of the Guarantors hereunder otherwise would be subject to avoidance under
Section 548 of the Bankruptcy Code or any applicable state law relating to
fraudulent conveyances or fraudulent transfers, taking into consideration such
Guarantor's (i) rights of reimbursement and indemnity from the Borrower with
respect to amounts paid by such Guarantor, (ii) rights of subrogation to the
rights of the Lender Parties and (iii) rights of contribution from each other
Obligor, then such obligations hereby are reduced to the largest amount that
would make them not subject to such avoidance. Any Person asserting that such
Guarantor's obligations are so avoidable shall have the burden (including the
burden of production and of persuasion) of proving (a) that, without giving
effect to this Section 3.8, such Guarantor's obligations hereunder would be
avoidable and (b) the extent to which such obligations are reduced by operation
of this Section 3.8.
SECTION 3.9. FINANCIAL BENEFIT. Each Guarantor hereby acknowledges and
warrants it has derived or expects to derive a financial advantage from each
Advance and each other relinquishment of legal rights, made or granted or to be
made or granted by any Lender Party in connection with the Obligations. After
giving effect to this Guaranty, and the transactions contemplated hereby, such
Guarantor is not Insolvent or left with assets or capital that is unreasonably
small in relation to its business or the Obligations. "INSOLVENT" means, with
respect to each Guarantor, that (a) determined on the basis of a "fair
valuation" or their "fair salable
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value" (whichever is the applicable test under Section 548 and other relevant
provisions of the Bankruptcy Code and the relevant state fraudulent conveyance
or transfer laws) the sum of such Guarantor's assets is less than its debts, or
(b) such Guarantor is generally not paying its debts as they become due. The
meaning of the terms "FAIR VALUATION" and "FAIR SALABLE VALUE" and the
calculation of assets and liabilities shall be determined and made in accordance
with the relevant provisions of the Bankruptcy Code and applicable state
fraudulent conveyance or transfer laws.
ARTICLE 4.
CONDITIONS PRECEDENT TO ADVANCES
AND LETTERS OF CREDIT
SECTION 4.1. CONDITIONS PRECEDENT TO CLOSING DATE. The obligations of the
Lenders to make any Advances or of the Agent Bank to issue any Letters of Credit
on any Funding Date shall be subject to the occurrence of the following
conditions precedent:
4.1.1. CLOSING DATE. The Closing Date shall occur on or before
___________, 1998.
4.1.2. CERTAIN DOCUMENTS. The Agent shall have received the
documents listed on SCHEDULE 4.1.2., all of which shall be in form and substance
satisfactory to the Agent.
4.1.3. FEES AND EXPENSES PAID. The Borrower shall have paid all of
the Fees and expenses due and payable on or before the Closing Date, including
the Fees specified in the Fee Letter and all legal fees and disbursements of the
Agent's counsel (including, without limitation, allocated costs of in-house
counsel) for which the Borrower shall have been billed on or prior to such date.
4.1.4. GENERAL. All other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered
or executed or recorded in form and substance satisfactory to the Agent and the
Agent shall have received all such counterpart originals or certified copies
thereof as the Agent may request.
SECTION 4.2. CONDITIONS PRECEDENT TO ADVANCES AND LETTERS OF CREDIT. The
obligation of the Lenders to make any Advances (except pursuant to Section
2.2.5.) or of the Agent Bank to issue any Letters of Credit on any Funding Date
shall be subject to the following conditions precedent:
4.2.1. CLOSING DATE. The conditions precedent set forth in Section
4.1. shall have been satisfied or waived in writing by the Agent before the
Notice of Borrowing (or telephonic notice in lieu thereof) is given or the
Letter of Credit Agreement is delivered.
4.2.2. NOTICE OF BORROWING, LETTER OF CREDIT AGREEMENT, ETC. The
Borrower shall have delivered, in accordance with the applicable provisions of
this Agreement, (a) to the Agent, a Notice of Borrowing (or telephonic notice in
lieu thereof), in the case of a Committed
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Advance (except in the case of any borrowing of a Base Rate Advance pursuant to
a Credit Sweep Program, if the Agent Bank is the sole Lender hereunder), (b) to
the Agent, a Competitive Bid Request and notification of acceptance of a
Competitive Bid submitted in response thereto, in the case of a Bid Advance or
(c) to the Agent Bank, a Letter of Credit Agreement (and such other documents
and instruments as the Agent Bank may require under Section 2.2.3.), in the case
of a Letter of Credit.
4.2.3. REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of the Borrower contained in the Loan Documents shall be true and
correct in all material respects on and as of the Funding Date as though made on
and as of that date (except to the extent that such representations and
warranties expressly were made only as of a specific date).
4.2.4. LETTER OF CREDIT FEES. In the case of any issuance of a
Letter of Credit, the Borrower shall have paid to the Agent Bank, for the
account of the Lenders, the Letter of Credit Fees then due and payable in
respect of such Letter of Credit.
4.2.5. NO DEFAULT. No Default or Event of Default shall exist or
result from the making of the Advance or the issuance of the Letter of Credit.
4.2.6. NO MATERIAL ADVERSE CHANGE. No Material Adverse Change shall
have occurred since the date of the financial statements referred to in Section
5.6.
4.2.7. ORDERS OF GOVERNMENTAL AUTHORITY, ETC. No order, judgment or
decree of, or any request or directive (whether or not having the force of law)
from, any Governmental Authority, or any other Applicable Law, shall purport by
its terms to enjoin, restrain, prohibit or otherwise prevent the Agent Bank from
issuing letters of credit generally or the Letter of Credit or shall impose upon
the Agent Bank or any Lender with respect to that Letter of Credit (or any
participation therein) any restriction, unreimbursed reserve requirement or
unreimbursed cost or expense that was not applicable, in effect or known to the
Agent Bank or such Lender on the Closing Date and that the Agent Bank or such
Lender in good faith deems materially adverse to it.
Each borrowing of an Advance (including any Advance made pursuant to
any Credit Sweep Program or upon any draw under a Letter of Credit) and Letter
of Credit issuance shall constitute a representation and warranty by the
Borrower as of the Funding Date that the conditions contained in Sections 4.2.5.
through 4.2.7. have been satisfied.
SECTION 4.3. ADDITIONAL CONDITIONS PRECEDENT AND PROVISIONS APPLICABLE
TO CERTAIN ACQUISITION ADVANCES.
4.3.1. CERTAIN CONDITIONS. The Borrower may request, and the
Lenders shall be required to make Committed Advances pursuant to Section
2.1.1, for the purpose of acquiring (the "ACQUISITION") a Real Property (a)
that, once acquired, qualifies as an Unencumbered Asset (including the
previous approval by the Required Lenders pursuant to subsection (vii) of the
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definition of "Unencumbered Asset"), and (b) without inclusion of which in the
Unencumbered Pool, the Borrower would not be in compliance with Section 7.4
giving effect to such Advances, if, in addition to the other conditions set
forth in this Agreement (including Section 4.2), all of the following conditions
shall be satisfied as of the Funding Date:
4.3.1.1. The Borrower shall be in compliance with
Section 7.4 giving effect to the Acquisition and the funding of the
Committed Advances;
4.3.1.2. The Borrower shall have previously delivered to the
Agent and the Lenders the information required to be delivered to them under the
definition of "Unencumbered Asset" as to such Real Property, and such Real
Property shall have been approved as eligible for inclusion in the Unencumbered
Pool as contemplated by clause (ii) of such definition;
4.3.1.3. The Borrower shall have delivered to the Agent a
separate Notice of Borrowing with respect to that portion of such Committed
Advances that could not be made in compliance with Section 7.4 without giving
effect to the inclusion of such Real Property in the Unencumbered Pool (such
portion being the "ACQUISITION ADVANCES");
4.3.1.4. The Borrower shall have delivered to the Agent
concurrently with its Notice of Borrowing referred to in Section 4.3.1.3 above,
a certificate in the form attached hereto as Exhibit B-5, duly executed by a
Senior Officer of the Borrower, describing the Real Property to be acquired,
designating such Real Property as an Unencumbered Asset effective upon
consummation of the Acquisition, and setting forth the Unencumbered Asset Value
of such Real Property as if it were an Unencumbered Asset as of the date of such
Notice of Borrowing (the "PRO FORMA UNENCUMBERED ASSET VALUE");
4.3.1.5. All statements set forth in the certificate
referred to in 4.3.1.4 above shall be true and correct as of the date thereof
and the Funding Date;
4.3.1.6. The Borrower shall have provided to the Agent and
the Lenders such information as may be reasonably requested by the Agent and the
Lenders in order to verify the terms, timing and method of payment specified in
the contract between a Borrower Party, as purchaser of the Real Property to be
acquired, and the seller of such property (the "ACQUISITION AGREEMENT"), or to
determine compliance with this Section 4.3.; and
4.3.1.7. No Required Lender shall have notified the Borrower
(and, if the notice is given by any Lender, also the other Lenders and the
Agent) that it is not satisfied in its discretion that the requested Acquisition
Advances are consistent with the terms of the Acquisition Agreement, that such
Acquisition Agreement is BONA FIDE, and that the Real Property will qualify as
an Unencumbered Asset upon the completion of the Acquisition of such property
pursuant to the terms of the Acquisition Agreement.
Each borrowing of an Acquisition Advance shall constitute a
representation and warranty by the Borrower as of the Funding Date that the
conditions contained in this
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Section 4.3.1 have been satisfied.
4.3.2. CERTAIN PROVISIONS APPLICABLE TO ACQUISITION ADVANCES.
4.3.2.1. The amount of the Pro Forma Unencumbered Asset
Value reflected in the certificate referred to in Section 4.3.1.4 with respect
to a Real Property, the Acquisition of which is financed through Acquisition
Advances, shall, notwithstanding that such Real Property is not yet an
Unencumbered Asset, be added to, and treated as part of, the Unencumbered Asset
Value for a period commencing on the related Funding Date and ending no later
than the earlier to occur of (i) seven calendar days thereafter, or (ii) the
date on which the Acquisition is consummated (the "CUT-OFF DATE").
4.3.2.2. The Borrower agrees and covenants that the proceeds
of all Acquisition Advances shall be used only to acquire the relevant Real
Property and that, if the Acquisition of such Real Property is not consummated
by, or such Real Property does not qualify as an Unencumbered Asset on the
Cut-off Date, then the Borrower shall immediately prepay outstanding Advances
under the Credit Agreement in an amount equal to the amount of such Acquisition
Advances.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES
Each Borrower Party represents and warrants to the Lender Parties as
follows:
SECTION 5.1. ORGANIZATION, AUTHORITY AND TAX STATUS OF THE BORROWER;
ENFORCEABILITY, ETC.
5.1.1. ORGANIZATION AND AUTHORITY; TAX STATUS. The Borrower has
been duly formed, is validly existing as a limited partnership in good standing
under the laws of the State of Delaware, and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such qualification
except where the absence of such qualification would not have a Material Adverse
Effect. The Borrower has all requisite power and authority to own or hold under
lease the property it purports to own (including the properties listed on
SCHEDULE 1.1C that are designated as owned by the Borrower) or hold under lease,
to carry on its business as now conducted and as proposed to be conducted, to
execute and deliver the Loan Documents to which it is a party and to perform its
obligations hereunder and thereunder. The Borrower is a partnership for purposes
of federal income taxation and for purposes of the tax laws of any state or
locality in which the Borrower is subject to taxation based on its income.
5.1.2. AUTHORIZATION; BINDING EFFECT. The Borrower has by all
necessary action duly authorized (a) the execution and delivery of the Loan
Documents to which the Borrower is a party and (b) the performance of its
obligations thereunder. Each Loan Document to which the
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Borrower is a party constitutes the legal, valid and binding obligation of
the Borrower, enforceable against it in accordance with its respective terms,
except as enforcement may be limited by equitable principles and by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to creditors' rights generally.
5.1.3. PARTNERSHIP UNITS; GENERAL PARTNER. All of the Partnership
Units of the Borrower are validly issued and non-assessable and owned of record
in the percentage amounts and by the Persons set forth on SCHEDULE 5.1., as
amended from time to time. The REIT owns (i) 26,004,747 Partnership Units of the
Borrower, (ii) 5,185,542 Preferred Partnership Units of the Borrower and (iii)
3,627,131 Series A Partnership Units of the Borrower, free and clear of any
Liens. Such Partnership Units were offered and sold in compliance with all
Applicable Laws (including, without limitation, federal and state securities
laws). There are no outstanding securities convertible into or exchangeable for
Partnership Units of the Borrower, or options, warrants or rights to purchase
any such Partnership Units, or, except as set forth on SCHEDULE 5.1, commitments
of any kind for the issuance of additional Partnership Units or any such
convertible or exchangeable securities or options, warrants or rights to
purchase such Partnership Units. The REIT is the sole general partner of the
Borrower.
SECTION 5.2. ORGANIZATION, AUTHORITY AND REIT STATUS OF THE REIT;
ENFORCEABILITY, ETC.
5.2.1. ORGANIZATION AND AUTHORITY. The REIT is a corporation duly
organized, validly existing and in good standing under the laws of Maryland, and
is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing of
property requires such qualification except where the absence of such
qualification would not have a Material Adverse Effect. The REIT has all
requisite power and authority to own or hold under lease the property it
purports to own or hold under lease, to carry on its business as now conducted
and as proposed to be conducted, to execute and deliver this Agreement and to
perform its obligations hereunder.
5.2.2. AUTHORIZATION; BINDING EFFECT. The REIT has by all necessary
action duly authorized the execution and delivery of this Agreement and the
performance of its obligations hereunder. This Agreement constitutes the legal,
valid and binding obligation of the REIT, enforceable against it in accordance
with its respective terms, except as enforcement may be limited by equitable
principles and by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to creditors' rights generally.
5.2.3. REIT STATUS. The REIT is organized in conformity with the
requirements for qualification as a real estate investment trust under the Code
and its ownership and method of operation enables it to meet the requirements
for taxation as a real estate investment trust under the Code.
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SECTION 5.3. ORGANIZATION, AUTHORITY AND TAX STATUS OF GUARANTORS;
ENFORCEABILITY, ETC.
5.3.1. ORGANIZATION AND AUTHORITY. Each of the Guarantors has been
duly formed, is validly existing as a general partnership or a limited
partnership, as the case may be, in good standing under the laws of the State of
California, and is duly qualified to transact business and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification except where the absence of such
qualification would not have a Material Adverse Effect. Each of the Guarantors
has all requisite power and authority to own or hold under lease the property it
purports to own (including the property listed on SCHEDULE 1.1C that is
designated as owned by such Guarantor) or hold under lease, to carry on its
business as now conducted and as proposed to be conducted, to execute and
deliver the Loan Documents to which it is a party and to perform its obligations
thereunder. Each of the Guarantors is a partnership for purposes of federal
income taxation and for purposes of the tax laws of any state or locality in
which such Guarantor is subject to taxation based on its income.
5.3.2. AUTHORIZATION; BINDING EFFECT. Each of the Guarantors has by
all necessary action duly authorized the execution and delivery of this
Agreement and the performance of its obligations hereunder. This Agreement
constitutes the legal, valid and binding obligation of each Guarantor,
enforceable against it in accordance with its respective terms, except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally.
SECTION 5.4. CONSOLIDATED ENTITIES AND UNCONSOLIDATED JOINT
VENTURES; MANAGEMENT COMPANIES.
5.4.1. OWNERSHIP. SCHEDULE 5.4. (as amended from time to time)
contains complete and correct lists of the Consolidated Entities (other than the
Borrower) and the Unconsolidated Joint Ventures, showing, in each case, the
correct name thereof, the type of organization, the jurisdiction of its
organization, and the percentage of Capital Stock outstanding and owned by the
Borrower Parties and the Consolidated Entities, as the case may be. All of the
outstanding shares of Capital Stock of each Consolidated Entity or
Unconsolidated Joint Venture shown in SCHEDULE 5.4. as being owned by any
Borrower Party or any Consolidated Entity have been validly issued and are owned
by such Borrower Party or Consolidated Entity free and clear of any Lien (except
as otherwise disclosed on SCHEDULE 5.4.).
5.4.2. ORGANIZATION AND OWNERSHIP. Each Consolidated Entity and
Unconsolidated Joint Venture is a corporation, partnership or other legal entity
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification except where
the absence of such qualification would not have a Material Adverse Effect. Each
such Consolidated Entity and Unconsolidated Joint Venture has all requisite
power and authority to own or hold under lease the property it purports to own
or hold under lease, to carry on its
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business as now conducted and as proposed to be conducted. Each such
Consolidated Entity or Unconsolidated Joint Venture organized as a partnership
is a partnership for purposes of federal income taxation and for purposes of the
tax laws of any state or locality in which the Borrower is subject to taxation
based on its income.
5.4.3. MANAGEMENT COMPANIES. Each of the Management Companies is a
corporation duly organized, validly existing and in good standing under the laws
of jurisdiction of incorporation, and is duly qualified to transact business and
is in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification. Each of the
Management Companies has all requisite power and authority to own or hold under
lease the property it purports to own or hold under lease, to carry on its
business as now conducted and as proposed to be conducted. The Borrower is the
sole owner of record of all of the issued and outstanding shares of preferred
stock of each of the Management Companies. Each of the Management Contracts
constitutes the legal, valid and binding obligations of the signatories that are
party thereto, enforceable against each of them in accordance with its terms.
SECTION 5.5. NO CONFLICT, ETC.
5.5.1. NO CONFLICT. The execution, delivery and performance by each
Borrower Party of each Loan Document to which it is party, and the consummation
of the transactions contemplated thereby, do not and will not (a) violate any
provision of the charter, bylaws or partnership agreement of any Borrower Party,
as the case may be, (b) conflict with, result in a breach of, or constitute (or,
with the giving of notice or lapse of time or both, would constitute) a default
under, or require the approval or consent of any person pursuant to (except as
disclosed in SCHEDULE 5.5., which consents have been obtained and are in full
force and effect), any Contractual Obligation of any Borrower Party, or violate
any provision of Applicable Law binding on any Borrower Party, or (c) result in
the creation or imposition of any Lien upon any material asset of any Borrower
Party.
5.5.2. GOVERNMENTAL APPROVALS. Except for filings and recordings
which are described on SCHEDULE 5.5., which in each case have been made and are
in full force and effect, no Governmental Approval is or will be required in
connection with the execution, delivery and performance of any Borrower Party of
this Agreement or any Loan Document to which it is party or the transactions
contemplated hereby or thereby or to ensure the legality, validity or
enforceability hereof or thereof. Each of the REIT, the Borrower and the other
Consolidated Entities possesses all material Governmental Approvals, in full
force and effect, free from burdensome restrictions, that are necessary for the
ownership, maintenance and operation of its properties and conduct of its
business as now conducted and proposed to be conducted, and is not in violation
thereof.
SECTION 5.6. FINANCIAL INFORMATION.
5.6.1. The consolidated balance sheet of the REIT and the
Consolidated Entities for the Fiscal Years ended December 31, 1995, December 31,
1996, and December 31, 1997, and
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the consolidated statements of income, retained earnings and cash flow of the
REIT and the Consolidated Entities for the Fiscal Year then ended, in each case
certified by the Borrower's independent certified public accountants, copies of
which have been delivered to the Agent, were prepared in accordance with GAAP
consistently applied and fairly present the consolidated financial position of
the REIT and the Consolidated Entities as at the respective dates thereof and
the results of operations and cash flow of the REIT and the Consolidated
Entities for the respective periods then ended. Neither the REIT nor any
Consolidated Entity had on such dates any material Contingent Obligations,
liabilities for Taxes or long-term leases, unusual forward or long-term
commitments or unrealized losses from any unfavorable commitments which are not
reflected in the foregoing statements or in the notes thereto and which are
material to the business, assets, prospects, results of operation or financial
condition of the REIT and the Consolidated Entities taken as a whole.
5.6.2. The unaudited consolidated balance sheet of the REIT as at
March 31, 1998 and related statements of income, retained earnings and cash flow
for the period then ended, approved by the Chief Financial Officer of the REIT,
a copy of which has been delivered to the Agent, were prepared in accordance
with GAAP consistently applied (except to the extent noted therein) and fairly
present the consolidated financial position of the REIT and the Consolidated
Entities as of such date and the results of operations and cash flow for the
period covered thereby, subject to normal year-end audit adjustments. Neither
the REIT nor any Consolidated Entity had on such date any material Contingent
Obligations, liabilities for Taxes or long-term leases, unusual forward or
long-term commitments or unrealized losses from any unfavorable commitments
which are not reflected in the foregoing statements or in the notes thereto and
which are Material.
SECTION 5.7. NO MATERIAL ADVERSE CHANGES. Since December 31, 1997, there
has been no Material Adverse Change that has not been disclosed in any report
filed by the REIT with the SEC prior to date hereof.
SECTION 5.8. LITIGATION. Except as disclosed in SCHEDULE 5.8. hereto,
there are no actions, suits or proceedings pending or, to the best knowledge of
the Borrower Parties, threatened against or affecting the REIT or any
Consolidated Entity or any of its or their respective properties before any
Governmental Authority (a) in which there is a reasonable possibility of an
adverse determination that could have a Material Adverse Effect, or (b) which
draws into question the validity or the enforceability of this Agreement, any
other Loan Document or any transaction contemplated hereby or thereby.
SECTION 5.9. AGREEMENTS; APPLICABLE LAW. Neither the REIT nor any
Consolidated Entity is in violation of any Applicable Law, or in default under
any Contractual Obligations to which it is a party or by which its properties
are bound, except where such violation or default could not, individually or in
the aggregate, have a Material Adverse Effect. Neither the REIT or any
Consolidated Entity is a party to or bound by any unduly burdensome Contractual
Obligation which could have a Material Adverse Effect that has not been
disclosed in any report filed by the REIT with the SEC prior to date hereof.
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SECTION 5.10. GOVERNMENTAL REGULATION. Neither the REIT nor any
Consolidated Entity is (a) an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, or a company
controlled by such a company, or (b) subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act or to any Federal or state, statute or regulation limiting its
ability to incur Debt for money borrowed.
SECTION 5.11. MARGIN REGULATIONS. Neither the REIT nor any Consolidated
Entity is engaged principally, or as one of its important activities, in the
business of extending credit for the purposes of purchasing or carrying Margin
Stock. The execution, delivery and performance of the Loan Documents by the
Borrower Parties will not violate the Margin Regulations. The value of all
Margin Stock held by the Borrower Parties and their Subsidiaries constitutes
less than 25% of the value, as determined in accordance with the Margin
Regulations, of all assets of the Borrower Parties and their Subsidiaries.
SECTION 5.12. EMPLOYEE BENEFIT PLANS.
5.12.1. Each Borrower Party and each of the ERISA Affiliates is in
compliance in all Material respects with all Applicable Laws including any
applicable provisions of ERISA and the Code and the regulations and published
interpretations thereunder with respect to all Plans and Multiemployer Plans.
There have been no Prohibited Transactions with respect to any Plan which could
result in any Material liability of any Borrower Party or any of the ERISA
Affiliates. Neither any Borrower Party nor any of the ERISA Affiliates has
participated in or contributed to any Defined Benefit Plan at any time. Neither
any Borrower Party nor any of the ERISA Affiliates has failed to make any
Material payments required to be made under any agreement relating to a
Multiemployer Plan or any law pertaining thereto. The Borrower Parties and the
ERISA Affiliates have not had asserted and do not expect to have asserted
against them any Material penalty, interest or excise tax under Sections 4971,
4972, 4975, 4976, 4977, 4979, 4980 or 4980B of the Code or Sections 502(c)(1) or
502(i) of ERISA. Each Plan covering employees of the Borrower Parties or any of
the ERISA Affiliates is able to pay benefits thereunder when due. There are no
Material claims pending or overtly threatened, involving any Plan, nor is there
any reasonable basis to anticipate any claims involving any such Plans.
5.12.2. The investment in the Borrower Parties by benefit plan
investors is not significant within the meaning of Department of Labor
Regulation Section 2510.3-101(f).
SECTION 5.13. TITLE TO PROPERTY; LIENS.
5.13.1. Each of the REIT, the Controlled Consolidated Entities and,
to the best knowledge of the Borrower Parties, the other Consolidated Entities
or Unconsolidated Joint Ventures has good and marketable title to, or valid and
subsisting leasehold interests in, all of its Real Property and other property
reflected in its books and records as being owned by it. On and after the
Closing Date, each Real Property from time to time designated by the Borrower as
an Unencumbered Asset meets the conditions set forth in the definition of
"Unencumbered Asset" (other than those set forth in clause (iv) thereof).
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5.13.2. Neither the REIT, any Controlled Consolidated Entity nor, to
the best knowledge of the Borrower Parties, any other Consolidated Entity or
Unconsolidated Joint Venture is in default in the performance or observance of
any of the covenants or conditions contained in any of its Contractual
Obligations, except where such default or defaults, if any, would not have a
Material Adverse Effect.
SECTION 5.14. LICENSES, TRADEMARKS, ETC. The REIT, the Controlled
Consolidated Entities and, to the best knowledge of the Borrower Parties, the
other Consolidated Entities or Unconsolidated Joint Ventures own or hold valid
licenses in all necessary trademarks, copyrights, patents, patent rights and
other similar rights which are Material to the conduct of their respective
businesses as heretofore operated and as proposed to be conducted. Neither the
REIT, any Controlled Consolidated Entity nor, to the best knowledge of the
Borrower Parties, any other Consolidated Entity or Unconsolidated Joint Venture
has been charged or, to the best knowledge of the Borrower Parties, threatened
to be charged with any infringement of, nor has any of them infringed on, any
unexpired trademark, patent, patent registration, copyright, copyright
registration or other proprietary right of any Person except where the effect
thereof individually or in the aggregate would not have a Material Adverse
Effect.
SECTION 5.15. ENVIRONMENTAL CONDITION. Except as set forth on
SCHEDULE 5.15. hereto:
5.15.1. To the best of each Borrower Party's knowledge, all Real
Property owned or used by the REIT or any Consolidated Entity is free from
contamination from any Hazardous Materials except contamination that would not
have a Material Adverse Effect that has not been disclosed in any report filed
by the REIT with the SEC prior to date hereof. To the best of each Borrower
Party's knowledge, no polychlorinated biphenyls (PCBs) (including any
transformers, capacitors, ballasts, or other equipment which contains dielectric
fluid containing PCBs) or asbestos is constructed within, stored, disposed of or
location on such Real Property except for matters that would not have a Material
Adverse Effect or that have not been disclosed in any report filed by the REIT
with the SEC prior to date hereof. Neither the REIT nor any Consolidated Entity
has caused or suffered, nor to the knowledge of any Borrower Party has any other
owner or user of such Real Property caused or suffered any Environmental Damages
that has had or which could have a Material Adverse Effect that has not been
disclosed in any report filed by the REIT with the SEC prior to date hereof.
5.15.2. Neither the REIT nor any Consolidated Entity nor, to the
best knowledge of each Borrower Party, any prior owner or occupant of the Real
Property owned or used by the REIT or any Consolidated Entity has received
notice of any alleged violation of Environmental Requirements, or notice of any
alleged liability for Environmental Damages in connection with the Real
Property, which could reasonably be expected to have a Material Adverse Effect
that has not been disclosed in any report filed by the REIT with the SEC prior
to date hereof. There exists no order, judgment or decree outstanding, nor any
action, suit, proceeding, citation or investigation, pending or threatened,
relating to any alleged liability arising out of the suspected presence of
Hazardous Material, any alleged violation of Environmental Requirements or any
alleged liability for Environmental Damages in connection with the Real Property
or the business
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or operations of the REIT and the Consolidated Entities that has had or which
could have a Material Adverse Effect that has not been disclosed in any report
filed by the REIT with the SEC prior to date hereof nor, to the best of each
Borrower Party's knowledge, does there exist any basis for such action, suit,
proceeding, citation or investigation being instituted or filed.
SECTION 5.16. ABSENCE OF CERTAIN RESTRICTIONS. Neither any Controlled
Consolidated Entity nor, to the best knowledge of the Borrower Parties, any
other Consolidated Entity or Unconsolidated Joint Venture is subject to any
Contractual Obligation which restricts or limits its ability to (a) pay
dividends or make any distributions on its Capital Stock, (b) incur or pay Debt
owed the REIT or any other Consolidated Entity, (c) make any loans or advances
to the Borrower or (d) transfer any of its property to the Borrower; PROVIDED
that the foregoing restrictions in subclauses (b), (c) and (d) shall not apply
to any Bankruptcy Remote Entity to the extent such restrictions are required by
any rating agency as a condition to the rating of the Debt of such Bankruptcy
Remote Entity.
SECTION 5.17. DISCLOSURE. The information in any document, certificate or
written statement furnished to the Lender by or on behalf of the REIT, the
Borrower or any other Consolidated Entity with respect to the business, assets,
prospects, results of operation or financial condition of the REIT, the
Borrower, or any other Consolidated Entity or any Unconsolidated Joint Venture,
including operating statements and rent rolls, for use in connection with the
transactions contemplated by this Agreement has been true and correct or, in the
case of any information relating to any Consolidated Entity that is not a
Controlled Consolidated Entity or to any Unconsolidated Joint Venture, true and
correct to the best knowledge of the Borrower Parties. There is no fact known to
the Borrower Parties (other than matters of a general economic nature) that has
a Material Adverse Effect or could reasonably be expected to have a Material
Adverse Effect, which has not been disclosed herein or in such other documents,
certificates, and statements.
ARTICLE 6.
AFFIRMATIVE COVENANTS OF THE BORROWER PARTIES
So long as any portion of the Commitments shall be in effect and until all
Obligations are paid in full:
SECTION 6.1. FINANCIAL STATEMENTS AND OTHER REPORTS. The Borrower Parties
will deliver to the Agent, with sufficient copies for the Lender Parties:
6.1.1. within 90 days after the end of each Fiscal Year, the
consolidated balance sheet of the REIT and the Consolidated Entities as of the
end of such Fiscal Year and the related consolidated statements of income,
stockholders' equity and cash flow of the REIT and the Consolidated Entities for
such Fiscal Year, setting forth in each case in comparative form the
consolidated or combined figures, as the case may be, for the previous Fiscal
Year, all in reasonable detail and accompanied by a report thereon of Coopers &
Lybrand or other independent certified public accountants of recognized national
standing selected by the
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Borrower and reasonably satisfactory to the Agent, which report shall be
unqualified (except for qualifications that the Required Lenders do not consider
Material in their discretion) and shall state that such consolidated financial
statements fairly present the financial position of the REIT and the
Consolidated Entities as at the date indicated and the results of their
operations and cash flow for the periods indicated in conformity with GAAP
(except as otherwise stated therein) and that the examination by such
accountants in connection with such consolidated financial statements has been
made in accordance with generally accepted auditing standards;
6.1.2. within 45 days after the end of each Fiscal Quarter, a
consolidated balance sheet of the Borrower and the Consolidated Entities as at
the end of such quarter and the related combined statements of income and cash
flow of the REIT and the Consolidated Entities for such quarter and the portion
of the Fiscal Year ended at the end of such quarter, setting forth in each case
in comparative form the consolidated or combined figures, as the case may be,
for the corresponding periods of the prior Fiscal Year, all in reasonable detail
and in conformity with GAAP (except as otherwise stated therein), together with
a representation by the REIT's chief financial officer, as of the date of such
financial statements, that such financial statements have been prepared in
accordance with GAAP (PROVIDED, HOWEVER, that such financial statements may not
include all of the information and footnotes required by GAAP for complete
financial information) and reflect all adjustments that are, in the opinion of
management, necessary for a fair presentation of the financial information
contained therein;
6.1.3. together with each delivery of financial statements pursuant
to clauses (a) and (b) above, a Compliance Certificate duly completed and
setting forth the calculations required to establish whether the Borrower
Parties were in compliance with Sections 7.2.2., 7.3., 7.4.
and 7.5 on the date of such financial statements;
6.1.4. promptly after any Borrower Party becomes aware of the
occurrence of any Default or Event of Default, a certificate of a Senior Officer
of the Borrower Party setting forth the details thereof and the action which the
Borrower Party is taking or proposes to take with respect thereto;
6.1.5. not later than five (5) days after their being filed with the
SEC, copies of all financial statements, reports, notices and proxy statements
sent or made available by the REIT to its security holders, all registration
statements (other than the exhibits thereto) and annual, quarterly or monthly
reports, if any, filed by the REIT with the SEC (other than reports under
Section 16 of the Securities Exchange Act of 1934, as amended) and all press
releases by the REIT or any Consolidated Entity concerning material developments
in the business of the REIT or any Consolidated Entity;
6.1.6. if requested by Agent, not later than ten (10) days after
such request, Tax returns, reports, declarations, statements, information
statements or any other document filed by the REIT with respect to the income
Taxes of the REIT or the qualification of the REIT as a real estate investment
trust under the Code;
6.1.7. promptly after any Borrower Party obtains knowledge thereof,
notice of all
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litigation or proceedings commenced or threatened affecting the REIT or any
Consolidated Entity in which there is a reasonable possibility of an
adverse decision and (a) which involves alleged liability in excess of
$2,500,000 (in the aggregate) which is not covered by insurance, (b) in which
injunctive or similar relief is sought which if obtained could have a Material
Adverse Effect or (c) which questions the validity or enforceability of any Loan
Document;
6.1.8. within 120 days after the end of each Fiscal Year, a forecast
for the next succeeding two Fiscal Years of the consolidated results of
operations and cash flows of the REIT, together with (a) an outline of the major
assumptions upon which the forecast is based and (b) information regarding the
capital expenditures forecast for such period (including leasing commissions,
tenant improvements, renovations and other capital expenditures, all broken down
by appropriate categories), other than capital expenditures attributable to
acquisitions of Real Properties (or to the Real Properties so acquired) that may
occur (but have not yet occurred) during the period covered by the forecast;
6.1.9. for each Unencumbered Asset held in the Unencumbered
Pool:
6.1.9.1. within 90 days after the end of each Fiscal Year, a
property budget with respect to such Unencumbered Asset for the next Fiscal
Year; and
6.1.9.2. within 45 days after the end of each Fiscal Quarter,
operating statements, rent rolls and lease status reports with respect to such
Unencumbered Asset;
6.1.10. for each Retail Property that constitutes
Construction-in-Process the value of which is estimated to be $20,000,000 or
greater:
6.1.10.1. within 45 days after the Commencement of
Construction, a property budget with respect to such Retail Property; and
6.1.10.2. within 45 days after the Commencement of
Construction, a pro forma operating statement respect to such Retail
Property;
6.1.11. promptly after the receipt thereof, a copy of any notice,
summons, citation or written communication concerning any actual, alleged,
suspected or threatened Material violation of Environmental Requirements, or
Material liability of any Borrower Party or any Consolidated Entity for
Environmental Damages in connection with its Real Property or past or present
activities of any Person thereon; and
6.1.12. from time to time such additional information regarding the
financial position or business of the REIT and the Consolidated Entities or
regarding any of the Real Properties as the Agent may reasonably request on
behalf of any Lender.
SECTION 6.2. RECORDS AND INSPECTION. Each Borrower Party shall, and shall
cause each Consolidated Entity to, maintain adequate books, records and accounts
as may be required or necessary to permit the preparation of consolidated
financial statements in accordance with
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sound business practices and GAAP. Each Borrower Party shall, and shall cause
each Consolidated Entity to, permit such persons as any Lender may designate, at
reasonable times and as often as may be reasonably requested, to (a) visit and
inspect any properties of the Borrower Parties and the Consolidated Entities,
(b) inspect and copy their books and records, and (c) discuss with their
officers and employees and their independent accountants, their respective
businesses, assets, liabilities, prospects, results of operation and financial
condition.
SECTION 6.3. CORPORATE EXISTENCE, ETC. Each Borrower Party shall, and
shall cause each Consolidated Entity to, at all times preserve and keep in full
force and effect its partnership, corporate or other legal existence, as the
case may be, and any licenses, permits, rights and franchises material to its
business, PROVIDED, HOWEVER, that the partnership, corporate or other legal
existence of any Consolidated Entity (other than the Borrower) may be terminated
if, in the good faith judgment of the REIT, such termination is in the best
interest of the Borrower and is not disadvantageous in any material respect to
any Lender Party.
SECTION 6.4. PAYMENT OF TAXES AND CHARGES. The Borrower Parties shall, and
shall cause each Consolidated Entity to, file all tax returns required to be
filed in any jurisdiction and, if applicable, pay and discharge all Taxes
imposed upon it or any of its properties or in respect of any of its franchises,
business, income or property before any material penalty shall be incurred with
respect to such Taxes, PROVIDED, HOWEVER, that, unless and until foreclosure,
distraint, levy, sale or similar proceedings shall have commenced, the Borrower
Parties and the Consolidated Entities need not pay or discharge any such Tax so
long as the validity or amount thereof is contested in good faith and by
appropriate proceedings and so long as any reserves or other appropriate
provisions as may be required by GAAP shall have been made therefor.
SECTION 6.5. MAINTENANCE OF PROPERTIES. Each Borrower Party shall, and
shall cause each Consolidated Entity to, maintain or cause to be maintained in
good repair, working order and condition (ordinary wear and tear excepted), all
Real Properties and all other Material properties useful or necessary to its
business, and from time to time the Borrower Parties will make or cause to be
made all appropriate repairs, renewals and replacements thereto.
SECTION 6.6. MAINTENANCE OF INSURANCE. Each Borrower Party shall, and
shall cause each Consolidated Entity to, maintain with financially sound and
reputable insurance companies, insurance in at least such amounts, of such
character and against at least such risks as are usually insured against in the
same general area by companies of established repute engaged in the same or a
similar business.
SECTION 6.7. CONDUCT OF BUSINESS. No Borrower Party or Consolidated Entity
shall engage in any business other than the business of owning and operating
Retail Properties or the assets and other properties set forth in Section 7.2.2.
or any businesses incident thereto. Each Borrower Party shall, and shall cause
each Consolidated Entity to, conduct its business in compliance in all material
respects with Applicable Law and all material Contractual Obligations.
SECTION 6.8. EXCHANGE LISTING; TAX STATUS OF BORROWER PARTIES. The REIT
will do or
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cause to be done all things necessary to maintain the listing of its Capital
Stock on the New York Stock Exchange, the American Stock Exchange or the Nasdaq
National Market System and continue to qualify as a real estate investment trust
under the Code, and the Borrower will do or cause to be done all things
necessary to cause it to be treated as a partnership for purposes of federal
income taxation and the tax laws of any state or locality in which the Borrower
is subject to taxation based on its income.
SECTION 6.9. SUBORDINATION.
6.9.1. The REIT, the Borrower and each Guarantor (each a
"SUBORDINATED CREDITOR") hereby absolutely subordinates, both in right of
payment and in time of payment, (a) in the case of the REIT, any and all present
or future obligations and liabilities of the Borrower or any Guarantor to the
REIT, (b) in the case of any Guarantor, any and all present or future
obligations and liabilities of the Borrower or any other Guarantor to such
Guarantor. and (c) in the case of the Borrower, any and all present and future
obligations and liabilities of the REIT or any Guarantor to the Borrower (such
obligations and liabilities referred to in clause (a) or (b) being "SUBORDINATED
DEBT"), to the prior payment in full in cash of the Obligations or the
obligations of such Person under the Guaranty, as applicable. Each Subordinated
Creditor agrees to make no claim for, or receive payment with respect to, such
Subordinated Debt until all Obligations and such obligations have been fully
discharged in cash. Notwithstanding the foregoing, the Borrower shall be
entitled to declare and pay dividends with respect to its Capital Stock, as long
as no Event of Default then exists.
6.9.2. All amounts and other assets that may from time to time be
paid or distributed to or otherwise received by any Subordinated Creditor in
respect of Subordinated Debt in violation of this Section 6.9. shall be
segregated and held in trust by the Subordinated Creditor for the benefit of the
Lender Parties and promptly paid over to the Agent.
6.9.3. Each Subordinated Creditor further agrees not to assign all
or any part of the Subordinated Debt unless the Agent is given prior notice and
such assignment is expressly made subject to the terms of this Agreement. If the
Agent so requests, (a) all instruments evidencing the Subordinated Debt shall be
duly endorsed and delivered to the Agent, (b) all security for the Subordinated
Debt shall be duly assigned and delivered to Agent for the benefit of the
Lenders, (c) the Subordinated Debt shall be enforced, collected and held by the
relevant Subordinated Creditor as trustee for the Lender Parties and shall be
paid over to the Agent for the benefit of the Lenders on account of the
Advances, and (d) the Subordinated Creditors shall execute, file and record such
documents and instruments and take such other action as the Agent deems
necessary or appropriate to perfect, preserve and enforce the Lender Parties'
rights in and to the Subordinated Debt and any security therefor. If any
Subordinated Creditor fails to take any such action, the Lender, as
attorney-in-fact for such Subordinated Creditor, is hereby authorized to do so
in the name of the Subordinated Creditor. The foregoing power of attorney is
coupled with an interest and cannot be revoked.
6.9.4. In any bankruptcy or other proceeding in which the filing of
claims is
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required by Applicable Law, each Subordinated Creditor shall file all claims
relating to the Subordinated Debt that the Subordinated Creditor may have
against the obligor thereunder and shall assign to the Agent, for the benefit of
the Lenders, all rights of the relating to the Subordinated Debt thereunder. If
any Subordinated Creditor does not file any such claim, the Agent, as
attorney-in-fact for the Subordinated Creditor, is hereby authorized to do so in
the name of the Subordinated Creditor or, in the Agent's discretion, to assign
the claim to a nominee and to cause proof of claim to be filed in the name of
the Agent or the Agent's nominee. The foregoing power of attorney is coupled
with an interest and cannot be revoked. The Agent or its nominee shall have the
right, in its reasonable discretion, to accept or reject any plan proposed in
such proceeding and to take any other action which a party filing a claim is
entitled to do. In all such cases, whether in administration, bankruptcy or
otherwise, the Person or Persons authorized to pay such claim shall pay to the
Agent for the benefit of the Lenders the amount payable on such claim and, to
the full extent necessary for that purpose, each Subordinated Creditor hereby
assigns to the Agent for the benefit of the Lenders all of the Subordinated
Creditor's rights to any such payments or distributions; PROVIDED, HOWEVER, the
Subordinated Creditor's obligations hereunder shall not be satisfied except to
the extent that the Agent receives cash by reason of any such payment or
distribution.
SECTION 6.10. REMEDIAL ACTION REGARDING HAZARDOUS MATERIALS. The Borrower
shall promptly take, and shall cause its Subsidiaries promptly to take, any and
all necessary remedial action in connection with the presence, storage, use,
disposal, transportation or release of any Hazardous Materials on, under or
about any Real Property in order to comply with all applicable Environmental
Requirements. In the event that the Borrower or any of its Subsidiaries
undertakes any remedial action with respect to any Hazardous Materials on, under
or about any Real Properties, the Borrower and such Subsidiary shall conduct and
complete such remedial action in compliance with all applicable Environmental
Requirements and in accordance with the policies, orders and directives of all
Governmental Authorities.
SECTION 6.11. YEAR 2000 COVENANT. The Borrower shall ensure that the
following are Year 2000 Compliant in a timely manner, but in no event later than
December 31, 1999: (a) the Borrower; and (b) any other major Real Properties and
entities in which the Borrower holds a controlling interest. As used in this
paragraph, "major" shall mean properties or entities the failure of which to be
Year 2000 Compliant would have a Material Adverse Effect on the Borrower. The
term "YEAR 2000 COMPLIANT" shall mean, in regard to any Real Property or entity,
that all software, hardware, equipment, goods or systems utilized by or material
to the physical operations, business operations, or financial reporting of such
Real Property or entity (collectively, the "systems") will properly perform date
sensitive functions, the failure of which would cause a Material Adverse Effect
on the Borrower before, during and after the year 2000. In furtherance of this
covenant, the Borrower shall, in addition to any other necessary actions,
perform a comprehensive review and assessment of all material systems of the
Borrower, and shall adopt a plan for the testing, remediation, and monitoring of
such systems. The Borrower shall, within thirty business days of the Agent's
written request, provide to the Agent such certifications or other evidence of
the Borrower's compliance with the terms of this paragraph as the Agent may from
time to time reasonably require.
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ARTICLE 7.
NEGATIVE COVENANTS OF THE BORROWER PARTIES
So long as any portion of the Commitments shall be in effect and
until all Obligations are paid in full:
SECTION 7.1. UNSECURED DEBT AND CLAIMS.
7.1.1. The Borrower Parties shall not, and shall not permit any
other Consolidated Entity to, directly or indirectly, create, incur, assume,
guarantee, or otherwise become or remain liable with respect to, any Unsecured
Funded Debt, except (a) the Obligations, (b) trade accounts payable and accruals
incurred in the ordinary course of business, guaranties and deferred purchase
obligations related to acquisitions and deferred acquisition costs and (c)
Permitted Subordinated Debentures.
7.1.2. The Borrower Parties shall not, and shall not permit any
other Consolidated Entity to, directly or indirectly, create, incur, assume,
guarantee, or otherwise become or remain liable with respect to, any unsecured
Debt, liabilities or claims (excluding (a) Unsecured Funded Debt and (b) Debt of
Unconsolidated Joint Ventures that constitutes Non-Recourse Debt) if, as a
result, the sum of (i) the amount of all such unsecured Debt, liabilities and
claims of the REIT and the Consolidated Entities, PLUS the REIT's PRO RATA share
of all unsecured Debt, liabilities and claims of the Unconsolidated Joint
Ventures (excluding Non-Recourse Debt), would exceed (ii) the sum of the amount
of all tenant and other receivables and cash and cash equivalents of the REIT
and the Consolidated Entities PLUS the REIT's PRO RATA share of tenant and other
receivables and cash and cash equivalents of the Unconsolidated Joint Ventures,
by more than 3.5% of Gross Asset Value. For purposes of this Section, the REIT's
PRO RATA share of unsecured Debt, liabilities, claims, receivables, cash or cash
equivalents of any Unconsolidated Joint Venture shall be deemed equal to the
product of (i) the unsecured Debt, liabilities, claims, receivables, cash or
cash equivalents, as applicable, of such Unconsolidated Joint Venture,
MULTIPLIED BY (ii) the percentage of the total outstanding Capital Stock of such
Person held by the REIT or any Consolidated Entity, expressed as a decimal.
SECTION 7.2. INVESTMENTS; ASSET MIX.
7.2.1. The REIT shall not at any time make or own any Investment in
any Person, or purchase, lease or own any other asset or property, except in (a)
the Borrower, (b) any Capital Stock of the Consolidated Entities (other than the
Borrower) listed in SCHEDULE 5.4. on the Closing Date, or any Capital Stock of
any Consolidated Entity (including a Bankruptcy Remote Entity) formed or
acquired after the Closing Date and added to SCHEDULE 5.4. in accordance with
Section 10.2.2., PROVIDED that such Investment in such formed or acquired
Consolidated Entity shall not exceed one percent (1%) of the Capital Stock of
such Consolidated Entity, and (c) any cash or other property that is being
distributed to the shareholders of the REIT substantially contemporaneous with
the REIT's receipt of such property from the Borrower.
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7.2.2. The Borrower shall not at any time make or own any Investment
in any Person, or purchase, lease or own any Real Property or other asset,
except that the Borrower may own or lease the following, subject to the
limitations set forth below:
ASSET TYPE LIMITATION ON VALUE FOR EACH ASSET TYPE
---------- ---------------------------------------
1. Wholly-Owned Retail Properties Unlimited
(other than Retail Property
Under Construction)
2. Wholly-Owned Raw Land that is 5% of Gross Asset Value
not under development and for
which no development is planned
to commence within 12 months
after the date on which it was
acquired
3. Wholly-Owned Real Property 5% of Gross Asset Value
(other than Retail Properties,
Retail Properties Under
Construction or Raw Land
referred to in clause 2.)
4. Wholly-Owned Capital Stock of 5% of Gross Asset Value, PROVIDED
any corporation (other than any that the Borrower may hold Capital
Person (a "WHOLLY-OWNED ENTITY") Stock of corporate Subsidiaries
at least 99% of the Capital formed to acquire one or more
Stock of which is held of record Retail Properties if, together
and beneficially by the Borrower with any other Capital Stock,
and the balance of the Capital holdings in such Capital Stock do
Stock of which (if any) is held not exceed 30% of Gross Asset Value
of record and beneficially by
the REIT (or any wholly-owned
Subsidiary of the REIT))
5. Wholly-Owned Mortgage Loans; 15% of Gross Asset Value
PROVIDED that the mortgage or
deed of trust securing any such
Mortgage Loan is a first
priority mortgage or deed of
trust
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6. Wholly-Owned Capital Stock of 40% of Gross Asset Value
Joint Ventures (other than
corporations or Wholly-Owned
Entities (as defined above)) of
which the Borrower is a general
partner and that hold primarily
Retail Properties
7. Retail Property Under 10% of Gross Asset Value
Construction (as measured by
Construction-in-Process)
8. Permitted Investments Unlimited
9. Capital Stock of Management 5% of Gross Asset Value
Companies
Notwithstanding the foregoing, Investments and other assets in the
foregoing categories 2 through 7 and 9 may not exceed, at any time, 50% of Gross
Asset Value. Without limitation of Section 1.2.3., all values of Investments and
other assets shall be the book values of such Investments and assets, determined
in accordance with GAAP, except as otherwise expressly provided.
SECTION 7.3. FINANCIAL COVENANTS.
7.3.1. MINIMUM TANGIBLE NET WORTH. As of the last day of any Fiscal
Quarter, Tangible Net Worth shall not be less than the sum of (a) $275,000,000,
MINUS (b) 100% of the cumulative Depreciation and Amortization Expense deducted
in determining Net Income for all fiscal quarters ending after December 31,
1997, PLUS (c) 90% of the cumulative net cash proceeds received from and the
value of assets acquired (net of Debt incurred or assumed in connection
therewith) through the issuance of Capital Stock of the REIT or the Borrower
after December 31, 1997. For purposes of clause (c), "net" means net of
underwriters' discounts, commissions and other reasonable out-of-pocket expenses
of issuance actually paid to any Person (other than a Macerich Group Member or
any Affiliate of any Borrower Party).
7.3.2. MAXIMUM TOTAL LIABILITIES TO GROSS ASSET VALUE. The ratio of
Total Liabilities to Gross Asset Value shall not be more than 60% at any time,
except that, during the period from the Closing Date to and including December
31, 1998, such ratio shall not be more than 65%.
7.3.3. MINIMUM INTEREST COVERAGE RATIO. As of the last day of any
fiscal quarter, the Interest Coverage Ratio shall not be less than 1.80.
7.3.4. MINIMUM FIXED CHARGE COVERAGE RATIO. As of the last day of
any fiscal quarter, the Fixed Charge Coverage Ratio shall not be less than 1.60.
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7.3.5. MINIMUM SENIOR UNSECURED INTEREST EXPENSE COVERAGE
RATIO. As of the last day of any fiscal quarter, the Senior Unsecured
Interest Expense Coverage Ratio shall not be less than 1.75.
7.3.6. MAXIMUM FLOATING RATE DEBT. The sum of the following shall
not exceed $500,000,000 at any time (without duplication): (a) Floating Rate
Debt of the REIT and the Consolidated Entities, PLUS (b) the REIT's PRO RATA
share of all Floating Rate Debt of the Unconsolidated Joint Ventures that does
not otherwise constitute Debt of the REIT or any Consolidated Entity. For
purposes of the foregoing, (i) "FLOATING RATE DEBT" means any Debt interest on
which accrues at a floating rate (including any Fixed Rate), except to the
extent there is then in full force and effect an interest rate swap or "cap"
agreement that does not expire or terminate prior to the Maturity Date with
respect to such Debt that entitles the obligor under such Debt to payments from
the counterparty equal to, and payable at the same time as, the floating rate
payable on such Debt (or that portion thereof exceeding the "cap"), in return
for payments by the obligor of fixed amounts to such counterparty, and (ii) the
REIT's PRO RATA share of Floating Rate Debt of any Unconsolidated Joint Venture
shall be deemed equal to the product of (A) the Floating Rate Debt of such
Unconsolidated Joint Venture (other than Debt that is a Contingent Obligation of
any Borrower Party), MULTIPLIED BY (B) the percentage of the total outstanding
Capital Stock of such Person held by the REIT or any Consolidated Entity,
expressed as a decimal.
SECTION 7.4. MINIMUM UNENCUMBERED POOL. The aggregate of the Unencumbered
Asset Values of all Unencumbered Assets in the Unencumbered Pool shall not, at
any time, be less than 165% of the sum of the unsecured Debt of the REIT and the
Consolidated Entities (other than the Permitted Subordinated Debentures)
outstanding at such time.
SECTION 7.5. AGGREGATE LEASED AREA OF REAL PROPERTIES IN UNENCUMBERED
POOL. As of the last day of any fiscal quarter, the ratio (expressed as a
percentage) of (i) the aggregate M&F Gross Leaseable Area of the Retail
Properties included in the Unencumbered Pool that is subject to a bona fide
lease pursuant to which the contractually agreed rent is being paid by the
tenant thereunder to (ii) the aggregate M&F Gross Leaseable Area of the Retail
Properties included in the Unencumbered Pool shall not be less than 85%;
PROVIDED that the M&F Gross Leaseable Area of any Retail Property included in
the Unencumbered Pool that constitutes a Retail Property Under Construction
shall be excluded from the calculation provided for in clause (i) and (ii).
SECTION 7.6. RESTRICTION ON FUNDAMENTAL CHANGES. The REIT and the
Consolidated Entities shall not enter into any merger, consolidation or
reorganization or any sale of all or a substantial portion of the assets of the
REIT and the Consolidated Entities, taken as a whole, or liquidate, wind up or
dissolve, except that:
7.6.1. as long as no Default or Event of Default shall exist after
giving effect to such merger or consolidation, any Consolidated Entity (other
than the Borrower) may be merged or consolidated with or into the Borrower;
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7.6.2. any Person may merge or consolidate with and into the
Borrower or any other Consolidated Entity and the Borrower or any other
Consolidated Entity may merge or consolidate with and into any Person, in each
case, with the prior written approval of the Required Lenders.
SECTION 7.7. TRANSACTIONS WITH AFFILIATES. None of the REIT, the Borrower
and the other Consolidated Entities shall, directly or indirectly, enter into
any transaction (including the purchase, sale, lease, or exchange of any
property or the rendering of any service) (i) in the case of a transaction to
which the REIT is a party, with the Borrower or any Consolidated Entity or
Unconsolidated Joint Venture, and (ii) in the case of any other transaction,
with any Affiliate of the Borrower or of any Consolidated Entity (other than a
transaction with a Consolidated Entity that is not a Bankruptcy Remote Entity),
in each case unless (a) such transaction is not otherwise prohibited by this
Agreement, (b) such transaction is in the ordinary course of business and (c)
such transaction is on fair and reasonable terms no less favorable to the
Borrower, Consolidated Entity or Unconsolidated Joint Venture party thereto, as
the case may be, than those terms which might be obtained at the time in a
comparable arm's length transaction with a Person who is not the REIT or such an
Affiliate or, if such transaction is not one which by its nature could be
obtained from such other Person, is on fair and reasonable terms and was
negotiated in good faith, PROVIDED that this Section 7.7. shall not restrict (a)
dividends, distributions and other payments and transfers on account of any
shares of Capital Stock of any Consolidated Entity, (b) payments pursuant to the
terms of any Contractual Obligations in effect on the date of the Existing WFB
Credit Agreement, PROVIDED that such dividends, distributions or other payments
are not otherwise prohibited by the terms of this Agreement or would result in a
Default or an Event of Default, and (c) transactions between any Unconsolidated
Joint Venture that is not controlled by the REIT or by any Consolidated Entity
and any Affiliate of such Unconsolidated Joint Venture that is not also an
Affiliate of the REIT or of any Consolidated Entity.
SECTION 7.8. RESTRICTED PAYMENTS. The Borrower shall not, and shall not
permit the REIT or any Subsidiary to, directly or indirectly, declare, pay or
make, or agree to declare, pay or make, any Restricted Payment, except:
7.8.1. dividends, distributions or payments (a) by the Borrower to
the REIT (to the extent used by the REIT for the payment of dividends
permissible under Section 7.8.2. or 7.8.3.), or (b) by any Subsidiary to the
Borrower or to a Wholly-Owned Subsidiary that is not a Bankruptcy Remote Entity;
7.8.2. if no Default or Event of Default shall then exist or result
from such Restricted Payment, the REIT, the Borrower and any Subsidiary may pay
or make Restricted Payments so long as the aggregate amount of all Restricted
Payments pursuant to this Section 7.8.2. paid during the four Fiscal Quarters
immediately preceding the Fiscal Quarter in which such Restricted Payment is
proposed to be made (treated as a single accounting period), together with the
Restricted Payment proposed to be made, does not exceed 95% of the aggregate
amount of Funds From Operations for such period of four Fiscal Quarters; and
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7.8.3. if no Default or Event of Default under Section 8.1.1. shall
then exist or result from such Restricted Payment, the REIT may pay or make
Restricted Payments only in the amount necessary to enable the REIT to meet the
requirements for taxation as a real estate investment trust under the Code, but
in any event not in excess of 95% of the aggregate amount of Funds From
Operations for the four Fiscal Quarters immediately preceding the Fiscal Quarter
in which such Restricted Payment is proposed to be made (treated as a single
accounting period).
SECTION 7.9. ERISA. No Borrower Party shall, and no Borrower Party shall
permit any current ERISA Affiliate to:
7.9.1. engage in any Prohibited Transaction or engage in any conduct
or commit any act or suffer to exist any condition that could give rise to any
Material excise tax, penalty, interest or liability under Sections 4971, 4972,
4975, 4976, 4977, 4979, 4980 or 4980B of the Code or Sections 502(c) or 502(i)
of ERISA;
7.9.2. permit the benefit liabilities (whether or not vested) under
all Plans (excluding all Plans with assets greater than or equal to liabilities
(whether or not vested)) to exceed the current value of the assets of such Plans
allocable to such benefits by more than $500,000;
7.9.3. adopt or contribute to any Plan that is a Defined
Benefit Plan;
7.9.4. create or suffer to exist any liability with respect to Plans
that are welfare plans within the meaning of Section 3(1) of ERISA if, after
immediately giving effect to such liability, the aggregate annualized cost with
respect to such Plans for post retirement benefits for any fiscal year would
exceed $500,000; or
7.9.5. Allow any investment in any Borrower Party by benefit plan
investors to become significant within the meaning of Department of Labor
Regulation Section 2510.3-101(f).
SECTION 7.10. AMENDMENTS OF CHARTER AND BYLAWS. No Borrower Party will
make any amendment of its charter, bylaws, partnership agreement or other
organizational document, as the case may be, if such amendment could have a
Material Adverse Effect or could otherwise be materially disadvantageous to the
Lender Parties.
SECTION 7.11. PAYMENTS WITH RESPECT TO PERMITTED SUBORDINATED DEBENTURES.
The REIT will not make any payment of principal (including redemption price) of
or premium, if any, or interest on, or additional amounts or purchase price
payable with respect to the Permitted Subordinated Debentures (including any
amounts payable upon repurchase at the election of the holders of such Permitted
Subordinated Debentures upon the occurrence of a Designated Event, as such term
is defined in the Offering Circular for such Permitted Subordinated Debentures),
unless (i) no Default or Event of Default under Section 8.1.1. or 8.1.7. and
(ii) no other Event of Default, then exists or would exist giving effect to such
payment on a PRO FORMA basis. At least five Business Days prior to making any
such payment (other than a payment of interest) with
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respect to the Permitted Subordinated Debentures (including any such payment
upon the occurrence of a Designated Event, as so defined), the REIT shall notify
the Agent and the Lenders of such payment, which notice shall be accompanied by
a certificate substantially in the form of Exhibit C-4 demonstrating that such
payment will be permissible under this Section 7.11..
SECTION 7.12. ACQUISITIONS OF REAL PROPERTIES. Neither the Borrower nor
any Consolidated Entity shall purchase any Real Property in a single transaction
or series of related transactions the gross purchase price of which exceeds 25%
of the Gross Asset Value without the prior written approval of the Required
Lenders.
ARTICLE 8.
EVENTS OF DEFAULT
SECTION 8.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events, acts or occurrences shall constitute an event of default (an
"EVENT OF DEFAULT"):
8.1.1. FAILURE TO MAKE PAYMENTS. The Borrower (i) shall fail to pay
when due any principal (whether at stated maturity, upon acceleration, upon
required prepayment or otherwise) of any Advance or (ii) shall fail to pay
interest on any Advance or any other amount payable under the Loan Documents
within three Business Days of the date when due; or
8.1.2. DEFAULT IN OTHER DEBT. The REIT or any Consolidated Entity
shall (a) default in the payment (whether at stated maturity, upon acceleration,
upon required prepayment or otherwise), beyond any period of grace provided
therefor, of any principal of or interest on any Non-Recourse Secured Debt with
a principal amount in excess of $20,000,000 or any other Debt with a principal
amount in excess of $1,000,000 or (b) be in default, breach or violation, beyond
any period of grace or notice provided therefor, of any other agreement,
covenant, representation, warranty or obligation under any Non-Recourse Secured
Debt with a principal amount in excess of $20,000,000 or any other Debt with a
principal amount in excess of $1,000,000 and as a result of such default, breach
or violation the holder or holders of such Debt (or a Person on behalf of such
holder or holders) shall cause such Debt to become or be declared due and
payable prior to its stated maturity, PROVIDED that the foregoing shall not
apply to Non-Recourse Debt of Unconsolidated Joint Ventures; or
8.1.3. BREACH OF CERTAIN NONFINANCIAL COVENANTS. The Borrower shall
fail to perform, comply with or observe any agreement, covenant or obligation
under Section 2.3., 6.1.4., 6.3. (insofar as such Section requires the
preservation of the corporate existence of any Borrower Party), 6.8., 6.9.,
7.6., 7.7., 7.8., 7.10., 7.11. or 7.12.; or
8.1.4. BREACH OF CERTAIN FINANCIAL COVENANTS. The Borrower shall
fail to comply with or observe any agreement, covenant or obligation under
Section 7.1., 7.2., 7.3., 7.4. or 7.5. and such failure shall not have been
remedied within 30 days after written notice thereof
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from the Agent or any Lender; or
8.1.5. BREACH OF WARRANTY. Any representation or warranty or
certification made or furnished by any Borrower Party under this Agreement or
the other Loan Documents or any agreement, instrument or document contemplated
hereby and thereby shall prove to have been false or incorrect in any material
respect when made (or deemed made); or
8.1.6. OTHER DEFAULTS UNDER AGREEMENT AND OTHER LOAN DOCUMENTS. Any
Borrower Party shall fail to perform, comply with or observe any agreement,
covenant or obligation to be performed, observed or complied with by it under
this Agreement (other than those provisions referred to in Section 8.1.3. or
8.1.4. above) or under the other Loan Documents (other than a Letter of Credit
Agreement) and such failure shall not have been remedied within 60 days after
written notice thereof from the Agent or any Lender, or there shall occur any
"Event of Default" (as defined in the Letter of Credit Agreement); or
8.1.7. INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. There
shall be commenced against any Borrower Party or any Consolidated Entity an
involuntary case seeking the liquidation or reorganization of any such Borrower
Party or Consolidated Entity under Chapter 7 or Chapter 11, respectively, of the
Bankruptcy Code or any similar proceeding under any other Applicable Law or an
involuntary case or proceeding seeking the appointment of a receiver,
liquidator, sequestrator, custodian, trustee or other officer having similar
powers of any such Borrower Party or Consolidated Entity or to take possession
of all or a substantial portion of its property or to operate all or a
substantial portion of its business, and any of the following events occur: (i)
any such Borrower Party or Consolidated Entity consents to the institution of
the involuntary case or proceeding; (ii) the petition commencing the involuntary
case or proceeding is not timely controverted; (iii) the petition commencing the
involuntary case or proceeding remains undismissed and unstayed for a period of
60 days (PROVIDED, HOWEVER, that, during the pendency of such period, the
Lenders shall be relieved of the Commitments); or (iv) an order for relief shall
have been issued or entered therein; or
8.1.8. VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. Any
Borrower Party or any Consolidated Entity shall institute a voluntary case
seeking liquidation or reorganization under Chapter 7 or Chapter 11,
respectively, of the Bankruptcy Code or any similar proceeding under any other
Applicable Law, or shall consent thereto; or shall consent to the conversion of
an involuntary case to a voluntary case; or shall file a petition, answer a
complaint or otherwise institute any proceeding seeking, or shall consent or
acquiesce to the appointment of, a receiver, liquidator, sequestrator,
custodian, trustee or other officer with similar powers of it or to take
possession of all or a substantial portion of its property or to operate all or
a substantial portion of its business; or shall make a general assignment for
the benefit of creditors; or shall generally not pay its debts as they become
due; or the Board of Directors (or respective governing body) of any Borrower
Party or Consolidated Entity (or any committee thereof) adopts any resolution or
otherwise authorizes action to approve any of the foregoing; or
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8.1.9. JUDGMENTS AND ATTACHMENTS. Any Borrower Party or any
Consolidated Entity shall suffer any money judgments, writs or warrants of
attachment or similar processes which individually or in the aggregate involve
an amount or value in excess of $1,000,000 and such judgments, writs, warrants
or other orders shall continue unsatisfied and unstayed for a period of 10 days
unless the amount of such judgments, writs, warrants or attachments are fully
covered by insurance (other than deductibles substantially the same as those in
effect on the Closing Date and provided that any deductible in excess of
$100,000 is supported by a bond or letter of credit in at least the amount by
which such deductible exceeds $100,000) and the insurer has in writing accepted
liability therefor; or a judgment creditor shall obtain possession of any
material portion of the assets of the REIT or any Consolidated Entity by any
means, including, without limitation, levy, distraint, replevin or self-help; or
8.1.10. ERISA LIABILITIES. Any violation of Section 7.9.3.
or 7.9.5. shall occur; or
8.1.11. CHANGE OF CONTROL OR MANAGEMENT. The Principal Investors no
longer control, directly or indirectly, at least 10% of the Capital Stock of the
Borrower (which percentage shall be subject to adjustment to give effect to any
dilution of such holdings by virtue of the issuance of any Capital Stock of the
Borrower or the REIT after the Closing Date or Arthur Coppola and either of
Edward Coppola or Thomas E. O'Hern are no longer Senior Officers of the REIT and
the Borrower; or
8.1.12. GENERAL PARTNER. The REIT shall cease to be the
general partner of the Borrower; or
8.1.13. INVALIDITY OF GUARANTY OR SUBORDINATION. The Guaranty or the
subordination provisions of Section 6.9. shall for any reason be revoked or
invalidated, or otherwise cease to be in full force and effect, or any Guarantor
or Subordinated Creditor shall contest in any manner the validity or
enforceability thereof or deny that it has any further liability or obligation
thereunder; or
8.1.14. CHANGE OF TAX STATUS.
8.1.14.1. The REIT shall either determine in good faith or
receive written notice from the relevant taxing authority that the REIT does not
conform or no longer conforms to the requirements for qualification as a real
estate investment trust under the Code (except as a result of the enactment of
any Applicable Law with which the REIT cannot or has determined in good faith
not to comply); or
8.1.14.2. The Borrower or any Guarantor shall either determine
in good faith or receive written notice from the relevant taxing authority that
the Borrower or any Guarantor does not conform or no longer conforms to the
requirements for qualification as a partnership under the Code.
SECTION 8.2. REMEDIES. Upon the occurrence of an Event of Default:
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8.2.1. If an Event of Default occurs under Section 8.1.7. or 8.1.8.,
then the Commitments and all pending Competitive Bids (whether or not accepted)
shall automatically and immediately terminate, and the obligation of the Lenders
to make any Advances and of the Agent Bank to issue any Letter of Credit
hereunder shall cease, and the unpaid principal amount of and any accrued
interest on all Advances shall automatically become immediately due and payable,
without presentment, demand, protest, notice or other requirements of any kind,
all of which are hereby expressly waived by the Borrower.
8.2.2. If an Event of Default occurs under Section 8.1. hereof,
other than under Section 8.1.7. or 8.1.8., (a) the Agent shall, at the request
of the Required Lenders, by written notice to the Borrower, declare that the
Commitments and all pending Competitive Bids (whether or not accepted) shall be
terminated on the date that is 60 days after the date of such notice or on such
earlier date as may be determined by the Required Lenders, whereupon the
obligation of the Lenders to make any Advance and of the Agent Bank to issue any
Letter of Credit hereunder shall cease on such day, and/or (b) the Agent shall,
at the request of the Required Lenders, by written notice to the Borrower,
declare the unpaid principal amount of all Advances together with any and all
accrued interest thereon to be, and the same shall become, due and payable on
the date that is 60 days after the date of such notice or on such earlier date
as may be determined by the Required Lenders, without presentment, demand,
protest, any additional notice whatsoever or other requirements of any kind, all
of which are hereby expressly waived by the Borrower.
SECTION 8.3. RESCISSION. At any time after the Advances shall have been
declared due and payable pursuant to Section 8.2.2. or a demand shall have been
made pursuant to Section 8.4, the Required Lenders, by written notice by the
Agent to the Borrower, may rescind and annul any such declaration or demand and
its consequences, PROVIDED the Required Lenders hold 66-2/3% of the outstanding
Advances. No rescission and annulment under this Section 8.3. will extend to or
affect any subsequent Event of Default or Default or impair any right consequent
thereon.
SECTION 8.4. ACTIONS IN RESPECT OF LETTERS OF CREDIT.
8.4.1. LETTER OF CREDIT COLLATERAL ACCOUNT. If, at any time and from
time to time, any Letter of Credit shall have been issued hereunder and an Event
of Default shall have occurred and be continuing, then, upon the occurrence and
during the continuation thereof, the Agent shall at the request of the Required
Lenders, whether in addition to the taking by the Agent of any of the actions
described in this Article 8 or otherwise, make a demand upon the Borrower to,
and forthwith upon such demand (but in any event within ten days after such
demand) the Borrower shall, (i) pay to the Agent, on behalf of the Lender
Parties, in same day funds at the Agent's office designated in such demand, for
deposit in a special interest-bearing cash collateral account (the "LETTER OF
CREDIT COLLATERAL ACCOUNT") to be maintained in the name of "The Macerich
Partnership, L.P., who executed a Security Agreement Rights to Payment in favor
of Wells Fargo Bank, National Association, as Agent for the Lender Parties" and
under the Agent's sole dominion and control at such place as shall be designated
by the Agent, an amount equal to
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the amount of the Letter of Credit Liability under the Letters of Credit, and
(ii) execute and deliver to the Agent all such documents, instruments and/or
certificates as the Agent shall reasonably request in order to perfect, and
maintain a perfected security interest in, the Letter of Credit Collateral
(including, without limitation, a Security Agreement Rights to Payment, Uniform
Commercial Code financing statements and any notice required to perfect the
Agent's security interest in the Letter of Credit). The Borrower authorizes and
empowers the Agent, as its attorney-in-fact, and as its agent, irrevocably, with
full power of substitution for it and in its name, following the occurrence of
an Event of Default, to give any authorization, to furnish any information, to
make any demands, to execute and/or deliver any documents, instruments and/or
certificates (including, without limitation, a Security Agreement Rights to
Payment, Uniform Commercial Code financing statements and notices required to
perfect the Agent's security interest in the Letter of Credit Collateral) and to
take any and all other action on behalf of and in the name of the Borrower which
in the opinion of the Agent may be necessary or appropriate to be given,
furnished, made, exercised or taken to perfect or maintain the perfection of the
Agent's security interest in the Letter of Credit Collateral. This
power-of-attorney is irrevocable and coupled with an interest, and any similar
or dissimilar powers heretofore given by the Borrower in respect of the Letter
of Credit Collateral to any other Person are hereby revoked.
8.4.2. PLEDGE OF LETTER OF CREDIT COLLATERAL. The Borrower hereby
pledges, assigns and grants to the Agent, as collateral agent for its benefit
and the ratable benefit of the other Lender Parties a lien on and a security
interest in, the following collateral (the "LETTER OF CREDIT COLLATERAL"):
8.4.2.1. the Letter of Credit Collateral Account, all cash
deposited therein and all certificates and instruments, if any, from time to
time representing or evidencing the Letter of Credit Collateral Account;
8.4.2.1. all notes, certificates of deposit and other
instruments from time to time hereafter delivered to or otherwise possessed by
the Agent for or on behalf of the Borrower in substitution for or in respect of
any or all of the then existing Letter of Credit Collateral;
8.4.2.1. all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the then existing Letter of Credit
Collateral; and
8.4.2.1. to the extent not covered by the above
clauses, all proceeds of any or all of the foregoing Letter of Credit
Collateral.
The lien and security interest granted hereby secures the payment of
all Obligations of the Borrower now or hereafter existing hereunder and under
any Loan Documents.
8.4.3. APPLICATION OF FUNDS IN LETTER OF CREDIT COLLATERAL ACCOUNT.
The Borrower hereby authorizes the Agent for the ratable benefit of the Lenders
to apply, from time to time
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after funds are deposited in the Letter of Credit Collateral Account, funds then
held in the Letter of Credit Collateral Account to the payment of any amounts,
in such order as the Agent may elect, as shall have become due and payable by
the Borrower to the Lender Parties in respect of the Letters of Credit.
8.4.4. LIMITATION ON THE BORROWER'S RIGHTS. Neither the Borrower nor
any Person claiming or acting on behalf of or through the Borrower shall have
any right to withdraw any of the funds held in the Letter of Credit Collateral
Account, except as provided in Section 8.4.8 hereof.
8.4.5. NEGATIVE COVENANTS. The Borrower agrees that it will not (i)
sell or otherwise dispose of any interest in the Letter of Credit Collateral or
(ii) create or permit to exist any lien, security interest or other charge or
encumbrance upon or with respect to any of the Letter of Credit Collateral,
except for the security interest created by this Section 8.4.
8.4.6. RIGHTS OF AGENT ON EVENT OF DEFAULT. If any Event of Default
shall have occurred and be continuing:
8.4.6.1. The Agent may, in its sole discretion, without notice
to the Borrower except as required by law and at any time from time to time,
charge, set off or otherwise apply all or any part of FIRST, (x) amounts
previously drawn on any Letter of Credit that have not been reimbursed by the
Borrower and (y) any Letter of Credit Liability that is then due and payable,
and SECOND, any other unpaid Obligations then due and payable against the Letter
of Credit Collateral Account or any part thereof, in accordance with Section
2.10.5. The rights of the Agent under this Section 8.4 are in addition to any
rights and remedies which any Lender may have.
8.4.6.2. The Agent may also exercise, in its sole discretion,
in respect of the Letter of Credit Collateral Account, in addition to the other
rights and remedies provided herein or otherwise available to it, all the rights
and remedies of a secured party upon default under the Uniform Commercial Code
in effect in the State of California at that time.
8.4.7. STANDARD OF CARE. The Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Letter of Credit
Collateral if the Letter of Credit Collateral is accorded treatment
substantially equal to that which the Agent accords its own property, it being
understood that, assuming such treatment, the Agent shall not have any
responsibility or liability with respect thereto.
8.4.8. CURE. At such time as all Events of Default have been cured
or waived in writing, all amounts remaining in the Letter of Credit Collateral
Account shall be promptly returned to the Borrower. Absent such cure or written
waiver, any surplus of the funds held in the Letter of Credit Collateral Account
and remaining after payment in full of all of the Obligations of the Borrower
hereunder and under any other Loan Document after the Maturity Date shall be
paid to the Borrower or to whomsoever may be lawfully entitled to receive such
surplus.
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ARTICLE 9.
THE AGENT AND THE LENDERS
SECTION 9.1. AUTHORIZATION AND ACTION.
9.1.1. Each Lender hereby irrevocably appoints and authorizes the
Agent Bank to act as its agent hereunder and under the other Loan Documents, to
execute and deliver or accept, on its behalf, the other Loan Documents and any
other documents, instruments and agreements related thereto or hereto to take
such action on its behalf under the provisions hereof and thereof and to
exercise such rights, remedies, powers and privileges hereunder and thereunder
as are delegated to the Agent by the terms hereof and thereof, together with
such rights, remedies, powers and privileges as are reasonably incidental
thereto.
9.1.2. Except for any matters expressly subject to the consent or
approval of the Agent under the Loan Documents, the Agent shall not, without the
prior approval of the Required Lenders (or, as provided in Section 10.2., all of
the Lenders), waive any default or otherwise amend this Agreement or any other
Loan Documents. The Agent will, to the extent practicable under the
circumstances, consult with the other Lender Parties prior to taking action on
their behalf under the Loan Documents and in acting as their Agent thereunder.
The Agent will not take any action contrary to the written direction of Required
Lenders, will take any lawful action not contrary to the provisions of the Loan
Documents prescribed in written instructions of the Required Lenders (or, as
provided in Section 10.2., all the Lenders) and, as to any matters not expressly
provided for by the Loan Documents (including enforcement or collection), may
decline to take any action, except upon the written instructions of the Required
Lenders (or, as provided in Section 10.2., all the Lenders). If such
instructions are requested reasonably promptly, the Agent shall be absolutely
entitled to refrain from taking any action and shall not have any liability to
any Borrower Party or any Lender for refraining from taking any action until it
shall have received such instructions; PROVIDED, HOWEVER, that the Agent shall
in no event be required to take or refrain from taking any action that would, in
the Agent's opinion, be inconsistent with the Agent's practice in similar
situations when acting solely for its own account or be contrary to the
provisions of any Loan Document or Applicable Law.
9.1.3. The Agent shall not have any duties or responsibilities
except those expressly set forth in the Loan Documents. The Agent shall not be
required to exercise any right, power, remedy or privilege granted to it in any
Loan Document, to ascertain or inquire whether any Default or Event of Default
has occurred and is continuing, or to inspect the property (including the books
and records) of any Borrower Party or to take any other affirmative action,
except as provided in Sections 8.2. and 8.4, or unless requested or directed to
do so in accordance with the provisions of Section 9.1.2.
9.1.4. The duties of the Agent shall be mechanical and
administrative in nature. The Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any other Lender Party. Except for notices,
reports and other documents and information expressly
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required to be furnished by the Agent for the Lender Parties hereunder, the
Agent shall not have any duty or responsibility to provide any Lender Party with
any credit or other information concerning the affairs, financial condition or
business of any Borrower Party that may come into the possession of the Agent or
any of its Affiliates.
SECTION 9.2. EXCULPATION; AGENT'S RELIANCE; ETC. Neither the Agent nor any
of its directors, officers, agents, attorneys or employees shall be liable to
any Borrower Party or any other Lender Party for any action taken or omitted to
be taken by it or them under or in connection with any Loan Document (a) with
the consent or at the request of the Required Lenders (or, as provided in
Section 10.2., all the Lenders), or (b) in any other circumstances, except for
its or their own gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction. The Agent makes no warranty or
representation to any other Lender Party and shall not be responsible to any
other Lender Party for any recitals, statements, warranties or representations
made in, or in connection with, any Loan Document or for the execution,
effectiveness, genuineness, validity, enforceability, collectibility, or
sufficiency of any Loan Document or any financial information, opinions of
counsel or other documents executed and delivered pursuant thereto, or for the
financial condition of any Borrower Party. The Agent shall not be responsible to
any Lender for the satisfaction of any condition specified in Article 4., except
receipt of items required to be delivered to the Agent. The Agent may treat the
payee of any Note as the holder thereof until the Agent receives the related
Assignment and Acceptance signed by such holder and the assignee and in form
satisfactory to the Agent. The Agent shall be entitled to rely upon any notice,
certificate or other writing believed by the Agent to be genuine and correct and
to have been signed or sent by the proper Person or Persons. The Agent shall be
entitled to consult with legal counsel, independent public accountants and other
experts selected by the Agent and to act in reliance upon the advice of such
counsel and other experts concerning its actions and duties hereunder.
SECTION 9.3. AGENT AND AFFILIATES. In its capacity as a Lender and issuer
of Letters of Credit, the Agent Bank shall have the same rights, powers and
obligations under this Agreement and the other Loan Documents as any other
Lender and may exercise or refrain from exercising the same as though it were
not the Agent or such issuer, including the right to give or deny consent to any
action requiring consent or direction of the Required Lenders or all the
Lenders. The Agent Bank and its Affiliates may accept deposits from, lend money
to, act as trustee under indentures of, and generally engage in any kind of
business with, any Borrower Party, any Subsidiary of a Borrower Party and any
Affiliate of any Borrower Party, all as if the Agent were not the Agent and
without any duty to account therefor to the Lenders. The Agent Bank shall be
entitled to receive from the Borrower its fees or portions thereof in connection
with this transaction without any liability to account therefor to any other
Lender, except as the Agent Bank may have expressly agreed.
SECTION 9.4. LENDER CREDIT DECISION. Each Lender Party acknowledges that
it has, independently and without reliance upon the Agent or any other Lender
Party and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each
Lender Party also acknowledges that it will,
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independently and without reliance upon the Agent or any other Lender Party and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents.
SECTION 9.5. INDEMNIFICATION. The Agent shall in no event be required to
take any action under the Loan Documents or in relation thereto unless it shall
first be indemnified to its satisfaction by the other Lender Parties against any
and all liability and expense that it may incur by reason of taking any such
action. Each Lender agrees to indemnify and hold the Agent harmless (to the
extent not promptly paid or reimbursed by the Borrower), ratably according to
their respective Commitments, from and against any and all (a) costs, expenses
and other amounts incurred by the Agent otherwise payable by the Borrower
pursuant to Section 10.1. and (b) Indemnified Liabilities that may be imposed
on, incurred by, or asserted against the Agent, except to the extent they are
finally adjudged by a court of competent jurisdiction to have directly resulted
from the gross negligence or willful misconduct of the Agent. Without limitation
of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand
for its ratable share of any out-of-pocket expenses (including outside counsel
fees) incurred by the Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, the Loan Documents, to the extent
that the Agent is not promptly reimbursed for such expenses by the Borrower.
SECTION 9.6. SUCCESSOR AGENT. The Agent may resign at any time as Agent
under the Loan Documents by giving not less than 30-days' written notice thereof
to the Lenders and the Borrower and the Agent may be removed at any time with
cause by written action of all Lenders (other than the Agent) delivered to the
Agent. Upon any such resignation or removal, the Required Lenders shall have the
right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Required Lenders, and shall have accepted such appointment,
within 30 days after the retiring Agent's notice of resignation or the removal
of the Agent, then the retiring or removed Agent may, on behalf of the other
Lender Parties, appoint a successor Agent, which shall be a financial
institution having a combined capital and surplus of at least $100,000,000, or a
branch or agency of such a financial institution, organized or licensed to do
business under the laws of the United States of America or any State thereof,
and which shall have a minimum rating of "Baa-2" by Moody's and a minimum
long-term debt rating of "BBB" by S&P. Upon the acceptance of any appointment as
the Agent by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged of its duties and
obligations under the Loan Documents. Upon any retiring Agent's resignation or
removal, the provisions of this Article 9. (as well as other expense
reimbursement, indemnification and exculpatory provisions in the other Loan
Documents) shall continue in effect for its benefit as to any actions taken or
omitted by it while it was Agent.
SECTION 9.7. EXCESS PAYMENTS. If any Lender shall obtain any payment or
other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Obligations in excess of its PRO RATA share of
payments and other recoveries on account of
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such Obligations obtained by all Lenders, such Lender shall purchase from the
other Lenders such participations in such Obligations held by them as shall be
necessary to cause such purchasing Lender to share the excess payment or other
recovery ratably with each of the other Lenders; PROVIDED, HOWEVER, that if all
or any portion of the excess payment or other recovery is thereafter recovered
from such purchasing Lender, the purchase shall be rescinded and the purchase
price restored to such Lender to the extent of such recovery, but without
interest. The Borrower agrees that any Lender so purchasing a participation from
another Lender pursuant to this Section 9.7. may, to the fullest extent
permitted by Applicable Law, exercise all of its rights of payment (including
setoff) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrower in the amount of such participation.
SECTION 9.8. LENDER PARTIES. The provisions of this Article 9. are solely
for the benefit of the Agent and the other Lender Parties, and the Borrower
shall not have any rights to rely on or enforce any of the provisions hereof
(except that the provisions of Sections 9.6. are also for the benefit of the
Borrower). In performing its functions and duties under the Loan Documents, the
Agent shall act solely as agent of the Lenders and does not assume and shall not
be deemed to have assumed any obligation toward or relationship of agency or
trust with or for the Borrower.
SECTION 9.9. DEFAULT BY THE BORROWER; ACCELERATION. The Agent will send to
each Lender copies of any notices of a Default or an Event of Default sent by
the Agent to the Borrower under the terms of the Loan Documents concurrently
with sending the same to the Borrower. In the event of any Default or Event of
Default of which the Agent has actual knowledge, the Agent shall (as soon as is
practicable under the circumstances) consult with the Lenders in an effort to
determine a mutually acceptable course of action with respect to the Default or
Event of Default. The Agent may deliver to the Lenders a written recommendation
of a course of action (the "recommended course of action"), in which case each
Lender shall either approve such action in writing or object in writing to such
action within thirty (30) days (or such lesser period as specified in the notice
from the Agent) following such notice. Failure to deliver a written objection
within thirty (30) days (or such lesser period which will not be less than five
(5) business days) will be deemed to constitute an approval. The Agent may take
the recommended course of action if consented or approved as provided above by
the Required Lenders (or, as provided in Section 10.2., all Lenders), PROVIDED
that no rights shall be released without the consent of all Lenders. In
furtherance of the foregoing, and notwithstanding anything herein to the
contrary, each Lender hereby appoints and constitutes the Agent its agent with
full power and authority to exercise in the name of, and on behalf of each
Lender, any and all rights and remedies which each Lender may have with respect
to, and to the extent necessary under Applicable Law for, the enforcement of the
Loan Documents, or which the Agent may have as a matter of law. It is understood
and agreed that in the event the Agent determines it is necessary to engage
counsel for the Lenders from and after the occurrence of an Event of Default,
said counsel shall be selected by the Agent and written notice of the same shall
be delivered to the Lenders.
SECTION 9.10. PAYMENTS; AVAILABILITY OF FUNDS; CERTAIN NOTICES.
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9.10.1. If the Agent shall fail to deliver to any other Lender Party
its share of any payment received from the Borrower as and when required by
Section 2.9., the Agent shall pay to such Lender its share of such payment
together with interest on such amount at the Federal Funds Rate, for each day
from the date such amount was required to be paid to such Lender until the date
the Agent pays such amount to such Lender, calculated as set forth in Section
2.4.4.
9.10.2. Unless (a) the Agent shall have been notified by a Lender
prior to the date upon which an Advance is to be made pursuant to Section 2.1.
or (b) the Agent shall have been notified by the Borrower prior to the date on
which the Borrower is required to make any payment hereunder, that such Lender
or the Borrower, as the case may be (the "OBLIGATED PARTY"), does not intend to
make available to the Agent the Obligated Party's portion of such Advance or
such payment, the Agent may assume that the Obligated Party will make such
amount available to the Agent on such date and the Agent may, in reliance upon
such assumption (but shall not be required to), make available to the Borrower
(in the case of an Advance) or the Lenders (in the case of a payment by the
Borrower) a corresponding amount. If such corresponding amount is not in fact
made available to the Agent by the Obligated Party, the Agent shall be entitled
to recover such amount on demand from the Obligated Party (or, in the case of an
Advance, if the Lender that is the Obligated Party fails to pay such amount
forthwith upon such demand, from the Borrower). Such amount shall be payable
together with interest thereon from the day on which such corresponding amount
was made available by the Agent to the Lender or the Borrower, as applicable, to
the date of payment by the Obligated Party (or the Borrower, as applicable), at
a rate of interest equal to (i) in the case of any payment by any other Lender
Party, the Federal Funds Rate, and (ii) in the case of any payment by the
Borrower, the interest rate applicable to the Advance. In addition, no Lender
that fails to make any such payment or otherwise fails to perform any of its
obligations hereunder within the time frame specified for payment or performance
or, if no time frame is specified, if such failure continues for five Business
Days after notice from the Agent (each a "DEFAULTING LENDER") shall have the
right to vote on, or be considered to be a "Lender" with respect to, any matter
for which a vote of the Required Lenders or all or any Lenders is required or
may be taken under this Agreement during any period commencing on the date upon
which such Lender Party is required to make such payment or render such
performance through the date upon which such payment, together with the interest
thereon at the Federal Funds Rate, is made or such performance is rendered.
Furthermore, (a) until such time as a Defaulting Lender has funded its PRO RATA
share of a Borrowing or a participation in a Letter of Credit or has funded the
Bid Advance with respect to any Competitive Bid that has been accepted by the
Borrower, or until all other Lender Parties have received payment in full
(whether by repayment or prepayment) of all their Advances included in such
Borrowing or used to fund such participation, and all interest and Fees due in
respect thereof (collectively, the "SENIOR OBLIGATIONS"), (i) all of the
Obligations (including principal, interest and Fees) owing to such Defaulting
Lender hereunder shall be subordinated in right of payment to the prior payment
in full of all Senior Obligations, and (ii) all amounts paid by any Borrower
Party or otherwise due to be applied to the Obligations owing to the Defaulting
Lender pursuant to the terms hereof (x) if due with respect to Committed
Advances, shall be distributed by the Agent to the other Lender Parties in
accordance with their respective PRO RATA shares (recalculated for purposes
hereof to exclude the Defaulting Lender's Commitment) and
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(y) if due with respect to any Bid Advance, shall be distributed by the Agent to
the other Lender Parties who have Bid Advances then due and payable in
accordance with their respective PRO RATA shares (based on the ratio of the
aggregate amount due to each such other Lender Party to the aggregate amount
then due and payable to all Lender Parties, but calculated for purposes hereof
to exclude amounts due to the Defaulting Lender with respect to Bid Advances),
until all Senior Obligations have been paid in full. This provision governs only
the relationship among the Agent, each Defaulting Lender, and the other Lender
Parties; nothing hereunder shall limit the obligation of any Borrower Party to
repay all Advances and other Obligations in accordance with the terms of this
Agreement and the other Loan Documents. The Agent shall be entitled to (1)
withhold or set off and to apply to the payment of the defaulted amount and any
related interest any amounts to paid to such Defaulting Lender under this
Agreement and (2) bring an action or suit against such Defaulting Lender in a
court of competent jurisdiction to recover the defaulted amount and any related
interest. The provisions of this section shall apply and be effective regardless
of whether an Event of Default occurs and is then continuing, and
notwithstanding (i) any other provision of this Agreement to the contrary, (ii)
any instruction of any Borrower Party as to its desired application of payments
or (iii) the suspension of such Defaulting Lender's right to vote on matters
which are subject to the consent or approval of Required Lenders or all or any
Lenders. In addition, the Defaulting Lender shall indemnify, defend and hold the
Agent and each of the other Lender Parties harmless from and against any and all
liabilities, cost and expenses, plus interest thereon at the Post-Default Rate,
which they may sustain or incur by reason of or as a direct consequence of the
Defaulting Lender's failure or refusal to abide by its obligations under this
Agreement.
9.10.3. The Agent shall promptly notify the Lenders by telex or
telecopy (or telephone, in the case of notice contemplated by Section 2.4.) of
each interest period chosen by the Borrower, the LIBO Rate for each interest
period (and the relevant interest rate), the date of any expected payment and
all other material notices transmitted by the Borrower.
SECTION 9.11. OBLIGATIONS OF LENDER PARTIES SEVERAL; ENFORCEMENT BY
THE AGENT.
9.11.1. Each Lender Party's obligations hereunder are several, and
not joint or joint and several. The failure of any Lender Party to make any
Advance or otherwise to perform its obligations hereunder will not increase the
obligations of any other Lender Party. Notwithstanding the foregoing, any Lender
may assume, but shall have no obligation to any Person to assume, any
non-performing Lender's obligation to make an Advance. Nothing contained in this
Agreement and no action taken by the Agent or any other Lender Party pursuant to
this Agreement shall be deemed to constitute the Agent and any other Lender
Party to be a partnership, an association, a joint venture or any other kind of
entity.
9.11.2. Each Lender agrees that, except with the prior written
consent of the Agent, no Lender Party shall have any right individually to
enforce any Loan Document or any provision thereof, or make demand thereunder,
it being agreed that such rights and remedies may only be exercised by the Agent
for the ratable benefit of the Lenders upon the terms of this Agreement.
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SECTION 9.12. REPLY OF LENDERS. Each Lender shall promptly reply to any
communication from the Agent to the Lenders requesting the Lenders'
determination, consent, approval or disapproval under this Agreement, but in any
event no later than ten Business Days (or such other period as may be required
under this Agreement to respond) after receipt of the request therefor by the
Agent for those matters requiring the consent of the Lenders. Except as
otherwise provided in this Agreement, including Section 9.9., if any Lender
fails to reply within the applicable time periods, such Lender shall be deemed
to have given its consent or approval to the action or actions recommended by
the Agent with respect to the matter for which the Agent requested such Lender's
determination, consent, approval or disapproval.
ARTICLE 10.
MISCELLANEOUS
SECTION 10.1. EXPENSES; INDEMNITY. The Borrower shall pay on demand:
10.1.1. any and all reasonable attorneys' fees and disbursements
(including allocated costs of in-house counsel) and out-of-pocket cost and
expenses incurred by the Agent in connection with the development, drafting and
negotiation of this Agreement and the other Loan Documents, the administration
hereof and thereof (including any amendments), the closing of the transactions
contemplated thereby and the syndication of the credit facilities hereunder; and
10.1.2. all costs and expenses (including fees and disbursements of
in-house and other attorneys, appraisers and consultants) of the Lender Parties
in any workout, restructuring or similar arrangements or, after a Default, in
connection with the protection, preservation, exercise or enforcement of any of
the terms of the Loan Documents or in connection with any foreclosure,
collection or bankruptcy proceedings.
10.1.3. The Borrower shall indemnify, defend and hold harmless each
Lender Party and the officers, directors, employees, agents, attorneys,
affiliates, successors and assigns of each Lender Party (collectively, the
"INDEMNITEES") from and against (a) any and all transfer taxes, documentary
taxes, assessments or charges made by any Governmental Authority by reason of
the execution and delivery of the Loan Documents or the making of the Advances
or the issuance of any Letter of Credit, and (b) any and all liabilities,
losses, damages, penalties, judgments, claims, costs and expenses of any kind or
nature whatsoever (including reasonable attorneys' fees and disbursements in
connection with any actual or threatened investigative, administrative or
judicial proceeding, whether or not such Indemnitee shall be designated a party
thereto) that may be imposed on, incurred by or asserted against such
Indemnitee, in any manner relating to or arising out of the Loan Documents, the
Advances, Letters of Credit, the use or intended use of the proceeds of the
Advances or Letters of Credit (including the failure of the Agent Bank to honor
a drawing as a result of any act or omission, whether rightful or wrongful, of
any Governmental Authority) (the "INDEMNIFIED LIABILITIES"); PROVIDED that (i)
no Indemnitee shall have the right to be indemnified or held harmless hereunder
for its own gross negligence or
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willful misconduct, as determined by a final judgment of a court of competent
jurisdiction, and (ii) Indemnified Liabilities shall include amounts
attributable to the passive or active negligence of any Lender Party.
10.1.4. To the extent that the undertaking to indemnify and hold
harmless set forth in Section 10.1.3. may be unenforceable because it is
violative of any Applicable Law or public policy, the Borrower shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities that is permissible under Applicable Law. All Indemnified
Liabilities shall be payable on demand.
SECTION 10.2. WAIVERS; MODIFICATIONS IN WRITING.
10.2.1. No amendment of any provision of this Agreement or any other
Loan Document (including a waiver thereof or consent relating thereto) shall be
effective unless the same shall be in writing and signed by the Agent and the
Required Lenders. Notwithstanding the foregoing,
10.2.1.1. no amendment that has the effect of (a) reducing the
rate or amount, or extending the stated maturity or due date, of any amount
payable by the Borrower to any Lender Party under the Loan Documents, (b)
increasing the amount, or extending the stated termination or reduction date, of
any Lender's Commitment hereunder or subjecting any Lender Party to any
additional obligation to extend credit, (c) altering the rights and obligations
of the Borrower to prepay the Advances, (d) releasing any Borrower Party under
the Guaranty, (e) changing this Section 10.2. or the definition of the term
"Required Lenders," (f) amending the definitions of "Gross Asset Value,"
"Unencumbered Asset Value" or "Unencumbered Asset," or (g) approving the
forgiveness of interest, principal or Fees shall be effective unless the same
shall be signed by or on behalf of all of the Lenders;
10.2.1.2. no amendment that has the effect of (a) increasing
the duties or obligations of the Agent, (b) increasing the standard of care or
performance required on the part of the Agent, or (c) reducing or eliminating
the indemnities or immunities to which the Agent is entitled (including any
amendment of this Section 10.2.1.2.), shall be effective unless the same shall
be signed by or on behalf of the Agent; and.
10.2.1.3. no amendment that has the effect of (a) increasing
the duties or obligations of the Agent Bank with respect to Letters of Credit,
(b) increasing the standard of care or performance required on the part of the
Agent Bank with respect to Letters of Credit, or (c) reducing or eliminating the
indemnities or immunities to which the Agent Bank with respect to Letters of
Credit is entitled (including any amendment of this Section 10.2.1.3.), shall be
effective unless the same shall be signed by or on behalf of the Agent Bank.
10.2.2. Notwithstanding anything to the contrary, (a) the Borrower
may, by written notice furnished to the Agent, amend SCHEDULES 1.1C, 5.1., 5.4.
and 10.4. to the extent the changes to such Schedules are expressly permissible
under this Agreement, and (b) a Guarantor may be released hereunder as specified
in the definition of "Unencumbered Asset."
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10.2.3. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No notice to or
demand on any Borrower Party in any case shall entitle such Borrower Party to
any other or further notice or demand in similar or other circumstances. Any
amendment effected in accordance with this Section 10.2. shall be binding upon
each present and future Lender Party and the Borrower.
SECTION 10.3. CUMULATIVE REMEDIES; FAILURE OR DELAY. The rights and
remedies provided for under this Agreement are cumulative and are not exclusive
of any rights and remedies that may be available to the Lender Parties under
Applicable Law or otherwise. No failure or delay on the part of any Lender Party
in the exercise of any power, right or remedy under the Loan Documents shall
impair such power, right or remedy or operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or remedy preclude other or
further exercise thereof or of any other power, right or remedy.
SECTION 10.4. NOTICES, ETC. All notices and other communications under
this Agreement shall be in writing and (except for financial statements, other
related informational documents and routine communications, which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
prepaid courier, by overnight mail, by overnight, registered or certified mail
(postage prepaid), or by prepaid telex, telecopy or telegram, and shall be
deemed given when received by the intended recipient thereof. Unless otherwise
specified in a notice sent or delivered in accordance with this Section 10.4.,
all notices and other communications shall be given to the parties hereto at
their respective addresses (or to their respective telex or telecopier numbers)
indicated on SCHEDULE 1.1B (in the case of the Lender Parties) or
10.4. (in the case of the Borrower Parties).
SECTION 10.5. SUCCESSORS AND ASSIGNS.
10.5.1. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. The Borrower Parties may not assign or transfer any interest hereunder
without the prior written consent of each Lender Party.
10.5.2. Each Lender shall have the right at any time to assign (an
"ASSIGNMENT") all or any portion of such Lender's Commitment, Committed Advances
or participations in Letters of Credit to one or more banks or other financial
institutions each having a combined capital and surplus of at least
$100,000,000, a minimum long-term debt rating of "Baa-2" by Moody's and a
minimum long-term debt rating of "BBB" by S&P, at the time of such assignment
(or participation, as the case may be), and which have not been involved in
material litigation with the Agent regarding an assigned, participated, or
syndicated credit (an "ELIGIBLE ASSIGNEE"); PROVIDED, HOWEVER, that (a) each
Assignment of any Commitment shall be of a portion of the Commitments at least
equal to $10,000,000 and, unless otherwise agreed by the Agent, each assignment
shall be of a constant, and not a varying, percentage of all of such Lender's
rights and obligations under this Agreement and the other Loan Documents; (b) no
Assignment (other than an Assignment to a Person that is then a Lender) shall be
effective without the consent of the
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Agent and the Borrower, which consents shall not be unreasonably withheld or
delayed, and which consents will not be required if a Default or Event of
Default exists; (c) the parties to the Assignment shall execute and deliver to
the Agent an Assignment and Acceptance substantially in the form of EXHIBIT F
(an "ASSIGNMENT AND ACCEPTANCE"); and (d) the assignee shall pay to the Agent a
processing and recordation fee of $3,000. From and after the date on which the
conditions in the foregoing clauses and the Assignment and Acceptance have been
satisfied, the assignee shall be a "Lender" hereunder and, to the extent that
rights and obligations hereunder have been assigned to it, shall have the rights
and obligations (including the obligation to participate in Letters of Credit)
of the assigning Lender hereunder, and the assigning Lender shall, to the extent
that rights and obligations hereunder have been assigned by it, relinquish its
rights and be released from its obligations under this Agreement (and, in the
case of an Assignment covering all or the remaining portion of the assigning
Lender's rights and obligations under this Agreement, cease to be a party
hereto). Notwithstanding anything herein to the contrary, for so long as Wells
Fargo Bank, National Association is the Agent under this Agreement the
Commitment of Wells Fargo Bank, National Association shall not be less than the
Commitment of the Lender having the second largest Commitment.
10.5.3. Each Lender shall have the right at any time to grant or
sell participations (each a "PARTICIPATION") in all or any portion of such
Lender's Commitment, Advances (including Committed Advances and Bid Advances) or
participations in Letters of Credit to one or more Eligible Assignees, subject
to the terms and conditions set forth in this Section 10.5.3. If the Lender
sells or grants a Participation, (a) such Lender shall make and receive all
payments for the account of its participant, (b) such Lender's obligations under
this Agreement shall remain unchanged, (c) such Lender shall continue to be the
sole holder of the Note or Notes and other Loan Documents subject to the
Participation and shall have the sole right to enforce its rights and remedies
under the Loan Documents, (d) the Borrower shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under the Loan Documents, and (e) the Participation agreement shall
not restrict such Lender's ability to agree to any amendment of the terms of the
Loan Documents, or to exercise or refrain from exercising any powers or rights
that such Lender may have under or in respect of the Loan Documents, shall be
limited to the right to consent to any (A) reduction of the rate or amount, or
any extension of the stated maturity or due date, of any principal, interest or
Fees payable by the Borrower and subject to the Participation or (B) increase in
the amount or extension of the stated termination or reduction date of the
affected Commitment. A Participant shall have the rights of the Lenders under
Sections 2.11. and 2.12., subject to the obligations imposed by such Sections;
PROVIDED that amounts payable to any Participant shall not exceed the amounts
that would have been payable under such Sections to the Lender granting the
Participation, had such Participation not been granted, unless the Participation
is made with the prior written consent of the Borrower.
10.5.4. Each Lender may at any time assign or pledge any portion of
its rights under the Loan Documents to a Federal Reserve Bank. No such
assignment or pledge shall be subject to the provisions of Sections 10.5.2. or
10.5.3.
10.5.5. Subject to the provisions of Section 10.6., each Lender
shall have the
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<PAGE>
right at any time to furnish one or more potential assignees or participants
with any information concerning the Borrower and the Consolidated Entities that
has been supplied by the Borrower to any Lender Party. The Borrower shall to
supply all reasonably requested information and execute and deliver all such
instruments and take all such further action (including, in the case of an
Assignment, the execution and delivery of replacement Notes) as the Agent may
reasonably request in connection with any Assignment or Participation
arrangement.
SECTION 10.6. CONFIDENTIALITY. Each Lender Party will maintain any
confidential information that it may receive from any Borrower Party pursuant to
this Agreement confidential and shall not disclose such information to third
parties without the prior consent of the Borrower, except for disclosure: (a) to
any other Lender Party or an affiliate of any Lender Party or any officer,
director, employee, agent, advisor, legal counsel, accountant or other
professional advisor to such Lender Party or affiliate; (b) to regulatory
officials having jurisdiction over such Lender Party; (c) as required by
Applicable Law or in connection with any legal proceeding; (d) to another Person
in connection with a potential Assignment or Participation, PROVIDED such Person
shall have agreed in writing to be subject to this Section 10.6.; and (e) of
information that has been previously disclosed publicly without breach of this
provision.
SECTION 10.7. CHOICE OF FORUM.
10.7.1. All actions or proceedings arising in connection with this
Agreement and the other Loan Documents shall be tried and litigated in state or
Federal courts located in Los Angeles, County of Los Angeles, State of
California, unless such actions or proceedings are required to be brought in
another court to obtain subject matter jurisdiction over the matter in
controversy. EACH OF THE BORROWER PARTIES AND THE LENDER PARTIES WAIVES ANY
RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS, TO ASSERT THAT
IT IS NOT SUBJECT TO THE JURISDICTION OF SUCH COURTS OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.
10.7.2. IN ANY ACTION AGAINST ANY BORROWER PARTY, SERVICE OF PROCESS
MAY BE MADE UPON SUCH BORROWER PARTY BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO ITS ADDRESS INDICATED IN SCHEDULE 10.4., WHICH SERVICE
SHALL BE DEEMED SUFFICIENT FOR PERSONAL JURISDICTION AND SHALL BE DEEMED
EFFECTIVE 10 DAYS AFTER MAILING.
10.7.3. Nothing contained in this Section 10.7. shall preclude the
Lender Parties from bringing any action or proceeding arising out of or relating
to this Agreement and the other Loan Documents in the courts of any place where
any Borrower Party or any of its assets may be found or located.
SECTION 10.8. CHANGES IN ACCOUNTING PRINCIPLES. Except as otherwise
provided herein (including, without limitation, the definition of "Funds from
Operations"), if any changes in generally accepted accounting principles from
those used in the preparation of the financial
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<PAGE>
statements referred to in this Agreement hereafter result from by the
promulgation of rules, regulations, pronouncements, or opinions of or required
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants (or successors thereto or agencies with similar
functions), or there shall occur any change in the Borrower's fiscal or tax
years and, as a result of any such changes, there shall result a change in the
method of calculating any of the financial covenants, negative covenants,
standards or other terms or conditions found in this Agreement, then the parties
agree to enter into negotiations in order to amend such provisions so as to
equitably reflect such changes with the desired result that the criteria for
evaluating the Borrower's financial condition shall be the same after such
changes as if such changes had not been made.
SECTION 10.9. SURVIVAL OF AGREEMENTS, REPRESENTATIONS AND WARRANTIES. All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement, the closing and the extensions of
credit hereunder and shall continue until payment and performance of any and all
Obligations. Any investigation at any time made by or on behalf of the Lender
Parties shall not diminish the right of the Lender Parties to rely thereon.
SECTION 10.10. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
SECTION 10.11. COMPLETE AGREEMENT. This Agreement, together with the
Exhibits and Schedules hereto, and the other Loan Documents is intended by the
parties as the final expression of their agreement regarding the subject matter
hereof and as a complete and exclusive statement of the terms and conditions of
such agreement.
SECTION 10.12. LIMITATION OF LIABILITY.
10.12.1. No claim shall be made by any Borrower Party against any
Lender Party or the Affiliates, directors, officers, employees, attorneys or
agents of any Lender Party for any special, indirect, consequential or punitive
damages in respect of any claim for breach of contract or under any other theory
of liability arising out of or related to the transactions contemplated by this
Agreement or the other Loan Documents, or any act, omission or event occurring
in connection therewith; and each Borrower Party hereby waives, releases and
agrees not to sue upon any claim for any such damages, whether or not accrued
and whether or not known or suspected to exist in its favor.
10.12.2. Except as otherwise provided in Section 10.12.3., neither
the REIT nor any officer, employee, servant, controlling person, executive,
director, agent or authorized representative thereof (herein referred to as
"OPERATIVES") shall be liable personally for the Obligations. The sole recourse
of any Lender Party for satisfaction of the Obligations shall be to the
Borrower, and each Guarantor of which the REIT is not a general partner, as an
entity, and to the Borrower's and each Guarantor's assets, and not to any assets
of the REIT or its Operatives. In the event that an Event of Default occurs in
connection with the Obligations, no action shall be
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<PAGE>
brought against the REIT or its Operatives.
10.12.3. Notwithstanding anything in Section 10.12.2. to the
contrary, (a) nothing herein shall limit or otherwise prejudice in any way the
right of any Lender Party to proceed against (i) the Borrower, or any Guarantor
of which the REIT is not a general partner, with respect to the enforcement of
any Obligations or the liability of the Borrower or such Guarantor for such
Obligations, or (ii) the assets of any Guarantor with respect to the enforcement
of any Obligations, (b) nothing herein shall limit or otherwise prejudice in any
way the right of any Lender Party to proceed against the REIT with respect to
any breach of its representations, warranties, covenants and obligations in this
Agreement or its liability for any violation of such provisions, and (c) Section
10.12.2. shall not apply to, or constitute a waiver of any claim by any Lender
Party for fraud, deceit, intentional or willful misrepresentation or bad faith
waste. It is expressly agreed that any Lender Party shall have full recourse
against the REIT and its Operatives for any matters referred to in clause (c) of
this section.
SECTION 10.13. UNSECURED ADVANCES; NO LIEN. The Advances and Letters of
Credit contemplated in this Agreement are unsecured loans and extensions of
credit and no Lien is intended to be created upon the Unencumbered Assets or any
other property of the REIT or any Consolidated Entity by any provision in this
Agreement or the other Loan Documents.
SECTION 10.14. AMENDMENT AND RESTATEMENT. On the Closing Date, (a) this
Agreement shall supersede the Existing Credit Agreement insofar as the two are
inconsistent, (b) all Existing Committed Advances will be considered "Committed
Advances" outstanding under this Agreement and (c) all outstanding Existing
Letter of Credit will be considered "Committed Advances" and a "Letter of
Credit" outstanding under this Agreement. However, the execution and delivery of
this Agreement shall not excuse, or constitute a waiver of, any defaults under
the Existing Credit Agreement, it being understood that this Agreement is not a
termination of the Existing Credit Agreement, but is a modification (and, as
modified, a continuation) of the Existing Credit Agreement.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
SECTION 10.15. WAIVER OF TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING ANY PRESENT
OR FUTURE AMENDMENT THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES OR ANY OF THEM WITH RESPECT TO THE
LOAN DOCUMENTS (AS NOW OR HEREAFTER AMENDED) OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE AND REGARDLESS OF WHICH PARTY ASSERTS SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION; AND EACH PARTY HEREBY AGREES AND CONSENTS
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE PARTIES TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO
TRIAL BY JURY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first set forth above.
BORROWER:
THE MACERICH PARTNERSHIP, L.P., a
Delaware limited partnership
By: THE MACERICH COMPANY, a
Maryland corporation, the Sole
General Partner
By: /s/ Thomas E. O'Hern
-----------------------------------
Senior Vice President, Chief
Financial Officer and
Treasurer
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<PAGE>
INITIAL GUARANTORS:
MACERICH BRISTOL ASSOCIATES, a
California general partnership
By: THE MACERICH COMPANY, a
Maryland corporation, a General
Partner
By: /s/ Thomas E. O'Hern
-----------------------------------
Name: Thomas E. O'Hern
Title: Senior Vice President, Chief
Financial Officer and
Treasurer
By: THE MACERICH PARTNERSHIP, L.P., a
Delaware limited partnership, a
General Partner
By: THE MACERICH COMPANY, a
Maryland corporation, the Sole
General Partner
By: /s/ Thomas E. O'Hern
-------------------------------
Name: Thomas E. O'Hern
Title: Senior Vice President, Chief
Financial Officer and
Treasurer
MACERICH BUENAVENTURA LIMITED
PARTNERSHIP, a California limited
partnership
BY: MACERICH BUENAVENTURA GP CORP., a
Delaware corporation, the Sole General
Partner
By: /s/ Thomas E. O'Hern
----------------------------------
Name: Thomas E. O'Hern
Title: Senior Vice President, Chief
Financial Officer and
Treasurer
94
<PAGE>
MACERICH HUNTINGTON LIMITED
PARTNERSHIP, a California limited
partnership
BY: MACERICH HUNTINGTON GP CORP., a
Delaware corporation, the Sole General
Partner
By: /s/ Thomas E. O'Hern
----------------------------------
Name: Thomas E. O'Hern
Title: Senior Vice President, Chief
Financial Officer and
Treasurer
MACERICH STONEWOOD LIMITED PARTNERSHIP,
a California limited partnership
BY: MACERICH STONEWOOD GP CORP., a
Delaware corporation, the Sole General
Partner
By: /s/ Thomas E. O'Hern
----------------------------------
Name: Thomas E. O'Hern
Title: Senior Vice President, Chief
Financial Officer and
Treasurer
REIT:
THE MACERICH COMPANY, a Maryland
corporation
By: /s/ Thomas E. O'Hern
-----------------------------------
Name: Thomas E. O'Hern
Title: Senior Vice President, Chief
Financial Officer and
Treasurer
95
<PAGE>
AGENT:
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Agent
By: /s/ Wayne H. Choi
-----------------------------------
Name: Wayne H. Choi
Title: Assistant Vice President
LENDERS:
WELLS FARGO BANK, NATIONAL ASSOCIATION
By: /s/ Wayne H. Choi
-----------------------------------
Name: Wayne H. Choi
Title: Assistant Vice President
NATIONSBANK, N.A.
By: /s/ Laurence C. Hughes
-----------------------------------
Name: Laurence C. Hughes
Title: Vice President
CREDIT LYONNAIS, NEW YORK BRANCH
By: /s/ Bruce F. Evans
-----------------------------------
Name: Bruce F. Evans
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Margaret Mulcahy
-----------------------------------
Name: Margaret Mulcahy
Title: Senior Vice President
96
<PAGE>
Exhibit 21.1
LIST OF SUBSIDIARIES
THE MACERICH PARTNERSHIP, L.P., a Delaware limited partnership
LAKEWOOD MALL BUSINESS COMPANY, a Delaware business trust
LAKEWOOD MALL FINANCE COMPANY, a Delaware corporation
MACERICH BRISTOL ASSOCIATES, a California general partnership
MACERICH BUENAVENTURA LIMITED PARTNERSHIP, a California limited partnership
MACERICH BUENAVENTURA GP CORP., a Delaware corporation
MACERICH CARMEL GP CORP, a Delaware corporation
MACERICH CARMEL LIMITED PARTNERSHIP, a California limited partnership
MACERICH CITADEL LIMITED PARTNERSHIP, a California limited partnership
MACERICH CITADEL GP CORP., a Delaware corporation
MACERICH CM VILLAGE GP CORP, a Delaware corporation
MACERICH CM VILLAGE LIMITED PARTNERSHIP, a California limited partnership
MACERICH CORTE MADERA GP CORP, a Delaware corporation
MACERICH CORTE MADERA LIMITED PARTNERSHIP, a California limited partnership
MACERICH EQ LIMITED PARTNERSHIP, a California limited partnership
MACERICH EQ GP CORP., a Delaware corporation
MACERICH FARGO ASSOCIATES, a California general partnership
MACERICH FAYETTEVILLE GP CORP, a Delaware corporation
MACERICH FAYETTEVILLE LIMITED PARTNERSHIP, a California limited partnership
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
78
<PAGE>
MACERICH LUBBOCK GP CORP, a Delaware corporation
MACERICH LUBBOCK LIMITED PARTNERSHIP, a California limited partnership
MACERICH MANAGEMENT COMPANY, a California corporation
MACERICH MANHATTAN LIMITED PARTNERSHIP, a California limited partnership
MACERICH MANHATTAN GP CORP., a Delaware corporation
MACERICH MANHATTAN MANAGEMENT COMPANY, a California corporation
MACERICH MARINA LIMITED PARTNERSHIP, a California limited partnership
MACERICH MARINA GP CORP., a Delaware corporation
MACERICH NORTHWESTERN ASSOCIATES, a California general partnership
MACERICH OKLAHOMA LIMITED PARTNERSHIP, a California limited partnership
MACERICH OKLAHOMA GP CORP., a Delaware corporation
MACERICH PPR CORP, a Maryland corporation
MACERICH PROPERTY EQ GP CORP., a Delaware corporation
MACERICH PROPERTY MANAGEMENT COMPANY, a California corporation
MACERICH QUEENS ADJACENT GP CORP., a Delaware corporation
MACERICH QUEENS ADJACENT GUARANTY G.P. CORP., a Delaware corporation
MACERICH QUEENS ADJACENT LIMITED PARTNERSHIP, a California limited partnership
MACERICH QUEENS LIMITED PARTNERSHIP, a California limited partnership
MACERICH QUEENS FUNDING CORP., a Delaware corporation
MACERICH QUEENS GP CORP., a Delaware corporation
MACERICH RIMROCK GP CORP., a Delaware corporation
MACERICH RIMROCK LIMITED PARTNERSHIP, a California limited partnership
MACERICH SCG FUNDING GP CORP., a Delaware corporation
MACERICH SCG FUNDING LIMITED PARTNERSHIP, a California limited partnership
MACERICH SCG GP CORP., a Delaware corporation
MACERICH SCG HOLDING LIMITED PARTNERSHIP, a California limited partnership
MACERICH SCG LIMITED PARTNERSHIP, a California limited partnership
MACERICH SASSAFRAS GP CORP., a Delaware corporation
MACERICH SASSAFRAS LIMITED PARTNERSHIP, a California limited partnership
79
<PAGE>
MACERICH SOUTH TOWNE GP CORP., a Delaware corporation
MACERICH SOUTH TOWNE LIMITED PARTNERSHIP, a California limited partnership
MACERICH ST MARKETPLACE GP CORP., a Delaware corporation
MACERICH ST MARKETPLACE LIMITED PARTNERSHIP, a California limited partnership
MACERICH STONEWOOD GP CORP., a Delaware corporation
MACERICH STONEWOOD LIMITED PARTNERSHIP, a California limited partnership
MACERICH VALLEY VIEW ADJACENT GP CORP., a Delaware corporation
MACERICH VALLEY VIEW ADJACENT LIMITED PARTNERSHIP, a California limited
partnership
MACERICH VALLEY VIEW GP CORP., a Delaware corporation
MACERICH VALLEY VIEW LIMITED PARTNERSHIP, a California limited partnership
MACERICH VINTAGE FAIRE GP CORP., a Delaware corporation
MACERICH VINTAGE FAIRE LIMITED PARTNERSHIP, a California limited partnership
MACERICH WESTSIDE ADJACENT GP CORP, a Delaware corporation
MACERICH WESTSIDE ADJACENT LIMITED PARTNERSHIP, a California limited partnership
MACERICH WESTSIDE GP CORP, a Delaware corporation
MACERICH WESTSIDE LIMITED PARTNERSHIP, a California limited partnership
MANHATTAN VILLAGE LLC, a California limited liability company
NORTHGATE MALL ASSOCIATES, a California general partnership
NORTH VALLEY PLAZA ASSOCIATES, a California general partnership
PACIFIC PREMIER RETAIL TRUST, a Maryland real estate investment trust
PANORAMA CITY ASSOCIATES, a California general partnership
PPR ALBANY PLAZA LLC, a Delaware limited liability company
PPR CASCADE LLC, a Delaware limited liability company
PPR CREEKSIDE CROSSING LLC, a Delaware limited liability company
PPR CROSS COURT LLC, a Delaware limited liability company
PPR EASTLAND PLAZA LLC, a Delaware limited liability company
PPR KITSAP MALL LLC, a Delaware limited liability company
PPR KITSAP PLACE LLC, a Delaware limited liability company
PPR NORTH POINT LLC, a Delaware limited liability company
80
<PAGE>
PPR REDMOND DEVELOPMENT LLC, a Delaware limited liability company
PPR REDMOND OFFICE LLC, a Delaware limited liability company
PPR REDMOND RETAIL LLC, a Delaware limited liability company
PPR SQUARE TOO LLC, a Delaware limited liability company
PPR WASHINGTON SQUARE LLC, a Delaware limited liability company
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
81
<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 17, 1999, on our
audits of the consolidated financial statements and financial statement
schedule of The Macerich Company as of December 31, 1998 and 1997 and for the
years ended December 31, 1998, 1997 and 1996, which report is included in the
Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Los Angeles, California
March 29, 1999
82
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
The Partners
SDG Macerich Properties, L.P.
and
The Board of Directors
The Macerich Company
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 February 11, 1999,
relating to the balance sheet of SDG Macerich Properties, L.P. as of December
31, 1998 and the related consolidated statements of operations, cash flows,
and partners' equity for the year then ended, and the related schedule, which
report appears in the December 31, 1998 Annual Report on Form 10-K of The
Macerich Company.
KPMG LLP
Indianapolis, Indiana
March 23, 1999
83
<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 40 AND 41 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-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 25,143
<SECURITIES> 0
<RECEIVABLES> 37,373
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,213,125
<DEPRECIATION> (246,280)
<TOTAL-ASSETS> 2,322,056
<CURRENT-LIABILITIES> 30,654
<BONDS> 1,507,118
91
0
<COMMON> 338
<OTHER-SE> 576,984
<TOTAL-LIABILITY-AND-EQUITY> 2,322,056
<SALES> 0
<TOTAL-REVENUES> 283,861
<CGS> 0
<TOTAL-COSTS> 94,364
<OTHER-EXPENSES> 63,101
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 91,433
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 34,963
<DISCONTINUED> 0
<EXTRAORDINARY> (2,435)
<CHANGES> 0
<NET-INCOME> 32,528
<EPS-PRIMARY> $1.06
<EPS-DILUTED> $1.06
</TABLE>
